From The Fool- The Lunchtime News -Dell
Mar 03, 1999
FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
Dell Announces Gigabuys.com
Earlier this morning, Dell Computer (Nasdaq:DELL - news) announced the launching of an on-line computer products superstore, Gigabuys.com. Through this site, consumers will be able to buy over 30,000 computer-related products such as printers, digital cameras, scanners, and software. CEO Michael Dell stated in a press release that he hopes this new offering will "deepen" Dell's relationship with current customers as well as attract new ones. When I checked out the site around 11:30 a.m., I received a friendly "Coming Soon" sign (not all was lost... it did capture another unique visitor to tout in its next quarterly earnings release). In midday trading, Dell was trading up $5/16 to $78 3/8.
>b>Expanding to sell a more significant array of computer products is a natural extension of the direct selling model. If you have people coming to your site in a buying mood, why not have them pick up everything customers might want? Just last week, direct computer seller Gateway (Nasdaq:GTW - news) announced that it was taking a stake in the NECX Office and Personal Technology Center, another online superstore. Broadening product offerings is a logical step to leverage off each company's large customer base.
Investors need to remember, however, that the Internet space is a competitive world. In addition to the superstores that the direct sellers have created, many others are out there. Some of these are from new companies such as Onsale's atCost service. Others are offered from traditional retailers such as CompUSA (NYSE:CPU - news) online and distributors like Compucom's (Nasdaq:CMPC - news) pcsave.com.
While most of these companies can enjoy initial success as they grow from very small bases, I would anticipate a significant competitive battle sometime in the next few years. Such a struggle will lead to the sale or closure of many weaker sites. Who will the winners be? Most likely they will be the ones who create a strong brand name, develop a loyal customer base, provide reasonable prices, offer excellent customer service, and have deep pockets. Based on its success in achieving these characteristics in the personal computer business, Dell is likely to be a strong contender in this field as well.
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