Few channel partners have it as hard as Apple’s. The Cupertino devices giant has never been highly regarded for putting the channel first, especially in retail where partners play second fiddle to Apple's own stores. But the past 12 months saw a rash of problems for independent Apple resellers.
The biggest Apple reseller to collapse recently was Dick Smith. Dick Smith acquired Apple specialist Mac1 in 2014 for one dollar – CRN understands that the driving factor behind the deal was to hire founder Kenneth Hogg to lead Dick Smith's Apple education business.
Where is Mac1?
Dick Smith revealed its plans for Mac1 in 2015 by opening nine Mac1 ‘kiosks’ inside existing Dick Smith retail stores. At the same time, Mac1 closed down its own stores in Albury, Armidale, Brisbane, Hobart, Newcastle, leaving just Canberra and Wollongong.
After Dick Smith fell into administration, administrators from Mcgrath Nicol told creditors it would be best if Mac1 was sold off as a separate company. However, if Dick Smith was wound up, its creditors would also become creditors of Mac1.
After Dick Smith was wound up on 25 February, a representative from McGrath Nicol told CRN that Mac1’s future was still in doubt.
Byte off more than they could chew
One of the biggest problems resellers have is direct competition from Apple. The Apple Store has become synonymous with chic; if you're a reseller, it’s a tough slog when the world’s biggest company is selling the same products right on your doorstep.
In 2012, Apple went on the offensive by opening its own stores in Australian capital cities, much to the chagrin of partners. This hit hard at Next Byte. The company, owned by publicly listed Vita Group, was founded in 1995.
Next Byte was previously the largest premium Apple reseller in Australia, with 18 locations as of 2012. Problems started when Apple opened up its second Sydney store in Broadway in 2012, forcing the Next Byte on the same block to close down. Two years later, Next Byte closed its Brisbane and Melbourne stores after Apple opened its own stores in the same city.
Next Byte attempted a strategy to focus on regional areas, as well as undergo renovations to mirror the interior design of an Apple store. Neither worked, and in December, Vita Group killed off Next Byte, which had been a drag on profitability.
Before Vita axed the eight remaining stores, Next Byte’s revenue was down 20 percent to $59.9 million, and an earnings loss of $700,000.
Vita Group has since migrated its Next Byte services customers over to its enterprise arm, Vita Enterprise Solutions.
Merger gone bad
With any downturn in business comes the likelihood of consolidation. ASX-listed investment firm, Broad Investments intended to roll up MyMac with an Apple wholesaler Monsta, as well as managed services provider Mirrus and communications reseller Unified BCG.
But Melbourne reseller MyMac is facing its own set of problems. While the company is still operating, MyMac’s managing director Steve Bardel has taken the directors of Broad Investments to court over alleged multiple breaches of the corporations act.
The court case is unrelated to the actual acquisition of MyMac, but it is a forewarning on what can happen in the consolidation process.
What can Apple resellers do?
Apple has admitted in the past that its direct push is hurting its resellers. In its 2015 financial results report, the company stated: "Some resellers have perceived the expansion of the company's direct sales as conflicting with their business interests as distributors and resellers of the company's products.
"Such a perception could discourage resellers from investing resources in the distribution and sale of the company's products or lead them to limit or cease distribution of those products."
Apple insisted it would continue to invest in its resellers to help them remain competitive in a highly volatile market.
It’s not all doom and gloom for anyone wanting to sell Apple. Only last week, major Perth-based reseller Stott & Hoare was appointed as an Apple partner.
Another long-term partner is Melbourne-based Crunch IT, which has worked with Apple for 11 years and is also a Microsoft partner.
Crunch IT managing director Mark Williams is a strong supporter of pushing Apple hardware and software into the enterprise as an alternative to a pure Microsoft software play.
“Microsoft might be more difficult in some ways because there’s a limit on what you can and can’t sell,” said Williams. “With Apple, you do have to go through an accreditation process, but that’s pretty easy.”
While Williams acknowledges being a pure Apple reseller is difficult, he says business need to focus elsewhere if they want to survive.
“People used to be able to get away with just selling Apple and knowing how to hook it all up. Two things have happened that changed that. Apple made setup so easy to do that a lot of users can do it themselves. That reduced the need for traditional pure Apple resellers.
“When you take Apple products to an area that does need that extra assistance and level of integration, finding engineers with those extra skills is difficult," Williams said.
“Businesses want more and more Apple, but if they aren’t able to find a good integration partner then they will struggle to properly adopted Apple. Our engineers are certified by Apple at the highest level, but they’re also certified with VMware, Microsoft and other vendors. You can’t keep making money on just hardware or software. If that’s how you operate, you’re going to go under.”
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