Retail is changing fast. Multi-channel retailing is the name of the game for leading high street brands, but a strategic mix of online and physical stores is far from simple to manage, as the world’s second largest computer maker is finding out.
Long applauded for its low inventory direct sales business model, Dell is seeking to tackle its recent market setbacks to arch rival Hewlett-Packard by departing from its sacred build to order philosophy and adopting a multi-channel approach by selling PCs through Wal-Mart in the US, Carphone Warehouse in the UK and Gome in China.
This need for a marked divergence from its highly efficient and iconic business model reflects a change in the market brought about by the PC evolving to more of a lifestyle purchase with its wide consumer appeal for storing photographs, music and video.
In this market place the consumer wants to touch and feel the product and that means having product in high street stores.
It’s an interesting twist to see an online brand moving to gain a presence in a physical retail environment – more often it”s the other way around.
The problem facing Dell will be in creating a supply chain that is adept to serving this new channel to market – and that will inevitably mean holding inventory. After many years of honing its direct sales supply chain to remove waste and inventory, it”s going to be a different mind-set required to work with a less efficient business model in order to reach the customer.
As anyone that has been involved in multi-channel retailing will know, many things have to be thought through properly, such as a consistent pricing policy across channels, flexible returns arrangements, appropriate warehousing and fulfilment, a full understanding of the cost to serve via each channel and much more besides, as our roundtable participants highlight on page 20 of this retail special issue.