New hybrid sales model
However, Dell is placing its bets on a model that is a blend of both direct and channel sales.
Ferrand stressed that Dell is not abandoning its direct model, which has helped provide the cost advantage it has over the competition. "We're not going direct like everybody else, where they're simply pushing their products on retailers or resellers to sell," he said.
Rather, Dell will continue to preserve and improve its supply chain which, he said, will prove to be a critical competitive differentiator for the company as Dell makes its play in the retail market.
"We're going to leverage our build-to-order capabilities so our resellers won't have to carry inventory, and we can still have a winning strategy without being a HP or Lenovo," Ferrand said.
"Our competitors typically don't have the supply chain that we have, and would [stock] thousands of their [computer] systems on the shelf," he explained, noting that this adds to their inventory cost.
In addition, consumers can only choose from specific configurations available on the retail shelf. "So it's a traditional supply-driven model," Ferrand said.
In contrast, Dell's new retail strategy will be supported by a network of VARs (value added resellers) and retail chains that can leverage the PC maker's already-proven supply chain, he said.
He noted that the company's retail strategy in the Asia-Pacific region will be a mix-and-match of both the direct and indirect sales models, where Dell's go-to-market strategy will likely differ between countries.
Ferrand explained that retailers can choose to have a handful of system configurations on the store shelf for consumers to see and touch. If a customer wants a model that is not available on the shelf, or that may not be in the inventory, the retailer can still place an order configured to the customer's requirements and have the system delivered to his doorstep.
"That's an example of how a distributor or retailer will not need to carry much inventory, but is still able to leverage our supply chain model," he said. "They can have bigger profit margins, split between them and Dell, and consumers also have more choice."
Ferrand declined to elaborate on such revenue-sharing models because the company is still working out the details behind their retail sales strategy for the region.
According to Gartner's Chakraborti, rather than simply take the reseller route in the Asia-Pacific, the company should focus on establishing alliances with large retail chains similar to its partnership with Wal-Mart in the United States.
What Dell must do
Chakraborti said Dell should also consider zooming in on its competition with Lenovo in countries outside the latter's stronghold in China, especially since Lenovo is currently "also a bit shaky". "India would be an ideal launch pad," Chakraborti said.
He suggested that Dell needs to activate a strategy to enter smaller cities in India, as well as China, and expand its AMD-based portfolio to penetrate these smaller towns.
He added the company does not need to abdicate its direct model, which it is "still a master at", as it can help Dell reach smaller towns in countries such as India and China, as well as enhance its visibility and trust among consumers.
IDC's Ma said: "It's not just about having a presence in channels, it's also about building the brand. Dell's brand isn't weak but it needs to convey the message that it's hip and an attractive brand.
"Marketing to consumers isn't the same as to enterprises, which don't usually want change whereas consumers want something that shows their status and [ability] to look cool," he said.
Dell needs to be perceived not as a clunky enterprise box maker, but one that produces products that are hip, Ma said, adding that its latest Inspiron notebook series--available in multiple colors--shows some efforts in moving toward this direction.
Chakraborti added that growing a services division that is as strong as IBM's and HP's will also add to Dell's overall margins.
According to Ferrand, services will indeed be a significant part of the company's growth strategy.
In fact, Dell currently operates a US$6 billion services business and the company believes it can outplay the likes of HP and IBM, he said.
"There's immense opportunity for us to grow, around the box, around client management as well as the IT architecture," he added. "It's a huge business and it's the fastest-growing division in Dell."
The company clocks 38 million technical calls a year, has 55 million systems under warranty, and hires 12,000 service personnel worldwide, Ferrand said.
"It's a massive organization, but we think we can do more," he noted. He added that Dell wants to establish a stronger link between its products and services business, allowing for service offerings such as Dell Connect, to be extended "beyond the box" of its SMB PC customers.
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