APPLE - All eyes on iMac
Apple's sexy new iMac has finally reached the UK. So have consumers and the channel alike been taken in by the hype?
Not since the launch of Windows 95 has a new product so captured theand the channel alike been taken in by the hype? attention of the world's media and the computer-buying public.
With stores opening at midnight, instant sell-outs and even the mainstream press running entire pages of coverage, the biggest surprise is that this isn't the latest oeuvre of Microsoft chief executive Bill Gates or pop group Oasis, but the work of an obscure British designer called Jonathan Ive. And the company behind it is the one we've so often written off - Apple.
First impressions of the iMac, Apple's all-in-one consumer computer, have been very favourable, but how has the channel responded? A PC Dealer poll of a cross section of resellers, distributors and analysts during the week after the 5 September launch shows that many have been seduced by the nation's latest craze. But the jury is still out on whether what Apple actually delivers will live up to the hype.
Many in the channel say they love the design, with its curvy lines, translucent turquoise shell and transparent, circular mouse. 'It just looks so sexy.
If you walked into an office full of iMacs, they'd look impressive,' says Tim Felmingham, managing director of London-based Apple reseller Axiom.
'A lot of people are buying it because it looks trendy,' agrees Colin Sidwell, proprietor of Sidwell Technology, an Apple reseller in Solihull, Birmingham.
The internet-ready and ease-of-use features have gone down well with the iMac's target audience of first-time buyers. 'A couple of elderly gentlemen have bought it and found the on-screen help very good,' adds Matt Levy, a sales executive at Canterbury Apple dealer 1st Temptation.
The features that have attracted criticism in the press and channel have been the absence of a floppy disk drive and the abandonment of Apple's traditional SCSI interface in favour of the newer Universal Serial Bus (USB).
'The obvious issue is lack of a floppy drive,' says Felmingham. 'But most people only use their floppy drive once every six months. We find they actually tend to fail through lack of use because the heads get clogged up.'
But others say that for business customers, the lack of a floppy is a problem, especially when combined with the absence of expansion slots and the built-in, 15in monitor which can't be upgraded. Some business software, notably Quark Xpress, requires a floppy for installation, even though the programs come on CD-Rom.
'I think it's ridiculous not to have a floppy drive or expansion slots,' says Ian Strachan, sales manager at central London PC and Mac reseller Reliance Computers. 'You are limited to being able to move data via the internet. It's a bit shortsighted and it won't get widespread business sales.'
USB is a more complex issue. It is definitely the standard of the future for the 'Wintel' PC and by adopting it so early, Apple is improving the iMac's compatibility and the long-term availability of software and peripherals.
But there are currently only a handful of USB peripherals available and some of those that do exist - such as the Epson Stylus Color600 printer - require special cables which are also in short supply.
By abandoning SCSI, Apple has made existing Mac peripherals obsolete, unless users shell out for a SCSI convertor. Even worse, although three times faster than a PC's Centronics serial port, USB is only half the speed of SCSI. This will make Mac aficionados feel that, yet again, they have been sold an inferior technology simply for the sake of PC compatibility.
Apple's own Response Centre admits that 'people's main concern is the peripherals'. And Sidwell has found that 'the fact that there aren't a lot of peripherals has put a few people off'.
But the iMac's G3 processor, claimed to be quicker than the fastest Pentium, has elicited nothing but praise. Any other criticisms of the spec are minor - not quite enough Ram, perhaps, and the fact that some of the built-in features will be wasted (for example, home users won't need the network connector and business users may not need the modem).
Philip Barton, marketing manager at central London PC and Mac retailer and dealer Micro Anvika, says: 'It's a very well put-together package.
Apple has got it as right as any new machine ever is.'
Pricing is a sensitive issue, however. Strachan believes the iMac is overpriced at a RRP of £999, including VAT. 'It's too dear, as all Apples are,' he says. 'It's too much for a low-function device that is not expandable.
We market 266MHz clone PCs for £400 plus monitor.'
But few expect Apple to compete on price with no-name clone PCs. Against its PC rivals, Apple appears better placed.
'It's not a low-end machine, so compared with a low-end PC, it does look dear, but it's price-competitive against machines that are its true competitors,' says Barton.
Levy agrees: 'It's competitive for the specification. When you say computer, most people automatically think of a £1,000 price tag.'
