Dell: The Channel is not the Product

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Dell’s agreement to sell computers through Gome is a sign that the folks in Round Rock have come to an important conclusion: they can – and in many places around the world, must – adjust the way they do business in order to sell their product.

That is a conclusion of profound import. It means that the way Dell sees the value it that it offers to customers is changing, that it goes beyond mere price to something else. The company’s leaders apparently realize that even if what made Dell unique in the past was the efficiency of its supply chains and its perfection of the direct-sales channel, all of that is of diminishing (relative) importance to the company’s long-term success.

As it moves into retail, Dell is now going head-to-head with Lenovo and HP, setting the stage for the kind of war for market share, shelf space, and attention that has already ripped through so many other sectors, most notably consumer electronics. There will always be people who could care less about the brand on their PC (especially if it saves them some cash), but this sets up a dynamic that will drive all three players to develop and sell products aimed at the low-end of the market, in competition with the build-to-order no-logo white-box computers sold in China’s computer malls.

Fighting for the bottom is not somewhere The Old Dell was comfortable going – the company already bailed out of the Battle for the Bottom once. The question is: does it want to go through that again, or is there something cooking that will see Dell deliver products that are unquestionably better than what HP and Lenovo offer?

The Gome deal, as important as it may be, is only a variation on the idea of differentiating Dell based on how and where it is sold. But the channel is not the product.

Dell’s next move must be to figure out how it can leap ahead of Lenovo, HP, and the white box guys in China without using the words “channel” and “price.” The only way it can win in China is if it starts making some qualitative improvements in the product and the experience it offers – in ways the Chinese consumer cares about.


About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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