John Chamberlain
Developer Diary
 Developer Diary · You Heard It Here First · Monday 16 February 2004
Apple's Store Strategy Succeeds
Three years ago Apple launched a risky gamble to build its own retail network. Apple sales were declining and the Mac was steadily losing shelf space as retailers focused on PCs. Creating space could cost Apple dearly if the Mac's popularity was unaffected by the presence of its own retail stores. Analysts like Arne Alsin ("Apple's Scraping the Bottom of the Barrel") quickly realized this and pointed out that if Macs had been selling well retailers would be glad to fork over real estate. They also already had a model failure for this create-retail strategy in the Gateway stores. Their conclusion was unananimous: Apple stores will bomb big time. Now those analysts must eat their words.

Last month Apple reported double digit growth with earnings of $63 million. It's retail stores and online store were substantial contributors. Contrary to expectations the stores seem to be driving sales and even leading customers to switch to Macs from PCs. The strategy appears to be paying off.

Last month I went to the Apple store in the Chestnut Hill Mall in the Boston area. I had to test the Mac version of our software on a Sunday when the academic computer lab I usually used was closed. Hourly rental shops like Kinkos either do not have Macs at all or prevent you from running your own program on them so that left the Apple store. Interestingly enough I originally did not even consider going to such a store because I thought they would be even less likely to allow me to run our app on their box. I had called a tech consultant who recommended I go to the store. At the store a sales thing approached me and after I explained what I wanted he directed me to the "genius bar", a counter manned by a support specialist. Behind the "bar" were two large plasma screens on each side of an Apple logo. the screens displayed stylish marketing images. The man behind the bar was casually attired in a T-shirt and ponytail. He invited me over to one of the nearby display iMacs in the store where we successfully tested the CD I brought. It works--right out of the box!

I can see why the store strategy is working. For one thing they had a support guy right there--that helps things along enormously. If I were a skill-less buyer I would be very glad to know the guy is there. Also, there are always tough questions the sales staff will not know enough to answer. Also, the store is very well-lit and and stylish. I found it so much so that I was a little reluctant to enter, sort of like when you feel uncomfortable entering jewelry stores where the smallest purchase is $500. On the other hand it is an enormous step up from CompUSA. At CompUSA the store layout is haphazard, almost chaotic. The ceiling is unfinished, displays are incomplete or partial and different products are mingled with each other with no distinction. The mac stuff is just dumped in one corner of the store. The sales people there know absolutely zilch about macs and focus their limited brain power on figuring how to turn the PCs off and on. The Apple stores are successfully providing an environment where you can buy and support Macs.

Apple closely monitors these stores to the extent of using specially placed video cameras to track how people move around the stores and which areas they go to. Their analysis seems to be showing the stores are working so they are building more. On February 28th Apple will be opening its flagship store in San Francisco. These openings and the attendant specials attract large audiences. There are even devotees who make a point of travelling to all the stores. One such fan is Gary Allen who maintains a detailed information site on Apple stores. With customers like that and stores to support them Apple seems to have found a winning combination.

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