Gateway to Close retail stores

[Force Flow]

I heard about this on CBSNews and of course they skimmed right over it but it doesn't deserve this. Gateway stores will close their doors nationwide at an estimated April 9 and >=2,500 jobs will be lost. Gateway Inc. said late Thursday it was shuttering all of its 188 retail stores in the U.S., including its store at 1900 N. Rock. In all, 2,500 retail positions will be eliminated as part of the store closures. In Wichita, the Gateway store employs 17. Patrick Phillips, manager on duty at the Wichita store, says he doesn't know the exact date of his store's closure, but the company says it expects to close all stores by April 9. A statement by the company announcing the store closures did not specify reasons behind the move. It said it will provide more detail on the decision at the release of its first quarter 2004 results on April 29. Founded in 1985, Gateway brands and sells a variety of personal computers and electronics, including thin televisions, digital cameras and connected DVD players.

http://www.bizjournals.com/wichita/s...ml?jst=s_cn_hl

~From Geeknewz.com

[mbossman2]

brick and mortar stores have a huge impact on your SG&A costs (selling, general and admin costs).

Gateway's model and pricing structure is set up around the efficiencies of the web and the stores themselves carried more cost per unit sold than profit per unit sold so a net loss was a no-brainer.

my guess is that Gateway will either attempt to embrace the VAR channel for penetration into the SMB space or attempt to wrangle space on a mass market retailers shelf space (virtual or otherwise). We'll know at the end of April what their plans are.

[glc]

Being that they bought out E-Machines (or was it the other way around?), there's the retail shelf space and service departments all ready to go.

[LawyerRon]

I was expecting that move from Gateway.

[Panama Red]

Saw another story on this that offered more detail and predicted a relationship with Best Buy stores may be coming. BB already sells eMachines and since Gateway bought eMachines, the new Gateway ceo is the former eMachines ceo and before that he was with Best Buy. Interestingly, I happened to see a Gateway notebook for sale at a local Office Depot a couple weeks ago.

[Brown Hornet]

gee how come that doesn't surprise me/us.to bad for the people losing jobs.

[Jaggannath]

At the end of the day their job is to make money, not to worry about the people they hurt to maximise the $$. It's the way of the world BH

[Brown Hornet]

i am well aware of that jaggannath

[Strider]

I only went to a Gateway store 1-2 times and all I ever did was look around and it seem that way with most people that were shopping in the store also, I'm not saying they didn't sell computers. Obviously they weren't selling enough and with Gateway acquiring EMachines the writing on the wall was already there. The only unfortunate thing is people losing their jobs, but hopefully they will be able to get back onto their feet pretty quickly.

[GaryRouth]

I am amazed the stores stayed open as long as they did. I'm even more surprised Gateway ever opened them in the first place. Really bad timing: just when PC profit margins were falling and retail overhead was climbing [especially workers benefit costs]. Unless the focus of the store is an area of premium profits per item, it can't survive low foot traffic. How many folks wandered the aisles of their local Gateway store, compared to how many folks wander the aisles of their local Best Buy?

They were nice stores, with nice folks [our local store has some wonderfully helpful techs who'll have some adjustments to make] . . . Those same nice stores just about killed Gateway: and no one would have a paycheck that way, either.

I just hope they stick to some recent movement toward higher quality components, made possible by a more logical and streamlined business model
. . . Gary

[glc]

Can you actually walk into a Gateway store and leave with a computer? I thought that they were strictly a service center and a display facility, and computers still had to be ordered and shipped.

[Panama Red]

Originally posted by glc Can you actually walk into a Gateway store and leave with a computer? I thought that they were strictly a service center and a display facility, and computers still had to be ordered and shipped.

Origianally they were just as you describe, glc. But over the last year or so they began stocking some popular combinations for folks to take with them. Even offered some decent discounts on both desktops and laptops.

[oddjob]

They shut all the Gateway Country stores in Canada several years ago (at least the ones near me). I believe they weren't even open for a year. Besides, their machines have always been stocked at all the Costco stores that I've seen.

[tomster2300]

What is it with Gateway's move into the plasma t.v. market? Are they moving more towards consumer electronics than computers? Or are they just testing the water and seeing what produces more profit?

[morriswindgate]

The dumbest thing that all the box computer retailers did was the 500 dollar computer system. None of them were very good computers and then when the owners got fed up with them and wanted something better, not only was the reputation of the manufacture damaged, but the people wanted a 1600 buck system for 500.
Dell concentrated on the business market more than the retail market as no one cares about the quality of a business computer when you just lease it.

[mbossman2]

Originally posted by tomster2300 What is it with Gateway's move into the plasma t.v. market? Are they moving more towards consumer electronics than computers? Or are they just testing the water and seeing what produces more profit?

and that was a good move, but it still boils down to the fact that their business/profit model is based upon the low cost model of the virtual store.

as an example:

Virtual web based store, manufacturing & warehousing costs 10% of purchase price.

Real store, manufacturing & warehousing costs 13% of purchase price + shipping to the store. total 13.5%

so with the real store you make 3.5% less profit, doesn't sound like much does it? but it your overall profit margin is 2.7%, you now are losing .8% and losses are a bad thing.

Originally posted by morriswindgate The dumbest thing that all the box computer retailers did was the 500 dollar computer system. None of them were very good computers and then when the owners got fed up with them and wanted something better, not only was the reputation of the manufacture damaged, but the people wanted a 1600 buck system for 500. Dell concentrated on the business market more than the retail market as no one cares about the quality of a business computer when you just lease it.

if those manufacturers didn't produce $500 boxes, someone else would.

Look at it this way:

IBM was king of the hill in the late 80's for PC's and were charging $5K a pop, then along came Compaq at $4k, then Dell @ $3k. So someone is always trying to move in on the "king of the hill", so if Dell doesn't do the $500 box, someoneelse will.

[glc]

And Dell does the best $500 box out there in my opinion.

[Tin]

what i tell my "customers" (i dont work on a storefront, i just like building for friends, family, etc.) is that if they want to play games, i can build them a good system for a decent amount of money, but if they want an econo-box, dell can offer them a much better price than i can.

[glc]

Exactly. The Dimension 2400 can't be beat for an econobox, and it will do everything except game and heavy multimedia work. No AGP slot, so don't even think about trying to upgrade it for that kind of work.