Personal Computer Industry: Sales Models

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Personal Computer Industry Sales Models

• Lucas Lanting
• Ernesto G. Rodriguez
• EC 521, Winter 2007

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Retail Sales

• Retail Sales Model
• Involving face-to-face or one-to-one contact

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Direct Sales

• A form of retail sales
• Product is shipped directly from manufacturing to
  the customer (via telephone or internet)
• Examples
• Mail-order (ex. Sears catalog)
• E-commerse (ex. amazon.com)

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Pros Cons

• Retail Stores
• Allow customers to experience product and
  purchase item immediately
• No lead time required
• Requires inventory (most carry 3-4 months)
• Lack of customer customization

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Pros Cons

• Direct Sales
• Skip the middle man and provide product direct
  from supplier to customer
• Usually requires lead time
• Reduces inventory costs (saves 3-5 percent)
• Allows for customer customization

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Direct Sales Model

• Dell Inc.
• The Dell Corporation was founded by Michael Dell,
  while still a student at the University of Texas
  at Austin in 1984 with just 1000. The goal was
  to sell IBM-compatible computers built from stock
  components from his dorm room.

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Direct Sales Model

• What makes Dell Direct different?
• Supply Chain Management
• The oversight of materials, information, and
  finances as they move in a process from supplier
  to manufacturer to wholesaler to retailer to
  consumer
• Maintains 3-5 days of inventory vs. 15-20 of
  competitors
• Just-In-Time Inventory System
• The ordering of goods or products so they arrive
  just in time for you to use them. This reduces
  the costs of storing excess and unwanted stock
  (reduces overproduction).
• Negative Cash Conversion Cycle

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Direct Sales Model

• Demand-Pull Company
• The pull of products and materials through the
  supply chain after the consumer places the order
• The System signals suppliers every two hours with
  updated quantities needed based on the number of
  orders received

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Supply Chain for a Direct Sales Manufacturer

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Direct Sales Model

• Current Consumer Trend
• Want/need it now attitudes
• This is hurting Dell because they do not have any
  retail store where consumers can stop by and
  purchase a new computer.
• Dell is experiencing with a form of retail store
  sales
• Challenge of new markets products

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Retail Sales Model

• In commerce, a retailer buys goods or products in
  large quantities from manufacturers or importers,
  either directly or through a wholesaler, and then
  sells individual items or small quantities to the
  general public or end user customers, usually in
  a shop, also called store. Retailers are at the
  end of the supply chain.

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Retail Sale Model

• Hewlett- Packard
• In 1934, the HP company originated in a garage in
  nearby Palo Alto while Bill Hewlett and Dave
  Packard were post-grad students at Stanford
  during the Great Depression.
• Personal Computers is just one of their major
  divisions.

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Retail Sales Model

• Supply Chain Management
• The oversight of materials, information, and
  finances as they move in a process from supplier
  to manufacturer to wholesaler to retailer to
  consumer
• Supply-Push Company
• The production of standardized commodities and
  pushing them in large volumes through the supply
  chain and finally into the hands of consumers.

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Retail Sales Model

• The System signals suppliers monthly or weekly on
  bulk purchases of material or units based on the
  monthly or weekly demand for their end product by
  the consumer.
• The Retail model does not leave much room for
  user customization demand

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Typical Supply Chain for a Manufacturer

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Retail Sales Model

• Current Consumer Trend
• Want/need it now attitudes
• This has benefited HP because they already have
  their products in retail stores where consumers
  can stop by and purchase a new computer.
• In addition to retail stores, HP is also now
  implementing direct sales