PS Consultants - ideas & solutions

Rich Yuletide fare!
February 1998

The concept of Intel and Dixons having pop at each over the issue of monopoly pricing is about as rich as the fruitcake and Christmas pudding that you’ll be eating about now.

Knowing the trade prices pretty well, I guess Dixons is making about 30% on an average PC sale. This is very interesting, since Dixons says this is the lowest margins it makes, which makes me wonder a lot more about those products that I do not know as well as PCs.

So how can Dixons do this in a “free” market? Simple, by suggesting to their suppliers that they will not do business with them unless Dixons gets products that are elevated apart from crude price comparison (aka “competition”) by having “exclusive” opportunities, which means that any other dealer offering the same goods for less may find their supplies somewhat – er – “withdrawn”. Allegedly.

Dixons adopt a defensive line, as you would expect. They are a popular aunt sally of consumer watchdogs, and they are required to provide a degree of customer support (don’t laugh or you may swallow the snowman decorations on that wedge of cake). In the awfully brutal big outside world of Internet trading, they are up against nasty people who take the customers’ money without providing proper service arrangements. Thus they have legitimate costs to cover, not the least of which is Dixons return for refund warranty, which your scribe used last year to return a Digital Video handycam that had been bought on the grounds of a computer interface being available, when there was none.

All this nonsense is another of the many ways in which the UK IT economy is being bled dry by some very traditional UK financial manipulation, whereas the US and the rest of Europe seems to be taking advantage of the opportunity to race on with the pace of change and develop ever more competitive marketplaces. Not the UK though, the tendency for consolidation in UK retail means fat times cartels and price fixing – yet the internet provides the basis by which these cartels can (and will) be blown apart.

I’ll run that past us again in more detail: Intel, those people who tell you a year in advance what their price for their products will be, because they are so utterly confident that they are able to control their marketplace, are telling Dixons, who operate Dixons, The Link, Currys, and PC now World and thus probably control of 50% of UK retailing (not the direct game – yet) to cut their prices. Dixons’ margins are being described by Intel as “Ridiculous”.

Oh yes, and I think it was some time around last Christmas that Dixons had a pop at Intel for its control of the PC market, causing supply problems. Tit for tat? Surely not…

The answer to all this is simple – readers of Computer Shopper are already aware that a marketplace consists of many competing suppliers – so next time you look through a window on a high street, take a note of the price and the spec and then see what one of the CS advertisers will supply the same system to you for.

And also check the costs of extending the warranty from the nearly universal 12 months – it could be more than the entire PC is worth in 12 months time, which reminds me, that’s another way in which high street retailers are famously rooking the punters, and arguably the biggest and best profit centre for many multiple retailers. So make sure you read the bits between the adverts in this magazine, and you will glean enough knowledge to be capable of doing most of your own support anyway, and with any luck, next Christmas both Dixons and Intel will be joining forces and having a pop at Computer Shopper for having forced the prices of PCs down so far that neither of them will be able to exert their virtual monopolies on the hapless public.


We’ve left the subject of Microsoft alone recently, nothing to do with being “sub judice”, more to do with being tedious, because this column has trailed and predicted the problems facing Microsoft more accurately than most, for longer than most. We don’t claim any clairvoyant capabilities, just a simple understand that all power corrupts, which is why monopoly legislation exists.

<smugmode>It’s boring being right all the time, but other journalists wouldn’t know much about that… </smugmode>

Ironically, the perfect solution of dividing the business into separate sections for operating systems, applications, networks and content would result in a much stronger Microsoft; but it would also provide a viable basis for competitors, because there would also have to be some recompense made for the damage done to the users around the world by being forced to swallow a mostly crap operating.

The Operating Systems division should be created as a public foundation and any software developer that wants to can participate – see how successful the open source approach of Linux has been, it’s almost the only thing that Microsoft can dream of to pretend it’s got a competitor at last. If you need an analogy, then “we” own the roads, and the fact we drive on the right or left is housed in the fundamental legal framework necessary to avoid chaos.

At the present time, Microsoft owns the roads, tells us which side to drive and supplies all the vehicles, all the sign boards and now wants to own all the destinations.

Without the subtle connection between the OS and “everything else”, Microsoft would be on a level (if slightly sloping) playing field, and it could concentrate on excellence, and not be hampered by its own flawed approach to OS design. Word has it that internal MS application developers are aching to be freed from being shackled to Windows, and would welcome a more enlightened approach.