Costco gives up on iPad, iPod

Apparently the warehouse discounter thinks dealing with Apple's micromanaging style is too much hassle.

By InvestorPlace Dec 10, 2010 2:56PM
Steve Jobs holding Apple's new tablet, 'iPad' © Kimberly White/Reuters/LandovWhether you think Apple Inc. (AAPL) is heavy-handed or just hands-on when it comes to product and sales controls, you can't deny the widespread appeal of products like the iPad and iPod. Apparently, Apple's reluctance to play nice with third parties hasn't prevented the company's gadgets from being huge hits with consumers.

Unfortunately, Apple's strict supply and pricing rules seem to be a different story with retailers. Warehouse discounter Costco (COST) seems to think it's not worth the hassle to do business with Apple anymore -- even if it's products are wildly popular.
The chain is phasing out Apple products per a mutual agreement between the companies, as reported by The Seattle Times. Costco had sold iPods and pre-loaded iTunes cards for years, although never at huge discounts because of Apple's price controls.
Apple never allowed Costco to sell its products online like other retailers. Though execs aren't dishing out any details, educated investors and consumers can read between the lines based on Apple's long history of micromanaging third-party retailers.

Of course, this could be nothing more than an isolated incident. Apple still has numerous retail partners beyond Costco, including Wal-Mart (WMT), Best Buy (BBY) and Target (TGT), which have been selling Apple's tablet since its spring release.

In all likelihood, these agreements are working out for all parties and will stick around. And it is rumored that the biggest point of contention was Apple's allowing Sam's Club, a Wal-Mart warehouse subsidiary and Costco competitor, to carry the iPad and not giving Costco a warehouse exclusive.
Whatever the reasons, it’s unlikely that the loss of Apple’s products will affect Costco too heavily, as the company is healthier than ever since it became publicly traded in the early 1980s, with shares trading around $71 after the company reported a 17% rise in earnings in its quarter that ended November 21. Similarly, Costco's decision to dump the iPad won't sink Apple.

But if other retailers start second-guessing their agreements to sell Apple gear, investors and consumers should take note.

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Dec 10, 2010 3:54PM
Congratulations, Costco! Let Trinket King peddle its overpriced gadgets somewhere else. 
Dec 10, 2010 4:38PM

It's about time.  Exclusivity will sink the ship in a market that wants Diversity and Affordability.


Hats off to you Costco for demonstrating some strength against such questionable marketing tactics.   They have worked for apple so far in a market that they have created with their phones and Ipods, but Jobs' arrogance will be the downfall of the company.

Dec 10, 2010 4:32PM
I've had my iPhone 3Gs for almost 2 years now. It has it's issues and is nothing to brag about. Likely I'll find something new in about 6 months and dump Apple. I'll also likely dump AT &T due to dropped calls and having to contact them every month for the last few months to correct billing errors. AT&T loves to continue playing the OLD landline phone rules. Well, they aren't a monopoly anymore and they aren't god anymore.
Dec 10, 2010 4:28PM
Good for Costco.  If more companies follow their lead maybe Apple will be forced to compete instead of pandering to an elitist clientele.
Dec 10, 2010 8:46PM

Sorry... Elvis just came back in the building for a news flash... 


Anyone who does not pay the least amount of money they can for any product they purchase (i don't care where its made)... I really have to question your overall intelligence... not just knowledge on business or economics.


J453... Consumers dont solve those kinds of problems... Laws do.

Dec 10, 2010 7:21PM
Aren't these Apple products made in China?  You buy them, and you continue to support the trade imbalance and deindustrialization of America.
Dec 10, 2010 6:59PM

Read again... its Costco that wanted "exclusivity"... not Apple.  Costco is attempting to demand favored nations clauses that reduce competition folks.  Much the same way Wal-Mart does.  This Big Retailer mentality kills small business.  Read between the lines.  Apple is correct here in ensuring that there is no favors being given and the retail price is left to competition on margin and quantity.  Very wise, not just for Apple but also for consumers.


Wake up people.

Dec 10, 2010 8:35PM

J-453... Thats a government problem, not an Apple problem... our libiral views in this country have crippled the U.S. and sends favor for co's to do business elsewhere.  Thats what happens when America offers world equality to producers to compete but Americans are expected to produce under standards that don't allow them to compete with countries that do not have to live up to those standards.  Tax the imports to make them less attractive and take less from our own.  It's not so difficult.


I for one actually do not have an i-Phone, i-Pad... and my i-Pod is 6 years old and its the little cheap one.  I am blessed to afford all of them if I chose, but I don't "need" them.  Supply and demand drive Apples wholesale prices.  But a single retailer does not deserve guaranteed favoritism on price over others, or exclusivity.  Else, its only good for that company at the expense of consumers and retailers. 


phil99..................Apple is the hero in this article... if fools didn't have to have the latest greatest gadget... Apple would charge less.  The price is not Apples choice here either so don't bash them for the price they can require... thank yourselves consumers.


Apple is doing everything right, but of course msn media has added the liberal spin and made them out to look like the bad guy when Costco is the attempted crook.


Anyone who reads this and doesn't agree is most likely a far left liberal or just doesn't understand what they're reading most likely from a lack of business knowledge... nothing to be ashamed of either.  If you did understand it... it would only give you one more thing in this mess we're living in to get disgusted over.


Elvis has left the building...

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