DELL: Giving Real Retail A Shot
One question I have had regarding DELL’s (DELL) recent slide is whether the horse that got them here has gone lame. In the past, DELL’s model was more efficient because declining prices meant that having a low inventory and no retail markup carried a large enough advantage to offset the cost of shipping the PC. Now, with the PC selling for $500 rather than $1,500 the shipping costs per unit are much higher and may actually make bulk shipments to retailers more cost effective than individual shipments to buyers.
When Dell’s first test was to open retail stores that were nothing more than showrooms I thought they were missing the point. The beauty of a direct model is that you can customize things the way you want, while the beauty of a retail store is that you can walk out a few minutes later with product in hand. Retail stores without instant gratification equal nothing more than a real estate expense. Dell soon came to the same conclusion.
Things are different now. Dell to sell 2 desktop PC models in 3000 Wal-Marts:
Computer marker Dell Inc. plans to start selling personal computers at 3,000 Wal-Mart (WMT - Annual Report) stores in the United States and Canada as of June 10, launching a major drive to sell its PCs through retailers, a company spokesman said on Thursday.
You don’t get any more retail than Wal-Mart. This should be a true test as to whether the sands have shifted in favor of mass distribution.
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