When it comes to Apple’s retail stores, allow me to invoke a Yogi Berra-ism. ‘Nobody goes there any more. It’s too crowded.’ That’s not actually true, but you get the idea.
Apple’s 400 or so retail stores are a great place to touch and feel new products, get expert help and support, and find a good collection of Mac, iPhone, and iPad accessories. Included in Apple’s retail stores is a secret weapon not easily matched by a competitor.
The Old Fashioned Way
The word on the street is that a few of Apple’s competitors are headed into retail. Microsoft is already there with a couple of dozen stores, thoughtfully placed close to the nearest Apple Store.
Google, Samsung, and Amazon have met with limited success selling products that compete directly with Apple’s Mac, iPhone, and iPad.
Why? Much of the country and many other countries have multiple Apple Stores within a few minutes drive.
And, as Yogi Berra pointed out, those stores are crowded with customers looking to buy, looking for service, looking for tips, tricks, and training.
Google isn’t denying rumors that they plan to open stores to compete with Apple. I’ve even advocated that Amazon buy Radio Shack to establish a retail presence to compete with Apple. Check out What Amazon Can Do To Disrupt Apple’s Revenue And Profit Parade (and stick it to Google and Microsoft, too).
Unfortunately, Microsoft, Google, Samsung, and Amazon– all formidable Apple competition– have one thing missing from any retail arsenal they might build.
Margins.
As in gross profit. Apple makes more money per Mac, iPhone, and iPad than any major competitor makes on similar products.
What does a retail store need to become a successful part of a company’s business? Customers. Products. Service. And, enough margin on the products sold to pay for the whole operation.
Apple’s product margins are the highest in the industry. Historically, the company stays away from slim-margin products, opting to live in the premium range.
Samsung’s margins are far less than Apple (the company reportedly spends 10 times what Apple spends on advertising). Google and Amazon have little to no margins on their smart phones and tablets).
Without margins, the profit needed to keep a store in business, how much competition will a retail store pose to Apple.
Microsoft is a slightly different animal, but not much. The Windows maker has a number of hardware products which could grace the shelves of a store– Surface tablets, software, Xbox 360, mouse and keyboards, Kinect– none of which have a gross profit margin that competes well with Apple’s products.
Can Google, Samsung, Microsoft (and, perhaps eventually Amazon) make up the difference by raising prices? Only if they can sell products in the stores in numbers similar to what Apple sells. That won’t be easy.
It may be that Apple’s competitors realize they have no choice but to lower prices, get by on hardly any gross profit at all, and even go to the added expense of building, staffing, and running retail stores to compete with Apple. Otherwise, Apple continues to take the lion’s share of the industry’s profits, and the competition will slowly suffocate while Apple prospers.
About Kate MacKenzie
Apple’s retail stores are completely overlooked by Wall Street’s claims that Apple has no future. Apparently, to Wall Street, customer service has no value at all. I think there must be a lot of consumers who buy Apple products with the presence of mind they’ll be able to get help with their products whenever they need it. Why would they give that up even for cheaper Android devices? So, Google is going to have a few retail outlets, but is that really much of a challenge to Apple?. That’s hardly much of a challenge to Apple’s already established global retail chain. It’s not like Apple’s retail chain was built overnight. It could be years before Google’s efforts bear any fruit and there’s no guarantee of that at all.
The news media always likes to make a big deal out of Apple’s rival’s efforts as though it’s going to terribly hurt Apple in some way. There were claims that Microsoft’s retail efforts were going to steal customers from Apple but so far there hasn’t been much of an impact at all especially with the waning Windows desktop market that’s currently happening.
This is laughable. Apple has 400 stores and they make money hand over fist because Apple’s margins are notoriously high. So Google and Microsoft– whose products have a lower profit margin (or, in the case of Google, no profit margin)– want to put their wares into the hands of customers by opening stores near Apple’s stores. Laughable, indeed.
The idea of Amazon buying Radio Shack makes far more sense. Those stores are already established, though barely profitable, could bring a huge retail presence to Amazon– if Amazon could afford it. First, they have to buy Radio Shack. That costs money. Second, Radio Shack has to be altered to accommodate their new sugar daddy. Being able to pick up products ordered from Amazon is a big plus.
Kate, I think you’re the only one pushing this idea.