Apple hits suppliers who sell in its stores with ‘tough new terms’

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Apple has 'tough new terms' for suppliers who sell in its stores.
Photo: Apple

Apple reportedly issued “tough new terms” for suppliers who sell products in its physical and online stores, The Telegraph reports.

According to the newspaper, Apple asked accessory makers to, among other changes, agree to slower payments and to accept responsibility for unsold products. “The new terms mean sellers must wait as long as 60 days after an order is completed before they are paid, up from 45 days currently,” the paper said. “They must also accept a so-called ‘consignment’ model, in which they are paid only after an item is sold, rather than after it is received by Apple, shifting inventory costs to them.”

Previously, suppliers supposedly negotiated with distribution companies. However, now they must follow nonnegotiable rules laid out by Apple. The report claims that while the deal is “unusual” and puts pressure on companies’ cash flow, “few [are] likely to reject it” due to their reliance on Apple. That’s not just for sales, either. Getting stocked by Apple acts as an endorsement of sorts.

An Apple spokesperson said: “Apple regularly assesses the assortment of the third-party products we sell and the structure of our models to provide vendors the ability to reliably and confidently grow their businesses.”

Apple drives a hard bargain

Apple is currently the world’s most valuable tech company, with a market cap of $2.27 trillion.

Of course, one of the reasons Apple is so insanely profitable is because it drives hard bargains. A few years ago, the company found a new way to squeeze extra pennies out of its manufacturing supply chain.

It did this by negotiating directly for the price of screws and tiny parts used in Apple devices. Previously, these were purchased directly by its contracted supply partners, which allowed them to charge a sourcing fee to Apple. By taking over the negotiations, Apple got cheaper parts.

It sounds like a similar thing happened here. Apple knows the value of the proposition it offers to accessory makers. Cupertino’s therefore not too worried about them leaving. They need Apple more than Apple needs them.

Nonetheless, this action has the potential to backfire. In South Korea, Apple recently agreed to pay out money after being punished for seemingly unfair supplier contracts. Apple is also under investigation around the world for potential antitrust issues.

Will this come back to haunt Apple, or will vendors just have to take this on the chin? We’ll keep you updated.

Source: The Telegraph (paywall)