BusinessWeek: Apple needs ‘to rebuild and reinvent its ties with small resellers’

“The success of Apple’s retail stores has been one of the most surprising chapters in the feel-good story of the Think Different company’s comeback. When the retail outlets were launched in 2001, analysts howled that CEO Steve Jobs was pouring money into a black hole. Now, one-time doubter and Apple bear Steve Milunovich of Merrill Lynch says the retail risk has passed. According to Apple, the chain has been profitable for two consecutive quarters, and it expects to see margins rise from 2% to 5% as customer traffic continues to increase,” Alex Salkever writes for BusinessWeek.

“Not everyone is smiling, however. Tony Verga, who owns CDS Group, a certified Apple dealer and consultant in Phoenix, has been selling Macs and providing Mac-centric consulting services for nine years. When Apple opened two stores in the Phoenix area in 2002, Verga saw an immediate impact on his business. Apple had previously referred service calls to CDS. But increasingly, Apple refers service customers to its own retail operations, claims Verga. ‘My guess is that they want to do it all,’ he says, estimating that his business is down by at least 10% since those stores opened,” Salkever writes.

“What should Jobs & Co. do,” Salkever asks? “Apple must craft a plan to rebuild and reinvent its ties with small resellers. First, it needs to be honest and admit that Apple stores are hurting the resellers’ business and that not all of them will survive. Second, Apple has to treat those that do hang on as integral parts of its organization and sales effort. Finally — and most crucial — Apple needs to ease the pain by coming up with programs to encourage these longtime partners to help it accomplish goals it can’t achieve on its own.”

“Of course, Apple can’t and shouldn’t pretend to guarantee the survival of all small resellers. Many will get out of the business — and they should. Viewed as a whole, small resellers have failed to build Apple’s market share and its brand. But throwing out the good resellers with the bad would cost Apple a huge amount of customer goodwill,” Salkever writes. “Unless Jobs & Co. think through the logical next step of their retail strategy and figure out a way to keep those small, valuable resellers in the fold, Apple could lose leverage in some of its most lucrative markets — and seriously damage the company’s overall ecosystem.”

Full article here.

49 Comments

  1. I’ve been to the resellers and listened to the uninformed, noticeably biased employees say something like “why would you want a 1.25 ghz machine when for the same price you can have a 2 ghz machine. Besides, there’s not much software for Mac”.
    Apple knows what they need to do not Businessweek. The only thing Businessweek needs to do is write another article.

  2. As an employee for one of these resellers, I can tell you that we’re considered one of the best yet you still have to worry how close can the Apple-branded stores get before you feel the crunch. There are three within a reasonable driving distance to us. Our store has a fully certified and trained staff that offers great service, but our store will never be as flashy or well-placed as Apple’s.

  3. I have not been impressed with our Mac-only resellers in the St. Louis area. They have been located in weird locations, have ugly stores and little stock. Our Apple Store (and Compusa) are a much better experience and they generally have what I want. I’m able to take friends into the stores to show them the product – I could never do that with the smaller reseller.

    We have a great business called City Mac which is part of a larger group that primarily focuses on serving the graphic arts community – although you can purchase retail from them they are not set up to serve walk-in traffic. Ironically, they are located in the middle of our up and coming warehouse loft district – a perfect location for a hands-on retail store.

  4. Seems this guy is pretty smart. Apple ought to hire him and let him direct the independent reseller effort. There are good ones. We have three in the San Diego area that compete with three Apple stores (one is a University Bookstore where I shop at ed. prices – legitimately, I might add). And they offer things the Apple stores can’t.

    But the Apple stores are where you can actually spend time working with the hardware, and they have better stocked shelves. So Apple cannot rely on thse independents to push sales and market share increase. But they could rely on them for quick, local repairs, and they should!

  5. I have worked closely with our reseller. (Until they closed down). The folks there said that Apple never gave them much of a discount from their listed web prices, so the store didn’t make money from new computer sales. The store was in business to fix the few apple computers that actually broke. So finally (Good for Apple bad for the reseller) so few computers were breaking that the store had to sell to an independant PC service that will forever be in business fixing the s#!t that Dull et al. put out.

  6. Competition is good! I’ve been buying macs for over 20 years, and I’d have to say that the Mac resellers have, by and large, not done so great a job promoting and selling Macs. There’s no reason why the Mac resellers can’t provide as good or better a shopping experience as the Apple Store. They need to get better or die.

  7. Years ago, there were two Apple resellers in our area. Then one went out of business, and the other started adding PC products into their mix. It’s a nice thought that these resellers could stick around, but the simple fact is that the Apple Stores do better, and help promote the Mac much more than a small reseller located in a remote corner location of an old strip mall. If there was still cloning, then I would argue towards more resellers. But since Apple is doing it all themselves, they might as well take care of the selling as well.

    I go back and forth on this issue, however. It’s always nice to have an alternative place of business to shop…

  8. The nearest Apple store is over an hour away from me. CompUSA, at least here, doesn’t do squat for Apple. I went in to look at laptops recently and they were still selling the last revs at full price. No hint that newer models were even available. They’ve got the Apple section and the DIY (do it yourself) section off in a corner together behind the digital cameras. Selection is poor. The only local reseller went of of business recently, but they were only selling legacy macs anyway, so I never had a reason to visit. It’s no wonder that our local United Way wouldn’t let us use technology grant money on Macs, I was the only one around who’d argue for them.

  9. If Apple wants to promote smaller resellers, they should come up with a franchise concept for them to follow to provide uniformity (although on a smaller scale) with Apple’s own stores.

  10. The general public is well aware that Apple’s are:

    � slower
    � more expensive
    � not compatible
    � not used in the business world
    � can’t play games on them
    � doesn’t have as much software
    � doesn’t work with the internet

    Therefore Mr. Jobs needs to control the sale of his products.

    If you go to a general retailer with real PC’s the sales people will direct you to the better product like a box from Dell or HP.

  11. All I can say is where was Apple’s marketshare with these “resellers”? Apple had to do something to boost both their image and their sales and the retail stores have gone a long way toward doing that. The stores are turning a profit (despite the death knell predictions when they debuted) and the public’s awareness of Apple’s products today are higher than they’ve been since the ’80s. The iPod goes a long way toward that goal as well, but the retail stores have also provided a big boost.

    At least now they have an alternative to the dark back corner of a Comp USA store where a salesman is never in sight. Besides, they took a page (sorta) out of Dell’s playbook and have taken more command of their own product’s retail sales. They should have done this years ago and they might be in even better shape today than they already are. I personally know of at least a half dozen people that had no clue Macs still even existed before the retail stores opened and over the last 3 years have purchased their first Apple computer since the mid ’80s.

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