As the iPhone 5 is launched, is the expanding Apple Store empire killing retailers?

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As retailers globally built up the Apple brand to the most valuable and loved tech company it is today, is Cupertino now taking over the show?

Ahead of the iPhone 5 launch last week, Apple has a total of 17 stores in Australia (249 in the US) opening up new locations in Canberra’s CBD and its first in Perth, and is said to be opening another in Melbourne soon.

Now it has emerged Apple gave retailers limited stock of the iPhone 5, with the largest retailer in the US, Best Buy, just getting 10 devices at some stores, and thus dehabilitated in its bid to meet consumer demand, reports the Wall Street Journal.

“While Apple’s own stores appeared to be selling the new device in large numbers, other retail chains that offered the device had limited quantities from the outset,” sources told the Journal.

“Shortages have hit Apple partners in the past, but the disparity seemed more pronounced this time.”

Apple confirmed it has sold out completely of the iPhone 5 with Tim Cook insisting “stores continue to receive iPhone 5 shipments regularly and customers can continue to order online and receive an estimated delivery date.”

A Vodafone spokesperson told SmartHouse last week it would work with Apple to get new stock if it did sell out of initial iPhone stock.

Telstra did sell out of pre-sale stock but declined to say how much stock it was given by Cuperinto in the first place, saying it was “working on getting more in.” 

Telcos were given a certain amount of pre-sale and retail stock, although the quantities Apple gave retail partners are unknown with the secretive company demanding such information be kept confidential and Apple refusing to give away such figures.

A Citi report recently noted Apple Stores in Australia generate “sales of more than $35 million per store,” which “is in stark contrast to Dick Smith, which has sales per store of $3-$5 million.”

Citi analyst Craig Woolford also noted JB Hi-Fi in particular was at risk from Apple’s Store empire since 20% of its sales are iOS devices and is becoming ever more reliant on Computers and TVs, rather than software and movie titles.

However, this is a load of nonsense, says JB Hi-Fi Marketing Manager, Scott Browning, who rejects the notion that the Apple Store poses any kind of threat to his company, and reckons the analysts view is a “little strange,” he told Channel News.

“Our growth is in line with Apple Stores” Browning insists, adding its 20% figure is “relatively sensible”, given Apple’s domination of consumer electronics with iPhones, iPads and Macs.

It also shows “we are universal resellers and successfully sell a lot of other brands including Samsung, Microsoft based PCs and others. The fact is, Apple remains a successful business and its a transparent company, so no-one has a market advantage.”

So is JB Hi-Fi worried about Apple expanding retail empire?

Apple Stores located nearby actually helps JB stores sell more iOS gear, says Browning, and “our view is they actually help our stores. A lot of people are still working out what they want to buy and the Apple central stores facilitates this.”

Cupertino’s model is to assist resellers and provide a lot of support, but is very dependent on its satellite sellers,  says Browning.

In fact, Apple “satellite resellers,” including the likes of JB, Big W and Harvey Norman, outsell Apple’s own stores sales by a mile. Apple has less than 20 retail stores, which pales in comparison with the 155 JB Hi-fi’s and 177 Harvey Norman outlets in major towns and cities throughout Oz.

The Apple model is about high volume, high rent locations and not spending a lot of money on advertising. The Cupertino giant  uses its stores as a testing ground for selling and merchandising techniques, which it then passes on to resellers, says Browning.

Apple’s flagship stores are centralised, confined to CBDs and are a showcase for iOS products, curating the brand and its products.

The Apple price model is also transparent, says JB Hi-Fi’s head of marketing, meaning prices are consistent throughout Apple Stores and resellers, so there’s no major gain for a consumer to buy from an Apple Store as opposed to a reseller.

Browning also says Apple does not inform the Melbourne based company, which has 155 stores scattered in Australia, about its retail plans.

There are now 17 Apple Stores in Oz, with another believed to be opening in Melbourne’s North West soon.