Apple and the reseller equation

My most recent post got me to thinking about how much better Apple products would perform in small businesses if there was some local support.  In the early eighties when I helped run a small regional chain of resellers, providing local support was the way you got customers to use your technology.  Things have evolved over time as technology customers have become more savvy. Apple, since their fall from grace in the mid-nineties, has been in more of an adversarial position with their resellers than in a partnership one.  Many resellers got very frustrated with Apple, their margins declined, and they ended up in a losing battle with mail order catalogers who often could provide the same product at better prices.

As resellers abandoned Apple, Apple eventually had to open their own stores so some Mac experts could be readily available.  The problem is that this only worked in the larger population centers.  Many small towns were left with no reseller who really could support Apple products.  Apple had some programs such as their Apple Specialist program which was designed to keep Apple expertise alive and well in the reseller channel. 

I'm not sure how that has worked but I suspect that being an Apple reseller is still a challenging proposition.  You know in your heart that the Apple Stores are going to get the product first.  Even when our Federal Team at Apple decided to partner with the Apple Stores and allow our federal customers to buy at Apple's federal prices at the store, we soon learned that the Apple Retail Stores has sophisticated ways of bundling product that often made our "deal" to the federal customer look a little lacking.

It's a little bit of a chicken and egg question.  What came first, under performing resellers or Apple treating their resellers poorly?  I'm not sure I can shed light on that, because when I came down from Apple Canada to work for Apple USA, the decline was well under way.  I was appalled at how good resellers were treated.  In Canada we had tried very hard to help the resellers build a strong business proposition. We had been very successful in doing that.  I had some great resellers across Maritime Canada, they were mostly Apple only.   In Apple USA the operative theory was open as many resellers as possible and see who survives.  At one time Apple had some exceptional resellers in the Washington, DC area.  As I remember there was probably $35M in business just going through five or six stores, and there were a number of strong smaller ones.  That was not to last long with resellers being opened on every corner.

The interesting thing is that those good resellers were selling to businesses and government.  They had been doing a pretty good job of it, but Apple efforts to authorize large national chains with little commitment to Apple product spelled the end of most of them even before the mail order houses put the survivors on the road to extinction in the mid nineties.

At the very least, this was a contributing factor to Apple's demise in the enterprise and business.  Whether Apple, a company whose products need some help often to fit in, can afford to have very few resellers is a question yet to be answered.  It doesn't matter with iPods but computers are a different things.

I know one thing. Apple's philosophy on resellers is completely different from what we're doing at Webmail.us.  Our reseller program allows our resellers to deliver the same email hosting service that we do to our enterprise customers.  We still take care of the backend services, the difference is that whereas we provide customer support to our enterprise customers, our resellers provide support to their customers.  They're even able to use their own private-label version of our interface.  If they find an enterprise before us and can handle them, more power to them.

To us a really successful reseller is a wonderful thing for our whole company. Resellers allow us to address markets that we just don't reach. They also have specific knowledge which makes them experts in particular markets that might be something other than geographically bound. It is unlikely we would ever have that market specific knowledge.

Though it is a little hard to compare selling a service to selling a product, there are still some valid criticisms of Apple's approach.  Structurally a reseller for Apple became competition for other parts of Apple.  At the highest levels of Apple, there was a belief that channel conflict was good because it made for a more aggressive sales force at Apple.  In fact the worldwide VP of Sales used to encourage Apple sales people to become "sales animals."  The unfortunate thing is this often set different divisions against each other.  What was good for the reseller division wasn't necessarily good for the direct enterprise sales people, the Apple Online Store, the Apple catalogers or the Apple retail stores.  The result was an unhealthy competition for Apple customers. We used to call the strategy moving "apples" from one internal basket to another.  It was a good way to rotate success among organizations without figuring out a real formula for success.  Perhaps Apple has sorted that out by now, but I haven't seen a great resurgence of Apple resellers.

There are some great Apple VARs and Specialists that have been able to survive in very specific markets where their expertise gives them a leg up.  To a certain extent many technology companies, with the exception of Dell have faced this same problem with resellers.  Though even Dell has some success stories. Cyberline Computers here in Roanoke seems to exclusively sell Dell products through some sort of Dell affiliate program, and they appear to be thriving.  To be fair after many years, Apple finally has a reseller in Roanoke, Computer Pros.  To my knowledge they are the only authorized Apple reseller outside of our universities in Southwest Virginia.

However, as is often the case with Apple, it all goes back to Steve Jobs.  Steve Jobs does not believe in sales people and resellers would just be a further extension of sales people.  It seems to be hard for Steve to be inclusive with his success.  Any success is due to the great products (read product of Steve's mind) not the people who work hard to sell them in what is often a hostile market at least compared to the world of iPods.  You get a good feel for Steve Jobs' character in the Wired article, "Jobs vs. Gates: Who's the Star?"

