Naren Ayyar, MD, SAARC Countries, Apple Inc, likes to believe that his relationship with his channel partners goes beyond business terms. He says that they are more like his friends who are welcome to walk into his office and tell him what they think about Apple. Maybe it is this very approach that has endeared Apple to all its channel partners. People who used to sell Apple products 12 years ago want to do it again. Naren tells CI how he is going to further consolidate channel relationships.
How important is the channel to your business? What programs do you have in mind for them?
The channel is very important, our entire business is based on the them. We have multiple programs for the channel. Firstly, I am trying to expand my channel from 23 to 100 within this year. We already have 55 right now. Secondly, we are upgrading three of our best channel partners who are performing well and loyal to Apple to master resellers. This means that they can import directly from Apple Inc instead of going through the distributors. And they can get those extra margins and direct recognition. And that option is given to everybody who come directly based on performance. They have to sell only in-house and can’t be selling any competitive products. They have to perform at a certain level and we will be importing for him directly. Even the importing is not a criteria because that’s global with whom you have tied-up permanently. We have even broken the rules and done the import clearing for our partners and delivered the goods across to them.
We are soon introducing a newsletter for channels, which will be called AppleTalk. It will share all that is happening in Apple worldwide in a concise form for the channels. Last December we had a regional channel conference. This year we are planning a national one, all the SAARC countries will converge at probably Maldives and we will have some important speakers from Apple.
Most of your channel partners conduct multiple brand selling. Doesn’t this affect your sales?
The channel can be divided into two parts, resellers and retailers. Policy does not state that you cannot deal with anybody else, though we give preference to our loyal partners for their status upgradation. We do not restrict them. They themselves feel that Apple requires a different type of mind share and they cannot do justice to other PC vendors. They do take lot of other products with them like the scanners, printer’s etc. Things that go along with Apple. But for PCs they choose only Apple.
The retailers, on the other hand, keep multiple brands. And that is a deliberate move because when a consumer walks into their showroom he wants to see, look and feel various brands. And we too feel that with complicated and multi-wired, cheap and dull looking machines next to the iMac, our machines sell faster.
How can you ensure that retailers push Apple products compared to competition?
There are multiple ways. One is margins. We try to be as competitive as possible on margins. We study margins offered by competitors and we try to be as close to them as possible. Secondly, we provide them with a lot of visual merchandising and contribute towards the dÃ©cor of the retail outlet. We also spend a lot of effort in training our sales people for our channels. The retailer pays these salespersons the salary while we give them the incentives. So, there are a whole lot of programs that go into motivating and maintaining our retail channel. So our retailers are very loyal to us.
Earlier, retailing was a push market whereas now it is pull one. Customers who walk in, know exactly what they want. The retailer cannot make them change their mind. So to some extent we have to make sure that promotions and advertising campaigns that we have, creates an enthusiasm for Apple. This has improved with the iMac but it still not what it needs to be. We are looking into this and in the next quarter you will find us more aggressive on the media front.
The iMac is targeted at school kids. We believe that kids in a family are the key decision-makers. Kids today are very knowledgeable on computers and they know why it is preferable to buy a branded PC over an assembled one. Children also do not have prejudices like I want only Microsoft and so on. Besides they also like the colors of the iMac. So we are just focusing ourselves to make the kids aware that apple is available. So we are doing a whole lot of things targeting kids in the family.
But do you plan to set up exclusive Apple retail outlets?
Not yet. In future, yes! But before that I have to create a volume of business to sustain the exclusivity of retail. Currently I’m still building my brand, so I will concentrate on that. And I want achieve reflex conversions. People come looking for HP or IBM and they look at iMac, fall in love and buy it. I will lose this clientele if I start exclusive stores!
Currently if you look at the entire Asia Pacific region, the Apple exclusive stores are only at Singapore, Hong Kong and Australia.
But if you look at the experiment of Compaq, it did not work very well. Because they have signed an agreement with Compaq, retailers open another shop nearby in a different name and do multiple branding at that place. This is not helping Compaq.
What is Apple’s warranty policy?
Our warranty policies are of absolutely international standard. They are uniform all over the world. It is meant to protect the customer demands. Two things go wrong in India in terms of customer perception. One is that certain leading Indian brands have had some loosely defined warranty policies. It means that even if you have not switched on the machine and you ask for their engineer to come and switch on the machine, they will not ask money for that because they were selling machines at 30-40 percent margins.
But now, margins have shrunk and customers have to get used to the idea that if you want international prices, you have to then accept international warranty. Many customers find this difficult to accept. They want Indian warranty at international prices, which is not possible.
