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Apple advances plans for retail stores

The Mac maker takes another step toward opening retail stores, winning preliminary approval for an outlet in downtown Palo Alto, Calif.

Apple Computer has taken another step toward opening retail stores, winning preliminary approval for an outlet in downtown Palo Alto, Calif.

The 6,500-square-foot store gained approval Thursday from the city's architectural review board, but the project still needs to be signed off Tuesday by the director of planning and community environment, said Amy French, a senior planner for the city of Palo Alto.

As previously reported, Apple has been quietly working for some time on a retail strategy, with the Palo Alto store likely to be one of many. Late last year, Apple hired former Sony retailing executive Allen Moyer, a move that observers predicted might lead to Apple stores.

As it has in the past, Apple declined to comment on the stores, saying Friday that nothing has been announced. Apple already operates one store--at its headquarters in Cupertino.

The move is a page from the book of Gateway, which has a nationwide chain of Gateway Country stores to supplement its direct sales. Gateway executives said in September that Apple was trying to hire workers from its Country store operation.

The Palo Alto store will be on heavily trafficked University Avenue, near a Borders bookstore and two doors down from Niebaum-Coppola, an eatery and wine store backed by filmmaker Francis Ford Coppola.

"It's nice because that block of University is getting more nightlife," said French, who noted that Apple plans to keep the store open late.

The Apple store will go inside a 1930s "streamlined moderne" building that previously housed a HomeChef cooking store. A fire gutted the shop last December.

While Apple's move may be a plus for cities such as Palo Alto, an open question is how Apple's venture will be viewed by existing retailers, particularly in the wake of slow sales recently.

Another question is whether the stores will carry inventory or just display Macs that can then be ordered directly from Apple.

Gerard Klauer Mattison analyst David Bailey said the company has probably made enough progress in its manufacturing and distribution operations to handle direct orders from Apple-owned stores.

Either way, Bailey said such a move could make sense for Apple, which offers products that differ significantly from the other computers sold by many of its retailers.

"They need a retail channel that can articulate those differences," Bailey said.

Although Apple won't say where it is looking to build stores, Bailey said big city locations would make sense. Those areas tend to get the most attention and serve as home to the graphics professionals who have been among Apple's most faithful audiences.