Channel sceptical on Dell pricing

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Channel competitors have poured scorn on Dell’s promised 20 percent price cuts to its enterprise and SMB hardware range, arguing that the company’s marketing fails to reflect its policy of adjusting prices by customer.

Channel competitors have poured scorn on Dell's promised 20 percent price cuts to its enterprise and SMB hardware range, arguing that the company's marketing fails to reflect its policy of adjusting prices by customer.
Dell, whose direct-to-market sales strategy has regularly provoked ire in the channel, announced that it would cut Australian prices by up to 20 percent for an unspecified set of enterprise and SMB products this month.
In its statement to the media, the company attributed the cuts - which it termed 'superior value' - to 'focusing on customers and passing on decreasing global component costs swiftly'.
Raymond Vardanega, marketing director for rival box vendor Acer Australia, said he thought the media release read like a piece of advertising.
'We have done some comparisons with their August product and their new product and we can not find a 20 percent price reduction. This is a marketing approach Dell uses that really has little substance,' he said.
Vardanega said Dell could appear to have cut prices when in fact the reductions were often set back by the cost of upgrades which many customers would require. 'So few customers actually benefit from those price reductions,' he said.
He added that Dell's trumpeting of its promise to deliver within seven to 10 days implied that was a fast turnaround time - yet some vendors delivered comparable custom-built product in five days.
'We can deliver cost drops in the same time frame as Dell,' Vardanega said.
Rod Stern, managing director at NSW specialist box-builder and reseller PC Fever, said Dell's products weren't as competitively priced as they sounded since he believed there was little service and support factored into its hardware retail price.
Stern said PC Fever provided three years of on-site warranty with some of its goods on a 'person by person' basis. 'So [Dell's] specials, we can't compete with,' he said.
On the other hand, Dell had advertising on TV and in theatres, he said, which were expensive media.
'They must have spent bazillions on advertising ... And they're advertising cheap products. So if you pay $999 for a PC, what do you expect to get?' Stern asked.
Cornel Ung, managing director at Australian box builder Optima Technology Solutions, said Dell's strategy had always been to lead prices in the marketplace. Dell's tactics set a cost-versus-price pace no channel-based vendor could maintain.
'From a local manufacturer's point of view, we see that because of the price pressure from Dell - because they are always doing that, it never goes away and they have a direct model - we won't be able to respond to the price drop,' Ung said.
He believed the corporate and SMB market would be attracted by Dell's advertising although they could later find that they perhaps paid more for peripherals, especially if the sales practice was to upsell on a customer-by-customer basis.
Optima survived by its contracts with education and government, Ung added.
Frank Colli, managing director at distributor Leading Solutions, said he would 'be inclined to question' Dell's assertion of 20 percent price cuts unless he had seen listed monthly or quarterly price for the range involved.
'I have asked three of my clients that also buy Dell and they said that their [September] pricing hadn't changed,' Colli said.
A spokesperson for Dell, Nicole Gemmell, said the company did have price listings, based on components and sample configurations for its range of custom-built machines.
Gemmell said she could not produce commercially-sensitive information but 20 percent price cuts were exemplified by sample configurations for the OptiPlex L60 PC, and 12 percent price cuts for the Latitude D600.
The OptiPlex L60 PC, excluding an average $99 delivery charge, had gone from $1,320 in August to $1044, including GST, in September, a difference of $276. The Latitude D600 had gone from $,2961 to $2,530, a difference of $431, she said.
Both PC sample configurations included a three-year warranty, she said.
'Ultimately, customers are the best judge of the value we continue to provide because they vote with their purchases. IDC's second-quarter 2003 figures for the Australian PC market demonstrate an increasing number of customers choosing Dell with market-share growth quarter-on-quarter from 10.6 percent to 11.4 percent,' Gemmell said.




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