The demise of the independent Apple reseller

The demise of the independent Apple reseller

Summary: MacOutfitters, a 22-year Pennsylvania Apple reseller, recently announced that it's closing its doors. Is it impossible to compete with Apple in retail?

SHARE:
TOPICS: Apple
23
The demise of the independent Apple reseller. Elite Computers and Software closed its doors in 2003

Elite Computers & Software, located across the street from Apple headquarters in Cupertino, used to host crazy midnight madness events that were like Hollywood movie premiers. When a new version of Mac OS was released (like Mac OS 9), the company would drive boxed copies to its Cupertino store by limousine so that they would arrive at the stroke of midnight to throngs of Apple customers waiting under search lights. 

Then Apple launched its retail store initiative in May 2001.

Elite closed in 2003.

MACadam, a popular bay area Apple Value Added Reseller (VAR) in business for 16 years, closed in 2003

After 22 years MacOutiftters, based in Doylestown, PA sent the following email to its customers last week:

I am sorry to announce that all MacOutfitters locations are closing permanently.

This has been a very difficult decision for us. The ever-changing market for computer goods and services has always been challenging, however, the last several years have been particularly difficult for our company. We have found that we can no longer be profitable providing the level of service that we have always strived to provide, and that you have come to expect.

It has been our great pleasure to serve you for nearly 22 years. We have been a part of some of the most exciting technology innovations ever seen. We will miss those aspects of the business very much.

Thank you so much for your loyalty over the years, we wish you the very best.

Very truly yours,

Jim Habel, President

and all the MacOutfitters team

There are stories like this in almost every town since Apple launched its first Apple retail store in 2001. Some notable exceptions are Tekserve in New York, Springboard Media in Philadelphia, and Charlotte Street Computers in Asheville, NC who have managed to survive in the shadow of Apple retail stores, sometimes just blocks away.

Three factors make it nearly impossible to compete with Apple retail's dominance:

  1. Declining hardware margins
  2. The impact of e-commerce/m-commerce/Amazon Prime
  3. Apple's meteoric rise into retail

The barrier to entry for an average (or even a well funded) entrepreneur are impossibly high. How could an independent Apple reseller compete with Cupertino's retail juggernaut that gets inventory first, in greater quantity and at cost?

You might be able to make a case for a specialized, consulting business, or maybe one focused on custom training, or even one specializing in high-end workstations aimed at vertical markets (pre-press, color separation, video, animation) but would it be profitable? Would it cover the $5,000 - 10,000 per month it costs to rent a retail storefront and then pay salaries? I doubt it.

Long time Apple Specialist MacOutfitters' (a.k.a. Computer Forum) owner Jim Habel has been involved with Apple products in Doylestown for over 30 years (the first 10 years with Solutions Computer). The organization has incubated several past and current Apple corporate employees and to many, MacOutfitters was an asset to the local Apple community and will be sorely missed.

Is it possible to operate an independent Apple retail store in the wake of total domination by Cupertino? Or is it analogous to opening a competitor to Walmart?

(Disclosure: Tekserve and Springboard have previously advertised on my website, PowerPage.org.)

Topic: Apple

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

23 comments
Log in or register to join the discussion
  • SLC

    We've got a small chain (Simply Mac) here in the Intermountain West. Of course I don't know how they're really doing, but they haven't been closing stores.
    MC_z
  • Same in Halifax

    After a 10 year run, the Halifax Mac Store in Halifax, NS closed up shop at the same time Apple opened its first store here last year.
    Mythos7
  • Bad Business Model

    So by competing directly with the small pc shops (Apple) is effectively cutting off many of the marketing outlets for it's product line. Brilliant move!
    Too bad those independents could not transition to another platform (read windows)...
    Jaytmoon
    • Not Windows

      No space in the Windows world. People would come try out the stuff and get their questions answered. Then they'd go to Best Buy or web to make the purchase. No future for a special-attention retailer there.
      MC_z
    • Well

      Apple has been selling more things and putting cash in the bank over the last 13 years as their VAR affiliates have complained and closed. It would be pretty hard to make the case that Apple is losing out through the trend.

