Gateway Doubles Channel Output with Redoubled Effort

By John Hazard  |  Posted 2005-10-06 Email Print this article Print
 
 
 
 
 
 
 

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Since it acquired competitor eMachines and closed its stores in 2004, Gateway has increased its channel efforts and doubled its output through resellers.

Gateway Inc. has doubled its channel sales to midsize and enterprise businesses and built trust among resellers since it shuttered its store fronts 18 months ago, the company said.

With a new channel chief at the helm, the PC maker, whose strip mall sales strategy was once seen as a contradiction to the channel, is six months into a two-year reconstruction to boost channel resources and build trust among a growing roster of partners.

Since March, the Irvine, Calif., company has added channel field representatives, marketing initiatives, a deal registration program and protected sales margins to make it a competitive business class solution for resellers, said Tiffani Bova, channel chief since June 2004.

Bova and Gateway partners say the signs of success are beginning to bloom.

Since March, the company has doubled its revenue through partner sales, Bova said.

Gateway would not release exact figures but said the channel had constituted less than 10 percent of the company's revenue and now composes just more than 20 percent.

Gateway has also recruited more than 85 new resellers to its 1,200-string Pronet channel program, Bova said.

But perhaps most telling of Gateway's achievement is the fact that many VARs, most of who chafed at Gateway's direct sales network, now praise Bova and the channel she is building.

"They're giving the cow a manicure, and it's starting to be a pretty good looking cow," said Edward L. Hunter, president of Champion Networks LLC, of Brunswick, Maine, a Gateway reseller.

"They're putting resources into the channel and getting to know the key players. It's a level of care and support I haven't seen since [technology distributor] Merisel Inc."

Click here to read more about Gateway's intentions for the small to midsize business market.

Gateway's new channel strategy has given it traction among resellers, especially among smaller business providers and verticals such as healthcare and education, where notebook and tablet offerings are driving sales, said James Brehm, director of business development at Frost & Sullivan, a financial analysis firm.

'Feet on street.'

Hunter attributes the manicure to what he calls Bova's "feet on street" approach, with accessible sales representatives and technical resources and her ability to get Gateway to react to partner's needs.

"She has gotten to the people within Gateway who can make things happen for a partner, so you're no longer just calling and giving a complaint," he said.

"What that means is when I am Specing a project and I've specified something that may not be possible, I can call Gateway and have an engineer. I'm sure that costs them money, but so do returns and dissatisfied customers."

Bova said it is her goal to make Gateway easy to work with and profitable for partners. "If the partner isn't making money, even a point or two isn't good enough, we aren't going to be an attractive partner," she said. "We know who the big gorilla is in the space, and we know if we are going to compete we have to do it on price."

Much of the savings garnered from closing stores and outsourcing Gateway's manufacturing were used to add staff to the channel team and securing decent channel margins.

Gateway has also struggled to build trust and credibility among resellers they once antagonized by driving down prices.

"Closing the stores was a big step toward gaining traction in the channel," said Bill Fearnley, senior PC and enterprise hardware analyst at FTN Midwest Securities Corp., of Boston, a financial research firm.

"The channel wants to know that when they quote somebody on a Friday, the customer isn't going to go down to your own store on Saturday get the same thing for $100 less."

On Wednesday, Gateway revealed that it would no longer market products through direct marketers, including CDW, PC Mall, PC Connection, Insight and Zones, whose prices often undercut those of VARs.

Gateway will now do only Custom To Order business through those organizations, which should be a boon to VARs, Bova said.

The company wasn't recognizing benefits from the direct market model and decided instead to focus on VARs.

Read more here about how Gateway added service to its offerings.

The purchase of eMachines, in January 2004, which had a small, but established channel program and staff of its own, added "knowledge and some Rolodexes" of channel contacts, Fearnley added.

Gateway also took measures to create new opportunities for its partners such as bundling hardware and promoting their professional service offerings, a remnant from the stores, which allow VARs to field Gateway service calls.

"One of the phrases I've heard is 'sell the whole cow,'" Brehm said. "They're adding the storage, and digital cameras and service packages. That's where the margin is at." The service package is especially well regarded by VARs, Hunter said.

"It has made it very enticing for customers," he said. "They brand the services as Gateway, and it helps that they know if I go out of business, they still honor those 100 hours of service. It's just another tool in the bag. If you're the only pony in town, you'd better not be a one-trick pony."

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