Conventional computer stores attempt to serve the average customer by offering a range of standard products from computer manufacturers. Manufacturers rely on these intermediaries to inform them about what the typical customer requires, and then produce an average product for this market. Customers travel to the store that is physically near enough to them in order to purchase the product. In this market, location matters. The store must be accessible to customers and, of course, be large enough to carry a reasonable range of goods, as well as provide access and parking to customers.
Dell Computer is one of the real success stories of electronic commerce, with estimates of daily sales off its Web site needing to be updated on a daily basis, and at the time of writing, estimated to be in excess of USD 6 million ( USD 5.5 million) each day. The company has been a sterling performer through the latter half of the 1990s, and much of this recent achievement has been attributed to its trading over the Internet. Using Dell's Web site, a customer is able to customize a personal computer by specifying (clicking on a range of options) such attributes as processor speed, RAM size, hard drive, CD ROM, and modem type and speed. A handy calculator instantly updates customers on the cost of what they are specifying, so that they can then adjust their budgets accordingly. Once satisfied with a specified package, the customer can place the order and pay on-line. Only then does Dell commence work on the machine, which is delivered to the customer just over a week later. Even more importantly, Dell only places orders for items such as monitors from Sony, or hard drives from Seagate, once the customer's order is confirmed. The PC industry leader Compaq's current rate of stock turnover is 12 times per year; Dell's is 30. This may merely seem like attractive accounting performance until one realizes the tremendous strategic advantage it gives Dell. When Intel launches a new, faster processor, Compaq effectively has to sell six-week-old stock before it is able to launch machines with the new chip. Dell only has to sell ten days' worth. Dell's location is irrelevant to customers--the company is where customers want it to be. Dell actually gets the customers to do some work for the company by getting them to do the reassortment and sorting themselves.
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