Dell checks into offline sales with Wal-Mart

Wal-Mart Stores Inc. next month will begin selling desktop computers from direct-to-consumer pioneer Dell Inc. in more than 3,500 Wal-Mart and Sam’s Club stores throughout the U.S., Canada and Puerto Rico, Wal-Mart Stores Inc. reported today.

For Wal-Mart, the deal extends its recent policy of expanding the number of brands offered in the recently remodeled and expanded consumer electronics sections of its stores. But for Dell, it marks a sharp change from its strategy of selling almost exclusively through Dell.com and its catalogs. Dell has also operated some small-footprint kiosk-based sales centers in shopping malls.

In preliminary results released for its fiscal fourth quarter ended Feb. 2, 2007—Dell’s latest available figures—Dell reported a 5% year-over-year decline in revenue to $14.4 billion from $15.2 billion. “We are disappointed with the company’s results, but what matters is our future plan of action,” founder, chairman and CEO Michael Dell said in a statement released with the preliminary Q4 results. “Our business model will become more aligned with the needs of our customers, which will improve their experience and yield improved growth and profitability for the long-term.” The company, No. 4 in the Internet Retailer Top 500 Guide, did not return a call for direct comment.

One way to meet the needs of customers is through giving them the option of purchasing Dell computers in a local store, experts say. “Dell’s move is surprising, but part of the reality of growth and PC market penetration is to target the Wal-Mart store customer,” says Jim Okamura, a Chicago-based retail analyst with consultants J.C. Williams Group Ltd.

To be effective with in-store sales, however, Dell will probably need to find a way to control how its products are displayed in Wal-Mart stores and presented to consumers by Wal-Mart employees, Okamura says. “The key is not just having a store selling channel in play, but having the ability to control the brand experience—and that can be tough to do in a rigid Wal-Mart structure,” he adds. “Dell isn’t used to dealing with a retail middleman.”

Moreover, he adds, selling through Wal-Mart could make it more complicated for Dell to provide good customer service—an area in which Dell has been criticized in recent years. “The challenge is convincing people they’ll provide good customer service through Wal-Mart and deliver on it,” Okamura says. “It will be interesting to see if Dell can provide good self-service communications, such as through in-store kiosks or even simple product tear sheets, and if customers who buy a Dell computer in a Wal-Mart store get the same customer service levels as on Dell.com.”

Dell will have its own free-standing product displays in Wal-Mart and Sam’s Club stores, a Wal-Mart spokeswoman says. Dell already sells a broad range of its products through SamsClub.com, but will not offer any products through Walmart.com, the spokeswoman adds.

Wal-Mart will, however, inform its Walmart.com customers about the availability of Dell computers in Wal-Mart’s stores, she adds. Dell plans to start selling in Wal-Mart stores only two desktop computer models, each offered in packages exclusive to Wal-Mart stores and priced under $700. It also plans to offer other exclusive models through Sam’s Club and Wal-Mart Canada stores.