Apple’s growing retail store success upsets some Apple resellers

“Apple Computer’s retail stores have been a boon to its overall business, but that may mean bust for some of its key partners. A growing portion of Apple’s sales have been coming through its expanding network of company-owned retail outlets. But some of the company’s resellers — independent retailers and businesses that sell Apple products — complain that a portion of those sales are being taken from their businesses,” Troy Wolverton reports for TheStreet.com.

“Apple now has about 120 stores, up from 86 at the end of September last year and just 65 in September 2003. The stores are mostly located in affluent, urban and suburban shopping areas in the U.S., although the company has recently opened a series of stores in Japan, Canada and the U.K.,” Wolverton reports.

“Apple doesn’t break out the retail value of its reseller sales or the wholesale value of its shipments to resellers. But in the first nine months of this year, just 17% of its overall sales came from its own retail stores, implying that a large portion of its business came from its reseller network,” Wolverton reports. “Retail stores’ share of Apple’s overall sales has been climbing rapidly, generating 14% of the company’s overall sales in its last fiscal year and just 10% in fiscal 2003. Some resellers charge that those gains are coming out of their cash registers.”

“Even if Apple’s stores hurt some of its resellers, some analysts think Apple will do what it can to nurture its overall reseller network,” Wolverton reports. “And some argue that instead of being hurt by the stores, some resellers are actually benefiting from them in that they help promote Apple’s products to customers who are considering the Mac platform and allow consumers to test them.”

Full article here.

35 Comments

  1. Couldnt wait until this story showed up here.

    Bottom line, if Apple resellers did a better job to begin with they wouldnt have this problem.

    I have a friend who is completely non-technical. He’s in sales and had an order for a client for 100 iPods. He goes to the local Apple reseller and gets nothing but an big arrogant attitude from the sales people there when he asked if he could get a break on a volume order. This actually happened TWICE and he got the same attitude from two different people.

    He walked out and ordered from Apple directly. Now theres a new Apple Retail store in his area. He’ll never set foot in that reseller again.

    MW ‘directly’, as in, when he got an attitude from the reseller he ordered from Apple directly.

  2. Unfortunately for those businesses, Apple had to go into the retail arena. The small guys weren’t doing enough to promote the Apple products, and, at the time, the big guys didn’t want to sell Apple stuff. So, Apple did the right thing. I think it’s up to the little guy to do what he can to sell Macs. Apple is not gaining a price advantage at their store – they have just made their store the place to be for cool products.

  3. The independent stores are mostly good at individualized support. However, if you just want to try to before you buy, they are too expensive. You might as well just order online if an Apple store is too far away. Also, they don’t acknowledge educational discounts (or Apple won’t extend it) for folks who qualify.

    The independent stores are certainly between a rock and a hard place.

  4. I’m self-employed, work from home (in the UK) and don’t have a bottomless budget. My nearest reseller is very keen for me to spend several hundred punds just to have a technician visit, let alone do anything. They NEVER advertise, have no interest in selling Macs to private buyers and invariably quote prices far in excess of the mail-order companies so I never purchase anything from them. Also most resellers just aren’t geared up with showrooms for people to go in and try hardware/software and are generally quite unwelcoming, as a result potential purchasers might as well buy by mail order or on-line. If businesses as well as private buyers are going to Apple Stores then obviously resellers aren’t doing much of a job. Please can I have an Apple Store in Southampton.

  5. I have next to no sympathy for these resellers. Until Apple started up their own stores, their market share was stuck in the mud and their products were relegated to the back corner of most retailers. So now that Apple is again successful (thanks in large part to the Apple retail stores) the other resellers want to cry foul? They need to look at themselves and quit blaming others for their problems.

  6. I’ve always been a fan of small independents. I will tell you though, recently, I’ve had it with them. We have several Apple resellers in my city. They have had lots of opportunity to improve the quality of their service and stores before the arrival of the APPLE store. I go into some of these stores and their business is going through the roof compared to a year ago. The Apple revolution is very good for them. Problem is, they are not cleaning up their stores, improving their service, etc. When an Apple store arrives, they will be crying when things thin out. I’m looking to spend about 12,000 on pro gear. They still have some of their high end gear running Jaguar! I want to try the pro apps on updated pro machines. Too lazy to upgrade. I’m now buying online through the apple store.

