Why Apples bite remains small
When Media Markt sells an Apple, its the news of the day. Thats because the American computer makers PCs and notebooks are far out of reach for most cost-conscious Poles who shop at the nationwide network of 16 high-tech self-service retail stores.
Apples iMac PC, its flagship product, sells for 1,200-2,500 depending on computer speed, display and functionalities, while top-of-the line Apple models with all the trimmings can run as high as 15,200 (zł. 60,000), according to a saleswoman at a Warsaw-based Media Markt superstore. She remarked that so far this month, no graphic designers or advertisers Apples core buyers had purchased a single iMac or iBook laptop at her store.
The situation underscores the classic catch-22 that Apple IMC Poland has been trapped in since it first appeared in the country 11 years ago. Traditionally, Apples sales have been geared to the education and graphic design markets. But since these markets are limited with only about 5,000 graphics users at publishing houses around the country and a handful of schools which can afford the expensive computers the companys market share has remained a stagnant 1% for the past several years. Hence, its attempts (thus far unsuccessful) to capture individual retail customers.
After a failed attempt to woo home and small business users four years ago, Apple has now reset it sights on having another go at the retail market possibly as early as next year and is contemplating establishing a network of specialised consumer sales outlets in the countrys largest cities, although no final decision has been made yet. The shops will offer a wide range of games and educational titles as well as digital
audio and video products.
Still, Apple must overcome its price barrier to increase sales among cost-sensitive consumers since its PCs are about three times as much as those of domestic makers Optimus, JTT Computer and NTT System, according to Jarek Smulski, a researcher at IT market watcher IDCs Warsaw office. Apples previous failure with retail buyers was largely due to price.
We tried to push this market, said Bogdan Jędrzejczyk, president of Apple IMC Poland. We made extensive marketing efforts even on TV, but the response was not good enough.
We failed, and we learned a lesson. And I havent seen any computer brand in Poland being a consumer market success story. Its hard to be the first, and there will be a certain time when we can start.
So far though, Apples sales in Media Markt outlets have not been going well. The company is in talks with Empik Megastores to sell some of its products, including its iBooks and iPod digital-music players, after it was rejected by local hypermarkets that only want products less than 100 on their shelves for their złoty-watching shoppers.
Jędrzejczyk has to do something; otherwise, his selling margin will be even worse than now, said Krzysztof Pietrasik, editor-in-chief of Digit, a magazine devoted to PCs and notebooks.
By year-end, Apple expects to sell about 4,000 iMacs and nearly 500 iBooks. Jędrzejczyk expects sales of iMacs to be flat in 2003 due to the general economic slump, but anticipates that sales of iBooks will pick up, especially after a recent price drop to 1,150.
Such flat sales, however, translated into a net loss on sales of 10 million for Apple in 2001. Jędrzejczyk was mum on total revenue for this year, but is certain that the company will see a profit. He also said that the firms 1% market share was good considering the countrys fragmented PC industry, which is divided between large domestic producers, multinationals and garage-based computer assemblers. Apples market share had been about double several years ago, but in the mid-1990s, it lost out to Microsofts Windows operating system. Ever since, its market share has remained static.
We are selling an expensive professional product, so 1% is not the same as the garage PC makers 1%, Jędrzejczyk said, and we are working on vertical and professional markets.
Its like Mercedes-Benz. Mercedes is very strong in a certain target group, but its market share in Poland is probably less than 1%, and it will probably survive.
Others say that the computer makers low market share and visibility will continue to hamper its efforts to expand its customer base to home and small business users.
Apple is still not very common in Poland, Pietrasik said. Just professionals buy, but people on the street do not distinguish the difference between iMacs and other PCs.
So how can Apple succeed in nailing the consumer retail market, especially with prices still too high for all but the wealthiest buyers? The blueprint has yet to be drawn. Much will depend on how Apples products sell on Empiks shelves. Nonetheless, Jędrzejczyk, who said such sales would also depend on a pickup in the economy, is already entertaining the idea of creating Apples first real consumer outlet in Warsaw next year.
I am talking about an intensive approach, he said. We have quite a nice target group in Warsaw and in other cities where people are rich enough and educated enough
but we think its not the right time not yet.
Apple already has two stores selling only its products one in Warsaw, set up two years ago, and one in Wrocław, established in May. But these, Jędrzejczyk said, are not geared to individual retail consumers. Other than these stores, the company mainly sells through a reseller network with only about 2% of desktops and 11% of notebooks sold directly by the parent company, according to IDC. No plans are in the making for a specialised marketing campaign to attract home and small business users, although Apple in general will spend about 200,000-300,000 on marketing its iMacs, iBooks and iPods.
Overcoming the widespread use of Microsofts Windows operating system might also make the consumer retail segment tough to conquer.
Consumers in Poland dont value the simplicity of use, said Jędrzejczyk, referring to Apples reputation for producing easy to use computers. They can spend time working with Windows and calling to friends to solve some technical problems. But Polish people are like engineers they think they can do everything themselves.
In the meantime, Jędrzejczyk is betting that the so-called creative market of high-end users in the entertainment industry, such as television stations, which require fast computers with heavy memory capabilities and special software to process digital content, will boost sales. Apple already supplies such equipment to big players, such as Polsat and some TV programs, but since the market is still fairly new, the company has no solid plan to corner it.
And it may not be able to anyway since this market segment is limited to about 10 big TV studios in Warsaw and a few more in other major cities. It also has been dominated by two other manufacturers of digital broadcast production computer equipment, according to Pietrasik.
Despite this, Jędrzejczyk said that TV producers might consider replacing their current 250,000-1.5 million systems with an Apple system that costs 10,000, but has fewer capabilities and features. He added that he expects an increase of 10-20% revenue from this new market in 2003, and that more competitive opportunities would come from Europe after Polands accession to the European Union in 2004.
