More and more brick and mortar retailers are looking upon Apple products with disdain, particularly the iPad. The Cupertino-based company has become that guy on the team that nobody likes, but he’s too good to trade. It’s a situation where retailers need Apple much more than Apple needs them and, as a result, retailer profit margins are thinning, and popular stores – like a Best Buy or Radio Shack – are praying manufacturers will produce a competitive Android tablet to even things out.
“[Retailers] have to carry Apple products from a sales perspective, a relevance perspective, and a customer traffic generation perspective,” said BB&T Capital Markets analyst Anthony Chukumba.
Apple’s success commands this kind of control, as the company’s influence is too great for retailers to pass up. And there’s nothing anyone can do about it. As an example, Motley Fool writes that for every 16GB iPhone 4S Best Buy purchases from Apple at a rate of $600, the retailer gets a $100 profit from a wireless provider for signing a customer up. In comparison, Best Buy pays $300 for the Droid Razr, retails it for $200, and still receives the $400 commission from a wireless provider. When it comes to the iPad, margins are much worse, as many consumers opt for the Wi-Fi only model, eliminating any carrier subsidies.
And the narrow profit margins resonate to investors, too. “Narrow profit margins, partly due to Apple products, have caused investors to sell off their stock of several electronic retailers,” Motley Fool wrote.
This is why retailers are pining over manufacturers to introduce something that can compete against the iPad. “Best Buy would love nothing more than for there to be competitive Android tablets,” Chukumba said. The thing is, that may be more wishful thinking than retailers would care to admit.
[via Motley Fool]