Dell to sell computers through Wal-Mart

Dell to sell computers through Wal-Mart
By Kevin Allison and Chris Nuttall in San Francisco
Copyright The Financial Times Limited 2007
Published: May 24 2007 18:46 | Last updated: May 24 2007 18:46



Dell, the struggling computer maker, will next month begin selling computers through Wal-Mart, confirming its move away from a traditional reliance on direct sales of personal computers over the telephone and internet.

News of the Wal-Mart deal came a week after Michael Dell, Dell’s founder and chief executive, said the company planned to end two decades of reliance on direct sales of computer equipment by embracing third-party resellers and retailers.

Dell is struggling to get back on its feet following several quarters of sluggish sales growth and missed forecasts.

“This is the first step in an evolving global retail strategy,” a Dell spokesman said on Thursday. “Customers are telling us they want more and new ways to purchase our products. We’re committed to finding new ways to reach more customers and this is one example of a new approach.”

Dell, which has long shunned retail sales because they force computer makers to carry costly inventory, said it would begin selling two of its Dimension desktop computer models for under $700 in 3,000 Wal-Mart stores in the US, Canada and Puerto Rico, beginning June 10.

J.P. Gownder, a principal analyst with Forrester Research, said Dell would gain a lot of experience from the deal in learning how the retail space worked. He predicted it could help the company regain some market share against Hewlett-Packard in the low-end segment.

“They are selling their lower end line, so it’s compatible with the Wal-Mart story, but I don’t know if it’s a great brand move because Dell is trying to sell itself as an elite brand,” he said.

The company stressed that the move to open a retail channel did not represent an abandonment of the direct-sales model that led the company to the top of the worldwide PC market in the early 2000s.

“The fact is the vast majority of our consumer customers prefer to purchase online or over the phone,” Dell said.

Dell has long argued that its direct sales model has an advantage over indirect sales because it gives the company tighter control over its supply chain and gives customers more options when it comes to customising purchases.

The cost advantages of the direct approach have been blunted by improvement in the supply chains of some of Dell’s rivals, such as Hewlett-Packard, which reclaimed the top PC spot from Dell last year.

Meanwhile, perceptions of poor customer service and other problems have led sales to slump.

The move to offer Dell computers for sale through Wal-Mart marks the most aggressive move yet by Mr Dell, who replaced Kevin Rollins as chief executive earlier this year in an effort to put the company back on track.