The Core Dump

The Core Dump is the personal blog of Nic Lindh, a Swedish-American pixel-pusher living in Phoenix, Arizona.

[By Nic Lindh on Friday, 02 April 2004]

The cow goes moo

Gateway has finally bowed to inevitability and closed its retail stores. This while Apple continues to roll out new stores at a good clip.

So why did Gateway’s stores fail so miserably and Apple’s succeed? It would be easy to point to the cult of Mac and how Apple users fall into Jobs’s reality distortion field and buy whatever tasty new expensive gizmos come out of the labs at Cupertino, while Gateway operates in a fiercely price-competive market where people don’t want stores, but want to save $50 off the price of their computers. But that would be missing the point.

The Gateway stores failed so abjectly because they didn’t carry inventory. Simple as that. Basically the Gateway stores were places where you could go get help with your mail order purchase. (Sure, they did sell a few select models in-store, but any sort of customization led the customer to the Gateway web site.) When people go to a retail store, they want to leave with their purchase. Impulse buying a hot new gizmo is no fun if you have to wait three to five business days for it to show up.

There’s really no excuse for Gateway management to not realize this from the start.

But putting on our tin foil hats we can guess what their thinking must have been: Buying computers is hard, and a lot of our customers don’t know how to configure systems to their liking on our web site, so if we create a place where knowledgeable people can help them, they will be able to order a system that fits their needs and will be happy customers.

Not bad thinking. Except when retail reality meets the ideal. Selling computers is arguably the most difficult kind of retail there is–so many factors and dimensions play into a customer’s purchase decision. Add to this the basic law of retail: Your performance is measured by how many units you push. That’s it. If salesperson A sells X number of computers through hard sell tactics and very few of them will ever return, and salesperson B sells x/2 computers by thoroughly understanding customers and the customers are uniformly happy, salesperson A is doing a much better job. Simple as that.

Lots of retailers make noises about being customer-centric, putting the customer first, and being more interested in the quality of the shopping experience and its effect on the brand, yadda yadda, but when the rubber hits the road, in the long dark hours on the store floor, it’s all dollars and cents and meeting quotas. Car dealerships are naturally the most extreme manifestation of this attitude.

Put these factors together, and what you end up with is a small boutique where salespeople are pushing to meet their quotas, and the customer ends up walking away with a receipt but no goods.

And that will not fly.

Rather than spending all that money on their stores (including the silly blimps that would sometimes fly over them) it would probably have behooved the company a lot more to focus their efforts on making their web site as friendly as possible, and staff their phone centers with the best people.

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