Dell to launch online "superstore"

Michael Dell, the company's CEO, will unveil on Wednesday a new online shopping site offering thousands of computer products from a variety of vendors, according to the company.

Dell's effort is expected to largely mirror efforts by other PC vendors to transform themselves into one-stop resellers of both PCs and related equipment.

The new online store is expected to be aimed at home and small business customers, and will offer "the latest in hardware, software and computer add-ons," according to a teaser ad on Dell's Web site. Recently, Dell has registered two domain names, "Gigabuys.com" and "Terabuys.com," as well as variations on those domains that are possible names for the new stores, according to CNET News.com research.

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.

Just last week, Gateway purchased a stake in the online division of NECX, a Massachusetts-based reseller of PC equipment and software in an effort to rope in additional purchases that might have gone to a traditional brick-and-mortar reseller down the block.

Compaq is pursuing a similar strategy, having announced its intention to acquire online vendor Shopping.com. The company hopes to steer users of its AltaVista portal to its own shopping site.

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 and enjoyed 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. The new venture is hoped to be a means to bolster the balance sheet.

Dell talked about its efforts to sell third party products in its recent conference call with analysts. While the company is positioning this as a service for consumers, Dell executives and other direct PC execs have said that third party products are going to increasingly become a part of the bottom line.

"Soon we will be offering an expanded range of software and peripherals," said Dell CFO Tom Meredith in a conference call with analysts, calling the upcoming service a "new store."

Currently, Dell customers can get third party products, such as switches or software, through the company's DellWare site. DellWare, however, is not heavily marketed. DellWare is listed at the bottom of Dell's product offerings and few links connect web pages that allow users to purchase PCs with the DellWare site. Blink, and you might miss it. DellWare orders are largely managed and fulfilled by distributor Ingram Micro, according to Ingram executives.

So far, it is not known whether Dell will take a similar approach to the new site, or if it would make a strategic acquisition in the ecommerce arena.

The new service seems destined to enjoy a much higher profile. The service will be "an initial foray," according to a Dell spokesman. "This is beyond what we are doing with DellWare," while declining to comment further.

Dell executives were speaking about third party product expansion already at last year's Fall Comdex trade show, even before earnings were leveling off to a less stratospheric earnings growth of roughly by 49 percent for the most recently completed quarter.

"It would not surprise me in the future if the No. 1 distributor for HP printers is Dell," Joe Marengi, senior vice president and group general manager at Dell told CNET at Comdex last year. Dell, he added, is already the third largest reseller of enterprise software licenses for Microsoft.