  7. One problem the independent resellers have is that it is hard to easy find them. I can readily find an Apple store on the Apple website. How can I find where independent resellers are.

    Second problem is that the stores are typically cluttered (at least those in Berkeley). Layout and ability to try out floor models are important factors in the success of the Apple store.

    Third problem is that peripherals are expensive. I do not buy anything from the Apple store or other reseller because of the prices. Everything can be bought online for a significant discount.

    If resellers want to compete with Apple for customers, they need to increase their visibility, make their stores more attractive and offer good deals on peripherals.

    I know these guys kept Apple alive in the past but after all they were in this to make money. No-one can rest on their laurels, if they want to increase their business, they need to consider advertising and remodeling their stores.

  8. You know, I gave the Apple Store 4 chances since it opened up in the Yorkdale Mall in Toronto, Canada. When I first went in I asked if anyone could demonstrate Logic to a couple of friends of mine… no one had the knowledge, I was so disappointed. After visting a few more times and asking if there are any knowledgable people, I was sorely disappointed.

    The resellers have a GREAT ADVANTAGE over the Apple Store’s main staff… The resellers employees know a hellava lot more.

    Service and knowledge…

    IMHO

    Jb

  9. Most resellers I know are also Apple Authorized Service Providers, and its in repairing Macs where they make the most money. Those that are only resellers are probably in more trouble.

    hammer – i wouldn’t blame the reseller for not giving a volume discount. I’m not sure how healthy their margins are on iPods. Typically most resellers are more than happy to give a break on accessories to the iPod.

  10. “So… what kind of a discount did Apple offer?”

    I dont know the specifics, but they did offer him a volume discount”

    The bottom line is, my friend was willing to buy even without a discount, but the arrogant attitude of the employees at the store really turned him off. Me being the big Apple fan and evangelist got an earful about it from my friend. I told him to call Apple directly and that a store would probably be coming to his area soon.

    I dont feel any pity for resellers who dont clean up their act.

  11. Good for you! A 20″ iMac is a great machine, and getting an educational discount at the Apple Store is a definite perk of shopping there.

    But, as Zupchuck pointed out in his post, the independent Apple resellers either cannot or will not extend an educatational discount to qualifying purchasers, unlike Apple themselves.

    I don’t believe that the independents are being slighted by Apple, as they had every opportunity over the past decade to turn things around. And their claims of preferential treatment lack merit. Supposedly, Apple is selling the computers to the independents at the same price they ‘charge’ their own retail or web stores (sure it’s just on paper, but it does come into play when it comes time to budget a store). Add to that the exhorbitant leases that Apple pays to be in high-profile locations, and the relatively higher wages (for retail) that they pay their workers. On top of that, the construction costs of each store must be astronomical, all that slate and metal and wood and glass…

    And still, Apple Stores are willing to take 5-15% off for anyone who can flash a university ID. They give their customers a pleasing atmosphere to shop in (the independent I used to frequent was a barely-lit cave on the back end of dead suburban strip mall with outdated software running in last gen machines), and the sales staff at Apple Stores are generally knowlegeable and freindly, unlike the suspicious bunker mentality and superiority complexes I used to have to endure at my local independent.

    The independents are shooting themselves in the foot by not keeping up with retail trends, and then they blame the product (which seems to sell fine in the right location) for their woes. I can see why Apple decided to step up and do it themselves…

  12. Tucker,

    I am familiar with the educational discount at an Apple Store – my wife and father are teachers, both have picked up equipment there at discount.

    The Apple resellers (the independent ones, anyway) are unable to extend the discount to qaulified folks. Apple won’t do it.

    For anyone wondering what the discount is, go to the Apple website, enter the store, and go into the educational instituion part. Just pick a school to see what the discounts are. It’s nice!

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