Merchants will divide sourcing methods: Renaissance

Merchants will divide sourcing methods: Renaissance

Renaissance expects retailers to be divided between sourcing from it or Apple, after losing the exclusive Apple distribution rights late last month.

Managing director Paul Johnston believes some merchants will prefer to keep sourcing from Renaissance, while some will choose Apple and some will select from both.

“Some will feel they just want a relationship directly with the vendor, some both. Some are happy dealing with us and will carry on. It will be a mixture until things settle down.”

Under the new contract with Apple, the distributor says some retailers it has supplied will be able to multi-source Apple products, as is the case in other countries.

“Certain large customers of Renaissance, such as the mass merchants, will be able to source from Renaissance or directly from Apple, or a combination of both,” Johnston says.

Apple’s Australian-based spokesperson said it would not comment on which members of its local channel were affected by the contract changes, nor the reason for them.

Renaissance expects the full impact of the new terms to be felt in 2008 and 2009, and has been diversifying its businesses along with flagging the prospect of changes in Apple’s go-to-market strategy, Johnston says.

“I wouldn’t imagine it would come as a surprise to most people. We started talking about this a year ago,” he says, adding it had raised the issue at its last AGM and when announcing the company’s half-year result.

“We fully expected it to be introduced into New Zealand at some time. It’s just a model we’ve got to get on with.”

Johnston says the company is pleased to have a new contract with Apple, and that it is on track to achieve the net profit before tax it expects for the year to December 2007 (between five and five and a half million dollars).

He says Renaissance’s distribution margin will reduce slightly between now and October, so that it is in line with the Australian model.

Renaissance’s diversification strategy has included the acquisition of Apple retail chain Magnum Mac and tertiary design college Natcoll.

In the recent statement outlining the contract changes, Renaissance said non-Apple-distribution activities would grow from an EBITDA (earnings before interest, taxes, depreciation and amortisation) contribution to overhead of less than 10 percent in 2006 to one that is projected to be greater than 60 percent in 2008.

“It has been our strategic aim to shift the earnings of the group to brands that Renaissance owns and controls,” Johnston said in the statement.

The company says both Magnum Mac and Natcoll have traded well.

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