“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.
They have been located in weird locations, have ugly stores and little stock.
There’s no reason why the Mac resellers can’t provide as good or better a shopping experience as the Apple Store.
there were two Apple resellers in our area. Then one went out of business, and the other started adding PC products
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
Fact is they couldn’t make money out of selling hardware — not enough margin. So who’s gonna pay for promotion, fancy store interiors, skilled staff, high-rent locations, large floorspace, stock for display, etc., etc., etc.? Floor mats and rust protection? Peripherals and software?
Managing a change to direct sales always leads to these kinds of problems. A lot of these resellers are going down, period; victims of a change in the times and Apple’s business strategy, which I’m all in favor of.
The best suggestion here comes from Alec: 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.
Aye … for areas where Apple needs a physical outlet but isn’t planning on starting a small store. However, as a large outfit, the Apple Store buys in bulk and sells at a margin no small retailer can match and still stay in business. The alternative is to increase retail prices to subsidize these stores by offering them a bigger discount. So, who wants to pay more for their next Mac? Not me. And Apple doesn’t want me to either — it wants to sell more units instead.
BusinessWeek is arguing that maybe some resellers should remain and be helped. Is there a need for them? If so, how do they survive and get with the program? If not, how should they be discarded — death by a thousand cuts or a quick beheading? Whatever it is, let’s not add insult to injury.
There were a number of Apple resellers near me when I had a struggling graphics business. They were stellar, and unlike the Apple chains I received great deals on used equipment, and had a resource for selling back equipment for a good return. They’re all gone now. Apple’s a great brand, but the PC world admittedly does have a better after-market than Apple. If it wants to appeal to Joe Sixpack or Joe Hobbyist, there needs to be more outlets for selling used machines and peripherals.
P.S. Sputdick is here just to get your goat. Ludicrous comments like that would only come from the lobotomy-enhanced if he were serious. If my Mac doesn’t play games, then I’d like to know what my 10GB of software is that I have in my “Games” folder. I’d also like Sputdick to tell me how I’m accessing this site if my Mac doesn’t work with the ‘net.
Look at Sputnik’s posts. He/she uses bullet points � and the � sign. Do you know any Windows users that know how to type these symbols? This is a Mac user that knows what the option key is for while typing. He/she is being sarcastic/ironic or MDN is doing it, looking for hits.
howards I think you are making a mistake thinking that Apples point is to sell a lot of computers. Their inability to supply the most popular items is legend. Using Radio Shack as an outlet would require a lot of manufacturing capacity, and it seems to me that apple finds the task of producing product mundane, while innovating and chatting it up are really exciting. It would never be a problem to sell more macs; just lower prices a bit, offer an entry level computer that is desirable, and advertise. Puny market share might eventually be a problem, but for now, stressfree slow growth seems to be the plan.
anyone notice how sputnik names herself after an ancient soviet rocket that was piloted by a monkey? that sure resembles microsoft!
PC’s have keys?
Yes, PCs have keys, Billy Boy, but they’re not used as often as the plug as in pullin’ it out
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Sputnik,
If a sales person at a “general retailer” starts referring people to Dull…. I mean Dell, then that sales person will soon be jobless.
See, Dull sells their own product, they do not have ANY authorized resellers. They are the only reseller, so if said sales person was referring Dulls, then s/he is referring people away from his/her store. Managers tend to not like this practice and fire people like that.
Dell does have some program for working with small computer companies – they just don’t publicize it. A few years back I ordered a Dull notebook through our local computer supplier/service company. They got a few bucks for arranging the order. When the screen went out in the first year they dealt with getting it repaired.
I think many Mac resellers can do well offering Mac services to business and promoting that aspect – an area where Apple is lacking. On the consumer-retail side, most need to close shop.
The reseller nearest my Mom’s place in Iowa is great and the people that work there are great Mac people. Iowa is too sparcely populated for a major Apple store but maybe one of the mini ones they are talking about will open up. I hope that Apple sticks by the people who stuck with them. I agree that stores that carry both can have really biased salespeople that don’t help Apple at all. However if the store is Mac only I think Apple should do their best to support them by maybe something like giving them increased discounts and referring to them at the closest Apple store for like set up and repairs, etc.
