After Dell Computer Corp. posted better-than-expected sales and earnings in its third quarter Monday, officials gave a lot of the credit to the PC maker's aggressive direct sales and marketing campaign via the Internet.
Analysts at first were skeptical that customers would conduct millions of dollars in sales through a corporate Web site. But when Dell started routinely posting $3-million days on its site, the market reacted in kind.
Soon, competitors such as Compaq Computer Corp. and Gateway 2000 Inc. scrambled to copy Dell's successful model. Even Apple Computer Inc. decided to jump on the bandwagon with its Apple Store.
"These guys looked at Dell and said, 'We need to be doing this,' " said Michael Geran, an analyst at Donaldson Lufkin Jenrette. "This formula and some of the new enhancements they've offered to online customers is a big part of their success. Also, it shows the world that electronic commerce can work."
In the third quarter, Dell reported record revenues of $3.2 billion. Granted, the $3 million in sales on the site each day might only account for roughly $90 million. But that's $90 million worth of sales that flows effortlessly into company coffers.
"It's straightforward and requires very little attention," Geran said. "The choices are made by the consumers, generally knowledgeable ones, and allows the rest of the sales force to concentrate on knocking on doors or making phone calls."
Last week, Dell introduces a slew of new Internet service and support features that will help customers diagnose problems with their PCs and track orders from the factory floor to their homes or offices. It will give customers access to the same technical reference materials used by Dell's telephone support personnel.
"(Dell's) using their head start online to expand the possibilities," said Louis Mazzucchelli, an analyst at Gerard Klauer Mattison. "You have a company like Compaq looking around for someone to partner with to provide customer services, and then you have Dell using its Web site to fulfill those needs. It's a brilliant strategy."