Apple computer strategy

When Apple ceo Steve Jobs puts his mind to something, it's a good bet investors will see results. Since Jobs rejoined the company in late 1996, the Apple label has adorned some of the industry's most innovative computer products. But as Apple has learned perhaps better than any manufacturer in the market, a knack for creating trend-right hardware is no guarantee for growing market share.

It is in this vain-an effort to gain back ground in one of the most fractured and vulnerable industries-that Apple set out early last year on one of its most radical, and at times controversial, expansion plans with the launch of a standalone retail store. Today, some eight months after the first unit opened in Tysons Corner, Va., the Apple store concept is 27 units strong-a significant milestone for both Apple and Jobs, who "guaranteed" at least 25 units by yearend.

The new stores, all of which are identical footprints of roughly 6,000 square feet, are a fantasyland for the Mac aficionado. In a sleek, blond-wood and white-wall environment reminiscent of a Scandinavian furniture showroom, Apple displays and services the products that have earned it a reputation as an industry leader. And much to the credit of the Apple store leadership, which includes veteran merchants from Target, Gap and Victoria's Secret, this new retail concept is as much about substance as it is style.

Unique features, such as an In-store Demonstration Theater, a Genius Bar staffed by Mac experts and loads of interactive multimedia displays, give the company a competitive advantage in the crowded computer sector-- which is precisely Apple's objective.

However, in order to fully incorporate all aspects of the new digital lifestyle, Apple's retail venture is taking the company down a path it has never been down before. In addition to showcasing its new role as a bricks-and-mortar retailer, the Apple retail store is the most overt example to date of a collaborative effort to work in compliance with other vendors.

Sharing shelf space with well-known Apple products such as the iMac and iPod are many computer peripherals and accessories made by competing brands, such as Palm, Rio, Canon, Sony, even Hewlett-Packard, all of which are sold and serviced at the Apple store. This all-inclusive merchandising strategy--the most aggressive example in company history--is a significant shift for a company that is notorious for its reluctance to create, market or support any product compatible with the PC platform.

Apple believes this new approach is the key to winning back market share, which has dwindled in recent years--at times dipping well below 5%. The new operating theory, which is echoed firmly by the new retail store concept, is that the part of the digital generation that's unfamiliar with Apple's core computer product will be attracted to the store and wowed by the performance of the Apple CPU.

The act of encouraging converts, however, may take more than a fancy store with lots of bells and whistles. As digital product has gained a great deal of interest in the last few years, consumer electronics competitors, such as Best Buy, Circuit City and CompUSA, have spent the better part of the last two years positioning digital peripherals (most of which are inherently more compatible with the PC than the Mac) as the centerpiece of their stores. This means that if history were to repeat itself, Apple could find itself once again struggling against an overabundance of PC product with lower price points and a wider channel of distribution.

Assessing how consumers will react to the new store is tricky business. Although opening day drew long lines of dedicated Apple fans, the company does not report sales figures and has not released roll out plans for the rest of the year, making the viability of the concept anybody's guess.

The only sure thing at this stage is that the image of a $3,500 G4 positioned at the front of a chic new store makes for a tough sell in a tight economy.