Apple Store suppliers suffering through longer payment terms, consignment model

Posted:
in General Discussion edited February 2021
Accessory producers and other suppliers who provide products for Apple's retail outlets have to wait longer before being paid by the company, a store claims, with changes in terms also making them responsible for unsold products.




Apple has reportedly made changes to the way it handles products it receives from suppliers for sale in the online and physical Apple Store. Suppliers who do not agree with the new terms reportedly risk their placement on Apple's shelves, with the changes considerably benefiting Apple.

After providing distribution for its retail stores to a new provider, The Telegraph reports Apple has made demands to suppliers directly, and in an inflexible way. Suppliers told the report that terms were previously negotiated with distribution companies, but the new ones were set by Apple and are not negotiable.

The changes include a change in how long a supplier waits for payment, increasing the time from 45 days to 60. Suppliers also have to accept a "consignment model," in that they are paid only once an item is sold.

The non-negotiable nature of the changes does at least mean all suppliers have the same deal with Apple, but the dependence on sales via Apple also means most are likely to accept them. Vendors are also reportedly anticipating a squeeze on cash flow from the changes.

"They are not doing their vendors any favors," said one unnamed supplier. "Their vendors face cash challenges that they don't. I don't think anyone's going to turn them down. There's very little competition for the brand exposure that you get with Apple. It's certainly a squeeze."

An Apple spokesperson said "We deeply value the close relationship we have with the world-class companies who sell their products via Apple.com and in our stores. Apple regularly assesses the assortment of the third-party products we sell and the structure of our models to provide vendors the ability to reliably and confidently grow their business."

The change to suppliers isn't the only way Apple is trying to improve its retail position. In August 2020, it made a request to landlords in the U.K. to cut the amount of rent it pays by half or to secure free rental periods, in exchange for lease extensions.
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Comments

  • Reply 1 of 24
    DAalsethDAalseth Posts: 2,124member
    You see, this is the kind of crap that will get Apple in trouble. 
    elijahgkkqd1337mac_dogGeorgeBMacsdw2001
  • Reply 2 of 24
    elijahgelijahg Posts: 2,608member
    DAalseth said:
    You see, this is the kind of crap that will get Apple in trouble. 
    Well the $500 credit for the DTKs has to come from somewhere, obviously... 
  • Reply 3 of 24
    I wonder how many people buy third party products   in an Apple store. Having the products in the Apple store is a smart way for a company to promote their products. Let the consumer decide if they want to make a purchase in the Apple store or go online or to a big box store.
    watto_cobra
  • Reply 4 of 24
    DAalseth said:
    You see, this is the kind of crap that will get Apple in trouble. 
    Why is that? And what is the trouble you speak of. And what "crap" is that? Trouble? Seriously, explain your comment.   Stop throwing vague "crap" (your word, not mine) like that out there. You want the government to stop this? You want a law passed?

    Changing the payment terms to 60 is pretty lame. Going to a consignment model is not. It's been in use by many industries for decades and still is. Unsold inventory goes back to the manufacturer and they get paid for what they sell. It's part of the price they pay for having the sales outlet. The seller does not accept inventory risk.It's called smart business and cash management. Ever buy goods through Amazon and return something that came from a third party supplier? Every buy clothing in a retail store? I don't think you understand how common this is in retail sales of non-perishable goods? You think Walmart and Target pay suppliers for unsold inventory of non-perishable goods? You think any big retailer pays up front when they don't have to? It's the price you pay to do business with them. Worth the risk for most of them.
    JanNLomar moralesmaximaraGrnMtGuywatto_cobra
  • Reply 5 of 24
    tommikele said:
    DAalseth said:
    You see, this is the kind of crap that will get Apple in trouble. 
    Why is that? And what is the trouble you speak of. And what "crap" is that? Trouble? Seriously, explain your comment.   Stop throwing vague "crap" (your word, not mine) like that out there. You want the government to stop this? You want a law passed?

