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Who Wants to be the Next Dell?
cybercomm writes "Tom's Hardware has a very interesting column regarding the future of beige-box manufacturers, such as Dell, gateway, Compaq, et all. I found this article really thought provoking, since the author has raised some really interesting issues, especially concerning the fact that the writer of the column compares reviewers to the lowest ring of the ladder, and asks one simple question: Instead of whining, why not do it? Why should you learn all the specs on the latest processor and slam the competition just because you may happen to own a P4? Why not start the same way that the Dell, Apple, Gateway, and other founders took by forming your own store, getting in touch with Asian suppliers who "are more than willing" to give you discounts, just so that they can get their foot in the lucrative N. American and European markets. Very interesting reading, that raises another what-if scenario (what if you succed and your business is based on Chinas' dragon CPU, XGI card, open-source OS...)."
You see the problem with hardware is all about margin. Unless you are moving a huge amount of goods you will loose your ass. Software on the other hand is all margin, big profit ratio's. Why do you think so many restarants go out of business? Small margins, same goes for grocery stores.
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...and while it is tempting to get into the whitebox market, it requires a significant amount of capital. Why? Bulk purchasing (ie for processors) is only really worth it pricewise if you do it in the thousands. Dell et al. do that easily now, but for "the next Dell", unless he/she/them are able to take advantage of those discounts by purchasing parts in huge multiples, it will always be cheaper for the end user to buy from current whitebox manufacturers, even if "the next Dell" provides better quality. The vast majority of people are willing to save a buck, and unless "the next Dell" can compete on price as well as everything else, it is unlikely that there would be "another Dell".
libertarianswag.com
They DO have stores (They've got Dell Direct sales kiosks in the mall- where you get to see something of what you're ordering through the system) and the online sales system for Dell (Whether it be by phone or by web) is also a store.
It's just that they didn't have brick and mortar storefronts until very recently- and these don't keep inventory, they're solely there to show off the wares so people can see what they're buying.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
I just finished working 4 years for a Korean firm that makes Dell branded equipment. We lost money dealing with Dell, but we did it to keep them from going to our competitor. No one wanted to handle the Dell account. They are cold and single minded.
Dell always came out as the worst to deal with, compared to IBM, Sun, HP/Compaq. Dell would negotiate for a certain number of units at a certain price, then order 25% of the original quantity, while demanding the original unit price. Sounds like smart business? When they break their original commitment, and then bully their way on, it's bad business.
The end result is their suppliers keep waiting for the 'big' contract that never comes along. They lose money and go out of business. Dell moves to another supplier and doesn't look back. That is one less supplier for the other buyers. Another carcass on the fire. It's called 'hollowing out', and most companies know better than to go down that road.
If you do business with me, you expect a certain percentage of every dollar we handle. Under ideal circumstances, I get 60 and you get 40. This proportion lets us both survive. Dell seeks 70/30...this helps Dell grow, of course, but the 30 means slow death for the other side. Most businesses honor the 60/40 balance, knowing that anything more will be abusive...Dell has long ago decided to cross that line.
The hope is to take the market, and then go back to 60/40...but with no suppliers left willing to take the abuse, Dell will be alone and cutting their own throat.