It was not so long ago that Michael Dell was writing off Apple. Nine years ago, at Gartner Symposium, the founder of the iconic direct-dealing PC maker suggested that, if put in charge of Apple, he would shut the firm down and give any cash from the sale back to the shareholders.
Nine years later, Dell must feel as poorly as its balance sheet because the fortunes of the firms have reversed. While Dell flounders, Apple is riding a stock-market high thanks largely to the iPod, the most successful MP3 player ever.
Since Michael Dell uttered those fateful words, Apple has introduced the iMac, ditched its old operating system for a modern, Berkeley Standard Distribution Unix-based system that some believe puts Windows XP to shame, dumped IBM’s PowerPC chip architecture in favour of Intel and made consumers the world over drool for translucent plastic cases.
However, part of this turnaround is also because of the firm’s approach to overseas markets and the channel. Apple has had to go after different types of customer and it has done so by going direct. But a rising tide lifts all boats: talk to some old-school Apple resellers and they will tell you that sales to businesses have also boomed, despite the success of Adobe InDesign on the Windows PC and the increasing ability of Microsoft to make operating systems that both work and are easy to use.
It is worth noting two things. First, Apple hardly ever talks business to the press. The firm authorises very few interviews with newspapers, business magazines and the specialist Mac magazines, and when it does it is usually under very tightly controlled circumstances. The firm was unwilling to field a representative for this feature, or provide on-the-record comment.
The second thing worthy of note is that Apple resellers can also be publicity shy. In part, this has to do with the way that Apple deals with its channel. Regardless, we managed to persuade Apple resellers to talk about the company’s latest moves and explain what the vendor’s recent success means for the channel.
Apple has had a mixed relationship with Europe. In the early days, the company took a very open approach to foreign territories. Individual country organisations were allowed levels of autonomy unheard of in conventional US business practice. This led to vibrant local organisations in Europe, India and Japan, to name but a few. For example, one reason for Apple’s continuing popularity in Japan is because of the vendor’s early provision of Japanese-character keyboards and software when other PC makers were not paying attention.
Michael Spindler, one-time head of Apple Europe, made it as far as the chief executive position, but at the turn of the century, following the return of Steve Jobs, control was reeled back in.
Apple’s UK business became answerable to a single European power bloc and certain functions were moved back to the US. When Apple launched its first retail outlets in May 2001 they were under direct control from Cupertino, California. The six UK Apple Stores – not to be confused with the online Applestore, which is a different business altogether – are still run from the US, according to sources. The Applestore internet retail arms are run by local organisations.
This, and other forms of centralisation, paid off handsomely when it came to products such as the iMac and iPod, but it did not appear to immediately affect business resellers.
Garrett Doyle, managing director of Apple reseller Rapid Group, said: “Applestore has had no noticeable effect on us. If anything, people use it for a reference before ordering from us.
“The success of iPod has obscured the fact that Apple is also doing quite well in business. There is more growth in Apple desktops and servers than in the PC market as a whole. Apple products also hold their value quite well. There has been a modest reduction in price points, but then you can sell a Windows PC for £300 these days, on a far skinnier margin.”
What has changed is that in July Apple decided to get serious about its retail channel. Its Premium Reseller programme aims to boost the firm’s retail presence. Branded stores, run by Apple VARs, will also open up in cities around the UK. The first opened in Chester; another new store was opened by Farpoint in Bath.
There have been Apple Centres – resellers with a retail presence accredited by the vendor – for many years, but the quality and layout of these stores could be charitably described as variable. The level of cheerful amateurism displayed by some such shops in the past – in keeping with the PC assembler stores – contrasts starkly with the monochrome colours and minimalist layout of the flagship Applestores. Even well-executed retail layouts pale in comparison with the designer chic of these shops. Premium Reseller stores will take design cues from Applestores, and it will also be harder to win the accreditation.
The resellers we spoke to said that Premium Reseller stores will be similar to the Apple Centres, but with a much higher standard required from participating resellers.
Rapid Group is one of the Apple resellers taking the Premium Reseller shilling. It has sold Apple kit for 13 years and this is the firm’s first venture into retail.
“We will open a Premium Reseller retail site in Bournemouth fairly soon,” Doyle said. “A large part of the site will offer consumer products, but we will also have a section that does professional products, such as photography, audio and video editing, and art and design products.”
