Les Jones

E-commerce > CDW Buys MicroWarehouse

Computer retailer CDW has purchased Micro Warehouse. They're the catalog giant behind PC Warehouse, Mac Warehouse, Datacomm Warehouse, and probably a few others. Despite nearly $1 billion in sales, MicroWarehouse was insolvent.

CDW was formidable competition before, with roughly $400 million in monthly sales. They're already the largest retailer of Apple products, bigger than CompUSA (with its Apple store-within-a-store) and bigger than Apple's own stores.

CDW is on track to become the Wal-Mart of catalog and online retailers in the computer category. Wal-Mart, incidentally, is the nation's leading retailer of DVDs, and is #2 in music and electronics. With volume comes the power to negotiate low prices:

CDW's increased volume and market share continues to give the company stronger pricing leverage with the major vendors, oftentimes better than what distributors and solution providers can sell for, Wolf and others said. That, coupled with CDW's strong end-user marketing and advertising capabilities, has made the company, along with Dell, one of the channel's most ubiquitous competitors, solution providers said.

"They got the cheapest price," said Bernie Franczak, manager at HPM Networks, a solution provider in San Jose, Calif. "What CDW has done is effectively driven down margins in the marketplace. If I give a customer a quote, they immediately compare that with CDW."

I'm not one of those people who rails against Wal-Mart. I like the low prices, and I like the fact that I can stop at one store to buy groceries, hardware, household products, and gardening supplies, and have my oil changed while I shop. And truth be told, I'm typing this on an Apple computer I bought from CDW.

As an online retailer, that's what worries me. My company's product line overlaps very slightly with CDW's. I've occasionally been in competition with them. (This is for quotes for large companies and government, not onesie-twosie purchases.) They're not very aggressive with online prices, but that's only because the manufacturers are reigning them in even more than they reign in e-tailers like us. With no holds-barred competition, and the deep pockets to finance large purchase orders, these guys are brutal competitors to a lot of e-tailers in the computer market.