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“Poor old resellers without many connections to speak of?” – Part One.

(Editor’s note: We hear all too often the horror stories of customer service, some that defy belief. This can make it quite easy to forget the dilemmas faced by the poor guy on the other side of the counter. While it may seem odd to have a retailer writing in a column about “Plain Old Customers” – you’ll soon see that they are also plain old customers, just slightly higher up in the food chain. So without further ado, here’s “Frontline Lamb” from America’s Northwest to share his views...)

Howdy. I’ve been in the Mac retailing business for almost as long as there has been a Mac to retail. I have suffered through endless Apple re-orgs, product line fiascos and the coming of mail order and superstores. And through all the highs and lows of being an Apple bricks-and-mortar shop I’ve survived and prospered. We now have a couple of locations and are growing.

So, what worries an Apple reseller these days?

Mail order? Well, they do set the low bar on what price you can sell brand-name solutions. But, not for everyone. Most retail customers don’t come in with a copy of MacMall or MacWarehouse when they walk in to buy an iMac. Shops with retail floors have a large advantage over mail order – customers can actually come in and see the products they are going to buy and the faces of the people they are buying them from. You have someone you can ask questions and get advice.

CompUSA and the other superstores? Never been an issue. I visit these competitors at least once a week. Never, in any of the times I’ve been there, has a superstore employee asked me if I needed help. I’ve gotten plenty of customers from these stores – customers who couldn’t get help and left in disgust. Please, please, please open more CompUSAs near me!

Vendors? Yep, it’s vendors who give us retailers the most headaches. Hey, we’re selling their products for them; why should they make it easy?

Let’s start with the vendors’ online stores – the Apple Store, the Adobe store, and the Hewlett-Packard store. It’s not really the competitors setting a low price that’s a problem. I can sell against discount houses night and day. It’s the vendors who set very low street prices and leave us no margin to work with.

For example, our “friends” at Adobe put a low street price as their only price on their web site. If you buy it from them, that’s the price you pay – no tax, no shipping. So what kind of discount does that give Adobe dealers? Why, only a whole 5% discount! I can’t afford to stock any Adobe product for a 5% margin! Credit cards charge me 2%; shipping, floorspace, and other miscellaneous costs eat up more than the rest.

Another example is the Apple Store. They set the prices that we, their dealers, can charge. So Apple decided that 3% was plenty for Apple Cinema Displays? Or that 6.5% was enough for iMac/350s? But hey, we get a whole 8% on the other iMacs. What’s Apple’s margin – in the mid-20s? In addition, they give a 30-day money-back for their web store but zero days for us.

What happens if you buy through a reseller and your gear’s defective? Too bad. You bought it, you get it fixed. It doesn’t matter if it boots only to give the “Arpeggio of Death”, it’s still yours. According to Apple, it’s now a warranty issue. Of course, in the real world, customers don’t accept that. So the reseller ends up eating the cost when we sell the repaired machine at a discount.

Apple likes to call their prices Minimum Advertised Price (MAP). That’s the minimum price that a dealer can advertise an Apple product at and still receive co-op marketing funds. Of course, that makes it the maximum you can charge as well. Customers equate MAP and street prices with the Suggested Retail Price (SRP). No one will accept paying over SRP.

The upshot of all this is that your price is fixed by the vendor and it’s fixed at a very low markup. You can’t make the money on hardware or software. So where do you make money?

That’s fodder for a future column.


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