Taipei, Taiwan, R.O.C. April 25th 2003- In
RAM, Reseller Advocate Magazine: Issue: 17: 2003, William Van Winkle's article
titled: "ABIT: STAYING OFF THE MIA LIST" features an interview with ABIT's USA
PR Manager on the key points of success that have allowed ABIT to do so well in
the channel market. Here is the article:
In 1991, I set out to start a PC hardware distributorship. I had $20,000 in
inventory, another $30,000 in the bank, and the Yellow Pages from 1990. Hour
after hour, day after day, I methodically went through every PC reseller listing
in the book. By nature, I don't have the constitution for hard-core sales. The
never-ending stream of hearing "not interested" and "we'll get back to you when
we're ready" just wears me down, whereas a true salesperson is able to not take
such things personally and keep wearing a smile for the next call-and the
hundred calls after that. But the one thing that really amazed me from all of
this phone work was the discovery that 25 to 30 percent of all the resellers
listed had vanished. Sure, most of these had been small operations, maybe
one-man shops run out of a garage, but there were plenty of MIAs from the larger
entities. By 1993, my distributorship would join the MIA list, too. Still, the
early '90s was a great time in PC sales. Margins were higher, the market was
booming, and seemingly anyone who knew the difference between Ethernet and Token
Ring could make a small fortune in LAN setup and consulting. And yet, the
reseller channel still had a 25 percent or higher churn rate.
Ten years later, the challenges facing the entire channel are far worse. Lower
profits, higher competition, massive IT spending cutbacks, and plummeting
consumer confidence indices all conspire to put intense pressure on resellers
and manufacturers alike. In a sense, the problems that resellers face are a
direct reflection of those faced by vendors.
So when I came across Jeremy Smith, PR manager for ABIT, the opportunity seemed
right for a valuable object lesson. The motherboard market is probably one of
the roughest arenas in the PC industry. Many vendors cut every corner possible,
starting with component quality, moving through the QA process, and giving
practically no regard to channel or end-user support. And even with these cuts,
there is still almost no money left.
"It continues to be really, really tough," says Smith. "The profit margin is
almost down to zero, to be honest. A lot of companies are selling boards at a
loss. I would be surprised if you didn't see some more players drop out or
consolidations not take place among some of the Taiwanese board makers. I just
don't think there's enough room for the number of them that there are right
now." This begs the question: How do you operate in this environment and keep
yourself off the MIA list?
STICK TO WHAT YOU KNOW
A lot of motherboard vendors are desperate enough now to try anything. USB
memory keys. Cases. Wireless routers and hubs. Optical drives. Even 3D gaming
glasses. The mindset is that you throw everything against the wall and see what
sticks. But in doing so, you expend a tremendous amount of time and resources,
much of which yields little if any return on investment.
ABIT has bucked this try-anything trend. Smith admits that the company does have
a line of audio products, but that these are largely marketed outside of North
America. (He notes that small quantity product trials often work best in Asia
and secondary markets. A North American release requires substantial quantities
and a full support network throughout the channel.) Rather, ABIT focuses on only
two product groups: motherboards and graphics cards.
ABIT has been a motherboard company ever since its founding in 1989. This
specialization has allowed the company to excel in its quality and earn the
industry's respect. This is why you find leading review sites like [H]ardIOCP
proclaim "ABIT has always been near and dear to most enthusiasts' hearts due to
their devotion to the overclocking world" and AnandTech describe ABIT boards
with phrases like" unmatched," "excellent," and "couldn't be a more perfect
choice."
"To be able to overclock a board," says Smith, "you've got to have good voltage
regulators and good capacitors. The circuitry has to be rock solid stable. So
when reviewers talk about how good ABIT boards are to overclock, that
necessarily means that these are well-designed, high-quality boards. I mean,
before I worked for ABIT, I thought that all motherboards were pretty much the
same. I was shocked to learn that there are huge differences, and it all comes
down to component quality and design."
INNOVATE
Companies constantly face the problem of whether to play it safe and follow
the standard practices in the industry or to branch out, take a risk, do some
things a bit differently, and perhaps get burned. Successful innovation is often
the deciding factor between sinking or swimming in a competitive market. The
trick, of course, is to target innovation toward widespread needs and not
frivolous niches.
One example is ABIT's dedication to making performance motherboards for the
Intel platform. While the playing field is more or less even (and very crowded)
for AMD boards, when it comes to Pentium-based boards, there is Intel in the
lead and then everybody else trailing far behind. Intel is known for its
quality, but not necessarily for its performance-and therein does ABIT look to
be one of the key innovators improving the platform.
