The Success Of Gateway's eMachines Acquistion Hinges On Channel Strategy
Gateway hasn't had a lot of good things to sing about in the past few years. The Gateway stores haven't proved to be a successful model to sell its products on the low end, and the pricing pressure brought to bear by Hewlett-Packard and Dell in the commercial space has been significant.
Having said that, the company has done a good job of expanding its product line and opening new market opportunities, especially in the consumer space.
The eMachines acquisition, however, brings with it an opportunity to re-examine the sales model at both the low and high ends of the company's product line.
A retail storefront that sells a single manufacturer's brand of product has never worked over any extended period of time. Gateway ought to either ditch its storefronts or scale back the number of them and use them as demonstration centers for an enhanced channel selling to small businesses.
Meanwhile, eMachines is one of the few brands that has been able to hold a position against HP/Compaq in the retail space during the downturn. The value-added channel, especially those solution providers that concentrate on small businesses, are aware of both the eMachines and Gateway brands but have little understanding of how or whether the two companies want to engage with it.
Couple that with the fact that distributors and VARs want to have another alternative for their customers, and you can begin to build a strong case for an opportunity in the small-business market.
But small businesses buy solutions,and those solutions are not a PC with QuickBooks loaded onto the hard drive. Gateway, which last week launched some interesting enhancements to its channel program (see crn.com for details), needs to do more.
The company can't successfully go it alone, and by that I mean it has to engage more with distribution and solution providers to increase its solutions sales to small businesses.
There are definitely some smart people inside the combined new organization. Errett Kroeter, Gateway's director of channel programs, for instance, was recently brought in and has already made some channel improvements. Kroeter is a former channel manager at IBM, and you have to hope he is given the opportunity to apply that expertise now.
If this new company is to truly get the benefit of the merger, its channel strategy needs to be given as much emphasis as any other part of the integration. Regardless of whether the channel strategy is completely rewritten, there needs to be a strong message to the channel about where the merged company sees itself playing with solution providers.
I believe Gateway should concentrate on small business, where it can build a base with solution providers, and expand from there. But whatever market it chooses, Gateway must put a mighty strong emphasis on building an indirect channel that can sell its products as part of the solution or it is going to miss those volume sales opportunities.
It seems to me that both the eMachines and Gateway brands ought to survive with different product lines in the small-business and home markets.
If eMachines' Wayne Inouye, the CEO of the combined new company, is able to ensure that the channel gets as much attention as the other issues facing him in merging the two firms, this just might be a huge success.
Make something happen. I can be reached at (516) 562-7812 or via e-mail at [email protected].