Apple Launches Fifth Avenue Retail Store
As of May 2006, Apple owned 147 retail stores around the world which including the US, Japan, the U.K, and Canada. According to Retail Forward, a consulting and market research firm based in Ohio, for FY 2005, Apple had recorded revenues of US$ 2.35 billion, which was around 17% of Apple’s total sales. This was a significant increase from the US$ 621 million in revenues from retail stores in FY 2003.3Apple also had a 44 percent growth rate in revenue per store from 2004 to 2005 in comparison to major retailers like Target Corp, Wal-Mart Stores Inc., and Best Buy Inc, which had a growth rate of three percent to six percent. According to Charlie Wolf, an analyst at Needham & Co., an investment banking and asset management firm, Apple’s retail strategy reinforced in building its brand. “It’s so consistent with what Apple is that it has really added value to the entire enterprise.” 4
However, Apple’s retail expansion upset its channel partners as they thought that the stylish ambience of Apple’s retail outlets would easily pull customers away from their stores. David Ash, president of MacSolutions Inc., a retailer of Apple products in Los Angeles, said, “They’re (Apple) killing us.”5 The resellers also accused Apple of favoring its own retail stores over as products like iPods that were scarce in other retail channels were available in Apple stores.
Resellers alleged that Apple had taken an unfair advantage by competing with them and several law suits were filed against Apple between 2002 to 2006 in Santa Clara County Superior Court in California. Talking about Apple’s decision of favoring a retail approach, Simon Yates, a senior analyst at Forrester Research Inc., said, “The theory was that if consumers could get their hands on the stuff, they’d be more likely to buy an Apple than a Dell. That put them in conflict with a reseller channel.” 6
Some resellers were upset that when Apple was not so popular and well-known, they were the ones who had stood by the company. Joe Weingarten, an ex-Apple dealer in Ohio, who had filed a law suit against Apple, said, “Within a few years, all of the independent resellers will probably disappear as Apple extends its storefront. When Apple was suffering, we were the ones who supported them.” 7
[3] Nick Wingfield, “How Apple’s Store Strategy Beat the Odds,” http://online.wsj.com, May 17, 2006.
[4] May Wong, “Apple's Retail Strategy Reinforces Brand,” www.abcnews.com, May 18, 2006.
[5] Nick Wingfield, “How Apple’s Store Strategy Beat the Odds,” www.onlineWSJ.com, May 17, 2006.
[6] “Apple eats its own,” www.chicagobusiness.com, March 21, 2005.
[7] “Apple eats its own,” www.chicagobusiness.com, March 21, 2005.
