Death of an ill-informed hardware salesman
Tuesday 09 December 1997
The first computer you buy is from a shop. The salesman may not know much more than you do and the PC you buy may already be out of date, but at least you can see what you're getting. Second time round, you know what you want, so you buy direct. For your third machine, you buy online - with no one to blame but yourself. This is becoming the typical computer buying pattern.
Online sales are booming. Dell now sells more than 1,000 computers a day via its Web site (about $3m worth, equal to more than $1bn a year). It only launched in May. Already 10 per cent of its UK sales are online, more in the US. The impact of the Web has been greatest in the consumer market, where more than a third of its buyers shop virtually.
Dell is already the number one direct PC supplier worldwide, having pioneered the market 12 years ago, and is the third biggest PC seller overall (after Compaq and IBM) but is growing faster and is more profitable. It is now the number two PC seller in the UK, with 12 per cent of all sales, and believes that online selling is key to maintaining this growth.
Dell's chairman, Michael Dell, says its URL (http:// www.dell.com/uk) is "even more important than the phone number. It's global, it's universal. It never changes. It's everywhere." Indeed, it even includes it in its BIOS, so that users are reminded of it every time they start up their PCs.
Some manufacturers whose PCs are sold through dealers have also been toying with online sales, but Andrew McNeile, Dell's UK sales director, claims this won't work; they can't put their best prices online because their retailers would object.
Besides online sales, buyers (however they buy initially) can also follow the progress of their order online, while existing users can type in the barcode from the back of their machines and the Web site will list all the drivers and updates they can usefully download. It has also put all of its technical support archives, right back to the 8088 processor, on the Web. Eventually McNeile hopes that buyers will be able to view precise waiting times for any specification they choose, such as finding out that it will take 10 days with one video card, or three days with another. It is also going to add buying advice to the site, to help new users.
That online sales have become so central to its marketing strategy, so fast, stands out amongst the half-hearted "success stories" usually seen in established companies doing business on the Web. McNeile says that a key to this has been that Michael Dell has driven its development.
"Too many companies leave it to be done as a half-hearted trial by a junior manager," he says. They can't overcome the natural resistance of people who fear that online sales threaten their jobs.
Besides commitment from the top, successful online commerce needs significant investment. Instead of relying on its US servers, Dell Europe invested pounds 2m in installing servers at its Irish sales centre, to give a faster response.
"The first lesson we learnt was to give as much content and functionality as possible," says Aine O'Dwyer, Dell's Internet marketing manager - even if most users don't require that depth. This doesn't mean complexity. Users hate to wait, so any order can be made in only three clicks. Although it uses Java to update the pricing every time you change the specifications, this does not require the latest software; it works with version 3.0 of both Netscape and Internet Explorer, and some parts of the site can be viewed on version 2. "There's no point in showing off on the Web if you want to do business," says Paul Roff, European Internet development manager.
Information also has to be kept up to date, and sales have to be properly monitored. Which is why Dell lists a unique phone number on the site (and includes those phone orders in its sales totals). It is also putting up special, secure pages for corporate customers, which include their discounts, and special configurations to standardise on.
"The Internet is a great liberator, and will do for Dell what ATMs did for the banks. It will free resources and people to focus on other areas," says McNeile. It also means they can sell 24 hours a day, instead of 12 hours on weekdays or six on Saturdays.
One thing holding buyers back is fear about security, although one online buyer I talked to revealed that these are being overcome. Brian Studdard, a Twickenham-based consultant, ordered his Dimension D300 online but was nervous about keying in his credit card details, so Dell phoned him back (they also do to confirm online card details). However, "having looked more closely at the security issues, maybe now I'd use it," he says - although that would depend on the company's size and reputation. Dell's system uses Secure Sockets Layer and Private Communications Technology standards, but only those parts of the system that really need to be secure are, "because that slows it down," says Roff. Other than that, Studdard found ordering online "very painless", jumping from page to page without having to wait for extra paperwork to be sent, and then being able to track his order online.
He bought a standard, high-powered, machine. The only extra was a modem. However, O'Dwyer says: "People seem to be more inclined to buy extras and configure systems more specifically online." She admits that this may be because they are more sophisticated users, but then direct buyers are typically existing PC owners, and she has found that the average selling price of PCs online is higher than for phone purchases. This and the reduced cost of sales are good reasons why online buying is going to grow.
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