November 4, 1997 4:40 PM PST

Apple snags deal with CompUSA

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In a move to bolster flagging sales, Apple (AAPL) has landed a deal with CompUSA (CPU) that will expand its floor space and presentation in the retailer's superstores.

As a result of the deal, CompUSA will increase the amount of floor space dedicated to Apple products and staff the "store within a store" area with Apple-trained employees. This area also will feature displays and merchandising promoting the troubled computer maker's national advertising campaign, "Think different."

The concept of a "store-with-in a store" is nothing new. It's been heavily used by clothing designers looking to designate space for their products within a department store, for example. In the consumer electronics industry, however, the concept is relatively new, said Lewis Alton, an analyst with L.H. Alton & Co. in San Francisco.

Retailer The Good Guys earlier this year rolled out a marketing initiative in which it banded together several manufacturers' products to develop themes, such as home entertainment, within its stores.

"I can't imagine any reason for CompUSA to do this unless they were increasing their square-foot profit," Alton said.

But Mike Muench, vice president of Apple's U.S. consumer sales, said CompUSA is not receiving a sweetened deal as a result of installing its "store-within-a-store" concept. CompUSA will have the same co-op marketing deal as it has had in the past with Apple, Muench said.

The concept will be installed at 40 locations before the upcoming holiday season, and will be installed at the remaining CompUSA superstores within the next three to five months.

"We want to be an active Apple advocate," said Hal Compton, CompUSA's president. "We think that because of their loyal customer following, where Apple business has been soft and declining, we are starting to see that turn around and pick up. They have great products and we can help Apple gain market share."

He added that Apple, a platform that runs solely on Apple-related products, is particularly suited to a store-within-a-store concept. The need for a designated area is not as pressing in the Windows-Intel space, since products from computer makers like Compaq and IBM are compatible with one another.

Discussions about the deal with CompUSA began several months ago between Compton and Apple interim-CEO Steve Jobs.

"CompUSA approached us and said they wanted to do a better job with Apple and we wanted to do a better job with our retailers," Muench said.

He noted that Apple customers, many of whom are second-time buyers, were finding it increasingly difficult to find the scope of products they wanted at retail stores.

"It's no secret. From a retail market share standpoint, Apple has diminished in market share in the last 18 months," Muench said. As volume at retail stores declined, store operators were less inclined to devote shelf space to Apple products, he added.

The move by CompUSA to enlarge its Apple presence will not be a situation of robbing Peter to pay Paul, Muench said. He said customers who tend to prefer superstore formats may already have been purchasing Apple products from places like CompUSA.

"This won't further accelerate the decline for traditional retail partners, this will grow market share for Apple," Muench said.

He declined to comment on whether Apple is pursuing a similar arrangement with other retailers.

 

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