Of all the stores in the world, why did Dell go with Wal-Mart?
There are several reasons, and they make sense when you remember that Dell Inc. -- which pioneered selling computers and electronics directly to customers -- has lost share in the PC market for the last year.
It needs to get its products in front of as many potential buyers as possible as fast as possible, and Wal-Mart Stores Inc., with 127 million U.S. customers every week, seemed the best brick-and-mortar bet.
So starting June 10, two of Dell's desktop PC models will go on sale in more than 3,000 Wal-Marts in the U.S. and Puerto Rico, Dell said Thursday. Until then, you can't buy a Dell computer in any physical place in the country, though there is a Dell store in a Dallas mall and about 100 kiosks in other malls around the country, where you can take a PC or notebook for a test drive.
Wal-Mart offers several advantages, the most obvious being that "90% of America" shops there, as Dell spokesman Bob Pearson put it.
What's more, computers from Hewlett-Packard Co., Dell's chief rival, are already on Wal-Mart shelves, so people are used to buying PCs at the discount retailer. And for Dell, being in Wal-Mart could be a fast-paced learning experience.
"From a cultural standpoint, it will be a difficult transition" for Dell, said Stephen Baker, vice president of industry analysis at market research firm NPD Group in Port Washington, N.Y. "They are used to owning the customer experience."
But teaming with a major retailer could boost Dell sales by as much as $800 million, or 14%, a year, Pacific Crest Securities said in a report issued this week.
NPD Group said that in the last year, 38.6% of all computers were bought directly from the manufacturer and 61% from stores.
"What we're announcing is the beginning of a global retail strategy," Dell's Pearson said. "The direct model will continue to be a core for Dell. But we need more choice for customers."
The two desktop PCs are from Dell's low-end Dimension line. The company didn't reveal details, but people familiar with the partnership said the computers would use Advanced Micro Devices Inc. chips and would cost $400 to $700. Wal-Mart said the Dell computers would also be available through Sam's Club.com but not Walmart.com.
Partnering with Wal-Mart does pose risks for Dell, analysts said. Wal-Mart runs counter to the upscale image that Dell has been trying to project, and having its PCs in Wal-Mart could back Dell into a price-cutting battle it doesn't want.
