Rude-- I see GTW is looking to sell at more brick and mortor sites. Seems they want to mimic cpqs model a little. The diff I see is in the quality of staffing,, surprise -- Kumar likes it,,, LOL!!
When Shirley Lundin buys a computer, she appreciates the personal
touch.
The Indian Head Park, Ill., resident recently visited a CompUSA store
in Downers Grove, Ill., hoping to get her trusty Packard Bell repaired.
Instead, with the help of a young sales associate, Lundin decided to
buy an entirely new computer. Then the store's service department spent
three days transferring her old files to the new machine.
'I wouldn't buy something like this over the Internet. I wouldn't
trust it,' said Lundin, who runs a training and consulting business
from her southwest suburban home. 'I still like to talk to someone and
see what I'm purchasing.
Lundin is the type of customer Gateway Inc. wants to win over.
Gateway, the nation's third-largest seller of personal computers, has
embarked on a store-opening campaign that rivals in sheer numbers that
of fast-growing traditional retailers such as Dayton Hudson Corp.'s
Target chain and Kohl's Corp.
Since 1996, Gateway, best-known for its black-and-white cow motif, has
opened 191 Gateway Country stores in the United States. Gateway _ which
recently moved its headquarters to San Diego from N. Sioux City, S.D. _
won't say how many stores it is targeting overall. But it figures about
75 percent of the U.S. population is already within a 30-minute drive
of a Gateway Country store.
The strategy of opening stores to sell computers, one of the hottest
items for sale on the Internet, seems almost counter-intuitive.
After all, stores cost money in rent, utilities and employee salaries.
And added overhead is the last thing a computer maker needs when
margins are rapidly shrinking because of aggressive Internet
price-cutting.
Several computer retailers such as the Incredible Universe and Computer
City already have gone the way of the buffalo. And industry giant IBM
Corp. said in October it will stop selling consumer PCs through retail
stores early next year, focusing instead of Internet sales.
But Gateway _ the first manufacturer to market computers on the
Internet _ believes that e-commerce is leaving a large part of the
population untouched. So combining its Internet business with a
wide-spread retail presence makes sense, Gateway executives say.
'We're taking a company that was selling direct to clients and adding
something you can't do in a direct way: giving customers the
opportunity to test-drive the machines and achieve a comfort level with
the technology,' said Keith Martin, vice president of Gateway Country
Stores. 'We think it's a compelling model.'
In the retail biz, Gateway's strategy is known as 'clicks and
mortar,' the recently coined jargon for a retailer that embraces both
Internet and store retailing simultaneously. Other examples of 'clicks
and mortar' retailers include apparel retailers such as Eddie Bauer
and Gap Inc. as well as financial services retailers such as Merrill
Lynch & Co. and Charles Schwab Corp.
Unlike Gateway, most started out as 'bricks and mortar' operations.
But all have substantial Internet presences now. They are committed
nonetheless to keeping their physical locations open for customers who
want face-to-face interaction. In fact, Merrill Lynch is currently
running televisions ads reassuring customers that its offices and
brokers are 'not going away' because of its burgeoning Internet
presence.
Taking a 'multichannel' retail approach like Gateway's makes sense,
retail consultants say.
Computer savvy folks may feel comfortable buying replacement equipment
over the Internet if they know exactly what they want.
But for first-time buyers, small business owners, senior citizens and
those who just like to play around with a product before buying it,
nothing beats a store with a well-trained sales force.
'Stores excel at helping you specify what you want to buy,' points
out Leo Shapiro, founder of Leo J. Shapiro & Associates, the
Chicago-based consumer research firm. 'Think of the number of bits of
information that come off a live salesperson in motion.
'The Internet excels at finding what you specify. For that reason,
almost all brick-and-mortar retailers will have an Internet site
eventually, and all Internet retailers will eventually have their own
stores,' he predicts.
Gateway is hardly giving up on e-commerce. In October America Online
Inc. said it will invest $800 million in cash and stock in Gateway as
part of a cross-marketing pact in which the companies will create a
co-branded online software store.
But its sales push is most apparent these days in suburban strip malls.
A Gateway Country store like the one that opened in Schaumburg, Ill.,
in August has more in common with a showroom than it does a
conventional retail store. Shoppers don't walk out with a computer
because the stores carry no inventory. Each Gateway PC is built to
order and delivered to a customer's home in three to five business
days.
Nevertheless, shoppers can play around with a dozen terminals that are
hooked up to desktop computers, lap tops, printers, scanners and
digital cameras. All the Gateway computers can access the Internet and
are loaded with real software.
What the sales associates do is help customers figure out how they are
going to use the computer and what features they require. That process
is called a 'needs assessment,' and every customer gets one.
All that personal attention means the stores need a lot of well-trained
employees. A typical Gateway Country store is a mere 8,000 square feet
but has 15 employees. Some urban stores are half that size.
The only way such a cost-intensive strategy makes sense is if Gateway
gains market share with its store network. Currently, Gateway, with 9.3
percent of the PC market, is a distant third to Dell Computer Corp.,
which has a 17.1 percent market share, and Compaq Computer Corp., which
has a 15.3 percent share.
But Dell and Compaq, which have many corporate customers, are unlikely
to be the biggest victims if Gateway makes inroads, says Ashok Kumar,
technology analyst with U.S. Bankcorp Piper Jaffray in Minneapolis.
Rather, Gateway will take sales from a variety of computer makers that
rely on broad-based retailers such as Best Buy Co. and Circuit City
Stores to sell their products. In those stores, associates are spread
thin selling everything from appliances to televisions in addition to
computers.
Gateway already is gaining ground, Kumar says. 'A large percentage of
Gateway's revenue growth can be attributed to the Gateway store concept,
' he says.
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