After 10 years of marketing to big business, government agencies and schools, the personal computer industry now is taking what analysts call the "low road" by trying to sell to small companies and individuals.
The industry is betting that this strategy, along with retaining existing clients, will help it through the difficult economic times that may lie ahead.
Computer prices have been cut, software packages simplified, and distribution channels are changing. Personal computers now are being sold in discount electronics stores along side toasters and radios.
Circuit City began selling personal computers in June and Baltimore-based Luskin's Inc. introduced a new line of computers in its stores a few weeks ago.
"The market is shifting dramatically," says Carey Luskin, president of Luskin's Inc., which sells IBM-compatible computers. "Computers are falling into the mainstream of American products."
Luskin's tried selling computers three years ago, but consumers weren't ready. Luskin said he believes buyers have the experience and confidence to buy from discount houses where prices are cheaper although sales people might not be computer experts.
Computer sales at Circuit City in the last few months seem to support that view. "We've been pleased with sales so far," said Ann Collier, a spokesman at the Richmond-based electronics chain.
The same strategy of vying for the small business and individual buyer has prompted manufacturers such as Apple and IBM to introduce less expensive personnel computers this year.
"We're in the middle of a major transition in the business computer industry," said Mark Stahlman, an analyst with Alex. Brown & Sons Inc. in New York.
One result of offering cheaper computers is that industry revenues have been relatively flat, but local stores say sales are up. In addition, some stores said they are even seeing a brisk Christmas business. Greg Mareski, executive vice president of Microcomputer Center/The Connecting Point, said computer business is better than it's been in three years.
One of the hottest sellers is the Apple MacIntosh Classic, a personal computer that was introduced in October and retails for less than $1,000. The new computer has been in such demand that many stores are sold out.
"I know of no dealer that can get any," said Mareski. He has sold more than 30, but could sell more than 300 if he had the supply, he said.
But looming over the mostly rosy picture are concerns about the economy. Industry experts are divided on how the economic downturn will affect the computer industry.
Some hold the view that computers sales will increase as businesses try to cut costs and become more efficient. Others argue that as money becomes tight, businesses will forgo new computer purchases.
While sales are strong now as businesses spend their remaining money in their yearly budget, Mareski said it is difficult to predict what will happen next year.
"There is no firm ground to put your feet on in this economy," he said.
Mareski said he is trying to keep inventories low and concentrate on his existing customers by giving them little Christmas gifts and aggressively marketing improvements on existing computer systems.
Many stores also are beefing up their service and hiring new technicians. Most stores offer service contracts. Many offer computer classes.
Compucare International Corp., a company that installs business computer systems, has changed its marketing strategy from trying to appeal to businesses that want to expand their operations to appealing to business interested in containing costs.
"What is selling is something that's going to save some money,said Evan Willner, vice president of Compucare International Corp.
Some of Compucare's business changes reflect economic conditions outside the computer market. For example, computer sales to real estate companies are down, but one of the hottest sellers these days is a software package for lawyers specializing in bankruptcies, said Peter Wollner, company president.
"We are all concerned," Wollner said. "Computers are things which people can do without."
Ideally, Mareski said, he would like to eliminate the unprofitable lines of his businesses and concentrate on those areas that offer the greater returns. But that has proved difficult. "I know of nothing at this point that is so bad that I want to get out of it," he said.
Although there has been an increased emphasis on low-cost computers, companies aren't necessarily buying the cheapest thing on the market.
Mareski said he sees companies in some cases going for top-of-the-line products. "They are buying machines that are more powerful than normal to squeeze the last ounce of productivity out of it," he said. "They're trying to get the most bang for the buck."
Maury Weinstein, president of Baltimore-based Computerland, said much of the expansion in the business computer market involves networking, or linking of individual computer terminals. The network allows computers to "talk" to each other and allows operators to send electronic messages to one another.
Other important product lines are small laptop and notebook computers, which allow salesmen to take their business along with them or provide extra work stations in the office, Weinstein said.
Mareski said 80 percent of his business is generated by companies looking for computers. "Business is interesting," he said. "I have no idea what it's going to be like at the end of the year."
He said he is concerned by signs of a recession outside the industry and is awaiting nervously to see if it affects his computer business, but so far it has not. "The downturn is nowhere as near as bad as everyone has been saying. We're all keeping our fingers crossed."