Dell to move away from direct sales, partner with 3rd party distributors

Dell has traditionally always sold its products direct to consumer, to the extent that its sales figures often aren't factored into retail-based PC marketshare figures. That could all be about to change (for reals this time) as the company plans to move away from its strict direct-to-customer sales approach with a move towards selling PCs through third parties including retail stores, "solution providers," and "channel partners." The change was apparently first hinted at in a memo from Michael Dell, who says "the direct model was a revolution. It's not a religion." Not that we've ever imagined Dell's sales strategy as the consumer electronics equivalent of the Bible (nor the little red book for that matter), but it'll still be pretty hard to envisage going into a mall and seeing Dells next to other brand name PCs: aside from the occasional sighting of a Dell kiosk, it's just not what we're used to. Fortunately the company's tentative steps in the direction of more aesthetically pleasing designs means that there hasn't been a better time for Dell to dive headfirst into retail. So, do you think Dell has got what it takes to go retail? 'Cause dude, it's a warzone out there.

[Adam Pflug @ May 19th 2007 8:21PM]

Just FYI, Costco has been a 3rd party distributor for Dell PCs for some time - though I think it might be the old store that is...

[Rick @ May 19th 2007 8:24PM]

I want a brand like Apple's, daddy! And I want it now!!!!

[Nadeem @ May 19th 2007 8:26PM]

Another one of your dodgy 'leaked' stories? Will never trust a word you say ever again and will go to real news sources staffed by professionals with years of experience.

[Anonymous @ May 19th 2007 8:30PM]

Seems to me like Dell isn't making a move 'away from direct sales' per say, but rather will be complementing their sales as per PCWorld.com

"Now Dell has plans to augment its existing direct sales by seeking growth through those solution partners as well as retail outlets in the U.S. and abroad"

http://www.goodforyourwallet.com
--The truth behind Alex Tew and the milliondollarhomepage.com

[michael @ May 19th 2007 8:45PM]

I think Dell should have it's own store. It does a better job of showcasing their own products instead of relying on 3rd party retailers to sell a bunch of computers all pushed together. Plus, a store would be much more comfortable then standing around a kiosk.

[Darnell @ May 19th 2007 8:53PM]

"Another one of your dodgy 'leaked' stories? Will never trust a word you say ever again and will go to real news sources staffed by professionals with years of experience."

Ha ha. Surely you kid. As no news media source is immune no matter how presitigious. Remember Jason Blair? I'll let you google him.

Anyway--This sounds like a no-brainer. Smart move. I wonder what kind of discounts they'll have when they start rolling these stores out. Probably be some great bargains.

[Arthur @ May 19th 2007 9:10PM]

I assume they will only sell pre-configured systems in the retail stores, and sell customized systems online only? Hopefully they don't make Gateway's mistake by putting these stores out in the middle of nowhere instead of inside shopping malls like Apple.

I think the biggest possible benefit to Dell consumers would be if they had a "Genius Bar" type service in their stores for tech support and repairs.

[THX 1138 @ May 19th 2007 9:43PM]

Didn't Dell used to sell stuff for Acer, or was it that Acer used to make the computers Dell sold?

[Craig @ May 19th 2007 10:11PM]

Dell has several small shops in Tokyo.... They're bigger than a kiosk, but not quite like an Apple Store....

[marby @ May 19th 2007 11:45PM]

I think the truth is probably that Dell is open to adding a retail brick and mortal component to its cornerstone direct sales strategy. Based on HP's success against Dell the past two years, this seems like a smart move. I can't imaging them moving completely to retail and giving up their margin advantages.

[Bitsbite @ May 20th 2007 1:17AM]

here in the UAE Dells have been sold in supermarkets and computer stores along with all the other brands since as far as I can remember. In fact I didn't even know a Dell store existed.

[mike @ May 20th 2007 1:37AM]

"I want a brand like Apple's, daddy! And I want it now!!!!"

The thing is.. Apple has always been a consumer oriented company.. and Dell has always been Business oriented.

Apple gets feverish and passionate fans, but they lose on marketshare when it comes to computers.

Dell sticking to business is the money play. This, I'm sorry, is not going to work.
Dell sells millions of computers to business customers, not people. People aren't passionate about Dell at all.

The reason they're doing this is because the PC marketing is being commoditized. Brand-less companies have been getting a free ride for too long.

So Dell follows the money. What the SHOULD do is not move to another customer, but move up to Business SERVICES. They're a business business. This will be a complete disaster.

Note: Buying a $5000 TV on the Internet is... not wise. You want to play with it, see how it looks in real life. This is why Apple has Apple stores.. most of their stuff needs to be seen and touched to really be appreciated. Specs alone do not make a Consumer Product.

Actually, that last line should be carved into every Windows Apologist's forehead. Copying Apple's stuff on spec is missing the point. Qualitatively, Apple is without peer. And that's everything in the Consumer market. The Windows Defenders will never get that.

[Grown Ass Man @ May 20th 2007 3:09AM]

Rick & Mike hit the 'nail on the head' on this call!

- Dell may have "Marketshare".
- But Apple has "MINDSHARE".

And there's a BIG difference.
Marketshare doesn't always ensure brand loyalty.
That's also why MS' biggest threat is Linux.

Mindshare is a form of 'social currency' that doesn't appear on a 'balance sheet' and can shift a paradigm almost overnight.

Just ask the folks at YouTube.

[Paul @ May 20th 2007 3:23AM]

- Dell may have "Marketshare".
- But Apple has "MINDSHARE".