Aryugaetu “”Find a need and fill it!” is the basic motto for a successful business.”
I can never figure out why someone doesn’t print up a catalog with all the Mac software available and let users page through it at the store and order what they want. They could even have it shipped to them if they don’t want to pick it up. And I know you can do the samething at the Apple store but it is different have an analog catalog for some reason. I think this would be a great low investment way to increase sales without having to take the risk of carrying inventory.
I meant you can do the same thing the Apple Store online. The physical apple stores do not have physical catalogs.
Try to have an Apple Store put a bigger hard drive in your machine: “Sorry, we can only replace Apple equipment.” Why would I want to replace a dead 10gb hard drive with another 10gb unit?
careless, JS would be well below radar signature if it never happened sometimes he has managerial position. The FUDs our satellite talks about are as well in the spoungy brain (technologically speaking) of people having the power to *forbid* Macs in organizations.
Been there done that: took a year to have them shut the fuck up for good.
My example is the DV Shop in Toronto, Canada. (http://www.dvshop.ca)… Terry has built a niche market servicing the semi-pro video market in Toronto and was into Apple Video Editing before most people knew it existed.
There is no way that any Apple store could duplicate his depth of knowledge when it comes to the Apple product line – and accessories – in relation to video editing.
If Apple doesn’t keep Terry and his shop alive and healthy, they will be losing a tremendous influence and resource. There is no way they should let his shop flounder.
You have to feel sorry for the resellers. I mean thirty years of supporting Macs through a continuously declining market share only, in essence, to be told that they are no longer required.
Of course, Jobs etc. are not actually saying this, but actions do speak louder than words.
I think, aside from the profitability factor, that there is another reason for this strategy. One of the things that Steve Jobs wanted to recapture after his return was the ‘cool factor’ of Apple – a task that he has fulfilled brilliantly, and as a result of Jonathan Ive’s designs, the aesthetic has become as important as functionality. The Apple stores are steel and glass churches for the faithful to worship this fusion of art and technology.
I believe it offends Steve Jobs that his wares can possibly be displayed in a dingy little reseller store on the edge of no-town USA. He finds it demeaning to the product and – on a personal level – disturbing to his aesthetic sensibilities.
i always try to support local shops and whatnot, but i find the independant resellers in my area dont know very much, about anything, let alone the macs they sell. unless you are trying to buy a cable, theyve got nothing
There’s no blanket description of “resellers.” Example, I live in one of suburbs just outside of Philadelphia. Early last year, after getting sick of spending more time installing and configuring Linux than using it, I got interested in Apple again after a friend told me about OS X.
Apple buying options in the area consist of:
CompUSA in NE Philadelphia and King of Prussia, which is generally useless–a few machines, almost no accessories, and usually nobody around.
Small Apple store in Marlton, NJ, which is a major bitch to drive to so I’ve only been to the opening, and bigger Apple store in King of Prussia, which is where I’ve gotten most of my stuff.
Springboard Media in Center City Philadelphia, which is a very nice store, have been very good whenever I’ve brought things in for service (guy there once spent at least an hour fixing a broken key on my wife’s iBook and refused to charge us), but their hours suck–I work not too far away in Center City, but they close before I usually get out of the office, and they aren’t in a great location for a weekend visit–not close to the train station and in part of town that is a pain for parking. Hence buying most of my stuff at the Apple Store.
MicroCenter–a whole Apple room, software area, accessories, etc. But not any closer than the Apple Store.
There’s also a long-going independent store up in Doylestown that I’ve only been to once–again, not any closer than the Apple Store, and again with the not as good hours.
So in the end I’ve ended up giving the least of my business to the independent resellers in the area for no reason other than inconvenient hours and inconvenient locations. And there’s nothing unique to that–back when I used PC’s I made an effort to buy from the “corner store” instead of Circuit City or whatever, and always ended up driving around finding some out of the way store that was closed.
To me, that is the indy store experience–stumbling around half lost only to finally arrive at a “CLOSED, open 10-6” sign.
I was able to go to King of Prussia at a time that was convenient for me, take a look at the machines, talk to people that knew what the hell they were talking about, and walk out with a machine. That was quickly followed with my wife wanting her own, wanting a desktop machine, and then tripping through ebay buying old machines. It would be pretty safe to say that they only reason I have Macs today is the Apple Store.
