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Dell Cheating on the Direct-Sales Model?
capt turnpike writes "Despite its CEO saying that the direct model is the company's 'religion', according to eWEEK.com, Dell seems to be moving away from direct sales and working with value-added resellers." From the article: "Still, 'they'll never admit it or make [the channel] a formal program,' said one analyst who asked not to be identified. 'If you look at Dell's stock versus HP's, part of the difference has to do with Dell's reputation for owning the customer. There's a sense they own the entire margin and have higher profits because they sell directly. It makes them appear more valuable to Wall Street.'"
The Dell model based on the "all capital gains, no dividends" business practice pioneered in the 1980s in Silicon Valley is 0xDEADBEEF.
Companies like HP, IBM and Microsoft survive because they offer dividends to their investors. People get real returns: real money back quarterly that they do what they want with. Silicon Valley investors, on the other hand, are playing musical chairs and the winners are the managers of the companies who can time their exits exquisitely and dump their stock on the hapless, casual E-trade luser.
"What would I do? I'd shut it down and give the money back to the shareholders."
(Oct. 6, 1997)
I just bought a new Dell LCD monitor through a reseller. I woulda been happy to buy it through Dell, but it was actually *cheaper* buying it from a reseller, go figure.
Dell's supply chain model was so innovative when it was introduced, but that competitive advantage won't last forever.
This new "secret" channel may be their way of testing a new innovative model.
This is nothing new, Dell has always been willing to go through resellers even in the 1990s. There are bsiness customers who have exclusive arrangements with VARs but still want to buy Dell. The solution is for the VAR to buy and resell the Dells, though typically the price was a little more after the VAR added in a percent or two for their troubles.
VAR used to mean you repackaged software and hardware and sold a more complete solution. These days, HW is often bid as a commodity line item so HW VARS often simply provide the HW as a convenience to their clients. Clients know Dell's prices and that's what they expect to pay so Dell's just using this channel as an extended sales force into clients that would've bought direct anyway - who cares?
In fact, they're successful with this model precisely because they're direct channel models is so successful. With our customers, they often specifically request Dell computers and they generally know exactly how much they cost.
Dell has the "Direct Marketing" - and may not sell in stores... but they do have resellers: System Integrators, or Consulting firms that sign up with Dell receive something like 10-15% discound on product purchases.
.13 = $$$ - $30 to actually order it = Happy Smile ;)
Company: I want a Dell XYZ for $1500
Integrator: ($1500 x
Integrator: No Problem, we should order it by tomorrow.
Plus, the Integrator/consultant that actually signs up with dell usually gets to avoid the script-monkey level of Tech Support.
I've occasionally found good prices on Dell equipment (including laptops and monitors) at both Costco online and in the Costco stores. Their prices are often 15 to 25% lower than Dell direct (but probably still more than the lowest Dell corporate sales prices).
Of course, no custom configurations...but the product does ship directly from Dell with Dell warranties.
For some reason, Apple seems to dump EOL equipment thru Costco too.
The growth of the PC Hardware market is slowing. Dell's sales aren't going to increase if they don't get into the retail sales market (particularly as they lose market share to HP etc as mentioned in TFA), and the only way for them to do that effectively is through resellers.
Anecdotally -- my employer (~90 employees) typically leases computers; at end of lease, we either buy at $1 or return if we have FMV purchase option instead on the computers. Past two years, we've not been leasing new boxes except for the art/design teams who need Macs. Instead, we've been replacing individual boxes as they go.
We're still getting Dells -- but now getting them through a VAR (Zones and/or PCMall, if you're curious). Since we're not buying 20+ PCs, it's more expensive to go through Dell than through the VARs -- and honestly, more of a PITA, since the VARs bend over backwards for us.
There are a ton of companies like mine, and Dell would be moronic to not want our business. If Dell needs to sell indirectly to get the business, they'll continue to do so.
Of note, though, we still buy our service contracts direct from Dell -- and that's where they are making a ton of cash off us. And the poor VARs aren't making anything off us except for when we buy peripherals, since the margin in the boxes is almost zero, and we're going to Dell for the service contracts.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Dude... YOU'RE GETTING a sliding percent markdown based on your volume of purchases and need to bundle office software in a corporate environment !!!!!!!!!!!
I'm a fiscal conservative, it's a pity we don't have a political party anymore
Blah blah blah.
Building your own PCs isn't any great skill. Anyone can do it. But there's really no REASON to do it. It's *cheaper* to buy the pre-built machine from Dell. Building your own PC almost never saves you any money, and hasn't for years. Seriously, can YOU build a complete PC, with a monitor and a legit copy of Windows, for $400?
Now, once you start spendig BIG BUCKS on a PC, then it can be cheaper to build your own. Sometimes.
"Don't brand the cattle, brand the buyer; he's the one more likely to stray."
I think they mean pwning.
Last year, I bought a new Dell workstation for work, the first of several workstations we were going to evaluate to replace our aging machines. Price on website: $1300 and change. But the website was flaky, and I couldn't complete the order. I called, got an "account manager", who took the product numbers I had written down from the website, and we ordered it--only to have the total come to $1400 and change.