I wouldn't call it mind share, as the brand loyalty comes from emotion instead of rational thought.
Fanboys are sheeple to be herded at a corporation's whim.

Just the other day I heard an older gentleman discussing how he was changing his dsl and phone services "back to at&t". When AT&T was bought by SBC and changed to SBC he had a bad experience and changed his services to another provider. Now that "AT&T is back" he is changing back to them. He is too blind to realize that it is still SBC, they are just changing their name to AT&T since they realized that brand loyalty is a powerful guide to the idiot blind sheeple.

[Grown Ass Man @ May 20th 2007 3:45AM]

"So Dell follows the money. What the SHOULD do is not move to another customer, but move up to Business SERVICES. They're a business business. This will be a complete disaster."

I agree with your assessment - but what I don't get is:

If Dell's 'service' is selling servers & pc's to businesses, then what other 'business services' would do the trick, in your opinion? Do you think that they should move away from being a hardware company? I would be interested to hear more on the subject.
--------------
If I were a consultant and wanted to give Dell some advice, here's what I would say:

Dell's alliance with Alienware provided top-notch pc specs, but the 'Average Joe' couldn't walk into a local 'big box' store and actually SEE any of the units in action.

Creating a more visible 'grassroots' presence wouldn't hurt them if they want to expand their sales with "John Q. Gamer"... if that's their goal.

[Grown Ass Man @ May 20th 2007 4:08AM]

"Fanboys are sheeple to be herded at a corporation's whim."

Paul, I totally disagee. Underestimating consumer intelligence will ruin a business... and right quick.

In fact, that's the EXACT type of mentality that causes companies to file for bankruptcy after their competition builds a 'better mousetrap'.
----------

I would even be willing to bet that for every (1) of those 'older gentlemen' you deemed 'AT&T sheeple', there are at least (10) younger Gen X'ers who would consider dropping their land-line altogether in favor of a mobile phone only, while upgrading to cable internet, or just use Skype, or VOIP, or just find a newer/better or cheaper service provider.

[Grown Ass Man @ May 20th 2007 4:19AM]

if anything Fanboys are Fanboys because their needs are constantly met by companies who keep an 'ear to the street' and build things they REALLY want.

Not because of hype.

A Fanboy wants a new feature, service or product and their favorite company says 'we hear ya and we're working on it.. stay tuned'.

Then when it hits the shelves, their 'fandom' goes up a notch.

Just my opinion.

[mike @ May 20th 2007 4:37AM]

I agree with your assessment - but what I don't get is:

If Dell's 'service' is selling servers & pc's to businesses, then what other 'business services' would do the trick, in your opinion? Do you think that they should move away from being a hardware company? I would be interested to hear more on the subject.

----

Dell is not in the service business. They are already beginning to sell advice, and try to apply the Dell model to other businesses. Rest assured, this is not easy: the Dell model only works for commodity goods (which is why Dell waits until something is a success before selling it--stupid in the consumer space).

Look at IBM. It may sound crazy, but as low end PC's become commoditized (obviously, look at Dell margins).. you move to higher margin stuff. Expensive servers, software(not an option for Dell) and Service.

Dell sells products and SOME business services already (that means selling advice, and information systems to small and medium sized businesses)

There's no real sense in 'getting out' of the hardware market, but as profit margins shrink, Dell will have a harder and harder time justifying current marketing budgets (whatever they may be) Cost/Benefit.

Don't worry.. the shareholders will begin to nag when those margins start to shrink.

Now, I basically said "Copy IBM".. which is an enormous company that sells business 'advice' with products included (in other words, they charge a lot for technological business solutions and vend the hardware as part of that solution)

My opinion. Not my idea: this is Experience Economy stuff (check it on Amazon)

[StreetStealth @ May 20th 2007 2:35PM]

Dell + better design + preinstalled Ubuntu + good looking stores ...

I may be an Apple fanboi, but this is starting to sound nice!

[LR @ May 20th 2007 10:19PM]

Are you trying to panic people?

I think your article is totally misleading, and I'm not sure if you believe Dell is migrating away from direct sales, or you're attempting a sensationalist headline and story to attract people.

Dell is NOT suspending direct sales. It's their primary business. The bulk of Dell's sales are to enterprise, but yes, they also have a consumer line.

Now if they happen to offer a line at retail, it's likely to compliment their existing direct sales. I suspect it would be an entirely different line for consumers only. Maybe gamer systems.

It would not be in Dell's best interest to suddenly adopt a VAR model entirely, as it would no longer offer Dell the benefits of the existing model of cutting out the middle man, the overhead of a brick and morter store, and maintaining value pricing.

In the cases of Apple and Sony stores, neither offers value pricing for their products.

But if you access Dell.com, you'l find a different price for the same item, from week to week (sometimes even day to day).

Anyway, we deal with the enterprise unit of Dell, and receive substantial discounts due to our volume of purchasing. No other company is able to touch them in pricing.

[Perrey Z. @ May 21st 2007 2:08AM]

Hmm... is that Angels I hear chanting of joy or a bunch of Dell batteries poping while they're on fire.

[andy @ May 21st 2007 9:31AM]

Dell told my company (one of the largest computer resellers in the US) months ago that they were planning on doing this and that they wanted to be more reseller friendly, but don't expect 3rd parties to jump right on board. We've always sold Dell, but it was a bit annoying and we have to worry about them stealing our customers so we're not really ready to just jump right in.