Secondly, all software has warranty only for 30 days. But whenever there is software problem, customers expect immediate response. I think there is a question of educational awareness as I cannot blame customers. But most customers today are beginning to accept this scenario.
Last year you had mentioned that Apple was planning to launch the Mac OS server sometime this year. When do you see that happening?
There are two thoughts to launch the Mac OS server. One is the seeding and second is the full-fledged promotional launch. The seeding part is already been done. We have one seeding unit already at The Times of India, Mumbai and another at a place in Delhi. These two seedings have been given to knowledgeable customers to test out all the connectivity issues, which is required within the country. These include the operating environment and all the other things too. That is progressing pretty well.
In the meantime what has happened is that if you see the Net, you will see that Steve Jobs has announced a new version of the Mac OS in a conference recently. So we are waiting for details. Once that comes through, we will be ready to launch the Mac OS server in India.
Why is that not all Apple products are available in India?
There are some products which Apple by policy restricts for sale outside the US and Canada. I will say that all the products that are available in Asia-Pacific are available in India. Till recently, our cinema product was not allowed to be sold outside the US and Canada. But just a few days back that was changed and we have already sold two units to Star TV, in which the Amitabh Bhachan’s Kaun Banega Crorepati will be telecast.
So the moment products are allowed within Asia Pacific they will be available in India. But there are certain products which are not made available to the region either because of support reasons or maybe the parent company thinks that the product has been developed keeping the North American or the European market in mind. Unless there is a corporate decision, all our products are readily available in the country.
But today the world is a global market. How can you determine whether or not the market in one country requires a specific product or not? What are the parameters for judging whether a certain region is ready or not?
The parameters are definitely corporate. But parameters ultimately need to protect customers. This means that in certain market you end up selling one or two pieces only because there is no demand for it. Then you are not geared up to provide support and eventually the customer suffers.
Ultimately we are producing products only to sell. As a company it does not make any sense to restrict customers from buying our products. But keeping customers’ interest in mind, we say that unless we have a larger demand and logistics of service are in place, we do not want to sell certain products. But once we see the demand pattern changing, then our products are released immediately in the market.
Why are there not many laptop manufacturers in India?
First of all, if you look at the top ten for laptops in the country, not a single local player features in that. The top three players in the market are IBM, Toshiba and Compaq who have over 35 percent of the market share between them. The fourth is Dell at four percent market share. There is a huge gap in the top three and the remaining. And then there are HP and other players. The reason for this is very simple. Manufacturing laptops is a very complex technology. It cannot be assembled. Even qualified people hesitate to repair the equipment. The TFT is virtually hand-assembled worldwide in only one place in Japan, Kyoto.
In the past, Zenith made an attempt to make its own laptops and gave it up,
PSI made an attempt to make a laptop, but did not succeed. So people have realized that it costs more to satisfy their laptop customers than desktop customers. Laptop customers are very particular because they are paying a big amount. They will never tolerate failures and they want immediate replacements. They want a battery to last for a longer time, etc. So, it’s not easy to get into the laptop market for a player unless he is a very serious player.
Even a company like Legend in China, which is the single largest PC Company in Asia Pacific according to a recent IDC survey, a company that has gone ahead of Compaq and IBM in PC sales, is not a leader in laptops. So laptop market is not made for everybody, which is why a specialized company like Toshiba is doing very well in the laptop segment. They are not in desktops at all. HP, for example, is doing so well in servers and desktops, but is not able to do well in laptops at all. It is only Compaq and IBM who have done well in both the areas which is an exception than a rule. This is a very specialized market not made for boys but for men in the industry.
Why is there virtually no grey market for laptops?
Not a single multinational company has a repair center in the country today. Most of the laptops are replaced and faulty ones are sent in bulk to Singapore or somewhere else for repair. So that’s why there has been no grey market in the country. Another reason is that the market is relatively small compared to the desktops. So everybody is attracted to the desktop. Also, investments required for assembling desktops is much less compared to laptops where investments required are very high while the market is small. I expect this trend to continue for the next three years.
The iBook is available at Rs 1,07,000. There is a local manufacturer who is offering a similar product at sub Rs 50,000. How do you look at this disparity?
There are no products which can offer the features of iBook at less than Rs 1,05,000. Most of the laptops available in the market are still from the Pentium II or Celeron range. A Pentium III laptop costs around Rs 2,03,000. So there is no comparison between iBook and others. We offer a six-month battery life which others hardly manage to match.