Apple Frustrates VARs

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It was Jan. 27, 2004, and in the Cupertino, Calif., offices of Apple, members of the company's reseller advisory board were about to try something new.

The board had been trying for months to battle low morale in the Apple channel. The Mac retail machine was gaining steam and several lawsuits had been taken out against Apple by its channel partners. Many VARs weren't even sure if they were going to be able to stay in business.

So, that afternoon, Apple was lending its office to help publicize the launch of the Apple Specialist Marketing Co-Op, an organization created by solution providers for solution providers.

"There was just a lot of pessimism in the channel at that point in time," recalled Kevin Langdon, president of Crywolf Inc., an Apple solution provider based in San Diego, who just a few months before had become a member of the advisory board. The board wanted to see if it could "pull together and start working on something positive" that would raise morale and "create opportunities for all of us," Langdon said.

More than 100 Apple resellers tuned into the Co-op's Webcast that afternoon. Within 48 hours, the group had signed up more than 40 members, the number it had hoped to recruit over the next six months.

The following spring, the Apple Specialist Marketing Co-op had its first meeting in Portland, Ore. More than 100 resellers attended. "It was transformative. It was amazing," Langdon said. "We had speakers talking to us about how to grow our businesses, how to better manage our businesses, how to take positive steps to market our businesses. The whole purpose was to help people do a better job to grow their own businesses."

And the group has done just that.

The Co-op recently surveyed 35 Apple Specialist Dealers and Authorized Service Providers and found that 95 percent had grown their businesses in 2007. More than 30 percent of them grew by more than 30 percent in 2007, including Crywolf, at 32 percent. What's more, 100 percent of respondents said they expected to grow sales and services in 2008.

Next: Going It Alone

Going It Alone
Despite the sunny expectations, many VARs say they find working with Apple, although it has its positive side, leaves a lot to be desired.

Angela O'Donnell, managing director of New York City-based W. O'Donnell Consulting, said Apple provides "excellent" training via the Web and is quick to provide information about new products when they're officially released. But, she said, Apple simply doesn't embrace the channel the way other vendor partners do, or work with VARs to foster their growth. "They're trying, but I don't think they're a super-channel-focused company," O'Donnell said. "It's very different from, say, IBM or Microsoft,[that have] all these teams of channel people that are really after you trying to get you to be aware of their programming," she said.

"It's kind of a mystery relationship in a way," she said. "I don't want to insult them in any way, but I don't know where we fit into the puzzle. I don't hear the channel dedication speeches or anything that we hear from other manufacturers."

CRN tried to get some answers about the company's channel strategy but, despite repeated requests, Apple channel chief John Brandon declined to be interviewed.

Out in the field, Apple's happiest partners tend to be the ones with the lowest expectations. They say, when working with Apple, sometimes it's simply best to go it alone. For instance, the company remains the Co-op's biggest backer, said Langdon, but although the group has a booth at the MacWorld Expos, it runs its own conferences and, more often than not, sets its own agenda.

"We have control," Langdon said. "We create things we want, when we want them. What we've found is, regardless of whether Apple should be doing something or not, we can do it better for ourselves. Because we're not Apple, we can be very nimble and move very quickly. We put together a publication called the New Products Guide and sent out branded versions for our members within a week [of MacWorld 2008]." It might take Apple a couple of months to deliver something like that, he said.

Last year, the Co-op produced more than a billion individually branded marketing pieces for members, including a holiday guide and a small-business-product brochure, Langdon said. Four catalogs are planned for 2008.

Next: Retail Concerns

Retail Concerns
The main concern among Apple VARs is the continuing expansion of the Apple retail machine because it highlights the issue of where they fit into the company's plans.

W. O'Donnell Consulting competes with three retail stores, and rumors float from time to time that Apple is planning a fourth.

From a retail point of view, Apple has it down. As of the beginning of this year, it had 204 stores nationwide. Its flagship store, at the corner of 57th Street and Fifth Avenue, in front of the FAO Schwarz toy store and across the street from Central Park, sits entirely underground beneath a gleaming glass cube adorned with a simple frosted-glass Apple logo.

A spiral staircase leads shoppers down into a pristine white fantasyland of Apple cool. Rows of laptops, desktops, iPods and iPhones sit out, ready to be touched. Apple employees keep watch but maintain their distance, allowing shoppers to discover things on their own. For those making smaller purchases, like iPod cases, clerks with wireless credit card terminals can swipe your payment and e-mail you a receipt without the need to wait in line.

So what can resellers provide that Apple can't? In a word, services.

Crywolf's biggest money-makers are professional solutions and services. "The Mac Pros and the MacBook Pros are good for us, especially things where we can bundle our own services, as is the installation of something like an Xserve or a bunch of video-editing machines. We'll sell, install and maintain. That' a great situation for us," Langdon said.

While Mac product margins are good, he said, services margins can reach 30 percent to 40 percent. "Pretty much all Apple Specialists are services-oriented," he added.

But Craig Flint, owner of Computer ER, Missoula, Mont., said that while he can make money servicing Apple machines, Apple's poor service support has almost driven him out of the Mac business. "We are an Apple Authorized Service Provider," he said. "We do warranty work for the portables and the desktops. That is not something they help us out with.

"We have to chat with whomever over in India to get any sort of support. We can't call anybody. There's a lot of documentation for Apple service that is incorrect or not up to date. We get dinged if we have to order more than one part for a repair even though their service manuals tell you what to order."

Michael Oh, president of Apple reseller Tech Superpowers Solutions, just hopes that Apple remembers its channel as it prepares to open a new retail store in his company's backyard on Newbury Street in Boston."It's extremely hard to predict what's going to happen. There's really no data out there on what happens when an Apple store opens up literally 30 yards from you."

Oh's biggest fear is the impact the new store may have on his B2B business, which focuses on business sales and professional services. "Are there ways that Apple will actively work for us in order to create a better experience for their professional customer especially, or are they going to take our business and not really think about it?" he asked.

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