With its core business on shaky ground, Dell executives said Nov. 29 that they believe their retail and channel strategies have been well received and will drive greater long-term revenue and profitability for the vendor.
In September, Dell stirred speculation and controversy in the channel when it announced it would build a formal channel program. The vendor said that while its strategy shift might temporarily dampen financial results in the short term, it expected to make significant growth gains by pursuing channel opportunities.
Dell said the indirect channel had welcomed it “with open arms,” and that its partners were not concerned about channel conflict resulting from the vendor supporting both a direct and indirect go-to-market strategy.
“Our partners really aren’t concerned that Dell also sells direct. They realize that all of our competitors also sell direct,” said CEO Michael Dell. He added that partners are pleased to have access to “the only full-line alternative to what our competitors are offering.”
Some VARs are not quite convinced, however. “Are they for real? I’m extremely skeptical,” said the president of an Indiana-based voice and data solution provider who asked not to be named.
“Dell is making the change because it has been struggling,” said Dan Roberts, general manager, E-net Solutions, an Austin, Texas, solution provider. “What happens when things get better?”
Dell remains bullish however. “We’re growing in areas where we haven’t been present before,” Michael Dell said, adding that Dell was looking for better ways to serve both retailers and VAR partners. The channel program, he said, is one way to do that.
“We have a $9 billion channel business that grew organically,” he said, “But we had no way of differentiating partners” from end-users. Extending configuration, customization and additional benefits to partners will drive partner growth as well as Dell’s, he said.
Specifics of the vendor’s channel program have been scarce, but Dell said this week it will reveal full details of the program in a virtual “Town Hall” meeting on Dec. 5.
The company has faced stiff competition from rival Hewlett-Packard, which shipped the most PCs worldwide in the third quarter. In the United States, Dell remained at the top of the PC market, but its share was eroded by gains from HP, Apple and Toshiba.
Dell CIO Steve Shuckenbrock said that Dell’s increased focus on retail channels and emerging worldwide markets is an attempt to reverse its market-share slide and also offers Dell opportunities in areas with lower operating expenses.
“Profit can grow quickly in emerging markets were we’re underrepresented. If we could approximate our U.S. representation, then we can do very well,” he said.
Earlier this year, Dell inked deals with retail giants Wal-Mart, Staples and most recently, signed Carrefour, the biggest retailer in Europe, as well as signing online office supply retailer Shoplet.com.
“Retail partners have embraced us in a strong way,” Shuckenbrock said, adding that Dell is still moving cautiously forward with other retail partnerships and carefully navigating the unfamiliar infrastructure and process issues of the retail channel. “We could be in more stores if we weren’t trying to be sure we get it right,” he said.
Dell said it is focused on a long-term strategy to drive sustainable growth and profitability. Michael Dell said the company’s financial results showed it was moving the right direction, and that “our long-term strategy to reignite growth is making solid progress.”