Marketing the Values to the Channel Partners


Dell revolutionized the computer industry by introducing the direct model of distribution. Consumers could order customized computers and have them delivered directly. Dell would maintain a direct relationship with consumers, bypass resellers, and keep all the margin. Due to Dell’s famous cut-out-the-middleman principle, the company was considered an enemy by the middleman—the resellers. Competitors were at first unconvinced by this business model but later tried to copy it without any luck. The solo run worked so well without meaningful rivalry that, by 1999, Dell was the largest seller on the Internet ahead of, eBay, and Yahoo! combined.1
Everything has changed since 2005. To Dell’s surprise, the world changed. Growth started to stall. Dell’s stock tumbled. First, the U.S. market was starting to mature. Experts were pushing Dell to embrace the middleman to solve this problem. Sunil Chopra was one of them when he argued that in mature markets, consumers increasingly saw computers as commodities and were less concerned about customization.2 Chopra recommended that Dell either try the direct-indirect hybrid model or do the customization model through resellers. In either model, Dell should start collaborating with the middleman.
The second reason for Dell’s setback was that Dell relied on extracting value from its direct relationship with consumers. When the market ...

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