Will Dell play the good guy with its resellers?

In early December, Dell announced it had chosen the Good Guys, as its second retail partner in Australia, adding to its current reseller agreement with OfficeWorks.

As part of the deal, consumers will be able to buy Dell products with standard configurations, including Inspiron desktops and laptops, Studio Hybrid and Studio laptops, XPS laptops and three different monitors.

Pricing for the products will be set by the Good Guys, although both parties declined to give further detail on the pricing strategy.

Jeff Li, managing director at Pioneer Computers, questioned the pricing model, claiming the vendor’s partnership with its first Australian reseller - OfficeWorks – shows just how competitive Dell can get with its resellers.

“Dell’s Inspirion 1525 notebook starts at $749, while the same machine costs $899 at Officeworks,” he claimed.

“There’s no Dell machine under $800 at the retailer. The vendor is more open to slashing its own price, rather than its dealers.”

According to Li, if the Good Guys and Dell can sort [product pricing] then the partnership will be good for the retailer.

“If it can’t, then they will become another Dell customer trying to make money. Good luck to the Good Guys,” Li said.

“Dell is known for its aggressive pricing, but it doesn’t seem like the vendor passes on aggressive price cutting to its customers.”

He also noted that current vendors being sold through the Good Guys’ IT section may also be a little miffed that they have to deal with competition from Dell.

“Acer, HP, Toshiba and Asus all sell through the Good Guys, they might not be happy if the retailer gets to aggressively cut Dell machines,” he claimed.

“I think local resellers will be alright. The vendor has never sold through local resellers, so the deal won’t bother them.”

Eric Kwon, manager at Tri Benedict agrees that there won’t be much competition because Dell has cut out independent IT retailers from its channel.

However, Kwon wondered where the margin will come from for the Good Guys.

“It needs to make around 20-30 percent margin, because it’s a franchise business and head office takes half,” he said.

“[Dell’s products] will become a lead product which will get customers in.

“When it sells a Dell product it’ll make around 5-10 percent margin then up-sell other products to make up the rest of the margin.

“This is a strategy that retailers like JB Hi-Fi are very good at employing.”

According to Kwon, Tri-Benedict no longer sells consumer machines and has gone into servicing products as well.

“It’s not that sophisticated models are any better than the rest, but people that input vast amounts of data want a machine that will be able to take care of that data,” he said.

While pricing of products still remains to be seen, one thing Dell was adamant about is the servicing of products.

In a phone conference with the media, Evan Williams,general manager, consumer sales and marketing at Dell Australia said, the servicing of the products will be taken care of by Dell as part of the customer’s standard warranty.

Boris Marshalik, parts division manager at United Electrical, told CRN, the vendor has always had a monopoly on servicing and warranty.

“Dell’s products are ones we don’t support. As an after warranty servicing company we have never been able to source a Dell part,” he said.

“The vendor has always had a monopoly on things. It will be interesting to see how it will all work out and what after warranty services, the Good Guys will recommend to its customers,” he added.

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