Personal Computer
Industry: Sales Models
Lucas Lanting
Ernesto G. Rodriguez
EC 521, Winter 2007
Retail Sales

Retail Sales Model
• Involving face-to-face or one-toone contact
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)

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
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
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.
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
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
Supply Chain for a Direct Sales
Manufacturer
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
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.
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.
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.
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

Typical Supply Chain for a
Manufacturer
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