Dell Is No Apple

By Pedro Pereira  |  Posted 2006-05-26 Email Print this article Print
 
 
 
 
 
 
 

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Opinion: Instead of investing in the channel, the area most likely to produce sales growth, the vendor is trying to be Apple. The problem is Apple is cool and Dell isn't.

PC maker Dell's decision to open two inventory-less retail stores this summer reminds me of a scene in the recent hit comedy "The 40-Year-Old Virgin."

The protagonist's love interest runs a store that does nothing but sell items on eBay. When a potential customer comes in trying to buy something, the owner has a hard time explaining the concept.

It makes me wonder how many potential customers will be walking into the Dell stores at shopping malls in West Nyack, N.Y., and Dallas expecting to leave with a new laptop under their arm.

"No, ma'am, you'll have to wait till we ship it to you at home. Is ground OK or would you rather pay an extra 50 bucks for overnight delivery?"

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I don't know about you, but unless I am buying furniture, I expect to walk out of a store with my purchase. If I am buying online, however, I accept I have no choice but to wait for delivery.

That's one problem I foresee with the Dell storefront approach.

The other is, well, at the risk of impersonating a broken record, I am convinced Dell is still in denial about the real issue: The Round Rock, Texas, company needs the channel.

Instead of investing in the area most likely to produce the results Dell needs—sales growth—the vendor is trying to be Apple. The problem is Apple is cool and Dell isn't. In fact, there hasn't been anything "cool" about the vendor since "Steven, the Dell dude" vanished from our TV screens a few years ago.

Apple is image; it's attitude. Using a MacBook at your neighborhood café says something about your nonconformist view of the world. But if you pull a Dell out of your bag, the only message you're sending is that you presumably got a decent deal when you bought it.

And if Dell has anything to say about it, you're going to continue getting a decent deal. The company is dropping its prices, raising concerns that it is about to spark a price war should competitors like Hewlett-Packard and Lenovo decide to return fire.

In a price war, all belligerents lose because margins get shot. Dell CEO Kevin Rollins appears unconcerned about that because the company has "kept margins too high."

Dell also plans to improve its customer support and the quality of its products. I'm sure plenty of customers feel this is long overdue, but it's hard to envision exactly how the vendor will achieve all this while taking steps to reduce margin.

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But that's a problem for Dell to resolve. Unfortunately, Dell's actions have repercussions in the channel, where VARs and integrators often get pressure from customers to buy or service the Dell brand even though the vendor boasts of cutting out the intermediary with a direct model that is "the most efficient path to the customer."

If Dell decides to expand its mall storefront initiative, pressure on channel companies is only going to increase. The problem is, unless it has a serious change of heart, Dell will continue to refuse to provide a support structure for those VARs that influence sales of and service the brand. By some estimates, about 20 percent of Dell sales is derived from the channel.

That percentage could be a lot higher if Dell came to the unavoidable conclusion that the direct model only gets a vendor so far and that it needs to embrace the channel.

Sure, Dell has done quite well over the years by selling direct, though I can't help wondering how well it would have done without the legion of VARs the vendor's customers have called on for service.

Customers will continue to need service, and no amount of price drops and retail store openings will change that. And Dell would help itself best by working with the companies that provide that service.

 
 
 
 
 
 
 
 
 
























 
 
 
 
 
 

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