Dell's Confusing Decision To Sell Through Wal-Mart.

Posted by: Bruce Nussbaum on May 25, 2007

I get that Dell wants to move away from its online sales model and expand its direct sales to consumers. The old model is broken. But selling through Wal-Mart is sending a confusing signal to me.

For several months, Dell has been publicizing its push into design and innovation as differentiators of its PCs and laptops. After a disaster with consumer service, it opened up a conversation with its consumers via social media to understand them better.

All this led me to believe that Dell was shifting to a higher-margin strategy based on innovation and design. That would allow it to differentiate itself from low-cost boxes coming out of Asia.

But the Wal-Mart gambit is clearly a low-cost, low-margin play by Dell. Wal-Mart will move the merchandise but it can only put pressure on Dell’s margins, which Dell doesn’t really need. In fact, Wall Street pushed Dell’s stock down on news of the Wal-Mart deal.

What Dell really needs to do is inject its PCs and laptops with “newness.” Give people lighter weight, longer battery life, cooler colors, easier web connections—stuff like that. Consumers will pay more for what they want and don’t yet have.

I think HP and Lenovo get that message. I don’t know if Dell does.

Reader Comments

Steve

May 25, 2007 5:53 PM

Hi,

It may add a presence and a bit to the bottom line as well. A way to say we are still present and accounted for. Hopefully, this is not the sum total of their revitilization strategy, if so then "Uh..Maybe Michael Isn't the Genius So Many Think Him To Be" (http://money.cnn.com/magazines/fortune/fortune_archive/2007/04/30/8405436/index.htm). Dell bumbles along like Microsoft, smart enough to take advantage of an initial wave but ignorant enough to never diversify beyond it.

Steve

Mike Reardon

May 25, 2007 7:13 PM

My niece just informed me that Dell comes with an extended service agreement, that relationship with new Wal-mart customers might be one of the reasons. There is also a natural lower product cost relationship that both Wal-mart and Dell have always sold as brand mantra. Dell can claim going back to its historic low price online business model in stores and expanding its reach into other lower cost markets.

Damon

May 25, 2007 8:57 PM

Apple, Motorola, Nokia, are innovative. When I think of innovation I don't think of Dell, and hardly think of HP. They count on Microsoft being innovative for them... and many people will argue that Microsoft is innovative.

Pete Mortensen

May 29, 2007 7:06 PM

I'm torn. This is either a perfect decision or a big mistake. Dell and Wal-Mart have been among the most innovative companies for inventory and shipping of the last few decades, so maybe they can squeeze out additional efficiencies together?

That's the only bright spot I can see. And nothing else has been working for Dell. Their mall kiosks have hardly been the Apple retail experience, and few people have a deep emotional relationship with their Dells the way they do with Macs or with ThinkPads. It's not really possible to fake that, either. It might be for the best for Dell to focus its efforts on applying its supply chain innovations to other facets of the business. They're never going to be the best engineers or designers, but they could be the cheapest. And most people like technology that's good enough.

We've reached a point where the difference between a MacBook Pro and an Inspiron whatever is pretty evident to anyone who tries one, so it's time for Dell to do some real design work, but not to go past the Apple model, just so it isn't embarrassingly off the mark. People aren't going to buy 2" thick laptops any more. You have to catch up. Two hours of battery life isn't enough any more. You have to catch up. But you don't need to lead. Dell has never led, but they're one of the best fast followers in the business. If they can figure out how to do that in a market without a clear leader, they can get back on top. If not, they're going to be chasing HP's dust for years to come.

Mike Reardon

May 30, 2007 12:00 AM

I'll agree with Pete Mortensen comments on reaching equal design are valid for rest of Dell's general market. About Dell's supply management, Dell's supply chain will be filled out by Wal-Marts direct to its stores, a reduced cost in shipping for Dell against its product cost. And better than magazines or web Dell's marketing into the face of Wal-Mart's 107 million weekly groceries shopper is a plus for Dell reaching less discriminating customers were cost is the first consideration. This is creating a relationship with that lower level market. Also it is a good place for any new products like desk top boxes for IPTV that Dell may what to reach that same customers.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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