Dell out to prove the sceptics wrong
In the United States, Ireland and Malaysia, the story was the same. Time and again Dell Computer was warned its direct sales model was unsuitable for local conditions.
Now, as the multi-billion dollar build-to-order computer giant launches mainland direct-marketing operations, the finger-wagging sceptics are howling louder than ever: 'Chinese customers want to see and touch a computer before buying one.' 'When I first encountered Dell in Ireland, I would have said the Irish customer wants to sit down and eyeball the computer,' said Buddy Griffin, vice-president for operations, Dell Computer Corp, Asia-Pacific. 'But I was proven wrong. It comes down to value for money.' Dell is betting the value it offers will have mainlanders clamouring on its telephone lines to put down their cash. In August, Dell launched a 135,000-square-foot manufacturing and technical support facility manned by 200 employees in Xiamen, Fujian province.
At the same time, Dell began directly marketing a range of OptiPlex desktop and Latitude notebooks PCs in Beijing, Shanghai, Guangzhou and Shanghai, along with the satellite cities of Tianjin, Hangzhou, Suzhou, Nanjing and Shenzhen.
Dell believes its investment - the amount of which it refuses to disclose - will raise its profile in what is considered the region's fastest-growing and most important PC market.
Last year, Dell used traditional market channels to sell about 30,000 computers in the mainland, representing less than 1 per cent of market share and ranking the firm 11th among mainland PC vendors.
'The new facility and strategy is certain to improve Dell's success,' Dane Anderson, regional PC analyst for International Data Corp, Asia-Pacific, said. 'Throughout the Asia-Pacific, Dell has proved sceptics wrong.' Mr Anderson said that since opening its facility in Penang, Malaysia, in January 1996, Dell had risen to seventh place among PC vendors in the region, ranking even higher in some markets.
However, the company had challenges to overcomde to compete in the mainland's price-sensitive market. 'Dell focuses on systems that cost above US$1,500, yet the market segment below $1,500 accounted for more than 85 per cent of computer sales in the first quarter of 1998,' he said.
Dell's Mr Griffin said it had no intention of competing in the sub-$1,500 market segment, but would drive prices hard. 'We are a high-volume, low-margin business,' he said.
'The computers we sell will always be state-of-the-art. We turn our products out fast and we stay leading-edge.' Mr Griffin said the company was building strong relationships in the mainland with government ministries, industry and large foreign-invested companies.
Already, it had the State Taxation Bureau and Telecommunications Administrations of Beijing, Tianjin and Xiamen as customers, and believed its installation and technical support service would help its mainland market share grow.
'We will power [the computer] up and hand it over to you as a working computer,' Mr Griffin said. 'If you want to know something about your computer, we can answer your questions on our toll-free numbers. And if you need on-site service we can provide it [in the nine cities] immediately.'
