Friday, May 25, 2007

Back to Retail for Dell

Dell announced today that they will be selling several PC models in Wal-Mart stores. It's a very interesting development, not only because Dell is so well-known for its direct business model, but also because Dell did not succeed when it tried to sell PCs in the retail channel back in the early 1990s. What's the challenge for Dell as it tries to sell through retailers? It goes back to why many traditional PC makers had difficulty imitating Dell's direct business model. The two ways of doing business (selling through retail and selling direct) are somewhat incompatible with one another. Selling through retailers means producing and distributing large volumes of standardized products. Selling direct means producing customized PCs on demand. The processes and activities required for each business model are quite different. It's easier for a firm to completely optimize on one business model, rather than trying to operate two models simultaneously in the same corporation. That's one reason why Dell did so well in the 1990s, while IBM, Compaq, and others struggled to launch their direct businesses while still selling through value-added resellers and retailers. Dell was a "pure play" - those often trump firms that find themselves "straddling" between two somewhat incompatible business models. Hewlett-Packard ultimately figured out how to make the two models work together - now Dell must learn the same if they wish to succeed in the retail channel.


Anonymous said...

Just wanted to clarify or add to your information.

The plan is to sell 2 specific desk tops at Wal mart. We see this, as you correctly note, as an addition to our business strategy, not a replacement. Direct is still at the heart of our consumer business…we are not fleeing that business but adding to it.

Also on the business-to-business side of the house, you might also find this interview of some interest.

Thanks for the perspective and commentary

Affordable Luxurious Wedding Dress Blog said...

cheap wedding gowns,
discount bridal gowns,
China wedding dresses,
discount designer wedding dresses,
China wedding online store,
plus size wedding dresses,
cheap informal wedding dresses,
junior bridesmaid dresses,
cheap bridesmaid dresses,
maternity bridesmaid dresses,
discount flower girl gowns,
cheap prom dresses,
party dresses,
evening dresses,
mother of the bride dresses,
special occasion dresses,
cheap quinceanera dresses,
hot red wedding dresses