Steven and Thread ... Looks Like Dell Jr. Comes to Austin.
regards,
mazman
Start-Up Hopes PC Buyers Want To Connect The IDot
Investor's Business Daily, 9/14/98
Author: Nick Turner
Do what Dell Computer Corp. does best and do it better. That's
what start-up PC maker IDot.com Inc. in Austin, Texas, is
attempting in Dell's own backyard.
Dell, based in the Austin suburb of Round Rock, epitomizes the
idea of selling directly to customers. IDot looks to cut out the
middleman even more. Dell's phone agents field many of its
orders; IDot handles everything online.
IDot officials claim their operation is so efficient that IDot can offer
lower prices than Dell. And it can make money, even with
razor-thin margins, they add.
''Dell's done a very good job,'' said Mark Marlow, IDot co-founder
and vice president of product marketing. ''But we feel that to be
successful in the long term, you have to cut down on the number
of times that a person physically interacts with a customer.''
At IDot, there are 23 full-time employees occupying 25,000 square
feet of space. Orders for IDot computers literally go directly to the
factory floor.
As soon as customers punch in their orders at IDot's Web site and
a credit card is approved, company servers then transmit that
order straight to the factory. No human shepherds the order
through. The PC typically is shipped to the customer within 48
hours, IDot officials say.
Can this model work? Dell's sales over the Internet have
blossomed, reaching $6 million a day in July, two years after its
Web sales began. Dell wants to sell half of its computers via the
Internet by the end of '00.
But Dell, with $13.7 billion in revenue, still says human contact is
necessary. Many customers are large corporations, which Dell
meets face-to-face, company officials say.
''The direct model is not just about selling,'' said Libba Letton, a
Dell spokeswoman. ''It's about developing and maintaining
relationships with customers.''
IDot insists that buyers can easily reach its employees over the
phone. Most of its customers, though, would rather deal through
the Internet. The company targets tech-savvy buyers who don't
need hand holding.
''We're looking for people who are buying their second, third or
fourth computer,'' said Neil Bremner, IDot co-founder and
executive vice president.
Some issues, such as technical support, still must be handled
over the phone. IDot outsources those services to another
company.
The idea behind IDot was spawned over dinner last November at
an Applebee's restaurant near Dell's campus. Bremner and
Marlow were introduced by entrepreneur C.P. Lee, who now
serves as the company's president.
''We thought there was a huge opportunity out there on the
Internet,'' said Bremner. ''It was a market that wasn't being served
well by the traditional companies.''
Backed by $3.5 million in venture money, IDot was formed in
January and started selling computers in April. Looking to build up
its infrastructure, the company seeks another $20 million in
funding.
Marlow won't discuss current company sales figures. But he
hopes to see the revenue growth of his former employer, the
now-defunct Power Computing Corp. Power, which made clones
of Apple Computer Inc.'s Macintosh, sold 100,000 units in its first
year of operation.
''We went from zero to $400 million in annual revenue in about
three years' time,'' Marlow said. ''We're hoping to come close to
replicating that feat at IDot.''
IDot claims to offer better prices than Dell. Comparable PCs are
anywhere from 3% to 15% cheaper, Marlow says.
The company's prices can indeed be better than Dell's - if you're
buying one or two PCs, says Rob Enderle, analyst at Giga
Information Group in Santa Clara, Calif. But Dell's prices drop on
volume purchases, he says.
IDot says it isn't going after large corporate customers. The
company hopes to attract college students, video-game players
and small businesses. And IDot sells low-end PCs, a market
segment that Dell won't touch. Some of IDot's models sell for less
than $700.
IDot's business model will allow it to turn a profit even if its gross
margins drop to single digits. The company won't divulge current
margins, but officials say they are lower than the roughly 22%
earned by Dell.
IDot says its Austin location allows it to get good deals on
components. Several component makers are situated nearby to
serve Dell.
Still, getting components at low costs is unusual for a start-up PC
maker, which often must pay higher prices because it sells a
lower volume. IDot's advantage is that it obtains credit-card
payment for a PC immediately, and the company can pay cash for
parts right away.
Dell leads the PC industry in turning over its inventory nearly 52
times a year. IDot hopes to achieve similar results. So far, it's on
track for about 40 turnovers a year.
In any event, it's far too early to start calling IDot the next Dell,
says Giga's Enderle.
''IDot has to run for a while,'' he said. ''It's going to take them a few
years to grow up and challenge anyone.''
(C) Copyright 1998 Investors Business Daily, Inc. |