      As for Windows computers, the hardware is very inexpensive — meaning not much cash even if the margin was decent — because of competition among manufacturers. Everyone is running it and so there's a somewhat competent brother-in-law to troubleshoot problems.

      Where's the upside to sinking capital in a storefront so as to compete with Best Buy, Staples, Office Depot, the manufacturers themselves via online, Amazon, etc. Whatever line(s) one carries, there's a cost to train a service staff and here they are, again, competing with the box stores who have their tech guys in nice shirts doing os upgrades, virus cleans, and AV software upsells, i.e., they captured the fat sector of the consumer servicing market.
      DannyO_0x98
    • Apple stores have the highest sales/sq. foot in the world.

      "Bad Business Model"? Where'd you get your MBA?
      matthew_maurice
  • Not just Apple resellers

    Same thing is happening to Windows-based computer retail stores. My wife had to close her company because it just wasn't profitable anymore. People would have an 11 year laptop but instead of buying a new one from her, they'd buy a tablet online. Tough times for all the computer resellers.
    arodriguez1
    • To a point. There's a difference with competing with other retailers

      in the same boat as you product / service wise, vs competing directly with the OEM who has a store right up the street, and can undercut the price you need to sell for you to remain profitable.

      Apple knew they were throwing their "partners" under the bus, but in the end, it's about business, and apparently for Apple it was a smart move from their perspective, so you can argue it couldn't be helped.

      Like Walmart coming in, somebody will always be hurt somewhere.

      It's sad about MacOutfittersas, as the MacOutfitters in Doylestown was where we went to get "Apple help", then Warrington later on when that store open in the new shopping center.

      I will have to stop in before they close. They are a good group of people, never had the "rightous" attitude some of the Apple employees we've dealt with at the Apple store seem to have.
      William.Farrel
      • Who are you and what have you done with Will Farrel?!?

        .DeusExMachina.
        • I never said I was anti Apple.

          What I have always said was I was Anti-Troll.

          I strongly dislike the shills and posers who want to hijack and spin any blog that doesn't paint the company they don't back in a negative light.

          If someone posts something worth replying to, I do so honestly.

          If they're trolling, then... :)
          William.Farrel
          • You should probably revisit some of your past comments, then.

            Just saying.

            Nice use of the triple negative, though, I'll give you that.
            .DeusExMachina.
  • This Has Been Happening For a Long Time

    Is there any surprise? The independent or small chain computer dealer has been on a decline for over 20 years. Why the surprise now? In fact, I was surprised in reading this article that there even was a computer retailer still in business.

    The computer dealer essentially disapeared in the early to mid 1990s in the major cities, and yet was still a somewhat viable business in smaller markets. By the early 2000s, these markets also became victims to eroding margins and cheaper prices offered online.

    Computer margins were always thin. Back in the late 1990s, you were luck to earn 7-8% margin off any Apple product, and that was selling at list price!

    Selling only one brand of computer manufacturer may have been a viable business in 1985, when you actually had to educate customers on why they needed a computer. But today, they are all commodities, no different than any consumer product.

    So the "demise of the independent Apple reseller" might have been a timely headline - in 2000. We have been passed that era for many years.
    HolmesJ
  • It's a shame

    I've been using MacOutfitters for years. The location, service, atmosphere, and lack of congestion made it the easy choice over the Apple Stores in the area. Now I will have to drive for an hour and battle my way though a 100 customers just to get a number and wait for some service. It's a shame Apple couldn't find a way to leverage these small retailers in a complementary way to the benefit of their customers.
    mnavar13
  • Missing Factors

    I think the App Store took software off the VAR's shelf. Hardware was always thin-margin, it was the software upsell that was truly profitable. The App Store, though, was a culmination of a trend. The best software for my purposes was found online and not in stores.

    Apple products becoming successful have meant they became available through big-box retailers as well. There someone who was considering a Mac as an option could compare pcs in one spot.

