Dell poised for store sales on mainland

Break from direct model follows Wal-Mart deal Dell, which became one of the leading personal computer brands on the mainland by selling direct to businesses and consumers, will soon take its first steps to sell inside selected retail stores across the country with a new range of low-cost, locally designed products. The move is imminent, according to Steve Felice, president for Asia-Pacific and Japan operations at Dell, which is neck and neck with Hewlett-Packard in a battle for leadership of the world PC market. 'We are now considering a retail strategy and other distribution channels to increase our coverage throughout the country. It's possible that this could happen this year, depending on who we select [as partners], how we negotiate and how quickly that happens,' Mr Felice said. 'We feel like we should be moving faster because customers are accepting our products very well in China.' Texas-based Dell, which started selling direct on the mainland about eight years ago, has been one of the country's top-five PC vendors over the past few years. It has also been the mainland's top supplier of PC servers, with Intel or compatible processors, for the past three years. The company's quest to build a retail presence follows recent efforts to accelerate its marketing push into the mainland's lower-tier cities. 'About three quarters ago, we started expanding into tier-three cities. Now, we've started moving into tier-four cities,' Mr Felice said. 'It will take us about nine to 12 months to get where we want to be [in the fourth-tier cities].' As the economy grows, Dell and its rivals are expanding beyond key cities such as Beijing, Shanghai and Guangzhou and second-tier urban centres including provincial capitals such as Changsha in Hunan and Fuzhou in Fujian. Other cities, including 200 county-level centres, offer increasingly well-off potential customers while the 400 or so tier-four cities also have large groups in their populations of between 500,000 and three million people prepared to buy a PC. Mr Felice said Dell's retail push would cover all the cities where Dell had a presence. 'We believe official details about Dell's retail moves could be articulated by year-end, including some more [information] on its own Dell stores,' said a report from UBS Investment Research last month. It noted that Dell would see 'some near-term benefits as it fills the channels with inventory, which could help sales into next year'. Dell this month started selling two PC models, with chips from Intel rival Advanced Micro Devices, to 3,000 Wal-Mart stores across the United States. The UBS report said that was 'likely the first step of many to come globally'. The retail initiative on the mainland would involve the introduction of a wider range of desktop PCs developed by Dell's China Design Centre in Shanghai, Mr Felice said. In March, Dell unveiled its Shanghai-designed EC280 desktop PC - selling from 2,599 yuan to 3,999 yuan - as part of efforts to boost the company's share of consumer and small business PC users on the mainland. Competition will remain strong from market leader Lenovo Group and United States-based Hewlett-Packard. Adrian Koch, senior vice-president of HP's personal systems group in the Asia-Pacific and Japan, said the company built its own desktop and notebook PC design facilities on the mainland in 2004. That has allowed it to offer a wide range of price-competitive products in all 420 cities across the mainland where HP has established both direct and indirect marketing channels. First-quarter PC sales on the mainland were topped by Lenovo, with a 36.1 per cent market share, according to researcher Analysys International. Mainland rivals Founder and Tongfang followed with 13.4 per cent and 10.3 per cent share, while HP had 7.7 per cent and Dell 7.2 per cent. Mr Felice said Dell's operations on the mainland had had a significant impact on the country's economy - a finding backed up by a six-month study last year by the Shenzhen Graduate School of Business at Peking University and the China Centre for Economic Research. The study estimated that Dell's mainland business, including benefits to support companies, in 2005 contributed US$36.4 billion to gross domestic product and supported nearly 1.5 million jobs, or 0.4 per cent of total non-farm employment. It found each US$1 million spent by Dell adds US$2.3 million to GDP, 92 new jobs and US$144,000 in tax revenues.