Apple resellers see sales targets soar
- 10 November, 2004 17:16
A major hike in sales targets has left a bad taste in the mouth for Apple resellers. One Sydney-based dealer said attempting to hit the new mark would be suicidal but admitted he had little choice.
Managing director of Apple Centre Taylor Square, Ben Morgan, claims his sales targets have been doubled for the three months to December 25.
He said the move went against the whole notion of Apple Centre resellers being in partnership with the vendor.
"We have had our targets doubled with no financial consultation whatsoever," Morgan claimed.
Next Byte managing director, Adam Steinhardt, confirmed his resellers had also seen their targets substantially increased.
He said the average increase across the Apple channel was understood to be about 40 per cent.
Steinhardt also expressed concern at the lack of consultation.
"Apple just gave us the target, we responded saying that it was too high and they just ignored us," he said. "Previous targets have been negotiable and open to change, but not this time."
Morgan said Apple had placed its resellers in a Catch-22 situation where the consequences of reaching the targets are just as bad as failing to do so because such rapid growth would be difficult to manage but failure to meet targets would seriously erode margins.
"The competitive nature of the market means our up front margin of eight per cent is commonly compressed to less than four per cent. If we don't meet our store targets we stand to lose the remaining three per cent we are paid on the back-end," he said.
"Given the size of the margin, how can Apple expect metropolitan retailers to compete against department store strategies and remain profitable?
"To grow sales 100 per cent in three months is suicide, no sensible business expands at such rates."
Steinhardt agreed with Morgan's sentiments, adding that running on minimal profits would limit the channel's ability to invest in more stores or initiatives to grow market awareness.
"You just have to batten down the hatches rather than expand," he said. "It's not death of the channel, but it is survival of the fittest.
"It's not entirely unrealistic, but the clock is ticking and Apple has done a pretty ordinary job of getting us stock.
"There have only been one or two weeks [since the quarter began in October] that we have actually had stock so, on the face of it, our chances of making the targets look glum."
While Morgan agreed stock levels were an obvious impediment to achieving the channel's new targets, he said issues around the openness of the market posed a greater threat.
"Given the current challenges, how can Apple expect this growth if practices such as the Key Customer Program or government and education authorisation processes continue to restrain what is supposed to be a free market?" he said.
"Apple Centre Taylor Square will do everything in its power to achieve the targets, because financially we have too," Morgan said.
That Apple was planning one of its biggest ever marketing pushes in November was of no consolation for the channel, he said.
"It's the usual story that Apple has never done so much marketing, but in three years I have never seen an Apple advertisement that mentions Apple Centre as the place to buy from," Morgan claimed.
"Apple has said its marketing creates goodwill around the brand, but if it doesn't mention the Apple Centres, where do you think people will buy their products from?"
Steinhardt disagreed, arguing that any exposure Apple received would eventually trickle down to resellers.
"If marketing helps persuade people to buy a Mac over a PC, then there are more potential customers for resellers," he said.
"It's then up to individual resellers to get their own name out there and win sales over other resellers or Apple direct."
Apple Australia declined to comment for this story.