MITS to Dell: the mail order gap?

Question

In 1975, MITS advertised the new Altair (not actually the first personal computer, but close enough that many historical accounts proclaim it as such) by mail order, and it sold very well by the standards of the time.

In 1984, Michael Dell started selling PC clones by mail order from his college dorm room, and founded a company that remains today one of the big names in the business.

In the nine years between, I have found essentially no mention of anyone selling computers by mail order. There is much discussion of dealer networks e.g. Paul Terrell's Byte Shop (the first Apple dealer) and Tandy (which acted as its own dealer network with several thousand stores, helping to make the TRS-80 for some years the world's bestselling personal computer), and some of department stores e.g. Commodore's bold and surprisingly difficult move in getting Kmart to sell the Vic-20, but always brick and mortar retail. As far as the historical accounts I have read are concerned, the question of mail order sales simply does not arise.

Was anyone selling a significant number of computers by mail order? If not, why not?

Edit: Raffzahn makes the excellent point that there were indeed plenty of mail order ads in the magazines of the time by small hardware companies, in many cases for computers now long forgotten. This hadn't really registered with me before, so let me rephrase my question:

During those nine years, as far as I know, there were no mail order sales of bestselling computers. The pattern was always that niche computers were sold by mail order, bestsellers by brick and mortar.

One reason for this pattern, in one direction, was that brick and mortar dealers wanted to be selling the bestsellers, not the niche machines. Okay, that's logical enough.

Why did none of the big players supplement brick and mortar with mail-order sales? Were the extra sales (even at substantially increased profit margin) not enough to be worth alienating the dealers?

Why did nobody between MITS and Dell make it big purely in mail-order sales? Conjecture: nothing changed after 1975; it was always the case that mail order would only get you a few thousand sales because mainstream customers were not comfortable buying expensive products that way; the big change came in the mid-eighties when the IBM PC clone industry started commoditizing computers enough that mainstream customers started feeling assured they knew in advance what they would be getting. Does that make sense?

Answer 1

You might just want to flip up any computer magazine from that time period and you'll come across hundreds of mail order companies of different size, not to mention computer companies selling direct as well.

Lets for example open Kilobaud of February 1979 - right in the middle of your time frame. Already the very first two advertisements are for SWTP and OSI, selling their machines and addons directly. Across the magazine you'll fine many companies small or large selling machines via mail order.

After all, there weren't computer shops in every neighborhood during the 'early' years. They were the exception and mail order the standard way to get a machine. Next to every microcomputer manufacturer did direct mail order sales (like MITS before and Dell after).

In fact, for most new machines it was the only way to start sales. There were no shops they could place them - keep in mind, even the big players had problems to get dealer contracts with department stores.

In fact, flipping through this ads are a great way to discover forgotten machines which often not even made it to be talked about in magazines!

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I think the question you are looking for is:

Why did DELL have such a success with mail order when mail order was already around since the beginning

I think it comes down to the fact that in 1984 computer stores were a common thing, and quite good in offering off-the-shelf configurations. Still, a brick and mortar shop with only local sales (even if the local area is a large city) can only supply a limited amount of configurations due storage cost.

Mail order does have a larger catchment area - potentially the whole world, while still only needing one storage facility. This advantage has been used by others as well before. The difference now was that there was only one, rather large platform to be supported, resulting in even larger scaling effects.

In fact, Dell started out more like a brick and mortar business, by configuring PCs for other students at University of Texas at Austin and then transferred that business into general mail order. While this is like any other mail order PC shop, Dell added aggressive marketing early on to get his service known to a wider public. Even before offering their own PC designs, they advertised in many computer magazines, as well as in newspapers.

Bottom line, it was all about being the loudest market crier in town - and nation :))

Up to this point Dell wasn't much different from others that did nationwide sales of generic PCs. Sure, the advertisements where good and worked, but so were others'. He might have vanished again a few years later as well.

The next big change was turning into a brand "manufacturer", but (almost) without development and completely without core component production. Instead of main boards or add on cards, Dell just designed cases - and even they got manufactured by contractors. Dell just configured the PCs. So unlike IBM, HP or any other big brand, he externalized (next to) all development cost, reducing the investment needed. At the core Dell still was a sales company, selling configurations of other manufacturers products with a new cover.

Their innovations were in the field of logistics, more like Amazon than IBM.

Answer 2

I believe the reason you are asking this question is that you may be underestimating the extent of the innovations in computer manufacturing and sales pioneered by Dell Inc. Dell was always envisioned as a high volume company. So, they have little if anything in common with MITS, which introduced the Altair as a low-volume niche product for hobbyists. By the time Dell was founded, IBM PC compatible computers were a well defined category of products aimed at regular consumers and businesses, and offering a great deal of customization to meet specific consumer needs.

Mail-order sales was only the customer facing aspect of Dell. Most of the genuine innovation was in the build-to-order process. Dell reinvested all their early revenue to grow the business' capabilities in supply chain management, just-in-time procurement, customization, and fulfillment. They introduced automation in all these areas to improve production efficiency, profit margins, and customer experience. It was this massive investment and accompanying innovation that made Dell a large and successful company, not the fact that their early sales were through mail-ordering.

You can read much more about Dell's early history and innovation in this article.

Answer 3

Why did nobody between MITS and Dell make it big purely in mail-order sales?

The Sinclair ZX81 neatly refutes your statement.

But more broadly, your claim depends entirely on your definition of "big".

Certainly lots of companies sold primarily or solely through mail order, and some of these are well known - Heathkit's H8, Northstar's Horizon, Comenco's Z2, IMSAI... these were all big companies (in their era) with no b-n-m presence.

I suppose you could go so far to say the same was partially true for the TRS-80, as their catalog sales was a major part of the company, in the 1970s anyway.

Answer 4

A major mail-order retailer from the era was Heathkit. They offered the:

1. H8 (8080 s-100 bus, kit only) beginning 1977
2. H89 (z80, kit or assembled) beginning 1978
3. H11 (DEC LSI-11, kit or assembled) beginning 1978

While Heathkit offered many other things besides computer-related stuff, and predated the home computer age by decades, I think it is fair to say that computer sales became a major part of their business.

Regarding why major-name computer companies tended to avoid mail-order, I think a significant reason was their retailers did not wish to compete with their suppliers.

Answer 5

A good candidate for a mail-order computer is one that:

1. Is cheap so people can afford to buy it sight unseen,
2. People are already familiar with, and
3. Is not too expensive to ship to homes (this rules out the Commodore PET!).

These requirements favor computers like the Laser 128 clone of the Apple II built by cheap overseas labor, and the build-it-yourself-to-save-money Heathkit computers sold by a company with many loyal customers in the USA going back decades. Sears and Tandy computers which others have mentioned are also good examples for the same reasons.

Answer 6

Apart from the fact that I think your question is based on false assumptions (see some comments, Sinclair and Apple are good counter-examples, and AFAIR even the IBM PC Junior was sold via mail order), I think you fail to look into the reasons companies had behind offering products by mail order - And those were entirely different between MITS and Dell.

MITS was offering an absolute niche product to a small number of computer enthusiasts/hobbyists (just as Sinclair did with their home computers initially a few years later) where the volume really didn't justify a dealer network (that needs quite a bit of time anyhow) and a "classic" distribution channel.

Dell, on the other hand, offered mail order to the end customer to eliminate dealership cost and margins from the consumer price when computers already were a mass-market product.

The (home) computer market had massively changed in the time span between MITS and Dell from a specialized, nerdy product with a very limited audience to a mass-market commodity every household had to have one of.