Walmart Apple Store

As a part of an effort to increase its United States retail presence, Apple Inc. (NASDAQ:AAPL) has begun to explore a ‘store within a store’ concept with both Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT). While Tim Cook, Chief Executive Officer of Apple Inc. (NASDAQ:AAPL), agreed that the firm was examining options, he did not provide many details on the strategy in when asked in the quarterly earnings call, other than that he did not expect Apple to be in all Wal-Mart stores.

Apple Inc. (NASDAQ:AAPL) currently operates approximately 250 retail locations in the United States, and likely would be looking to expand that footprint, especially into underserved regions. A partnership with firms such as Target or Wal-Mart certainly would allow expansion without significant capital investment. The test stores are constructed as a standalone space within the store and are reportedly staffed by Target staff (in the case of one Target location) that had received a handful of training hours on Apple product. The selection of products was also less than Apple’s main retail locations; however, this is not completely surprising due to both space limitations and sales knowledge concerns.

While Apple may benefit from further expansion, this strategy is not without risk. Apple has built a brand based on knowledgeable sales and service employees within their retail locations, and this has been part of the value proposition for higher end prices. Apple does risk diluting the service quality aspect of their brand by having employees with significantly less training selling their products in these stores.

Apple Inc. (NASDAQ:AAPL) released its 2012 Q1 earnings on April 24, 2012, announcing earnings of $12.30 per diluted share, up from $6.40 in the first quarter of 2011.