A Bull's-eye for iPads: Apple May Put Ministores in Target

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Bulls eyeTarget (TGT) may be planning to add something that's chic but certainly not cheap to some of its stores.

Sources are telling Apple (AAPL) watcher AppleInsider.com that the tech giant will open small stores within 25 of Target's largest stores later this year.

However, if you already live in a major city that has a stand-alone Apple Store, don't expect to be camping out at your local Target to snag the iPad 3. Your town's not on the list. Apple's plan apparently is to launch these mini-stores in smaller cities where opening its own store concept in the middle of a mall isn't economically feasible.

Russian Nesting Dolls of Retail

Target is no stranger to the "store-within-a-store" concept. When RadioShack (RSH) was looking for a new partner after its deal with Walmart's (WMT) Sam's warehouse clubs expired, Target stepped in; up popped hundreds of RadioShack kiosks inside select stores.

It's a popular trend that isn't going away anytime soon.

  • J.C. Penney (JCP) acquired a minority stake in Martha Stewart (MSO) last month, and plans to open a Martha Stewart "store-within-a-store" concept throughout the chain next year.
  • After it acquired Lands' End in 2002, Sears (SHLD) opened Lands' End stores and Lands' End Canvas Shops inside its iconic yet meandering superstores.
  • Even UPS (UPS) has hopped on the bandwagon -- a brown bandwagon, that is -- by opening UPS Stores within national and regional retail chains.

The concept is alive and well on the high end of retailing. Instead of simply buying designer fashion and cosmetics only to resell them, Bloomingdale's has set up "store within a store" arrangements in the past with Ralph Lauren, Calvin Klein, DKNY, and Kenneth Cole. Macy's (M), Neiman Marcus, and Nordstrom (JWN) have struck similar arrangements with brands that may be household names but just aren't ready for their own storefronts deeper in the same malls.

Right on Target

Target is a smart choice if the sources are right.

Traditional department stores don't sell a lot of consumer electronics. Discounters do. But Walmart isn't right for Apple's brand. Fair or not, Walmart is seen primarily as a place to get cheap stuff. And Apple shouldn't even think about Kmart, which, after several years of declining store-level sales, is about as cool as a Vanilla Ice tattoo.

Target really is the best fit among discount department stores. The "cheap chic" tag gives the chain stylish panache. Post on Facebook that you're going to Walmart or Kmart and it's an invitation for mockery. Put up a status update about trekking out to Target and watch the "take me with you" and "lucky" replies pour in.

What Will the Concept Look Like?

It will be interesting to see how this plays out. Target already sells plenty of Apple devices, so this can't be a matter of creating a larger area dedicated solely to Apple products. Will Apple Store branding be promoted outside of Target, even if it's something as subtle as the classic Apple logo illuminated next to the Red Target sign? Will there be a large number of hands-on display models like those featured in the stand-alone stores? Apple's expansion will have to come at the expense of the selling space of something else. Which departments will get scaled back?

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And the biggest question: Will these smaller stores come complete with Genius Bars -- the service-oriented hub of traditional Apple stores where folks bring in their iGear when it needs repair? If Apple is serious about this move as a way to reach into less-populated markets, surely it can't be putting all this effort into outfitting gadget buyers if it will force them to mail in glitchy devices or deal with third-party repair shops.

Cynics will wonder if this was the moment when Apple jumped the shark. The company that prided itself on making stylish and functional high-end products for early adopters has truly gone mainstream if they're following RadioShack into Target.

Either way, things will definitely get interesting once these stores begin opening up and the next hot Apple product hits the market. Long queues outside of Target on day other than Black Friday? Strange sights are coming indeed.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of RadioShack, Walmart Stores, and Apple. Motley Fool newsletter services have recommended buying shares of Walmart Stores and Apple. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple and a diagonal call position in Walmart Stores.



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