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.
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.