Mahesh Bhalla
Director,
Consumer Sales,
Dell India
“We are providing credit to a few MSAs"
 Would you tell us about Dell’s channel strategy for consumer products?
We have so far signed up with 20 Master Sales Affiliates (MSAs) across the country activating nearly 1,000 resellers through them. This has all happened in a short period of six months and we are seeing unexpected traction for our consumer products through channels.
We rolled out our consumer channel program in February 2008 and in about two months managed to increase our market share in consumer notebook space from 5 percent to slightly over 9 percent as per IDC India Q1 2008 research report. In the consumer desktop category, we have increased our market share from 2 percent to 4 percent.
Are you planning to add more MSAs and if so how many more and in which states?
Eastern part of India is where we are looking to add partners in a big way. So far we are happy with market coverage we have in south, north and west. Our strategy is to have MSAs looking after exclusive territories to avoid conflict and over distribution. So, for instance, we have Devraj Computers for Chennai, Bloom Computers is an exclusive MSA for rest of Tamil Nadu.
For years PCs have been sold through stock and sell mode in the channels. Do you think your unique model will work?
We remain committed to our BTO model, which allows customers to customize and purchase the PC online with consultation from our resellers. However, there are many customers who are keen to buy the product over the counter and don't want to wait for seven days to receive the product. For such customers, we are allowing our partners to stock. So, since the past few weeks partners have taken stock positions of select consumer models.
Your MSAs have told us that they have been stocking Dell products but at their own risk and credit. So are you now saying that you would provide credit to MSAs to stock Dell?
In some cases, we are also providing credit to MSAs to facilitate inventory stocking. But this is not the standard policy. We are providing credit to a few MSAs for select models only, and that too depending on the local market dynamics they operate in.
Please tell us how exactly your inventory-less channel sales model works?
MSAs are regional distributors and they activate partners for us who are then registered as Dell sales affiliates. In the inventory-less model, the sales affiliate helps the customer place an order online. The fulfillment is done directly by Dell. The SA earns a commission on every sale it enables. The MSA earns reseller management commission on every sale executed by the SA registered under him.
Why would a customer wait for seven days to receive the PC unless there is a compelling price benefit?
Of course there is a compelling price benefit to place an order online than buying over the counter. He gets a waiver on VAT of 4 percent. Also our proven BTO model allows us to keep our manufacturing costs low, which eventually benefits the customer. On a spec-to-spec comparison, Dell has at least a 10 percent price advantage over competition. Then there is the benefit of onsite warranty. Over the past couple of quarters we have expanded our onsite support to 600 locations. In as many as 300 cities we are able to provide next-business day turnaround. While in smaller cities it is 2 business days. We are constantly trying to shorten the delivery time for the BTO model. Today, it's maximum 7 calendar days across any part of the country. In many cities it happens within a couple of days.
I believe you have introduced goods return policy...
We are the only PC company in the country to have a 30-day return policy that allows customer to return their Dell product within 30 days of purchase in case they are not happy. They only have to pay for the to-and-fro freight charges in case of return.
How have you maintained pricing parity between online and channel?
Despite operating through channels we have single pricing for products whether bought online, from LFRs or through our sales affiliates. Price disparity occurs as most PC vendors have volume-based incentive system which often leads to over-distribution resulting in price undercutting. But with Dell, a reseller selling one PC will earn as much per-unit incentive as someone selling 100 PCs. Incentives are based on configurations sold. A reseller selling one high-end notebook of Rs 40,000 will get better incentive than someone who sells two notebooks worth Rs 20,000 each
What are your retail plans plans on the retail front?
We are currently evaluating the franchisee retail model. We will analyse whether we need to have an exclusive franchise model or work with multi-brand retailers. But, that's still work in progress and it will be too early to comment on when and how. With regards to large-format retail strategy, our shop-in-shop presence at Croma is doing extremely well. We are exclusively focused on BTO model there and customers are willing to wait to get a customized machine at really good price points. We are also evaluating customer financing options. |