The IT Threat
Milne explains that the introduction of the company's own plasma television hinged on two concepts. One was validating the brand name in CE, not just PCs. The other was reaching consumers directly with products. "We have direct relations with our customers and this allows us to hit price points," said Milne. "We're not having a series of distributors and resellers reach the consumers." At the same time, Milne attributes the 20 to 30 percent plasma market share to Gate-way stores. "We think clearly that it's an asset that a consumer wants to be able to see the quality of the plasmas. It's unlikely they'll buy sight unseen," he said, adding that though people go into the stores to see the televisions, still the majority make the purchase online or by phone.
"We see the opportunity to have a direct presence with a retail presence," says Milne. "We started the stores in 1997 as showrooms for PCs (with stores ranging between 5,000 and 10,000 square feet). Starting last November, we really turned the stores into cash and carry. We also started putting CE products in them. Starting around May, we announced that we would launch new products in new categories. Since that time, the products have done well." He cites Gateway's well-received USB music players and MP3 music players. "We also launched our digital camera line at the end of August," he adds. "That category will be huge for holidays."
In addition, Milne explains that price points can be lowered even further, allowing the PC maker to effectively compete with CE manufacturers. He says, "If you look at a Sony camera that ultimately get sold through Best Buy, there is somewhere in the neighborhood of five to six touch points between point of manufacture and end consumer of that product."