This leaked Wal-Mart Brand Positioning document has given me new insights into DELL’s decision to sell desktops in Wal-Mart.
As we know, DELL prides itself on forging direct relationships with customers be it directly over the phone or directly over the Internet. A by-product of this direct relationship is people are able to get quality customer service to help them make the best decision possible in buying a computer that costs less because the middle-man retailer has been cut out of the equation. (And yes, DELL has had/is having its own struggles in delivering quality customer service.)
We all know Wal-Mart isn’t known for its customer service and the leaked brand positioning analysis highlights this challenge. Wal-Mart struggles to offer excellent customer service from its store associates when selling complicated, higher-dollar electronics. As noted in the report, “People don’t go to Wal-Mart to shop, the go to Wal-Mart to buy things as quickly as possible.”
The report goes on to say that Wal-Mart shoppers believe Best Buy is a smarter choice when it comes to buying higher-dollar electronics like HDTVs and computers because Best Buy employees are able to provide shoppers with product knowledge to help them make a more informed buying decision.
Here’s what this relationship between Wal-Mart and DELL really boils down to … Wal-Mart is an “OR” company and DELL is an “AND” company.
When given the choice between offering low prices OR high-customer service, Wal-Mart has chosen to offer low prices. On the other hand, DELL has always answered this question differently. DELL has purposely chosen to offer low prices AND offer high-customer service through its direct relationship model.
Because Wal-Mart is an “OR” company and DELL is an “AND” company, I question the strategic viability of this relationship. Maybe a partnership with a like-minded "AND" retailer such as Best Buy, CompUSA, or Fry's would be a better strategic fit for DELL.
NOTE: I evoked Jim Collins' "Tyranny of the OR" and "Genius of the AND" thinking into this post.
I agree that that the deal seems inadequate for Dell's side.
It feels like they were seduced by the selling power that WM could bring them and totally ignored the risk of the effect this could have on the public's perception of the company.
Posted by: Jean-Sébastien Dussault | June 01, 2007 at 10:49 AM
I responded to your comments at this blog and appreciate your thoughtful perspective. As I noted there, think of the strategy as AND+
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johnmoore (from Brand Autopsy):
You can visit the Brains on Fire blog post VeeDub wrote to read Richard's comments. For link simplicity sakes, I've also copied/pasted his comments here...
Hi John
Thanks for the input and your point is taken. The strategic viability of being in both spaces, I suppose in some respects will come down, no doubt, to execution — something Dell is pretty good at.
Think its important to understand that Wal-mart is not the only retail presence Dell will have nor will they be selling the complete Dell line of products. This is an addition to our current market position. We are not abandoning the direct connections with customers or our “AND” company position.
We are, however, offering customers more choices. The choices are more in terms of what they buy (Linux and other expanded/alternate product offerings coming soon) and where/how they buy it (Wal Mart, Dell Kiosks, dell.com, and more to come).
Even at Dell.com we are expanding the customer perspective with ratings and reviews now.
Perhaps in your scenario we are becoming more AND+
Posted by: RichardatDELL | June 01, 2007 at 03:50 PM
Richard … thanks for dropping by and representing DELL. Given your response, I have a response:
DELL is great at execution when it comes to building and shipping computers. But DELL lacks retail merchandising expertise. Wal-Mart excels at retail execution when it comes to stocking shelves and inventory control. One of the reasons Wal-Mart is able to get dead-net pricing from vendors is because vendors know Wal-Mart will stock the goods exactly to plan.
HOWEVER, the area where Wal-Mart fails at retail execution is in the customer service department. The leaked Wal-Mart brand positioning document from GSD&M made some very astute comments in this area. Paraphrasing and remixing some of GSD&M’s analysis, here’s a summary as it relates to DELL selling desktops at Wal-Mart…
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“People don’t go to Wal-Mart to shop. They go to Wal-Mart to buy things as quickly as possible. The Wal-Mart brand was not built to inspire people while they shop, hold their hand while they make a high risk-decision or show them how to put things together. Today Wal-Mart is not seen as a smart choice in high-dollar electronics. The lack of service concerns people as they might make the wrong decision if they’re left to their own devices. And because electronics is not the primary business, they worry that Wal-Mart might not be there after the sell.”
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This is exactly why I believe Wal-Mart is not the smartest choice for DELL to have as a retail partner to sell $700 desktop computer.
My advice would have been for DELL to first introduce this “AND+” retail strategy at retailers known for not just their retail merchandising execution skills, but also for being able to guide/direct/service customers. Fry’s, Best Buy, CompUSA, Circuit City, and others would have been a better place for DELL to embark on its AND+ retail strategy than Wal-Mart. Once the retail channel gains traction for DELL is when I would start thinking about placing products inside Wal-Mart.
Posted by: johnmoore (from Brand Autopsy) | June 01, 2007 at 04:53 PM