The coming reseller cataclysm
I was reading through a very sobering VARBusiness article on Apple and it's resellers, and it along with some other things continually makes me wish I'd get off my ass and get that link blog going for awhile I'm working on other things.
It's a sobering read, and you might be inclined to think that it's sour grapes, but just about everything in it is something I've heard from resellers before. I had an interesting conversation recently with a reseller who was mulling going public with his plight, and what the consequences when his customers so love Apple. This quote from the article especially stuck out at me:
"Once a 20-plus person strong consultancy, Precision Consulting is down to just six people, though not for lack of success. The company was key in helping Apple successfully deploy some 38,000 computers for the state of Maine. However, despite helping with follow-up deals involving other institutional organizations, Adam Schechter, CEO and founder of Precision Consulting, finds himself at odds with Apple's salesforce more frequently. "It sort of feels like Apple has changed its business model, and we haven't been told [officially]," he says.
I think there's a lot of truth in that last line, or it at least rings truer than I'm comfortable with. Apple seems to be taking a slowly-boiling-the-frog approach with the resellers (stick a frog in warm water, and it'll relax... slowly turn the heat up, and the frog will start to cook before it knows what's going and can do anything about it)... much less noise that way. All that thrashing and all.
This is probably going to get worse, or messier and louder, before it's over. If you're curious as to why I'm worried that the resellers going away is a bad thing, I wrote about this awhile back in 'Screwing the Resellers', and we'll talk about it more when I get around to whipping out Part 2 of 'El bloguero cervecero'.
Posted by drunkenbatmanJanuary 06, 2005, at 05:18 AM
Comments (9)
Posted by: smykes at January 6, 2005 08:32 AM
Apple has the highest profit margins in the industry, they pass none of it on to the resellers offering them some of the lowest profit margins out there.
Posted by: . ... . ........ .. . at January 6, 2005 09:55 AM
This has been coming since the Apple Store first opened online. Mac resellers are given very low margins to use. In 1999 an iMac would cost $1k and a reseller would make $30. Apple would have these huge margins and the end reseller would make 3% on a very good seller! But it was hard to just cover costs let alone advertise! But Apple increased its advertising budget by leaps and added the costs onto iMacs and hardware. And it was a lot of costs! Apple is not that big but does have a huge advertising budget. Apple and maybe another distributor, like Ingram Micro, would get the rest of the margin. Most of it to Apple. The Apple Store coming online meant all of it went to Apple.
They are just taking share from the resellers but every ounce they take away from resellers and distributors gives them more profit so they look healthier...... but only for so long. Mac market share is not moving but Apples sale are moving to direct and retail and away from channel -- more like Dell or Gateway. THANK GOD FOR THE IPOD
When the mac marketshare collapsed and there were fewer sales with less margin [it used to be 15 percent margin not 10 then 8 then 6 then 3 and now if the article is true 6] and apple products had dropped in price for those would buy.... NO MONEY because more macintoshes were not being sold due to the lower prices, PEOPLE JUST DID NOT WANT MACS THAT MUCH. Not enough of them. The business of selling macs turned bad. Apple also has cutoffs to sell an amount of Macs like one million to be a specialist and of course killed off much hardware so a VAR would not be able to sell Apple printers or stuff to their customer which meant they had to sell more macs to be get to where they were to keep their status.... they would fall under the threshold and lose their status and would not be able to have product on hand. Of course Apple then could not provide real inventory and still can't unless the model does not sell well. Making a sale and getting th emoney then is not the same as make a sale and getting the money in four months because apple cannot dleliver the hardware. That is if the person does not cancel altogether because they dont want that money tied up and then goes and buys from Apple because theyare the ONLY ONES WITH STOCK. You have to income of 100k a year to sell at all. To be an Apple Specialist you had to devote the majority of your sales to Apple CPU s, 70 to 80 percent and yet they had nothing to sell........ SO THEY QUIT and just sold PCs. There was a dealer who served my college and could not get a PowerMac or iMac for months in 2004. The whole summer. Or when the iMac just was not sold for a quarter and there was no G5 iMac even announced what would that CRAP do to resellers?
I worked at Best Buy and Macs were a joke. Yeah some because the employees were young and knew windows but here is a secret they had commissions but direct from the manufacturer where if you sold a gateway gateway would gives bonuses to the salesperson and it added up. Apples did it too but they were the lowest of anything behind sold. TERRIBLE. So no sales person wanted to sell a mac they could make more with any PC.
You want to know the worst though. Apple wants you to carry a lot of stock. Its good for them it gets it out of their hands but they require their dealers to have so much on hand, to order so much but they do NOT GIVE REAL ROADMAPS FOR PRODUCTS. It is all secret and hype but a dealer has no idea when something new will come out and all the inventory they have paid for has lost twenty percent of its value. There are more stupid bundles and things Apple makes you do like selling their displays with the PMs to get any real advantages but u know.
