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Dell Direct Disadvantage

July 25th, 2006 · No Comments

Nicholas Carr writes:

On the production/distribution side of the PC business, Dell’s direct model has given it a big cost advantage, which in the past enabled it to make lots of money selling machines at prices that competitors could match only by taking a loss.

But there’s another side to the PC business: the support side. And here, the direct model looks less attractive. If, after all, you’re selling directly to customers, you have to shoulder all the related support costs, from handling information requests before the sale to taking and tracking orders to handling service inquiries after the sale. You can’t offload any of those costs onto resellers or retailers or other distribution partners – because you don’t have any distribution partners.

The direct sales model provides a cost advantage on the production side, in other words, but brings a cost disadvantage on the support side.

Tags: Management

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