Earlier this week, Dell released a new product line, the EC280, with a price of approximately $335. This is part of a new initiative by Michael Dell himself to boost sales of PCs to consumers globally. Dell explained that the EC280 “was designed with China and other key markets in mind,” so that the company could “adjust our business to meet the needs of customers in fast-growing and emerging markets.” So far, sales of the EC280 are limited to China, but Brazil and India are other countries where it will be sold shortly.
The EC280 has a nice, sleek look (see picture below) and was designed by engineers in Shanghai. The idea is to attract first-time buyers and novice users with an inexpensive way to connect to the Internet.
China’s PC industry is no stranger to cheap computers, however, with price wars occurring frequently among competitors. The new focus is on consumers in outlying cities where incomes are often lower. Thus, a key aspect of Dell’s strategy for rekindling growth is to sell to these home consumers in developing economies. This is a big change for Dell, as last year only 10% of Dell PCs sold in China where to individual consumers. The “try before you buy” model is popular in China, forcing Dell to make its computers more visible by setting up product display centers.
But even if it is a big change for the company, the potential is huge. China is one of the fastest growing computer markets. Computer shipments in 2006 were up by 21% in China, compared to only 10% growth world-wide. PC sales in China were above $14 billion last year, making the country the second largest market after the U.S.! Dell currently ranks third in China (by market share), lagging behind companies like Lenovo.
Speaking of Lenovo, the leader in the Chinese consumer PC market, it has found a way to get PCs into home much more inexpensively than Dell. The company has partnered with Microsoft to establish a “pay as you go” model. The consumer pays an upfront price of only around $150. A bank loan finances part of the computer while the consumer buys computer cards (similar to phone cards) that allow for a certain amount of computer usage time. The computer cards purchased count toward the price of the computer. At a certain point, after buying enough computer cards, the consumer gets ownership of the computer.