Dell Computer Corp. is in a virtual tie with Compaq as the top PC seller in the United States while fellow direct marketer Gateway also is gaining ground, according to a report released this week by International Data Corp.
Dell, Round Rock, TX, shipped 1.143 million units in the second quarter to grab a 14.3 percent share of the market, up from 9.1 percent in the same period last year. Compaq, Houston, shipped 1.157 million units — including shipments from recently acquired Digital — and saw its share increase incrementally from 14.3 to 14.4 percent.
Dell, which is up to $6 million in online sales per day, saw its second-quarter shipments jump by 72 percent over last year and 21 percent over the first quarter of 1998. PC shipments as a whole were up 10 percent over last year but down 1 percent from the first quarter.
Christine Arrington, an analyst for IDC, Framingham, MA, said the direct model lets Dell move inventory through distribution channels faster than indirect vendors, which makes it less susceptible to price drops. It also streamlines the sales process for customers.
“Dell is targeting an educated customer who doesn't need the hands-on experience that a less educated customer would in the retail channel,'' Arrington said. “To get on the phone and, now, especially to get on the Internet and configure your own machine allows customers to pass by a lot of the steps that a newer purchaser would go through.''
Gateway, North Sioux City, SD, is neck and neck with Hewlett-Packard and Packard Bell NEC for the No. 3 position in the United States. Gateway increased shipments by 33 percent compared to last year in what the company considers its slowest quarter of the fiscal year. That increase in shipments to 623,000 units helped Gateway expand its market share from 6.5 percent to 7.8 percent and move up from fifth place.
“You see Gateway's growth numbers coming in lower than Dell primarily because they are focused on one or two segments of the market,'' Arrington said. “Dell playing in the commercial market has a much bigger pot to draw from. You are going to see a continuation of picking up in market share from the direct vendors.''
Dell is continuing to command business-to-business market share against competitors that rely on direct marketing resellers like Insight Enterprises to help drive sales. By shifting to a fully direct sales approach, indirect vendors would risk alienating these resellers who are their primary distribution channel.
Insight, Tempe, AZ, which sells Compaq, NEC and IBM machines, attributed its record second-quarter results to its outbound telesales and e-commerce strategies. Insight experienced 70 percent growth in sales to $237 million — 91 percent from direct marketing — as well as 59 percent growth in net income to $4.7 million.
Dell's direct model has been successful enough to hold the company up as the brand to beat. Said Insight spokeswoman Valerie Paxton, “To beat Dell is a huge focus.''
