Cows Come Home Fast
Trey Bitteker, manager of one of Gateway Inc.’s three computer and electronics stores here, looked at the darkened parking lot and pulled out his keys.
“It’s time,” he said. Then he ambled over to the double glass doors and locked them. It was 8 p.m. on April 9, the hour when the last of Gateway’s 188 retail stores was shuttered in the latest restructuring by the money-losing computer maker.
By today, the dozens of trucks mobilized for the effort will have made their final pickups and be on their way to Gateway warehouses in North Sioux City, S.D., with whatever loose ends of merchandise and equipment customers hadn’t carted away. Like most, the store Bitteker managed was picked fairly clean during its last week; most of the desks in the office were snapped up, along with the chairs used in computer training classes -- the store’s photocopier too.
“The only things we’re not selling or removing are fixtures hard-wired to the electrical system,” said Richard Fix, Gateway’s vice president for retail operations.
Gateway had bet big on its retail outlets. Founder and Chairman Ted Waitt, moving the company heavily into sleek, flat-panel television sets and other consumer electronics goods, early last summer ordered a $15-million renovation to make the stores cozy and inviting, like the living rooms they were hoping to supply. The Phoenix store got its makeover only last August.
All the while, Gateway was struggling to turn a profit. Last year, the red ink totaled $526 million on $3.2 billion in sales.
Then, in January, Gateway announced it would acquire EMachines Inc., the ultra-lean discount PC maker based in Irvine with a wide distribution channel through such retailers as Best Buy Co. and Wal-Mart Stores Inc. EMachines’ frugal chief executive, Wayne Inouye, was named Gateway’s CEO.
And April 1, Gateway said it would lay off 2,500 employees and shut down its retail business in a lightning-fast eight days. All inventory and supplies would be sold or donated by closing time April 9 and packed up within a fortnight. The entire chain would be dismantled within just three weeks. By contrast, it took Montgomery Ward seven years to close down its national department store network.
Once executives made what they called the “wrenching” decision to let its retail staff go, Gateway revealed a remarkable resolve to carry out the shutdown. The company’s aggressive plan reflected the no-nonsense, get-things-done attitude of Inouye.
The man charged with making everything happen was Fix, who, before he joined Gateway in 1994, was manager of operations for Montgomery Ward and helped it launch the shutdown of its stores.
For the Gateway effort, Fix led a team of 21 managers in drawing up a plan to handle the convoluted logistics of emptying the stores of all furniture, equipment and supplies -- from paper shredders to envelopes -- and as much of their inventory as possible. They produced a 10-page price list that put a value on virtually everything under the roof.
“We’re a business; we pay for something; we have a depreciation schedule,” Fix said in an interview from Gateway’s headquarters in Poway, just north of San Diego. “A stapler may seem trivial, but we have to account for every dime.”
In Phoenix, Bitteker received his price list the first week of April. Then he and his eight employees set out to sell all the furniture and supplies they could.
Chairs and tables from the computer training rooms were adorned with price tags and gathered on one side of the showroom, joining sofas and easy chairs that had been part of the floor displays. Also for sale were desks, file cabinets and white boards from the offices of store managers.
“People came in and saw our office equipment for sale” and would make offers, said Bitteker, who turned 32 Saturday. There was a little leeway for bargaining, though store managers had to get approval for low-ball offers.
When Gateway kicked off its clearance sale April 3, stores across the country were packed. About 100 people lined up outside Bitteker’s Phoenix location by 7:30 a.m. Erik Neal, the store’s assistant manager, let in 10 shoppers at a time. Six of the store’s nine employees staffed cash registers.
As at other Gateway stores, customers made beelines for the heavily discounted plasma and liquid crystal television sets. The floor model of a $6,000, 50-inch plasma TV was slashed to $2,000 and sold quickly. Other, boxed items were 15% to 20% off.
When the last customer left the store the following Friday, employees blocked the windows with sheets of black plastic.
Their work was only half done. After a weekend off to celebrate Easter, the store’s staff got busy.
Fix and his team had drawn up a detailed plan for each day of the week to take care of all loose ends. Each day’s activities were minutely scheduled, right down to the timing for unplugging the last Internet connection.
Among the tasks for the first Monday: make final bank deposits, account for all remaining inventory, box up some files and shred others, and destroy business cards, letterhead and anything else with Gateway logos. (Staffers were able to keep their Gateway polo shirts).
The to-do list for Tuesday included separating the TVs, computers and phones, removing vending machines and taking apart the phone systems. Wednesday and Thursday were devoted to packing up remaining merchandise, boxing up bar-code scanners and credit card swipers, completing final expense reports and doing general cleaning. Bitteker said he would personally dismantle the store’s servers and routers.
On Friday, April 16, store workers waited for charity groups to pick up donations. Some desks and chairs were earmarked to be sent to Athens for this summer’s Olympic Games, of which Gateway is a corporate sponsor. In Phoenix, Bitteker arranged for a local children’s shelter to receive some leftover desks, chairs and other supplies.
Then it was time to take down the last connected systems and clock out the final employee hours.
Last week, the trucks began showing up at Gateway stores to cart away the packed-up goods and transport them to South Dakota. The last of the pickups is scheduled for today. After that, store managers like Bitteker are supposed to use a UPS envelope provided by Gateway to send their keys back to headquarters.
Executives in Poway are negotiating with landlords to end their store leases earlier than expected. Fix declined to give details.
The efficiency with which Gateway threw itself into the process “is very impressive,” said Robert Lieb, a professor of logistics at the College of Business Administration at Northeastern University in Boston.
“What you had happen is not typical,” he said. “When other retailers shut down, there’s been a tendency to hang on till the very end, and then chaos breaks out.”
Fix has worked to avert that, spending much of the last month on the road and seeing to store issues such as making sure necessary space is available and that records are kept properly. Some of his staff work in a war room in North Sioux City that is filled with flow charts and organizational matrices that track every detail of the tightly choreographed shutdown process.
“People there were taking calls from stores 12 to 14 hours a day,” Fix said. “Someone’s there with charts and maps and can get in touch with third parties to arrange whatever’s needed.”
At Bitteker’s store in Phoenix, customers kept trickling in until the last minute.
Dan Caplan, who works in an exotic-car dealership in neighboring Scottsdale, heard about the store closings at 4 p.m. that final Friday and got there in time to pick up the last MP3 player, a 20-gigabyte model that can hold as many as 8,000 songs. The price was cut from $300 to $255.
Like many other customers who came in the final week, Caplan shared messages of goodwill with Gateway employees.
“See you guys -- good luck with everything,” he called out as he left.
Gateway won’t discuss what kind of severance package employees will receive, but the company has set up a website with information about other jobs in electronics retailing.
Bitteker starts taking real estate classes today, and Neal is considering joining a cellphone company, but both are looking at a number of options.
As Bitteker locked the doors, the melancholy strains of “Songbird” by Duncan Sheik seeped from a computer’s speakers.
“It was great while it lasted,” he said, a company man to the end. “A business decision is a business decision; I think everybody understands that.”
