Apple drives comeback of retail computer store


FILE - In this Nov. 11, 2010 file photo, Katherine Braun sorts packages toward the right shipping area at an Amazon.com fulfillment center in Goodyear, Ariz. Products are flying off the shelves at Amazon warehouses across the county as Californians prepare to start paying sales taxes on online purchases. The change, which takes effect Saturday, Sept. 15, 2012, will pave the way for the e-commerce giant to open warehouses in California and offer same-day shipping to customers. (AP Photo/Ross D. Franklin, file) (Ross D. Franklin/AP)
September 21, 2012

The war for supremacy among the nation’s most advanced technology companies is spilling over into an unexpected place: the brick-and-mortar store.

On Friday, Apple’s otherworldly success was on full display at its stores as long lines of customers waited to get their hands on the new iPhone 5 . Meanwhile, Microsoft, which is racing to challenge Apple in mobile technology, is significantly expanding its retail footprint this year.

And Amazon, perhaps the epitome of the virtual shop, has tried to form partnerships with big-box retailers as it launched its line of Kindle tablets. It was dealt a blow this week when Wal-Mart decided to purge the devices from its shelves.

The events highlight the focus on traditional retail for today’s most dominant tech firms.

Nearly two decades ago, when Dell and other technology manufacturers began allowing consumers to order customized laptops and desktops online, some thought the days of the local computer store were numbered. Big-box retailers such as Circuit City and CompUSA collapsed as buyers flocked to cheaper options on the Web.

But then Apple, against conventional wisdom, brought the computer retail space back.

“One of the most important initiatives Apple ever embarked on was its retail store strategy — which was thought by everyone at the time as the dumbest move ever,” said Carl Howe, head of consumer research for the Yankee Group.

Today, Apple has 380 retail stores in 13 countries. Its Fifth Avenue store in New York City ranks among the most successful retail spaces in the world — bringing in more revenue per square foot than Tiffany.

Apple wanted to control how its computers and devices were displayed and wanted knowledgeable sales representatives to explain how they worked. The stores ended up bolstering Apple’s brand and bottom line — they account for 12 percent of sales. Consumers began to think of Apple as a luxury product because of its large, modern spaces in some of the most expensive locations in the world, analysts said.

“Our stores offer the best buying experience and the best customer service on the planet,” chief executive Tim Cook said at this month’s unveiling of the iPhone 5.

Following in Apple’s footsteps was Microsoft, which has opened 23 Apple-like stores since 2009. This year, it has plans for seven more as well as 35 temporary shops for the holidays where it can show off the latest Windows phones and its Surface tablet. At Tysons Corner Center, crowds often pack the store where they can play the latest XBox 360 Kinect games.

Amazon and Google, which began making and selling their own mobile devices during the past year or so, turned to big-box partners such as Target and Wal-Mart to showcase their devices.

That’s why Wal-Mart’s decision might hurt Kindle Fire sales, analysts said. Consumers will have a harder time feeling the devices in their hands or comparing them with Apple’s iPad. Target stopped selling Kindles earlier this year.

The move was logical for Wal-Mart, other analysts noted. Why should it help Amazon peddle a device whose main goal is to sell other stuff — including movies, books and housewares — that Wal-Mart also sells?

“Wal-Mart basically said, ‘We are not going to sell Kindles so people can buy products through those devices instead of at our stores,’ ” Howe said.

Even with the ease of buying products online, only 7 percent of all goods were purchased through the Web in 2011, according to Forrester Research. That is expected to grow to about 9 percent by 2016.

For computers, mobile phones and tablets, 15 to 20 percent of consumers buy those products online, but that number isn’t expected to change much, according to research by the NPD Group.

“When you are in a store and see all your options, you are better able to make a decision,” said Stephen Baker, a vice president of electronics research at NPD.

Craig Timberg contributed to this report.

Cecilia Kang is a staff writer covering the business of media and entertainment.
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