Apple: Some considerations about the distribution policies

4 Some considerations about the distribution policies

Apple adopted a multi-channel distribution approach for mainly three reasons:
1. Reduce pressure from buyers that could negatively affect margin.
2. Have more control in order to ensure a buying experience in line with
products standards of quality.
3. Reach high visibility.

4-1 Competitive pressure.

As many computer and consumer electronics manufacture Apple is exposed to heavy
pressure from large retailers and wholesalers. Although the company has a very
strong brand and well differentiated products the retailer has still a lot of power on
exposition, promotion customer service. A selective and differentiated distribution
helps to reduce the bargaining power of buyers.

The On-line shops are useful as a showcase for the company’s product, but it is
mainly used by people who already owns a Mac and that do not need to try the
computer because they already know how it works. They are more attracted by the
possible customization and by the wide selection of peripherals and accessories that
the website offers. For example it is possible to choose some components of a PC
and have a personalized write engraved on the back of an iPod and ask for a gift box;
moreover only through the On-line store it is possible to redeem gift voucher. At
their heart, the On-line shops are more a service to its customer, than a competitor to
large e-commerce website, like Amazon and eBay, which have a pricing strategy far
more aggressive.

Although having being pretty selective in the past, today Apple is far more open to
large mass retailer than it was in the ‘80s, when only authorized dealers were allowed
to sell their product. It was decided to jump in for taking advantage of the large
amount of traffic generated by large retailers. Since 95% of those who are going to
buy a computer didn’t even consider a Mac a presence in the place where most
people buy electronic was essential. However this strategy presented more than a
challenge.

Big retailers are used to deal with big OEMs don’t have the will and the capacity of
providing a comfortable buying environment. Mac were stored on the shelves with
other computers and the small range of products (3 desktops and 2 notebooks) almost
disappeared within the vast assortment of big shops. They were not getting the
exposure they needed and the low knowledge level was a barrier for those curious
the try the machines. In 2000 Apple realized that retailers were damaging the
relationship with its customers, at a time when the company was being heavily
pressured by Dell’s direct distribution model. Not only: this dramatically reduced the
possibilities for a significant user base expansion, since it was not possible to explain
the possibilities of a Mac to customers used to see Apple as a something exotic,
aimed mostly for computer geeks. Dell had a much better control of its relationship
with customers and Apple had to take countermeasures.