Apple Battles 'Gray' Market, Windows

Apple Computers has never had a problem building a brand name in Russia. The difficulty has been supporting it.


Last year, the maker of the Macintosh parted ways with its affiliate here in a financial dispute, leading to what industry sources estimate was a loss of $10 million. The firm considered pulling out of Russia entirely, and for many months was left without official representation for sales, support and service.


This month, Apple signed an agreement with the Moscow company DPI, its interim distributor since last summer. The deal makes DPI Apple's exclusive independent marketing company in Russia, handling all aspects of business. To convince the computer-buying public that Apple has restored its presence, the two companies shelled out $200,000 for one of the larger displays at this week's Comtek '97 technology exhibition.


"We learned from our mistakes and won't fail again," was the message from Jean-Paul Rigal, sales manager for Eastern Europe, at a presentation Tuesday at the trade fair at the Krasnaya Presnaya Expocenter.


The mistakes, Rigal said, included a "cowboy approach" to local management -- which would change under DPI -- and not paying enough attention to the needs of dealers and customers. Furthermore, he said the California company's well-publicized problems at home, including layoffs and hundreds of millions of dollars in quarterly losses, had a "dramatic impact" on last year's sales in Russia.


Apple has only a minimal presence on the Russian market, and its goals are modest. Rigal would like to see the present market share of less than 1 percent rise to around 3 percent by the year 2000. He is aiming for revenue of $15 million in this rebuilding year -- down from a peak of $30 million in 1995 -- and steady growth thereafter.


With Windows-based systems dominant, Apple is concentrating on the same niches in Russia as it does worldwide, such as publishing, education, multimedia and Internet applications.


One of the problems Rigal must address is so-called "gray market" dealers, who legally import computers directly from the United States for resale here, but avoid official Apple channels. He estimates that 20 to 30 percent of units sold in Russia arrive through such channels, a figure that has increased in the last year during the company's absence from Russia.


"People wanted to buy an Apple computer, which is nice, but they couldn't buy it here," said Rigal. "It's very hard to convince them to come back."


Rigal's strategy is to negotiate directly with the gray market dealers, hoping to lure them into the official Apple fold with attractive pricing. The parent company is helping by keeping costs to within 10 to 15 percent of U.S. prices, a level Rigal says makes gray market dealing unprofitable.