Retail is hard these days. Not only are retail storefronts competing with other retailers, they’re also competing with the vast world of online.
One peculiar subset of brick and mortar retailing is the so-called factory-authorized reseller. We have long known about this phenomenon when it comes to cars. In fact, so hard-wired is the practice of selling cars through resellers that Michigan has a law preventing Tesla from selling direct to customers in that state.
Back in the days before Amazon and the Internet, disintermediation was rare. Marketers worried about protecting the integrity of the channel, which meant that wholesalers who bought from manufacturers got their cut. Retailers, who bought from wholesalers, also got their cut.
In the world of computer software and hardware, the traditional cost of distribution was often 60 percent or more; that is, the original maker got 40 percent, or less, of what the customer had to spend. That’s why, for many old-school software vendors, the fact that Apple takes a 30 percent cut was actually a win. Many vendors were used to giving up a 60-70 percent cut.
One category of brick-and-mortar that’s still thriving is the mobile phone retailer. People still want to touch the phones they’re going to buy. Also, setting up and provisioning phones is often so complicated that it’s nice to have someone in the store do it for you.
When I bought my iPhone 6s Plus, I bought it at an Apple Store. But when the Apple Store (after hours and hours), just couldn’t get it properly provisioned, I stopped into my local Verizon. They had it working in under 30 minutes.
Even though the iPhone 7 has been out for half a year, neither my wife or I upgraded. I’m uncomfortable giving up my headphone jack. I rely on it for work, and my wife just wasn’t all that enamored of the features in the iPhone 7.
The problem was, she also wasn’t thrilled with her iPhone 6s Plus. It wasn’t the phone’s capabilities. Rather, it was its size. While my Plus phone is perfect for my bear-like man hands, her Plus phone takes up too much space in her purse, and is too bulky and heavy for her pants pockets. So today, given that Apple recently refreshed the iPhone SE, we went out to get her a cute little 128GB iPhone SE.
She didn’t want to order it from Apple and wait for it to arrive. She was more comfortable walking into the local Verizon store, and letting them make it all happen. We have a Verizon store in the next town over that we’ve used regularly. But recently, a Verizon store opened next to our local pancake house. In my eyes, a Verizon store that shares a parking lot with a pancake house is always going to be better than a Verizon store not accompanied by a stack of harvest grain and nut happiness.
From all outward indications, this store appeared to be a Verizon store. After all, there was a giant sign that said Verizon on the building. But when we got close, we noticed that there was, literally, subtext. Small lettering under the Verizon logo said it was an “authorized reseller.”
Inside, the store looked exactly like a Verizon retailer. All the point-of-sale displays were Verizon-branded. The slightly sweaty guy in a button-down shirt wasn’t wearing the typical Verizon logo, but that was it. Still, I could feel the hairs raise on the back of my neck.
We wanted to buy the phone outright, and just move the provisioning from my wife’s old 6s Plus to the SE, so I could inherit the 6s Plus as a spare 4K camera. The guy didn’t want to do it that way. He was all about selling us a monthly plan, because otherwise Verizon wouldn’t warranty the phone. Something didn’t seem right, but it wasn’t until we left the store that I realized that Verizon didn’t warranty the phones, it was AppleCare+ that provided that service.
As it turned out, this “fake” Verizon store didn’t currently stock the 128GB rose gold iPhone SE my wife had her heart set on. So we left, I got my pancakes, and then we went to the real Verizon store. Less than an hour later, my wife left with her new phone.
So what’s the deal with these authorized dealers?
Should you just avoid them like the plague? Or do they provide a valuable service?
Back in the day, dealers served the very important purpose of getting all categories of products in front of customers. For many vendors, it was too costly to both create a product and maintain a network of retail locations. Local business people knew their community and their needs, so partnerships arose that provided for what became the retail distribution channel.
Some resellers just bought products and sold them. But others wanted a more “authorized” relationship. They wanted breaks on the costs of spare parts, training, repair manuals, and all of the benefits that came from having a strong relationship with the manufacturer. Eventually, many of those dealers also licensed the branding of the builder, which is why you might buy a Ford from Bob’s Ford or Hank’s Ford, but there’s a giant Ford logo up there.
