Aviator who loves Macs

From the ruins of the Buzzle liquidation sale more than five years ago, Ben Morgan made his first foray into business, acquiring the AppleCentre retail shop in Taylor Square, Sydney.

These days, the 27-year-old who loves to fly aircraft in his spare time, has his sights set on bigger things. Morgan is set to open arguably the largest Apple store in Australia - a three-storey glass-fronted building at Westfield Bondi Junction, complete with retail shop, lab and a learning centre. He is also in the process of renaming the AppleCentre as Academy Store, a store that he owns with business partner Shannon Daniel.

Morgan entered the IT industry completely out of the blue. After finishing at Morrisett High School, near Newcastle in NSW, he started work as a clerk at the Centre for Asia-Pacific Aviation. "I was introduced to my first Mac - it was an LC475 and I was literally told, 'Like it or leave it, you have to use it'," he recalls.

"I spent a bit of time with that company - about two years - and in that time I got very familiar with Apple and was responsible for buying and maintaining [the Centre's] networks in the end," he says.

However, Morgan left the aviation consultancy business, deciding that there was no foreseeable future in that industry. What followed was a move into the topsy-turvy world of Apple reselling at AppleCentre Sydney.

"I knew a gentleman by the name of Peter Shaw and he was working as a salesperson with AppleCentre Sydney, which is no longer in existence. He was the sales guy and I got to know him through buying and selling all the Apple equipment for Centre for Asia-Pacific."

Shaw asked Morgan to come and work for him. "There was an arrangement at the time that if the salesperson got another sales guy in they received some kind of bonus, so I was in part shanghaied into this position," he says.

It was during this time that Morgan says he "fell into love" with the Apple product. "One of the things that really separated me from a lot of the other guys is that I was really looking at that business and constantly asking questions about how these things [AppleCentres] work. Obviously there's not going to be a career in sales but there's obviously got to be a career in owning these things."

Morgan decided that his future would lie in owning an AppleCentre and he set about learning the processes involved in operating a retail shopfront and how Apple ran its business. "Even since I was young, I've always had the thought in my mind that owning a company was something that I wanted to do. We were brought up as kids with that fundamental thinking - my father was always involved in several business interests at one time."

Rise from the ashes

Morgan purchased AppleCentre Taylor Square in 2000, which at the time was part of the Buzzle liquidation sale. (Buzzle was a former consortium of Australian Apple resellers that planned to list on the Australian Stock Exchange.)

Morgan says he was lucky to have met Lindsay McCombe, the owner of the AppleCentres in Broadway and Taylor Square. "I guess through that relationship with Lindsay, getting to know him and managing Taylor Square as a store for him, when Buzzle started to look like it was going south, Lindsay gave me a call and said, 'Look, if you were thinking of getting into the Apple business, your opportunity will be now'."

So with his own funds, Morgan and Daniel spent six months negotiating with Apple, KPMG and the receivers of Buzzle for the purchase of a location and in the end through some fairly careful consideration the decision was made to go with the Taylor Square store. "And we made that decision for that store based on the fact that it was one of the worst performing stores [in the Buzzle group]."

Taylor Square carried with it considerable debts and ill feeling from many customers due to the Buzzle breakdown, Morgan recalls, adding that the dilution of the company was going on for some time before the receivers were appointed.

"If we were going to take on the risk, we wanted a store that was performing badly so that we had a lot of gain. We looked at Broadway and CBD and those stores were performing mid-range."

In its first four years of operation, Morgan and Daniel tried to align the store with what Apple was doing in retail. "We've always tried to maintain that if you can produce a high quality retail experience for the customer, then you are going to be rewarded for it."

Morgan admits that "it's not easy" being an Apple reseller and does not mind saying he has a 'mixed' relationship with the vendor. "Yes, it's a love/hate relationship, we love the product, we love the concept, we believe there is opportunity in that. What we hate is the mechanics of the way in which the corporate deals with its external relationships.

"And in some ways, it's very disappointing. I think that Apple has an amazing opportunity given the scope of the people that it does business with, yet sometimes it chooses not to capitalise that opportunity but rather suppress and make the situation very difficult."

