According to an article in Business Week (subscription required) Dell (ticker: DELL) is struggling in China. As recently as this past April it appeared that Dell's direct sales strategy was working in China. But according to the latest report from market research firm IDC Dell's market share for Asia fell a point to 7.8% in Q3. Here is a short extract from Business Week:
While Dell has focused on large business and government customers in the country's major cities, demand is emerging elsewhere -- in hundreds of smaller cities, where Dell doesn't sell as effectively as its rivals and where even some business customers want to see products before they buy. That's where competitors Lenovo, Hewlett-Packard, and Founder have been selling briskly through retail shops. Says HP Executive Vice-President Ann Livermore: "You have to wonder, how well does the direct model work in the hinterland?" HP has invested heavily in hiring staffers and recruiting retailers in secondary Chinese and Indian cities.
If it does start chasing consumers, Dell's direct-sales strategy might falter because relatively few Chinese customers use credit cards, and those who do aren't accustomed to buying over the phone or the Internet. "The reality is, Dell needs to establish more of a presence on the street," either through sales kiosks or retailers, says Roger L. Kay, president of consulting firm Endpoint Technologies Associates Inc. in Wayland, Mass.
Comment: Dell reports Q3 earning results on November 10th.