BEIJING, Mar. 3 /Xinhua-PRNewswire/ -- CCID Consulting, China’s leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), recently analyzed the new continent of Dell’s direct
sales-distribution.
Dell walks out of direct sales via the cooperation between Dell and Gome. It is not easy to lay effective dealers network for Dell. If Dell would like to get rid off the disadvantage of its former direct sales and build perfect distribution architecture, Dell will need to develop its partners in depth. Distribution will become the new continent of Dell’s direct sales.
With Michael Dell comes back into power, Dell has adjusted its channel policies. Dell announced that it will directly provide products to Gome on Sep., 24. This is a landmark move in Dell’s global retail strategy. Dell has developed partners in U.S., Japan and Britain before, such as Bic Camera, Carphone, Warehouse and Wal-Mart.
Crash-then-law
I. Direct sales falls short of its reality. In Dell’s direct sales mode, all products are sold to terminal users without the involvement of distributors. However, this is not the case with commercial users. Dell has a bulk purchase policy that offers discount for buying in huge quantities. This policy leaves profit room for some dealers, who purchase products at the lower discount price and then sell the products to terminal users, acquiring the variance in price. On the other hand, China’s consumers are not used to paying money before acquiring the products, and have a distrustful feeling to the concept of direct sales. This has left room for dealers. It is estimated that 70% of Dell’s computers are sent to terminal users via system integrators. Dell’s direct sales falls short of its reality in China.
II. Dell’s service needs to be improved. Dell needs its employee to provide relevant services in its direct sales mode. And factitious differences cause faulty services. Dell’s direct sales has been facing mounting complaints from both individual and enterprise customers, which exposed the shortcomings of its direct sales mode.
III. The market presents flexibility
In China, some of the biggest market opportunites are in 3 or 4 tiers cities. However, these economies are comparatively backward, which makes it difficult to implement direct sales in these areas. China’s consumers in middle and small cities prefer to purchase products in local retail stores. HP and Lenovo are already targeting SMEs customers in 3 or 4 tiers cities. Both of them pay attention to construct channels, especially to cooperate with influential dealers.
Challenges on the road
I. Professional sales organization cultivating. Michael Dell made preparations: Dell poached Motorola’s senior vice president to take charge of global consumers; Dell hunted Oracle’s CMO to take charge of adapting sales mode’s change; Dell appointed global operation president Mike Cannon to take charge of the new mode of building issue and manufacturing. It is a long process to establish a rational and effective channel system. HP held a powerful channel mode and program after 25 years’ effect. How to form a powerful relation network and how to promote both sales modes are the challenges that Dell will face.
II. Contradictory relation between dual marketing
Dell’s famous zero inventory supply chain is completely adaptive to direct sales era. However, because of the distribution, the contradiction between zero inventory and distribution is unavoidable. Having two coexisting sales channels will bring new problems to the management. There is competition among different channels, which adopt different pricing strategies. Dell’s distribution is doomed to affect its direct sales. It is important for Dell to deal with the relationship between these two sales methods.
III. The choice between price and profit. It is a question about these coexisting channels adopting factory price’s coherence or terminal price’s coherence. If there is no difference on factory price, the profit for distribution channel is too low. CCID Consulting suggests Dell adopt independent accounting and different policies for these two sales channels. When Dell develops other channel partners besides Gome, how to deal with the relationship between channel partners will bring great challenge to Dell.
Devise strategies without going outside
I. Channel construction is not built in a day.
Lenovo commented on Dell’s distribution: channel construction is not built in a day. It means that it is not easy for Dell to catch up with companies such as Lenovo in channel constructions.
Lenovo has spent much resource on channel development and learned how to cooperate with different partners tacitly, for example, how to hold the profit balance between manufactures and partners, how to make different on sales policies among different cooperation partners, how to develop different strategies for different partners on different products in different areas and eras. These questions seem to be trifling. However, how to manage these issues decides the performance of sales channels. Dell needs time and cooperation experiences with partners to deal with these challenges. Without practices theses questions will stay in theory and cannot be settled in reality.
Hence, Dell has to be patient and learns from HP, Lenovo, and other distribution companies to build good relationship with channel partners. Products sales by proxy of other band on the website can promote Dell’s brand image and widen sales channel, which is the target of cooperation with Gome. The cooperation between Dell and Gome is the first step to walk out of the mode of direct sales and distribution will be the new continent of Dell. It is not easy for Dell to build an effective dealer network while the cooperation with Gome is just a small step of a long march.
A Gradual Sales Strategy
A gradual transformation on sales strategy is necessary for Dell. Cultivation of a mutual sales team need time, and trusting with cooperation partners need cooperating practices as well. Actually, cooperation with Gome is a reliable choice for Dell, since Gome being a retail distribution dealer will cause less impact on the original direct saless mode. Furthermore, 3 or 4 tier market development will benefit from the cooperation with Gome. Besides, cooperation with Gome will be useful to accumulate experience for Dell’s sales team.
CCID Consulting expects to see Dell makes great efforts to distribution scope, such as the sale of Vostro. A completely independent team takes charge of Vostro’s sales team, after service and market promotion, and the team makes strategies which are different from Inspiron and Latitude to VIP customers. The team adopts online, off-line, marketing activities and direct saless activities in 1-2 tier markets. As for 4-5 tier markets, they cooperate with partners.
CCID Consulting suggests Dell get rid of the disadvantage of direct saless mode and build a consummate distributing framework, cooperate with more retailers and develop a agency system.
About CCID Consulting
CCID Consulting Co., Ltd. (hereinafter known as "CCID Consulting"), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: HK08235), is directly affiliated to the China Center for Information Industry Development (hereinafter known as "CCID Group"). Headquartered in Beijing, CCID Consulting has set up branch offices in Shanghai, Guangzhou, Shenzhen, and Harbin, with over 300 professional consultants and industry experts. The company’s business covers over 200 large and medium-sized cities in China. Apart from home market development, CCID Consulting establishes international cooperation links across the United States, the Asia-Pacific region and Europe with agents in the U.S., Japan, South Korea, Australia, Singapore, Italy and Russia, with the aim of going global.
Based on four major competitive areas: powerful data channels, industrial resources, intense knowledge and a deep understanding of information technology, CCID Consulting provides customers with consulting, research and IT outsourcing services covering strategic planning, IT applications, marketing strategies, human resources and information technology outsourcing. Customers range from industrial IT users, telecommunications companies, energy companies, finance companies, and automobile companies, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to be the number 1 consultant in strategy consulting, the number 1 advisor for enterprise management and the number 1 consultant for government decision-making.
For more information, please contact:
Cynthia Liu
Coordinating Manager
CCID Consulting Co., Ltd.
Tel: +86-10-8855-9080
Email: liuyan@ccidconsulting.com