Apple's recent move to the Intel platform with its MacBook Pro product, for instance, has meant that 2006 is a year of transition for Apple and it is a challenge for resellers to get through the transition unscathed.

"I categorically understand that this is the future - it's a great product and it's one of the smartest decisions the corporation has made. Obviously the corporation needs to deliver this product to customers and this is an important shift. The problem is that we selling a product today that doesn't necessarily have everything that needs to go with it. So the challenge for the reseller is that you are simply told via an announcement at a developer conference by Steve Jobs.

"Very little accommodation is made for the reseller now having reduced revenues and increased cost structures because we are trying to get a product out there to an audience that may not be necessarily buying early and there is no compensation for that. You are expected to survive that storm the best way you can and come out the other side hopefully smiling."

He believes that good resellers will survive this transition but others that are operating "marginal" business will struggle. "This is going to be an enormous challenge [for marginal businesses] and in some cases may prove to be a challenge which cannot be overcome."

Morgan feels that millions of dollars being pumped into marketing the iPod could probably be diverted to other areas to ensure the companies that have delivered Apple's products for the past 25 years remain profitable through the transition. "They don't wear the penalty of Apple making a global decision not a local decision."

Morgan says the reseller channel would argue that there is never enough being done while Apple would argue that they do too much. "I think it's Apple's view that they do enough in terms of brand and awareness, and that the resellers receive the benefits from that.

"If you're a corporation that's a great view because (A) it's going to be a lot more effective to your bottom line and marketing spend and (B) it's going to make things a lot easier to get approved internally because you're not pushing the envelope and it's a very comfortable decision.

"From a reseller perspective, it's difficult if you don't want to open a shop for Apple and you have this thing on the front door saying you're an Apple centre but people don't know that you exist. I think that more could be done in that respect. Apple have for the last 20 years in Australia had this brand called AppleCentre and I would have thought that in 20 years you could make that a good retail proposition. It is unfortunate to see that resources haven't been allocated to local awareness - that resources haven't been allocated to building a strong retail front in that respect and subsequently you have AppleCentres that aren't of a high standard and don't deliver the message clearly."

Apple stores

It is for this reason that it would make the decision easy for Apple to do retail on its own. "I would also put back to Apple that this isn't something that is the responsibility of the retailer - it's also the responsibility of the branded vendor."

The potential for Apple to open its own direct stores is a threat to the existing Apple channel. "Apple have spent the last two-and-a-half years in Australia reshaping the way Apple stores are going to be perceived."

Morgan believes that while Apple-owned stores improve the company's image, they will come at a cost for Apple resellers. "It's going to put a lot of guys out of business. Apple aren't hiding or denying that their intentions are to put stores in busy locations. It could be a huge risk.

"If I read between the lines, I think they are ready to do it. I've spent the past four to five years, complaining about it. There are multiple ways of Apple achieving what it wants to achieve in retail and it doesn't necessarily have to do this by retailing itself. It will be an extremely sad day to realise that Apple's faith in the third-party relationship is just not there. In some ways, I'm going to feel personally that it's a back-hander to me. I've given Apple five very good years of my life from the age of 21 to now.

"It's going to be a very upsetting experience to know that Apple will be eventually contacting my customers, saying 'We can do it better than what you have been getting so far'. I know that Apple look at box movements, they look at numbers, but I'm a human being and I look at the fact that I have given them minutes, hours and days of my life that I will never get back and I would like to think that is of some value to them."

The future

The only risk for the future of Apple would be the company becoming too proud of its own position and "alienating itself from an audience that is not interested in how great Apple thinks it is".

"It's only interested in what it can achieve using its product. I know there's a lot that has been invested by Apple in building the cult, building the following and the feeling towards the corporation that it's the creative person's computer, it's the computer for the rest of the population. We buy that and we understand that but you can only go so far."

Still, Morgan feels that Apple is a great company and has conveyed a lot of "good feeling" into a market that is traditionally about saving a buck. "They have really challenged that thinking and it is paying off for them."

Morgan believes that there is a big job to be undertaken from Apple's and its reseller's perspective in achieving awareness of Apple computers. "I think that we are going to be able to do it more effectively together working in a united form than fighting with each other for what customers are there."