Advertisement

Archive for Sunday, October 11, 1992

S VIGILANCE IN CHANGING MARKET

October 11, 1992

Advertisement

If business trends come in waves, the profit curve for Connecting Point Computer Center is on the upswing, a circumstance about which Myles Schachter, co-owner of the 10-year-old business, feels gratified but not complacent.

Schachter measures Connecting Point's success by several yardsticks:

The company today is the largest dealer of computers to educational customers, such as school districts, in Kansas and western Missouri.

IBM named Connecting Point its second largest U.S. dealer of education systems to education markets for the first half of 1992.

During the same period, Intelligent Electronics, Connecting Point's franchiser, recognized t($0$ business as the 80th largest among the 1,500 U.S. computer resellers. That put Connecting Point in the top 6 percent of resellers in the IE group.

Schachter expects the business's 1992 sales to total $15 million to $20 million; two years ago Connecting Point did $4 million in sales. During the first nine months of this year, Connecting Point installed more than 2,000 computers and more than 100 computer networks.

THAT'S A dramatic turnaround. Four years ago, Schachter, who owns the local business with his wife, Rhonda Ross, wasn't reporting such satisfactory results.

Schachter, a former urban planner and consultant, and Ross, who has a doctorate in education, have been IBM dealers since 1982, previously under the name Computer Outlet, which was at 804 N.H. Schachter recalls that back in the '80s, the boom days of personal computer sales, the college-town market was a natural and Schachter grew his retail business to 50 percent of sales.

"Then we had a catastrophe in 1988," he recalls. The catastrophe had a name namely, the Kansas Union Bookstore, which was selling personal computers to Kansas University faculty and students at near-wholesale prices that a retail dealer such as Schachter couldn't touch.

"We lost 92 percent of our retail trade, but fortunately we were diversified enough that we survived," he said.

HOWEVER, survival came with a price. Schachter had to cut loose about half his 30-person work force and has now rebuilt the payroll to that level. He and Ross then increased their focus on educational markets, which he deemed "a perfect fit for us," given Ross' background.

Today the Shawnee Mission school district is Connecting Point's biggest client; the business is under a five-year contract to install 8,000 computers or one computer for every teacher and every three students in the school system.

Since the blowout in 1988, the walk-in retail trade at the Connecting Point store, 813 Mass., has dwindled to 3 percent of the business's retail trade. But Schachter said he hasn't lost sight of the lesson on the importance of diversification that he learned four years ago.

As a result, Schachter says, more than half of Connecting Point's sales come from selling computer systems to small and medium-size businesses and helping them automate.

CONNECTING Point also has some large corporate accounts, including a deal with Blue Cross and Blue Shield of Kansas, in which the health insurer acts as a reseller for Connecting Point.

"They sell computers to doctors and dentists around the state with a specific program . . . for their paperless claims system," Schachter explained.

Schachter's conviction to be diversified also took him and Ross into Bizmart stores in Topeka and Overland Park last year, where they began operating the in-store computer concession. Schachter said they exercised an option to bail out in May after finding that the retail computer market was dwindling even for high-volume discount markets such as Bizmart's.

THAT'S NOT to say Connecting Point will ever forfeit the retail market. Rather, Schachter said, he sees a need for value-added computer retailing in which consumers buy support services, such as training and trouble-shooting, along with hardware and software.

"We're confident that computer retailing will continue for the consumer" who doesn't have computer expertise, he said, noting that value-added services also are part of what Connecting Point is selling to the small and medium-size businesses it helps automate.

Despite Connecting Point's return to health and subsequent growth, Schachter said he can't assume his game plan will remain the same in a rapidly changing industry in which margins are tight and technology can become obsolete overnight. New computer models are now introduced every six months, he noted.

IN ADDITION to diversifying across several segments of the market, Schachter said, it's important to specialize.

"We found a niche in value-added services," he said, holding up the Blue Cross deal as an example. "We're not the lowest seller to Blue Cross Blue Shield, but we offer assistance for which they pay a little extra."

Schachter said businesses like his also must be entrepreneurial enough to identify and tap new markets. But he prefers to hedge his bets, such as with the option that let him back out of the Bizmart deal when it didn't feel right even though he and Ross made money on the arrangement.

"These people who jump on the cutting edge and try to do what's new get burned out quick, they get burned out financially," he said.

Commenting has been disabled for this item.