Correction Appended
PLEASANTON, Calif.— Standing in front of a huge white board containing a scrawled list of his problems, William Tauscher, chairman of the Computerland Corporation, the nation's largest franchiser of personal computer stores, summed up the turmoil in his industry.
"In the retail business, someday soon somebody is going to sit down to eat, and somebody else is going to be lunch," he said.
Retailers are grappling with a host of difficulties that mirror the challenges facing computer manufacturers. The growing strength of clone makers and mail-order firms and the rise of low-margin computer superstores have sharpened competition and are likely to force a new round of industry consolidation, perhaps as early as next year. Coping, So Far
Since Mr. Tauscher took over an ailing and disorganized Computerland in 1987, he has been diner rather than dinner. In revamping its business, Computerland has so far successfully coped with a brutal market that has already digested several large victims.
Businessland edged near bankruptcy before it was acquired by JWP Inc. of Purchase, N.Y. in August. Compucom Systems Inc., the nation's seventh-largest computer reseller, recently announced that it would leave the retail business by selling or closing its Computer Factory outlets.
Mr. Tauscher's Computerland, which was barely profitable last year, has survived by shifting the core of its business away from the crowded middle market catering to small business customers.
Computerland has bought many of its big-city franchises, adding sales people who focus on its largest corporate accounts, instead of walk-in customers. And the company is wooing those corporate customers with improved service and support, and a direct electronic link that allows them to shop by computer.
In smaller cities, Mr. Tauscher wants to retain franchisees to handle customers too small to warrant sales calls.
Despite some bobbles, it looks like Mr. Tauscher's strategy is working.
In June, Computerland acquired Nynex's chain of 79 computer stores along with a sophisticated service and support center that adds appeal for corporate customers. By September, Computerland had completely integrated the Nynex stores and sales force into its existing operations. The company also recently opened its third 250,000-square-foot warehouse that permits just-in-time delivery of custom-tailored computer systems.
This fall, Computerland opened its first trial superstore in Atlanta, called Computerland Express. If Mr. Tauscher sees positive signs from the Atlanta experiment, Mr. Tauscher said, he is prepared to open superstores nationwide. A decision could come as early as February or March.
The resulting business looks a lot like the lean, heavily automated systems that Mr. Tauscher, a former wholesale drug distributor, has set up in his previous ventures.
"I have a lot of respect for the management team he has put together," says Avery More, president of Compucom, the Dallas based computer retail chain that is one of Computerland's competitors.
Today, Computerland's principal competitors all result from a recent round of mergers and acquisitions: JWP's purchase of Businessland; the acquisition of the Bizmart superstores by Intelligent Electronics; the merger of Valcom and Inacomp Computer Centers to produce Inacom, and Compucom's purchase of the Computer Factory, primarily to acquire its corporate sales business. Dissent in the Franchisee Ranks
The most difficult challenge that Mr. Tauscher has faced is coping with angry franchisees who have found themselves competing with company-owned stores as a result of the Nynex acquisition. In the most bitter case, D&W Computer Stores in Florida has sued Computerland, with D&W charging that it is being pushed out of business. But in most regions of the country, Mr. Tauscher said, he has solved territorial disputes to the satisfaction of the dealers.
At the same time, Computerland has used its acquisition of Nynex to bring a national service and support operation largely under one roof. Selling Service as a Product
Mr. Tauscher plans to sell service and support as a separately priced package to help build closer relationships with large corporate customers. In addition, Computerland now offers its large customers a computerized linkup that permits them to review an electronic catalogue, get price quotes and place orders from their own offices. Computerland has connected its 12 largest corporate customers to this computerized buying system and is adding three to four customers to the network each month.
Such a close connection with his customers will give Computerland an advantage that mail-order firms like Dell Computer, Gateway Computer and Zeos International cannot match, Mr. Tauscher said.
But Mr. Tauscher must still overcome the skepticism of some industry watchers who doubt he can truly bring his costs down to match his competitors.
"The big factor for the outbound dealer is keeping overhead low enough to be profitable," said Seymour Merrin, president of Merrin Information Services, a consulting firm that tracks the retail computer market. "The fact is that more and more customers are abandoning the branded lines for the commodity parts."
Some other analysts disagree, however, arguing that Computerland's niches -- corporate clients in major cities, walk-in customers elsewhere -- are unlikely to disappear any time soon.
"Saying that superstores will take over the entire industry is as unrealistic as expecting that everybody will buy their suits at K Mart," said Richard Shaffer, publisher of the Technologic Computer Letter. "Somebody has to provide support, either the manufacturer, or the dealer, or the customer must do it himself. If Computerland can do it cheaper, then that's a potential edge." Greater Reliance on Clones
To meet the cost competition, Mr. Tauscher said that in the last year Computerland has dramatically increased its reliance on makers of low-priced I.B.M.-compatible clones, like AST Research and NEC. Computerland, however, continues to sell I.B.M. products, and Mr. Tauscher is still counting on the computer maker to aggressively reclaim market share by lowering prices and offering higher performance hardware.
If I.B.M. falters, he said, he will consider using his automated distribution factories to assembled Computerland-branded machines to match the prices of the clone makers.
Mr. Tauscher brings an intense no-nonsense approach to computer retailing. He has been in and out of the computer business, beginning in an I.B.M. sales and distribution office in Chicago. He shared the business there with George Conrades, who now heads I.B.M.'s United States sales. Mr. Tauscher boasted that he managed to sell computers in Chicago's tough Southside, while Mr. Conrades had the lucrative Sears account.
After leaving I.B.M. in 1972, Mr. Tauscher started and profitably sold several retail sales and distribution businesses, including Vons drugstores. In 1987, he joined a group of investors led by E. M. Warburg, Pincus & Company that raised $250 million to buy Computerland, and he became chief executive a year later.
Mr. Tauscher had to revive morale at a company that had suffered from an ownership struggle for years. When Mr. Tauscher took over he stripped away many accumulated layers of management.
Now, he said, he has restored enough of Computerland's luster to consider taking it public next year. The company tried to go public once before, in August 1988, but investors complained that Computerland was asking too much for its shares.
Even if the company does go public, Mr. Tauscher said, he is likely to stick around. "I love to build things and I'm unabashed in my love of business," he said.
Photo: William Tauscher, Computerland's chairman, in his office, with a white board that contains a scrawled list of his various problems. (Terrence McCarthy for The New York Times) (pg. D1) Graph: "Leaders in Computer Sales" shows sales of leading computer retail chains, in millions of dollars. (Source: Dataquest) (pg. D4)