March 16 (Bloomberg) -- As supplies of Apple Inc.’s new iPad run thin after it goes on sale today, Fred Hadd will feel the pinch as much as anyone.
Hadd owns Computer Village, a reseller of electronics with outlets in South Dakota, Montana and Wyoming -- three of only six U.S. states that don’t have their own Apple retail store.
Apple may sell 2.5 million or more iPads this weekend, according to Carl Howe, an analyst at Yankee Group. Predicted demand for the new iPad, which will feature a more powerful processor and higher-resolution screen, has helped Apple extend its lead as the world’s most valuable company. It also means long lines and surging sales for Computer Village and other far-flung sellers, which are likely to sell out before Apple’s better-stocked 363 official outlets.
“We get calls every few minutes,” said Hadd, who’s based in Rapid City, South Dakota, an eight-hour drive from the nearest Apple store. “They want them, and they want them now.”
The challenge for Hadd and other sellers is getting enough supply. Apple, based in Cupertino, California, prioritizes its own stores and website, making it harder for independent shops to get new products. Hadd keeps a waiting list at his office, located about 20 miles from Mount Rushmore, and says he doesn’t mind the lag. Each new iPad and iPhone introduction brings in visitors, even when shoppers can’t get the latest device.
Gene Munster, an analyst at Piper Jaffray Cos., predicts that Apple will sell more than 1 million iPads on day one alone.
IPad Wait Times
Following Apple’s unveiling of the new iPad at a press conference last week, online preorders quickly maxed out. Wait times for Web orders now extend to as many as three weeks. That backlog will send many customers to Apple’s chain of stores, said Howe, who correctly predicted Apple would sell more than 4 million iPhones in the weekend after the 4S debut in October.
At Apple’s glass-walled store in Sydney’s George Street, employees cheered and counted down the 10 seconds until doors opened at 8 a.m. local time. A line of at least 200 people snaked 328 feet (100 meters) around three sides of the city block. Customers will probably follow suit throughout the day in cities stretching from Singapore to San Francisco.
In the two years since the first model went on sale, the iPad has become Apple’s second-best selling product, behind the iPhone. Sales of the device doubled to $9.15 billion last quarter, exceeding Mac revenue. Apple is facing competition from Amazon.com Inc.’s Kindle Fire, as well as the planned introduction of new devices from Dell Inc. and Hewlett-Packard Co. running a new Microsoft Corp. operating system.
New Retail Head
CityMac is a reseller in Traverse City, Michigan, a city in the northern part of the state, about two hours from the closest Apple store. While remote stores run out fast, they also have a leg up over big-box retailers that vie with Apple in bigger cities, said Jeff Broderick, co-owner of CityMac.
“Not having a corporate store in the immediate vicinity is an advantage,” he said. “We are going to have a busy day.”
Apple is debuting its third-generation iPad as it transitions to a new head of retail operations. Apple said in January that it hired John Browett to take over for Ron Johnson, who left Apple to become CEO of J.C. Penney Co. Browett was the CEO of Dixons Retail Plc, Apple’s largest authorized dealer in the U.K. Browett is due to begin at Apple in April.
Last quarter, $6.1 billion of Apple’s $46.3 billion in sales came from its retail stores. The company’s website and network of resellers made up much of the remaining purchases.
In addition to smaller outfits like Hadd’s Computer Village, larger sellers include Dixons, Wal-Mart Stores Inc., Target Corp. and Best Buy Co.
‘Metrics for Everything’
Hadd said Apple requires resellers to meet many requirements, such as a 25 percent jump in sales each year. To be an authorized shop for making repairs, the store also must meet certain service goals, he said.
“Apple has metrics for everything,” he said.
Hadd isn’t just gaining consumers. He’s also luring business from companies and local governments, markets that have traditionally gone to rival PC makers, such as Hewlett-Packard and Dell. The Rapid City police and fire departments are buying iPads from Computer Village, Hadd said, along with local health centers and schools. His annual sales have been rising about 35 percent to 45 percent in recent years, he said.
Not all resellers are as lucky as owners of rural stores, said Gary Allen, whose website ifoAppleStore.com has been tracking Apple’s retail business since 2003. When Apple decides to build a new store in an area, the results are often grim for the outside dealer.
“If an Apple store came to Fargo and there’s an ordinary retailer there doing ordinary retail store things, then that Apple store would be a killer,” said Allen, whose site attracts about 4 million visitors a month.
The biggest challenge is that Apple keeps much of the inventory for its newest releases, he said.
“If a reseller does have the authority to sell a new iPad, they are probably going to get five, not 105,” he said.
Resellers in the U.S. and Europe have filed separate lawsuits against Apple, accusing the company of favoring its own outlets. The cases are ongoing. Apple spokeswoman Amy Bessette declined to comment.
Don Mayer, the CEO and co-founder of Small Dog Electronics, which as locations in Vermont and New Hampshire, said he’s cultivated a “very positive” relationship with Apple even as he vies with the computer maker. Apple accounts for about 80 percent of the products he sells, he said.
“We love our relationship with Apple,” Mayer said. “They’re our best friend, and our worst enemy. They’re our biggest competition, and they’re our biggest supplier.”
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