Channel Strategies: Dell and Eureka Forbes

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Excerpts

The history of Eureka Forbes dates back to 1909, when a Detroit-Michigan-based businessman, Fred Wardell launched vacuum cleaners under the Eureka brand name. The company's vacuum cleaners were sleek, versatile, and lightweight, compared to other vacuum cleaners that were clumsy and difficult to use... Dell's Direct Selling Model Dell made its foray into the PC market during the 1990s. The exclusivity of Dell's PCs was its direct selling model, which revolutionized the global IT industry. Earlier, PC makers had sold their PCs through middlemen like wholesalers and retailers.

Hence, there was little possibility of customizing the PCs. But the direct model provided by Dell offered customers customized products along with appended products and services such as PC replacement, maintenance, technical support, and upgrades...

Eureka Forbes followed the direct selling route like Dell for marketing its products in India, thus becoming one of the first direct selling companies in India. Vacuum cleaners and water purifiers were rather new concepts for the consumers in India, who had till then followed only the traditional methods of cleaning and filtering...

Though Dell enjoyed a market leadership position in the 1990s through the mid-2000s due to its direct selling model, it soon started facing problems when its competitors tried to replicate the direct selling model. In the 1990s, IBM took some initiatives to reproduce some aspects of direct distribution by coordinating better with resellers and distributors...

Dell's innovative sales model had made it the favorite in the industry and the company was also regarded as a high technology initiator. However, with the decline in Dell's profits and share prices in the mid-2000s, many industry observers began questioning the efficacy of the direct model. Dell was also being flooded with complaints about the company’s failure to provide support services, particularly in its consumer business...

Analysts in general appreciated Dell's new channel strategy as many of them had been saying for a long time that such a change was necessary for the company. They felt that Dell would benefit from its foray into retail as well as its new channel initiative. Industry experts observed that partnering with retailers like Wal-Mart was a win-win for both the retailer and Dell...

Exhibit I: Dell's Five-Year Financial Summary (in US$ billion)
Exhibit II: Financials of Eureka Forbes (in Rs. billion)
Exhibit III: Preliminary 2010 Worldwide PC Shipment Market Share Ranking (Ranking by Unit Shipments in Thousands)
Exhibit IV: Preliminary Q4 2010 Worldwide PC Shipment Market Share Ranking (Ranking by Unit Shipments in Thousands)

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