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Apple limits own iMac sales to boost channel

First fix your inventory then fix your channel

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Analysis Well, so much for Apple's great inventory management. Last week, the US branch of the company's direct-sales operation posted a message on its Web site admitting that it will now not be able to supply iMac purchasers with their machines until the end of July. In other words, buy now, and you'll have to wait at least a month for your kit to arrive. This from a company that regularly claims its ability to keep the number of computers it manufactures in sync with demand is even more responsive to market changes than the acme of direct PC sales, Dell. Indeed, at Apple's last financial results announcement, Chief Financial Officer Fred Anderson said the company had gotten its inventory management down to a fine art, with its warehouses containing only one day's worth of unsold Macs. Getting your inventory right isn't just about having as few machines as possible stacked up waiting for buyers; it's about ensuring you can satisfy however many customers you have at a given time. And it looks like Apple may be having problems here. First, the latest, "bronze" PowerBooks failed to ship on time; now we have an unforeseen, month-long iMac delay. Or do we? Perhaps the self-imposed limit on iMac shipments is actually an exercise in good inventory management -- one that shows Apple has finally got it figured out. Look at it this way: Apple has a policy of regularly updating the iMac, a plan it has followed at least twice since it launched the original version of the all-in-one consumer system last summer. Apple is known to have another update -- the so-called "C2" version -- in the works, and the latest leaks suggest it's going to ship this summer. According to the rumors, the C2 iMac is likely to debut at Macworld Expo, to be held in New York at the -- yes, you've guessed it -- end of July. The close timing between the C2's probable debut and the Apple Store's anticipated renewal of iMac shipments seems just too good to be true. But why the delay? After all, computer manufacturers typically want to shift as many old machines as they can before introducing the new model, and signaling the upgrade too early is generally seen as a sales killer. That would suggest that there's another reason for Apple's inability to ship iMacs for a month or so. To see why the delay really could signal the arrival of a new iMac, you have to remember that Apple, unlike Dell, isn't exclusively a direct-sales vendor. Apple's motivation here is clearly to avoid what happened every other time it has updated the iMac: A reseller and retail channel stuffed full of the old models they can't sell except at a potentially money-losing discount. An excess of old iMacs in the channel has been an issue ever since the machine was first updated. Over here in the UK, there's still talk in the channel of a warehouse full of Bondi-blue iMacs made unsellable by the Rev B iMac and later, the multicoloured Rev C version. And the channel quite naturally wants to get the old stock out of the way before introducing the new, faster model, which is one of the two key reasons -- the other is price, of course -- why older iMacs have generally sold in greater quantities than later versions. It's telling that the U.S. retail channel only began selling more multicolored iMacs than Bondi-blue machines in May, five long months after their introduction, according to figures from market researcher PC Data. Apple's warning is quite cleverly timed. A month is probably too long a time for most buyers to wait for their new computers. Instead, they're likely to head on down to their local independent reseller, or CompUSA or Sears and buy a machine there. In short, Apple is cutting back on its own sales to ensure its channel gets a chance to catch up. And this is no bad thing given the problems its previous approach to iMac updates caused with Best Buy and given how friendly it's now trying to be with Sears. And Apple needs its channel. The Web may be well on its way to becoming the place to buy computer equipment, but it's not there yet, so Apple still has to rely on physical stores rather than virtual ones. And when the product you're selling depends so much on looks, you need outlets where prospective buyers can actually look at what you're selling. The CompUSA store-within-a-store project is a good case in point (although if the number of e-mails we get from disappointed would-be CompUSA customers is anything to go buy, Apple needs to take a fresh look at the situation). The deal that got Macs into 800 Sears stores is another. A better example, however, appears to be Apple's mooted chain of showrooms. The idea that Apple is considering something like this emerged from a casual comment from a company executive back in early June, and has since been backed up by events at a recent meeting between Apple and its resellers, according to one Mac store owner's comments to The Register. But wherever Macs are sold, what matters here is Apple seems to have realized that channel management is just as important as inventory control. Central to that strategy is giving the channel a chance to sell machines, and you can't demonstrate that much better than by foregoing a month's worth of iMac sales. ®

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