Michael Dell told PCR last November that Dell has had 11 quarters in a row gaining share in its client business. How important is that client business to Dell today?
We’ve had a consistent growth and share gain. If you take the UK as a case in point, we’ve always had a substantial PC business. In the last year we said we’re going to go back into retail.
We’re investing in resources, people and marketing to develop new partnerships and grow that business. We’re very serious about the PC business, it’s hugely important to Dell.
What is your retail strategy?
We’re being selective. We’re trying to preserve the brand strength we believe we have, particularly around our XPS and Alienware products which have recognition in the industry for innovation. Whoever we select as partners, we want to be able to maintain the brand that we have. It’s not that we don’t want any retailers, it’s actually a positive thing – it’s a partnership. We see what they want from us and we don’t set a goal for one quarter ahead, we set it for two or three years ahead. And with Dell going private in the last couple of years, it’s given us that ability to plan for the long term.
We start that relationship, explore what each other wants, build a plan together and get the business behind it, without rushing to put a product on the shelf. You need to align common goals, marketing, operations and in- store merchandising.
In terms of strategy for our broadline consumer PCs, we’re looking to have a handful of partners and develop long-lasting partnerships with them over time. We’re ready to start small and keep deepening that relationship through trust on both sides and make sure the operations side works. We’re not trying to take on the whole market in one fell swoop, we’re willing to build it up gradually. We don’t see this as a short term thing, it’s a multi-year plan and vision.
As a mid to high-end brand, what’s your etail strategy? Are you conscious of price erosion in the market?
We recognise that the world is moving to online. We see it in our direct business – we have a big online side. Is it part of the strategy? Yes. Will we continue to develop it? Yes. Again, we’ll be selective. There are a lot of online sites, some offering incredible breadth like Amazon. Some are a little bit more niche, like Very.co.uk, with a targeted market, and I think that’s great.
We’ll be careful selecting those partners that maintain the brand, the overall economics for the business. It’s a business that has been challenged on maintaining price points, and with consumers it’s a very price- driven business.
Can independent retailers get involved with Dell?
Yes they can. I think in certain areas like gaming there’s rich potential. It’s a market that’s set to grow with catalysts like virtual reality, but gaming is also becoming ever bigger and more mainstream. So I think there is an opportunity there. We’d love to develop it. We’re still early in the stages of developing it, but absolutely there is a place for independent retailers.
It’s Alienware’s 20th anniversary this year. What’s your strategy with this gaming brand and how do you see it changing in light of tech such as virtual reality emerging?
I think the key to it will be the in-store experience. If we put Alienware against notebook xyz, or even a desktop against xyz with nothing beyond that, I think it’s always far more difficult to understand why you would look at an Alienware machine. When you look at true gaming machines with VR headsets and the demos, the games being played and the accessories around it that dovetail with that system, that experience really shows the mass market what you can get out of a machine like that.
So I think the challenge for all of us – Dell, as well as the retail industry – is how do we bring that to life? And how do we show to core gamers, who understand these things, why they should be looking at an Alienware machine, rather than it being a bit faster or with more memory?
For retailers, we spoke about the price point challenge where we see steady erosion. There are some things that can arrest that, and I think gaming is the big one. There are others as well – 2-in-1s, touch etc.
What share of the UK retail market does Dell hold?
We have a small piece of the market in the UK today compared to other markets that Dell is present in. That’s the great opportunity for us. On PCs in commercial we have about a quarter of the market and are gaining share pretty well, so it’s a good successful business – also on the service side as well.
On the consumer side we’re at around 2.6 per cent as of Q4 last year. So it’s a tiny portion of the consumer market and that’s purely on the basis of our consumer/ direct business. So we know the growth is going to come from retail. If you look at where we are in the US, India, Brazil and China, we’ve taken consumer shares there to well in excess of 20 per cent. That’s been driven off the back of partners and retail and so on.
There’s tremendous potential to become a major UK consumer brand. Retailers we’re talking to all reference the fact that we’re still one of the most searched-for brands by consumers. That’s interesting because we only hold a bit less than three per cent of the market. And also, where we’ve got back into retail, we’ve seen some pretty decent reception to the products. We’re trying to expand with those partners we’ve already spoken about – and the signs are positive.
Is there a substantial level of marketing support you can provide retailers?
Absolutely. As part of the investment, we have secured significant marketing support and that’s another reason for being selective: making sure all the retailers we partner with have that support. We can back it with resource to tell our story and tell their story to the market.
Are there any new products retailers should be aware of?
I think in gaming we have our Alienware brand and we lead with a lot of things through that. We talked about virtual reality at CES and our tie-up with Oculus. And then the other side is in our high-end Inspiron 7000 range, we have gaming-capable machines with the right graphics cards and processors on the market.
Looking at the XPS brand, we brought out the 13 with great success. There’s now the 15, which sets the standard with its infinity screen, super performance and lightweight, beautiful design. Compare that to any product in the market and it’s terrific – consumers will want to have it.
Where we’ve gone back into retail, we’ve seen great success in those product lines. We do have a large range. I think we’re one of the few vendors that have that end- to-end offering and that range of products.
It seems Dell is trying to change some of the perceptions people in the industry have had towards it, specifically that it was too focused on doing business direct. Is that a fair assessment?
Partly, but it’s more fundamentally our strategy. We know the contribution and value that retailers bring. The value they bring in showcasing the products we have to consumers means we absolutely embrace it.
This isn’t just about perception – obviously that’s a key thing as we want to give retailers the confidence that we are committed to it. It’s based on a fundamental thing that we bring a value and a reach into the market that we can’t hope to do alone. I go back to the market share statistic – through direct we have less than three per cent of the market. We’re leaving 97 per cent uncovered.
We know retail plays a huge role in getting us to expand. We want to do more and we believe retailers want to do more. We want to start with that initial relationship, rather than just rushing.
BIOGRAPHY: Jamil Nathoo
– Jamil has been at Dell for 14 years, having held a number of different global and European roles. He originally joined Dell in its Austin headquarters, looking at the firm’s corporate strategy.
– Prior to his current role as Dell UK’s retail general manager, Jamil looked after the consumer and small business division in the UK, taking care of Dell’s client solutions division (the PC product category).
– He reports in to Dell UK general manager Tim Griffin, alongside Sarah Shields (head of commercial/reseller sales, working with Ingram Micro and Tech Data), Richard Rawcliffe (head of the public sector business) and Aisling Keegan (who runs Private Large Commercial).
– Jamil has a team of around 150 staff, looking after consumers and small businesses as well as retail. Distribution partners include Exertis, Ingram Micro and Tech Data.