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July 15, 2005
The Round Rock, Texas-based PC manufacturer announced that revenue for the current quarter would be lower than expected. The problem was blamed on costs associated with replacing faulty capacitors with some business PCs as well as lower-than-expected sales to consumers in the U.S. and U.K.
But the hiccup in the consumer market, in part, can be attributed to price. Although often tagged as a low-cost PC manufacturer, Dell has managed for the past several years to largely keep out of the bargain segments of the PC market in Europe and the U.S., allowing it to garner more revenue and profits than its competitors.
Will luxury PCs boost Dell profits?
Bargain PCs, however, have become quite sophisticated, and competitors such as Hewlett-Packard and Acer have gained market share by touting low-priced desktops and notebooks. Gateway also has come back to life, emerging as one of the fastest-growing brands, thanks to discount PCs.
A look at the average selling prices for consumer PCs in the U.S. underscores the phenomenon. In 2002, the average selling price for a consumer PC from Dell was $1,084, according to research firm IDC. HP's average selling price for the same year was $1,009, or $75 lower. The average for all manufacturers was $1,030, $54 less than Dell.
In three years, that gap hasn't shrunk. Instead, it has widened. Dell's average selling price for U.S. consumer PCs for the first three quarters of this year was $854, more than $200 above HP's $651 average. The average selling price for the market as a whole was $744, or $110 less than Dell.
Now with the price gap so large, Dell's sway with the upscale PC buyers it usually courts has weakened slightly.
"In the past, the attitude of consumers was, 'Of course you buy a Dell," said Richard Shim, an analyst at IDC.
For Dell, snaring customers who were willing to buy higher-priced PCs was doubly hurtful to competitors. Not only did it mean more revenue for Dell, the company's direct selling model gives it lower operating costs.
The current problems, though, may not spread. When business PCs are added to the mix, Dell's average prices are lower than HP's, making HP the party vulnerable to higher pricing.
Dell edged under HP in 2004. Then, Dell's overall average selling price for the U.S. was $1,016, while HP's was $1,037, a $21 gap. So far in 2005, Dell's overall average for the U.S. has been $963 compared with HP's $986, a gap of $23. While it ships many consumer PCs, most of Dell's sales are to businesses.
Additionally, Dell has already taken action to try to segment its high-end consumers from average ones. In October, the company said it would offer more models in its upscale XPS line of computers. If branding segmentation succeeds, Dell can cater to its traditional consumer base with XPS and fight on price with Acer and the rest with standard Dimension desktops and Inspiron notebooks.
However, Dell also has been dogged by complaints about service. Back in February 2004, Consumer Reports and Technology Business Research reported that customer satisfaction among Dell customers dropped. Although the company ranked higher than most competitors, it was a stinging criticism for a company that can be obsessive when it comes to customer service. Founder Michael Dell himself occasionally dons a headset and fields customer service calls, according to sources close to the company.
Dell took immediate action and improved customer service by December, according to the TBR surveys. But consumers this year have become more vocal about complaints. Dell customer service stories are now a staple of many blog sites.
Although Dell made its earnings warning on Monday, signs of a slowdown were already out there. Earlier in the month, Gartner pointed out that in the third quarter, Dell's PC shipments grew at 17.6 percent, about as fast as the market on the whole. It marked the first time that Dell had grown only as fast as the market in seven years.
See more CNET content tagged:
average selling price,
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business PC,
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R.K.
http://www.Remove-All-Spyware.com/
I remember back in the late 80's early 90's when Dell only made top of the line custom PC's only comparable today to Alienware's. Hey need to get a better deal from Intel on there Intel only market if they want to continue on this same road.
Instead Dell uses the sub-class Celeron and Centreno Pentium processors to compete with the XP and 64. These might compete with the Durons, but how often do you seen systems with Duron processors?
Don?t get me wrong Intel makes a good processor, but I prefer more bang for my buck.
They're stalling on replacing defective GX270 motherboards to corporate clients. Feel free to search on either issue.
Meanwhile, customer service surveys show that Dell's satisfaction is in a slide:
http://www.computerworld.com/hardwaretopics/hardware/story/0,10801,103959,00.html
"Study: Dell customer rating plunges; Apple leads pack. Customer service, not products, were source of dissatisfaction for Dell"
News Story by Tom Krazit
AUGUST 16, 2005 (IDG NEWS SERVICE)
Although Dell has made some good deals as of late,It still needs to do MUCH better on service.
Other PC companies are often cheaper, and other companies --
especially Apple -- are riding innovation highs that Dell just can't
match. Dell has also gained a reputation for mediocre service and
slipping build quality.
Methinks they need to spend some time figuring out just what
"Dell" is all about.
A friend of mine recently bought a Gateway laptop. It wasn't exactly cheap at over $1,200. But what do you call a laptop only a few months old that has the key labels wearing off already? A piece of ****.
A customer of mine recently bought a Compaq Presario 2218RS. The laptop was only 1 day old when the power LED light stopped working. He didn't want the hassle of having to box everything up, take it back to Radio Shack, get another one, and redo all his customizations. He decided he will just live with it. What do you call this laptop? A piece of ****.
Dell should run an ad campaign with the slogan, "I should have bought a Dell." I will do the commercial for them for free.
As for the warranty issues. You should have brought it back again stating how it is NOT yet fixed. If it's been returned to you within 30 days, you should be able to get them to re-repair it again for you.
I know it is a hassle, been there with an old Tandy monitor that just wouldn't work. I ended up with a brand new monitor after several months of sending it back. On the first ship out I lived without a monitor, but after that, I demanded they provide me with a temporary replacement while I waited for the repairs. It went out a total of 5 times before they stopped trying to fix it and just replaced the monitor.
For expensive purchases that you will not want to live without, use the in-store warrnty options if available. I've done this with the old PS2 and when it started to have issues was able to walk in to get a replacement unit. No long waits, no worries if it was going to break again in a couple months after a shody repair job.
and Compaq and my PC machines all work very well. The power
LED's even work and the key labels are still good.
Filling the gap left behind now is Via. The current AMD products are faster and cheaper. The interesting thing is that the longer things stay that way, the more consumers assume it's always been that way.
This would be the other end of the market that was not focused on in the article. High-end, High-performance with good customer service and at a premium.