As widely reported yesterday, Target (TGT) said they will to stop carrying Amazon's (AMZN) Kindle in response to the e-tailer's practice of undercutting prices. The move reflects the growing concern of traditional retailers that their "showrooms" are for customers who later order the same goods online.
In almost a throwaway comment it's noted that Target is testing expanded displays of Apple (AAPL) products. By coincidence, Apple-devotee website Appleinsider.com is running a story today regarding a similar test-run of Apple products in Walmart (WMT) stores. Citing the work of Piper Jaffray analyst Gene Munster, the site is running pictures of what it calls a store-within-a-store at a Walmart in Lowell, Arkansas.
Could a marriage as bizarre as that of Apple and the Discount world work? According to Brian Sozzi, chief equity analyst at NBG Productions, the answer is yes.
"I like it," Sozzi says in the attached video clip. "The customer service won't be there but if you don't know what an iPad is, where have you been living the last couple years?"
Sozzi feels customers have already been convinced Apple offers a premium product. At this point it's a matter only of distribution. "Over the next two or three years you could see 5,500 stores carrying Apple products; they're going to sell more of it because everyone knows what it is anyway."
This isn't a matter of clashing stereotypes between upper-crust Apple customers and middle America. Combined Apple, Target, and Walmart will sell over $600 billion in merchandise this year. These are three companies designed to appeal to every American, everywhere. They are America.
The problem is what America has come to expect from the shopping experience. The late Steve Jobs and Ron Johnson famously designed Apple's store concept from scratch with no expense spared. The sales team in an Apple store is armed with total knowledge of product and the ability to help a customer from greeting to checkout.
Now Jobs has passed, Johnson is CEO of JC Penney (JCP) and Apple product is poised to be sold in two chains where ideal customer service revolves around being friendly. Munster says the staff at the Walmart store-within-a-store test had received two-hours of training. That's about long enough to learn what the products are called and where the keys to the display are located.
All three chains want nothing so much as to exceed customer expectations; the problem is how those expectations are defined.
The cost of opening a single Apple store is estimated at anywhere from $5 to 10 million just in terms of renovations. The stores do more revenue per square foot than any other retailer in the world but there are a finite number of showcase locations.
It's not just Apple looking for more worlds to conquer. "This is the start of something bigger," Sozzi says. "So many parts of a big box store no longer make sense. Why aren't Starbucks (SBUX) in a Best Buy (BBY)? Put a Starbucks in a Walmart. Make empty space, boring space, more productive."
Of Apple, Sozzi says, "I think they're impregnating Walmart right now." The question is how the customer on either side of the mating ritual is going to feel about the experience.