Reply #293: Dell is a HUGE player in the government market [View All]

[jmowreader]

This is probably the largest piece of their market. (I'm going on intuition here. I've dealt with government purchasing from both sides of the counter.) Dell was one of the first small computer companies to have a GSA Schedule.

The GSA Schedule is very important if you want to play in the government market. If you are a government purchasing agent and I am a vendor, there are two ways you can purchase from me.

The first is competitive bidding. If you want to use the competitive bidding system, you issue a Solicitation for Bids. I have two choices here: I can surf the GSA website looking for SFBs I want to answer, or I can hire a solicitation broker who does the same thing and sends me SFBs that match what I do--if I sell tools, I don't want to get SFBs for furnaces. After the bids are opened, the GPO publishes all of the submitted bids and buys from the vendor who offers the best deal.

Or I can create a catalog called a GSA Schedule. By doing so I am contracted to sell what's in it for the price listed in the catalog until the expiration date of said catalog (there are exceptions--if you're dealing in commodity items whose price floats, like lumber, the price is allowed to track the market, and if the price of the thing you're selling goes through the roof you're allowed to issue a new catalog). The flipside is that, by offering to hold my price steady for, usually, one full year, I don't have to go through the competitive bidding process. The agency who wants my stuff can just pick up the catalog, find the thing they want, and order it.

This probably accounts for half of their business. And I think sales to businesses account for about three-fourths of the rest--businesses want "account executives" on their accounts, and Dell offers that.

Now let's talk single-unit sales. There is a certain percentage of our populace that buys things from television--which explains why there's a place in the marketplace for both HSN and QVC. For the rest of the United States, we wait to receive the things we buy for exactly two reasons: the thing we want isn't available locally, and the thing we want is way cheaper if we order it. Dell used to have the line on both of these. Now? Thanks to places like Wal-Mart and Best Buy, quality computers that are reasonably priced with many popular features are available to everyone in America. There's really not a NEED to shop Dell, the way there was in the past. Used to be, you couldn't get a decent computer in Billings, Montana, unless you wanted to spend three or four thousand dollars for a machine targeted at business. Now you can.

Here's the real reason I know single-unit has become a minor part of Dell's business: In retail we talk of "season." There is a prime selling season for any class of product--for lawn mowers it's in the spring, for cigars it's the four weeks centered on Father's Day, for linens it's late summer. Computers' season is the summertime so students will have them before school opens--and for computers sold via mail order, it's early summer so you know you will have it. You are looking, right now, at the annual report for Dell's season.