Slow sales bite Apple retailers

Casualties are growing among companies whose businesses depend on Mac sales, including Australia's Buzzle and the San Francisco Bay Area's ComputerWare.

4 min read
A slowdown in sales is hurting more than just Apple Computer, with a number of Mac retailers running into trouble.

Buzzle, a conglomeration of the largest Apple resellers in Australia, has been placed in receivership amid a mountain of debt. According to several Australian press reports Wednesday, Apple was the driving force behind the receivership. Buzzle allegedly owes Apple around $10 million.

The problems at Buzzle follow the recent closure of longtime San Francisco Bay Area Mac chain ComputerWare. Earlier this year, New England Mac seller Computer Town closed all but two locations when it changed ownership.

Apple declined to comment on its retailers beyond issuing nearly identical statements on the Buzzle receivership and ComputerWare closure.

"Apple's products are available through thousands of outlets worldwide," the company said in a statement about Buzzle. "It is not uncommon for some of these businesses to turn over each year."

January and February were particularly tough months for some retailers, as Apple had announced but not shipped in volume several of its high-end models.

Exacerbating the slowdown in sales of Macs is the fact that more people are buying computers through Apple's Web site.

Sales from Apple's online store accounted for about a third of the company's revenue in the October-to-December quarter, up from 13 percent in the same quarter a year earlier.

As a result, NPD Intelect analyst Stephen Baker said, many Mac retailers are suffering.

"The same kind of person that is going to buy from ComputerWare is buying from Apple's Web site," Baker said.

Baker added that many Apple loyalists see shifting their purchases to the Apple online store as a way to help the company through tough times.

Planting brick-and-mortar roots
The Mac retailers' woes come as Apple is preparing to launch its own line of retail stores in the United States, with reports linking Apple to various sites including Palo Alto, Calif.; Littleton, Colo.; New York City and Chicago.

Apple has not commented on plans for its own stores but has said it is seeking better performance from companies that sell its products.

"We'll cut some channel partners that may not be providing the buying experience" that Apple wants for its customers, Senior Vice President Tim Cook said in a January meeting with analysts. "We're not happy with everybody."

Last month, Apple and Sears said they are ending their relationship.

Apple reported a $247 million operating loss for the October-to-December quarter, after twice warning that sales would be lower than expected.

The slowdown allegedly caused Buzzle to delay its planned stock offering on the Australian market last year, according to Australian press reports. A conglomerate of several Apple resellers looking to boost the Mac's presence in the Australian market formed Buzzle last July.

Although response to Apple's new products has been strong, several Apple retailers in the United States said they had a tough time getting their hands on the products in most demand: Apple's Powerbook G4 Titanium notebook and the 733MHz Power Mac.

One Apple retailer said sales were off 40 percent in January and February, although sales improved in March as more of the high-end models were made available.

Computer sales industrywide are sluggish, although Apple has predicted a "slight profit" for the quarter that ended last week.

Different approaches
Some Mac retailers even report that business is growing, although in many cases not as much as in past years.

"Apple's new product line, particularly the Titanium G4 PowerBook, has been very well received," said Don Mayer, president of Small Dog Electronics, a Mac-only retailer in Vermont. Mayer said his business is up 30 percent this year compared with the same period last year.

Small Dog has grown by offering refurbished Macs, Mayer said, as well as by selling computers over the Internet, which now accounts for more than half the company's sales.

"You've got to be a little bit different," Mayer said, "especially as Apple is looking at opening retail stores."

New York-based Tekserve started out a decade ago fixing computers. It started selling computers five years ago. Now the company gets more of its sales from selling Macs than from service, Tekserve co-owner David Lerner said, although service is still more profitable.

"For the first quarter, we're just slightly ahead of last year, which historically is not good for us," Lerner said. "We've grown tremendously over the past few years. But given the current environment, I'm happy."

Lerner said he hopes his company's focus on service will allow it to avoid the same fate as ComputerWare.

"We lead with service," Lerner said. "I know that they had outsourced their service. I'm hoping that mine is a better business model."