Not that the iMac will stay at £1,000. A number of observers are speculating that the list price will drop to £800 including VAT within six months, or even by Christmas, especially if Apple builds on the range with newer models.
In fact, there are two resellers - Dabs Direct and Rocket Hardware - who are actually selling the iMac at £799 and £798 respectively.
But the current price is about as low as the channel can stand, at least according to resellers who specialise in Mac sales and have grown used to premium prices and generous margins. Not only does the iMac's low price mean smaller margins, but the percentage is lower than on other Macs.
'The only bad thing is that it's too cheap,' says Felmingham. 'I've never sold a computer and made only £75 on it. It was quite a shock.'
'Unless you're selling by mail-order, there's no money in it,' agrees David Traynor, a consultant at Kinetsys, an Apple Var based in Telford.
'We'd make more out of a single Ram chip than out of the machine itself.'
There is also the fear that the iMac will take business sales away from the more lucrative PowerMac. 'Everyone's worried that businesses will cash in on the built-in networking and go for an iMac, instead of one of the higher-spec machines,' says Levy. In this context at least, perhaps it's fortunate for the channel that lack of expansability and a floppy drive may put the brake on business sales.
But other resellers are happy enough, especially if they have experience of PCs. Margins on the iMac are said to be about six per cent, which is no worse than some PC brands. 'It's a retail margin rather than a good value-added margin, but it's still probably better than the average PC,' says Rob Pickering, marketing director at distributor Computers Unlimited.
Mac-only reseller Sidwell is even undercutting the list price, selling iMacs for £839 plus VAT. The reseller does a lot of mail-order sales and quotes mail-order prices for all customers.
The one serious complaint from almost across the board was that Apple has messed up on the supply side. 'We'd think it was going very well if we had any to sell,' says Traynor. 'We've just had one, which is a big drop on the 12 we ordered three months ago. We've had potential customers phoning us from Exeter.'
Axiom also had just one iMac. 'I'm glad we didn't have a launch day on Saturday with only one machine,' Felmingham says.
Distributors have fared little better, with both Computers Unlimited and Computer 2000 complaining that they had received only a third of the iMacs they had ordered. Only the retailers seemed to have been better supplied, with Micro Anvika and John Lewis saying they had had no stock problems, despite strong sales.
The irony is that this year Apple finally seems to have got its act together on the supply side, until the time of the iMac launch. The obvious explanation is that the vendor was taken by surprise with the demand, or that it used up its stock for the US and Japanese launches, which preceded those in Europe.
Cynics suggest the shortages might even have been orchestrated by Apple to create the impression of higher demand and encourage resellers to re-order more stock.
Apple's iMac marketing and PR push has been impressive judged against its previous efforts - not surprising, given its commitment to spend $100 million on marketing by Christmas. Its timing has been excellent - a relatively quiet period for news, combined with the start of the pre-Christmas sales bulge, and almost the same time of year as the highly successful launch of Windows 95 three years ago.
Most resellers believe Apple has already got itself back on track following the launch of its G3 chip, but most agree the iMac will help strengthen its armoury and could push it back into the big league.
'It will be a big boost to the brand,' believes Traynor. 'It's all very well being number one in the design market, but until it gets into the domestic market, everyone will always write Apple off. It's a turning point and I just hope the organisation and logistics in the UK can match the hype.'
In a sense, the iMac is the final piece in the Apple jigsaw. The higher-end PowerMacs and PowerBook portables are already strong, and with an attractive product in the entry-level, consumer and education sector, it now has strength across the board, combined with some of the innovative design flair which it seemed to have lost touch with during its three or four years in the wilderness.
Pickering even believes Apple could achieve its target of doubling market share from four to eight per cent in the next 18 months - if it can take the software developers with it.
'The battle with the PC will be won or lost in software,' he adds. 'If Apple gets the software, its machines are a damn good competitor. I think the iMac will set a new trend and will be a long-remembered classic.'
Hands up who wants an iMac
Apple is trying to break into mainstream markets by targeting the iMac at first-time consumer buyers, Net newbies and education. But the early signs are that most actual buyers are experienced computer users, many of them with previous experience of Macs.
1st Temptation in Canterbury sold 10 iMacs in the first week, mostly to home users who had used Macs before, typically at work. They now felt they could afford a Mac for home. 'A lot of people have seen the price and how good the machine looks,' says Matt Levy, sales executive at 1st Temptations.