Apple used to sell exclusively through third-party dealers. But back in 2001, Apple decided to launch its own, company-owned stores. The big difference between independent authorized dealers and company-owned stores is that the manufacturer owns the store. Back in the day, for example, there used to be a lot of authorized Mac resellers. Today, there are very few.
Apple does sell its products through partners like Verizon, Sprint, and AT&T — and all operate factory-owned stores. But they also sell their products through retailers who operate under the Verizon, Sprint, and AT&T logos, but are independently owned. Of course, Apple products are also sold through other retailers, like Staples, Best Buy, and Walmart. These, too, are authorized retailers, but they don’t operate under the carrier’s logo.
There are some advantages to buying from an independent vendor, especially one that’s authorized by the factory. The biggest is price. You’re unlikely to get a deal from an Apple store or a carrier-owned store. But you might be able to strike up a little bit of a bargain from a store that’s owned by Bob from downtown. Smaller dealers are willing to take a bit of a hit to their margins in order to move product. Once in awhile, if the moon is right, you might save a few bucks.
Bigger independent resellers also have the power to discount. Walmart has, on occasion, been known to bust out an Apple bargain when no one else has the muscle to pull it off.
If you’re very, very lucky, your independent dealer might be an enthusiast for your product. If that’s the case, service and product knowledge may well be off the charts. But it’s rare, these days, to see an enthusiast go out and set up a retailer. It just doesn’t happen much anymore. So instead, you’re more likely to find employees in an authorized reseller that aren’t trained as well as in a factory-owned store.
Product stock can also be a problem. It’s expensive to stock goods. While there’s only an on-paper cost in moving inventory from a carrier’s warehouse to a company store, there’s a real inventory purchase cost in moving goods from a carrier’s warehouse to an independent store. There might be some consignment goods, but a lot of those things have to be bought outright. As a result, independent sellers are likely to have less stock.
All this means that you might not find the phone you want. It’s why so many retailers are happy to tell you, “We’ll order it for you.” Back in the day, that was a value. Now, hey, we all have access to Amazon.
There are three more problems with authorized dealers (not to mention those dealers that aren’t authorized). These are problems you’re less likely to find in factory-owned stores.
The first is service. It’s not clear what the training level will be for those working in a non-factory store. In most cases, the authorized reseller will simply send a product out for repair. What you’ll never know is whether the product went out to repair to, say, Verizon or Apple, or to Cousin Skeeter, who buys spare parts on eBay.
The next problem is returns. Apple and most carrier-owned stores allow returns for pretty much any reason within 14 days. Almost no questions asked. But since private resellers have to give you money back that they might have already spent to buy more inventory, you might find yourself arguing over why store credit is not an acceptable option. The return policies may be different. It may or may not be harder to actually recover your cash.
Finally, there’s the fine print. There’s no doubt the fine print from an Apple Store or a carrier-owned store is daunting. At least you know that just about everyone has signed those deals with the devil. They’re moderately known quantities. But unless you’re going to read the really, really fine print from your participating authorized dealer, you never really know what you’re signing up to.
The sales person may say one thing, but the fine print may obligate you to something far more heinous. You’d have to read everything extremely carefully, and make darned sure you understand every facet of the deal, to determine whether or not you’re signing up to a deal with a devil you don’t know.
Look, most factory-authorized retailers are just fine. You may run a slight risk of being ripped off, if the retailer isn’t really factory authorized. And you may or may not get the level of support you want if you go through a third party.
My big beef is with the branding. It wasn’t until we looked more closely that we realized that the store we first went into wasn’t a factory-run store. The heraldry was pure Verizon. I don’t have a problem with third party stores. I do have a problem with not being able to tell they are, in fact, third party stores.
Personally, I don’t like buying from non-factory-owned stores, but that’s me. I don’t like taking a chance on a contract that might be dicey, or replacement parts that might be genuine. But it’s up to you. Caveat emptor is in full force when you walk into a store that looks like it’s one thing, but it’s not.
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