Apple at Walmart?

27 December 2008

A Mismatch Made In Heaven? Apple Gets In Bed With Walmart

by Freddy Tran Nager, Founder of Atomic Tango + Branding Purist…

Seeing iPhones sold at Walmart is like seeing Wolfgang Puck dishes at IHOP (not likely) or Rachael Ray pimping Dunkin Donuts (oh yes she did). Have you ever seen a bigger mismatch in marketing? What’s next, an Apple logo on a NASCAR vehicle? Or even worse, an Apple at—

What? You want to know what’s the big deal?

Oh, of course. If you’re not an Apple fanatic like myself, this appears as just another business deal. Walmart sells early everything else, so why not iPhones? 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…

Apple’s fanboys are creative-industry professionals who care as much about the brand’s image as they do its technology. (iPhone should be an acronym 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).

Conversely, Arkansas-based Walmart is as Red State as boar hunting, and it’s the whipping boy of choice for lefty kale-munching critics. On Christmas Eve, the company forked out $640 million to settle 63 lawsuits over wage-and-hour violations. Walmart’s big box stores are the antithesis of hip, emphasizing low-price over style. And Walmart’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 shop at a Walmart.

And yet, these two kids are now dating.

Tue, both companies have recently strayed from their once-solid reputations. Walmart decided to make itself the greenest retailer in America (though I suspect the motivation was to splinter regulators). And Apple isn’t 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.

If “1984” were being remade, Apple would have to hurl the hammer itself.

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 dating Sarah Palin. It’s just wrong, wrong, wrong.

What could possibly explain it?

Well, Apple and Walmart do have something in common: they’re both kicking ass during this recession. Walmart attracts hurtin’ consumers, including some middle-class types and former Wall Street financiers who previously preferred classier joints. And Apple turned the iPhone into a recession-era cashflow machine, scoring a chunk of the extortionist fee that AT&T charges iPhone users. Apple’s takes an estimated $12-$18 per month per customer. Multiply that by 14 million customers and you have a Niagara-caliber flow.

Apple also makes a killing on Apps. 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 sounds large, it’s a fraction of the 250 million cell phone users across the U.S.  Apple wants more. With Walmart’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. For Apple, that means more subscriber fees and software. It’s tough to sell hardware during hard times, no matter how cool it is. Just look at Best Buy, the only other third-party retailer that Apple currently allows to sell iPhones. Best Buy is considered the best managed electronics retailer in America, yet its sales have declined this year. Apple clearly needs to spread its bets.

But, really now, Walmart?

If Apple needs a general merchandiser, why not Target, which has a hipper brand, or Costco, which carries other high-end brands?

Walmart? Nike won’t allow its shoes to be sold through Walmart. (See postscript below.)

Granted, iPods sell at Walmart, but in 2008 the iPod is 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 generating headlines and landing on wish lists. What is Apple thinking?

Apparently, when the going gets tough, everyone goes to Walmart, 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 pay a premium for the Apple brand (the notorious “Apple Tax“)?  I’m not just talking about the iPhone. Apple’s computers cost significantly more than comparable products. Could this Walmart fling undermine the entire Apple brand, which thrives on hipness and exclusivity? Will Apple realize 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-Walmart… divorce? If so, who’ll get the kids?!

Stay tuned. ‘Cause here’s one fairytale romance that could become a soap opera.

***

Tangential Interest: Think I’m going overboard with brand orthodoxy? You’re likely right. But consider Nike, which sells golf equipment through Walmart, but not its signature shoes. To tap into Walmart’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 Walmart — 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 Walmart. 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?

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Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches graduate-level marketing communication courses at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

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