Dell Inc to develop its business on new scale

Dell Inc. is going to sell computers at Best Buy stores.

Photo: Dell Inc to develop its business on new scale

The companies said Thursday that Best Buy Co. will sell Dell's XPS and Inspiron notebook and desktop computers at more than 900 stores in the United States.

Dell built its business around selling personal computers directly to customers, but it has been cutting deals with retailers as growth of PC sales slowed. The Round Rock, Texas-based company lost its spot as the world's No. 1 computer maker to Hewlett-Packard Co. late last year, and HP has stretched its lead since then.

Dell officials believe Best Buy gives the PC maker a presence at different levels of the U.S. retail market. The company already sells modestly priced PCs in about 3,000 Wal-Mart stores and targets small-business owners through a retail partnership with Staples Inc.

The computer maker, however, will miss the pre-Christmas sales traffic at Best Buy.

That suggests negotiations with Best Buy were difficult, said J.P. Gownder, a technology marketing analyst for Forrester Research Inc.

Dell spokesman Bob Kaufman said the company "recently launched a number of initiatives with retail partners around the world, and these things just take time to develop." He said January is "a very heavy buying season" for consumer PCs and notebook computers.

Besides Wal-Mart and Staples, Dell already has arrangements with Bic Camera Inc. in Japan, Gome stores in China, and Carrefour Group and Carphone Warehouse PLC in Europe. With the Best Buy agreement, Dell machines will be sold in nearly 10,000 stores around the world.

For many years, Dell resisted selling computers in stores out of fear it would dilute the company's image of building machines to the customer's specifications. The direct-sales approach was a success with business customers and seemed to work well with consumers, too.

But consumers now are more interested in style and computers that match their personality, a development that has helped HP and other brands that are readily available in stores, Gownder said.

"This is very overdue," he said. "Even if this cannibalizes some of (Dell's) direct sales, they'll be able to compete head-to-head for market share, because right now they're getting their lunch eaten by HP. Dell had to make this move. They're hemorrhaging in the consumer market."

Dell has added colors to its Inspiron and XPS notebooks in a nod to consumer tastes. It has also beefed up high-performing machines to entice gamers.

Richard Shim, an analyst with IDC, said selling through retailers is risky - Dell will be relying on Best Buy sales personnel. But he said there's a good chance Dell would succeed in shelves already crowded with machines from HP, Toshiba Corp., Apple Inc., Sony Corp. and others.

"They have the brand name, they're viewed as being a good value, and they can pass on the advantages of being as big as they are," he said.