Are Macs in Store for Wal-Mart?
The recent
announcement that Wal-Mart Stores is looking to significantly upgrade its
consumer electronics departments has created speculation that Apple may
slowly ease its way into selling its complete line of products at the chain’s
stores.
Ben Reitzes,
an analyst with Barclays Capital, told the Apple Insider, "Apple
is very particular and exclusive with who sells its Macs (much more so
than iPods) and any ‘Mac experiment’ with Wal-Mart
would likely start very gradually via a pilot program at first — just
like Mac sales started at Best Buy."
Wal-Mart’s
new consumer electronics departments will include an Apple boutique featuring iPod and iPhone products and accessories.
"We
believe Wal-Mart is actively pitching Apple to carry more products," Mr. Reitzes said. "With
Wal-Mart improving its retail displays, we believe that the mega-retailer
could eventually earn the right to sell select Mac products without diluting
Apple’s brand."
According
to Apple Insider, Steve Jobs and company have 10,000 distribution
points worldwide for the Mac line. Adding them to Wal-Mart’s 3,500+ stores
in the U.S. would provide an immediate boost and put Macs in many rural
locations that are not close to existing Apple Store locations.
Mr.
Reitz believes that while the typical Mac user profile doesn’t fit neatly
with Walmart’s, there are ways it could address
the retailer’s core consumer’s computing needs.
"Apple could reposition
the low-end of its Mac lines to be more affordable as well as eventually
introduce an ultraportable touchscreen tablet
device as early as this year," he said. "Apple’s Mac sales growth
accelerated markedly when it first expanded with Best Buy and more distribution
deals may not be far behind if Apple wants to keep pace with the rapidly
growing netbook category in its own distinctive
way."
Discussion Questions:
Do you see Macs in Wal-Mart’s future? How do you see it affecting
Mac sales and Apple’s brand image?
I’m all about moving product but this is bad for Apple. The last thing they want to get caught up in is Walmart-style service. Apple is a brand you want to protect and coddle. There isn’t a person in a blue vest that could ever do it justice (and yes that is a challenge).
Regarding Apple and Walmart shopper profiles not matching up…how can this be? 80% of the US shops at Walmart. So demographically, there have to be matches. But really, the preference for Mac is an attitudinal dimension for some, a performance dimension for others and for some, a cult-like loyalty. Walmart is full of shoppers with those various dimensions. Watch both brands gain sales, loyalty and momentum from serving the shopper!
Doron has it exactly right. This is my first contribution written on my new MacBook Pro bought, much to my surprise, at Best Buy. Yes I’ve finally come to the light. Apple’s own stores are amazing but it’s hard to get attention there without an appointment. At BB I had a Mac expert who took over an hour going over pros and cons. And they had some significant incentives just to clinch the deal. First I spent about 3X what I was planning to spend on a new PC. Would I go to Walmart to do that? I don’t think so. But the biggest issue will be the expertise and service. Trust me, those of us who are converting need LOTS of help!
If a prospective buyer runs into a sales person who can’t easily explain the Mac world from top to bottom will kill the deal, guaranteed. Brilliant computer geeks wearing a blue smock? There’s just something not right about that.
Doron makes a good point on service after the sale. Maybe an opportunity for the Genius Bar to get mobile with branded SMART cars and take the genius to the people? Maybe Walmart would split the cost of that business model or fund the cars. Maybe they could get some Pontiac’s from GM….
This is a huge win/win for both companies. Brings another name brand to Walmart–strategically very smart–and gives Apple much more visibility and opportunity.
While 80% of Americans may shop at Walmart, 99% of current Mac users probably don’t. We shop at Target instead. I’d say chances of Apple developing a product line specifically for Walmart are at least 50/50, however, Mac can’t afford to be a boutique item forever.
On a related (perhaps) note: why is Apple allowing Best Buy to allow Microsoft to film anti-Mac commercials inside of their stores? We’ve all seen them: usually a parent and a teenager, looking for just the right computer, going through various Windows-based models and Macs, and the child usually saying that the Mac is too expensive (along with a close-up shot of a Best Buy price sign reading “$1999”). Were I Apple’s marketing department, I would be extremely annoyed with Best Buy right now. As a Mac loyalist (who bought his through the website), I know I’m annoyed.
Unless Apple is planning to provide experienced salespeople at the sites of all Walmart store and provide some competitive price points, the experiment will not work. Apple tried this strategy many years ago at Circuit City with limited success. Then they expanded the strategy to Sears which did not work at all. The only way the strategy would work at Walmart was if Apple leased spaced and staffed and ran the section as an Apple store within Walmart.
It seems odd that Apple would risk Mac’s distinctive image (“Hello, I’m a Mac”) and premium price points for the dubious advantage of being sold by the world’s biggest commodity retailer.
A week or so ago there was a discussion about high-income earnings transitioning to Dollar Stores. A chart was provided with that discussion. The chart also showed that high-income earners were transitioning to Mass. Since this was a chart expressed in percentage, the migration of high income earners to Mass was extraordinary. And, if we look at the performance of Wal-Mart since the recession hit, we would have to surmise that a greater portion of the migration went to Wal-Mart.
If so, Wal-Mart has to start thinking about its expanding customer base. If it wants to keep upscale customers, it must make offerings that they desire. That is why Wal-Mart is pursuing Apple. Why does Apple hesitate? Because they have a brand to protect. Surely, dialogue between them revolves around sales expertise and support. If Wal-Mart can guarantee sales and support at the level Apple demands, both companies will be hugely successful.
