Is It Or Isn't It?

There is a lot of confusion surrounding Dell's channel plans. While
officials are tightlipped about going indirect to the market, there are reports
of partners being signed in almost every state in the country. When will Dell
come clean about this entire affair and break its stoic silence?

In the IT market, channel is the route that has always been convenient and
beneficial for the vendors to reach to their end customers. Dell was one of the
few exceptions to this rule, in the desktop, laptop and server space. Globally
the IT giant banked on its vast direct sales team and support staff to cut down
on the channel network and go straight to the channel. And it managed to pull
this business model off with great aplomb and success.

When Dell India entered the country a couple of years ago, it as confident
that it could emulate this direct selling model here as well, with equal
success. After all, it was a well known brand and had products that had been
benchmarked and appreciated by leading agencies.

Sadly, this model did not work as well in India as the company expected. The
reasons could broadly be put down to the cultural mindset of the Indian
customers. Though tech-savvy, Indian buyers still want to see, touch and feel
the product before they buy it. And it was not possible for Dell, or any other
vendor for that matter, to have direct sales offices in all the cities to
fulfill this customer need.

This is precisely why after months of contemplation, Dell India has finally
decided to go the channel way. This is a fine reminder for all vendors about the
importance the channel has as a conduit to reach to the end-customers. But what
is surprising is that Dell is still unwilling to talk openly about its channel
plans. And all the more so, because the channel has good things to say about it.

Channel speak

According to the newly appointed dealers of Dell, they have been promised a
better profit margin than those offered by other brands in the market. One
reason for this could be that the vendor has not invested in a huge distribution
network and is looking after logistics itself. Hence the profit saved falls in
the pocket of the channel.

Dell is investing in large retail stores as well as on the channel in order to create a better market presence

This indicates that so far Dell is making efforts to keep its channel
satisfied. When Dell had initially dabbled with the channel model, there were
complaints that its direct sales team was poaching customers from its partners.

“Initially Dell did not have clear guidelines in terms of division of the
customers and there were clash among between the direct sales team and channel
partners. Now they have resolved the issue and have a given a set of directions
to the dealers so that any such issues are not raised in future,” shared one of
the dealers handling the western region of Dell.

Officials from Cache Technologies who were earlier signed to do business with
Dell and later terminated the deal said, “We discontinued with Dell only because
they did not have any clear cut policy related to customer handling. We faced
many cases of poaching and we are not comfortable in doing such business as
sooner or later it affects the vendor-dealer relationship.”

Approaching SMB via channel

According to market reports Dell has currently 2.5 percent of SMB market
share and is expecting a rapid growth in the coming period. Also, it is eyeing
on the upcountry market in a major way and is in the process of appointing
channel partners in various regions.

The market is flooded with competitors and in order to stand ahead in the
race Dell will have to mould its strategies accordingly. Therefore,
under­standing the potential of the upcountry market Dell has been reported to
tie up with partners in second tier cities, as that would be the best way to
reach large number of customers.

Interestingly, one of the top Dell officials admitted of its channel
appointment strategies and said, “Upcountry is a potential market for Dell and
in the coming months Dell would announce the names of its new partners in these
regions. As of sales model, for B class cities we would primarily go through the
channel route.” Dell officials have already started training the sales and
technical teams of their channel partners to better equip them.

According to one of the dealers, Dell is coming up with aggressive strategies
that are focused to win a large market share and observing the potential of
towns in Uttar Pradesh and Punjab the company would begin their operations in
these states and will gradually expand to other regions. Towns that are
speculated to be the first hit areas by Dell are Lucknow, Kanpur, Allahabad,
Varanasi and Gorakhpur.

One of the primary reasons for Dell approaching the SMB market through
channel could be due to the service and after sale support issues as the
customers in this segment do not feel very comfortable in getting the service
online and they still insist on going to local dealers for any such matter. Even
for the direct orders, Dell can ensure the delivery of the product but for the
value addition, only local dealers can play the role of synthesizer and that
could be the reason why the vendor is switching to dealers for upcountry
location.

Besides appointing channel in SMB space, Dell is giving a major thrust on
opening retail stores in B class cities and is investing on its partners to
expand their retail presence. This approach is to ensure that customers can have
better feel of the Dell products and even if they place their order directly,
they can have a look of the products.

The retail initiatives

The next approach that Dell is taking to create a dominant presence in the
market is through retail. Dell is now in the phase of retail expansion and is
investing in large retail stores as well as on channel partners to enter into
retail presence in order to create a better market presence.

Dell has recently signed up with Croma to showcase its products where
customers will be able to experience and place a customized order for a wide
range of Dell products at select Croma stores in Mumbai. However, the company
declined to share any figure of investment on its retail sector.

“Our primary goal is to create an environment where customers can experience
Dell's award-winning technology first hand. The agreement with Croma will
strengthen Dell's consumer presence in India, making our products more
accessible to more customers,” shared Michael Tatelman, VP of Sales and
Marketing, Dell's Consumer Business.

Dell has two distinguished target customers that include corporate or large
houses and SMB market. The former one is being primarily looked after by the
direct sales model and the latter one would be by the channel space.

According to market sources, Dell is also planning to adopt the stock and
sale model and will adopt distributors in different region and in the SMB space
of upcountry region and hence orders will be catered by the system integrators
who will also after sale service to the customers.

Dell partners have also felt the overstretched delivery period of Dell
products over certain locations. Taking heed of this fact, the company has
signed up with Iris Computers for the logistics movement. Commen­ting on the
issue, Rajan Anandan, VP and GM, Dell India shared that the delivery time
depends on the location of customers and it takes three to four days for the
configuration of the model and the company aims to deliver the order on time
every time.

According to market sources the company has appointed a committee to monitor
the functioning of SMB space that would be operated by channel for the next two
to three years. The committee would rate the success of the SMB market and a
non-impressive result might compel the vendor to adhere back to the direct sales
model.

Now that Dell is specifically focusing on the SMB space and has designed its
strategies to draw large number of customers, its success can be gauged only
when it finally takes off in the upcountry market and starts its operation in a
full-fledged manner. Till then, channel and end buyers will have to wait and
watch the company's perfor­mance. But will Dell first acknowledge the existence
of its channel network?

Amrita Tejasvi

amritat@cybermedia.co.in