Dell's new online chief puts the squeeze on

When Richard Owen signed on as vice president of Dell Computer Online in November, he inherited one of the greatest success stories on the Web, Dell.com. The online store accounts for $US14 million a day - or 25% of Dell's business. But Owen has been charged with moving 50% of Dell's business to the Web within 12 to 18 months. And he'll do it by 'squeezing the reseller even more.'

When Richard Owen signed on as vice president of Dell Computer Online Worldwide in November of last year, he inherited one of the greatest success stories on the Web, Dell.com. The online store accounts for $US14 million a day -- or 25% -- of Dell's business.

But Owen, who stepped in after Scott Eckert left to take over Dell's European operations, has been charged with the goal of moving 50% of Dell's business to the Web within 12 to 18 months. The first stage of Owen's plan comes to fruition Wednesday, with the launch of Gigabuys.com, an online store dedicated to selling peripherals including printers, software and PC add-ons.

"We want to squeeze the reseller even more," says Owen. "They've always handled the small stuff we didn't bother with, and now we're taking a chunk of that revenue away from them."

The launch couldn't have come at a better time. Although Dell met earnings expectations in its recent quarterly report, some industry observers have questioned Dell's ability to continue its growth rate. Analysts have downgraded Dell's stock in recent weeks, while the continuing trend toward online retailing cuts into markets traditionally dominated by giants like Dell.

The move comes hard on the heels of competitor Compaq Computer's acquisition of online store Shopping.com and Gateway 2000''s investment in computer reseller NECX. But Dell's direct-sales model has always been the one to beat, insists the company's Web chief. "A lot of what happens with other companies launching into the online world is a knee-jerk reaction. What we're doing is a continuation of our strategy, not what makes good copy," he said.

But, as Owen's first project, the new online store was indeed a quickly implemented reaction to the evolving online computer retail space. To rush the new store into existence in just three months, Owen directed two separate teams. One built Gigabuys.com as it will appear upon Wednesday's launch -- a consumer site with 30,000 products. A second, parallel team has been working on a plan to build a bigger store (with more than 40,000 products for sale) that will integrate features to serve Dell's business customers. The latter team was given 12 months to build the more full-featured version of the store.

Owen has no financial projections for Gigabuys.com, saying only that it is expected to become profitable quickly. "Unlike a lot of online stores, we're not in business to lose money," he jeers.

In the future, Owen can see adding auction or other such capabilities to Dell's online business, to foster community. (In fact, Dell has already bought the domain name dellauction.com, although Owen says the company currently has no plans to launch an auction site.) "Now that we've learned how to do this quickly, this is by no means the last project like this we'll launch," he says. "We want to keep people around our site, using the same shopping cart to make purchases."

While Dell has largely shielded itself from the problems that have plagued the traditional PC manufacturer channel, that isolation will not last forever. Resellers and competitors are slowly learning how to reconcile channel conflicts and move to more Web-based sales. But some competitors, such as Compaq, which recently halted supply of its consumer PCs to a number of Web retailers, are struggling to find an adequate solution.

"Zero-cost Internet companies are sucking profits from the traditional players. It'll be confusing for a few years until they figure things out," says Owen. "We're hoping to be a few years ahead of the game by the time things sort themselves out."

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