Consumer electronic products are pouring into and out of Gateway's 190 stores at a rate even company executives did not expect.
One year after the PC vendor/retailer introduced its first CE device, a 42-inch plasma TV, the company has added 99 more and CE sales now comprise 28 percent of Gateway's consumer sales, a figure expected to hit 40 percent by the end of the holiday selling season.
Scott Edwards, executive VP of Gateway's consumer products, said the high product introduction rate has been a killer, but he and his staff were willing to put in the extra work because the potential payoff was so big.
"The fast pace was good for several reasons, but mainly it gave us a good product mix going into the holidays," he said.
In addition to offering a wide selection, Gateway is tempting customers through price. Ted Waitt, Gateway founder/CEO, introduced a tiered CE pricing system last year that intentionally prices product well below the going retail rate in an effort to quickly gain share and market buzz. This trend was continued with its latest CE releases, but so far Gateway has not implemented a similar strategy with PC products. Edwards said there is little margin available at the low-end to cut prices, but there might be some wiggle room at the middle and upper levels that could be "disrupted" in the future.
"We don't want to be any more aggressive than we have to be," Edwards said, "Instead we want to be disruptive in other ways such as form factor."
One example of this "disruptive" strategy in form factors is the 901 Family Room Media PC, which is a computer housed in a stereo component chassis and intended to be stored in an A/V system rack.
With the introduction of seven new CE products and another half dozen PC products on Nov. 11, Gateway's merchandise mix is set for the remainder of the year, Edwards said. At this point the average Gateway store inventory is set at a 60 percent PC to 40 percent CE product ratio.
The new CE products launched Gateway into three new areas, DVD recorders, Media Center PCs and portable MP3 hard drive audio players and reinforced the company's effort in its existing LCD TV and digital camera lines.
With the addition of the two new LCD TVs, Gateway now fields 12 TV SKUs with screen sizes. The new models have 23-inch and 26-inch screens with built in speakers and street prices of $1,499 and $2,299, respectively.
The AR-230 DVD recorder uses the +RW format and is priced at $349. It is also offered bundled with Gateway's existing KAS-303 1,000-watt home theater system for $1,099. The KAS-303 has a stand-alone price of $999.
The ability to launch and have in stock new cameras in time for the holiday season was a vindication of the company's direct business model, said Matt Milne, senior VP and GM, consumer solutions.
The 4-megapixel DC-M42 will carry a $249.99 suggested retail price, while the 2-megapixel DC-T23 will be offered at a suggested $129.99.
The M42 sports a 3x optical/4x digital zoom, a 1.6-inch TFT display screen and several flash and shooting modes. It features 11Mb of internal memory and an SD card expansion slot. The T23 is a pocket-sized model with a 4x digital zoom and an SD expansion slot.
To complement the camera offering, Gateway also unveiled its $99.99 Digital Photo Creator bundle, including imaging software, a how-to guide, and a 6-in-1 flash memory card reader/TV photo viewer.
"Many retailers aren't approaching the system idea behind the digital camera," Milne said. "This is critical for consumers to understand, that there are a wealth of other products out there" to augment the digital photography experience, Milne added.
Despite its entry into the digital camera market, Gateway continues to stock third-party cameras from Kodak, Canon and Nikon. Milne said the strategy is to use third-party brands where they offer a different technology from Gateway — such as Kodak's camera dock — or a strong "photo brand" that resonates with consumers. Gateway is positioning its cameras as the value alternative to the pricier, feature-rich Canons and Nikons, Milne said.
Edwards said he is studying whether to bring this philosophy to other categories. Bringing in a third party vendor would not make sense in the plasma area, where Gateway is a leader, but perhaps it would be logical in other segments, he said.
The 901 Family Room Media Center PC has an Intel Pentium 4 processor and has the usual Media Center features like PVR functionality and remote control operation. Pricing has not been set, but should be under $1,000. It becomes available Nov. 24 in Gateway stores and online.
Gateway's pure PC products also bumped the company into a new area and expanded its notebook computer line. The company is now a player in the Powerline and 802.11g home networking categories with the release of the Gateway Powerline networking system, priced at $49, and an 802.11g USB adapter, at $59. The company already sold 802.11b wireless and other home networking products.
The new notebooks are the M675, M505 and M275. The M675 line are desktop replacement models with a 17-inch screen, an Intel Pentium 4 processor with Hyper-threading technology and a price range of $1,999 to $2,499. The M505 is an entry-level multimedia-centric model with a 15.4-inch screen and a price range of $1,599 to $1,899. The M275 is a combination notebook and Tablet PC. Prices start at $1,799.
— Greg Scoblete contributed to this story