Best Buy, keep an eye on this development. If Wal-Mart adds the expertise to sell Macs, will they add expertise to the rest of the department? I don’t think so. Wal-Mart will continue to be the price leader in electronics. For Apple, Wal-Mart may not even aggressively price Macs. But, don’t bet against them not having the very best in Mac sales and service personnel.
Apple is an aspirational brand, with darn near a cult following. Walmart sells commodity brands cheap. Apple would need to be willing to relinquish their aspirational status for the chance at becoming a commodity. I think it’s too big of a risk as they would most likely alienate their very loyal core customer.
As a long time Mac user (member of the cult), and WalMart shopper, I can say that there isn’t much surprising about this. If true–and remember, iPods and iPhones (in the US) are sold at Walmart–Apple is no doubt looking at it as an investment.
For Apple, having computers available at Walmart is another immersion to the brand–and if you find yourself drowning, refer help cases to Apple store or online–two expert areas where the converted customer can buy something. No one has any qualms about Walmart selling PCs–don’t customers need PC help too? 6 and one half dozen are the same.
Organic growth for the Mac line has to come from expanded distribution or expansion of the product line. Already an ultra-premium brand in the laptop and desktop space, the only direction for product line expansion is downward in price. Similarly, existing distribution, prior to BBY, was in the ultra-high end boutique Apple store channel.
Apparently the expansion into BBY didn’t destroy the brand image, and apparently, at least for some writers here, BBY has supported that expansion with the service component the brand requires. Personally, that has not been my experience in several local BBY’s.
The critical question for Apple involves the long term management and lifecycle maximization of the Mac brand. Can the brand retain it’s positioning with a hybrid distribution scheme involving segmented product line distribution? This is not a new model. Unfortunately, it is also NOT a model which has resulted in long term success.
Any apparel veteran will give you chapter and verse on apparel brands that sought the payoff of expanded distribution through “managed” product line segmentation. Variations have included sub-brand, co-brands and brand extensions. No winners. Not really. And the brands that didn’t create spin-off brand variants for the down-stream distribution suffered even more than those that did.
I would strongly urge the very bright marketing people at Apple to look at branded apparel for their research, and try to identify why, almost without exception, efforts to grow through downward retail distribution killed the brand.
How much did Walmart selling iPhones affect the brand? Zero. Zilch! Macs would definitely represent the high end at Walmart; however, many doubted whether Walmart would be able to upgrade its selection of high-end televisions and overall brand profile in CE. As it is, Walmart is giving Best Buy a run for its money.
As for Apple, selling Macs at Walmart wouldn’t just be about “more,” it would be about “different.” Walmart offers Apple the opportunity to reach an entirely new audience, one that Walmart has helped make more knowledgeable. That’s right, I don’t subscribe to the bad service rep that Walmart gets by default. There definitely is room for improvement (just as there is at Best Buy); however, I have received above-and-beyond service many times in Walmart’s CE department and its laser focus on the CE experience promises to make it even better. Paraphrasing my recent Tweet on the subject: Walmart is poised to become a Mac Daddy!
It makes sense to me to sell Macs at Walmart. They are the worlds biggest retailer. Nobody goes to Walmart to have a product sold or explained to them. You buy things at Walmart for price and convenience. Apple just needs to be careful and not get totally dependent on Walmart for sales or Walmart will put the screws to them. I recently replaced an old laptop and had been going to my local computer store for years. Imagine how I felt when I saw the same computer at Walmart for $200 less? Dang it, should have gone to Walmart.
Service quality and price points aside, one sentence in the AppleInsider post jumped out at me as if it had been styled red and bold, with blinking animation: “Reitzes also noted that many of Wal-Mart’s stores are located in rural areas not near one of Apple’s own company stores.” Seems to me the issue is geography: Apple might be looking for a way to serve its target demographic in areas that don’t have the numbers to support a mall store–or even a mall. Plus, these places tend to have spotty internet access and uneven coverage from Fedex, making the Apple online store a less-than-ideal option. (I think I just described the Outer Banks of North Carolina–and maybe a bunch of other resort areas too–which would also mean that at least several months of the year, they have plenty of folks who will still pay their mortgages next month if they buy a MacBook Pro instead of a Dell….) Put those factors together, and a store inside Walmart isn’t a bad way to find and serve those rural residents who fit the Apple target demo.
And if a few PCs happen to play with the machines and buy one? We’ll let them into the club if they learn a few simple phrases of our lingo, starting with “insanely great” and “One more thing….”
UGH!! Macs at Wal-Mart. Just doesn’t sound right.
For Apple, Walmart pricing could be dangerous, harming Apple’s other dealers. It’s not possible for a full-service dealer to compete pricewise against Walmart. Toyota, Honda, and Nissan learned that it’s better to have fewer dealers whose average volume per location is high, compared to GM, Ford, and Chrysler with many more dealers, whose average volume per location is low.
For Apple, it might be better to have a few high volume dealers (including its own locations), so that each dealer can afford great service, rather than many dealers operating on low margins, who can’t afford any meaningful service. Of course, Apple might “encourage” Walmart to price its merchandise in a way that’s not very aggressive. And based on Apple’s superior software, compared to Microsoft-based brands, there might be less service required.