THEY ARE THE WORST COMPANY TO BE A RESELLER FOR IN THE COMPUTER BUSINESS PERIOD. But I do love my iBook. :D
Posted by: Jakob at January 6, 2005 11:23 AM
What would you make of Apple's revised service strategy in Europe?
What's happened is the following: No more repairs where you can have your iBook or PowerBook picked up and repaired, then delivered back to you. Instead, everything is now going through local resellers and service providers - are Apple shooting themselves severly in the foot by making themselves dependent on the very contractors they're crowding out, or should this be seen as a reconciliatory step?
Handing over all repair resposibilities to the Service Providers and resellers surely can't be a very good idea if Apple plan on crowding out the local guys?
I don't have a clue myself, but it would be interesting to read your theories on this (when I don't know myself, I always pester more knowledgeable people with questions and opinions instead).
Posted by: superfunkomatic at January 6, 2005 04:46 PM
i agree with malcolm. good riddance. the support and service most of the small VARs was shite at best, plus apple traditionally hasn't had stock to fill their orders, so when you went to these little guys to get the latest and greatest they were actually behind people (customers off the street) buying direct from apple.
plus if something goes wrong, now you deal with one company - apple. not dicking about with some mom and pop, who just sent everything off to apple themselves.
Posted by: joel at January 6, 2005 06:48 PM
Last month i had 3 iBook DOAs in a row.. Just think how long it would have taken me to replace these one by one through the Apple Store/Support by mail.. 8) Thanks God i bought them at my local Apple reseller. I just went over there and they gave me a new one.. You should have seen their faces when i returned the 3rd time.. ;)
Posted by: Hafen Slawkenbergius at January 7, 2005 05:25 PM
It's prolly because there is (as yet) no Apple retail store in Amsterdam that three independent Apple stores have sprung up/enlarged, and I'm talking about really big stores, with plenty of floor space. Points go to the iPod, because I think half the customers were either there looking to buy a new one or shopping around for accessories. A store is about to open soon in London I gather, so the other major European cities can't be far behind.
I think Apple is becoming a world unto itself, what with its (rumoured) Office-clone and a slew of small apps that have been cannibalized (Konfabulator, Liteswitch et al). Its part survival strategy, MS is clinching the deals that will lock out Apple/Linux/whathaveyou for good (Trusted computing, Xbox, Windows MC). Same goes for iTunes. When the market dominance goes tits-up, Apple may find that the heretofore scorned manufacturers are not so keen to adopt AAC.
The most blatant problem is the Apple Parallel Universe, where mere mortal computer users have no knowledge of. I work at a helpdesk, but when I extoll the virtues of MacOSX to some technical boffin, not only do I get stared at in merriment, but I find that a) their experience is based upon OS9 at best b) there is no way they will even have a look at what OSX has to offer.
Posted by: Juanxer at January 8, 2005 12:28 PM
(I wonder if this "El bloguero cervecero" came from Macuarium. If so, guilty as charged :-Z )
Posted by: Bruce Bailey at January 9, 2005 02:20 PM
Thanks for referencing that article DrunkenBatman. That certainly is not a site I would have come across myself. The article offers a very sad perspective to be sure. It reminds me of how Apple lost the educational market by taken them for granted. Please note, however, there is nothing in the story that implies that this is a bad strategy from the perspective of Apple nor consumers! I wish Andy Gold, Thomas Arme, Tom Santos (and the unnamed others) best of luck with their lawsuit. This kind of business practice may be pragmatic, but it is the sort of thing I would expect from Microsoft, not Apple.
One thing I was left wondering though, do current VARs have the option of becoming an Apple Retail Store? This course may not appeal to many entrepreneurs, but if I currently made a living selling Macs, that is what I would be investigating! A quick search reveals that Dan Knight wrote on Mac Musings years ago about how this should be handled:
Not Franchising Apple Stores. Does anyone know if this reseller transformation is happening?
I'm not getting what the problem is. When was the last time you went into a Mac shop? Most "independent resellers" for the Mac SUCK! Old merchandise, crappy buildings and crappy service. Almost every one is a shack. I have never understood why that is because Apple products are more expensive and upscale but it is truth. People like going into an Apple Store, not a shack where the bored teenager working the counter never looks up when you come in and there is one iMac on display with no software and everything has to be ordered. More and more times they just send broken equipment to Apple instead of fixing it themselves. I say good riddance they sealed their own fate by not doing a better job of selling Macs in the beginning and forced Apple's hand to do it for them. It works for Dell who also focuses direct to the consumer and business I see no reason why it could not work for Apple.