    Changing the payment terms to 60 is pretty lame. Going to a consignment model is not. It's been in use by many industries for decades and still is. Unsold inventory goes back to the manufacturer and they get paid for what they sell. It's part of the price they pay for having the sales outlet. The seller does not accept inventory risk.It's called smart business and cash management. Ever buy goods through Amazon and return something that came from a third party supplier? Every buy clothing in a retail store? I don't think you understand how common this is in retail sales of non-perishable goods? You think Walmart and Target pay suppliers for unsold inventory of non-perishable goods? You think any big retailer pays up front when they don't have to? It's the price you pay to do business with them. Worth the risk for most of them.
    Agree with most of this. In addition, big box retailers such as Walmart, Target and especially Costco have to arrange an agreement for what happens when a customer returns an item. I’m sure that Costco’s agreements reflect their return policy. Whereas Apple and others have only a short return period. But for small sellers waiting 60 days for payment is an unreasonable hardship from a company the size of Apple. Apple needs to take care of its suppliers in a kinder way. 
    edited February 2021 tommikeleomar moraleswatto_cobra
  • Reply 6 of 24
    lkrupplkrupp Posts: 9,991member
    DAalseth said:
    You see, this is the kind of crap that will get Apple in trouble. 

    Apple’s stores, both online and physical, are theirs and they get to decide whose products they choose to offer in those stores. There’s NOTHING anti-competitive or anti-trust about stores choosing what products they put on their shelves and under what terms. EVERY retail store, online or physical, chooses what they offer for sale.

    it is disingenuous  of you to imply this is somehow illegal or unethical. If Belkin wants their products on the shelves at an Apple Store then they agree to Apple’s terms, period. Belkin, for example, and others are parasite companies, making products compatible with Apple’s and other’s products and they have absolutely no right to demand shelf space in an Apple Store on their terms. Period!

    People have inflated the claims of anti-competitive and anti-trust to ridiculous levels. 
    tommikeleJanNLwatto_cobra
  • Reply 7 of 24
    chadbagchadbag Posts: 1,696member
    It would have been nice when I had an online store (not Apple related) to have been able to use a consignment model or 60 day payment.  I had to purchase the products I sold and take the risk of it not selling. I did get 30 days from most vendors however, and one vendor (Magpul) did take a bunch of stuff back when I got in a bind (out of the kindness of their heart).  
    watto_cobra
  • Reply 8 of 24
    Many of the posters here seem to think that Apple is punishing small producers and craft shops selling low quantities of products. The companies affected are well established third party vendors that spent months or years getting into the Apple Store. They know there's a price to pay for the exposure on Apple's shelves, virtual or digital. Once the 15 - 30 day payable changes are made, the flow of cash will return to normal. 

    FTR I was an Apple dealer for years. We bought and owned our inventory through distributors that included their markup. Most big box vendors that we competed with were essentially consignment shops buying direct from manufacturers at a lower cost than us and other dealers. It sucks but you work your own competitive advantage, which, for years, was our product knowledge and customer service.
    ravnorodomforegoneconclusionmaximaraomar moraleswatto_cobra
  • Reply 9 of 24
    citpekscitpeks Posts: 185member
    For suppliers, product placement in Apple's stores surely has some value, in terms of exposure to the desirable demographics who frequent them and a tacit endorsement as solutions that Apple offers, either solely, or alongside Apple's own products.

    Since Apple doesn't appear to directly charge slotting, listing or placement fees, it can exploit the desirability of those benefits in other ways, such as through the terms it demands from suppliers.

    While debates can, and are, being had about the market power Apple holds via its app stores, and whether that falls outside legal bounds, no such argument can be made in this case.  Apple's stores are not the exclusive outlet for related product accessories, for either third party suppliers or even Apple's own first party accessories.  It may benefit suppliers to utilize Apple's stores as a distribution channel, but they are far from the only option, and Apple is not obligated to those who do not agree to its terms.

    As with the brouhaha over recent news of Apple's rental agreements, many responses betray an ignorance of the machinations behind business negotiations, and a failure to recognize that business markets differ from consumer markets.

    Ever wonder why one can't order a Pepsi at a McDonalds, or why Coke's products are no longer an option at Costco's food courts, but Pepsi's are?  The same Costco that at one point stopped carrying Apple's products altogether?  Surely that was illegal, no?

