Although products receive the majority of discussion, one of the hidden strengths of Apple (NASDAQ:AAPL) has been its successful retail operation. Earlier this year, data firm eMarketer found that Apple extended its lead in the highly watched metric of sales per square foot, beating out retailer heavyweights Tiffany & Co., Michael Kors, and Lululemon Athletica.
Last year, eMarketer found that the company reported $4,551 in sales per square foot, followed by No. 2 Tiffany at $3,043. This year, Apple increased that figure to nearly $4,800 -- a gain of nearly 5.5% -- while Tiffany's number grew just 3% to $3,132. For Apple, sales of its wildly popular iPhone 6 and iPhone 6 Plus iterations have helped grow its retail sales.
Last year, Apple made a rather high-profile hire when it lured Angela Ahrendts from luxury fashion company Burberry and paid her $70 million in stock grants. And as the earlier figures demonstrate, she's clearly had some successes executing on Tim Cook's mission to sell more products through Apple Stores. For the Apple Watch, however, Ahrendts' sales strategy has been muddled, as the company's recently installed preorder system led to delays and poorly informed customers.
Apple's partnering with Best Buy
This week, electronics retailer Best Buy released a corporate memo announcing its deal to become the first national retailer, outside of Apple, to carry the Apple Watch. Starting on Aug. 7, 100 stores will carry the watch, with a total of 300 carrying the device by the holiday season. For those looking to own the top-of-the-line Apple Watch Edition model, however, you'll have to still go to the Apple Store to buy the unit, as Best Buy will carry only the low- and mid-range Sport and Watch models.
For Apple, there's obviously a trade-off here. On one hand, Apple should increase sales, at least incrementally, by having more distribution outlets. And that's a positive for Apple going into the seasonally heavy holiday season. On the other hand, however, this seems antithetical to Apple's existing Watch rollout, in which the company appeared to want to control the purchasing experience and build upon its retail-sales-per-square-foot figure.
Compared with Apple's last new product, the iPad, which was initially available at "select Apple Authorized Retailers," versus Ahrendts' plans for a tightly controlled and tailored experience through Apple's retail channels only, partnering with Best Buy feels like a change in strategy.
For Apple investors, does it really matter?
To be fair, Apple partners with Best Buy with its host of products and even employs a "brand store" (essentially a store-within-a-store concept) at the big-box retailer. In addition, Cook was rather sanguine about the watch's prospects and mentioned that sales picked up once the watch was available in its stores. So from Apple's standpoint, the limiter of Apple Watch sales appears to be supply, not demand. Even if the company is modifying its tightly regulated, experience-focused sales strategy for its watch, this should not be a major factor in watch sales.
However, while increasing outlets does nothing to solve Apple's supply problem, it does hint toward the fact that Apple is more confident about its supply issues. I doubt Cook would open up sales to third parties while struggling to properly stock Apple's own retail stores. That said, let's remember that Apple Watches are almost immaterial to the company's overall financial performance. The company is mostly an iPhone-driven company and will continue to be so for the immediate future.