Apple unveils its offline strategy

Apple plans to open 25 stores in upscale malls across the US

By BBC NewsOnline's Kevin Anderson in Washington

Fans of Apple computers are planning a pilgrimage as the maker of iMacs open the first two of 25 stores in the US.

One Apple fanatic from Boston logged on to MacAddict's forums to say that he was considering making the seven-hour drive to the store set to open in suburban Washington DC. Another forum user said of a possible trip to opening day at the Apple store, "I would give at least 75% of my soul to go."

But while Apple appreciates its faithful users, the stores are aimed at expanding the computer company's market share, which now hovers around 5%.

Some analysts question Apple's foray into retail, citing overall softness in the computer industry and drawing parallels to PC maker Gateway's struggling retail effort.

The Genius Bar

Apple announced sites for 14 of the 25 stores that it plans to open, including several in the San Francisco and Los Angeles areas, and others in New York, Chicago, as well as stores in Minnesota and Colorado.

Apple has what it calls a Genius Bar to answer customers questions

The stores will not only feature Apple's computers but also some of the electronic devices that Mr Jobs has highlighted as part of a digital lifestyle.

Apple has found that users of its computers own digital cameras, video recorders and digital music players in much greater numbers than other PC owners.

In the rear of the store, Apple has what it calls a "Genius Bar," a cross between a coffee bar and a help desk.

And if one stumps the Apple genius, the bar also sports a red emergency phone that connects directly to the company's advanced technical support.

Five down, 95 to go

Chris LeTocq of Guernsey Research describes Apple's stores as a "break-out strategy."

"Apple has, essentially been good at selling to people who have already made a Mac decision," he said, but added that Apple's difficulty has been, "how to sell to people who have not made a Mac decision?

CEO Steve Jobs admitted, "Apple has about 5% market share today," adding candidly, that the other 95% "don't even consider us".

In conjunction with the opening of the first two stores, the company has launched a "5 down, 95 to go" advertising campaign.

But Apple's attempts to win market share comes at a disastrous, unprecedented slowdown in the technology industry.

And while Apple has suffered like other computer manufacturers in the rapid deceleration of the high-tech economy, Mr LeTocq said: "It's the guy who invests in marketing who comes out on top."

"If Apple just sat on its hands, they would not be looking at 5%, they would be looking at 4%," he said, adding, "Apple has to be aggressive just to maintain share."

Not entering Gateway Country

But some retail analysts have questioned the timing of Apple's with computer sales dropping and with PC maker Gateway struggling with its line of stores. Gateway recently closed 40 of its stores in the US and Canada.

But Stephen Baker of NPD Intellect said he sees few parallels between the retail strategies of Gateway and Apple.

"The way (Gateway's) stores are sited, you have to purposefully go there," he said, adding such a strategy has forced Gateway to advertise not only its computers but also its stores.

"Apple will be there in malls with high traffic that do not need a lot of external advertising to drive people to those stores," he said.

Polishing Apple's image

Apple has also been criticised by some of its resellers who fear that the new stores might undercut their business.

Apple wants to carry to bring its polished image to a shopping experience

But Mr Baker said: "Most manufacturers competing with their channel in one way or another."

Mr Jobs also noted that there are 3,000 dealers in the United States that sell Apple products, and the 25 planned stores represent only a 1% addition to the number of businesses selling Apple products.

Indeed, it is some dealers, especially so-called big box electronics stores, that led Apple to launch its own retail strategy.

"Apple had a feeling it was not well served by traditional resellers," said Chris LeTocq.

"People would go to local computer store, and frankly more often than not, they were forced to walk through racks of PCs, with people determined to sell them PCs before they found the Macs in the back of the store," Mr LeTocq said.

Apple, which is known for slick computers and even slicker advertising campaigns, wants to take "its high-concept image all the way through to the store," he added.