LG monitors gain popularity with resellers

PC bargain hunters looking for a low total price on a new PC usually find resellers offering an off-brand monitor with the computer to keep the costs down. One such off-brand, LG Electronics USA Inc., has become the most popular monitor in reseller Government Technology Services Inc.'s inventory.

Most customers are unfamiliar with the name LG Electronics, but many people are familiar with the company's Goldstar-brand computer and consumer electronics. Because the association of Goldstar with low-end microwave ovens was not necessarily a positive one, the company adopted the LG initials of its full name: Lucky Goldstar.

"We all have good, long memories," said Mark Thoreson, inside sales manager for GTSI. "Using the LG name is not meant to deceive, but it is a good decision."

Customers may have bought LG monitors with their name-brand computers whether they realized it or not, because LG Electronics is a big monitor supplier to popular PC companies which put their own labels on the displays. "Half the monitors Hewlett-Packard sells are [made by] LG," Thoreson said. "Dell places an annual order with LG."

In fact, while the LG brand name was mired squarely in the "other" category of top-selling monitor brands for 1997 in research compiled by Stanford Resources Inc., the company was the fourth-largest monitor manufacturer in the world, according to Bennett Norell, LG's marketing manager.

But as an OEM supplier, LG was hostage to its customers' ability to win contracts because the products sold under those customers' names, Norell said. Conversely, "having your own brand equity and distribution system builds the brand," he said.

The South Korean company got its big chance in the federal government market when its home country was added to the Trade Agreements Act (TAA) in 1996.

LG jumped into the market right away and has recently gained some momentum. The company will sell about $60 million worth of its products in the federal market through its resellers this year, compared to half that amount a year ago, according to Mike Bahniuk, LG's government territory representative.

Plummeting prices in the monitor market play to LG's strength, so the timing is good for the company to establish its own name. "[Because] the Korean companies are TAA-compliant, they have a cost advantage over the Japanese manufacturers because of economic issues," said Alan Bechara, president and chief operating officer of Government Micro Resources Inc.

Gaining Stability

GTSI, Dunn Computer Corp./IDP Corp., Intelligent Decisions, GE Capital Information Technology Solutions, Vanstar Corp. and GMR are among LG's resellers in the federal market. LG is targeting contracts from agencies more than the GSA schedule because of its greater stability. "Those quantities are attractive," Norell said. Furthermore, the contracts are more stable than the GSA schedule. "You know where your profitability is going to be," he said.

GTSI's PC-2 contract with the Army is a big source of LG monitors for federal agencies, Thoreson said. "We sell thousands and thousands of those things on PC-2," he said.

Vanstar also sells LG monitors on PC-2; IDP sells them on Desktop V, and Unisys Corp. sells them on a contract with the Internal Revenue Service. On contracts such as these, the $50 to $75 variation in price per unit for monitors from different companies can quickly add up, so substituting LG for a more expensive brand is a common strategy, Thoreson said.

Consultant Bob Guerra, president of Robert J. Guerra Associates Inc., called such practices "a legitimate sales approach and a way for the government to avoid paying too much."

Bechara said it is easy for resellers to use this approach. "Many times where [agencies] specify a PC or server [on a bid], they stay silent on the monitor," he said. "Monitors are one of the most commoditized items in the industry."

LG still sells low-end products with the Goldstar label, but it plans to phase that name out completely. Norell said that will enable the company to sell more profitable, higher-end products, instead of just competing on price. "Some people associate Goldstar with value, but at the low end," he said. "When you look at the long term, you can't have the emphasis on 'cheap.' "

LG will build its reputation with new, cutting-edge products, such as LCD flat-panel displays and a traditional CRT monitor that uses technology invented by Zenith Data Systems Corp. to produce a truly flat surface. "We are not talking about low-tech, inexpensively procured technologies," Norell said.

It will also have to build its reputation the old-fashioned way— by earning it. Over time, customers have to come to believe LG monitors are reliable. So far, customers have not seemed to shun LG based on any negative association with the Goldstar name, according to the resellers.

"They are first or second tier," Bechara said. "We haven't had any unusual issues."

Thoreson said he gets very little resistance from customers when he offers them LG monitors, and a solid warranty usually allays any doubts they might have. "The monitors come with a three-year warranty that takes a lot of the apprehension out," he said. "But occasionally I get someone who says, 'No, sell me something else.' "

As part of its plan to establish a reputation for high technology, the company sells a handheld computer called the Phenom Handheld PC Ultra, which has found some interest among federal customers, according to Thoreson. It also sells CD-ROM and CD-Readable drives and will soon sell Digital Video Disc drives.

-- Carney is a free-lance writer based in Herndon, Va. He can be reached at DanCarney@compuserve.com.