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Sink or swim for Net resellers

Would-be titans of online software retailing look forward to chaos, opportunity, and potential ruin for online computer stores.

3 min read
REDWOOD CITY--With some trepidation, would-be titans of online software retailing look forward to 12 months of chaos, opportunity, and potential ruin for online computer stores--and that's the good part.

"The real game is only just beginning, but it will have a high mortality rate for those who don't get it," said Dwayne Walker, chief executive of fast-growing TechWave, which builds and runs online stores, distributes software, and sells electronic distribution systems to resellers.

"Net resellers will either get really big or die or differentiate," said William Headapohl, chief operating officer of BuyDirect, a software distribution service recently spun off by CNET: The Computer Network, which retains an 19 percent ownership. (CNET is the publisher of NEWS.COM.)

Software has been touted as the most logical product to be sold on the Net for several years, but the business hasn't taken off. Bullish executives from online software stores said yesterday that they see the next 12 months as a pivotal time, speaking at an online commerce conference sponsored by Global Touch.

In the next year, more big software publishers will sell directly to customers and new competitors will surge into the market, but only a few strong brand names--a key factor to success--will emerge, those bullish execs say. All think, or at least hope, the online software revolution is near.

"In 10 years, all software will be sold online," declared Software.net chief executive Mark Breier, who left a senior management job at Amazon.com this spring to join Software.net, which went public last month. His ambition: become the world's largest software retailer--and not just online.

"Market share will never be this cheap again," predicted Vincent Pluvinage, CEO of technology supplier Preview Systems, underscoring the strategic importance of the next year.

Seasoned veteran Michael Pickett, who formerly ran giant distributor Merisel, foresees "a giant shift of power to the buyer."

"We are providing the tools to put the buyer in control," said Pickett, now CEO of systems integrator Technology Solutions Network.

Publishers like Microsoft, Lotus, Netscape, and Adobe Systems will launch or expand their sales directly to buyers, executives predicted, circumventing traditional channel partners.

"Every major software publisher will have a direct sales component on their Web site within the next year," Walker declared, predicting massive channel conflict as publishers, resellers, distributors, and others all try to sell to end customers.

But Breier, in a minority view, thinks the percentage of software sold directly by publishers won't outstrip the reseller channel.

"People will buy more software and the pie will be bigger, but the direct share won't grow because customers want selection [that they can't get from a single publisher]," the Software.net CEO said.

A flood of new resellers coming into the Internet market--search engine destination sites, catalog companies, retailers from the brick-and-mortar world, and so on--will increase the importance for building a strong brand name, panelists agreed.

"Only a few large players will dominate the brand wars," said Headapohl, who argued the online software stores will sacrifice profits to grab market share.