Just two weeks after expanding its relationship with Best Buy Co. Inc., Lenovo Group Ltd. said Wednesday it will try to win even more U.S. small business customers by selling its notebook PCs at Circuit City Stores Inc.’s retail shops.
In both deals, customers will be able to buy Lenovo’s ThinkPad T60 widescreen and Lenovo N100 notebook PCs. Circuit City will also sell extra variations of those models in its stores, and the C200 notebook over its Web site and the phone.
The move makes Lenovo notebooks available to shoppers at Circuit City’s 700 U.S. stores and Best Buy’s 300 “Best Buy for Business” stores. The deal could reach even more consumers in 2008, when Best Buy plans to build 95 new stores in the U.S.
Lenovo made the move because it sees a trend of more small business users purchasing their PCs at retail outlets instead of channels or online, according to a statement from Steve Mungall, Lenovo’s vice president for worldwide and Americas channels.
If it succeeds, the plan could help Lenovo return to profit after several weak quarters. The company relies strongly on revenue from China and Europe, while sales in the Americas have declined with a slump in enterprise demand. The company was also shaken earlier this month by the sale of 300 million Lenovo shares by IBM Corp., its second-biggest shareholder and the original owner of Lenovo’s ThinkPad PC line. However, while Lenovo is making a wise move in using retail stores to reach small business buyers, it will face new challenges, one analyst said. Since retail stores attract a full spectrum of buyers, Lenovo must improve its marketing and product features to succeed.
“Retail is a blunt sword to capture those customers as opposed to the sharp edge they are normally used to. Being in stores like Best Buy, Circuit City and Office Depot means they need to be priced competitively against the more consumer-focused offerings on the shelf,” said Stephen Baker, vice president of industry analysis for the NPD Group.
To succeed with this strategy, Lenovo will have to sell PCs designed for both consumers and small businesses, instead of the business-focused notebooks they have now.
“Bottom line is they are entering a very tough segment with products that are trying to focus narrowly in a wide atmosphere. I suspect that they will be severely challenged to profitably expand their business to the customers they are interested in with this channel strategy,” Baker said.
In the meantime, Lenovo is sticking with its business focus. The company advertises the T60 as the lightest 15.4-inch widescreen notebook available from the top five vendors, with a weight of 5.1 pounds (2.3 kilograms). And Lenovo pitches the N100 to small business customers who want improved Wi-Fi for greater range and faster speeds in wireless connectivity. For Circuit City sales, both models come preloaded with Microsoft Corp.’s Windows Vista Home Basic or Premium OS, while the online version of the T60 uses Vista Business.