Rather, he uses social issues to support his own selfish business goals. In the Think Different campaign, Jobs used cultural figures he admired to sell computers -- figures who stuck their necks out to fight racism, poverty, inequality or war.

The point is that the Steve Jobs' ecosystem is very small even within Apple.  It certainly doesn't include resellers or even Apple sales people.  If you don't believe me, talk to some Apple sales people most of whom have not shared nearly as much in the wealth created by Apple as people at other technology companies.

Whatever tactics will sell the most computers in Steve's mind at the least cost are the best.  If that means turning Apple into a place where reseller partners have a tough time being successful, then so be it.  After all it was Jobs' brilliance alone that made the computers sell in the first place.  The rest of how it happens doesn't matter at all.

When I contrast Steve Jobs to our CEO, Pat Mathews, the differences are huge.  While they are both intensely focused on success, Pat is absolutely committed to creating an environment for success for everyone in the company, our partners, and our customers. It's a quantum shift in attitude especially when it comes to dealing with resellers.

We actually have a close enough relationships with some of our resellers that we sometimes push customers to them and they push customers to us.  It's not a very complex strategy underlying those actions.  We live in a very competitive world, if you don't do what is right for your customers, you're probably going to lose them.

We have a dedicated team of people calling on resellers.  Their success doesn't mean that another part of the organization fails.  The branding opportunities that we have created for Resellers allow for a strong business proposition.  We also have Pat out leading the choir as it were, telling people about the shift to email hosting.  Pat's posts and references in his blog such as this one, "The future is hosted, online e-mail" help pave the way for success in our whole ecosystem.   Pat recently referred in one of his posts to an article, "What's the true cost of running email in-house?"  His efforts to get the message out are good for our business and for the business of our resellers.

So when is the last time Steve Jobs went out on a limit and told us publicly that having Macs with OS X is a better alternative to the Windows world especially for small business, and MacWorld doesn't count because the reality is that MacWorld is a risk free world.  If Steve wants Macs and OS X to have greater market share then he should start talking about the Mac advantage in places where people don't already know about it.  Then maybe he could build an organization where resellers can be successful without another part of the organization seeing reseller success as their failure.  I know it is possible because there are a couple of small examples where it has worked in Apple over the years.

I'm not going to hold my breath for this to happen.  Steve doesn't have to share the success even though he has more than enough to go around, maybe if you believe the Wired article he doesn't even care to.

What I do know for sure is that our business model at Webmail.us is built around creating a company, resellers, and customers that all share in the success.  If we can deliver better and better services to our customers and do it without channel conflict, then we all win.  Maybe as our market matures that will be impossible, but right now there is plenty of opportunity for us and our resellers.  Actually I wish I had some of those great Apple resellers that I've been affiliated with in the past selling our email hosting services.  They were as a good bunch of business partners as I've ever seen.  The ones I worked with in Canada accomplished some amazing feats often turning small towns into virtual Apple outposts.

If any of them are still around and want to figure out a new revenue stream that can deliver real value to their customers, get in touch with us at Webmail.us, we would love to have new partners who can take our products where we don't have the time or resources to go. And if you're a small business yourself and interested in email hosting and don't have a reseller partner, we're also glad to help you.  You can check out our pricing here.

Working together is the way a reseller and a company with resellers ought to work, not the way Apple has it set up.

Comments

[Olivier Van hamme]

Your writings about Apple seem to be honest, but pretty scary :s

Do you know if Apple Computer is open to creative input from the outside?! I'd love to share my view on iCal, but I don't know how to get in contact with the Visual Interface Designer (MACOSX) of Apple. Considering your scary stories about things going wrong at the level of management, I'd love to send my stuff to the right people.

I know there is a no-reply feedback option on the Apple site to give comments on their products, but I'd love to get in contact with the guys involved with iCal. Or should I inform sjobs@apple.com? I want to challenge his guts feeling :)

Olivier from Belgium-Europe
About myself: I am a junior Visual Interface Designer who just finished an advanced slide show presentation of what iCal could be in the foreseeable future. It's crazy, but it makes sense!

[ocracokewaves]

I really wish Apple were open to input from the outside. I just spent some time trying to help some people with a revolutionary input device get an audience with Apple. I got a very well respected Apple person to send a few e-mails for them, but he was unsuccessful in stirring up any interest.

I hate to say it, but right now my guess is that Apple has tilted back to more of a non-invented here place.

At other companies which utilize blogs for feedback, you would have a prayer.

I'll do some poking around for some contacts but don't hold your breath. Apple is a pretty closed society these days.