Kinetsys in Telford took eight or nine orders in the first few days.
One was from a corporate business, and other customers included an architect, a doctor's practice and families wanting a computer for the kids. Although Kinetsys does not specialise in consumer sales, it has been receiving four or five enquiries a day from consumers since the launch, compared with one a week before.
Sidwell Technology in Solihull took about 10 orders in the first few days. Half of these were from consumers, mostly first-time buyers. The rest were Mac-owning businesses like advertising agencies and media companies, who wanted a trendy-looking machine for their reception desks or cheap workstations for office work.
'We've had loads of interest,' says proprietor Colin Sidwell. 'They like the look of the iMac and it's turning PC users on to the Mac, which we haven't seen before.'
Micro Anvika on London's Tottenham Court Road, hasn't had time to analyse the 84 people who bought iMacs in the first five days, but marketing manager Philip Barton estimates that most were consumers and most of these were experienced users of computers.
'A significant number were people who have been PC purchasers in the past, so the evidence is that it's well positioned against the PC,' he adds.
Keep the faithful
Distributors think Apple is being over-optimistic in expecting to take the first-time buyer market by storm, but point out that regaining the loyalty of former users will be a good start.
'I'm confident that the first few months' shipments will be going to the Apple faithful,' says Ed Ewing, general manager of the Apple business unit at Computer 2000. 'The real challenge will be to sell to first-time buyers.'
'The iMac is a little too odd for someone wandering into a retail store,' says Rob Pickering, marketing director of Computers Unlimited. 'It isn't perceived as an all-purpose machine by Mr Average who wants a home computer.
'But Apple has a lot of mopping up to do in its traditional user base - of people who are using old Macs or have switched to a PC. That's a hell of a turnaround for Apple.'
Apple's big marketing mistake so far, he believes, has been not promoting the iMac enough in the education sector, particularly since it launched at the start of the academic year.
'The iMac could be brilliant for schools, because it's so simple to maintain and it's a reasonable price. But it depends on having the right educational software and the right channels in place.'
The iMac analysed
Analysts are less gung-ho about the iMac than those who are trying to sell it. Pete Day, head of PC tracking at Woking-based research company Inteco, thinks Apple is right to emphasise the iMac's ease of use and internet-ready features, since ease of use has become the most important issue to consumers, according to Inteco research.
'We've been saying for a while that the idea of continued escalation (ever more complicated computers) is turning people off, so perhaps the idea of a sealed box will be attractive,' says Day. 'The iMac looks good, although it's perhaps a little pricey. It might create an initial stir among devoted Apple users, but I'm not convinced it'll turn consumers away from Windows.'
Clive Longbottom of research company CSL, agrees. 'The iMac is a brilliant thing for Mac users - people in the media or the arts who want fast graphics and multimedia capability without knowing anything about computers,' he says. 'It's something to slow down the attrition in the Mac market and slow down the move towards Windows.
'The Mac defines plug-and-play and the PC certainly doesn't. But most home users want a safe bet and they'll plump for a PC rather than a Mac.
With a product that's only just competitive on functionality and price, Apple has got an uphill battle. I don't see it getting back to five per cent of the market on a consistent basis.'
iMac specification
233MHz PowerPC G3 processor, with integrated FPU and 64Kb level 1 cache 512Kb level 2 cache
- 32Mb of SDram expansible to 128Mb
- 4Gb IDE hard disk drive
- 24x-speed CD-Rom drive
- Two Universal Serial Bus (USB) ports
- 10/100BASE-T ethernet connector
- 56K modem, with preinstalled software for BT Internet, BT Online and Direct Connection
- Infrared IrDA port
- 15in 1024x768 0.28 dot pitch display
- 2Mb ATI RAGE IIc graphics accelerator (expansible to 6Mb)
- Two built-in stereo speakers
- Built-in microphone
- HxWxD 15.8 x 15.2 x 17.6 inches
- Weight: 38.1lb
- Software bundle includes System 8.1, ClarisWorks 5, MS Internet Explorer, Netscape Navigator, MS Outlook Express, plus consumer titles
- No internal floppy disk drive and no SCSI or standard serial connectors
- Suggested retail price £999 including VAT (£850 excluding VAT)