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Dell cuts ribbon on Gigabuys.com

The computer maker may eventually position its online store against other Internet superstores such as Buy.com, Onsale.com, and CompUSA.com.

    Dell Computer, a multibillion dollar business that has grown by exploiting the inefficiencies of computer stores, has opened an online store of its own.

    Dell today officially unveiled Gigabuys.com, a new online shopping site that will offer customers thousands of computer products from a variety of vendors. If all goes well, Dell could eventually position its online store against other online superstores such as Buy.com, Onsale.com, and CompUSA.com for computer peripheral and software sales.

    "We will evolve Gigabuys.com into the number one destination site for computer related products," Michael Dell, CEO, said today in a press conference announcing the new site.

    As previously reported by CNET News.com, the site will get a big boost simply by capitalizing on the success of its own Internet PC sales. The target audience, initially, will be small and medium sized businesses.

    "We get about 25 million visitors to our Web site a quarter," Dell told CNET's News.com in an interview. "[The goal is] to be able to sell those customers anything they buy that goes along with their PC--printers, software, modems, networking cards, add-ons--and to have one common shopping cart."

    Unlike many newer online superstore sites, Gigabuys.com won't have an expensive TV marketing campaign to drive revenue growth. As plans for the store evolve beyond moving current and prospective Dell customers to the site, though, the company will have to attract customers by stepping up marketing efforts.

    "Over time, we will consider putting in the necessary marketing campaigns," to promote Gigabuys.com as a separate entity, said Richard Owen, vice president of Dell Online. Such campaigns would still likely be aimed at customers likely to also purchase Dell computers, rather than a mass market TV campaign.

    And, unlike Gateway's Country Store effort, Dell will not have real estate expenses. There are no plans to open "brick and mortar" storefronts, said Dell.

    How Gigabuys works
    With the announcement, Dell officially joins the ranks of PC players who are looking to create ongoing revenue streams to offset ever-decreasing PC prices. Dell has been selling third-party products for a while, but not with the same emphasis the Round Rock, Texas, company will put behind Gigabuys.com.

    One factor limiting the store's ability to compete against other online resellers: Dell doesn't have plans to offer non-Dell branded PCs.

    Dell took pains to emphasize that there will be no change in the company's PC pricing strategy in order to boost sales for Gigabuys.com, although he maintains store prices will be competitive to other online stores.

    Order taking will be via Internet only to keep costs down, while inventory and order shipping will mostly be done via a distributor or electronic reseller.

    The site will try avoid one of Michael Dell's personal pet peeves with computer stores--bad customer service. The product explanations on Gigabuys will come in plain English, and eventually include customer-written reviews a la Amazon.com. Also, owners of Dell PCs will be able to call up lists of software and hardware best suited for their particular system.

    Still, it is an open question whether Dell will have to invest more in customer service. As a company, Dell prides itself on the service and support to assist its customers. Currently, most of the products the company sells it makes itself. It is unclear what will happen if Dell customers want advice on an HP printer or Cisco router it picked up from Gigabuys.

    "Gigabuys does not provide technical support for the products we sell online. Gigabuys products are supported by the original manufacturer or publisher only," the Gigabuys site states.

    The site currently states that Dell will offer email advice during normal business hours, but that the response time depends upon the volume of questions.

    Customized sites considered
    In the future, Dell is looking to offer its expanded offerings through customized Web storefronts for its current corporate, education, and government clients. These customers currently make up 70 percent of the company's online purchases by revenue, Owen said. The company already offers customized sites that list Dell products a particular organization has standardized on.

    The need to expand comes from increasing competition in the market for large corporate customers, say analysts. Dell's growth rocketed skyward in this segment for over two years, posting an especially strong first half of 1998, when many other vendors were dealing with inventory problems. But now, concerns about how Dell and other PC vendors can continue to grow while maintaining profitability are mounting.

    Now, after having forced other PC companies to take the direct sales model into account, the company appears to be poised to tackle resellers and retailers by matching their lineup of goods offered.

    Michael Kanellos contributed to this story.