Apple dealers fear online price match
- 13 October, 2004 17:00
Apple has launched an aggressive price matching policy against its US reseller base, raising fears of a similar scheme being introduced locally.
The company's direct online outlet, Apple Store, is offering to match the pricing of Authorised Apple resellers that have products listed up to 10 per cent cheaper than the website. Apple Australia refused to confirm or deny whether the offer will be introduced in Australia.
Co-managing director of the Flinders Street Apple Centre in Melbourne, Steve Bardel, claimed Apple was already undercutting its channel.
"I have an email from a client saying he could receive a 10 per cent discount from the Apple Store and asking if I could match it," he said. "Without rebates I can tell you that the Australian channel does not make 10 per cent."
Former Apple employee and managing director of Sydney-based Maccentric, Henrik Kocharians, acknowledged the channel could lose out if the offer was introduced locally.
"We would likely lose customers but there is still a group that likes to look, touch and feel the product, plus there's the third-party products and support that go with it," he said.
"I see something like this as a challenge rather than a problem, but we have a business to run and if it is impacted by Apple undercutting us, then I would be extremely concerned."
One Sydney-based reseller, who asked not to be named, expressed greater concerns about Apple's business practices. He said that undercutting concerns had already been put to the company last year at a reseller forum.
"Apple was given examples where it had matched reseller prices to win deals off them," the reseller said.
"We felt Apple had broken its agreement because we thought it would only ever sell at retail prices through their Apple Store. The answer was that Apple would be a 'fair competitor', so you can read into that what you want."
Next Byte director, Adam Steinhardt, said he had grown accustomed to thinking of Apple Store as a competitor in the past five years.
"Apple's competitive ability is constrained by its size so it cannot be as nimble and light as us," he said.
"However, Apple does at some point in time have to draw the line in terms of attacking the marketplace of its established reseller channel."
Total Recall Solutions managing director, Adam Conner, argued the practice would force dealers to sell below cost.
"We make eight per cent on hardware," he said. "If they are prepared to go to 10 per cent, they'd be selling for less than we can buy for."
Steinhardt said the issue of price matching was a distraction when compared to the bigger issue of stock allocations.
"The price matching policy is not brand new or particularly stunning, resellers already do it," he said. "The bigger question is over Apple's stock allocation policies," he said. "Apple has a difficult job in that there is high demand for a limited supply of product, so it has to make some tough allocation decisions."
Flinders Street's Bardel agreed, arguing that Apple Store was usually favoured over the channel.
"One of my biggest competitors in Australia is the Apple online store, to the degree where it's a very sore point," he said. "On a number of occasions we were unable to get stock and told our customers to order direct from Apple. Two weeks after the customers have received their machines, we received ours.
"It's not bad blood, I'm just glad I'm aware of what Apple's doing so I can get around it. I've realised it is not only my supplier but one of my biggest competitors and it's better to know where I stand."
However, all resellers agreed that the introduction of the iPod had brought a flood of new Windows users to their stores. But not all could agree on whether a price matching policy would benefit the company's traditional Mac-user base or the new Windows blood.
"The existing Mac customer base users will keep coming into the stores, but Windows users are savvier when it comes to buying online so they will look for deals like this," Total Recall Solutions' Conner said.
Next Byte's Steinhardt argued the dynamic would go the other way.
"Apple users will begin to shop around and most Apple Store buyers are already very familiar with their products and have the confidence to buy over the Internet," he said.
"Windows users are more likely to come to a reseller because they want advice on something like an iPod."