WSJ(1/30)Dell Plans To Peddle PCs Inside Sears, Other Chains
30 Jan 00:00
By Gary McWilliams and Ann Zimmerman
BUY A DELL at Sears? Why not, the computer maker says.
Direct-sales champion Dell Computer Corp. soared in the 1990s by selling PCs
on the phone and over the Internet. Now it's also courting old-line retailers
by offering to pay for floor space and launching trials of a Dell
store-within-a-store with big-name chains. It also is making its mall-based
sales kiosks permanent.
Dell started putting online kiosks in shopping malls a year ago to allow
customers to see and try its computers before they bought. By year end it had
expanded the concept to nine U.S. states, Canada, Japan and England.
Yesterday, Dell launched a trial with retail company Sears, Roebuck & Co.,
opening the first of about 10 stores-within-a-store in Austin, Texas, according
to John Hamlin, a Dell senior vice president. "We see it as another marketing
vehicle to extend the direct [sales] model," he says.
Dell isn't the only computer maker expanding its retail presence. Apple
Computer Inc. and Gateway Inc. have both opened retail stores in the U.S. to
supplement their online sales. But both companies stock their computers in
their stores. Dell customers will be able to pick out their computers at the
stores but will then either place their orders online at the kiosks or phone in
their orders from home. The company says it learned its lesson about stocking
stores with PCs in the early 1990s, when it tried to sell through Wal-Mart
Stores Inc.'s Sam's Club, Staples Inc. and CompUSA. That push failed in 1994 as
customers struck better deals over the phone directly with Dell and the
retailers were stuck with unsold stock.
So far, Dell's new approach has met resistance from some retailers,
particularly those that see the company's in-store kiosks as a Trojan horse.
Best Buy Co., the largest U.S. consumer electronics retailer, spurned Dell's
overtures. A Best Buy spokeswoman confirms that an approach was made, and says
the company considers Dell a competitor.
Dell was also rebuffed at computer superstore CompUSA, where it sought to
install kiosks in exchange for a fee for sales. "They couldn't make us happy,"
says CompUSA President Larry Mondry. The two companies disagreed on which one
would handle non-PC sales such as extended warranties, accessories and
upgrades. CompUSA, which operates some 229 stores, is a subsidiary of Mexico's
Grupo Sanborns.
Mr. Hamlin maintains that Dell isn't suffering from any lack of potential
retail partners. "On any given day, I can tell you of 50 or 100 guys who have
approached Dell trying to do business with us," he says.
The latest retail moves reflect the Round Rock, Texas, company's drive to
expand its consumer sales amid a weak corporate-PC market. Indeed, even as
rivals such as Gateway are retrenching and analysts see overall PC revenue
falling 4% this year, Dell is rapidly expanding home-PC sales and preparing for
the launch of its own printer brand.
On Feb. 13, Dell is expected to report its fourth-quarter profit rose 30% to
$600 million, or 23 cents a share, on a 20% jump in revenue to $9.7 billion,
according to estimates compiled by Thomson First Call.
Consultant Adam Levin, who advises technology companies on retail strategies,
says that despite Dell's early rebuffs, retailers are more willing to
experiment with new sales ideas than they used to be. But he adds that Dell
does face resistance because of its insistence on selling computer add-ons in
addition to PCs.
At Sears and at Japan's Jusco supermarkets, the kiosks link directly to
Dell.com. But Dell has been more flexible elsewhere. Since November, warehouse
chain Costco Wholesale Corp. has sold Dell PCs through its own Web site at
prices below Dell's. Dell supplies 11 pre-built PCs for the retailer's Web
site. Recently, a Dell PC marketed on Costco.com was priced nearly $300 lower
than a machine configured to the same specifications on Dell's Web site.
"Most of the time our prices are cheaper," says Doug Schutt, Costco's senior
vice president for electronic commerce.
Costco also recently installed a PC kiosk that lets customers order Dell PCs
in addition to its other products from inside the store adjacent to its
Issaquah, Wash., headquarters. "We are excited to test something with such a
great name," says Chief Financial Officer Richard Galanti.
Analysts say a permanent retail presence now may well be critical to Dell,
especially as it tries to sell its own printer line. "It's still not clear to
me how Dell can be successful in consumer-printer sales with a pure direct
model," says Bill Shope, a computer analyst at J.P. Morgan Chase & Co.
Stephen Baker, an analyst at sales-tracker NPD Group Inc., says Dell's move
to align itself with retailers is part of its plan to challenge printer market
leader Hewlett-Packard Co. "They're looking long-range and they know they can't
keep people happy just by selling [printer] ink through a Web site," he says.
Smaller kiosks went up last month at five Japanese supermarkets. Dell's
Japanese subsidiary began putting kiosks in book and electronics stores and
then broadened its approach to include well-known retailers. Its Japanese
retail partner is Aeon Co., the nation's second-largest retailer.
The kiosks have helped the company quickly expand its sales to the home.
Dell's world-wide share of home-PC shipments rose to 11% in last year's third
quarter from 6.8% when it first began setting up the kiosks, according to
market watcher International Data Corp. Dell also says its third-period unit
sales to the home jumped 51%.
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Miho Inada contributed to this article.
(END) Dow Jones Newswires
01-30-03 0000ET |
