Maven: Dell's Dilemma

The PC maker's store strategy has a huge hole, largely ignored by the press. Plus, airlines are as airlines do.
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The Business Press Maven's heart is, uncharacteristically, coiled in a little knot of good feeling. The by-and-large positive initial media coverage of Henry Paulson's appointment as Treasury secretary can be excused by a single mitigating fact: the appointment of the

Goldman Sachs

(GS) - Get Report

chief was, by-and-large, a good move.

But let's not tilt too far toward the light. Let's spend more time on something the media botched and badger them for it.

Dell

(DELL) - Get Report

, which has done so well over time by selling directly to customers like The Business Press Maven who are buying on price and don't want to go to a store, is coming off a year of disappointing sales and profits. That's what happens when the fact that you face stiff competition (

Hewlett-Packard

(HPQ) - Get Report

did particular damage) in a commodity business finally catches up with your marketing and operational genius. Here is where your marketing genius, enabled by a gullible press, can buy your company a little grace.

Dell announced that, like

Apple

(AAPL) - Get Report

, it was going to open stores. A colossal 3,000 square feet of computers you can't carry home (you still have to place a phone or Internet order). The company's implication was clear: It helped Apple and it will help us.

That's where Dell's work was done, and the business media, unencumbered by subtle distinctions between companies in the same industry, could fall into their familiar role as stenographer and spread the word. Look far and wide at everything written and tell me if you saw much mention of the key difference between the stores Dell is planning to roll out and Apple's 100-plus outlets: Apple has the iPod, which has been the central draw of its stores, a profit generator and the essential creator of buzz. And Dell has ... uh, the Dimension.

The Business Press Maven has never owned a Mac, but the iPod's sense of excitement drew him into the store.

The only thing I'd have a sense of in approaching a Dell store is hunger -- and that's only if the food court was anywhere nearby.

So how did most reporters pinpoint this essential difference between the two retail endeavors?

You didn't really ask that, did you?

Upon scoring an interview with Jim Skelding, Dell's director of sales for homes and small businesses, the first question

Business Week

asks?

"Why not just stick with kiosks?"

Because kiosks are shrimpy and these stores are the size of Bolivia, Skelding answered (

I'm paraphrasing

). And

Business Week

did not follow up with a question about how you are going to, absent an exciting draw, get people to shop in a huge store from which they cannot take anything home. Maybe

Business Week

was just softening Skelding up, lulling him into a false sense of security. No such luck.

Business Week

did manage to ask how Dell would succeed where

Gateway

(GTW)

had failed. The answer? A lame "there'll be no inventory." Seems to me that being able to carry home a snazzy little music player would help. The only attempted comparison with Apple came in the form of a question about whether Dell would try to make the same sort of brand statement with "cool architecture and design" and "spiral staircases."

Getting back to what The Business Press Maven touched upon

last week, there are questions about how many stores Dell might open, but no question about exit strategy if this cumbersome idea doesn't work out. The key to long-term success for any business is having a plan to get out of mistakes early; but reporters, who are geared toward exit strategies in warfare, are rarely attuned to it in business.

But let's get back to that iPod because way, way down at the bottom of his story, Matt Slagle, an

Associated Press

technology writer, comes probably the closest that The Business Press Maven saw to pinpointing the sticking point by at least quoting an analyst who said: "It is not clear to us that the economies of Apple's staffing model likely supported by robust iPod sales makes sense for Dell."

Even though it was buried in the story, considering the lack of competition, Matt wins a coveted Business Press Maven "Nod of Approval."

Flights of Fancy

What never makes sense to The Business Press Maven is how divorced from history -- both recent and ancient -- the business media is. Part of the problem is the youth of many business desks. But there is also a lack of experience in the real business world. Anyone, for example, who lost real money the last time discount airlines were in vogue (see: People Express and Laker Airways) would have arched their eyebrows before investing again -- or writing anything too glowing -- about

JetBlue

(JBLU) - Get Report

,

AirTran

(AAI)

or

Southwest

(LUV) - Get Report

. If you think computers are a commodity business, check out the airlines. So, while discounters have blown onto the scene every now and then, adjustments by the majors and jumps in fuel prices have always caught their feet in the door of eventual trouble.

Larry Ingrassia, the editor of

The New York Times

business section, was asked the perfect questions on this topic in an online forum.

Rob Kulat, from Shrewsbury, N.J., asked why, too often, he reads a story where the reporter lacks the knowledge and sense of the past that can put an industry's future in greater perspective. Ingrassia, to my steel trap of a mind, gives a half-baked answer, concluding that the business media "should not bog down every story about JetBlue with the saga of People Express or Laker or every story about computers with the saga of the early room-sized, expensive Univac computers that would be less powerful than today's cheapest PCs."

Indeed. But history has a way of repeating itself, and it's possible not to get bogged down in the story of People Express while realizing Jet Blue might eventually face the same challenges, and coverage should reflect that. Just as it should reflect the fact that without the iPod, Dell will not repeat Apple's success in retailing.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial website twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.