Suggestions for Channel Conflicts at Apple

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Suggestions for channel conflicts at apple

What should Jobs & Co. do? Apple must craft a plan to rebuild and reinvent its ties with small resellers. First, it needs to be honest and admit that Apple stores are hurting the resellers' business and that not all of them will survive. Second, Apple has to treat those that do hang on as integral parts of its organization and sales effort. Finally -- and most crucial -- Apple needs to ease the pain by coming up with programs to encourage these longtime partners to help it accomplish goals it can't achieve on its own.

WHERE'S THE PROOF? For example, Apple could award higher commissions and faster restocking to resellers that make deals to sell, say, 10 or more of the new X-serve servers. Or it could offer a special bonus for orders placed through resellers by large corporations, a target market for Apple. That way, people like Verga might once again see a prosperous future in working with Apple, thereby furthering Jobs's goals as well.

To date, Apple has denied that its policies are hurting resellers. Apple retail guru Ron Johnson contends that the company has evidence that third-party dealers located close to an Apple store actually benefit from a symbiotic relationship. But when I asked an Apple spokeswoman for those numbers, she was unable to provide them.

Apple's own publicly reported numbers tell a clear tale, however. Revenue growth from the stores has outpaced total revenue growth. Retail sales have increased by more than 900% from December, 2002, to March, 2004, and Apple says it now does one-third of all repairs in its stores. Those are repairs the third-party folks can no longer do. 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. Stores Within a Store

While working quickly to establish an online presence, Apple also had to be careful to balance its direct orders...
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