Seeing iPhones sold at Wal-Mart is like seeing Wolfgang Puck chowing down at IHOP (not likely) or Rachael Ray pimping Dunkin Donuts (oh yes she did). Has there ever been a bigger mismatch in marketing history? What’s next, an Apple logo on a NASCAR vehicle? Or even worse, an Apple at a — what? What’s that, you say? You want to know what’s the big deal?
Oh, of course. If you’re not an Apple fanatic like myself, this might appear to be just another business deal. Everything else is available for sale through Wal-Mart, so why not iPhones? Well, that’s a perfectly legit perspective. So let me try to explain this unholy matrimony by first introducing the newlyweds….
Apple rose to uber-hipness by positioning itself as the people’s rebel against corporate giants. Its legendary “1984” ad featured a runner heaving a hammer at a giant televised Big Brother, and its relentless PC vs Mac commercials have driven Microsoft to silly desperation. (I’m still trying to figure out those Seinfeld ads.) Apple’s fanboys are creative-industry elitists who are as much into the brand’s hipness as they are into its technology. (iPhone is short for “I prefer hipness over network excellence.”) Apple’s corporate partners are usually other hip brands like Nike and Starbucks. And Northern California-based Apple is Blue State all the way — recently donating $100,000 to fight Proposition 8 (the same-sex marriage ban).
Imagine Wal-Mart doing that…
Conversely, Arkansas-based Wal-Mart is as Red State as boar hunting, and it’s the whipping boy of choice for us lefty granola-munching critics. On Christmas Eve, the company forked out $640 million to settle 63 lawsuits over wage-and-hour violations. Wal-Mart’s big box stores are the antithesis of hippitude, emphasizing low-price over style. And Wal-Mart’s impact on communities sends neighborhood-preservationists and union organizers into mouth-foaming rages. Many of the consumers who prefer Apple would rather pay more for a product than be caught in a Wal-Mart.
And yet, these two kids are going to bed together.
It’s true, both companies have recently strayed from their once-solid reputations. As I wrote last January, Wal-Mart decided to make itself the greenest retailer in America (though I suspect the motivation was to splinter the liberal opposition). And Apple is not the golden-hearted champion of the little man it pretends to be. Wrote Wired magazine earlier this year (“Evil/Genius”)…
Apple is irredeemably evil, behaving more like an old-fashioned industrial titan than a different-thinking business of the future. Apple operates with a level of secrecy that makes Thomas Pynchon look like Paris Hilton. It locks consumers into a proprietary ecosystem. And as for treating employees like gods? Yeah, Apple doesn’t do that either.
So maybe the two companies aren’t that far apart? Maybe I, too, should accept this as business as usual?
Uh, nyet. Nada. Never! Not in the eyes of this Apple junkie. Watching this relationship unfold is like seeing Jon Stewart go on a date with Sarah Palin. It’s just wrong, wrong, wrong.
What could possibly explain it?
Well, Apple and Wal-Mart do have something in common: they’re both kicking ass during this recession. Wal-Mart, of course, is pulling in a lot of hurtin’ consumers — including some middle-class types and former Wall Street financiers who had preferred classier joints. And Apple has turned the iPhone into a recession-era cashflow machine: while hardware sales may decline, Apple still scores a chunk of the extortionary fee that AT&T charges iPhone users. Apple’s take is estimated to be between $12-$18 per month per customer. Multiply that by 14 million customers and you’re talking serious Niagara-caliber flow.
Apple is also making a killing on Apps — the small software applications developed exclusively for the iPhone, and priced impulsively low. According to Silicon Valley Insider, Apple has sold 300 million Apps since July, pocketing an estimated $50-$100 million. SVI acknowledges that that’s “couch change” for Apple — but it’s also just the beginning.
While 14 million appears to be a big number, it’s a fraction of the 250 million cell phone users across the U.S. Apple wants more. With Wal-Mart’s frightening penetration of Middle America, Apple can now reach customers in parts of the country that have never seen and will probably never see an Apple Store. (Go Wasilla!) For Apple, this venture is clearly about subscriber fees and software. As everyone’s discovering, it’s tough to sell hardware during hard times, no matter how cool it is. Just look at Best Buy, which was the only other third-party retailer that Apple allowed to sell iPhones. Best Buy is considered the best managed electronics retailer in the business, yet its sales are also down this year. Apple clearly needed to spread its bets.
But, really now, Wal-Mart?
If Apple needed a general merchandiser, why not Target, which has a hipper brand, or Costco, which is known for carrying high-end merchandise?
Wal-Mart? Nike won’t allow its shoes to be sold through Wal-Mart. (See postscript below.)
Granted, iPods sell at Wal-Mart, but in 2008 the iPod is really just another MP3 player. Starting at under $50, it’s practically disposable.
The iPhone is Apple’s most innovative product — more so than its computers. The iPhone is the item that’s generating headlines and wishlists. What is Apple thinking?
Apparently, when the going gets tough, everyone goes to Wal-Mart, and the bottom line is all that matters… right?
Right — until the competition comes out with a comparable product. If that happens, will consumers still be willing to pay a premium for the Apple brand (the notorious “Apple Tax“)? I’m not just talking about the iPhone. Apple’s computers are currently priced higher than comparable products. What if this Wal-Mart fling brings down the entire Apple brand, which was built on a foundation of hipness and exclusivity? Will Apple realize that it’s pulled a Dell and turned its much vaunted products into (gasp) commodities? Would Apple then have second thoughts about this relationship? Could we then see an Apple-Wal-Mart … divorce? Who’ll get the kids?!
‘Cause here’s one fairytale romance that could become a soap opera.
Tangential Interest: Think I’m going overboard with brand orthodoxy? Maybe I am. But consider the case of Nike, which sells golf equipment through Wal-Mart, but not its signature shoes. To tap into Wal-Mart’s massive customer base, Nike bought the Starter brand for distribution through the big box in 2005:
Nike is adamant that the products it will offer in Wal-Mart — as well as at Kmart, Payless ShoeSource, Target and other discounters in coming years — always will be swooshless…
“It’s a very funny thing,” said Mary Gleason, the president of the Exeter Brands Group, a Nike subsidiary and parent of the Starter and Shaq brands. “You can buy a Pepsi at the Four Seasons for $4 and you can pay $4 for a Pepsi six-pack at Wal-Mart. But when you cross the aisle and get to something personal, it’s very different. You have luxury brands, and you have those brands that only sell in the discount (market),” she said.
“The Nike brand just does not belong in the discount channel.”
As Nike knows, your brand is also shaped by the company you keep.
P.S. How about a little musical number to close this out?