Dell Seeks to Expand Customer Base, Product Lines With Gigabuys Launch

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Direct marketer Dell Computer Corp. unveiled a new vehicle for selling everything from educational software to computer carrying cases this week, hoping to leverage its direct sales infrastructure to broaden its customer base and generate add-on sales from existing customers.


Gigabuys.com was launched with a menu of more than 30,000 computer-related products and services from a variety of major manufacturers. Products include printers, software, CD players, games, digital cameras, keyboards, mice, cables, connectors and joysticks. The site also will offer Dell's line of computer products in addition to a limited selection of hardware products from other computer makers.


Dell's move came just one week after fellow computer direct marketer Gateway 2000 Inc. announced that it had acquired a minority stake in a similar online venture, the NECX Office and Personal Technology Store.


"Its competition is doing the same thing," said Megan Hackett, an analyst with S&P Equity Group. "But Dell does have the lead in the direct sales channel, and with this move they will continue to be well-positioned to capture the lion's share of that channel."


The site offers several simple methods for shopping, including searching by product type or by brand. It also showcases several products in a "specials of the week" section and in an area of the site called "product spotlight." The company said it expected to price the Gigabuys merchandise competitively.


Dell also said it would use products available through Gigabuys to build customized Web pages for its "Premiere Page" extranet customers that will feature products and services suited for the systems those customers operate. Dell currently maintains about 15,000 such Premiere Pages, which display a product mix that is customized to the individual consumers and provides a secure purchasing environment.


The site also features an area specifically for Dell-brand computer owners that will list software and accessories that are compatible with the users' systems.


"It's really just kind of broadening the company's product line, giving them the chance to pick up additional business from its customer base," Hackett said.


Traditional online shoppers at either www.dell.com or www.gigabuys.com will be able to click back and forth between the sites seamlessly, the company said.


"Customers have told us that they want to purchase a full range of software, accessories and peripherals with full integration back to the Dell.com site," said Dell founder and chairman Michael Dell in a conference call with reporters, adding that he felt the Gigabuys site also would help attract new customers. "This site will feature the same things Dell is all about, which is direct relationships with customers."


The company is planning a broad range of marketing initiatives, according to Richard Owen, vice president of Dell's global online business.


"Without giving away our specific plans, you can obviously anticipate that we will be looking at most of the effective ways people have developed for demand-generation models on the Internet, and we're going to be using those in the future," Owen said.


The site offers visitors the opportunity to sign up for a monthly e-mail newsletter that promises to keep registrants updated on the latest deals.


Owen said the company expects to add enhancements to the site this summer as well as expand the product lines. He also said the company plans to open international versions of the site in other countries where Dell has an Internet presence. Dell currently sell computers online in 44 countries.


Dell said it generates about $14 million a day online, and about 70 percent of that revenue comes from business, education and government accounts. Although the site was initially launched to appeal primarily to home consumers, the company said it soon expected to add features designed to appeal to its other consumer groups.


The company, which is known for its low-inventory, build-to-order distribution model, said it would use a hybrid fulfillment system for its Gigabuys products. It will build some products itself, warehouse others and call on its manufacturer and distributor partners to deliver other products directly to consumers.


Although the items offered at Gigabuys generate slimmer margins than its core computer products, the company said it was not building revenues at the expense of profitability.


"We're an old-fashioned Internet company," Dell quipped. "We're still encumbered by our desire to earn profits and cash flow."
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