The Doors To Gateway Are Being Shut

Apr 02, 2004

By George Anderson

Gateway, the only major manufacturer to run its own stores (not counting Apple), announced it was going close all 188 locations on April 9. The move will result in 2,500 workers being laid off.

Brad Williams, a company spokesperson, told USA Today the move was made because, “We’re looking for any way we can to reduce our operating costs.”

U.S. Bancorp Piper Jaffray analyst Ashok Kumar said the decision to close the stores was necessary. “The stores were an albatross around Gateway’s neck,” he said.

Martin Reynolds, an analyst with Gartner Group said the stores were part of the reason that Gateway’s overhead was twice as high as Dell, which relies on Internet and phone orders for the bulk of its sales.

Moderator’s Comment: What are your thoughts on Gateway closing its retail stores? Does this mean that manufacturers
should stay out of the business of running physical stores?

In a commodity market such as PCs, where price is often the final determinant in making a purchase, any extra overhead is going to reduce your competitive
position. The exception in the PC category would be Apple, which sells more on innovation, ease of use and stability and less on price.
Anderson – Moderator

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