Dell Takes Wares to Wal-Mart

In January, founder Michael Dell resumed the chief executive role and recruited a slew of marquee executives from other companies.

One of the company's biggest problems, analysts say, has been its strategy of shunning retail outlets and selling PCs exclusively through online and phone orders.

The direct model once allowed Dell to turn the industry on its head and crush the competition. But with growth in the PC business increasingly coming from overseas markets and notebook sales, both of which are better suited to a hands-on retail store experience, Dell has found itself at a disadvantage.

Dell has recently experimented with quasi-retail efforts, such as setting up kiosks in shopping malls that showcase its products, as well as opening a couple of 3,000 square-foot Dell retail stores in Dallas and New York. None of these actually stock inventory, however, meaning customers can order a product for delivery but can't drive home with a new PC.

Dell has also partnered with CostCo Wholesale(COST)in recent years, selling some of its products through the big-box retailer.

"Dell is a proven electronics brand and adds a new complement to our other high quality desktop selections, and we're very excited to now bring our customers new access to a product they want, with the ability to purchase a Dell right away," said Gary Severson, Wal-Mart's senior vice president of U.S. Entertainment and Electronics.

It remains to be seen how effective the latest Wal-Mart partnership will prove. For one thing, Thursday's announcement only contemplates desktop sales, whereas notebook PCs are the fastest-growing part of the business and the type of product that would really benefit from going retail.

Also, the deal is limited to stores in the mature North American market. It's in emerging economies, such as China and Brazil that Dell really needs to go retail.

Of course, Wal-Mart has stores in those regions as well. And if the North American experiment manages to mitigate Dell's aversion to retail, it could pave the way to something really significant.

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