Apple Computer announced on Monday that it would stop selling its PCs through four big national retailers, one week after being dropped involuntarily from the shelves of Best Buy.
Spin it Apple's way, and the announcement is all about the company committing to a tighter relationship with CompUSA, the one national retailer that Cupertino headquarters will continue to work with. Spin it Wall Street�s way - Apple shares lost 4 percent of their value following the announcement - and the company's products are no longer attractive enough to consumers to warrant shelf space at mass-market chains like Circuit City, OfficeMax, Sears, and Computer City.
Analysts call today's news a mutual dumping.
"National retailers have sales goals they want to meet, and Apple wasn't getting there," says James Staten of Dataquest. "But Apple also wanted to focus on the store-in-store concept that was working well with CompUSA, and they told others that that was the idea they were going with. So there's a little of [the retailers] dropping Apple and Apple dropping them."
Indeed, Circuit City spokesman Morgan Stewart confirmed that the move to eliminate Apple products from his company's 493 superstores was "a mutual decision." But had Circuit City been considering clearing Macs off its shelves, as Best Buy did on January 28th? "Sure," said Stewart. "To us, it's a product that the vast majority of our customers weren't interested in."
Apple thinks differently. Today's move, according to Steve Jobs' troops, is a "redefinition" of the consumer's retail buying experience. Apple is seeking more control over how its products are sold, said spokeswoman Rona Hamilton. "We want a customer to be able to walk in and buy hardware, software, and peripherals in one place, and to have a salesperson there who knows the products," she said. "With some retailers, our products would get lost."
The decision could also benefit CompUSA. Since creating Apple-only mini-stores within all 148 of its outlets, CompUSA has seen Apple sales jump from 3 percent of its total computer sales to 14 percent. Now, with fewer competitors stocking Macs, more sales could accrue to CompUSA.
But the retailers who will no longer be moving Macs aren't exactly crying. Best Buy said that Mac sales accounted for less than half of one percent of its revenues. And Nathan Morton, CEO of the 96-store Computer City chain, said, "[Apple products are] a very small percentage of our sales today. We don't expect a significant impact from the announcement."
But Morton pointed out that Apple's decision only covered its hardware; Computer City will still carry Mac-oriented software and peripherals. It was also a US-specific announcement; Computer City will still sell Apple boxes in Canada.
Further, today's "redefinition," according to Apple spokeswoman Hamilton, really only covered the largest national retailers. Neither small national chains like MicroCenter (where the store-within-a-store concept originated) nor regional chains are being ditched by Apple.
Roger Kay, an analyst at International Data Corp., said that only about 13 percent of Apple's sales come from the retail channel, and that today's announcement indicated an intention to focus more on direct sales, such as Apple's online store, which generated $12 million of revenue in its first month of operation.
"The direct stuff and the dealer/VAR [value-added reseller] stuff is clearly where their bread is buttered," Kay said. "The most important thing about their retail presence is just maintaining some brand awareness, and my impression is that CompUSA can do that."
There are risks, however, to partnering with a single national retailer. First, Kay points out that if the Apple/CompUSA relationship sours, the company would be hard-pressed to ink a favorable deal with a retailer it had jilted in the past. Second, Staten at Dataquest says that the move could limit Apple's already battered ability to attract new home users, who won't all necessarily be shopping for a PC at CompUSA.
Morton, the CEO of Computer City, concurs: "Our shelf space is pretty valuable. This is an opportunity that Apple is missing." And, adds Staten, "If Apple ever gets back into a pattern of growth, and they decide they want multiple national retailers on board, they might not be able to get these guys back."
For now, though, Apple is determined to dedicate its resources to the retailer that seems most enthusiastic about hawking its products. "We want to focus on who our supporters are and who we can make the most impact with," said Hamilton.
That's not such a bad strategy, according to most Apple observers.
"It's not good that you have to keep pulling back to survive, but it is good to draw a line in the sand and say, `This is where we're gonna be,'" said Kay of International Data Corp.
"Focus is the mantra at Apple these days," says Adam Engst, a columnist at MacWeek and publisher of TidBITS, an Apple-oriented e-mail newsletter. "This is in line with the decision recently to concentrate their software division on FileMaker," he says, referring to last week's announcement that Claris will be pared back to a narrow product line." They have to focus down," Engst adds, "but the main challenge they'll face down the road is that it's hard to regain territory that you've given up."
