Costco confirms break with Apple | iLounge News


Costco confirms break with Apple

As first reported by iLounge in October, membership club Costco has confirmed that it is phasing out all Apple products per a mutual agreement between the two companies. Speaking to The Seattle Times, Costco CFO Richard Galanti said that the company had sold iPods and iTunes Gift Cards for years, but Apple had never allowed the retailer to sell its products online, as it did other retailers. “In the past couple months, we agreed to wind down,” he added. Costco is the third-largest retailer in the U.S., with 425 stateside warehouses, more than a quarter of which are in Apple’s home state of California.

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While I don’t doubt that Apple contributed to the soured relationship, I have to wonder if Costco’s 90 day no-questions-asked return policy on electronics has something to do with this, too. Given the iPod’s sales volume, high price, product hype, and propensity for confused users, I could see a lot of buyers taking advantage of this return policy, which has to hurt Costco’s bottom line on these products.

Posted by rockmyplimsoul on December 10, 2010 at 1:56 PM (CST)


@1: Your observation is a very logical one, and a sound one at that that I could not refute with evidence. However, having worked for Costco for three years in the electronics department it’s to my understanding that what is reported in the article (not being allowed to sell Apple products online through the Costco website) is accurate, in addition to the fact that competing retailer Wal-mart and Sam’s Club were offered the iPad while Costco was snubbed. So, you’re intuitions about a soured relationship are spot on with regards to Apple’s business policies. However, I will not be altruistic and say what we all already know: That it takes two tango, and that there are two sides to every story. My estimation, though, is that Apple will come crawling back at some point… just like Coca-Cola did last year.

Posted by BlueHUE on December 11, 2010 at 12:42 AM (CST)


@1: Possibly true in some sense, but I doubt it has that much to do with this schism. Costco is still taking the short term hit to profits for camcorders and bigscreen TVs (and similar stuff) and isn’t seeking to ditch those. Ultimately, retail establishments know that taking a short term hit from a return buys them good will and future profits from customers. Plus, I know of no company that doesn’t have tracking measures in place to weed out the habitual abusers who use these policies to use expensive goods payment and interest free.

I’d wager this is more about two big corporations playing chicken over getting their way and Costco isn’t blinking. As #2 says, I’d bet on Apple coming back to them before the end of 2011. As I observed in an earlier post on this topic, at the wholesale prices Apple demands and the minor discount a store like Costco is “obligated” to apply, Apple’s products are hardly much of a money maker for Costco even ignoring the possible exacerbating matter of their more liberal returns policy. Apple needs their products in one of America’s largest retailers a lot more than Costco needs Apple’s products.

Posted by Code Monkey on December 11, 2010 at 10:35 AM (CST)


@3: Very well put. And a great way of explaining the dynamics of sales, marketing, and returns. We do have a system in place the identifies the abusers of the return policy and we have relationships with many component recyclers, so there is a minimal profit loss in the end.

The only thing is now I have to deal with all the questions about “Where are your iPods/iTunes cards?” That’s gotten old really quick. I’m praying they come back soon just for that reason alone! LOL! We’ll see, I guess.

Posted by BlueHUE on December 11, 2010 at 9:25 PM (CST)

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