The direct selling model is not a new concept. But the success ratio of the Dell model, especially in the wake of success in the desktop market has sparked off ripples in the air especially for the Indian channel.
There are many complications on the issue. For long Dell has been the number one PC maker globally with direct sales and the perception has been that they would not find the going easy as the Indian market, owing to dynamics like varying market from city to city, region to region, has been essentially channel and relationship centric.
But there is perhaps a change in this perception as the world’s best-known direct selling vendor has succeeded in making a mark in India as well.
Independent research suggested that Dell grew by an astounding 80 percent in unit terms and 60 percent in value in a market that only grew by 5 percent in units year on year. Besides the PCs, Dell has done well in the x86 server market also.
Last year the vendor touched a revenue figure of Rs 1800 crore while the market share moved to around seven percent. Observers also do not miss a point that the positive side of Dell gaining ground on the commercial desktop is that it is making a shift and moving from dollar billing to rupee billing.
From the face value of the situation, partners are at times only getting confused. Sadly, they find that HP and other vendors are unable to police their policies and frequently appear to be out of touch from the ground reality. “Till now customers compared prices of HP, HCL, LG, Sony or Acer, but nowadays nearly all customers want to know about Dell,” wrote a Hyderabad-based partner reacting to a media report.
For all practical purpose this is the area of challenge for the Indian channel and other vendors. The partners are already facing the brunt as many of them in Chennai and Kolkata have lost a few odd deals to Dell, especially owing to prices. To many it’s like the customers who ask these days more frequently about AMD processors, they have started making inquires about Dell.
The channel also has experienced that Dell India’s delivery timing has been much quicker than the competition. Adding to the woes of the partners is the growing concern regarding other vendors, who have been traditionally playing the channel line, further strengthening their forte in direct selling.
Partners cutting across cities like Ahmedabad and Delhi say there has been a significant increase in the direct business of HP and even smaller brands like Zenith of Raj Shroff are increasingly pumping in money for direct selling. So partners have all the reasons to be wary.
On one hand they continue to see Dell gain market share at the expense of other hardware companies, while on the other hand they cannot afford to just wait in the wings because the damage done to the prospects of the channel will be largely irreversible.
There’s no doubt that Dell is making inroads in India and once they gear up with their manufacturing plant in Sriperumbadur later 2007, Dell will start shipping PCs cutting on delivery time substantially and ensuring to cash in further on the price front. Remember, in price sensitive markets like India, relationship no longer count as much and the end customers at all levels could opt for special discounted prices and save their own booty.
So far, Dell has been doing well in server market and PCs, but with their manufacturing plant functional the day is not far off when they would be able to market notebooks and consumer products in a phased manner. The challenges are stupendous both for other hardware vendors and the partners.
Therefore, the channel has to show consistency in their go-to-market strategy and keep putting up pressure with the likes of HP and HCL so that a well foolproof safety cushion is prepared to brave through the Dell threats in a more ruthless day.