Why Dell’s World of Warcraft PC and Best Buy strategy make sense

  • Analyst Opinion - Sometimes vendors do something outrageous, so outrageous that you have to stop for a moment and recognize that this doesn’t happen very often.  I’m not talking about the World of Warcraft laptop , but about Dell opening the doors to Best Buy.

    For Dell to get into Best Buy appeared to be just is unlikely as Microsoft getting Apple to become a Windows reseller. The World of Warcraft notebook is something we call a co-branded product or affinity product and I’m kind of surprised we don’t do this more often. Let’s chat about both this week.

    Dell in Best Buy:  Third sign of the Apocalypse

    Dell is the second largest on-line retailer behind Amazon and Best Buy is the leading retailer for consumer electronics in the US. As a result, Best Buy thinks of Dell as a primary competitor. This means that typically Best Buy is spending a lot of resources ensuring that Dell isn’t successful and were someone to ask me the likelihood that Dell was going into Best Buy this decade I’d have put it at near zero as a result.

    What is fascinating is that Best Buy, which is incredibly well run, seems to have figured out that the best way to assure buyers to not go to Dell’s website is to sell Dell products in their stores.   They have effectively turned Dell from a competitor into a partner.  

    There clearly is a loser in this transaction and that is the company who just gave up a lot of Best Buy shelf space to Dell. HP and Best Buy are close partners so it probably isn’t them but everyone else is probably at risk.  We’ll have to walk into a Best Buy in a few weeks when these products hit the stores and just see who the big loser is.

    Dell World of Warcraft laptop

    Slashdot is one of my guilty pleasures and the discussion there on the new World of Warcraft laptop is priceless.  Some get it and many seem to think the product isn’t very practical. If you even bring up the word practical in the context of a notebook in today’s market costing over $4000 you clearly don’t understand what drives people to buy exclusive products. In that context, Diamonds aren’t practical, and why the heck would you “pimp” a perfectly good and inexpensive car?

    There are a lot of people deeply involved in World of Warcraft, including a large number of folks in my own family.  There are also a lot of us, and I include myself, that like things to stand out a bit because we don’t really like the idea of being just like everyone else.  You combine the two into one product and you can end up with something really powerful.

    A few years ago Dell came out with the Renegade a desktop computer that cost $10,000 and didn’t expect to sell very many.  It was more of a demonstration of what such a product can do.  Dell sold out of them in a matter of days and the thing was backordered for months.   And this was a machine that was so big and heavy the only folks that would see it likely had to come over to the house. It is hard to believe such limited production products could hold their value let alone appreciate, but this WoW laptop actually could because of its connection to what is a very popular game. That connection coupled with the relatively rarity of the offering could create a future collector’s item.

    Other products that have been co-branded have done reasonably well, the most widely known was the Acer Ferrari, which was my personal favorite for years; Itronix, now part of Data General, did a Hummer laptop that was one of their top sellers and Europe’s Flybook did a Porsche co-branded laptop which was twice as expensive as a similar non-Porsche product and it sold out as well.

    Kind of makes you wonder why more laptop vendors don’t co-brand their products.   I think this goes down as a pretty good week for Dell and likely as a pretty bad one for whoever got booted out of Best Buy.  And, as one of the posters on Slashdot said, someone finally made a laptop for Leeroy Jenkins!  

    Rob Enderle is one of the last Inquiry Analysts.  Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them.  Currently he provides his services to most of the major technology and media companies.