Analysts say mini-Apple stores can help Target boost sales and profits in its big-box SuperTargets.
Target has always prided itself on high-profile partnerships. But this one is a real doozy.
The Minneapolis-based retailer reportedly is working with Apple Inc. to open mini-Apple concepts at two dozen locations across the country. Such "stores within a store" would help Target not only boost sales in electronics, a critical but weak category for the retailer during last year's holiday shopping season, but also would allow the company to make more-profitable use of precious store space, analysts say.
For Apple, the move would enable the famed maker of the iPad and Macbooks to sell its products beyond its company stores and at Best Buy Co. Inc. The Richfield-based consumer electronics giant, the only retailer to boast so-called mini-Apple stores, has been struggling to grow sales of late.
Citing unnamed sources, the blog AppleInsider reported that Target will open the mini-stores at 25 stores in retail markets that can't support a full Apple store. The report did not say whether Apple employees would staff the stores.
Target officials referred questions to Apple, which declined to comment.
"At Target, we constantly strive to deliver an innovative shopping experience that makes popular brands easily accessible to our guests," spokeswoman Leah Guimond said in a statement. "At this time, we have no additional information to share."
Amy Koo, an analyst with Kantar Retail, said the mini-stores could restore much-needed excitement to Target, which normally thrives on such high-profile partnerships. Target and Apple, Koo noted, share "remarkable similarity" for crafting unique marketing campaigns that effectively shape consumers' perceptions of their brands.
Indeed, Ron Johnson, a former Target executive, ran Apple's retail division before joining J.C. Penney as its CEO.
Target could also use a jolt with sales, especially in the electronics category. Last week, the retailer said sales at stores open for at least a year grew a disappointing 1.6 percent in December. Sales in "hardline" categories like electronics, movies, music and books fell in the low single digits despite Target investing millions of dollars in promotions and store remodels to sell these products.
Electronics, once a strong category for Target, "is very much in a state of transition," as traditional retailers like Best Buy continue to lose market share to online retailers like Amazon.com, said Judith Russell, editor of the Robin Report, a newsletter that tracks the retail industry. "It is very competitive."
Nowhere has the loss of retail sales to the Internet been more clear than in music, which is in many ways tied to sales of handheld devices such as the iPad, iPhone and iPod. Nielsen SoundScan, which collects music sales data, recently reported that in 2011 the sale of music online exceeded the sale of music in retail stores for the first time. In 2011, 50.3 percent of all music sold was digital, rather than on CDs or vinyl records, Nielsen said.
Furthermore, Target is devoting more space in its stores to its PFresh grocery concept. The strategy has succeeded in driving additional sales of lower-margin produce, meats, and baked goods but has yet to boost store traffic and overall same-store sales.
Target "is struggling on how to allocate space in its big boxes," Koo of Kantar Retail said.
Mini-Apple stores would not only get more people to shop at Target but also would offer a chance for the retailer to sell more profitable merchandise such as iPhones and iPads, Koo said.
An iPad is "not a general electronics device," she said. "It's one area that's still growing. You want to put something out there that still attracts people."
That Apple would expand its partnership from Best Buy to Target may reflect its worries about Best Buy's long-term prospects, Koo said.
In 2007, Best Buy debuted Apple's mini-stores at several of its locations. Today, more than 700 Best Buy stores across the United States have an Apple shop.
"We find our customers appreciate the advantage of shopping for and comparing Apple products with other operating platforms," Best Buy spokeswoman Paula Baldwin wrote in an e-mail. She, however, declined to specifically comment on Apple's possible plans for a partnership with Target.
Last year, Best Buy spent millions of dollars on creating Tablet Central, a special store area devoted to devices like the iPad. Despite these efforts and heavy discounting, Best Buy said same-store sales last month fell 1.2 percent.
"Apple is looking for a good retail partner," Koo said. "Best Buy has not been doing well."
Staff writer Steve Alexander contributed to this report. Thomas Lee • 612-673-4113