Since its launch in the mid '90s, Dell's e-commerce business has been a poster child for the benefits of online sales, says Aberdeen Group analyst Kent Allen. The company's strategy of selling over the Internet -- with no retail outlets and no middleman -- has been as discussed, admired and imitated as any e-commerce model. Dell's online sales channel has proven so successful, says Allen that the computer industry must ask: "Does the consumer need to go to the store to buy a PC anymore?"
Regardless of the company's past success, Dell is affected by two current trends in e-commerce, says Forrester analyst Carrie Johnson. And only one of these trends works in the PC giant's favor.
The early adopters were always comfortable buying PCs online, she notes, but the general public has taken a while to catch up. "What we know about how consumers buy online is that they start with low-ticket, low-risk goods like books, and they eventually begin to trust the Internet more and graduate to higher end products like PCs and travel."
At this point, "Enough consumers have been shopping online for three or more years that they trust the Internet to buy almost anything," Johnson says. "Which is why you see apparel do so well now and even computers do so well, because it's not just the early adopters buying online now. We've caught the second wave of online shopping."
But while this trend bodes well for Dell, says Johnson, another does not: due to a slowdown in PC sales, what's fueling most of the online growth [in the PC market] at this point are second hand sales of computers. Auction sites like eBay and uBid are enjoying thriving growth rates in PC sales, she says, in contrast to new PC vendors like Dell. So the challenge for Dell now is figuring out how to grow sales in a tough market.
The Front End
Launched as a static page in 1994, Dell.com took the plunge into e-commerce shortly thereafter, and by 1997 was the first company to record a million dollars in online sales, according to Dell spokesperson Deborah McNair.
After six strong years of online sales -- widely regarded by analysts as stumble free -- Dell has racked up some impressive statistics. In the last quarter of 2002, Dell.com logged a billion page views, a company first. According to Dell spokesperson Bob Kaufman, about half of the company's revenue comes from the site, which means approximately $16 billion flowed through Dell.
Dell inc. is mostly known for personal computers, storage devices and computer peripherals. The company is highly innovative and has been known for its excellent direct-sales and build-to-order model that have contributed highly to the growth and profitability of the company. Dell is known for best organizational practices and organizational culture. It promotes a positive culture that encourages team spirit and good relationship between all the stakeholders. Technology industry or sector is among the toughest industries which demand much effort, innovation and effective marketing and promotional strategy in order to compete favorably.
Dell Computer Company is known for its meteoric rise to industry dominance based on founder Michael Dell’s ability to transition a part-time business of building and upgrading personal computers into a multi-billion dollar enterprise (O’Rourke, 2010). Dell’s business model was producing low cost, high quality PC’s that were built-to-order called “Dell Direct”. The strategy of shipping direct to customers eliminated the need for middlemen and gave Dell a competitive advantage (O’Rourke, 2010). Company growth surged in the 1990’s with over 38,000 employees and a global platform. Dell and Chief Operating Officer, Kevin Rollins, created a fast-past, win-at-all-cost, highly competitive organizational culture whereby compensation and promotions were based on exceptional performance (O’Rourke, 2010). Finally, in 2000, Elizabeth Allen joined the company as vice president of corporate communications.
Dell attended the University of Texas immediately after high. While at college, he noticed computer dealers standing on street corners to locate customers. More importantly, he noticed that these same computer dealers had “very high markups, very low service, and inventory everywhere”. (Thorpe, Helen 1) It was then that Dell realized what would become his life’s career. He used a portion of his savings and began to build and sell computers from his dorm room. “His emphasis, however, was not just making good machines but ensuring strong customer support and cheap prices.” (Michael Dell e.g.) Soon after Dell began selling to the students that attended his college, he established new accounts with customers outside of the school as well. It w...
The world’s largest PC manufacturer, Dell has grown from $6 million annual revenue to over $40 billion in only sixteen years. It’s the largest online computer retailer, selling an average of $30 million a day. I have attached a tab with financial data to demonstrate how Dell’s high return to shareholders has been the result of a focused effort over the time to balance growth with profitability and liquidity.
