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.”

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