Gateway Country Stores

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14303 Gateway Place, Poway, Calif. 92064

858-848-3401, Gateway.com

Chairman/CEO: Ted Waitt

Annual Sales: $3.1 billion

Number of Stores: 200, plus online and direct sales

Product Mix: Computers, consumer electronics

Poway, Calif.— Every business needs to undergo a little nip and tuck from time to time to stay competitive, but Gateway and its retail chain are about to undergo a complete makeover.

After trimming its store count and tightening operations, the PC maker and seller has begun transforming itself into a consumer electronics-focused retailer that plans to roll out 50 high-tech audio/video products in 15 categories in the coming year.

To instantly grab mind and market share, Gateway will implement a new three-tier pricing strategy that will include what it calls "disruptive pricing." Essentially it will sell certain products well below marketplace levels, while still managing to turn a profit. The company gave a glimpse at this new direction last year when it shipped a $2,999 42-inch plasma TV.

The first of these new products entered the pipeline last month with the introduction of 17-inch and 18-inch LCD TVs, with price points of $799 and $899, respectively. Gateway also expanded its plasma line to include 46-inch and 50-inch models with suggested retail prices of $3,799 and $6,999.

The physical changes at Gateway's Country Store business will be the most apparent to the average consumer. All of the chain's 200 stores are now in the process of being upgraded to properly sell the new consumer electronic products. In addition, the company will open five new store concepts by the end of 2003. Gateway will take the lessons learned from these new locations and incorporate them into a new store format that will be used for all future Country Stores, a company spokesman said. Specifics of the changes have not been announced.

Eventually, these steps will see the company's revenue almost evenly split between its traditional computer and peripherals business and the new CE assortment.

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