Ten years back, where the majority of business transactions were conducted offline. Today, the trend of most of companies is to deal with its consumers through internet and not just using PCs, the customers are using different types of platforms such as mobile phones, tablets and other small mobile devices. Just imagine that all computer manufacturers are in along marathon has no end point, guess who is running alone in the front? Answers would be different but sure Dell is one of them. Its success came from a strategy which is missing with most of its competitors. Dell has effectively relied on its online selling strategy more than offline selling strategy. Actually, the core of Dell’s strengths is on its website which is the platform of most deals and services and also selling computers directly from company to customers. These deals and services are shown in the following:
Today Dell is the third largest computer manufacturer in the world. On January 2004 Dell reports net revenue approximately $41,444 millions and 46000 employees (Annual report 2004).
The competitors to Dell are as follows: Hewlett-Packard, IBM, and Sun Microsystems (Hoovers). HP and IBM pose the biggest threat in competition. Dell's sales overview has increased each year except for 2001 to 2004. In 2001 the annual sales in millions were $31,888 and a major increase in sales in 2004 at $41,444.0. (Hoovers).
Speaking about the business model of Dell, it has ability to remain on the higher end of the scale for a particular time period. Dell has business model, which primarily focuses on direct selling line of attack. It in a straight line supplies the PCs to the regulars. It does not believe in intermediary, retailers for the business practices. Undeniably, this gives them an edge to serve customer well. Nevertheless, it understood the importance of retailers and start offering products on the premises of retailers, such as Wal-Mart, Sam’s Club and so on. Next, Dell administration is certain of the exclusive business of PCs. As time goes on, however, observing the
Dell Inc, was founded as “PC’s Limited” in 1984 by Michael Dell, while still a student at the University of Texas at Austin, with just $1000. From Michael Dell's off-campus dorm room at Dobie Center, the startup aimed to sell IBM-compatible computers built from stock components. Michael Dell started trading in the belief that by selling personal computer systems directly to customers, PC's Limited could better understand customers' needs and provide the most effective computing solutions to meet those needs. In that year, the company became the first in the industry to sell custom-built computers directly to end-users, bypassing the dominant system of using computer resellers to sell mass-produced computers.
Why has Dell been so successful despite the low average profitability in the PC industry?
According to Michael Cannon, Dell's President of Global Operations, the key differentiators that have made Dell so effective for nearly two decades are its made to order direct sales model and its innovative supply chain (SCN, 2008).
In 1984, Michael Dell invested $1,000 in start-up capital to register his business as Dell Computer Corporation, which was known as PC's Limited. The company becomes the first in the industry to sell directly to end-users by passing the dominant system of using computers resellers to sell mass-produced computers. Dell Computer also pioneers the industry first thirty-day money back guarantee. It became the cornerstone of Dell's commitment to expand its service offerings, superior customer satisfaction, and the industries first on site service program. It also established its first international subsidiary in the United Kingdom, and raised $30 million in its initial public offering.
Dell Computer’s business model, when viewed with that of a traditional manufacturer was set aside as unbelievable. When Michael Dell thought of making a business like Dell Computer, he focused on making personal computer systems and selling directly to customers. Personal Computer 's Limited could better understand customers ' needs and provide the most effective computing solutions to meet those needs. Notably quoted as saying that “technology is about enabling human potential,” Mr. Dell’s vision of how technology should be designed, manufactured, and sold forever changed the IT industry.
Dell’s initial competitive strategy, when it was founded in 1984 by Michael Dell, was to focus mainly on differentiation. Its strategy was to sell customised personal computer systems directly to customers, which was a rapidly emerging market at that time (1). This was done by targeting second-time customers, those that already understand computers and know what they wanted. Meanwhile other companies at the time was selling “’plain brown wrapper’ computers” (2). By offering customisations, Dell gained a better understanding of customers’ needs and wants. This helped the organisation position itself differently against the more popular brands, such as Compaq and IBM.