"Intel used to be the only game in town," notes Smith. "Then you had all these
Taiwanese motherboard makers come. The herd thinned out, and now you have the
top five, which includes ABIT. With those companies, you get a lot more
innovation than with a standard Intel board. I mean, Intel is stable, and it's
fine for basic stuff, but when you're ready to push it or create systems for
customers with lots of bells and whistles, you want to go with something like an
ABIT MAX version board."
For example, while many Intel boards simply use the AC'97 audio functionality
built into the Southbridge, current ABIT boards will opt for a part such as
Realtek's discrete ALC650 chip. This is the same digital-to-analog converter
chip that appears on all nForce2 boards, which are renowned for their superior
audio functionality.
"With a brand name like ABIT, which is kind of like the BMW of motherboards,
it's not the cheapest. Instead, the quality you're getting justifies the cost.
--Jeremy Smith, PR manager for ABIT
ABIT's history of innovation is impressive. In 1996, the company released the
industry's first jumperless board thanks to its SoftMenu technology. In 1999,
ABIT delivered the first dual Celeron motherboard, and in 2001 the company
decided to make RAID functionality standard across its mainstream product line.
In April, ABIT will release a new line of Intel server motherboards, something
no company without ABIT's proven track record could hope to pull off.
Steps like these aren't taken lightly, and are often prey to criticism. But the
fact is that me-too companies don't survive for long, and unless you can add
value through innovation, there will always be somebody who does a better job at
what you do.
FOLLOW THE MARGIN
Common wisdom says that if you can't make it on margin, compensate with
quantity. The reality is that this approach only works well in PCs if you have a
lot of volume, as in multinational levels. Smaller resellers and vendors that
try to thrive in budget parts are courting disaster.
"Where you get hurt is where you have companies like PC Chips or ECS, where they
make really low-end, bare minimum motherboards and are competing for that bottom
dollar," says Smith. "But we don't want or try to follow down that road. With a
brand name like ABIT, which is kind of like the BMW of motherboards, it's not
the cheapest. Instead, the quality you're getting justifies the
cost. Because in the long run what you want is a stable system to build on."
The object of the game is not to be a commodity, because that's where
competition is fiercest and the margin has eroded to nothing. When there are new
features and technologies involved, this is the place where vendors can step in
and help educate buyers and create tailored solutions for them. Many buyers, in
turn, are willing to pay for that added value.
This might apply to a new technology such as integrated Serial ATA. Yes, it
costs more. But a board with SATA will hold its value, performance potential,
and functionality longer than a parallel ATA-only board. Once customers
recognize this, they'll pay for the higher-end product.
CUSTOMER SERVICE
Customer service has historically been one of the biggest problems for
Taiwanese board vendors. Resellers have traditionally been forced to RMA boards
through their distributor, but this has caused substantial problems for both the
reseller and end-user. Resellers are often forced to pull for-sale stock to
cover advance replacements. Otherwise, the process of sending a board through
the distributor back to the vendor for repair or replacement and back again
generally takes weeks to months. Everybody does this, and everybody hates it.
Again, ABIT saw this as an opportunity to distinguish itself in the industry and
fill a serious need. "The biggest news for ABIT resellers right now is our eRMA
program," says Smith. "This is our online, direct RMA service. We're the only
motherboard manufacturer to offer this. Basically, anybody, a reseller,
end-user, distributor, can directly RMA the board with us, and we've got a
10-day turn-around time from when we receive the board to when it goes out. We
offer a cross-shipping service for a fee."
It's worth noting that ABIT provides a two-year unconditional warranty followed
by a third year in which any repair is covered by a $25 handling fee.
The eRMA program is actually a good value-add for resellers, who are frequently
faced with the question: What happens if you go out of business? Now, the
reseller is taken out of the loop and the customer can feel secure in getting a
much longer than normal warranty direct from the board vendor. If the customer
wants to check on the status of his RMA, that information is easily accessible
via ABIT's Web site.
Additionally, ABIT supports its resellers with a strong channel program. "We
send them on almost a daily basis industry news topics, product updates,
information about BIOS updates, CPU compatibility-things that are important to
resellers," says Smith. "And we support them with things like marketing
collateral, posters, and banners they can use for point-of-sale."
In 1993, I knew none of these lessons. But in the near future, many resellers
are going to be faced with joining the industry MIA list. Perhaps by following
the example of vendors like ABIT, many of these losses can be avoided.
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