Dell Expands Beyond Direct with Wal-Mart Deal

In a company memo last month, Dell founder/CEO Michael Dell referred to the company’s direct-to-consumer model as “a revolution…not a religion.” Now that marketing strategy is evolving to include retail.

In its battle with Hewlett Packard Co. for top spot among PC manufacturers worldwide, Dell announced on May 24 plans to sell desktop computers in Wal-Mart and Sam’s Club stores nationwide as well as in Canada and Puerto Rico. Beginning June 10, more than 3,500 Wal-Mart and Sam’s Club stores will offer two Dell desktop models, each available in a package bundle and priced under $700.

This new partnership between discount retailing giant Wal-Mart and Dell ends the latter’s long-standing stance against bricks-and-mortar retail. Since the Round Rock, TX-based company’s inception in 1984, Dell has sold directly to consumers through the mail, the phone, and the Internet. Sagging sales in recent years, coupled with Hewlett-Packard’s successful relationships with retailers, prompted Dell’s strategic decision.

“This is the first step in a global strategic rollout in retail for Dell,” Dell spokesperson Bob Pearson tells MULTICHANNEL MERCHANT. “Global is the key. Michael [Dell, the company’s founder] came back as CEO on the last day of January.”

Having stepped away as CEO in 2004, Dell returned to that position early this year, apparently because the company had not performed well under former CEO Kevin Rollins. Upon Dell’s return, Samuel A. Nunn, the director of Dell’s board, said, “The board believes that Michael’s vision and leadership are critical to building Dell’s leadership in the technology industry for the long term.”

“Ninety days ago we launched a new computer for the Chinese market,” Pearson notes. “There are quite a few things going on. In coming quarters, I think you’ll hear more.”

By reaching Wal-Mart and Sam’s Club shoppers, Pearson says, Dell can make a significant impact. “Five hundred thousand people come online every day for the first time,” he says. “We have a great direct model, continue to invest in it, and people can buy online or buy via phone. We need another way for customers to access our products, and retail makes a lot of sense. A lot of people are getting a PC for the first time. We believe that Wal-Mart knows its customers better than anyone. Ninety percent of Americans shop at Wal-Mart.”

The two desktop models sold via Wal-Mart and Sam’s Club are exclusive to those stores. “I can tell you that for Wal-Mart, we are very excited to offer a to segment of the population a trusted brand at a great Wal-Mart value that they can now purchase in store, as a complement to our other computer offerings,” Wal-Mart spokesperson Melissa O’Brien says. “So while this action provides Dell new access to customers, we anticipate it attracts consumers to our stores who have been considering a computer, or particularly a Dell, to purchase this summer and would rather buy off the shelf than online.”

Dell’s sales have fallen to their lowest point in the past five years. In its most recent fourth quarter, Dell’s profits fell to $673 million, compared with $1 billion for the fourth quarter of 2005.

In an April 25 memo from Michael Dell to the company’s 78,000 employees, he referred to “profound changes” and said the direct model so critical in launching the company may have run its course. “The direct model has been a revolution, but is not a religion,” he wrote.