Will E-Commerce Save CompUSA?

As part of an effort to turn around its losses, CompUSA launched a re-designed e-commerce Web site earlier this week.

By doing so, the number one brick-and-mortar retailer of PCs hopes to double the number of visitors it attracts to the Internet.

The revamped site, cozone.com, is targeting both the family and small business market in an effort to compete with giant online computer seller Dell Computer Corp.

Too Little, Too Late

However, while some industry observers feel that CompUSA’s latest foray into cyberspace makes sense, it could be a case of “too little, too late.” The Dallas, Texas-based retailer with more than 200 stores in 40 states has watched its stock value plummet by 52 percent this year, with its price hovering at about $6.50 (US$) per share.

Additionally, the company’s balance sheet is continuing to hemorrhage. In its fiscal year ending 1999, CompUSA lost $45.7 million on revenue of $6.3 billion.

To add insult to injury, some think its acquisition of 40 new stores from Tandy Corp. in 1998 was not the right deal at the right time.

Yet, CompUSA is hanging in there.

Faster Rebate Program

The brick-and-mortar giant just announced a new rebate program with America Online subsidiary CompuServe that it hopes will also help to jump-start its sales.

Under the new program, customers who sign up for three years of CompuServe receive a rebate from CompUSA at the time of purchasing their computer.

But that’s not all that’s pumping up the hopes of CompUSA stockholders. There has even been some speculation that CompUSA could soon spin off its e-commerce venture to cash in on the current Internet frenzy.

Relic Of The Past

Still, while all these things sound good on the surface, I agree with analysts who think it is too late to salvage such a crippled ship. If it can’t find a way to flourish in the best of times, how can it hope to make it if there is even the slightest economic downturn?

There is no doubt in my mind that CompUSA — as it is today — is a relic of a brick-and-mortar past that is now ancient history.

The company is top heavy with store leases and personnel. Even with its re-launched e-commerce site, it can’t deliver the sleek, seamless service given by Gateway, Inc. — a computer seller that utilizes selective brick-and-mortar showrooms that back up itse-commerce Web site.

Reinvent And Align

The only hope for the CompUSA chain is if its CEO suddenly comes to the stark realization that there is no going back to business as usual.

He must quickly pare down personnel and inventory, and then go about reinventing CompUSA. Instead of selling hardware, he should begin focusing upon Web hosting and educational services, and quickly commit company assets in that direction.

Finally, he must pick up the phone and cut a deal with Michael Dell to become the computer maker’s new warehousing and distribution center. CompUSA buildings not used for warehousing could then be conveniently utilized as Dell Computer showrooms.

Of course, the odds of CompUSA’s CEO doing something like this are microscopic.

But who knows? Stranger things have happened.

What do you think? Let’s talk about it.