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RealTime IT News

Lenovo Reaches Small Business Through Retail

ThinkPad laptops are returning to retail shelves after an absence of more than six years.

Lenovo announced on Tuesday that it is partnering with electronics retailer Best Buy to sell Lenovo computers at select stores across the U.S.

Lenovo, based in China, acquired IBM's personal computer division last year, and has recently been reaching out to consumers via traditional retail outlets. The company signed a deal with Office Depot in November to sell its line of ThinkPad machines in 1,000 retail Office Depot locations.

In an agreement similar to its deal with Office Depot, Lenovo will target small and medium business customers at Best Buy. Consumers will be able to see, test and order -- but not walk out the door with -- Lenovo computers at 135 "Best Buy For Business" stores across the U.S.

"Lenovo is scared of becoming a consumer PC company in the U.S. for all the reasons that you might expect, including low margins, aggressive competition and lots of cost for advertising and shelf space in that industry," said Stephen Baker, an analyst at the NPD Group.

"Right now they're not sure they have the brand pull to get in there and make that happen."

"What they have wanted to do is focus on their core businesses in the U.S., which is small and medium sized businesses. That dovetails well with Best Buy's overall strategy."

Best Buy For Business is a division of electronics retail giant Best Buy, which functions as a store within a store at select locations and focuses on selling business technology suited for small and mid-sized companies.

Lenovo-trained Best Buy employees will be on hand at each store to help customers select, and, if necessary, troubleshoot their hardware.

Consumers will be able to order the machines through Best Buy, or can test out the hardware and then make their purchase online at Lenovo's Web site or over the phone.

IBM had pulled ThinkPad machines from the majority of retail shelves in 1999. The often pricey ThinkPads didn't sell as well as budget brands in a retail environment.

IBM continued to sell ThinkPads through a limited number of independent retail stores, such as J&R Electronics, in select cities.

But the machines were marketed primarily to corporations through IBM account representatives and became status symbols known for their excellent engineering and business-savvy features, such as file restore software, online diagnostic support and on-the-road repair and replacement services.

Lenovo now joins other major computer manufacturers in their march to retail stores.

Virtually all manufacturers now sell their computers through electronics outlets as well as online through their own Web sites and call centers.

Dell PCs are only available through Dell, which recently bought Alienware, a manufacturer of high-end computers and of the few other retail hold-outs.

"Vendors will continue to look for ways to reach new audiences. The key determining factor on channel choice is profitability," said Charles Smulders, the lead PC analyst for Gartner. "I don't think we will see Dell moving into third-party retail anytime soon for that reason."

Some manufacturers, like Samsung and Sony, have opened retail showcases for their products, which allow consumers to take PCs for the silicon version of a test drive before purchasing them online.

Computer manufacturers typically offer several pre-built models in popular configurations available for immediate delivery in retail stores and their Web sites. But most have found that it's more cost effective to build computers after a consumer orders a PC.

This allows the consumer to configure the machine as he or she wishes, and also helps cut costs associated with overstocking of computers and components.

"I think [the Best Buy agreement] is positive," Gartner's Smulders said. "It gives customers more exposure to Lenovo's product. The key will be managing this business profitably. Vendor retail margins are very tight."