Apple's iPad Strategy: Be Everywhere

Are Apple's (Nasdaq: AAPL  ) retail stores anything more than Genius Bars that also sell product from time to time? I'm beginning to wonder. The Mac maker is now selling its iPad 2 in 500 U.S. RadioShack (NYSE: RSH  ) locations, CNET reports.

The announcement isn't entirely surprising, since RadioShack began selling Apple's iPhone 3G and 3GS back in 2009. As an investor, I'm more surprised by how big Apple's retail channel has become.

In addition to RadioShack, Apple's partners include Best Buy (NYSE: BBY  ) -- which sells Macs, iPhones, iPods, and iPads -- and AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) , which move iPhones and iPads.

Thousands more stores sell iGear today than a decade ago. The widening channel suggests a changing role for Apple's retail outlets, from primary sellers to product showcases and support centers. Engage customers face to face, and they'll be more likely to buy your products. And if those shoppers choose to buy your goods elsewhere? So be it.

Consider the alternative for a moment. Apple would have no trouble building its own retail network if it wanted to. Using just a fraction of its more than $60 billion in cash and investments on its books, the iEmpire could geometrically expand its retail footprint. That it hasn't chosen to do so says something about CEO Steve Jobs' strategy.

One possibility is that Apple wants to win the hearts and minds of comparison shoppers. A growing list of Android vendors is fighting for retail shelf space at electronics stores. By striking its own retail deals early, Apple ensures that consumers have every chance to compare iOS devices to rivals at the point of purchase.

This makes a lot of sense to me. As much as I like Apple's retail stores for providing on-site product support, I'm fine buying my Apple gear wherever I get a great price. The iEmpire wins either way, and so do I.

Do you agree? Disagree? Let us know what you think about Apple's retail war with Android using the comments box below.

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Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple, Best Buy, and RadioShack and has written Apple puts. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is known far and wide.


Read/Post Comments (6) | Recommend This Article (3)

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  • Report this Comment On March 30, 2011, at 1:09 PM, GlassHouses wrote:

    People may forget that Apple went into the retail business when Best Buy and other (many now defunct) partners were cutting back on the space and support they gave Mac customers. The idea was more of a branding idea -- to to give the products a showcase that other retailers wouldn't give them.

    Apple stores immediately became the busiest stores in the malls. In those pre-smartphone days, where else could you go to check email at no charge during a trip to the mall. Or keep your kids entertained while you shopped. Many of those people, I bet, were PC users that are buying Macs today.

    Even at the time, the impact on Apple's bottom line went beyond the sales in the store. In 2003, for instance, I got a better deal on an iMac at J&R Music World than I could get at the Apple store (extra memory was cheaper and they threw in a better free printer). Great channel management strategy.

    Today Apple retail stores probably have one of the highest sales per square foot in retail. But there are a lot more radio shacks, best buys, target stores, etc. out there. If Apple stores just showcase products and offer support, the company as a whole will do fine.

    Apple became a retail juggernaut not by design, but by doing retail better than everyone else. Just like they seem to do everything better than everyone else.

    JMHO.

  • Report this Comment On March 30, 2011, at 2:21 PM, 1984macman wrote:

    This article's premise would make a lot more sense if you could buy Apple computers at those other outlets. The fact is, the Apple store is where they showcase the heavy hitters in the Apple lineup, their computers.

    Those computers require a LOT of extra support, especially for those new to the Mac ecosphere. A friend of mine in her seventies just bought her first Mac, and relies heavily on the One-To-One training they sold along with the computer.

    What you and so many, many analysts keep missing is the depth and power of the Apple ecosphere, the seamless integration between their whole product line. And where does that integration happen? At those Apple retail storefronts, that's where!

    It's The Ecosphere, Stupid!

  • Report this Comment On March 30, 2011, at 3:40 PM, DefunctAcct wrote:

    This is a simple and straightforward strategy.

    If Apple relies only on its own retail stores, then a downturn could mean closing the stores. When the money is flowing in, it is time to prepare for when the flow slows. That is prudent business strategy.

    Expanding sales channels to include other retailers let consumers gain easy access to Apple products without Apple investing more in every neighborhood. Strategically located company stores then provide one-on-one personal support ranging from training, data migration to repairs and services so consumers feel the comfort of solid backing from a manufacturer. This is a smart retail strategy.

    Have you ever tried to have your Sony camcorder and camera serviced? Nikon? Marantz electronics? Nokia? RIM? There are no manufacturer presence, only a monolithic faceless "wall". If something breaks, it takes many phone calls, shipping and a long wait. If you have a question, it is a long wait to talk to a machine or an email that may never earn a reply.

    Is there any doubt why Apple's is an effective retailer? This is ALL by design and not by accident.

  • Report this Comment On March 30, 2011, at 3:53 PM, ConstableOdo wrote:

    Apple shares will be heading down again. If Radio Shack starts selling iPad 2s, then it will only one more group of stores causing consumers to suffer through waiting on lines only to find out that they've also run out of stock. Apple is just killing consumers by forcing them to either freeze, get wet, get heatstroke, lose valuable time or whatever by coercing and teasing consumers to stand on hours-long lines. It's all Steve Jobs fault for creating a hit product with overwhelming demand and not being able to force Foxconn to build at least 20 million iPad 2s a month.

    I wondered why Apple share price was down again today and this is probably just one of the numerous reasons why. Why did Apple create a product that it can't keep in stock. Why didn't Apple create a product like the Xoom of which there's always plenty of inventory to go around, with no waiting involved?

  • Report this Comment On March 30, 2011, at 5:02 PM, chadscards1274 wrote:

    ConstableOdo = I think I hear a tongue in cheek type of comment asking "Why did Apple create a product that it can't keep in stock? Why didn't Apple create a product like the Xoom of which there's always plenty of inventory to go around, with no waiting involved?"

    Just in case this wasn't your attempt to be funny...the share price today probably has nothing to do with anything about the iPad 2. The reality is Apple created a hit product and either underestimated demand or knew what would happen and realized that when people really want a product and have to wait for it their gratification when they get it is that much higher.

    Here is a hint, if something is always in stock and there is no waiting that's probably not a good sign. Ideally Apple does need to increase production to meet demand, but your comment that people are waiting in line and that the iPad 2 can't be kept in stock is even more reason to buy Apple shares. Huge demand for a product that Apple will sell millions of sounds familiar...think about the iPhone when it first came out.

  • Report this Comment On March 30, 2011, at 5:44 PM, DefunctAcct wrote:

    Spreading out to Radio Shacks make it easier for consumers to purchase an iPad. A simple call to a local branch does the trick. The Shack can decide to hold for a person with a credit card number or ask them to come in; no different than selling any other product. There is no need for any line.

    I have to believe that Apple wants everyone who wants one to get one because each sale brings in hard cash. There is absolutely no business reason to "... coercing and teasing consumers to stand on hours-long lines..."

    Lines form because some consumers want what they want and are willing to wait for it. Apple has no role in this except for being unable to meet demand.

    Forecasting demand for iPad is difficult because no one knew if the iPad is a fad or a true multi-generation product. Apple can only hope that their market study is correct.

    We will know if iPad 2 is for real in April.

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