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AppleCartel™ Australia – Is the 30-store mega-merger good for consumers?

By Tony Leggett, 12 July, 2000

As reported by Stephen Noble, editor of Australian Macworld, seven vendors – Next Byte, Mac’s Place , GM Computers, Status Graph, Choice Connections, DesignWyse, and Manning Computers –- will team up to form a 30-store conglomerate. With only 60 AppleCentres Australia-wide, this is a big move, and there’s speculation that the conglomerate could even list on the Australian Stock Exchange. This has a wide range of implications for small customers and prosumers alike. The impact of this merger on smaller resellers, regional outlets, and “in-house” warranty repairs and service all need to be examined.

A brief background on AppleCentres

The AppleCentre (yes, “centre” – it’s Australian spelling for this article) concept arose from the ashes of Apple Australia’s hasty retreat from the mainstream retail sphere in the mid-90’s. AppleCentres were meant to be slightly more than just an authorised reseller; they were meant to also share a certain look and feel. It’s a bit like McDonald’s – you know the service you receive may be mediocre, but the predictability is comforting.

The AppleCentres produce a quarterly “Centalogue” – a glossy, 48-page catalogue with a reasonable list of stock at reasonably offensive prices (for example, the price of Office 98 has actually risen since 1998). The Centalogue effectively standardised the prices for many items, leaving little price competition. While the situation in the U.S. is not perfect, the retail situation in Australia could be described (some would say cynically) as geographic cartels.

Diversity amongst the uniformity

Despite this, there are subtle differences between the stores. They vary slightly in their client focus and how heavily they are influenced by Kool-Aid™ marketing (that is, advertising that makes heavy use of phrases such as “Pentium-toasting” and “twice as fast”). For example, DesignWyse and GM Computers have traditionally focused on the high-end graphics professional. Not many resellers bother with advertising A$25000 DV solutions in their catalogues, but that’s GM Computers’ niche. Both GM Computers and DesignWyse are part of the “Masters of Media” consortium.

Choice Connections is an authorised educational reseller (for both tertiary and K-12). An educational authority is a prize licence to land, and potentially (but not necessarily, as I’ll show in a later article) lucrative work. But if overseas trends are anything to go by, it won’t be long until this line of work is centralised back to Apple Australia.

Manning Computers is a regional franchise on the mid-north coast of New South Wales. Times have been tough for Apple in regional Australia. To get by, Manning Computers has stocked both Hewlett-Packard PCs and Macs for several years. Apple Australia no doubt frowns upon this but they can’t afford to remove the main coastal reseller between Sydney and Brisbane.

Mac’s Place and Next Byte are particularly consumer-focused - with Next Byte probably the most guilty of Kool-Aid™ marketing. From the pamphlets and junk mail I receive from Next Byte (they’re my nearest reseller), they use the phrase “Pentium-toasting” more often than Steve Jobs himself. And that’s saying something.

The point of this is that trying to mix all of these stores – some professional-oriented, some more consumer-oriented, some way too hepped up on RDF, and all of them way too overpriced – risks producing homogenised blandness. What will go and what will stay? The best guess is that the focus of this new as-yet-unnamed organisation will be squarely on the consumer market, with a dash of Kool-AidTM for the debut.

The good

What is most pleasing from a consumer perspective is the conglomerate’s intention to establish an AppleCentre in a busy shopping mall. For far too long, most AppleCentres have been kept away from the busiest retail centres – the big shopping malls – allowing them to get away with a modest sneaky markup on some products. When Australians shop, they want to do it at big air-conditioned shopping malls. While significant price drops are wishful thinking, consumers will benefit from the extra exposure and accountability. AppleCentres will benefit from the larger customer base of a high-profile mall. Build it and they will come, and don’t stop at just one.

The (possibly) bad

Stephen Noble noted in his article that one of the benefits of the merger would be the cost efficiencies from eliminating duplicated costs. Accounts departments, online stores, service departments, and marketing strategies are all logical areas for consolidation and/or rationalisation.

Running a service department, particularly a good one, is a headache most resellers would like to avoid. Consolidating repair centres would be a tempting option for a merged company. Depending on how they implement it, this could be good or, as they say in Australia, a total “dog’s breakfast”.

Savings can also be gained from holding a reasonable, but not exhaustive, range of stock. If stocking expensive drum scanners or sophisticated DV solutions in every store is a liability, they’re gone. If you’re a print or video professional and want one, call the manufacturer. Same deal with the educational authority. What is in greatest danger are the regional outlets. These outlets are in sparsely-populated areas and will always have a tougher time selling than city outlets. The regional program is likely to be “rationalised” at the first sign of trouble, particularly if this venture floats on the stock exchange.

The uncertain

To return to the original question of consumer benefit, the answer is “yes, and no”. Consumers will benefit from an increased, higher-profile presence of AppleCentres within metropolitan areas. Where consumers will lose out is in price competition. There may be greater choice in where you can get your Mac gear, but not in what you pay for it. Additionally, there is the thorny question of “in-store” warranties. Will someone, for example, with a Next Byte extended warranty have it honoured at any store, only ex-Next Byte stores, or (heaven forbid) not at all? This is particularly important should repair services become centralised.

The smaller resellers who are not part of this merger may struggle for recognition under the shadow of this new conglomerate. This new venture could, at a rough estimate, account for somewhere between a quarter to a third of all Apple sales in Australia. The smaller stores are probably not going to be driven out of business through price competition – knowing how Apple Australia works, this conglomerate is likely to be strictly a Recommended Retail Price outfit, perhaps with occasional “special offers”. It’s the marketing muscle of this new conglomerate that other resellers may have trouble dealing with.

As for the 64-million-dollar question of whether this venture will succeed financially, they’d have to try very hard to screw this up. If listed on the stock exchange, and barring some unforseen disaster, the venture should do well. For the customer, however, it means less price competition,the possibility of a more standardised product range, a (possibly) centralised service/repair department, and a degree of uncertainty for regional outlets.

Tony Leggett is a slightly embittered antipodean and assistant editor at MacEdition. Comments, particularly from fellow antipodeans, are welcome at pocwactso@macedition.com.

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