Sydney reseller upsets the Apple cart

By Lilia Guan, Brett Winterford on Dec 1, 2009 4:15 PM
Filed under Hardware

Dares to question Apple's stranglehold on its channel.

One of Apple's longest serving Australian resellers has been asked to change its online advertising strategy so as not to compete with the vendor's continuing push into direct sales.

Sydney-based reseller MacToFront, based in the inner-city enclave of Ultimo, has sold and serviced Apple products for some 15 years, according to proprietor David Macintosh.

But he fears that his business - like many other authorised Apple dealers - is at risk of having its status revoked by the Apple as the vendor continues its push towards direct sales.

Apple's contract with Tier II resellers states that the vendor has the right to arbitrarily review a reseller's authorisation to sell its products at any time and without explanation, with only 30 days notice, particularly if resellers sell into various named markets or via online sales, catalogue sales (mail order) or telesales/telemarketing.

MacToFront and many other reseller partners have resisted this pressure, engaging in online sales regardless. Indeed, Apple's largest consumer partners - the likes of JB HiFi and Harvey Norman - routinely include Apple products in massive catalogue sales campaigns, while nearly all Tier 1 resellers sell online.

Macintosh has also used paid Google search links (AdWords) so effectively that Apple's marketing team demanded he remove certain words.

Apple Australia's marketing manager Rob Small has since told CRN that there are "no restrictions on what authorised Apple resellers [can] put in their ads."

The matter between Apple and MactoFront, Small insisted, had "nothing to do with Adwords" but he was not prepared to discuss the conflict any further. Nor would he confirm whether MacToFront was, in Apple's eyes, still an 'authorised reseller'.

"All I can say is that any Apple authorised reseller is not restricted in terms of using Apple terms in their ads," he said again.

Macintosh said he has received no formal notification from Apple about a pending suspension of his authorised status, and has been working to improve his relationship with the vendor. He assumed that his use of Google Adwords had simply "ruffled a lot of feathers" at Apple Australia.

Macintosh doesn't feel that Apple "defines these [online sales] activities as being definitively prohibited."

"They don't exactly say that we can't.. but they are [used as] examples... So as we all do [engage in online sales and marketing] - it gives [Apple] grounds to cancel our contract with 30 days notice."

He claimed to have little choice but to use online channels with gusto.

As the vendor opens up more of its own Apple stores and invests further in its own online sales capability, Macintosh said the company is becoming "A, our supplier, and B, our competitor."

"The lines between can come into conflict," he said. "Apple is trying to dictate what markets we sell into and how we can sell our products."

While he agrees that Apple has the right to maintain value in their brand and products, he saw little other choice but to market aggressively and offer discounts. The margins available selling some Apple products are "down to sub-5 percent levels," he said.

"Even when we drop below RRP, Apple will come through and undercut us."

 
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