I’m blessed by having a “good” CompUSA in the area. The staff in the Mac section are well informed and will show you that Macs are better. They can carry on intelligent conversations about the pros and cons of the systems i.e. this one is great for home use, office use, whatever. They truly love Apple products. But about resellers and profit margins: they probably make about the same or less profit as Apple. If you look at their stock reports and such, their profit margin is a little more than 2%. That’s like a grocery store’s profit margins. OTOH, Microsoft’s profit margins are upwards of 20%. Talk about cheap garbage. What a shame that Apple makes such great products with great components, and when it comes down to it, is once again screwed by the Microshaft.
I’m surprised there’s been no mention (until now) of any of the ‘net resellers, some of whom also have B&M outlets (best case in point I can think of is Small Dog Electronics – http://www.smalldog.com ). I think they are following the “find the niche and fill it” philosophy rather spectacularly, and have the steady, positive growth (at their own intentional pace) to show for it, and all while including a retail presence at their headquarters in Vermont. I may not always agree with their politics, but their stated business philosophy and code of ethics is very solid along with a long-standing involvement in the surrounding community. If I were ever to move to Vermont and need a job, I’d be hanging out on their doorstep for the next opening, even if it was “Chief Pooper-Scooper” for the owner’s dog.
As for retail outlets in the Dallas, TX area, there are of course the two Apple stores, but then I always visit CompUSA and Fry’s stores (which gobbled up Outpost.com a few years ago) and the MicroCenter – it has a separate area for Apple which has steadily improved since the Apple stores arrived. And for all of those places, I don’t really care if there’s a salesperson who tries to “help,” I just want to see how they’re presenting things and what’s available – sometimes the Apple stores are TOO busy, and it’s nice to just go sit and play with one of the newer machines without a gaggle of people pressing into your back or looking over your shoulder – and then sometimes they’ll have an accessory or two that I’m looking for that the Apple store doesn’t carry, or offer printer ink for a few bucks less.
OTOH, I’m also on the perpetual mailing lists all those “mail-order” catalog resellers out there who have websites, too. (CDW/MacWarehouse, MacConnection, etc., etc.) They always seem to be tacking on extras when you purchase, which you then have to wait for the “rebate check”. My guess is they’re probably making their money off the interest that they can collect on the money paid for equipment while the rebate companies take their sweet time to send out the refunds (if folks even bother to send in the properly completed rebate forms). It’s funny, too, when a catalog arrives with the “newest, bestest equipment” two or three or five weeks after announcements by Apple of speed bumps and even <newer> equipment… you’d think they could time their mailings a little better, but then again, SJ certainly does have fun with his timing, too!
Maybe Apple should consider franchises of its Apple Stores instead of full ownership. This way resellers in a certain area could open an Apple Store of their own, respect Apple’s standards and have part of the profits. In return Apple would give these franchises exclusivity over that area. This way Apple could open much more stores without having the full weight of thousands of employees and locations to manage.
I feel for the Apple resellers. I like to establish a personal relationship with service organizations and I belive that choice generally results in competition and better overall service and price.
But these resellers have already been hurt by Apple’s reduced marketshare and, seemingly, have not been an effective part of improving the marketshare situation. In the end, everyone (Apple and resellers) will be better off with an increased marketshare, even if Apple Stores take over a reasonable percentage of that business. If Apple Stores are given an unreasonable competitive advantage then the resellers will eventually disappear in areas directly serviced by Apple.
Sputnik,
Get thee a wife! Get thee a wife!
Afterwards, get some extra RAM in between your ears.
😀
I’ve been doing this personal computer sales business since the mid-seventies as margins have fallen many resellers have less and less competent sales staffs.
Yes, I worked for an “Apple Store” for about a year � this is not a store designed as a sales environment � People, go to the Apple Store to worship, not buy!
Franchises of these Apple Stores would only compound all the things that the ‘vision’ of theses stores should provide.
I have to believe that a competent independent reseller can beat Apple or any manufacture at it’s own game and make the customer the primary focus of the store.
We’ll soon find out, we are about to open a new venture in the area. Let’s just see if true customer service, with a good product mix will overcome dazzling lights, white displays and wood floors.