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HP aims at Dell Web sales

To minimize the cost advantage of direct sellers, HP's Web site will take orders and distribute products through its resellers.

Borrowing a page from Dell's playbook and adapting it to its own needs, Hewlett-Packard will open an online store in December where small businesses can configure, inspect, and even buy HP computers and components.

A similar online service will be set up for HP's large customers as a way to compete with the low costs offered by direct marketers, said Jacques Clay, vice president and general manger of the extended desktop business unit at the company.

"We are doing this to be more efficient," he said. "We want to maximize access and minimize the cost advantage of a Dell."

But unlike Dell, or even vendors such as Apple, NEC Computer Systems, or Compaq, all of which sell products directly to customers on their Web sites, HP will take orders and distribute products through its resellers.

To use the Small Business Mall, consumers will visit the HP site, check out products, and configure systems, Clay explained. But, at the point where the customer would order the product, the customer will be referred to HP resellers in the customer's region.

By clicking links, the customer can get price quotes and other information from the reseller. A few clicks later, the customer can then buy the equipment without ever leaving the site. One visit to the HP site can do it all, he maintained.

While this sales procedure may sound byzantine, it could prove a boon to HP. HP, Compaq, and others have been struggling with ways to sell goods cheaply over the Web without alienating their reseller base.

"It cuts the price of a PC" said Martin Reynolds, an analyst at Dataquest, explaining why vendors are rushing to the Web.

So far, most of these companies have decided to use the Web to sell directly to customers, a cost-effective method that has been producing mixed results. NEC has seen a decrease in business as a result of its shift to direct electronic sales, analysts at International Data Corporation have noted. Compaq has tried to avoid conflict by selling very few models on the Web.

HP's system is designed to avoid conflict because HP does not sell the equipment, said Clay. Resellers in fact set their own prices. Thus, a wide variety of product can be made available.

While the Small Business Mall will go live later this year, the online sales sites for large customers will come in a more ad-hoc fashion. Large customers will likely get customized Web pages through which they will purchase equipment from chosen resellers.

If and when these systems can be established, Clay among others posited that Dell will face a competitive disadvantage. Dell has grown primarily because its computers cost less. When the price of equipment is equalized, older vendors with established resellers will again gain preeminence.

"They [the computer vendors] will all soon have the same efficiency as Dell," he said.

As a counterweight to this, Dataquest's Reynolds noted that Dell is busy hiring reseller executives and establishing relationships with resellers.