The Fruity Ways of PC Marketing

SYDNEY — Apple computer announced yesterday that it would open its first retail store on May 19.

Clearly the strategy is more to do with marketing than sales, however the move raises an important question: just what is the right mix of retail stores and resellers for PC manufacturers?

Apple’s first step into the world of retail is a small one. According to reports, Apple intends to open around 10 or so stores in the USA to help reach wealthier customers. The aim of the stores is primarily to bring potential customers closer to the purchase point via the display of the world famous Apple aesthetics and design. As such, the stores are not expected to account for a significant amount of Apple’s sales.

Currently, Apple sells around a quarter of its computers through the Internet and the remaining 75% through its reseller channel. Most notably, the company has been able to build its online direct channel without damaging the relationship with its existing base of wholesale distributors.

With the mass closures of retail outlets and restructuring of sales channels by other PC manufacturers one might hesitate before embarking on such a strategy. For example, Compaq recently abandoned plans to open 100 ‘Compaq Connect’ stores around Australia, preferring to return to the hand that feasted it in years gone by – Harvey Norman. Moreover, Gateway has closed many of its stores and now operates primarily through stands in Telstra retail outlets.

On top of the trials and tribulations of retail, Apple must also face a softening PC market. Traditionally the first quarter is a weak one for PC manufacturers and 2001 was no exception. According to IDC, Australian PC sales declined 15.4% from the fourth quarter of last year, however were 6.9% greater than the same quarter a year ago. IDC estimated that 478,000 units were sold during the first three months of this year, with Apple not registering in the top 5.

So why enter the retail game now? Why commit to the overheads of physical stores and the risk of slow moving inventory? Simply, its a matter of balance. Clearly, direct selling through retail outlets has merit. Like anything though, the measure and weighting of how much retail is the tricky part. In this case, a small footprint should not raise concern.

The key point to Apple’s selling proposition has and always will be design and aesthetics. Obviously a real world store is able to communicate those values better than a web page. That said, it is unclear whether the cost of a real world store outweighs the benefit.

The move by Apple is an interesting one, especially when placed in the context of Australia and the failed Buzzle reseller network. Buzzle was placed into administration in March, with roughly $30 million in debt. Six stores have since been closed and KPMG is currently searching for a buyer.

The weakening of its distributor channel in Australia would make a good case for the launch of a showcase store down under. That said, the nature of the small move is unlikely to translate into an international strategy in the short term.

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