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Dell Strikes Deal with Wal-Mart
Dell Inc. plans to sell personal computers at Wal-Mart Stores in a departure from its strategy of selling PCs only directly to customers. The computer maker said it will begin selling two of its Dimension desktop computers in about 3,500 Wal-Mart stores in the U.S. and Canada, beginning June 10. Wal-Mart said it will charge less than $700 for the two multimedia desktop personal computer bundles.
Dell said the deal "represents our first step" into global retailing. The company said it will announce additional moves into retailing in the coming quarters, although it declined to give specifics. The move represents an attempt by Dell to better compete with Hewlett-Packard Co., which has supplanted Dell as the world's No. 1 PC maker, in part, due to a strategy of selling in the U.S. through major retailers including Wal-Mart, Circuit City Stores Inc. and Best Buy Co.
Commentary: As noted in our last issue, it seems more practical for Dell to get into the retail market by seeking shelf space in an existing chain, rather than acquiring a retailer (such as RadioShack) outright. However, in going with Wal-Mart, Dell's profit margin may take a hit, although it will definitely gain market share. In selling PCs over the phone, Dell has been able to pad its margins by up-selling - convincing consumers to spend extra dollars on additional software, more memory and other add-ons. Now, Wal-Mart will be the one taking advantage of up-selling. In addition, it will be interesting to see if Dell seeks additional retail partnerships. Best Buy is an obvious choice, although getting shelf space at this retailer can be expensive since it's where all PC vendors want to be.
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