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Gateway To Close All Retail Stores
John Lazzaro writes "Looks like Gateway is throwing in the towel and closing all of its remaining retail stores, according to a Reuters/Yahoo! report." The story notes: "Gateway's stores, which will be closed on April 9, have long been criticized by analysts and investors as an expensive drag on cash flow because of lease costs and the difficulty of managing inventories", and goes on to suggest: "...with [the acquisition of] eMachines, Gateway doesn't necessarily need the added distribution channel the stores gave the company. In addition to selling Gateway's wares over the phone and via the Internet, eMachines PCs are sold at major retailers such as Best Buy."
Dell doesn't have any retail outlets, or even sell computers in the usual chains, so Gateway isn't necessarily doomed...
but I don't think Gateway's build-to-order system is as well running as Dell's.
This is understandable, i suppose, as you can keep more profit without the overhead associated with brick n' mortar stores, but still, the stores had a use.
I remember trying to help my dad buy his next computer, and it really helped for me to be able to take him to the store and for him to physically see the computer he was going to buy. While large computer outfits can do this too, it was better, conceptually, for him to go to a store that only had one brand of computer, and they weren't all in the back next to shelves of accessories and idiot salesmen (like at CompUSA or Fry's.)
Especially for the over 45 crowd, adoption of internet-based sales can be a little discomforting. While i haven't a problem with it, Gateway's target audience just might.
filter: +3. Hey, look! all the trolls went away!
I imagine that part of the choice to close retail shops is the simple fact that you have to pay tax in states that you have a retail presence in. On a $400 pc, this could be easily $40.00 in taxes even if you mail order it. If you buy it local, that's great, but if you buy it via mail order, you get stuck with shipping and tax. This can really add up for those who buy their more premium solutions via mail order.
There is no sanctuary. There is no sanctuary. SHUT UP! There is no shut up. There is no shut up.
I had a client who would not switch to Dell or anyone else becuase there was a Gateway store near his house. I have HATED Gateway for years because of several bad experiences with them. Even after relating these to him, he would not switch his company to Dell because of that store. Well, I guess he just lost his reason.
Great ideas often receive violent opposition from mediocre minds. - Albert Einstein
Seriously, I used to check my email at Gateway stores all the time. Now it's going to be hard to find a place. Try checking your email at a Radio Shack to see what I mean. They freak the moment you navigate off the Radio Shack website, screaming that they "hear about it" from the main office whenever this happens.
The flag just makes more sense than the constitution. - Judas Gutenberg
The closing isn't surprising at all. To sell at a store like this, you need to have a more attractive product. Gateway had the Profile, which was not a good product. It saved space, but it performed poorly, and was not designed to be easily maintained. It was similar to the iPaq in these respects, and neither succeeded. They failed to attract certain market segments that made the iMac popular, namely education.
Besides that, all they had were a bunch of run-of-the mill computers. Their company really did not have much vision. And when they made an interesting move (acquiring Amiga or saying that DRM is bad), they didn't follow through with it.
The future of Gateway looks pretty bleak. I think in this move they are probably looking to be acquired. They have never really got it. Trying to show vision, and then turning their back on that vision. Poor service, trying to undersell, not finding a customer base.
You know, I remember when the first Gateway store opened around here, and it was a big event! People flocked from miles around to gape at the amazingly fast new home computers running Windows 98. They even had a real cow outside of the store to comemorate it--no really! People thought Gateway was cool back then, but now...well, maybe it's for the best!
Gateway is trying to diversify into consumer electronics: Televisions, MP3 players, and so forth. This seems like a good idea to me, since competing with Dell on PCs is difficult.
After the Gateway stores close down, how will they peddle their consumer electronics? Unlike PCs, customers want to see and hear these products perform.
This is exactly the issue.
Gateway computers are like the budget no-name brands of the early/mid-90's. Basically built like crap and built with crap components.
Don't get me wrong, at one time Gateway had relatively nice stuff. They didn't keep it going though. It seemed like rather than creating higher quality systems they kept looking for ways to cut costs (and increase profit). Eventually they started turning out garbage machines. People stopped buying them so at that point they were absolutely forced to cut costs which in turn created even worse machines. Gateway started dying when management cut quality to increase their wallets.
On the other hand, Dell has some extremely nice custom type systems now. And the quality is supurb. The Dell branded LCD monitors are top notch. Their laptops & desktops are standard for many large companies nowadays.
I think you're confusing cause and effect here. Apple chose to go direct precisely because their forays into big box retail had been so unsuccessful.
I'm sure that not cutting the dealers in on the profit was a part of their motive too. Apple fucked their dealers our of the lucrative educational market, which contributed to Apple losing their lock on that market.
Apple's method of business doesn't work well in big retail. For big retail, the name of the game is volume discounts and lower prices than the competition. Apple's MAP(Minimum Advertised Price) prevents this. Sure, technically you can sell an Apple machine for any price, but a part of their arrangement to be a dealer (and more importantly a service center) requires you to not advertise prices below their MAP.
