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Gateway and Apple

Gateway started as a direct PC manufacturer without retail stores but later opened stores that configured PCs to order without inventory, which failed. Apple opened stores in 2001 carrying inventory of its limited product varieties and had over $20 billion in sales by 2013.

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Ramesh Safare
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24 views

Gateway and Apple

Gateway started as a direct PC manufacturer without retail stores but later opened stores that configured PCs to order without inventory, which failed. Apple opened stores in 2001 carrying inventory of its limited product varieties and had over $20 billion in sales by 2013.

Uploaded by

Ramesh Safare
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Gateway and Apple:

Two Different Journeys into Retailing Gateway was founded in 1985 as a direct sales manufacturer of
PCs with no retail footprint. In 1996, Gateway was one of the first PC manufacturers to start selling
PCs online. After many years of selling its PCs without a retail infrastructure, however, Gateway
introduced an aggressive strategy of opening Gateway retail stores throughout the United States in
the late 1990s. Its stores carried no finished-goods inventory and were primarily focused on helping
customers select the right configuration to purchase. All PCs were manufactured to order and
shipped to the customer from one of the assembly plants.

Initially, investors rewarded Gateway for this strategy and raised the stock price to more than $80
per share in late 1999. However, this success did not last. By November 2002, Gateway shares had
dropped to less than $4, and Gateway was losing a significant amount of money. By April 2004,
Gateway had closed all its retail outlets and reduced the number of configurations offered to
customers. In August 2007, Gateway was purchased by Taiwan’s Acer for $710 million. By 2010,
Gateway computers were sold through more than 20 different retail outlets, including Best Buy and
Costco. As one can imagine, this was quite a transition for the company to experience. In contrast,
Apple has enjoyed tremendous success since it opened its first retail store in 2001. By 2013, Apple
had more than 415 stores worldwide, with sales of over $20 billion. Unlike 14 Chapter 1 •
Understanding the Supply Chain Gateway, Apple has always carried product inventory at its stores.
Given its product designs, Apple carries relatively little variety in its stores. In 2012, average revenue
per Apple retail store was $51.5 million, a 19 percent increase over 2011.

The following questions highlight supply chain decisions that have a bearing on the difference
between Apple’s and Gateway’s performance:

1. Why did Gateway choose not to carry any finished-product inventory at its retail stores? Why did
Apple choose to carry inventory at its stores?

2. Should a firm with an investment in retail stores carry any finished-goods inventory? What are the
characteristics of products that are most suitable to be carried in finished-goods inventory? What
characterizes products that are best manufactured to order?

3. How does product variety affect the level of inventory a retail store must carry?

4. Is a direct selling supply chain without retail stores always less expensive than a supply chain with
retail stores?

5. What factors explain the success of Apple retail and the failure of Gateway country stores?

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