Apple's Rotten Reseller Ways

In San Francisco, excitement is high, as it always is, about Macworld. And, this year, there's more to be excited about than just another iFillInTheBlank. We finally, finally, have a cheap Mac, the Mac mini, a headless iMac starting at $499; the low-end iPod shuffle; and iWork 05, a combination word processor and high-end presentation manager.

So what's wrong with this picture? Well, all the news so far is great for Apple. When I tried to get to the Apple online store for the iMac I saw an Apple site that was slower than I had ever seen it before. I'm sure it's because the site was drowning in eager iMac customers. In fact, I'll go out on a limb and say now that mini may be, in terms of unit volume, the most popular Mac ever.

The news is also great for the Apple faithful. So, what's not to like?

Well, when I tried to find a local reseller, using Apple's Find a Reseller page, instead of a reseller listing I got the cryptic error message: "Error getting the reply desc." When I tried again later I got the even more entertaining error message, "acgi services are unavailable at this time, please try again later." Well, that certainly tells me a lot.

OK, so maybe, it was just that the site was overwhelmed by customers but, boy, from what I've heard from Apple resellers, it also sounds far too typical of how things go between Apple and its resellers.

Take, for example, the case of Computer Stores Northwest Inc., an Apple reseller with five Oregon stores and one in Seattle, Wash. According to a report in the Seattle Post-Intelligencer, the wildly popular iPod has been bringing in more business, but, at the same time, Apple's opening of an Apple Store not far from its Seattle store has hurt its business.

Yes, it's that classic hardware reseller problem of having to compete against their vendor.

Of course, there's nothing new about this—old-time Compaq resellers can give you chapter and verse on this story—but these days most vendors seem to have gotten a clue that competing against the people who could be their best supporters isn't the brightest idea. Not Apple, however.

It's not just the direct and reseller channel fighting though. In Apple's case, things have gotten so bad that several current and former Apple partners are suing Apple. Their position is a simple one: Apple isn't playing fair with them.

Specifically, according to their lawsuits, the five resellers are accusing Apple in the Superior Court of California in Santa Clara County of breach of contract, fraud, negligent and intentional interference with economic relationship, negligent misrepresentation, trade libel, unfair competition and false advertising.

Two Apple resellers, involved in the suits, the now defunct Elite Computers & Software Inc., of Cupertino, Calif., and MACadam Computers Inc., of San Francisco, have accused Apple of that deadliest of direct vs. reseller sins: a vendor selling its equipment to its own stores at rates much lower than what they charge its independent resellers. The result, of course, is that the resellers can't compete.

I'm no Apple insider, so I can't tell you about the virtues of their case. For their arguments you can turn to a Web site run by former resellers, Tell on Apple. (Apple doesn't talk about the case.)

What I can tell you, though, is that while Apple's remaining resellers love the technology, many of them, and not just the ones involved in the lawsuit, think that Apple's channel strategy is rotten to the core.

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