Dell looks to Sears
to extend buyer reach
April 28, 2003
BY MICHAEL KRAUSS
Rock, Texas-based Dell Computer Corp. quietly announced back in
January they are piloting sales kiosks in Sears stores.
Coming on the heels
of Sears' $1.86 billion acquisition of catalog clothier Lands'
End, I thought Sears CEO Alan Lacy might be up to something big.
Lacy needs major changes to transform Sears. Then, too, maybe
Dell could use Sears' bricks and mortar to improve its customer
experience and gain merchandising expertise. Calls to Ray Brown,
vice president and general merchandise manager of home electronics
at Hoffman Estates, Ill.-based Sears and Dwayne Cox, a senior
spokesman for Dell, dampened my speculations.
"All of the kiosks
in Sears stores would be characterized as pilot programs or experiments,"
"We're just a
few weeks into this, there's nothing to talk about yet,"
So why is Dell in bed
with Sears? Are they moving away from their fabled direct-to-consumer
strategy? Is it to improve Dell's after-sale customer service
The kiosks are part of a broad experiment by Dell that spans 10
states where some 50 kiosks are already in place. Most of these
mobile kiosks are in the common areas of major shopping malls.
According to Cox, only four are at Sears' stores. One is in Austin,
Texas, and three are in Orlando, Aventura and Coral Gables, Fla.
The kiosk program is
aimed at one single goal -- improved market penetration. Dell
wants to reach a retail shopper who they characterize as direct-averse
-- not typically interested in shopping online. The kiosks at
Sears simply give a broader range of buyers the opportunity to
pass by, touch and test the product, and maybe place an order.
"If you go to
a kiosk, you can't purchase a product and walk away with the product,"
Cox says. "The kiosk gives you the benefit to see, feel,
touch and talk to a subject matter expert. Get a test drive and
a demonstration. Then you can order it online at home or at the
Cox is quick to point
out the tiger isn't changing its stripes.
intensely, fiercely, direct," he adds. "We continue
to think the fact that we're direct gives us anywhere from a 10%
to a 15% cost advantage over our indirect competitors."
Dell also appears intensely, and fiercely, intent on control.
According to Cox, even if you order a Dell computer online from
a kiosk at one of the Sears pilot sites, it is still a direct
transaction with Dell. "Sears is not a party to the transaction
or an intermediary in it," he says. My guess is Sears gets
a fee and maybe a percent of any gross transactions attributed
to the kiosk, but neither Sears nor Dell would share intimate
As a marketer and a
Dell customer, this still left me curious. The direct model is
efficient. It's lower-cost, but it's not always a great consumer
experience. And the merchandising possibilities in cyberspace
often don't measure up to those in a physical store. For example,
purchasing a laptop online is complicated. It requires a myriad
of choices about items like processors, memory and software. It
helps to have an expert give you guidance. Post-sale inquiries
can be frustrating. After-sale maintenance and service and be
downright daunting. All of these are reasons why it would be nice
to drive to a local Sears store to shop for or service a Dell
computer. Dell recognizes the problem, but their solution involves
the direct channel.
more in direct after-sales service and support," Cox says.
"Our goal is to deliver each individual customer the exact
kind of support they desire down to the level of their machine."
What does Cox mean? Well, consider the experience at Best Buy.
If you buy your computer there and have a problem, they're going
to refer you to a manufacturer's call center. They aren't going
to know the history of your machine. They aren't going to have
a relationship with you. They aren't going to solve your problem.
Dell is aiming for
something the gurus call mass customization. Conduct customer
service online, using technology to keep costs low, yet customize
and personalize the service for each individual buyer. It may
sound like an oxymoron, but if Dell can deliver, it will give
them another competitive advantage.
What about Sears? Why
are they in this?
When I think of Sears,
I think of the power of in-store merchandising. Though Sears won't
comment directly on the Dell collaboration, listening to a veteran
merchandiser like Brown you get some hints.
"From a consumer side, few folks have broken the code at
retail in terms of what the consumer wants to do with computers,"
Brown says. "They sell boxes. They're box merchants. They
buy the box. They uncrate it. They set it on the shelf. They put
a price on it. What you see is boxes lined up like little soldiers.
They all look alike. They focus on bits and bytes," he laments.
"In the absence
of anything else, you focus on price," Brown says. "And
now there's no going back."
Brown believes the
answer to falling prices and the commoditization of technology
rests with the merchandiser. "You have to recognize customers'
needs and provide a valued solution. If you do that, you can charge
more," he says.
He uses the audio business
and home theater as an example. "For years there hadn't been
many advances in audio receivers and prices started to collapse.
Along came this idea of home theater in a box, an integrated pulling
together of components; receivers, mini DVD players, subwoofers
and speakers and the wiring all in one. Now we're selling home
theater in a box for $ 400 to $ 500 when the average price of
a receiver is heading south of $ 150," he says.
Find a consumer need.
Bundle up a group of products and services. Merchandise it smartly.
"We like to think
to ourselves as the best in the industry," says Cox from
Dell. "Course our detractors say that we have the largest
house in a burning neighborhood."
relationship between Dell and Sears will help put the fire out.
can be reached