    Or why one must stretch to the top or the bottom of the shelf to reach Brand Y and Z, while Brand X can be easily grabbed at eye level?  Or why there is a bunch of Lays chips at the end of the aisle, and not another brand?  Those situations are not due to coincidence, or chance.

    Many other examples of how the retail market operates abound, and none of them are "trouble" for the retailers who practice them.
    edited February 2021 gregoriusmtommikelewatto_cobra
  • Reply 10 of 24
    For a company with so much cash, squeezing little vendors doesn’t particularly sound so ethical.  I’m a big fan of Apple,  but these monopolies are becoming too large for their own good.  
    elijahgGrnMtGuyprismatics
  • Reply 11 of 24
    22july201322july2013 Posts: 2,997member
    wow321 said:
    For a company with so much cash, squeezing little vendors doesn’t particularly sound so ethical.  I’m a big fan of Apple,  but these monopolies are becoming too large for their own good.  
    I'm sure you agree that it's a stretch to call Apple's physical stores a monopoly. The third party products available from the Apple store are all available from many other stores. Apple does not have a monopoly for selling any of its third party products. For any product vendor that sells things in Apple's stores, I would expect that less than 10% of their sales come from Apple's physical stores. Apple has no obligation to sell any third party products in their physical stores, and it won't hurt those vendors too much if they or Apple decides not to sell things in those stores.

    It's also true that Apple has no obligation to sell any third party apps in Apple's App Store.

    Nobody can force Walmart, or Apple, to sell products made from other companies in their stores.

    This doesn't mean I always support whatever Apple does, but I always point out that any company is free to sell whatever they want, however they want, whenever they want. If Epic or anyone else wants to change the rules of Apple's stores, all they have to do is buy 51% of Apple's total stock. And I also support Epic's decision not to allow other parties, like Apple, from changing the rules to Epic's app store.

    And by the way, Apple doesn't own Apple. The shareholders own Apple. And most of Apple's shares are owned by small investors, even though some of that doesn't seem apparent because brokerage houses act on smaller individuals' behalves. Tim Cook tries to make Apple profitable in order to benefit all those small little investors. Apple is owned by little people like you and me. (I don't own Apple stock, but I have some bank investments that probably include Apple stock, however banks normally don't tell you what stocks they are investing in.)
    omar moraleswatto_cobra
  • Reply 12 of 24
    DAalseth said:
    You see, this is the kind of crap that will get Apple in trouble. 
    In what way? Space on Apple Store shelves are a premium commodity, consignment terms and payment schedules are just the price of getting your product on those shelves. Don’t like the terms there’s always Circuit City, oh wait...
    watto_cobra
  • Reply 13 of 24
    The problem here is image. Every time Apple, the most valuable company in the world, bullies the little guy it looks bad. More than that it incentivizes governments to reign them in with regulations that will cause them significant harm. The EU is licking its chops to go after Apple. Every move that causes another company to become bitter at Apple is another tool the EU and yes, the US will use to justify regulating them. I’m not saying Apple is doing anything wrong, but they seem to quickly forget how they were the small underdog that almost faded away 
    edited February 2021 elijahg
  • Reply 14 of 24
    DAalsethDAalseth Posts: 2,124member
    tommikele said:
    DAalseth said:
    You see, this is the kind of crap that will get Apple in trouble. 
    Why is that? And what is the trouble you speak of. And what "crap" is that? Trouble? Seriously, explain your comment.   Stop throwing vague "crap" (your word, not mine) like that out there. You want the government to stop this? You want a law passed?