Apple determines how much profit a dealer can make on a machine instead of the local market. I worked at Circuit City even while I worked at what was then the biggest Mac dealer in western PA. It isn't that the salesmen don't know anything about Macs, it's that there is less profit and less commission in selling them.
In every case Apple's products were marginalized by big-box salespeople who didn't know the first thing about Apple technology and had no interest in learning about it.
When I was at Circuit CIty, if I sold a mid-line Aptiva or a Presario with monitor, I could make ~$80 in commission. I would have needed to sell a Mac, a printer, a scanner, and a top of the line APC surge strip to match that.
So if someone is on the fence, there was no incentive for a salesperson at a big dealer to guide him/her towards the Mac platform.
Time and time again Apple has proven to be as arrogant as M$, but they don't have the market share to back it up. Time and time again, that has caused them to lose out.
I saw first hand how Apple treats its dealers, I saw the inside angle on how they treat their customers. That is why I am no longer a Mac user. I haven't bought any new Apple hardware in over 6 years.
Apple has only Apple to blame for the fact that there aren't Macs on every shelf on every computer store in the country. A few different decisions 20 years ago would have made that happen.
LK
"Hi. This is my friend, Jack Shit, and you don't know him." - Lord Kano
Couldn't have helped their sales when they briefly partnered with OfficeMax stores, one of which is across the street from the Gateway Country store.
LostCluster is correct, though, eMachines has a much larger retail distribution chain set up that Gateway can take advantage of now that it has acquired it....
Gateway was reselling CPU time on the PCs showroom PCs in all of their stores for companies to use as a private computing grid. So what happens to the grid? Do they just put all of the PCs that were in the stores in a warehouse and run the grid there? They just signed a new customer a few weeks ago.
Was it a year or a year and a half ago? At any rate one of my buddies was a manager at a Gateway Country store. I can remember him talking about days going buy with next to no one comming in the store and being "forced" to play games all day. When his store was closed in the first wave he and a bunch of the other ex-gateway employee banded togather to form a new store - where they play games all day.
/.ers near a closing Gateway check it out. If not for the tech they had some great office stuff.
Also something to note: THE LAST WAVE OF CLOSINGS HAD GREAT GOING OUT OF BUSINESS SALES. Any
"Capital punishment makes the state into a murderer. Imprisonment makes the state into a gay dungeon-master"
The truth of the matter is that e-machines acquired gateway - and got PAID to do so. Don't believe me? Here's the story - pieced together from articles from PR from the last couple of months.
...Of the 17 people reporting to the Waitt, 15 were out right fired and replaced with e-machines leadership. The remaining three (including the CFO) were demoted in title.
About 12 months ago Gateway Founder and CEO Ted Waitt ran into a man named Wayne Inouye, CEO of e-machines at a trade show. At the time GTW was trading at $3.50 - below cash value of the company. Inouye was interested in doing a leveraged buy out. The combined force of e-machines (4th largest computer manufacturer at the time) and Gateway (3rd largest) would have made a powerful combo. But for whatever reasons the stars did not align. Fast forward 12 months later. Gateway announces that it will "purchase" e-machines for $235MM in cash and stock. Inouye was named CEO and Ted became chairman of the board of the new company. Last Friday is when the axes fell
In my opinion there is more to come -- you see e-Machines is a 138 person company with revenue of (get this) $1.1 Billion. The 7000 people at gateway pull in under 3 Billion. I don't have a business degree or nothin' but it sounds like e-machines is a much leaner meaner company, which - given the new leadership structure - is exactly what gateway will become.
Why worry about the jobs situation? You don't need a job. A rise in GDP means the economy is "better". So we all win!
And GDP is delicious, and nutritious. I'm eating fried GDP with Jobless Recovery hot sauce, and this weekend it's GDP with Consumer Confidence Index noodles, followed by GDP pie. And it's Atkins friendly (no carbos)!
Just kidding. I'm not having my GDP and eating it too, although I hear from 1% of the population that it is very good.
I think it would be a good idea for Gateway to franchise out their existing base of Country Stores. That way they could turn a liability into an asset, moving the control of inventory, property, etc. to the franchisees yet still getting a slice of the pie.
If gateway gives some freedom to franchisees, they could become very competitive in the PC service area, offering cheap rates(i.e. flat rates). This is a niche yet to be filled, IMO. There are thousands of home users(and small businesses) with out of warranty PC's that need caring. People want to do it cheaply. End of story.
-D
Damn right emachines is cheap
Last week my uncle bought a 2 ghz AMD, cd-r, dvd-rom, and 40gig harddrive and 17" monitor emachine for 350$ after rebates.
It was too damn good to pass up.
I work tech support for Gateway. Trust me those computers are verified crap. They put the worst, cheapest parts in all of the systems I've seen.
My favorite is the guy who called up with a Gateway computer that had 768 MB Ram, a Radeon 9600, and RAID 0 in it. Which is all fine, except the power supply was 250 Watts!!! Needless to say this guy had tons of problems with his computer from day 1.
023AD01("Child", "Evil");
cragen