ON WHY APPLE STORES REALLY WORK

AGAINST ALL ODDS

The Wall Street Journal has an article titled "How Apple's Store Strategy Beat the Odds", by Nick Wingfield worth reading.  It's a subject worth pondering, as Apple opens it's grandest store to date, number 147, on Fifth Avenue in New York, on May 19th at 6pm.

As the Journal explains:

"On Friday evening, five years after opening its first store, Apple will unlock the doors to a subterranean store that sprawls beneath the plaza in front of the General Motors Building, just across from Central Park.

In keeping with Mr. Jobs's penchant for eye-catching designs, all that will be visible from the street is the entrance, surrounded by a roughly three-story-high glass cube jutting from the ground, reminiscent of I.M. Pei's glass pyramid at the entrance to the Louvre museum in Paris."

"The store is located in one of the most highly trafficked tourist and retail corridors in the world. If it is successful, it will enhance Apple's visibility as the company attempts to grab a bigger slice of the computer and electronics industries. Charlie Wolf, an analyst at Needham & Co., says an Apple executive told him the store will be open for business 24 hours a day, a first for the company."

Lines will likely start forming at the location, hours if not a day before the grand opening.

The question of course is how Steve Jobs did it.  In an over-marketed, over-retailed world, how did he manage to succeed in retailing computers and music players when others failed.  Again, the Journal notes:

"Apple's stores are an unlikely success story in an area littered with failures -- and another vindication of Mr. Jobs's marketing savvy. In April 2004, computer maker Gateway Inc. shuttered a chain of 188 company-run retail stores after an aggressive expansion, eliminating 2,500 retail jobs.

More recently, hand-held device maker Palm Inc. has attempted to mimic Apple's success, opening its own gadget shops in airports and shopping malls."

And it's been financially successful too, something that gives comfort to Apple shareholders like yours truly:

"Revenue from the Apple stores was $2.35 billion in fiscal 2005, ended Sept. 24, or 17% of Apple's total sales, up from $621 million in fiscal 2003. Apple says the stores have been profitable for several years, providing $151 million in operating income in fiscal 2005..."

"The numbers have been just astonishing in terms of the traditional retail numbers we look at," Mr. Wolf says."

So what's the secret sauce of making this work?  The Journal article takes a stab at some of the ingredients, including

1.  Steve Jobs' personal attention to the stores and various design details.

2.  Showcasing the products much better and prominently than other retailers handling Apple products.

3.  Having successful, cool products like the iPod music players.

4.  Offering on-going "how-to" instructional demos on Apple hardware and software, along with a "Genius Bar", where customers and potential customers can get their questions answered.

And they're all valid, and differentiating points that make the stores attractive to visit, shop, and window-shop in.

But I think there are also some additional, more subtle things that make the stores a little cooler than most others in retailing.

1.  All the computers in the store are connected to the internet via broadband.  This is a big deal, because it encourages folks to come in for reasons other than the products.  It's almost like an Internet Cafe without the coffee.  You can go in, check your email, check out some info online, and as you're passing through the aisles of cool products, check out some Apple products.

The connections are also important for another reason.  It allows customers not just to try out the products themselves, but also look up information on the hardware and software online, both on Apple's website, and third-party reviews.

This is especially important when shopping for third-party software and computer accessories showcased in Apple's stores. 

I've often taken a stack of software to a computer, and looked up the reviews online.  This has often resulted in my NOT buying certain products, but it made me appreciate the fact that Apple empowered me to do my own research and make the decision.  Which brings me to the next point.

2.  Non-pushy salespeople.  At a time when most computer stores have their salespeople hovering around you constantly when you're checking out a computer or consumer electronics item, asking if you're ready to buy, the Apple approach is a breath of fresh air.  The Apple folks are there only if you need them.  They're generally well--informed, and if they don't know the answer to a question, they'll generally point you to another colleague who may know the answer.

