5 down, 95 to go

In 2001 Apple decided to take the plunge into the retail channel, and opened 2 stores in the United States. The move was partially in response to a declining market share, but primarily due to the poor marketing of Apple products by its retail partners. To lead their retail expansion Apple hired former V.P of retail at Target Corporation, Ron Johnson, who left Target after successfully redefining its retail strategy. At the time of the expansion Apple commanded a 5% share of the personal computer market. They believed that the other 95% of consumers didn’t even consider Mac’s because they had never experienced the product. Apple strategy was to gain control over the retail selling experience to convert dissatisfied P.C users.

Consistent with Apple’s products the retail stores are designed to simplify and enhance the presentation and marketing of their products. When the strategy was first pursued “we had four products, two portables and two desktop computers." Johnson faced the dilemma of having only four products to fill the 6,000 square-feet stores. "And that was a challenge. But it ended up being the ultimate opportunity, because we said, because we don't have enough products to fill a store that size, let's fill it with the ownership experience."[1] Although Apple now carries a full line of computer and music products, the basic layout of the stores hasn’t changed. The store is brightly lit with big windows and the distinct Apple icon to attract passing traffic. The computers, I-Pods, and other accessories are perched on simple tables, which put the focus squarely on the products. The computers are fully functional and hooked up to digital cameras, I-Pods, and printers, so customers can create something and fully experience the product. Overall, the retail experience is non-abrasive and interactive which has generated positive feedback from customers.

A key aspect of Apple’s retail experience is the quality of their store level employees. At the opening of a store in California, Ron Johnson joked that it’s harder to become an Apple store employee than to get into Stanford University.[2] One reason is that Apple has the unique advantage of having an enormous following of dedicated customers who are willing to accept lower wage jobs to be a part of the company. Furthermore, Apple carefully selects their staff as they invest over 80 hours of training into each employee. The most differentiating feature of Apple’s retail store is the level of customer service provided by the Mac Geniuses at the genius bar. Apple customers can bring in their products and ask any technical question about their Mac. If the Genius cannot answer their question, there is red phone behind the counter with a direct line to headquarters in Cupertino.[3]

Fast forward 7 years and Apple now operates over 200 retail stores worldwide. Although their share of the personal computer market hasn’t grown, many attribute the dominance of the I-Pod to Apple’s retail exposure. Apple was able to effectively manifest the company’s retail value proposition into their retail format, and as a result the stores feel like an extension of their product.

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[1] http://www.ifoapplestore.com/the_stores.html

[2] Ibid

[3] http://www.ifoapplestore.com/stores/chernev_case_study.pdf