Apple price cuts an early Christmas present?

In late November Apple announced price cuts on selected hardware products by as much as 15 percent for the holiday season.

The offer was only available for selected laptop models and didn’t apply to iPods and iPhones.

Apple is rarely known for cutting prices on its products and the vendor has actively discouraged channel partners from doing so, but falling consumer spending appears to have prompted an extra effort, including the setting up of new incentives such as an iPhone 3G gift card.

In addition, Apple Store managers have reportedly been told to match the discounts being offered on so-called Black Friday, the day after the US
celebrated Thanksgiving.

Analysts are predicting that the move will not hurt Apple’s high profit margins too badly, since falling component costs would cover any revenue shortfall.

The price cuts caused confusion amongst members of the popular Apple forum The Mac Observer http://www.macobserver.com/, prompting them to look at the “uneven” relationship Apple has with its channel, something that CRN has been ranting about for a long time.

Time and time again the vendor has proved that its dual channel model is not working. How many retailers have lost their business because they were in a lucrative spot that caught Apple’s eye?

Not only do the average independent authorised Apple retailers have to compete against each other and mass merchant retailers, but also Apple’s own branded stores.

While appearing to make gracious gestures in allowing retailers to cut and match prices, the move hurts retailers wanting to make good margins on products.

Let’s face it, independent retailers are at the bottom of the food chain when it comes to the vendor’s channel.

These guys are fighting for survival at a time when mass merchant retailers such as JB HiFi are doing well because they have the financial backing and ability for mass-produced advertising and the ability to stock multiple product ranges.

That’s the name of the game these days – it’s not only about the product you sell, but the extras a retailer can offer their customers.

The average independent retailer may stock Apple-only products and a few other hardware bits and pieces, but how can they compete with mass merchant retailers that can throw in DVDs, games consoles, CDs and other technology bits and bobs?

With 15 percent off products, what kind of margins can independent Apple resellers make? That is a question everyone will be scratching their
heads about.

Generally I am guessing that Apple resellers can make nice margins on hardware products – well at least better than say on a PC and notebook – which for general IT resellers came right down to around 10 percent in 2006 – right?

In an article by Iain Thompson of VNU, research by analyst house NPD has shown that on average Apple users pay twice as much in the shops as
PC users.

Retail data showed that in June the average cost for a Windows laptop was US$700, compared to US$1515 for an Apple machine.

The difference was even noticeable with desktop models, with the average Windows machine going for US$550, compared to US$1543.

Someone out there throw me a bone! Tell us exactly what an average independent Apple retailer’s margin is like? If you take another 15 percent off products for customers, does that mean your margin goes down or does it stay the same?

There must be a reason why independent Apple retailers battle it out day in and day out. Besides the money and love they have invested in their business, what else drives these resellers?

Email me at lguan@techpartner.news and let me know your views on this issue.

an apple christmas cuts early hardware present price