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Dell Opens First Of Two Retail Stores

7/27/2006 02:42:00 PM Eastern

Dallas — Dell opened the first of two planned company-owned stores this week at the upscale NorthPark Center mall, here.

The 3,000-square-foot Dell Direct Store carries the company’s full line of flat-panel HDTVs, desktops, notebook PCs, printers and MP3 players, as well as devices by outside vendors such as digital cameras. The store also showcases accessories, although they are not available for purchase.

A second store is slated to open in West Nyack, N.Y., later this year.

Dell already maintains 170 kiosks in airports and malls throughout the country, which are limited to displaying about 12 SKUs. As previously reported by TWICE, neither the stores nor the kiosks carry inventory, requiring customers to place orders for delivery.

A Dell spokesman told TWICE last month that the stores have nothing to do with the company pulling back from its direct model. Instead he insisted it was in response to the desire of Dell’s customers to inspect first-hand a product before making a purchase.

Steve Baker, The NPD Group's industry analysis VP, said the storefront concept tracks what the company is already doing with its kiosks, which Dell claims are a very good sales generator.

“This is a more expansive way to develop its customer relationship. It doesn’t hurt their direct model, but is a natural extension,” he said after the store openings were first reported last month.

PC vendors have had a mixed experience in handling their own retail operation. Gateway created its large Gateway Country Store chain, which imploded two years ago when the company attempted to turn them into full-line consumer electronic outlets. Apple has had the opposite experience. Its Apple Stores are a huge sales generator for the company and Apple just opened a new facility on Manhattan's trendy Fifth Avenue.

CE manufacturers including Sony, Bose and Bang & Olufsen, and more recently Nokia and Pioneer, have also entered the retail business, leading market research firm ABI Research to warn that the strategy could disrupt traditional CE retail channels and backfire for vendors.

“Stores mean ongoing operational costs as well as infrastructure,” said ABI research director Vamsi Sistla. “Anybody can make money when times are good, but when economies contract, retailers are the first to be tested. Some will remain profitable, others may not. With this strategy, OEMs may be trying to ‘boil the ocean.’”

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