Apple's 'Small Experiment' To Match Amazon.com

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Apple Inc.AAPL
is offering same-day delivery in the San Francisco Bay Area. Analysts
don't think
it will alter the Mac maker's strategy for brick-and-mortar locations, but could there be another goal with this initiative? "It costs a lot of money to have stores," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "The more stuff Apple can deliver outside of their stores, the more money they make. It incrementally increases their profit margin." Aside from increased profit margins, Udall said that Apple could start selling more of its own products and more third-party products. "And maybe [Apple] has a small little experiment going on where they try to see what [it] would be like if they had a small part of [their] company that ran like Amazon.com," Udall added.

Related Link: DISH Network Exec Explains Why Apple Was Unlikely To Release A TV

'Soft Launch'

Dan Miller, senior analyst and founder of
Opus Research
, thinks that Apple is definitely keeping an eye on
Amazon.com, Inc.AMZN
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. "Amazon has been stetting the standard on retail logistics," Miller told Benzinga. "In a funny way they've been calling the shots ever since Amazon Prime added all these refinements, like the button and putting packages in people's cars. Every retailer, whether it's Target or Best Buy, is recognizing that customers will gravitate toward the retailer that can promise the fastest delivery time." Still, Miller said that Apple's venture "sounds like a soft launch." "Given the construction around the [local] Apple Store and how hard it is to get to it, I can see why you'd want to attract customers with the promise of speedy delivery," he added. "I think you're gonna see more of this. If you think three years ahead and all the rumors about these dispatched systems like Uber, not just being about cars but being about everything you use in your life, Apple has to at least experiment with this and find out how to stay in this rapid delivery cycle domain."

Sneaky Acquisition Tool

Apple's same-day delivery plans could have a side benefit: better acquisitions. "They want a lot of third-party innovation with all the products they have -- both on the software side and the hardware side, like they did with Beats," said Udall. "They may find companies that come up to the food chain that make complementary products. There's no better way for them to evaluate products than if they sell them themselves." Udall said this would allow Apple to see firsthand if those are companies worth acquiring. "Maybe this is a management team we want to buy?" he continued. "Maybe this is a product category that we want to enter?" For now, Apple's strategy might be far simpler than investors expect. "If other people are starting to do same-day delivery or quicker, just-in-time delivery, it could just be…a natural evolution that Apple would do something similar, too," Udall concluded. Disclosure:
At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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Posted In: TechAmazonAmazon PrimeAppleDan MillerOpus ResearchSean Udall
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