Could Apple Suffer From Living Up to Its Own Reputation?
Yes, the Apple Store organization is a paragon of customer service. But does living up to that image make it impossible for management to make sensible operational cutbacks?
The controversy that inspired the question was triggered by news that Apple SVP Retail John Browett — hired earlier this year to replace Ron Johnson after his departure for Penney’s — would be trimming store staff. Reported by ifoAppleStore.com, Mr. Browett felt store operations were "too bloated." The Apple-observing site alleged that Mr. Browett was defying warnings from "retail segment veterans" that a reduction in store staff on the verge of an anticipated hot September selling season would be disastrous. "Browett disagreed with his staff," the story reported, "and said the chain needs to learn to run ‘leaner’ in all areas, even if the customer experience is compromised."
A number of over-the-top attacks followed on high-profile Apple-related blogs.
John Gruber, on his blog called Daring Fireball, quoted an infamous scene from Glengarry Glen Ross: "Second prize is a set of steak knives. Third prize is you’re fired."
Jim Dalrymple’s blog post on The Loop was entitled, "Apple boss tries to gut retail operation."
"This has the stench of a man looking to make a name for himself, not someone that’s doing what’s best for Apple or more importantly, its customers," wrote Mr. Dalyrmple.
Now, Mr. Dalrymple and others did make some good points. Sure, Apple Stores are highly profitable and Apple has a lot of cash reserves. Why risk backing off from customer service levels even an iota? And yet, could a retail exec with Mr. Browett’s smarts, who reports directly to CEO Tim Cook, be that far off in his judgment? Surely he understands what has made Apple Stores successful. Is it outside of the realm of possibility that some locations really are over-staffed?
The Wall Street Journal, in a report last Thursday, characterized the original management decision of a few weeks ago as "a new staffing formula for its retail stores" calling for fewer hours for some associates and job cuts at certain stores. Whether an internal backlash among Apple employees, pressure from above or the media brouhaha are to blame isn’t clear, but Mr. Browett has since apologized and reversed his decision.
Apple’s official statement, as reported by CNN Money, was a serious exercise in eating crow: "Making these changes was a mistake and the changes are being reversed. Our employees are our most important asset and the ones who provide the world-class service our customers deserve."
On the surface it appears Apple screwed up, sucked it up, and is trying to move on. But one wonders if, like the party animal afraid to take a night off for fear of losing the respect of his admirers, Apple is now unable to make sensible operational decisions.
Discussion Questions
Discussion questions: Did Apple overreact to criticism in reversing its decision to make modest staffing cutbacks? Could Apple’s superior reputation stand in the way of reasonable and perhaps necessary operational decisions?
In all fairness, that many employees on the floor does not mean they are all working optimally or all delivering value to customers, which is why I’m sure Apple implemented a scheduling program. Good question at the end, Rick.
To me, this is an example of a traditional retail “number cruncher” not understanding the uniqueness of Apple’s model. Sure the payroll to sales ratio is probably a bit high by “Dixon” standards. But who can argue with $2,206 average sales per square foot?
This is the inverse of what we’ve seen at JCP, where the hubris of having come from a singularity makes one think they can do it again without even a reality check.
Especially given the current Mountain Lion battery problems (they are VERY real…I know, I have one), back-to-school season in the US and the pending introduction of the iPhone 5 and a new iPad, this was a really dumb move. I give Apple props for acknowledging the mistake and moving on.
Apple moved quickly to reinforce its brand and repair damage to its image. It had to be done and was the right thing to do.
Refining the workforce is possible and probable. Every Apple store does this each day as it designates hours and adds or assigns staff. It’s possible that Mr. Browett, coming from Dixon’s, a cutthroat UK electronics chain, saw the number of employees at each Apple store and thought that he could increase profitability by cutting staff, but that runs counter to the Apple image and he was burned in the press and by Apple loyalists.
Even Apple makes mistakes. It has the sense to admit when it does, apologize and move on. How many other companies would have done the same?
This looks more like an executive in the ivory tower making a decision off the numbers and not understanding the process and activity. Store labor has never been an easy issue. Even though Apple has a different labor model, the fundamentals are the same. With all Apple’s computer power they should be able to schedule labor to support customer service without over spending.
I’m sure the effect of the reduction in staff was a reduction in sales or the inimitable Mr. Browlett would have been heralded the new retail guru, no matter how many people cried foul.
Apple has proven that a well selected and trained in-store staff that successfully executes a focused customer experience can sell a lot of stuff without discounting. Why they let this guy mess with their success is baffling.
A good example of why this might be a wise strategic move is to look at the staff at places like Best Buy standing around talking rather than working with potential customers.
I have to give Browett some props for making a tough decision the first time. A company like Apple does not make an operational decision without doing the analysis necessary to make most of those decisions correct. There is no doubt that with the amount of retail outlets that Apple has, there are opportunities to be more efficient.
