Gateway puts David Jones on trial

Gateway puts David Jones on trial

Gateway has embarked on its first trial venture to sell PCs indirectly through a mass merchant in a significant break from its direct sales history.

The company announced the deal with an advertising campaign over the weekend promoting its Essential Pentium III 650MHz machine on sale at David Jones for $1999.

The move marks a clear attempt to wrest control of the consumer market and improve its poor standing beside Australia's top selling PC vendors.

The vendor has also refused to rule out the possibility of expanding further into the channel with the addition of other retailers and resellers.

In an exclusive interview late last week, Gateway managing director Paul Heath would not hint at possible new partners but suspected Harvey Norman would not take on Gateway. With obvious reference to HN dumping Compaq over its retail stores, Heath said Gateway would not get in for the same reason.

Heath did not reveal how long the David Jones trial will last or detail its sales targets, explaining David Jones was chosen because of its "significant and loyal market".

He did say, however, that the mass merchant had taken stock of the Essential machines in deference to its traditional method of building machines to order at its plant in Malaysia.

Significantly, Gateway's move comes at a critical time in the race for PC sales. According to IDC's results for Q1 this year, 442,116 unit sales of PCs represented a 16.6 per cent decrease on the previous quarter and an 8.4 per cent decrease on Q1 1999.

Gateway's mass-market plans throw down a challenge to its direct-selling counterpart Dell, which maintains a head-in-the-sand approach to indirect sales. According to IDC, the PC market trends are not good for Dell, which witnessed a sales slide in its chosen corporate market space.

IDC reports Dell is struggling to maintain its position in the top five PC vendor stakes. The Q1 results show Compaq leading with 15.1 per cent of market share, followed by IBM at 11.5 per cent, HP at 10.6 per cent, Dell at 6.9 per cent and Toshiba at 6.6 per cent. When asked, a Dell spokesperson said its policy was not to comment on the strategies of its competitors.

Read the full story in the June 28 issue of ARN this week.

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