2 min read

Dell and distribution: A marriage of convenience

Another step in Dell's attempt to become a channel friendly vendor

I had to look out the window a few times to make sure hell hadn’t frozen over. What was this about Dell going through distribution? It was shocking enough when Dell decided to start selling through the channel, but now it’s turning to two-tier distribution?

As we see signs of the spring thaw, there is no indication that hell, in fact, has frozen over. And Dell will be selling select products through Ingram Micro and Tech Data.

In response to feedback from partners, Dell will be offering its Vostro desktops and notebooks for the SMB market through distribution, with the likelihood of adding more product lines in the future. The program is effective immediately in the U.S., with plans to roll it out in Canada later this spring. But resellers can continue to buy those same products directly through Dell, via its PartnerDirect program (as well as custom build-to-order products).

This is more a marriage of convenience, not one of true companionship. Despite the well-worded quotes in the press release, I expect there’s more to this story. Dell went to the distributors, after all, not the other way around.

Consider that Gartner is predicting a decline in PC sales of 12 per cent for 2009 – the steepest decline ever in the history of PCs. Dell started reorganizing its business in January, mulled over the acquisition of other businesses and is now moving to distribution. And it’s attempting to sex up the brand in its latest ad campaign.

So why would distributors agree to this, when Dell is still selling direct to resellers? With average selling prices always plummeting, disties need to bring more vendors onboard to keep growing the business.

Like an arranged marriage, it has nothing to do with emotions. That doesn’t mean emotions aren’t involved – they’re perhaps hidden or repressed – but they’re not part of the decision-making process. It’s business.

But, it’s also a sign that Dell is more serious about the channel and, as a result, solution providers may feel more comfortable dealing with Dell (via Ingram Micro or Tech Data). Dell will initially stock 11 desktop and three notebook configurations that will be delivered to customers in 24 to 48 hours – something it wasn’t able to do on its own.

These benefits are not surprising to anyone who understands two-tier distribution – that’s why it exists in the first place. It’s a heck of a lot easier to source all your IT solutions through the same place – not to mention the credit capacity, product selection, training and marketing expertise that comes along with it. But up until recently, Dell didn’t quite understand that value.

So, Dell will also have to understand that this arrangement will only work if it coordinates its direct pricing with that of its distribution partners. Even a marginal price hike would discourage VARs from purchasing through disties.

It would be naïve to think Dell won’t add a competitive pressure to HP, IBM, Lenovo and Acer, which already go through distribution, but on the other hand, Dell may be forced to raise the bar to compete with such channel-friendly brands.