It is a huge leap for a company that has not sold through retail before, but Doyle is very happy with the support he has had from the vendor.
“The level of support we get from Apple is very positive,” he said. “We get commercial support, but Apple is also providing all kinds of know-how gathered from opening its own Apple stores. For companies such as us with no retail background, this is a huge help. Opening a retail store would have cost us a fortune otherwise.”
Rapid Group has done the calculations on such a store. Doyle claimed that he can open a shop as easily as open an office in a business park, but it is not as simple as that.
“Apple is a big part of the retail store, but it by no means produces all of the revenue,” he said. “Selling associated bits and pieces, such as backup, storage and printing solutions, is more lucrative than the core products.”
Rapid’s metier is professional photography and a large part of the store will be devoted to professional photography. Doyle added that the Premium Reseller stores will allow Apple to hit 20 to 30 additional city centres in the UK that the vendor would not possibly be able to cover itself with Applestore. Putting together one of these stores is a very expensive venture, according to Doyle, and it might not provide a return on investment within a reasonable time scale.
“There is also something else to this move,” Doyle said. “This is Apple making peace with its channel. This is Apple being channel-friendly.”
There is also the fact that Apple has changed markedly over the past few years.
Jason Harcourt, senior analyst at Context, said that the Premium Reseller move is a concerted effort by the vendor to support its brand and make it more approachable to consumers. He added that, outside of London, it is quite difficult for customers to get up close and personal with Apple kit in anything other than a specialist shop. On top of that, he said, the ecosystem of products that surround the iPod need to be aired alongside the iconic music player.
“Premium Reseller is part of a new wave of initiatives from Apple to augment its presence and extend it to the rest of the country,” he said. “People outside of London want to try out Apple’s products, so this is great for them.”
But Harcourt did have reservations about how much help this will give Apple resellers that have traditionally sold to businesses, not consumers.
“As far as IT hardware is concerned, one wonders how much that side of things will go with this initiative,” he said. “This is a consumer-oriented move. How many iPod customers will want to buy iBooks or desktop computers? This is less about business users and more of an attempt to capture the mass market.”
Not all resellers are convinced by the Premium Reseller stores.
Ben Konopinksi, sales director at Luxtech, a Microsoft reseller which bought an Apple dealer earlier this year, said: “Apple Premium Resellers are a way for Apple not to have to spend more money. People shop around now.
“When people buy an iPod, they might look at it in a physical store, but then they go and buy it online for less money. The Apple Premium stores are somewhere to go to window shop.”
Apple has tightly controlled its pricing in the past and it is difficult to find discounted kit with a serious amount of money off, aside from the end-of-line products.
Konopinksi was concerned that business resellers may not be able to provide to fickle and internet-enabled consumers. However, he did point out that traditional Apple customers are willing to wait for their kit rather than go to another source for a quicker delivery.
“Margin on product is thin, and these stores need to be in high-profile areas,” Konopinski said. “We sell mostly business-to-business [B2B] and throw in services. Premium Resellers can get on this as well: serving people who bring their kit back into stores for servicing. They need to focus on that and not the products.”
Mark Hooper, managing director of Bath-based Apple reseller Farpoint, was far more bullish. His firm has invested in a retail presence in the past and it makes perfect sense for him to move from Apple Centre to Premium Reseller.
“Apple is trying to get VARs to promote a more professional retail appearance in the stores,” he said. “Applestore is run from Cupertino and we are trying to become more like them.”
Like Doyle, Hooper claimed that getting the mix right is important, as well as having more than one string to his bow.
“We sell lots of third-party products and we have quite a big B2B business,” he said. “We think of the store as expensive advertising, but if things go well, we might expand. I really do think that Apple is doing the right thing. The more awareness there is of the Apple brand, the better. Not everyone wants to buy on the web or go to an Applestore.”
Finally, it is worth noting the Applestore management. While the online Applestores are run locally, physical retail presence for Apple is controlled centrally. Local organisations have their own targets, and Premium may well help them achieve this. It is also great advertising and marketing for Apple.
The problem for Apple is in keeping control of its brand, and in Apple resellers working out whether all the advertising they are doing on the part of the vendor is repaid in profit.
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