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You know those stores within a store at your local Best Buy (NYSE: BBY ) ? I'm talking about the not-quite-fenced-off-but-still-quite-separate areas of Best Buy where you can focus on finding your next cell phone or dive deep into the Apple (Nasdaq: AAPL ) catalog. Target (NYSE: TGT ) wants to copy the concept with a handful of Apple sections inside Target locations.
According to Apple Insider, about 25 Target stores will get a Cupertino-flavored makeover in 2012. For Apple, it's a push into markets that can't support a full-blown Apple Store with a Genius Bar and the airy design -- those are typically found in high-end malls, far away from the suburban areas where Target battles Wal-Mart for everyday dominance.
For Target, this would be a conscious effort to raise the company's profile. Notice how easily I compared Target with Sam Walton's discount empire? Target would love to live a few classes above that level, because the margins are fatter up there.
Yes, Verizon (NYSE: VZ ) CFO Francis Shammo recently said the iPhone actually hurts his company's margins even as it boosts revenue numbers, but then the wireless industry plays by very different rules from the retail giants. Verizon's trailing net margin stands at 6.5% today, and AT&T (NYSE: T ) enjoys an even richer 9.3% profit take; Target, Wal-Mart, and Best Buy would all sell their mothers for margins like that. Of those three, Target's net margin is the lushest at 4.3%.
If this handful of Apple Targets helps both partners, we should expect many more of them in the coming months and years. The Minnesotan retailer runs more than 1,750 stores today, nearly double the location count of Best Buy and many times the retail footprint of Apple's 245 stores on American soil.
This move might help Target stave off Wal-Mart in the traditional retailing space, but the real Wal-Mart killer doesn't live in big-box stores at all. Learn all about the real cash kings changing the face of retail in a special report, free to Fools for a limited time.