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It's tough to be in a market where one of your competitors wrote the book. But that's exactly the position PC manufacturer Tiny Computers finds itself in.

Not only does the UK company compete head-on in its traditional business with Dell, the king of direct selling, it's also up against the same company, the most proverbial of web success stories, in the online arena. Tiny is trying, from a standing start, to compete with a company that sells a hundred billion quid's worth of kit over the internet every day/hour/minute/fill-in-whatever-unlikely-sounding-figure-you-fancy-here. Consider, also, the fact that Tiny has only had any sort of meaningful web presence since last year and you have, to put it charitably, a rather tough task.

Not that any of this worries Colin Greene. Brought in from Intel as general manager of Tiny Online five months ago, Greene immediately set about relaunching the company's existing site, which had been pretty underwhelming, to say the least. By December, the current site, built by Domino Systems, was in place.

"Before that, there was this big animated splash page, and 85 per cent of the people who got as far as that page were then clicking away from the site," he says. "We wanted the site to echo the way we positioned the product in our offline marketing and other activities. We had been spending millions on advertising and the web site didn't bear any relation to any of it."

The redesign certainly did the trick, massively stimulating growth in traffic, and more importantly, in sales. "We sold more online last week than we did during the entire first two months I was at Tiny," he comments.

"But we're still catching up with what Dell has done. The difference, and the advantage we have, is that we are a clicks and mortar company - we have a retail presence as well."

In fact, Tiny is difficult to categorise. It doesn't sell through the normal retail channels like, say, Compaq or Hewlett-Packard. But it's not a pure direct seller, because it has premises that it sells from.

And neither is it a genuine retailer; it's careful to refer to these premises as "showrooms" rather than stores, because shoppers can't simply walk in and stroll out with a computer under their arm. The machines are made to specification in a factory and shipped to the customer from there.

This non-retail business model helps the company's e-commerce operation to run smoothly, according to Greene. "We don't hold stock because this industry moves so fast, and we don't want a warehouse full of 450MHz processors," he says. "The web site works the same as the showrooms: the order is placed online, it goes to our factory in China, and the machine is with the customer within a week. So the back-end, the logistics and so on, are exactly the same. And people are happy to buy online if it's a trusted brand and they feel comfortable with it."

The company is a surprisingly large operation. It sells more machines in the UK than, say, Gateway, and for a period recently, its domestic PC sales topped IBM's. Every PC it sells comes with an icon connecting the user to Tiny Online, the company's free ISP (www.tinyonline.net), which was launched in March last year and has now become the 15th most popular ISP in the UK, according to Fletcher Research.

"The ISP is a very good distribution mechanism," comments Greene. "We sold 300,000 PCs last year, and 92 per cent of buyers clicked on the ISP icon. We have nearly 300,000 subscribers and acquire more than 1,000 every day. We distribute the CDs in 250 showrooms, and we receive 3,000 calls a day in response to our offline advertising, all of whom are sent CDs.

We're like a smaller version of Freeserve."

In a rather neat virtuous circle, PC sales are used as a way of signing people up for the ISP, and the ISP is used to sell them more computer equipment. "The ISP is a customer acquisition play," says Greene. "We're using it to sell warranties, software, peripherals and things like digital cameras - and then there's the interconnect revenue.

"We're starting to realise that there is a unique way of communicating with our customers that we never had before.

We now know, for example, what the top products are that people are interested in. And we're getting 3,000 people a month signing up to receive email from us - people who want to receive our promotions.

"We're doing internet-only deals, like discounts for buying online, or offers where you get 64MB of memory for the price of 32MB, or free software.

The promotions have been the most visited area of the site. That kind of thing we can do quite easily, but it's much more difficult for us to do things online like upsell warranties when someone buys a PC."

In order to sell upgrades and other products more effectively, Greene concedes that the company needs to take control of the ISP's portal site.

At the moment, it's co-branded with MSN, which produces the content, but Greene wants to make it a unique destination site with more of a Tiny focus. "It's not as flexible as we would like it to be," he says. "The Tiny elements of it should be better integrated."

With a better portal up and running, the role of Tiny's web site in changing the profile of the company's customers will increase.

This change is already beginning to happen. While the majority of Tiny buyers remain in the B, C1 and C2 demographic groups, their levels of PC-literacy are gradually changing. The showroom-buying route has always suited the computer newcomer, while more experienced purchasers have preferred direct-sales channels, which are now coming to the fore with the success of the web site.

"Traditionally, more than 50 per cent of our customers have been first-time buyers, but that's going down because of the web site," says Greene.

"We increasingly appeal to a lot of people who are buying their first upgrade, and who understand what a processor is, or a software bundle."

The site is also changing buying patterns. Where the majority of retailers experience their peaks in business at the weekend, Tiny's are on Mondays and Tuesdays. Greene believes that this is to do with first-time PC buyers who are exposed to Tiny's offline advertising at the weekend, and then go online and buy when they get back to work. His view is backed up by the fact that the company did its highest ever volume of online business on 4 January this year, which was the first day back at work after the extended Christmas and New Year break.

So far, the biggest hurdle the company has faced online is financing.

One of the company's biggest selling points in its showrooms is the availability of a variety of different financing options, the most popular being buy now, pay in nine months' time. The showroom assistant can ring up and get instant authorisation for the deal. But that isn't so easy on the web.

"More than three-quarters of our offline sales are buy now, pay later.

People don't understand that we can't make that sort of immediate finance decision online," says Greene.

"We get several dozen calls about it every day. The first day we relaunched the site, a lot of people got as far as the basket stage, but not many ordered. So we asked people why they didn't buy - we had to word that email pretty carefully - and a quarter responded: they all said it was the lack of a pay-later facility."

The company has started to offer customers the chance to buy online and defer payment until 2001. The problem, as Greene admits, is that it takes up to a day to reach a decision about whether an individual is eligible for financing, and Tiny still requires the customer's physical signature.

As well as overcoming obstacles like this, he is also devoting his time to building up the business and professional side of Tiny's business online, which accounts for 15 per cent of offline sales, and to expanding internationally.

As well as the UK, the company's online offering currently covers the US and Asia-Pacific. The former complements a small showroom network in Washington State, but Tiny has no terrestrial presence in Asia, and has instead spearheaded its expansion into that market with one of Hong Kong's first free ISPs. "I'd like to think that I've fixed tiny.com/uk, and now I'm devoting my time to the US and Asia-Pacific," says Greene.

In the UK, however, he believes that Tiny's biggest trump card is the ways in which the company's online and offline operations work together.

That applies to people buying online after doing their research in a showroom, and those who look at machines in the unpressurised environment of the web site and then walk into the showroom to pay for them. It also applies to the operational side of the business which, he insists, is all pulling in the same direction. "Either way, it's a sale," he says. "It isn't an either-or: clicks and mortar does work. When a sale is partly made offline and partly online, we don't have an argument within the company about who gets it." l