Nokia to close its two U.S. flagship stores

Handset maker plans to shutter its New York and Chicago stores, as well as a store in London, as it shifts its retail strategy.

Nokia, the world's largest maker of mobile handsets, said Thursday that it plans to close two flagship stores in the U.S. as it refines its sales strategy and struggles to get a bigger foothold in the North American market.

Nokia also said it plans to close one of two stores in London. And it will look for a new location for its Sao Paolo store.

The U.S. Nokia stores that will be closed are in New York and Chicago. Nokia has 12 stores worldwide. It opened the first store in Moscow in 2005. Nokia said closing the stores is part of a new retail strategy that includes more cooperation with operators and other retailers.

Nokia's shift in strategy comes as the company indicates it plans to focus more on services and applications through its online Ovi store. Last month, the company said it plans to limit the number of devices it will launch as hardware has become less important to consumers and services and applications have become more important.

It's hardly a surprise that Nokia would shut down the U.S. stores as it refines its retail strategy, since this is one of the company's weakest markets. While Nokia still dominates the worldwide cell phone market with about 37 percent market share, the company's market share in the U.S. is only in the single digits. For years, the company has said that it plans to focus on the North American market, particularly the U.S. But little progress has been made.

Nokia executives say that the company is developing new products for the U.S. market and that it's working with wireless operators to get Nokia devices on those networks. This is important for Nokia since about 90 percent of all cell phones sold in the U.S. are sold through an operator. And most are subsidized. Nokia doesn't offer many products through carriers in the U.S., a fact that has hurt the company in the U.S. market.

But Nokia is making some progress. Earlier this year, it launched its E71x smartphone on AT&T's network. That said, other high-end devices, such as the N97, are still not offered by a U.S. operator.

Meanwhile, Nokia's competitors, namely Apple and Research In Motion, have taken advantage of forming relationships with carriers and their devices are offered with hefty subsidies. As a result, Apple and RIM have much higher market penetration than Nokia with respect to smartphones.

Apple, which makes the popular iPhone, has also been far more successful with its retail strategy than Nokia. The company now has 279 stores that it's opened in the past eight years since it opened the first Apple store in 2001. These stores have become a big revenue driver for the company, generating about $6.6 billion of the company's $29.9 billion in revenue in fiscal 2009.

Apple's flagship stores, or as the company calls them "significant stores," are especially designed to draw in visitors with eye-catching design and architecture. Some of the stores, such as the Fifth Avenue store in Manhattan, which sits below a glass cube across the street from the Plaza Hotel, have become tourist destinations. Worldwide some 170 million visitors entered an Apple store in fiscal 2009.

Apple plans to open between 40 and 50 new retail stores in 2010. More than half of these new stores are expected to be outside the U.S. Some of the countries where Apple will open new stores include the United Kingdom, Canada, Australia, Italy, Switzerland, Germany, France, and China.