Analysts say Dell must expand its presence in stores because consumers increasingly see computers as an extension of their personality, and want to touch them before buying.
Dell built its business around selling personal computers directly to customers over the phone or Internet, but it has been cutting deals with retailers as growth of PC sales slowed and Dell's U.S. consumer revenue declined. It fell 26 percent for the six months ended Aug. 3, compared to the same period a year earlier.
The company lost its spot as the world's No. 1 computer maker to Hewlett-Packard Co. late last year, and HP has stretched its lead since then.
Round Rock, Texas-based Dell said Thursday that Best Buy Co. (BBY) will sell Dell's XPS and Inspiron notebook and desktop computers at more than 900 stores.
Best Buy complements Dell's U.S. retail lineup. The company already sells modestly priced PCs in about 3,000 Wal-Mart stores and targets small-business owners with sales at 1,400 Staples Inc. (SPLS) stores.
Michael Tatelman, a vice president for Dell's consumer business, said Best Buy gives his company access to a big audience of shoppers looking for machines for gaming, music and photography.
The computer maker, however, will miss the pre-Christmas sales traffic at Best Buy.
That suggests negotiations with Best Buy were difficult, said J.P. Gownder, a technology marketing analyst for Forrester Research Inc. (FORR)
"Gosh, it would have been nice to have this available about a month ago so they could have taken advantage of Black Friday," he said, referring to the traditionally heavy retail traffic the day after Thanksgiving.
Tatelman responded that Dell wrapped up the Best Buy deal sooner than expected, and "We've got Wal-Mart and Staples available for the holiday season."
With the Best Buy agreement, Dell machines will be sold in nearly 10,000 stores around the world. Dell has deals with Bic Camera Inc. in Japan, Gome stores in China and Carrefour Group and Carphone Warehouse PLC in Europe.
For many years, Dell resisted selling computers in stores out of fear it would dilute the company's image of building affordably priced machines to the customer's specifications. The direct-sales approach was a success with business customers and seemed to work well with consumers, too.
But consumers now are more interested in style and computers that match their personality, a development that has helped HP and other brands that are readily available in stores, Gownder said.
"This is very overdue," he said. "Even if this cannibalizes some of (Dell's) direct sales, they'll be able to compete head-to-head for market share, because right now they're getting their lunch eaten by HP. Dell had to make this move. They're hemorrhaging in the consumer market."
Richard Shim, an analyst with IDC, said selling through retailers is risky because Dell must rely on store salespeople instead of its own. But he said there's a good chance Dell's offerings will stand out in shelves already crowded with machines from HP, Toshiba Corp., Apple Inc. (AAPL), Sony Corp. (SNE) and others.
"They have the brand name, they're viewed as being a good value, and they can pass on the advantages of being as big as they are," he said.
Shim added that Dell must continue to produce innovative, attractive machines and change its marketing to appeal to consumers.
Dell has added colors and slimmer profiles to its Inspiron and XPS notebooks in a nod to consumer tastes. It has also beefed up high-performing machines to entice gamers.
Dell has also started to tweak its advertising, getting away from a longtime fixation on price.
New print ads feature Victoria's Secret model Karolina Kurkova. A television spot shows old machines exploding in slow motion, leaving only a new XPS One, and ends with the tagline, "Dell. Now available in beautiful."
From Best Buy's perspective, the deal with Dell adds another name to the chain's lineup of PCs.
Dave Morrish, a Best Buy senior vice president, said adding Dell would give its customers unprecedented choice in buying a computer.
Shares of Dell rose 64 cents, or 2.6 percent, to $24.95, and Best Buy shares gained 89 cents, or 1.7 percent, to $52.71.
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