Dell to hit discount shelves?

Dell to hit discount shelves?

Dell's decision to kick-off its US retail strategy through discount chain, Wal-Mart, raises questions about whether the PC giant has similar plans for Australia.

Dell Australia spokesperson, Paul McKeon, said it had been talking to a number of retailers since the global announcement of its indirect strategy but couldn't comment on specific relationships. "We are talking to retailers across the spectrum, so I wouldn't rule those [discount department stores] out," he said.

Budget department chains like Big W, Target and Kmart have historically been a successful channel for PC vendors reaching out to customers with low prices. But while the retail channel as a whole is buoyant, analysts claim the budget players are suffering a decline in popularity.

"There was lots of activity when we started getting into the sub-$1000 PC space," IDC PC analyst, Liam Gunson, said. "But now these are commonplace: prices keep coming down but they're not hitting any psychological barriers. Until we get to sub-$500 machines, we are going to have similar price points between the chain stores and the more traditional PC retailers."

GfK IT account director, Neville Ray, agreed discount stores had lost their advantage as the gap between notebook and desktop PC pricing narrowed across all sales channels.

"Selling through the discount chains is nothing new - it happened in May 2005 when we had Big W launch the first sub-$1000 notebook, and there have been other relationships," he said. "They haven't done as well recently as they have done in the past as we're not seeing any drivers."

Gunson said traditional PC retailers could afford to offer "loss leader" products to draw customers into their stores because staff had the ability to up-sell.

"The chain stores can't because they don't have the people to do it. Ultimately, they're just offering a price point and a box on the shelf," he said. "These changes have been about simple shipments of PCs. It's not a strong sustainable business, and it doesn't offer vendors the ability to put out high-end products, which is important as margins shrink."

Gunson claimed the discount chains had better success with CE products consumers were more comfortable with, such as TVs and stereos, but Ray argued PC products would continue to move through places like Big W because of their distinct customer set.

"The end-user who is going to buy a PC from a discount department store either knows what they're buying from a technical perspective or they're solely focused on price," he said. "People will buy from that channel - it has been proven - so the IT industry has to take that into account."

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