Why would Dell add an indirect marketing channel using Wal-Mart?

In 2006, Sunil Chopra, a very distinguished Professor of Operations Management at the Kellogg School of Management, published an article in the October volume of the ”Supply Chain Strategy” newsletter (a newsletter published by MIT). In this article, professor Chopra explained that although Dell was still enjoying a competitive advantage by customizing computers and using their direct distribution approach, the market for such type of offerings was drastically decreasing. During 2005 Dell’s stock price felt over 30 percent, while mayor competitors such as HP had had a much better performance. As explained on his article, customer needs are constantly changing and so is the technology evolving around consumer electronics, perfectly in line with Moore’s law and making technology rapidly obsolete (Chopra, S. , 2007).
It was no doubt that when Dell first emerged with their one of a kind customization approach, consumers were more interested in personalization of products, which made the indirect distribution approach a costly and inefficient channel. During the last five years, consumers have been willing to choose from a reduced number of choices at the stores and are less concerned with customization. Prices have drastically decreased over the years, which have contributed to a faster inventory rotation at the point of sales. With all those facts into consideration Dell had no choice but to have a dual strategy in order to maintain their market share. They needed to keep their direct customized distribution and at the same time add an indirect marketing channel approach to sell their standard product or PCs (Chopra, S., 2007).

Reference

Chopra, Sunil (October, 2007) A New Channel Strategy for Dell The PC industry’s increasing maturity pushed Dell to shift its longstanding direct sales