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Dell targets SMB market through distribution

Dell's new Vostro V13 ultra-portable laptop could be its channel niche

Targeting the small business market isn’t easy. You’ve got entrepreneurs, SOHOs and SMBs. A company with five people may be highly technical in nature, while a 100-employee company might not have any dedicated IT staff. And there’s overlap between what retailers and VARs offer – not to mention competition from direct players.

Is it really any wonder it’s been such a challenge for vendors to penetrate the market? Earlier this week I sat down with Dell (NASDAQ: DELL) to talk about their latest Vostro V13 ultra-portable laptop – one of those products that doesn’t quite fit in the netbook category and doesn’t quite fit in the notebook category. But that’s the point.

The idea is that for a bit more money than a netbook, you get a lot more functionality. And that extends beyond light and thin and brushed-aluminum good looks – we’re talking encrypted hard drives, online backup and data protection, as well as customizable service and support solutions for small business.

Perhaps it’s this type of product that will help differentiate Dell in its distribution strategy. When Dell first entered the channel, it had no plans to go through distributors. It sold standard configuration PCs through retailers, while offering VARs the option of using its configure-to-order capability.

But back in March, Dell moved further away from its direct legacy by teaming up with Ingram Micro and Tech Data to sell Vostro PCs and notebooks, following in the footsteps of competitors such as HP, Acer and Lenovo. Dell made standard configurations available through distribution in a move to speed delivery times to channel partners from five to seven days down to 24 to 48 hours. These distribution agreements were also a way to recruit VARs to its PartnerDirect program – VARs that may have been hesitant to deal with Dell, but felt comfortable going through a distribution partner.

Dell has been trying to differentiate its various product lines (from consumer to SMB to enterprise) and build out its channel, so the latest addition to its Vostro lineup will not be sold through retailers – it will be sold direct, through distribution or via VARs.

Oftentimes, consumer and SMB offerings are found alongside each other on the shelves in Best Buy or Future Shop or Staples, meaning VARs have to compete with retailers to sell those products – sometimes directly with the manufacturer as well. That’s been one of the biggest challenges for VARs selling to the small business market: A lot of the products they peddle are also sold at retail for cutthroat prices.

A VAR may offer value-added applications and services, but can’t afford to offer the same prices that Walmart can. It can also be somewhat confusing for the customer, who doesn’t really understand the added value they’re getting in a product designed specifically for small business as opposed to consumers.

Dell’s Vostro line is designed for that customer segment that doesn’t have a full-time formal IT staff. Small businesses aren’t cheap, but they want a lot of value for their money, so Dell is focusing on value, IT support and protecting data (with built-in disaster recovery services). It’s also offering Ubuntu as a lower-cost option to Windows.

Dell has been trying to find gaps or niches in distribution to attract new customers, rather than simply compete with more established channel players. With Vostro, it may be starting to find that niche.