    Changing the payment terms to 60 is pretty lame. Going to a consignment model is not. It's been in use by many industries for decades and still is. Unsold inventory goes back to the manufacturer and they get paid for what they sell. It's part of the price they pay for having the sales outlet. The seller does not accept inventory risk.It's called smart business and cash management. Ever buy goods through Amazon and return something that came from a third party supplier? Every buy clothing in a retail store? I don't think you understand how common this is in retail sales of non-perishable goods? You think Walmart and Target pay suppliers for unsold inventory of non-perishable goods? You think any big retailer pays up front when they don't have to? It's the price you pay to do business with them. Worth the risk for most of them.
    I thought it was obvious but I guess it needs to be explained:
    The crap is the subject of the article. Arbitrarily changing the terms with their retail suppliers putting them in a cash crunch. Doing something to pad their own bottom line at the expense of their partners. 
    Trouble? that could come in many forms. This could add to the narrative about Apple being an abusive monopoly leading to more investigations and possibly even sanctions. Much worse it adds to the growing narrative that Apple is just another abusive money grubbing company and not "the computer for the rest of us". If Apple loses that then it risks much of what makes it an aspirational product. Apple has cultivated over decades the image as a company that cares about the environment, social justice, people. It is one of the pillars of the companies image. But acts like this put that image at risk. That will come back to Apple in the ***, and will hurt the bottom line. It's a self inflicted wound.  It doesn't have to happen. 
    elijahg80s_Apple_Guymuthuk_vanalingamgatorguy
  • Reply 15 of 24
    wow321 said:
    For a company with so much cash, squeezing little vendors doesn’t particularly sound so ethical.  I’m a big fan of Apple,  but these monopolies are becoming too large for their own good.  
    You have a right to your opinion, but it is horribly uniformed, vague and purports to inflict your personal brand of business morality on others.
    omar moraleswatto_cobra
  • Reply 16 of 24

    The problem here is image. Every time Apple, the most valuable company in the world, bullies the little guy it looks bad. More than that it incentivizes governments to reign them in with regulations that will cause them significant harm. The EU is licking its chops to go after Apple. Every move that causes another company to become bitter at Apple is another tool the EU and yes, the US will use to justify regulating them. I’m not saying Apple is doing anything wrong, but they seem to quickly forget how they were the small underdog that almost faded away 
    No it is't. This is universal method of retail sales employed by every large retailer and applied to non-perishable goods. 

    This is not something that is a regulatory matter nor something the EU or Dept. of Commerce or even the courts have the authority to regulate. This is not anti trust, anti-competitive or any of the categories regulators are charged with oversight of. There is nothing illegal, immoral or anything along those lines that is applicable here.
    omar moraleswatto_cobra
  • Reply 17 of 24
    Folk complaining about the Net 60 don't seem to understand the real world: I'm averaging Net 75 with one of my customers, Net 80 with another.
    watto_cobra
  • Reply 18 of 24
    lkrupplkrupp Posts: 9,991member
    The problem here is image. Every time Apple, the most valuable company in the world, bullies the little guy it looks bad. More than that it incentivizes governments to reign them in with regulations that will cause them significant harm. The EU is licking its chops to go after Apple. Every move that causes another company to become bitter at Apple is another tool the EU and yes, the US will use to justify regulating them. I’m not saying Apple is doing anything wrong, but they seem to quickly forget how they were the small underdog that almost faded away 
    Looks bad to who? Tech blog denizens? You do realize stuff like this never makes it to the national psyche. And again your argument seems to imply that accessory vendors have some kind of right to be in an Apple Store on their own conditions. These smaller companies are just as cutthroat as Apple, maybe more so. I don’t get the concept of socialism in business relations espoused by some here. Apple has an obligation to support other businesses that thrive on their coattails? 
    edited February 2021 omar moraleswatto_cobra
  • Reply 19 of 24
    elijahgelijahg Posts: 2,608member
    tommikele said:

    The problem here is image. Every time Apple, the most valuable company in the world, bullies the little guy it looks bad. More than that it incentivizes governments to reign them in with regulations that will cause them significant harm. The EU is licking its chops to go after Apple. Every move that causes another company to become bitter at Apple is another tool the EU and yes, the US will use to justify regulating them. I’m not saying Apple is doing anything wrong, but they seem to quickly forget how they were the small underdog that almost faded away 
    No it is't. This is universal method of retail sales employed by every large retailer and applied to non-perishable goods. 
    Did you forget Apple's motto was once "Think Different"? They don't usually follow the same path as others, so there is no reason they have to for retail sales either. It's just greedy Cook trying to beef up the bottom line even more.
    80s_Apple_Guy
  • Reply 20 of 24
    Hopefully this will ease Apple’s cash flow squeeze, and help the company stay afloat in these financially constrained times. 
    Xed
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