German PC chain moves into UK

NIGEL COPE

Germany's largest computer company is turning up the heat in Britain's cut-throat PC market - through a joint venture with a UK retailer.

Vobis, which has sales of more than pounds 1bn and more than 220 stores in Germany, has signed a deal with Powerstore, the electrical retailer which earlier this year took over the Homepower stores from East Midlands Electricity and Yorkshire Electricity.

The deal will see Vobis open concession stores within PowerStore's 87 outlets. The company is also looking for other deals to gain nationwide coverage and may open a chain of stores under the Vobis name.

The decision follows the expansion into this country by Vobis's German rival Escom when it took over 230 of the former Rumbelows store sites in March. Vobis says that it wants to test the market through concession stores before saddling itself with high rents on stand alone outlets.

Theo Lieven, the Vobis chairman, said: "We don't need to be first in a country and we do not want to be the cheapest and get involved in a price war. We don't want to fight Escom on the high street. That is why we are seeking a partner."

Vobis entered the UK market in 1993 when it negotiated a distribution deal with Dixons. But after Escom took over the Rumbelows stores Dixons asked Vobis to lower its prices.

The company declined to do so and began pursuing other alternative routes to UK distribution. It ended its agreement with Dixons last month. "We didn't want to be used as Dixons' lowest price computer in a battle with Escom," the company said. Under the terms of the joint venture Vobis will begin opening "stores within stores" during this week, with all 87 planned to open by the end of October.

Vobis both manufactures and retails PCs under the Highscreen name with a standard machine retailing at pounds 649.

The increase of the Vobis challenge poses a serious threat to Britain's' already competitive PC market which is worth around pounds 2bn a year. Started in 1973, the company is now controlled by Kaufhof-Metro, a multi-billion pound company which ranks as one of Germany's largest retailers.

Vobis manufactures its own PCs and has 400 retail outlests in 10 European countries. It has been expanding outside of Germany since 1989.

According to one study by the computer industry research organisation Dataquest, Vobis has 14 per cent of the German market, compared with Compaq's 10 per cent and Escom's 9.5 per cent. IBM has 6.8 per cent.

The Vobis deal with PowerStore marks another stage in the battle for the burgeoning PC market in Britain. Dixons still has the largest presence on the high street with 350 stores as well as 180 branches of Curry's. It also owns the PC World chain, which currently consists of 12 out of town superstores.

Escom - which is backed by the IT and telecommunications giant Siemens - has more than 260 outlets. Byte, the privately-owned computer superstore group, is also expanding quickly. Last year Amstrad abandoned the high street altogether - in favour of selling PCs and other office equipment direct.