I called back to complain, and the account mangler very rudely refused to do anything to help resolve the situation, boldly lying about one of the options I had purchased as an add-on supposedly being included in the base price. Eventually he said, "I don't know what you expect me to do about this," and wouldn't say anything else.
Needless to say, today we are an all-HP shop. We have a local reseller who provides excellent on-site service, and who I can reach directly; no IVR, no switchboard; I call my tech directly.
This site will never buy another unit from Dell.
Find environmentally and socially responsible products on http://buy-right.net
When a customer flashes an ad at you with a $399 (after rebate) system complete with XP Home and a 19" LCD, what can you do?
My experience with Dell servers is not positive. Call it anecdotal, but I see amber lights on Dell equipment more often than on every other piece of equipment in the datacenter. This is true for Dell shops and mixed shops. This is also true where there are only maybe 2 or 3 servers from Dell in the mix of other stuff.
Motherboard failures, PERC failures etc...
When I sell an HP server, I sell something that I can trust. The truth is, however, that corporate desktops are throwaway boxes. I don't care if one of them dies and keep a spare at hand.
Leonid S. Knyshov
Find me on Quora
Ahh, you younsters. In my day, when I wanted to build my own computer, I had to get individual ICs, resistors, diodes, capacitors, etc... You have it too easy, just slap a preassembled motherboard in a premade case and poof, a computer.
Ok, ok, my first computer was actually a Heathkit, all the parts came in bags, and there were detailed instructions and troubleshooting guides. But I know a guy who put together his own Z80 based computer just by reading the spec sheets.
All ideas^H^H^H^H^Hprocesses in this post are Patent Pending. (as well as the process of patenting all postings)
I saw the same thing too, however it was actually a decent deal. If you looked closely, yes it was an EOL machine, but the price did include AppleCare. It's about $150 or so for a Mini, I think, so subtract that from the price and it's not as bad a deal as your laughter would indicate.
...we've put an official decree down that we're not buying their crappy, crappy crap anymore. We finally convinced the higher-ups that when they save a couple of hundred bucks on a server, they lose it all in downtime. Who'dathunk you had to explain money to accountants?
Which is more painful? Going to work or gouging your eye out with a spoon? Find out!
http://www.workorspoon.com
When you base a company's "value" on their stock price and not on the product(s) they produce and the service/support they give said products you're making a HUGE mistake and you will probably end up getting fleeced sooner or later.
Nothing more to really say, I'm sure everyone reading this has had trouble with Dell support by this time.
If it is the same one I saw, it not only included AppleCare, but a wireless keyboard and mouse as well. If I wasn't saving my pennies for a FrontRow Mini to use as a media center, I may have picked it up.
Are the prices at Costco lower then Dell's weekly 30% off sales?
I just purchased an E1505 directly from dell.com . It was several hundred dollars cheaper then the comparable models at Costco.
The Dell deals really require some understanding of the Dell rebate process, and close monitoring of the different deals. It's a little sleezy. I missed a $585 off coupon the other day when it expired at 10:00:00PM Pacific Time. I missed the coupon by 30 seconds (I entered my credit card number, hit submit, and the price on the _very_last_ confirmation screen jumped by $585. Dell support also closes at 10:00PM, so I couldn't call anyone.
Costco doesn't have this headache.
"Can of worms? The can is open... the worms are everywhere."
If your a small fish, you probably won't get the service you think you deserve from Dell, that's my experience. Now that I spend a few million a year with Dell, while it may not be Dell's biggest account, we get some more attention.
I hope Dell's listening, because I've been buying Dell personally for a long time and my XP400 while a good machine, didn't come with a restore disk (lame) and had so much 'trialware' running it was killing my performance. I just had to wonder what a non technical person would do. Is it about the price or the customer? IMHO Dell's going to lose market share.
Here's a good war story, my 5160 laptop USB ports went dead, I think due to a power surge. I called and spoke to 'India' to a very very pleasent person, but couldn't do anything outside of the script. They finally agree to replace the motherboard (after having me check lots of things). I travel a lot, so the local VAR calls me and we make an appt. for 2 weeks out. He calls back and says that he had to return the part because the ticket was open to long per Dell. I had to call Dell support again, and again go through the script, and they wanted me to do every test again (30 minutes). I played along, because I needed my ports and there was that this guy was going to comprehend the situation. After both the Dell calls, they ask, would you talk to a supervisor about your experience. I did both times. But, the second time, I told them the story and I don't think it meant anything to the guy, because it probably didn't impact his pay. I got a 'ok thanks'. (No thank you)
So Dell had to take two calls at 30+ minutes a pop. Dell mailed the motherboard twice to the VAR and 1 time back to Dell. I had to sit on the Dell support line for an additional 30 minutes, but luckily they gave me another code, the VAR got the motherboard back and he fixed my laptop before I headed on another trip.
Did Dell save money on that transaction by outsourcing? Probably, but it's short term IMHO
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