In 2010, Apple and Costco parted ways. At the same time Apple’s divorce with Costco was being completed, dealings with Walmart and Sam’s Club were heating up. Coincidence? We didn’t think so then, and now we don’t believe that's the case now. But rumor is, Apple and Costco are putting aside their differences in order to team up once again.
An email that's been circulating the past week is claimed to be from the Wireless Advocates CEO (Wireless Advocates owns the wireless kiosk contract at Costco), which states:
“I am extremely excited to share the news of a new partnership between Apple Inc. and Costco Wholesale. This partnership will bring a top selling line-up of Apple products to Costco members including the iPhone and embedded iPads. As Costco’s solution for wireless devices and services, we are proud to be a part of this new partnership and incorporate Apple products into our already strong product line-up in Costco.
We already know Apple products. They are not new to our business. We currently sell Apple products in two of our three enterprise channels (Car Toys and Military). We already have a great business partnership with them and this new opportunity strengthens that relationship. They are valuable to our long-term success and growth in our space. This initiative will accelerate same store sales through performance gains and new products and services, as well as enhance our strategic partnership with our suppliers. This is critical to the overall success of "Our 5 Strategic Business Initiatives.”
Having worked at both Costco and Apple, there seems to be more behind the scenes than Cupertino and Kirkland simply deciding to team up again. In 2010 Walmart began deploying Apple products across both Sam’s Club and Walmart locations en mass, while iPods and any form of Mac sales were summarily pulled from Costco's infamous floor pallets. This looked very much like a typical Walmart strong-arm move. “Work exclusively with us (on our terms) or don’t work with us at all,” is an often played Walmart card. But Walmart is in the eye of public scrutiny and government oversight regarding their business practices. Odds are that Apple has completed their exclusivity agreement with the retail giant and can now re-engage Costco without fear of Walmart retaliation.
Is costco a big deal for apple?
Despite Apple products being available at Best Buy or Macy’s and airport kiosks, Costco is still a major pickup for Apple. If Costco remains true to form they won’t be selling Apple products unless they can offer some form of discount over Apple’s traditional MAP pricing. Apple has already loosened its pricing policies for various Mac systems via Best Buy, and Costco’s core competency is bringing lower prices to its members. Without holding a price advantage over its competitors, why would anyone purchase a Costco membership, or more to the point, an Apple product at Costco? Many believe Costco's two-year electronics warranty covers phones. This is not the case via their kiosk contract purchases. Costco's membership dues are what drives their profits, not product sales, thus Apple's products will need to offer some form of price advantage over other retail outlets.
Samsung currently holds the poll position in all Costco's world-wide, and many of Costco's loyal patrons simply buy what Costco has to offer – including smartphones and tablets. Costco is a big deal for Apple as it eliminates an exclusive selling channel for Android partners and will only increase iOS sales.
It appears Tim Cook is more willing than Steve Jobs ever was to offer their products in virtually any channel that it's competitors like Samsung hold an advantage, thus Costco should be the prime target to engage. Costco selling iPhones and iPads for 5% - 10% below other retailer’s prices will be music to the ears of Costco's Clark Howard-like customer base.
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