BusinessWeek Offers Look At Apple Resellers, Recommends Apple Ditch Resellers Near Apple Stores

by , 10:00 AM EST, February 12th, 2003

Have you ever seen a small, independent bookstore within a short distance of the local branch of the nationwide Sav-U-Mor Books chain, and wondered what the point of the smaller store is? According to an article on BusinessWeek, Apple should be wondering the same thing in regards to independent Mac dealers near its new chain of Apple Stores. The author recommends that Apple draw a circle around each of their stores, and cut off all resellers that fall within a certain distance. Exempted from the blast radius would be retailers that sell Macs as part of their consulting business.

In addition to trimming out excess Mac retailers, the article suggests sending additional Apple representatives to CompUSA stores during peak selling periods such as the back-to-school season and the winter holiday season. During off-peak times, the excess Apple reps could be used to help train employees of independent Mac retailers in areas where Apple doesn't plan to build stores. From BusinessWeek:

I think Apple should take a compass, draw a circle around each of its stores, and cut off all resellers that fall within a certain distance. I would leave in place the consultants who sell Apple wares as part of their gigs advising companies and organizations (Mac Tech in Bend will continue to consult on companies' Apple projects, for example). But the rest of the crowd -- meaning those who can't survive as consultants -- probably isn't worth the hassle anymore if they live too close to Apple's own retail turf.

The numbers back me up. One-tenth of Apple's worldwide sales now come from its own stores, according to Charles Wolf, a veteran Apple watcher at investment bank Needham & Co. (he owns Apple stock and has a hold on it.) That figure should climb smartly this year, as Apple continues to open more stores. What's more, Wolf calculates that Apple is getting an exceedingly high internal rate of return on its store investments -- on the order of 52%.

So it seems Apple is doing a better and better job selling through its own stores. And unlike the resellers, Apple's snazzy outlets attract not just Macheads but Windows users who might make the switch. The stores even get sweet rental rates at malls because they're foot-traffic magnets.

You can read the whole article at BusinessWeek's Web site.

The Mac Observer Spin:

Wow. Alex Salkever doesn't pull any punches. We like that. In the case of the reseller issue, we don't entirely agree with Mr. Salkever, but we do think that Apple is headed in this direction anyway. Since Steve Jobs returned to the helm, the company has repeatedly shown that it is not afraid to make the hard choices, and we have little doubt that sacrificing a reseller or two is not beyond the company. Indeed, Apple has already fired many of its lower-performing resellers.

That's hard news for the men and women who have busted their butts to make a living selling Macs. In many cases, some of these resellers have poured many years of their lives into their businesses. Being hung out to dry is hard to take, and we sympathize with some of Apple's reseller partners who are not happy with the current situation.

On the other hand, business is business. The hard, and sometimes sad, reality is that Apple can operate retail stores in a better manner than most resellers. Note that there are some outstanding exceptions to this, and that includes businesses that currently operate within Mr. Salkever's suggested compass-radius. These people have done nothing (in most cases) but work hard to be outstanding partners with Apple, and it's no simple matter to just off-handedly decide that these people no longer have the right to do business.

Indeed, none of this is simple, but Mr. Salkever's article is thought provoking, and raises some issues that are most likely on many minds within Apple and the reseller network, as well. What do you think?

BusinessWeek