No, These Aren’t Apple Fool’s Stories!
May 24th, 2006STORY #1: When Apple was considering just where to take its processor business, is it possible that it was planning to go with a startup company that had never released a single product? That’s what the stories say, that PA Semiconductor of Santa Clara, CA, was developing a PowerPC-compatible processor and that Apple had expressed interest. Worse, the company’s executives actually felt they had a deal, because they were allegedly sharing code with Apple and that they were stung when the MacIntel announcement was made.
Now I don’t pretend to know the truth of the situation, but Apple says it ditched Freescale Semiconductor and IBM processors because they couldn’t deliver the goods, nor demonstrate a compelling roadmap for the future. While Intel has been late on its own processor designs, it clearly shipped the Core Duo and Core Solo on schedule, and Apple confounded nearly everyone in getting most its transition out of the way months before any of us expected. What’s more, Intel’s future roadmap, if met within a reasonable semblance of the announced schedule, will mean tremendous improvements to future Macs. The forthcoming Power Mac replacement is destined to be one incredible powerhouse.
But I’m not speculating here. I’m just looking at the known facts and making a few assumptions that are, in my view, pretty conservative.
Now I am not criticizing PA Semiconductor. It’s quite possible its future chip designs, using technology licensed from IBM, will be stellar, and will be incredibly power efficient. But they aren’t shipping now, and would it have made sense for Apple to entrust the future of the Mac platform to a company that couldn’t commit to any products until 2007? And with no track record of having delivered any products, even though it’s comprised of folks experienced in the industry, that would seem to be a terrible risk to take at this stage.
Sure, developers would likely not have to be put through the agony of making major changes to their applications, but the failure to release faster Macs might have put a major monkey wrench into efforts to boost market share. Apple has a golden opportunity right now, with the ongoing success of the iPod, the delayed release of Windows Vista, and continued dissatisfaction with Microsoft’s products. Why bet the ranch on the unknown? Why indeed!
STORY #2: Another fascinating development is the news that Dell plans to expand beyond its kiosks and attempt to build a retail network, no doubt to compete with The Apple Store. You see, Dell’s luster has dulled. Sales aren’t increasing as fast as previously, and some tech observers feel the only reason the company is adding AMD chips on some of its servers is to gain more of a psychological than performance boost. Sure, AMD may make faster chips, but that hasn’t stopped Dell from staying in bed with Intel up till very recently.
Now before I tell you more about these prospective Dell stores, let me talk about the lessons of history, and the folks who are doomed if they fail to heed those lessons. Once upon a time, Gateway had its own chain of stores, but unlike Apple’s retail outlets, you couldn’t actually go in one of those stores, select a computer system and take it with you. You had to place an order, and wait for it to arrive at your home or office.
Just imagine how this situation might have looked on Christmas Eve, where you want to bring home a brand new PC for the kids. Even if they could do it on one day service, it would be too late for the overnight carriers to go into action, and they don’t operate on Christmas anyway. So much for the Gateway chain, which died.
Now imagine what Dell is going to do? Yes, they will make it possible for you to play with their products, and in that regard they might try to emulate some of the airy spaciousness of an Apple retail outlet. But, as with Gateway, you won’t be able to select something and bring it home. You will place your custom order, and it’ll ship from Dell’s ultra-efficient warehouses, precisely the way it’s done when you order direct from their site.
So what’s the incentive to come to the store anyway? Why struggle through heavy traffic, consume expensive fuel and waste time finding a parking space at a busy mall, when you can just select your PC and place your order from your home or office? Has any of these occurred to Dell?
Well, they are reportedly planning to open two pilot stores this fall to test their silly, failed concept. One will be in Dallas, and another in West Nyack, New York. I bet you can’t wait to line up on opening day.
Now I suppose Dell’s marketing people might just be spending too much time hanging out with Hollywood’s movie moguls, struggling for product placement. Or they forgot that old saw about the lessons of history.
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If they can stock the stores with preconfigured Dells (whose components are selected based on the most popular orders), then sell them cheaper than what the competitors charge for HP, BTOs and so on, then they can take the loss and profit by pushing peripherals, digicams and LCDs. It could just work.
OTOH, with razor-thin profit margins as it is, they would have to plan and execute their business plan to exquisite perfection. The least little stumble in presentation, sales, service or technical support at the store level will immediately begin cutting into their bottom line. We’ll see how it plays out.
I don’t think it’s just the absence of inventory. Lot’s of people drop by the Apple Store without buying anything but go there anyway just to look at the product. Hell, at least once a month, I dirve 15 miles just to see what’s up at the local Apple store.
Who would drive any distance just to look at generic, uninteresting, yawn-inducing Dells? It’s not the retail outlet that makes the product successful, it’s the product that makes the retail outlet. Dell can have the fanciest, most impressive, gimmick-laden floor space but in the end they’re still selling, yup, Dells.
Gateway’s business model worked because of their values. The stores were places where you could get a better deal than online, talk to someone about what you needed, get some goodies, and so forth. When the company got swallowed up by east coast bankers, they ran the company into the ground and eliminated the corporate values that led to the company’s success. They didn’t understand the “high touch” nature of the company and as a result, led it straightaway to bankruptcy. The country stores also debuted at a time when internet penetration was not as widespread as it is today.
Dell has absolutely no hope of getting close to Gateway’s early success with the country stores. They don’t understand customer service and to open a retail store is absolutely a fool’s mission for them. If they rebranded select outlets as Alienware depots, they might suck in the hardcore gamers. But even that couldn’t succeed without items for sale, due to internet access being widespread.
Will they have Dell “Geniuses”. I’d love to hear some of those conversations. And I’m sure that Apple will have some witty in Mall advertising that direct them to the Apple store. Talk about comparison shopping.
Dell “genius” program for the day:
“Reinstall Windoze. If the problem persists, it’s obviously software, not harware. Contact MicroSoft.”
Repeat. 😉
At least the wait in line will be short!
The main reason I go to an Apple Store is to talk to a techie. There is always a wait list, even with the restriction of not addressing any issue that might remotely be caused by third party software. If the Dell stores provide any tech support, that could become the main focus of the stores. If they charged for it, the stores could become profitable. Dell’s reputation for low prices will draw customers for quite some time, regardless of the drawbacks of Windows and Dell’s customer support.