Dell available in Wal Mart – end of pure online business models?

Ever since I saw some Dell computers in my local Wal-Mart, I have been well, shocked! Shocked because like so many others, I have believed that Dell had a unique end to end supply chain that linked its customer preferences directly to its supply chain partners through a very visible and transparent global supply chain . In fact, it is for over 10 years that Dell has been following a direct marketing model and I remember ordering a laptop in 1997 online from Singapore that was delivered from the Malaysian Dell factory. It had a DVD player and I was pleased as a peach when the ordering system told me that the supplier (I think Toshiba) had a backlog and there might be a slight delay. In other words, each component you ordered became visible to an upstream supply chain partner who moved into motion. Dell transfered my warranty to the US and actually replaced some components that were not working within the extended warranty in 2000 in the US. Well that was Dell- providing global customer service in the year 2000.

So what’s changed in 2007? Over the years I think the computer industry has become commoditized. For example,  it’s just not worthwhile  for  the hardware geek to put  together a  machine from components. The costs simply do not add up today against the bulk-component buy power of big players like HP. In addition, computer makers like HP,Compaq,Acer,IBM (now Lenovo) allow things like memory to be easily upgraded as they use more modular memory configurations. These big traditional retail channel players have reaped the benefit of lower component prices without bothering to build any huge proprietary advantage in what has turned out to be a commodity market.  Dell instead, has tried to follow a more proprietary model with expensive memory upgrades. Most importantly, there is a large population that wants to buy a computer but cannot handle the Dell buy process because it is rather overwhelming for someone not used to online buying. That population is over 50% in the US and that’s a really large market and where does that market go to shop? Wal-Mart- you bet !

On the supply chain side, for the Wal-Mart segment Dell will have to reduce the assortment simply because now you have finished goods inventory sitting at various parts of Wal-Mart unlike the last minute assembly by FedEx/UPS in the direct model. But that should not be too difficult given the extreme competence Wal-Mart has in figuring out what works for middle America. So all in all- this should work and mean more market for Dell and Wal-Mart. But it does  reduce the  great charm  that the Dell direct system brought to all discussions of the "pure" end-to-end global supply chain.Is this the end of pure online plays ? Let’s watch Amazon.