The Apple of Retail’s Eye

In the new edition of Fortune they call out “America’s Most Admired Companies” and to nobody’s surprise; Apple is in the top 10. They have a great article on Apple’s success with retail. When they got into the retail game in 2001, industry experts where extremely critical of their approach and didn’t think they would succeed. I think the opening paragraph is worth repeating here:
“Sorry Steve, Here’s Why Apple Stores Won’t Work,” BusinessWeek wrote with great certainty in 2001. “It’s desperation time in Cupertino, Calif.,” opined “I give [Apple] two years before they’re turning out the lights on a very painful and expensive mistake,” predicted retail consultant David Goldstein.

The Apple Store’s sale per square foot, a key measurement of success in retail, was $4,032. That’s unheard of! Tiffany& Company, the next closest was $2,666 followed by Best Buy at $930, Neiman Marcus at $611 and Sak’s at $362. Apple Stores reached a billion in sales faster than any other retailer in history. Not bad for a company that was supposed to fail inside of two years.
You can go on and read the entire article but the thing that really strikes me is how Steve Jobs approached Apple’s entrance into retail. He did not look to what everybody else in retail was doing. He certainly pulled in some top talent for advise (Mickey Drexler from the GAP and Ron Johnson from Target) but he approached retail from an experience perspective. He wanted the stores to create the same kind of experience that people had with Apple’s products. The store concept was built with the same energy and meticulous attention to design and user experience that Apple’s products are known for. Jobs broke the mold on traditional retail models. Its more of a sit and play like environment with only a demo model on display and plenty of staff on hand to answer all of your questions. Sales associates are very well trained and versed on the products and features. And of course, the stores are beautifully designed.
Being a former retail executive myself, I watched Apple’s efforts with great interest the past few years. I remember thinking that it didn’t matter whether or not the Apple Stores were profitable. In my opinion this effort was a way to extend the Apple brand and expose more people to their incredibly designed and user friendly products. As long as it drove over all demand for Apple’s products up and the stores didn’t lose money, then the retail venture would be a success. Oh what a success story they have created. Job’s turned the traditional retail model on its head. Its time that many other retailers took a step back and thought more about experience vs. sales per square foot.

3 thoughts on “The Apple of Retail’s Eye

  1. Wow. I had no idea about the sale per sq. foot. Apple did a great job of not opening up spaces that were too large.
    Apple would need to keep the stores open even if they weren’t profitable. People need to get there greasy sticky fingers all over the newest product in a setting that justifies the price tag.

  2. Damn, that figure is probably higher than the MoMA gift shop, which had long been the retail leader. I think the only thing that’s really surprising is that Microsoft didn’t come out with a Microsoft Store, in which the chairs only occasionally work and there are frequent and unpredictable power-outages.
    Apple has succeeded by turning their stores into places people will stand in line to get into, places that actual humans want to visit. They’re a company that rightly depends on someone’s true desire for their product, as opposed to a mere willingness to buy it.
    The only complaint I’d register about Apple is that Jobs gets all the credit, pretty much all the time. Much of it–most of it–is deserved. But I wonder what its going to be like when Jobs steps down. I think that’s years in the future, but there’s no reason, and probably no long-term benefit, for the entire company’s identity to rely on his vision and personality alone.

  3. Brad and hebchop, thanks for your thoughts. The Apple Stores are perfect for exposing their products. Thats why I felt that it was a success for Apple even if the stores were not profitable. As an interesting point I learned recently, Best Buy will begin, or has already begun, to carry Apple computers. This is the first time I’ve seen a manufacturer sell drectly in their own stores and create enough demand to then be carried by the largest retailers despite the fact that the manufacture has their own distribution channel.
    To your point Brad – everyone will be watching to see what happens when Jobs steps down at some point. It could be just like the situation at Nike where Phil Knight has come back from retirement twice after two failed hand offs.

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