With the Direct Stores, Dell is looking at one more channel to capture those consumers who might otherwise gravitate to the PCs that they can touch and feel. The jury is certainly still out on the Dell Direct Store tests but a recent article in The Wall Street Journal article of Thursday, January 29, 2003, entitled "Dell Plans to Peddle PCs Inside, Sears, Other Large Chains" reported:

"The kiosks have helped the company quickly expand its sales to the home. Dell's world-wide share of home-PC shipments rose to 11% in last year's third quarter from 6.8% when it first began setting up the kiosks, according to market watcher International Data Corp. Dell also says its third-period unit sales to the home jumped 51%."

The DDS program moved into a new phase with the deployment of 21 kiosks in mid-July to catch the back-to-school market. In mid-October, fifty more units opened in the US and three test locations were launched in Toronto, Canada during the first week of November.

where it's @ worked with the Dell Direct Store to bring the "Direct Experience" to attendees at industry tradeshows such as Comdex in November 2002 and CES in January of 2003. Both shows proved to be huge successes. The CES show provided an opportunity for the Dell Direct Store team to visit with Michael Dell, who in a presentation to analysts' attending the CES show, talked about the Dell Direct Store test, going on to reveal plans to test locations at a few select super-regional airports. S ubsequently, a green light was given to continue the test past mid-year of 2003.

In February, Dell rolled out five test Direct Store within Sears stores in Austin, TX and Florida. The early returns are reported to be positive - Dell being happy with sales, considering the dismal economic environment, and Sears being very pleased with the increased traffic that the Direct Stores are generating.

While some in the media perceived this strategy as a weak response to HP's presence in bricks and mortar stores, it was in fact a move of a company confident in its performance and ready to attack the competition on their turf. The challenge for any PC company is to survive on the razor-thin profit margins that the industry is currently saddled with. Dell is well positioned to do so. Unlike Apple, whose stores are reported to be losing in the neighborhood of $1 million a year and Gateway who is continuing to lose money, and is expected to announce a further downsizing of its retail base, Dell is gaining market share and delivering profits. According to industry sources Dell's operating profits are about 8.3%, more than double the industry's average. HP just reported its numbers, showing declining sales but profitability in its PC business for the first time in many quarters.

Dell reported very positive Q1 results in early February, posting earnings of $0.23 a share vs $0.17 a year ago. Sales were up to $9.45 billion vs $8.07 billion. There is no doubt that the success came at the expense of the competition. That is just what the Dell Direct Stores are all about and that will be the key to the program's future.