    One thing that could help a VAR is servicing older Macs. The complication is that replacement parts are very costly, and I suspect intentionally so. Apple would prefer that one got a new computer rather than extend the life of an old one. I know. Obvious.

    Like the book stores and record stores of yore, with a VAR there was the opportunity for the business to have a more personal relationship with the customer, to mutual benefit. As technology has gotten less scary (that's what ubiquitous mobile computing and app stores mean), the customer has become more independent of the expert and there goes the opportunity that ultimately kept the doors of many VARs open.
    DannyO_0x98
  • Apple shuttered my business

    My independent Apple Reseller business went under as well for a different reason. Apple raised the sales quota for resellers and specialist at the same time they discontinued their server line and let the Mac Pro languish. Also, many of our laptop sales were cannibalized by the iPad (an item most resellers are not able to sell).
    We still have many customers that do NOT want to go to the mall to buy their equipment or order through online stores. They are doing the Apple community a disservice in an effort to squeeze more profit out of the channel.
    I am surprised that Apple hasn't taken more heat for killing off so many middle class jobs.
    Todd Schneider
    • Apple shuttered my business

      Completely agree.

      We stopped supporting Apple when they did that my company - we pulled out and focussed on our other business. It simply became too hard to compete - I think our buy was about 6% from RRP - too slim to bother, especially when the retail chains were getting marketing rebates and Apple was able to undersell us on most occasions if you 'spoke to the right guy'.

      It's a shame. The only really successful Apple reseller I know of support them in business, and charge astronomical rates (compared to Windows land). Simple supply and demand - they offer a service that is rarely offered (Apple-Only business solutions), even when the reality of their offerings (with current apple tech simply not server-grade) not fit for purpose.

      I think it's a little sad. Apple made a hell of a mistake killing off their only inroad into Business - they could have actually been a competitor if done correctly. Apple seem to get away with business tactics that would be unheard of (and simply not allowed) in other channels.

      But yeah, their home-use tech and marketing are both amazing. Their business tactics, however, leave a lot to be desired.
      stewymelb
  • How to succeed as a Apple Reseller?

    The answer to your question is the same as it's always been. Change, adapt. You can continue to sell Apple stuffs and be successful, you just have to change the way you go about it. iPhones are Apple's number one seller and people are always breaking their screens. Offer a repair service. Sell iPhone cases, lightening adapters, and peripherals that people need at reasonable prices. Offer to go to customer's site to do the repairs if you have to. Adapt, adapt, adapt!
    Maha888
    • You think these resellers aren't that smart?

      They know what they need to do to survive in business. They've been in business.

      unfortunately, if their manufacturing partner (which is what Apple technically is) decides to no longer support you, it's hard to just turn around on a dime and go an opposite direction to suddenly be profitable again.
      William.Farrel
  • So Many Complaints

    It's annoying listening to all the commenters complaining about how Apple is killing off middle class jobs and putting these smaller companies out of business. It's the exact same argument for people who say Walmart kills off small business. Just because you are in business doesn't mean you deserve to be in business. Lots of business owners have no idea how to run a competitive business and their prices are too high, or they don't know how to manage inventory or overhead (employee wages). You people deserve to go under. We live in a competitive world, if you can't compete get out of the kitchen.

    There are plenty of other businesses that compete with the Apple store (and Walmarts) of the world. How do you think they do it? Maybe you should take a gander at how they do things and take a page out of their book?
    Maha888
    • Right. Apple is blameless, it's all the retailer's fault.

      What I find unbelievable is the amount of clueless people that have no idea how to run a business all got into selling Apple products.

      they could have gone a different direction, but from the amount of Apple resellers closing, it's amazing that they coincidently all chose to open Apple stores.

      And you're right, they deserve to go under because they should have understood from the beginning that Apple was going to one day undercut their pricing, and hold back products from them.

      You're just so on top of it all - you're the only one that sees this is 100% the retailer's fault, and (of course) that Apple is always above reproach, being the benevolent entity they are!
      William.Farrel