Dude, Wal-Mart’s getting a Dell

ROUND ROCK, TEXAS —Dell Inc. signaled a major shift in strategy last week when it began selling its computers at more than 3,500 Wal-Mart and Sam’s Club stores. The move comes at the same time Apple is preparing to roll out select Macintosh computers at 200 Best Buy stores and suggests both suppliers are prepared to make more retail deals.

Dell, which generates more than 90% of its revenue through direct sales, began selling two of its Dimension desktop computers in stores June 10 and called the move a “first step” in its new retail strategy that would “expand the number of places and ways people can buy Dell computers.” The move also came on the heels of a first quarter in which revenues were almost flat and less than one year after Dell was bumped from the No. 1 spot in computer sales by Hewlett-Packard.

The NPD Group’s vp of industry analysis Stephen Baker said he doesn’t think Dell’s move to retail is a good idea but said Wal-Mart is a good touching off point if they’ve made their decision. “If you’re going to sell at retail, Wal-Mart is a good place to start,” said Baker. “They don’t ask for a lot of back-end funding and their merchandising is simple.”

While direct sales generate the bulk of Dell’s revenue, it does have a few retail partners already. It sells computers through Costco and QVC—primarily through their Web sites—and does approximately $4 billion in “indirect” sales per year.

Baker says selling computers through the Web sites of select retailers isn’t a problem, but believes a larger move into retail by Dell would be a mistake. “They’re going to have less control of the product, the way it’s displayed and the way it’s priced,” said Baker. “Hewlett-Packard sells computers at retail but they also sell a lot of other things and they know what they’re doing. Dell has none of those competencies.”

Apple is another supplier that’s taking the plunge into mass retail with a test of Mac sales at 200 Best Buy stores that’s due to launch this month. The test could eventually lead to Macs being sold at most of Best Buy’s 832 stores and at other retailers such as Circuit City.

Andy Hargreaves, an analyst with Pacific Crest Securities in Portland, Ore., said the experiment shows Apple looks at mass retail differently than it did years ago when it sold Macs in Best Buy for a brief time in the late 1990s. “I think it’s part of Apple trying to expand its distribution base to more outlets,” said Hargreaves.

Hargreaves said that Circuit City could also jump on board with a large rollout of Macs in stores. He said the chain is currently experimenting with Mac sales in select stores and wouldn’t be surprised if it followed in Best Buy’s footsteps later this year.

The moves by Dell and Apple also come just months after CompUSA closed 126 stores and other high-end CE retailers are under pressure from larger rivals.