|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | |
JUNE 17, 2004
By Alex Salkever Apple, Respect Your Resellers [Page 2 of 2] HP'S MODEL. "The Mac market has not grown dramatically, and the Apple stores now represent a third of all U.S. retail business. That had to come from other third-party retail outlets," says Charles Wolf, an analyst with investment bank Needham & Co. "Apple should say, 'We need those added profits that we can get from selling direct. We think that as a company it benefits us. But we also think it benefits us to have other distribution points, too,'" says Steve Baker, a retail tech analyst with NPD Group. This is hardly unprecedented. Hewlett-Packard (HPQ ) has built a direct-sales business while maintaining strong relationships with resellers, says Baker. It has done this by ensuring that resellers had plenty of opportunities to make money, either by bundling low-margin PCs with higher-margin HP printers or by giving resellers higher margins on iPaq handheld computers. Originally, Apple's stores were supposed to showcase and sell products. Then Apple added repairs to the list of services. Next came ProCare, a $99 per-year premium subscription that gives purchasers next-day repairs and consultations with Apple specialists working at the stores' Genius Bar. Verga says customers have told him that Apple store reps have been leaving the premises to make outside sales calls. GOOD HAND-HOLDERS. No surprise, then, that the small resellers that have provided all of these things in the past now feel they have bull's-eyes on their backs. Rather than keep moving the line between its stores and the resellers, Apple needs to set some boundaries and give resellers space to run their businesses. Many of the independent resellers service creative outfits and advertising shops, which remain Apple's bread and butter. These customers are more likely to buy higher-price professional Macs and other big-ticket items, but they need far more hand-holding than the average customer. Also, while Apple takes on more of the basic repair business, it should leave high-end software consulting to partners. If the Apple store doesn't have a Mac-centric product that a reseller might stock, it should point the customer to that reseller. Also, new business possibilities have opened up because of changes in Apple's own product lines, such as servers, data-storage systems, and high-end software. Logically, the best customers for these new offerings will be existing Apple customers in the creative fields already serviced by independent resellers. SURVIVAL OF THE FITTEST. Or how about training resellers to offer in-home installation of Wi-Fi stereo systems using Apple's new AirPortExpress wireless broadband routers and iTunes software? "You have to have some evangelists and feet on the street," says NPD's Baker. "A lot of businesses are reluctant to buy from a big, nameless, faceless corporation somewhere. They're not going to have 600 Apple stores in every corner of the country. They need to use the resellers and the retailers to fill in those gaps." 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. 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.
 Salkever is Technology editor for BusinessWeek Online Edited by Peter Burrows
BW MALL
SPONSORED LINKS
Buy a link now!Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
