Dell's move to sell through Wal-Mart was a "creative choice" and the PC maker needs to be careful about balancing the message that choice sends, according to J.P. Gownder, a principal analyst at Forrester Research. Gownder has been watching the company's moves into the retail space.
"They are going for cost-sensitive consumers, and if there is something that Dell needs to be careful of it's that they need to make sure that everyone understands that this is the low end of their product line," he said. "They have spent the last five years trying to convince everyone that they are a high-end build-to-order company."
Gownder said the company needs to ensure that the message spread by the recent move is that it caters to a range of price points and needs—the same way General Motors has both luxury cars and economy cars.
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Gownder described Dell's choice of Wal-Mart as "creative" because more natural targets would have been Best Buy or Circuit City Stores, he said. But Dell has said that Wal-Mart, as the world's largest retailer, can provide it with an education about retail.
And now that Dell will be in the retail space, the company must learn how to stock SKUs, how to determine the mix of SKUs to stock, what kind of retail displays are useful in reaching customers, and how to work with customers to make decisions about displays, Gownder said.
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Dell, based in Round Rock, Texas, is joining several PC makers already selling in the retail space, including Hewlett-Packard, Gateway, Toshiba and Apple. "Dell has been a holdout in the PC industry," Gownder said.
The company has called the Wal-Mart move a first step in an evolving strategy; its next retail move is anyone's guess. Gownder said he believes a subsequent move could be to expand the company's demonstration stores, now only in New York, Tokyo, and Austin, Texas. Other moves could be for Dell to expand its mall kiosks, open its own stores, or sell through midmarket retailers such as Best Buy and Circuit City.
"They have been a little tight-lipped," Gownder said about the company's ultimate plans. "Something secretive is going on in Round Rock and we'll have to wait to find out what it is."
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