[photopress:IT_dell_China.jpeg,full,alignright]There appears to be in China something of a cultural reluctance to buy computers online. Despite this, Dell has 9% of China’s PC market.
Antonio Wang, IDC’s analyst in Beijing summed up the problem very neatly when he said, ‘China consumers might find something online, but they’ll buy it in a technology mall.’
There is an immense potential market in China and Dell is very seriously keen to get a substantial share. Dell and other computer makers see the possibility for tens of millions of PC sales because many people who say they use computers do not own one.
After opening its first plant in China in 1998, Dell now employs more than 6,000 people, including at its manufacturing plant in Xiamen.
However, it is a hard sell in a country where credit cards aren’t widespread and consumers are leery of buying computers online or over the phone. They want to see for themselves that products work — everything from light bulbs to computers — before they plunk down any money.
Salespeople often open the box and fire up the computer before the customers open their wallets.
It is mostly Lenovo, the homegrown company that bought out IBM’s personal computer division, that dominates the Chinese market.
Cracking the Chinese consumer market is one of Dell’s biggest challenges, but the country is also its biggest opportunity. According to Forrester Research with 54 million PC users now, China is expected to have almost 500 million more by 2015 — about half of the worldwide increase.
While computer shipments are growing at less than 3% in the United States, they are booming at 20% a year in China — double the worldwide rate.
So Dell is bending its business model to fit a Chinese market that could provide billions in new revenue.
It is opening ‘experience centers’ to help Chinese consumers get comfortable with buying online or over the phone. It recently signed a deal to start selling home computers at Gome, the nation’s largest electronics chain. It has developed a low-cost computer for first-time Chinese buyers and is testing other initiatives.
After nine years in China, Dell has about 9% of the market. Lenovo and Beijing Founder, the two largest Chinese computer makers, have more than 47% of the market between them. And now Hewlett-Packard has pushed past Founder to the No. 2 spot.
Analyst Roger Kay, president of Endpoint Technologies Associates said, ‘The Lenovo guys are the original PC company in China, so they’re kind of comparable to what IBM was in the U.S.They’re the reliable original guys out of Beijing University.’
While Lenovo engenders some local pride, its key advantage is its huge network of retail outlets, and, Roger Kay says, to gain any ground, rivals will have to build comparable networks.