For Struggling Retail Sector, IPad May Be Cinch That Saved Christmas

Plan Is to Lure Shoppers Who May Then Buy Other Things

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NEW YORK ( -- If there's a halo product for retail this holiday season, it's Steve Jobs' iPad, the fastest-selling new product in Apple's history. It is also turning into an all-important magnet for retailers such as Target , Best Buy, Sam's Club and Walmart, which hope the mere presence of the device will bring new shoppers in the door with bigger budgets to spend. But first they're going to have to play by Apple's rules.

In a bid to make the iPad as big and mainstream as the iPod, Apple has widened distribution for the iPad to big-box retailers as well as Verizon stores and Amazon. It's a tall order for a device that starts at $499 and tops out at $829 for the 3G version, but Apple will get a lot of promotional support from retailers hoping to get the upper hand. It's requiring retailers that feature the iPad in circulars to devote an entire page to the device; the iPad will also feature in their local TV ads.

The iPad will remain behind the glass at Target stores for security purposes.

Analysts predict that shoppers looking for iPads as gifts will buy where they can knock other items off their lists, and where the iPad is cheapest.

Retailers have no flexibility on the retail price of Apple products, but Target found a workaround, offering 5% off storewide -- including the iPad -- for using a Target -branded credit card.

In expanding distribution, Apple goes from about 300 of its own stores -- clustered in urban, affluent shopping areas -- to 8,000 stores geared to mainstream America. Apple has already sold 7.5 million iPads, and Forrester expects it to sell at least that many in the fourth quarter.

"Expanding distribution to Walmart and Target makes the iPad more accessible to more Americans," said Forrester consumer product strategist Sarah Rotman Epps. But more importantly, "it brings traffic into the stores where touching the iPad is part of the experience."

One problem: Target isn't letting shoppers actually touch the iPad, because they say, the tether chain can't secure it. They'll stay behind the glass "due to the high retail [price] of the item," said Target spokesperson Kristy Welker.

In contrast, Best Buy had demo iPads out, fully smudged. A staffer at Walmart in Secaucus, N.J., said the retailer is planning to put out demo iPads this week. Walmart is also carrying a host of e-readers: Amazon's Kindle, the Sony e-Reader and Barnes & Noble's Nook.

Accessible or not, the question is how much the presence of iPad at retail helps juice sales of other products. Big -box retailers have a history of selling books and DVDs at a loss to bring in the right kind of consumer: those that spend a lot on other things. They also take "slotting fees" from vendors for shelf space, but observers said they doubt Apple is paying much, if anything, for that privilege.

For Target and Walmart in particular, the challenge isn't growing the pie, but taking share from electronics retailers, toy stores, the web and yes, Apple's own stores. "An iPad is one of those devices [consumers] go spear-fishing for; if it's on their list -- they will go to the store where it's available," said Forrester retail analyst Sucharita Mulpuru. "Every incremental visit they can get to the store, people will pick up five to six other items."

What else will they buy while they're there? According to New Media Metrics, those with high brand affinity for the iPad are also fans of other Apple products, but also for Dell Computers (go figure), Xbox and Nintendo Wii. They also have a high brand affinity for Walmart -- higher than Best Buy or Target .

Brand fans will also likely buy plenty of high-margin third-party accessories, such as the $40 iPad covers that seem mandatory for the device. According to Accenture, 4% of consumers plan to buy a tablet as a holiday gift, while 7% plan to purchase an e-reader and 10% have a laptop or netbook on their holiday list.

Among other retailers stocking iPad, don't expect Verizon stores to have much of an impact. Both the iPhone and 3G version of the iPad are exclusive to AT&T, though Verizon versions of both have been long-rumored.

Amazon carries the iPad, but is heavily promoting the Kindle, and is expected to sell 1 million of them in the fourth quarter, bringing the total to 6 million sold over the past several years. Amazon is putting it front-and-center on the landing page, while forcing iPad shoppers to dig for the device.

However, iPad sales net out for the retailers, the real winner is Apple, which will get loads of free marketing in holiday circulars and local TV and newspaper ads.

'WePads' Take on the IPad

Already, the tablet market is starting to look a lot like iPad vs. the "WePads." And since few competing tablets will be available for the holiday, it seems inevitable that iPad will have that market to itself.

BlackBerry's PlayBook and Cisco's Cius, both aimed at business users, as well as Hewlett Packard's consumer pad, won't be out until next year, nor, reportedly will be consumer pads from Acer, Lenovo and Asus. However, Samsung's Galaxy and two Dell products -- the Streak mini-tablet phone and the Inspiron Duo netbook/tablet combination -- will be on store shelves before the holidays. HP's Slate, aimed at business customers, was just introduced and its consumer product won't be ready until next year.

Many iPad competitors are crafting campaigns, layering on plenty of bravado about their chances against Apple.

"There is plenty of opportunity," said HP Senior VP-Strategy and Worldwide Marketing Richard Gerstein. "It's not like Apple invented the smartphone business, they were, like, 10th to that business, and obviously were able to come in with a great product."

Dell's tablets, the Streak (already out) and the Duo (coming soon), will be backed by a just-launched umbrella marketing and ad campaign from WPP's Y&R that includes several other Dell "hero" products as it strives to remake itself into a lifestyle brand and a "cool" company.

"A lot of customers don't go with the A company -- they are going with the PC, that's where they want to be," said Paul-Henri Ferrand, chief marketing officer of Dell's consumer and small- and medium-business division, referring to the much larger combined market share of the PC makers vs. Apple computers.

All this "WePad" confidence, however, still has to be proved. "Apple definitely does have an early advantage, and it looks more and more like it will sustain that advantage," said Susan Kevorkian, an analyst with IDC. -- Beth Snyder Bulik

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Contributing: Judann Pollack

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