Apple’s Bad Habit of Competing With its Channel Partners

November 24th, 2008 at 2:00 PM - Columns and Opinions by John Martellaro

Apple loves it when its channel partners sell lots of Apple products. Everyone makes money. However, in tough economic times, as each partner seeks to squeeze out a profit on Appleis famous brand, Appleis first reaction could be to grab some of that profit for itself instead.

Apple has always had an uneven relationship with its channel partners in my experience. On the positive side, Appleis retail stores have led the way, set the example, and created consistent, international sales focal point for Appleis clear advantage.

On the other hand, there have been occasions when, it seems to me, that Apple perceives any money to be made on its products to belong inherently to them in some vague sense. The company works with is channel partners to increase the sales of Apple products, but that hasnit always meant a 110 percent benign relationship.

I read today that Apple is now giving its store managers more liberty to match the prices of other authorized retailers. Again, in perspective, thatis a good thing because customers will be shopping for bargains this Christmas buying season, and itis not too hard to run over to CostCo or Microcenter to get a better deal on a coveted iPod gift for Christmas. Apple wants its stores to be at least as competitive as anyone else.

The problem is that some authorized retailers are at the end of the food chain. That creates some typical problems for that kind of scenario. Even so, theyill trade off a bit of profit to get customers into their store. Often, those channel partners sell other things. CostCo and Microcenter, for example, sell HDTVs, PCs, cameras, and all kinds of other cool electronic gadgets. Theyid like to present those items to a customer whois been invited into their store with an attractive discount price on an iPod. Thatis a business decision they make to increase overall sales.

When Apple matches that low price, Apple as a whole, still sells the same number of products, but its partners suffer a little, make a little less money, and donit get as much of that coveted foot traffic.

Apple is always doing interesting things, both to promote sales for its channel partners and other times to give them great pause. This looks to me like another case where Appleis unflagging obsession with profit doesnit take into account the business needs of its partners.