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Distribution Channels
Assessing Dell's Distribution Channels
Dell Corporation (NYSE:DELL) is a global provider of personal computers, laptops, enterprise servers and storage networks, generating $61B in revenues during its latest fiscal period. All products are sold through a multichannel marketing and distribution strategy, with the server systems being sold through a network of distributors, dealers, resellers and service providers. The Dell servers are heavily customized to the specific needs of a given business, which provides distributors, dealers and resellers with an opportunity to customize these systems and gain incremental profit. Dell's approach to multi-channel distribution relies heavily on the distributor to share inventory carrying risk and the reseller to customize the system to user needs. This is a well-known best practice in multichannel distribution, of distributing risk evenly throughout an organization while ensuring systems are configured to specific customer needs (Magrath, Hardy, 1987).
Analyzing the Effectiveness of the Dell Multi-Channel Distribution System
In constructing its multi-channel strategies,...
The reliance on distribution channel partners as a full service sales and service centers in the personal computer industry has become a factor in the consolidation of smaller and less value-add channels (Chu, Chintagunta, Vilcassim, 2007). Dell also requires their primary-tier distributors to support Vendor Managed Inventory (VMI) in addition to stock balancing and service lifecycle management of warranty contracts (Chu, Chintagunta, Vilcassim, 2007). As Dell's business model benefits most from inventory turns and the ability to quickly customize systems with the help of resellers to drive margins, the first-tier strategy of full service distributors works well for this manufacturer. The secondary tiers are focused on value-added resellers, retailers for their laptops and tablet PCs and a wide variety of chain stores and outlets. Dell relies on the value-added resellers however to customize the servers for specific larger customer requirements and needs.
Dell benefits significantly from…
References
Chu, J., Chintagunta, P.K., & Vilcassim, N.J. (2007). Assessing the economic value of distribution channels: An application to the personal computer industry. JMR, Journal of Marketing Research, 44(1), 11-11.
Frazier, G.L. (1999). Organizing and managing channels of distribution. Academy of Marketing Science.Journal, 27(2), 226-240.
Magrath, A.J., & Hardy, K.G. (1987). Avoiding the pitfalls in managing distribution channels. Business Horizons, 30(5), 29-29.
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