3.  The Kid's corner. Every Apple store, large or small, has a little kid's corner, where computers are set up in a circle, loaded with tons of kid-friendly software, and kid-level seating is available.  This is truly one of the only places in the computer retailing world, where you can take your little kids to check out the hardware and software, and make informed decisions about products they might like.  At a time, when more and more mainstream customers have kids, Apple's struck on a brilliant way to get them into the stores.

4.  A Club of like-minded folks. Going to an Apple store is almost like going to a club that caters to folks with a particular interest in common.  If you're an avid Apple fan, it's like going to a place where you can potentially chat with other people who share your interest.  If you're new to Apple products, you'll more and likely find another browsing customer volunteer advice and help on a given product or service.  And a recommendation that doesn't come from a salesperson is always more credible, right? 

These are some of the "little things" that strike me as unique differentiators that make Apple stores cooler than their competitors.  If you have some other observations, do let me know.

In the meantime, see you soon at the New York "Cube" Apple Store.

Comments

[Computermaven]

Hi, Michael - just wanted to commend your posting on the Apple retail franchise. I agree with your points.

I've thought about this topic quite a bit, both as a loyal denizen of the Apple store near my house and as a tech enthusiast. Here are a few additional observations about “why Apple stores have succeeded”:

1) Apple never tries to be cheap or look cheap. There are 2 ways to maximize $ of sales per sq foot - volume-crammed price leader, or luxury retailer - and Apple has successfully employed the latter. What's more, they've done it without necessarily being all about "luxury." Yes, their prices are higher, but that gap is actually narrowing (viz., the new MacBooks). The way that the other big electronic stores are arranged and marketed (through newspaper circulars and the like) usually screams, "CHEAP!" As a result of its differentiated approach, Apple has loyal customers who actually like being in the stores because it's "luxury they can afford," and the products are well designed. People actually feel good about buying Apple products (see below), in creative and exciting ways, rather than "Hey! I got such a bargain!"

2) The store isn't too cluttered. That's one of the reasons it isn't ugly. No piles of boxes, or "endcaps" blocking the aisles.

3) The employees tend to amplify, not dissipate, buyer passion. The lack of this technique is another major gripe I have with the computer-retailing competitors. I'll go into a typical big-box retailer. I'll be excited about buying something. By the time I get finished looking at the items on display, and dealing with the salespeople, the passion is gone. All I'm left with is instant gratification (vs mail order) and probably a decent price. In contrast, while not all the Apple employees are Genius Bar-qualified, in most cases it's clear they share the passion for the product and the vision. Yes, they'll figure out how to increase your incentive to buy, but it will be done by tapping into your pre-existing interest and amplifying that interest, rather than by half-disinterestedly and ignorantly ramming stuff down your throat. Put simply, it's an "I want this!" (i.e., positive) sale rather than a "Such a bargain! I really put it over these guys!" (i.e., negative) sale.

4) The store appeals to all ages - not just kids, as you pointed out. For example, most teenagers I know seem to love to go to the Apple store, vs rolling their eyes and groaning constantly when confronted with even a brief visit to the typical electronics retailer.

5) The products are designed to look good in a store (among other criteria). This is another detail that matters. This is another facet of the "luxury goods" approach. The only comparable that immediately comes to mind is the Sony Experience. Even with less-compelling products than Apple's, I'd bet that Sony moves a good deal of merchandise through that Madison Ave. store.

6) The demo programs are way better than PC demo programs. (One could argue that this is because the platform supports better demo programs, and attracts those who create them - but that's another debate!) The color is better. The motion is better. The people look better. The scenery looks better. The multimedia is better integrated. The sound is cool. This versus the typical, boring "scenes of nature" or "racing cars" or that ilk, showing on PCs - or the endless Orwellian screens, showing the same mindless commercial channels or the latest jarring DVD.

Let me temper these remarks a bit by stating that I'm undoubtedly painting more of a black-and-white picture than actually exists. I've met helpful people and seen attractive displays in non-Apple stores, and I'm sure the objectives of the non-Apple retailers include raising the quality of the in-store experience. However, in my personal experience, most of the thoughts above apply more often than not.

Keep up the good blogging!