Micron adds partners to retail distribution program

Micron jumped into retail in March when it cut a deal placing configure-to-order kiosks in 358 Best Buy stores.

The Nampa, Idaho, PC maker, like Dell Computer and Gateway, is best known for selling computers directly to consumers, unlike Compaq Computer and Hewlett-Packard, which favor selling through retailers.

But with dwindling market share, particularly among consumers, Micron has been looking for new ways to boost its brand. The new program, VelocityNet Direct, will focus on an increased presence in brick-and-mortar operations as well as with Internet retailers.

Today's announcement adds Outpost.com, RadioShack Canada and Staples to the retailers taking orders for Micron PCs, which the company then builds to order and ships to customers.

"People still shop bricks," said Micron CEO Joel Kocher. "Retailers are still the primary mover of PCs into the consumer space. They just can't handle the inventory logistics."

Kocher spoke with CNET News.com from New York, where he plans to meet with financial analysts tomorrow following the company's third-quarter earnings announcement.

But Micron's retail strategy may translate into few sales, say analysts.

"I think there are some issues with a build-to-order model in retail, when your business is traffic," said PC Data analyst Stephen Baker. "In the standard retail store--the Best Buy or Circuit City--BTO is never going to be a big chunk of their business, nor do I think they really want it to be."

Case in point: Compaq, which has more than 9,000 retail kiosks, sells fewer than 5 percent of its retail systems configured-to-order, according to PC Data.

While sales through retail outlets may add little to Micron's bottom line, the exposure could have other benefits, Baker said. "There are a couple of reasons why you would be in retail. One of them is that by buying some ads and (having systems) around, they do better than direct mail. People are out shopping, and that's great exposure."

Best Buy, for example, puts Micron in about 75 million ad circulars a week.

"That was one of our primary reasons for doing this," Kocher said. "We do not have the brand awareness of Compaq, Dell or Gateway. Our challenge for this management team that came in 24 months ago was how do we take the assets we have...and how do we compete with the brand awareness of these companies, especially in the consumer space. We can now leverage the very large brand presence and footprints of these big-box retail companies."

Micron is trying to compensate by selling some systems on retail store shelves, a brash experiment that could pay off, given that only three major PC makers remain in retail, Baker said. "That leaves some shelf space for anyone willing to take risks and manage their inventory very well."

Said Kocher: "We do offer the retailers an opportunity--and they are taking advantage of it--of promotions where we do have inventory for what we call burst orders or burst periods of time."

Best Buy, for example, occasionally sells Micron PCs in its stores in addition to taking kiosk orders.

Micron isn't targeting direct rivals Dell and Gateway but traditional retail PC makers such as Compaq and HP. On average, Micron builds systems ordered at Best Buy in about 1.6 days.

"If you were going to go out and do a 1.6-day benchmark with Compaq or Hewlett-Packard, I think you would see we are exponentially faster than those guys," Kocher said.

But the company faces stiff competition even from its direct rivals. Adding to its Country Store operations, for example, Gateway in February cut a deal with OfficeMax to create 1,000 stores-within-a-store.