Dvorak on Apple mini-stores inside Best Buy.
Another innovation at Apple: the retail strategy
Commentary: There's a lackluster history of success in computer retailing
By John C. Dvorak
Last Update: 3:30 PM ET 6/28/07
BERKELEY, Calif. (MarketWatch) -- Best Buy Co. representatives acknowledge that Apple Inc. will have its own "store within a store" at 300 Best Buys around the country by year's end.
At least one investment analyst, Andrew Horowitz, thinks this is a big benefit to both companies, especially for Best Buy (BBY) since Apple (AAPL) will drive more foot traffic into the stores. Visit Horowitz's blog.
I assumed that these stores would be in areas of the country where locals are not served by an Apple storefront, but I'm told that the locations were determined by market research.
This means that in some instances a Best Buy will compete with an Apple store.
While Apple has been getting a lot of free ink and publicity for its new and innovative touch-screen phone, this retail initiative apparently has gone under the radar. It was mentioned on a recent Best Buy earnings call, but no formal announcement has been made by either company.
Apple gets a lot of credit for nifty product design, but should actually be lauded for its successful foray into retail. Since it has made no missteps so far, I have to presume that this Best Buy arrangement is a good idea.
Apple gets a lot of credit for nifty product design, but should actually be lauded for its successful foray into retail.
The retail business for computers and computer-related products has been a nightmare for many companies that continually did things wrong. I've always believed that if we constantly make analogies between the computer business and the auto business, we must examine the way computers and automobiles are sold.
This would mean that vendors such as Apple, International Business Machines Corp. (IBM) , Hewlett-Packard Co. (HPQ) and others should have their own showrooms, where they can control and fine-tune the sales pitch. Unfortunately, earlier attempts to do just that failed, and often miserably.
IBM ran a series of retail outlets in the 1980s, promoting their PCs and software offerings. It is still arguable whether the company turned a profit on the stores, but they were phased out within a few years.
Sometime after that, a then-hot Texas direct-marketing computer maker named CompuAdd rolled out a series of retail outlets around 1990. In 1993, the retail operations took down the company, which filed for Chapter 11.
I was familiar with these stores; they were simply too big and too far ahead of their time. Years later, Gateway Inc. (GTW) launched a chain of Gateway Country stores. It opened 188 outlets before it determined that they were money-losers; they all closed by 2004.
I visited these stores too, and they were dreadful -- too big and weird inside, very uncomfortable in general. What someone needed to do was something small, cozy and nonthreatening.
I was looking for something that resembled the early Byte Shops, or even some of the ComputerLands that did well in the late '70s and early '80s.
Perhaps the most successful in their day was the original computer stores called Computer Kits, of around 1975. These were the outlets selling one brand: the MITS Altair, the first popular microcomputer. The stores were company-sponsored.
At first, the Apple stores were more like the Computer Kits than the grandiose megastores done by CompuAdd or the grim Gateway ones. This has changed somewhat, as Apple now has some very large storefronts in expensive urban districts, such as New York and San Francisco.
But the Mac and iPod maker gets good traffic and didn't jump right into the larger stores. The ministores with Best Buy might work, since the space will be image-controlled by Apple. The personnel are to be specially trained to sell Apple gear.
I'd prefer to see mini-Apple stores such as the mini-Sears outlets you can still find in rural locales. At some point, there has to be some sales-pitch control issues when sharing space in Best Buy, no matter how well-trained the sales staff.
Horowitz thinks the top play here is Best Buy, since these stores will court more shoppers as long as Apple is constantly in the news. I agree.
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