Dell`s PC Pricing Conundrum

By Frank Ohlhorst  |  Print this article Print

Dell continues to wrestle with pricing conflicts between what solution providers pay for systems and the price customers get quoted when buying from Dell Direct. With Dell’s deal with Ingram Micro and Tech Data, will solution providers find similar pricing conflicts with distributors? Channel Insider puts Dell’s pricing scheme to the test.

Has Dell learned its lesson about pricing products for the channel?

Since the computer manufacturer re-entered the channel nearly 18 months ago, it’s dodged issues of conflict for what it offers registered partners for prices on products and what customers can find by shopping direct on Dell’s Web site.

Now Dell is engaging the channel through distribution. In a deal signed two weeks ago with Ingram Micro and Tech Data, Dell is offering 14 desktop and notebook units from its business-class Vostro line through distribution giants Ingram Micro and Tech Data. Dell says solution providers can buy direct from Dell or through distribution. The benefit of buying through a distributor is having one source for comparative brand pricing, a broad line of products for building holistic solutions and credit. Distribution, in theory, often offers better pricing than what manufacturers charge end users, but slightly more than what solution providers can get direct from suppliers.

Dell’s pricing conflicts with the channel are nothing new. Dell’s 2002 attempt at a white box program proved disastrous. The company offered solution providers "unbadged" Dell PCs for resale, but there were a lot of problems with the model. First, the white box versions were often more expensive than Dell-branded systems. Second, the removal of the Dell label made the systems less desirable to customers. And third, Dell only offered a limited selection of low-end PCs to its partners.

Has Dell learned from the past and is the company really looking to equip its partners with competitively priced systems that can’t be under-sold by Dell.com and the company's many competitors? Channel Insider checked out the prices of the new Vostro systems sold through distribution against the prices of comparable systems available direct from Dell and from Dell competitors.

Dell’s foray into the distribution model consists of the company’s Vostro product line, with approximately 14 desktops and notebooks available. The Vostro product line is aimed at business users and sport mid-level features and performance. Vostro should have particular appeal to the small business user due to affordable pricing and competitive software bundles.

Dell’s price leader via distribution is the Dell Vostro 220 desktop, which has an MSRP of $469.99. Tech Data is offering the Vostro 220 (P/N 464-2127) for $451.21. That system comes with a Core 2 Duo E7300 (2.66 GHz) CPU, 1 GB Ram, 160 GB Hard Drive,  DVD±RW (±R DL) optical drive, GMA X4500HD video,  Gigabit Ethernet and  Windows Vista Business with an XP Pro downgrade available. 

An equivalent system available from Dell Direct prices at $478, just a few dollars more than the MSRP of the distribution-level system. Interestingly, building that configuration at Dell.com generates a warning that 1 GB of RAM isn’t enough for Windows Vista Business edition.

While on the surface, it looks like Dell is taking the right approach in regards to pricing for the channel, but one needs to consider Dell’s frequent specials and offers. For example, Dell.com is currently offering a "Desktop Deal" Vostro 220s equipped much the same as the distribution system, with 2 GBs RAM and a 19-inch LCD monitor included for $559. Solution providers buying through distribution are going to find it difficult, if not impossible, to compete with that offering.

Those looking to compete with Dell’s pricing may turn to Lenovo or Hewlett-Packard for similarly equipped systems. Lenovo’s ThinkCentre A57 9702, when equipped similarly to the Vostro, costs about $470; an HP Compaq Business Desktop dx2400 costs about $540. This shows that on the bottom end, Dell can beat most other vendors when it comes to basic pricing.

On the other hand, system builders may be able to under-sell Dell by carefully choosing components. For example, a system builder should be able to build a comparable system for about $435 using an Intel E7300 CPU, Intel DG31 Motherboard, Antec case/PSU, Maxtor 160 GB hard drive, Corsair RAM, Lite-on Optical drive, generic keyboard, mouse and Windows Vista Business Edition.

Comparing notebook computers is a little easier. Here, Dell offers a Vostro 1510 Notebook (P/N 464-3400) for $747.55 through Tech Data. That unit has a MSRP of $892 and features a 2.1 Ghz Intel Core 2 Duo T8100 CPU, a 15.4-inch display, 2 GBs RAM, 160 GB hard drive, DVD±RW optical drive, GMA X3100 graphics, gigabit Ethernet,  802.11b/g wireless, biometric fingerprint reader and  Windows Vista Business with XP Pro downgrade available. On Dell’s Web site, the T8100 CPU is not offered on the Vostro 1510, forcing buyers to select the T7250 CPU. That said, the Dell Direct Vostro systems come with 3 GBs RAM and can be configured pretty much the same otherwise. Dell.com prices the similarly configured Vostro 1510 at $780, slightly more expensive than the distribution version of the notebook.

At this time, Dell did not have any "Dell Deals" on the Vostro 1510, meaning that until a special offer develops, the best place for a solution provider to buy the Vostro 1510 is through distribution.

Of course, Dell is not the only notebook manufacturer. Toshiba offers a similarly equipped Satellite Pro S300 for $799 and Lenovo offers an SL500, with a P7370 Intel CPU (2.0Ghz) for about $680—a bit cheaper than Dell, albeit with a slightly slower processor.

In our tests, Dell’s pricing against both distribution and competitors either doesn’t conflict or is within a reasonable variance. Even so, solution providers will have to pay careful attention to Dell’s "specials" when pricing systems. Those not looking to sell Dell products may have some work cut out for them, where it may be difficult to beat Dell’s prices feature by feature.