Apple Shines in Retail Marketplace
Apple has always been known for its legion of loyal fans – those diehards who have stuck by the company even as everyone else seemed to see Windows as the only operating system in the world.
It was this as a backdrop that led to so much open scoffing when Steve Jobs and company announced Apple would open its own retail stores and reduce its reliance on third-party merchants.
Five years after the first Apple Store opened, it has proven the naysayers wrong by being named as America’s Best Retailer by Fortune magazine.
Mr. Jobs, Apple’s CEO, tried to explain the success of the company’s stores. “People haven’t been willing to invest this much time and money or engineering in a store before,” he said. “It’s not important if the customer knows that. They just feel it. They feel something’s a little different.”
What is also different about Apple’s 174 retail locations is the amount of revenues generated by stores across the country. The average sales per square-foot at Apple Stores is $4,032.
Apple found its way into retailing in large part because of the lack of support it felt it was getting from those selling its products. This was especially true of the larger chains that saw the market for Macs as miniscule compared to hardware and software made for Windows.
“I started to get scared,” said Mr. Jobs. “It was like, ‘We have to do something, or we’re going to be a victim of the plate tectonics. And we have to think different about this. We have to innovate here.'”
Innovation is something Apple knows about, but retailing was a completely different challenge.
“We looked at it and said, ‘You know, this is probably really hard, and really easy for us to get our head handed to us.’ So we did a few things. No. 1, I started asking who was the best retail executive at the time. Everybody said Mickey Drexler, who was running the Gap.”
Mr. Drexler joined the Apple board and then Mr. Jobs went in search of someone to run the retail operation. The person he found was Ron Johnson, a former merchandising chief at Target.
“One of the best pieces of advice Mickey ever gave us was to go rent a warehouse and build a prototype of a store, and not, you know, just design it, go build 20 of them, then discover it didn’t work,” said Mr. Jobs.
What Messrs. Jobs and Johnson discovered in the warehouse wasn’t pretty.
“We were like, ‘Oh, God, we’re screwed!'” he said. “”So we redesigned it,” he says. “And it cost us, I don’t know, six, nine months. But it was the right decision by a million miles.”
One of the redesigns included the popular Genius Bar, which is being expanded in many current and in all new Apple Stores.
“When we launched retail, I got this group together, people from a variety of walks of life,” said Mr. Johnson. “As an icebreaker, we said, ‘Tell us about the best service experience you’ve ever had.'” Of the 18 people, 16 said it was in a hotel. This was unexpected. But of course: The concierge desk at a hotel isn’t selling anything; it’s there to help. “We said, ‘Well, how do we create a store that has the friendliness of a Four Seasons Hotel?'”
The answer, he said, was “Let’s put a bar in our stores. But instead of dispensing alcohol, we dispense advice.”
“Apple has changed people’s expectations of what retail should be about,” said Candace Corlett of WSL Strategic Retail. “After they’ve seen Apple, how do they feel looking at a drugstore or the jeans section in a department store?”
Discussion Questions: What do you see as the keys behind the success of Apple’s retail business in-store and online? What impact has the Apple Store had on how retailers look at store design, product display, customer service, etc.?