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Distribution Lessons from Dell

by Anu

Earlier this summer, Dell announced a partnership with Wal-Mart. For fifteen years, Dell promoted a business model for "direct" sales to customers. Dell maintained that this link to customers provided necessary information on computing trends, consumer needs, and customer service issues. Through Wal-Mart, Dell loses that link to their consumers. Dell created a new, Wal-Mart-only model that sells at a bargain-basement price. To balance that effort, they'll need to reinforce the value proposition to customers currently purchasing higher-priced models at Dell.com. Why would I buy at dell.com instead of going down the street?

What if you could bring in a new distribution partner the size of Wal-Mart? (Wal-Mart accounts for almost 8% of all money spent in US stores.) Would you do it immediately? How would it impact operations and portfolio management?

Distribution problems are not as simple as "the more distribution the better." Asset managers should look to balance three objectives:

• Adding distribution partners


• Profitably scaling operations and portfolio management


• Communicating the impacts to current distribution partners

While Dell's dilemma is different from a typical asset manager (Dell is managing direct versus intermediary), firms should use the case study to examine distribution growth strategies.