Apple Core to Target’s, Walmart’s CE Strategies
Many saw no contradiction in the news last week that Target had decided to phase out Amazon.com’s Kindle line while continuing to sell wireless devices made by Apple. In fact, many accepted the premise that Target’s test of an Apple store-within-a-store concept at 20 of the chain’s locations may have played a role in the decision.
According to a Dow Jones Newswires report, Walmart is also testing an Apple concept at a location near the company’s headquarters in Arkansas with plans to add another 24. At a recent conference, Duncan Mac Naughton, chief merchandising officer for Walmart’s stores in the U.S., said the Apple shops would help "drive customer loyalty" at the retailer.
Gene Munster, an analyst with Piper Jaffray & Co., saw the Walmart partnership, in particular, as being a benefit to Apple. "The true expansion of Apple’s product line to untapped rural U.S. geographies would likely come in the next two years as Wal-Mart expands the Apple micro-store concept," he told Dow Jones.
Discussion Questions
Discussion Questions: What would a widespread rollout of Apple store-within-a-store concepts mean for Target and Walmart respectively? Would the concept drive loyalty for the chains as well as traffic? What do you think it would mean not only for Apple sales but for its brand image?
Two very different issues at play here: There is no question that Apple micro-stores within Target and Walmart are good for both retailers, and give both of them added credibility in the consumer electronics business. It also provides yet another threat to the Best Buy business model.
But the other side of the coin is the potential damage to the Apple brand itself. It has taken years for the Apple Store (and the product development behind it) to build priceless brand equity around innovation, premium pricing and customer service. If the Apple Store “experience” isn’t duplicated in your neighborhood Walmart, the risk may exceed the payback over the long run.
I think the more interesting question is what does this mean for Apple’s branding? The Apple stores are geared toward young, hip urbanites, and the Apple brand in general has a tech geek edge that doesn’t quite fit in with Walmart’s or Target’s image. Looks like Apple is trying to go “Middle America.”
I see pluses and minuses here. On the plus side, Apple gets in introduce its products to a wide array of new customers who do not have access to an Apple store. The chains benefit from having these smaller Apple stores.
The potential downside is customer service. Will Apple be able to maintain the same level of superior customer service that currently exists in an Apple store, which helps to make those stores so special?
I visited the test Walmart store shortly after launch and a store associate told me that iPad sales were already on the uptick. The displays, demo stations and supporting accessory walls looked terrific (dare I say better than in some of the more cluttered Best Buy stores?) and traffic through the area was brisk. Apple products are already in these stores — this is about improving presentation and brand impact. It’s all good for all parties.
Good news for Walmart & Target. Raises electronics profile & drives traffic.
Greater risk to Apple in terms of brand perception & dilution. As the saying goes, “You can make it with class or make it for the masses, but you can’t do both.”
The Apple store-within-a-store concept is brilliant as long as the store is also a service center for the Apple consumer, and as long as the store is easily accessable for consumers carrying their own products in and out of the store.
Best Buy’s steep decline increases the opportunity here for Target and Walmart. It’s another nail in the “why do I need to go to Best Buy?” coffin and a chance for Target and Walmart to gain share of wallet in areas where there isn’t a nearby Apple store. I don’t see it driving a lot of true incremental sales for Apple, unless these points of purchase will be used to help drive a yet to be announced product targeted at the lower end of the mass market.
I’m surprised that Microsoft isn’t doing something like this, since their store footprint is still small and deals like these would help them scale their retail presence before Windows 8.
Sales, sales, and more sales. Apple’s greatest issue is enough supply and getting more exposure to more people. Working with some of the largest retailers in the world to gain this exposure is something which Apple truly needs…and will win from…sales, sales, sales.
Target and Walmart will win out of the gate. Apple will win if they get to control the staffing of the stores. If Target and Walmart control the staffing, all you will have is a major drop in perceived value.
Better to go vending machines, limited product, just for convenience.
Maybe the new CEO of Apple wants to sell Apple to the masses, vs the high-end, high-labor stores. If successful, will Apple phase out the premium stores, and let the big box stores do the selling instead? This is another example of having it both ways, and Apple will see what happens before adding more B&M stores, thus saving money.
Definitely a plus to both Walmart and Target, but the jury is out until I see how it is set-up, displayed and staffed as far as Apple goes.
Apple’s brand image may suffer with these rollouts if they are not managed closely by Apple representatives. This is particularly true of Walmart. They’ve offered various Apple products for years, but have done a poor job maintaining the display materials. My local Walmart store literally has black and white photocopies of the products on display, seemingly because the real ones are too much of a shoplifting temptation. My local Target still has the last generation of iPods on display. None of the items can be touched of course, which is the “Magic” of Apple’s retail strategy.
Apple can make inroads in rural and other smaller markets this way, but they can’t trust WM or Target to present the products correctly without some serious oversight.
WM and Target of course see these items as door swingers. They want to attract more customers with expendable income. These items may help them do that, but if they want to keep Apple customers coming in they’ll need to provide a desirable buying experience. I’m not sure that either of these chains can do that.
Personally, I think Apple could take real advantage of JC Penney’s “Main Street” concept. With the former Apple retail chief running the show, it’s a safe bet the products would be presented very well and would still penetrate markets that are currently undeserved by Apple. From the looks of things JCP could stand the extra door swings that shiny new iPads would bring as well.