Dell Rips off Large Businesses

On the left is a nicely-configured Dell Latitude D620 laptop as you’d see it in Dell’s Medium & Large Business store. On the right is the exact same computer if configured in the Small Business store:


Not only does the Small Business store offer a significantly lower price to begin with, but they also automatically include the advertised $250 discount special.

Basically, Dell is taking advantage of the fact that large businesses often have bureaucracies that don’t have the time or inclination to seek out discount pricing. So they simply charge them 40% more and laugh all the way to the bank.

I shudder to think how much they charge the Government for these.


12 responses to “Dell Rips off Large Businesses”

  1. njkayaker Avatar

    “bureaucracies that don’t have the time or inclination to seek out discount pricing”

    Not exactly Dell’s problem.

    So what are the people in the purchasing departments being paid to do?

    Big busnesses probably tend to buy many of these at the same time. I bet they get volume discounts in that case (otherwise, what are the purchasing departments being paid to do).

  2. nj, it seems like you’re trying to argue that Dell isn’t trying to rip certain customers off. If so, it’s not very convincing. Just because purchasing departments are paid to find good prices doesn’t mean that Dell isn’t being unethical here. That’s like arguing that burglary isn’t unethical because we have police departments.

    In the early 20th century, when what we know today as “department stores” were making their debut on the retail landscape, one of the main innovations was adding price tags to all items in the store, avoiding the uncomfortable haggling and the unethical selective pricing (charging some customers more than others) most retailers practiced historically. Today we take this kind of business ethics for granted at the retail level, but apparently at the “medium to large business” level, this kind of ethics hasn’t taken hold.

    I’m not saying Dell is being criminal here. The effects of overcharging are indeed as much the responsibility of the buyer as the buyee. I’m just pointing out that in this particular microcosm of capitalism, it is possible to sustain a business on what is patently unethical.

  3. Joel has a great essay looking at the seller’s challenge in segmenting customers and setting prices:

    Also, having worked at a Fortune 10 company, my experience jives with what nj is saying. It’s brutal how much pressure big companies will put on vendors. In my experience that’s where the more unethical behavior was happening.

  4. I am so glad that I have a blog, because people like Victor point me to links like the excellent Joel article and I learn a ton of great stuff. Thanks!

    After reading Joel I have more sympathy for Dell, but my thinking is still split: As a vendor who sells services, segmentation is a familiar and good thing. Yes, I’ve priced differently based on, say, if the client is a sympathetic non-profit or, alternately, if the project looks like it carries a ton of risk. But on the other hand I still think the Dell policy above is creepy, although I get the point that it’s a two-sided street: that purchasing departments are complicit as well. I guess it’s like a dysfunctional relationship, where large vendors exploit large businesses, and large businesses don’t have the organizational ability to escape the vicious cycle.

  5. Mike Harper Avatar
    Mike Harper

    There are other factors in play as well. Dell counts on small business customers purchasing the support contracts as they are much less likely to have dedicated computer support personnel. Large corporations often do, and they also have volume discount agreements with Dell so that they don’t order at the large business site prices.

  6. njkayaker Avatar

    What you discovered was odd and I spent a fair amount of time figuring out if there was some difference that justified the price (I didn’t find any that justified more than a $89 difference).

    Is what Dell is doing any different than providing coupons (for example)? Would Dell risk the “bad press” that would result from being “unethical”? Maybe, there is something that justifies the extra cost. Do big firms really ever pay the increase price? Or does it allow Dell to reduce the price to the real price and make the purchasing depts feel good about themselves.

    “large businesses don’t have the organizational ability to escape the vicious cycle”

    I’m not sure if I approve of what Dell is apparently doing but I do have a problem with the notion that poor little big company purchasing departments are being exploited. I suspect that there is a lot of incentive for these departments to reduce costs. If not, maybe they should be exploited.

  7. I guess it feels more like it’s a rip off to me because learning about the option to pay less is so easy to do. Which, of course, begs the question as to why corporate purchasing departments don’t do the same research.

  8. njkayaker Avatar

    It’s bizarre.

    I would think that most of the corporate purchasing departments do. Usually, they don’t do one-off purchases: they buy lots of machines. And it’s quite likely these companies are buying machines at a much lower price than that indicated.

    The two options beg the question “why are there two options?”.

  9. tkepler Avatar

    These are the same SYSTEM configuration, but what about support options? Does a corporate purchase offer other support options standard that don’t come for home users? Big businesses can become a very big burden on a support staff, much moreso (in my experience) than individual customers. They expect overnight or same-day replacement, are harder to pick through to find the right person to talk to if you need to contact them, and so on. Individual users are more needy on a person-to-person basis, but each one only has one machine. So I wonder if Dell isn’t building some headache money into the corporate price, too.

  10. Ever hear of EPP?

  11. Talo: I guess not. Google turns up a hundred different definitions for the acronym EPP, too. Would you like to elaborate?

  12. Dan Ridley Avatar
    Dan Ridley

    I have to buy from Dell reasonably frequently, and we’re classified as a Medium business (barely), and it’s actually cut our prices substantially.

    However, there are two interesting factors: first, the Medium/Large-sized business configurations usually have a 3- or 4-year high-end service contract picked by default, and you have to downgrade it to get to next-business-day (especially since they don’t honor same-day contracts in our area anyway). Second, we have to e-mail the shopping cart to our Dell rep, who tells us what the price will be (notably less than what the Web site says) — and if we really do need to order immediately we pay a penalty for it.

    My feeling is that the main impetus is to make it harder to comparison shop. It’s difficult, for example, to find out what the *real* dollar impact of adding RAM from Dell as opposed to a third party is. For us, this means we get minimal configurations and order RAM with lifetime warranties from Crucial or Kingston; but I suspect many people react in the opposite way.