DALLAS (AP) - Dell Inc. is venturing farther from its direct-to-consumer
sales model and will start selling computers at Best Buy stores in January.
Analysts say Dell must expand its presence in stores because consumers
increasingly see computers as an extension of their personality, and want to
touch them before buying.
Dell built its business around selling personal computers directly to
customers over the phone or Internet, but it has been cutting deals with
retailers as growth of PC sales slowed and Dell's U.S. consumer revenue
declined. It fell 26 percent for the six months ended Aug. 3, compared to the
same period a year earlier.
The company lost its spot as the world's No. 1 computer maker to
Hewlett-Packard Co. late last year, and HP has stretched its lead since then.
Round Rock, Texas-based Dell said Thursday that Best Buy Co. will sell
Dell's XPS and Inspiron notebook and desktop computers at more than 900 stores.
Best Buy complements Dell's U.S. retail lineup. The company already sells
modestly priced PCs in about 3,000 Wal-Mart stores and targets small-business
owners with sales at 1,400 Staples Inc. stores.
Michael Tatelman, a vice president for Dell's consumer business, said Best
Buy gives his company access to a big audience of shoppers looking for machines
for gaming, music and photography.
The computer maker, however, will miss the pre-Christmas sales traffic at
Best Buy.
That suggests negotiations with Best Buy were difficult, said J.P. Gownder,
a technology marketing analyst for Forrester Research Inc.
"Gosh, it would have been nice to have this available about a month ago so
they could have taken advantage of Black Friday," he said, referring to the
traditionally heavy retail traffic the day after Thanksgiving.
Tatelman responded that Dell wrapped up the Best Buy deal sooner than
expected, and "We've got Wal-Mart and Staples available for the holiday season."
With the Best Buy agreement, Dell machines will be sold in nearly 10,000
stores around the world. Dell has deals with Bic Camera Inc. in Japan, Gome
stores in China and Carrefour Group and Carphone Warehouse PLC in Europe.
For many years, Dell resisted selling computers in stores out of fear it
would dilute the company's image of building affordably priced machines to the
customer's specifications. The direct-sales approach was a success with business
customers and seemed to work well with consumers, too.
But consumers now are more interested in style and computers that match
their personality, a development that has helped HP and other brands that are
readily available in stores, Gownder said.
"This is very overdue," he said. "Even if this cannibalizes some of (Dell's)
direct sales, they'll be able to compete head-to-head for market share, because
right now they're getting their lunch eaten by HP. Dell had to make this move.
They're hemorrhaging in the consumer market."
Richard Shim, an analyst with IDC, said selling through retailers is risky
because Dell must rely on store salespeople instead of its own. But he said
there's a good chance Dell's offerings will stand out in shelves already crowded
with machines from HP, Toshiba Corp., Apple Inc., Sony Corp. and others.
"They have the brand name, they're viewed as being a good value, and they
can pass on the advantages of being as big as they are," he said.
Shim added that Dell must continue to produce innovative, attractive
machines and change its marketing to appeal to consumers.
Dell has added colors and slimmer profiles to its Inspiron and XPS notebooks
in a nod to consumer tastes. It has also beefed up high-performing machines to
entice gamers.
Dell has also started to tweak its advertising, getting away from a longtime
fixation on price.
New print ads feature Victoria's Secret model Karolina Kurkova. A television
spot shows old machines exploding in slow motion, leaving only a new XPS One,
and ends with the tagline, "Dell. Now available in beautiful."
From Best Buy's perspective, the deal with Dell adds another name to the
chain's lineup of PCs.
Dave Morrish, a Best Buy senior vice president, said adding Dell would give
its customers unprecedented choice in buying a computer.
Shares of Dell rose 64 cents, or 2.6 percent, to $24.95, and Best Buy shares
gained 89 cents, or 1.7 percent, to $52.71.
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