Dell Web store exceeds targets as global sales reach £3m daily

From a very minor presence on the Web, the Texas-based direct-sales specialist, Dell Computer, has transformed its site into a multi-million dollar business. The company, which opened its personal computer Web store in the US in July 1996, initially expected to sell $20-$30 million (£13.7-£20.5 million) worth of computers a quarter. But global transactions on the Web now amount to $3 million daily.

"If Dell continues to grow at its current rate [revenues in the quarter ended May 4th, increased by 58 per cent], and our competitors also continue to grow at their current rates, we will be number one worldwide by the year 2000," says the company's 33-year-old founder and chairman, Mr Michael Dell.

The firm employs 450 people in Bray, Co Wicklow, and ranks fifth in the world of PC systems vendors.

Industry sources estimate that £3 billion worth of Internet commerce will be done by the year 2001. Dell should be able to account for a significant proportion of these sales, having seized upon the Internet as an extension of the company's direct sales model.

The website attracts over 225,000 customers a week, allowing potential buyers to electronically configure, price and buy PC systems.

Dell has begun creating customised intranet (in-house network) sites for its larger corporate clients which simplify and streamlines sales and support services. "Not only are some sales done completely online, but people who call on the phone after having visited dell.com are twice as likely to buy," says Mr Dell.

Once its website began being accessed 1.5 million times per day from Europe, the next step for Dell Online was to establish a backbone on this side of the Atlantic to address the huge demand.

The task of providing the architecture for a European Web offering fell to an Irish company, Eirtrade, a Telecom Eireann Group company. With a $3 million investment, Dell's European online service has been based in Bray since August, operating websites for 16 European countries and one in South Africa. "While in the US it (Dell Online) was a billion dollar business, the marketing in Europe had been lagging that of the US. Now the infrastructure is there, it has become a distinct and separate business entity," says Mr Paul Silke, European Network manager.

Eirtrade was favourite for the Internet access contract because of the Telecom Eireann alliance with KPN and Telia, which are part of the Unisource consortium which is developing a pan-European network.

Mr Gordon Ballantyne, Dell's Director of Internet in Europe, stresses how important the Eirtrade contribution has been. "They are a business critical component, ensuring we drive this business. If we lose our Internet connection, then we are completely exposed and risk customers going elsewhere," he says. As a result, a radio link has been set up as a back-up circuit - ensuring a fallback global interconnection in the event of an international link failure.

Meanwhile, the European operation, set up to mirror the US experience - where 10 per cent of revenue was generated online last year - is reaching its targets at an alarming rate. "In Europe we generated the same amount of revenue on the Internet in September as we did in the whole of the second quarter," says Mr Ballantyne.

Now the company aims to conduct 50 per cent of business online within three years. A Dell source says it has already reached this target in one country.

There are significant savings available in selling a PC online - largely because of the elimination of dealer mark-up and Dell does not start ordering components or assembling computers until an order is booked.

The establishment of a separate European operation has provided faster Internet access for customers and enabled improved business applications. An example is the Online Order Status facility, which will allow customers who have ordered their PC online, to link real time to the Dell manufacturing assembly in Limerick where they will be able to monitor exactly what stage of the manufacturing process their PC has reached.

"Dell prides itself on being a direct model, and because Internet transactions reduce cost, we can make exclusive offers online because it is a tool which enables lower costs," says Mr Ballantyne.

He says transactions conducted online are safe: "We employ the same security encryption as that used for inter-bank transactions, in fact this is safer than ordering by credit card over the phone. While there is a perception problem surrounding electronic commerce, we provide full details on the website of the transaction security we use."

The service particularly suits larger companies, where customised websites are set up by Dell which provides online technical support and diagnostics tailored to the client's requirements. One large Fortune 500 customer has estimated its annual savings using this service at more than $2 million.

While the company has over 100 customer pages online, Mr Ballantyne says that 95 per cent of the service is geared towards small office and home office business.