Apple Could Benefit From a More Colorful Retail Strategy

Apple needs to improve its online operations, and some suggest that a branded store could further boost its sales.
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Apple

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CEO Steve Jobs wowed the faithful at the

Macworld Expo

with the iBook, a shell-shaped laptop computer that has translucent white plastic and blueberry- or tangerine-colored rubber sheathing.

A year after the Cupertino, Calif., company brought out more fruity colors for its iMac, Apple fans flocked to see the iBook as if it were a new toy at

FAO Schwarz

.

But the three-day lovefest did not include a radically new retail strategy. Although more PC makers are moving to control their sales channels, Apple relies mainly on mail-order catalogs, outmoded retail stores and thousands of resellers, including

CompUSA

(CPU)

,

Best Buy

(BBY) - Get Report

and

Sears

(S) - Get Report

. Apple has also had some troubled dealings with its largest retailing partner, CompUSA.

"There were some real problems with CompUSA giving Apple a hard time about stocking all the

iMac colors a while back," says Eric Klein, a small-business analyst with the

Yankee Group

. "And now CompUSA is limiting PC floor space and turning to consumer appliances like digital cameras -- it doesn't seem to be where Apple wants to be right now." Apple officials didn't return calls seeking comment on the company's relationship with CompUSA.

"I think both online and in its stores, Apple could do a much better job of allowing new customers to become comfortable with its products," says Apple reseller Matthieu Besson, who came to Macworld from Lausanne, Switzerland, where he runs a computer retail outlet.

Apple certainly needs to improve its approach to the Internet. While Apple's online sales are still an inconsequential part of the company's total revenue, PC companies such as

Dell

(DELL) - Get Report

use the low-cost, tax-free Internet to produce 30% of their total revenue through sales. Even

Compaq

(CPQ)

generates 15% of revenue from online sales.

Even Apple's faithful are quick to complain about the online store. "My experience at Apple's store online hasn't been that great," says Eric Yang, editor of the

MacEvolution

Web site. "I've tried to order two computers online, and both times I didn't get them."

Apple Stores

There have been

rumors that Apple was close to rolling out a new retail strategy, but so far nothing has transpired.

Charles Wolf, a

Warburg Dillon Read

computer analyst, isn't a fan of Apple's current sales strategy and believes a retail store devoted solely to the company's products would provide Apple customers with a decent shopping experience. Wolf has a buy rating on Apple, and his firm has done no Apple underwriting.

Mitch Mandich, Apple's worldwide head of sales, says the company has no plans to change its retail strategy at this time, but it seems something may be afoot.

International Data

PC analyst John Brown, who recently talked with Apple officials about their future plans, says he was told that Apple wants to complete the launch of its iMac products and then roll out its retail sales strategy. "We expect to see more direction in its retail strategy here by the next quarter," says Brown.

Not all on Wall Street are enthusiastic about Apple stores. Mark Specker, a PC analyst at

Soundview Technology Group

who has a buy rating on Apple, says there is "no way" Apple will have retail stores in the near future. "The idea just would create more headaches than it's worth," he says. Soundview has done no Apple underwriting.

Nevertheless, the idea of branded stores has been gathering momentum in the industry ever since the Street grew enamored with

Gateway's

(GTW)

Country Store concept earlier this year. The San Diego, Calif.-based PC maker embarked on this strategy to build brand recognition and appeal to small-business customers more than two years ago. After initial skepticism, the Street now considers Gateway's 160-plus stores in the U.S. a success because the stores generate sales but do not carry inventory. The stores also allow the customer to touch and feel Gateway's products, something Apple could benefit from.

One thing's for sure: Apple's idiosyncratic fans will be hard to please. "I kind of see a sort of large-scale NikeTown," says an Apple Macworld attendee who sports a black T-shirt that says "Mac Geek."

Nike

(NKE) - Get Report

has opened 15 NikeTown stores, including one on New York's 57th Street, amid such designer boutiques as

Hermes

and

Burberry's

. With its colorful iMacs and iBooks, an Apple store could very well fit in there, too.