This was an internal decision that should have stayed there! Too much information leaked can lead to a firestorm of protests and in my mind, this type of reaction can cause companies to not make the correct decision because they are concerned about the perception and not the reality.
Overreaction. Guilty as charged. The stores are bloated. How many associates need to be standing around aimlessly before they realize it? I’ve been in a half dozen Apple stores in different cities and you can always see a cluster 3 to 4 associates just huddled and talking. Would it hurt service to only have 2 to 3 associates huddled?
Logic does not apply to operational decisions at Apple.
Go to the Apple store on Fifth Avenue and you have to wait for help. Don’t cut the staff, add. Go to the Apple store at Grand Central Station and see personnel standing around. Fix something. A retailer must find a balance and not treat all stores with the same solution.
More than that, however, the Apple store is a showroom and a showroom demands customer service, not because what is being sold today, but because of what will be sold over the lifetime of the customer. Hopefully, Apple is not reacting to a sales/square foot mentality.
It is not a question of whether the staffing levels are correct or not, it’s 1) listening to others in the organization who said this is not a smart move. I am sure they had good reason for that statement. 2) If you were sure that you were right and staffing levels in some stores need to be changed. I am sure there is a way to test that theory without creating all of the negative PR.
I think the part that got them in trouble was the part about “even if the customer experience is compromised.” No one is going to have a cow over cutting staff that is just hanging around. If he had said “We’re seeing a lot of idle staff in our stores and we need to adjust” would we even be having this discussion? The question might then have turned to “Is even Apple getting hit by cross-channel cannibalization?” instead.
What I don’t understand is, if you’ve successfully differentiated from your peers based on the customer experience, and it seems to be working — Apple stores have traffic and sales per square foot numbers that can’t be touched — why would you mess with that? Why would you undercut the very thing that makes you successful? I appreciate Rick’s point about, this guy can’t be an idiot, but there is one thing I do know about retailing, especially when it comes to the store. Dyed-in-the-wool retailers look at Apple’s staffing model and think it’s nuts. I could see a traditional retailer not giving that model the credit that it’s due.
This all comes down to how “helpful” Apple wants to be relative to its store traffic. This is addressed by the shopper to associate ratio or how many shoppers per associate that Apple wants. Since Apple uses traffic counters, they can determine whether they want 8 shoppers per associate on the floor or 6 shoppers or 15 shoppers. It’s up to them. Moreover, they can schedule their workforce accordingly by day of week and hour according to a target ratio. If Apple associates are standing around talking to one another then that’s an in-store management problem that should be addressed by the store manager(s).
I have to admit that while Apple can certainly afford to keep staffing at such a level, I too find it a bit wasteful to see all the staffers clustered around, talking. On the other hand those of us waiting in the back for our appointments create a little cluster too. Perhaps the balance of genius’ to sales types could be rethought?
Yes, fundamentally it was a poorly executed decision regardless of the operational inefficiencies surely present in many locations. Particularly at a time of overall economic challenges, this is the time for Apple to stay fully invested and further strengthen their already huge market share. If particular locations are significantly bloated, simply delaying filling jobs as they turn would facilitate reasonable reductions without calling attention to a “reduction strategy.” However, I would avoid even these today. Counter-intuitively, it is wise to establish more efficient staffing standards during an expansionary period, simply adding less than you would ordinarily to set a better productivity standard.
It’s a plain fact that store operations departments are “control” departments. They are successful only when their costs are controlled to the knife edge point where when one more dollar is cut, sales fall.
I think Apple overreacted. They already pay hourly wages among the lowest in the retail electronics industry. Certainly, at one point Browett had to convince Tim Cook that the cutbacks were a good idea, and that would not have happened without ample diagnostics.
Contrary to some comments today that customer service “is the very thing that makes [Apple] successful,” it could be said that Apple products are the very thing that makes them successful. When new i-products are introduced, don’t Apple stores always form lines around the block? The customers don’t seem to mind waiting.
Apple is a service-driven store and to cut staff during back-to-school is crazy. Their stocking, merchandising, operational needs are minimal. Anyone not working with customers would be a waste of payroll.
Every (smart) retail operation tries to own one word that distinctively describes its position in the marketplace. I don’t know if it’s official, or just that customers think this way, but I’d say the Apple Store’s word is service. Why would anybody want to tamper with that?
Service should be separated from market buzz. Lots of employees standing around doesn’t mean they’re serving anyone or everyone. Buzz shouldn’t provide a pass for service. Apple’s service is fine — but it isn’t spectacular.
Retail isn’t about lopping off large chunks of anything. A good retailer runs to issues and surgically fixes them. This is certainly the case for public companies that are under close scrutiny.