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Apple plots direct-only sales

That's the rumour -- and it makes a lot of sense

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Apple could be preparing to push even further up the direct sales route, according to sources. Actually, it's "several sources and knowledgeable readers" of Web site MacOS Rumors, which doesn't sound at all like a sufficient number to suggest the "very strong body of evidence", but we suspect they may have a point here. The sources claim that Apple is planning to move its education sales into the direct space, in the process letting its education channel go. That's the first stage in the company's plan to shift all its sales to the online AppleStore and its long-prepared Apple retail presence. The only traditional channel such a move would leave are the existing large-scale Apple retailers -- though they may well bail out of the Mac once Apple launches stores of its own. Other resellers may be allowed to continue to offer Apple product -- they "will be carefully integrated into our plans going forward", according to one "highly placed Apple source" cited by MacOS Rumors. Now, while there is as yet no other evidence to confirm any of this, it does appear to tie in broadly with the direction Apple has been moving in under Steve Jobs. Jobs' priority has long been to get not only the cost of sale down but to increase Apple's margins, and the successful launch of the AppleStore has helped here by cutting out some of the middlemen. Such is the momentum behind online sales in general and IT online sales in particular that the AppleStore's sales will continue to grow, almost exclusively at the cost of traditional resellers, even if Apple doesn't modify its strategy in any way. That it will increase its focus on the direct channel is clear from Apple's ongoing 'maximise revenue at all costs' strategy. Big production outsourcing deals cuts costs, cutting out resellers increases the cut Apple takes. Moves like the decision to make it difficult for users to upgrade CPUs instead of buying new computers suggest that Apple is sufficiently bottom-line driven now to be willing to sacrifice its reseller channel. Of course, many resellers add so little value to a sale these days -- and with fewer of them, price competition isn't what it was -- that's unlikely to be too much of an issue for most buyers. However, that does leave those customers seeking solutions rather than commodity boxes, and buyers requiring maintenance and repair services, out in the cold. Again, much of this can actually be handled through an expanded AppleStore, as Dell has shown. But here we also have Apple's long rumoured retail presence a la Gateway. When your kit is sold on the basis of looks as much as performance, you need a better way of showing them off than a series of newspaper ads for your online sales service. And -- bingo! -- this neatly allows Apple to retain many of its better-located resellers by opening up AppleCentres (or whatever they end up being called) to franchise deals. True, Apple starts losing money to the middlemen, but with fewer such operations that's less of an issue, and Apple could take full whack on its own products, leaving franchisees to make ends meet on consultancy and third-party product sales. Apple can also ensure that all such stores look and feel the same -- and we all know how keen Apple is on a consistent look and feel -- and provide the same customer experience. Neatly, it also allows Apple to provide that "careful integration" of existing partners into its plans, as MacOS Rumors' source put it and still get the most out of the channel. The template here is Apple UK's AppleCentre programme, although right now this appears to be run along more traditional grounds -- better margins in exchange for toeing the company line on look and feel -- than the franchise model. The real parallel, though, is perhaps Gap, which goes deeper than simply having Gap CEO Mikey Drexler on Apple's board (and Jobs on Gap's board). Gap is fundamentally an image company, selling a look and feel more than a product (begin to sound familiar?) and one that goes beyond simple branding. Design is part of that, and so is stressing the company's difference from other clothing retailers. Having its own stores to sell its own products comes into the deal too. Meanwhile, Gap is ruthless in keeping its cost of sale right down. Not so long ago, the UK's Independent on Sunday newspaper revealed Gap's use of sweatshop third-world labour. That's not to say all of its clothing is produced in such conditions, but it indicates how it likes massive outsourcing deals to cut the cost of production right down. Apple's contract with LG Electronics to produce almost all of the world's iMacs runs along broadly the same lines. Unlike Gap, Apple still appears to want to have its products sold alongside competitors', but as its retail plan takes shape, that could easily change. ® Related Stories Apple ponders own US retail chain

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