Apple dealer cull makes sense

Opinion This article was first published in February 1999 Apple UK is terminating all reseller contracts at the end of February and dealers are up in arms. Particularly CJ Graphics, the Apple dealership with a £12 million turnover that went bust last month. The London Apple dealer is blaming its chief supplier, Apple, for the "forced disposal" of the company to rival dealership Rapid Group. CJ Graphics owner, Floral Street, sold the assets of the company for "up to £500,000" on 29 January, after its bank pulled the plug on all the company's financing facilities. AIM-listed Floral Street has ceased trading and is initiating insolvency procedures - the directors expect there to be a deficiency of net assets. Some financial engineer will pay good money for reversing a company or two into the shell that is now Floral Street. Aziz Punja, chief executive of CJ Graphics, said: "It is no secret that we experienced a downturn in business during the latter part of 1998. This, combined with mounting orders due to Apple's lack of product and the recent changes imposed by Apple, has really forced our hand." The buck clearly stops there, as far as CJ Graphics is concerned. Apple has struggled to keep up with UK demand for the iMac, its most popular launch, with many models on allocation throughout the fourth quarter last year. But how many other Apple UK dealers have gone bust recently because of product shortages or channel changes? Banks do not usually pull the plug for these reasons. Besides, CJ Graphics could have been reasonably certain that it would retain a direct relationship with Apple, post channel reorganisation. With five retail outlets nationwide, CJ Graphics looks less dependent on Apple than many of its rivals. The company also sells graphics arts materials and office furniture, as well as Apple kit. Its future now looks secure under the wing of the Rapid Group. What about the future of the remaining Apple dealers, who are now expected to apply for reaccreditation? The future doesn't look bright for low-volume dealers, who are already losing out in new volume breaks introduced by Apple disties Ingram Micro and Computer 2000. This could force smaller resellers to raise prices by up to eight per cent, which, as one source said, will mean they will lose out to low-price mail-order resellers. But is Apple behaving so outrageously? It wants minimum volume commitments of #60,000 a year from its dealers, which doesn't seem such an awful lot. It is also trying to impose minimum requirements for staff size and company standards. Apple appears to have concluded that it has too many dealers in the UK. And Apple would be right. Its direct sales operation, AppleStore, is already a fixture on the Mac scene and with a few choice third-party applications and add-ons, could represent a big threat to the mail-order guys. In this context, low-volume, low value-adding resellers are an irritating distraction. ®