Dell Dips Toe in Retail Waters

Though it is widely praised for its cost-efficient online and phone sales model, Dell (Nasdaq: DELL) now plans to try its hand at selling computers in retail stores. The company said it will install sales kiosks inside Texas Sears locations and will make permanent a shopping-mall experiment.

However, Dell noted, the moves do not indicate a change in its overall direct sales focus. Although the kiosks will be staffed by Dell representatives, customers will place orders through them either online or by phone. The information-booth-size kiosks will display desktop and portable computers, as well as software and accessories.

"We see it as an extension of what we're already doing," Dell spokesperson Venancio Figueroa told the E-Commerce Times. "The mall program has turned out to be a good way for people to see our products in person, and that's proven worthwhile for some customers. This gives a different customer segment that same exposure."

The first kiosks were launched in an Austin, Texas, Sears store this week and will appear in 10 Texas Sears outlets by the middle of February, according to Dell.

Opposite Directions

Ironically, the move comes on the heels of Dell competitor Gateway's (NYSE: GTW) announcement that it plans to reexamine its retail strategy in the face of sagging profit margins. Some observers have taken that as a signal that Gateway, despite saying it remains committed to a retail presence, may be gearing up to close a significant number of its 272 U.S. stores.

Gateway CEO Ted Waitt said in a conference call Wednesday that the company already has shut four stores and will closely examine each of some 120 leases due for renewal this year.

In contrast, Dell's direct sales model has helped it remain a profitable market leader even in a fiercely competitive environment that has seen Gateway, Apple (Nasdaq: AAPL) and other computer makers cut costs in recent weeks.

"They've mastered the direct sales process in such a way that many others have tried to imitate it," IDC analyst Roger Kay told the E-Commerce Times. "Any wild variation from that model would be dangerous, but if they can use retail as an extension of what they're already doing, it might make sense. Certain customers, particularly those who may be new to PCs, want to see what they're buying before they put their money down."

Market Maven

Dell will report fourth-quarter earnings next month and is expected to post a profit of about US$600 million, which would represent a 30 percent increase from the year-ago period. The company also has stated its intention to begin selling its own line of printers this year.

Plans call for the kiosks to remain in the Texas Sears stores until summer, when the two companies will decide whether to make them permanent and expand the effort to other parts of the country. Financial details of the arrangement were not disclosed.

Been There

Dell is not new to the in-store retail arena. The company flirted with an indirect sales model in the early 1990s, putting its computers on shelves at Wal-Mart (NYSE: WMT), CompUSA and other chains around the country. But by 1994, Dell had pulled back to its core direct sales approach.

Published reports indicate Sears may not have been Dell's first choice for the kiosks, with electronics retailers Best Buy (NYSE: BBY) and CompUSA reportedly declining to host the experiment.