These are different times and more customers want to physically see what they are buying instead of having a few images on a website representing that large purchase. Dell has always competed with the retailers it is about to partner with, and so how it handles this will be interesting. Would consumer electronics leader Best Buy (NYSE: BBY) want yet another PC vendor on its shelves? Who knows. Once Dell enters retail, how will it compete? On price? Retail is quite a different beast than direct sales, and Dell may need to cut prices to lure more customers. Competition, most notably Hewlett-Packard Co. (NYSE: HPQ), which already has a very strong retail presence, could easily match these price cuts.
With expectations for a severe drop in net income and sales set for next week, Dell is desperate to revive growth. Entering retail may be the quickest fix to please the market (and Dell's shares), and my bet is that the company will make that move. Its products are boring in most cases and it has a lot of work to do to compete on the "style" scale along with price. PCs are also commodities (regardless of what the manufacturers say), so if Dell shuns leader Best Buy and goes for Circuit City (NYSE: CC) (which is also desperate to revive growth), will customers seek out Dell specifically at a certain retailer? It's hard to see this, as the consumer PC market is set on price first and style second. Sometimes that's not the case, but Dell's entry into the labyrinth of retail will not be nearly as meaningful as when it left the channel in the early 90s. I hope it has more up its sleeve.
Update: CNET is reporting that Dell will start selling PCs in Wal-Mart stores as early as this weekend! If that turns out to be true, then Dell will have almost instant gratification insofar as entering the retail market. Will selling at Wal-Mart (NYSE: WMT) hurt its brand? I will further delve into this if the rumor comes out true. Stay tuned!