Apple Focusing on ‘Showcase’ Stores

Discussion
Nov 17, 2009
Tom Ryan

By Tom Ryan

Apple last week announced plans to open
40 to 50 new retail locations in 2010 with a focus on larger, flashy
flagships in major cities as part of a new “significant stores” strategy.

“Our
stores are too small,” Ron Johnson, Apple’s senior vice president of
retail, told The Wall Street Journal at
the opening of Apple’s fourth store in Manhattan on the Upper West Side. “Our
biggest challenge at the Genius Bar — we cannot build them big enough.”

Representing
its bigger store strategy, the store at Broadway and 67th Street is the
first time an Apple store has had a roof made entirely of glass – one
supported by 45-foot marble walls that reflect sunlight. A glass spiral
staircase leads to a lower level featuring a 45-foot Genius Bar spanning
the entire length of the wall. It houses more Apple products than any
other store in the world as well as the company’s largest training and
support area. The service area can accommodate up to 100 customers at
any time. There will also be events at this store, particularly free
workshops aimed at those under the age of 25.

Like-minded stores in the “significant stores” strategy,
according to Mr. Johnson, include its glass cube on Fifth Avenue and its
just-opened, first store in France beneath the Louvre
museum in Paris.

“Other retailers call them flagship stores.
We don’t use that word,” Mr. Johnson said. More “significant stores” will
open in London, Paris and Shanghai in the spring or early summer next year,
he said.

More than half of Apple’s 40 to 50 new retail
locations in 2010 will be outside the U.S., including the United Kingdom,
Canada, Australia, Italy, Switzerland, Germany, France and China, he
said.

Charlie Wolf, a Needham analyst, told the Journal he
suspects the major focus on its “significant store” strategy will be international,
particularly Europe and Asia where it has less store penetration than the
U.S. Mr. Wolf added that the retail stores create a “halo effect” by attracting
customers to more Apple products. “Stores have been the Trojan horses for
Apple,” he said.

Apple said it doesn’t have any plans to
put a fifth store in Manhattan but when asked about a first store in Brooklyn,
Mr. Johnson said, “Stay tuned!”

Apple opened its first store in 2001 and now has 280 worldwide.

Discussion
Questions: What do you think of Apple’s new focus on “significant stores”?
What are the pros and cons of focusing on showcase stores as Apple
is doing? At what point do you worry about Apple opening too many
stores?

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17 Comments on "Apple Focusing on ‘Showcase’ Stores"


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Doron Levy
Guest
Doron Levy
11 years 5 months ago

At Apple, it’s all about the customer experience. That experience starts with the actual physical store and layout. These new layouts really do up the bar when it comes to delivering an outstanding customer experience. I don’t really see any cons with opening stores along this track. You always want to be perfecting your layout and optimizing it to increase sales.

These ‘higher-tier’ locations will require something more than just the standard layout and plan that you would find in a suburban mall. Look at most retailers in the NYC area and you will see extravagant and engaging setups that draw customers in.

I don’t see a case of over saturation. They are opening up these ‘significant’ stores in extremely high-traffic areas that would substantiate the business. And we open stores based on the demand for our product and at this point in time, Apple products and resources are in high demand. The release of Windows 7 has increased awareness of the Apple brand.

Joan Treistman
Guest
11 years 5 months ago
Continuing the theme among retailers that the way to the consumer’s heart is through the experience and the associated value, Apple is cupid and their “significant” stores are the arrows. How much more special can you feel than to know the manufacturer of your Mac or iPhone builds stores and trains friendly staff just to take care of your wants and needs? Of course, it helps Apple to showcase their products in a beautiful and user-friendly atmosphere. Loyalty is part of the Apple customer profile and that loyalty can easily be extended to many more products. How many are too many stores? The article suggests the focus is now international and larger cities in the US. While that expansion is going on, the number crunchers can gauge the success and ROI on the current US stores. Companies have gotten into trouble when they pushed stores out the way rabbits…well you know what I mean. It would seem that Apple is moving ahead at a good pace and will know when enough is enough, before it… Read more »
Max Goldberg
Guest
11 years 5 months ago

Many pundits scoffed at Apple when they opened their first stores. They were wrong, as Apple used the stores to touch their customers and allow customers, in turn, to directly interact with Apple products.

I think the significant stores are great. They answer the problem of crowding and the need for increased genius bar access.

Is 280 stores worldwide a glut?…hardly.

There is a reason why Apple’s sales are up. They clearly get the idea of building a user-friendly product and delivering a unique in-store experience.

Anne Bieler
Guest
Anne Bieler
11 years 5 months ago

Apple continues to understand and engage their target consumers extremely well. By creating a tremendous “store experience,” shoppers are encouraged to explore and use exciting new Apple products, with helpful, knowledgeable staff–this is just the best way to do it.

Taking the stores to the next level will be creating a new standard for retail. Knowing the experience will be unique and rewarding will just make them destination stores for so many more shoppers.

ROBERT HARPER
Guest
ROBERT HARPER
11 years 5 months ago

“Significant,” “Flagship,” “Showcase”…call them what you will but are they making money on a retail basis?

Too many will cannibalize sales from authorised retailers and can cause ill feeling, but there’s nothing like your own stores as a manufacturer for taking charge of your brand presentation and experience.

And no doubt about it that Apples stores make interaction with their brand an awesome experience.

Lee Peterson
Guest
11 years 5 months ago

They have yet to make a critical retail error, so, I’d get behind them and their magic touch. And at $4000+ a square foot, that’s not a hard decision to make. The notion of pushing for a retail saturation point is not new, but as in the case of Starbucks and many more, they should be prepared to quickly turn off the spigot when they hit it.

Craig Sundstrom
Guest
11 years 5 months ago

“Other retailers call them flagship stores. We don’t use that word,” Mr. Johnson said….

If for no other reason, we should love them for that.

Gene Detroyer
Guest
11 years 5 months ago

Apple’s business is not retailer merchandising and sales and fortunately they know it. These stores are not open to deliver sales per square foot (though they will). These stores are open to make customer connections. The investment in these stores is no different than the investment they make in advertising and that is the metric they should use to measure success.

They do not care if the sale is made in one of these outlets. They are just as happy if the shopper goes home and buys online or from another Apple retailer. Consider what section of the store is driving the growth; The Genius Bar. They call these locations a “Trojan Horse” and that is exactly what it is. But, surely, one thing it is not is a retail store.

Doug Fleener
Guest
11 years 5 months ago

You can’t argue with success. I think adding “super” stores (or whatever you call it) makes sense as they grow market share in a given market that then drives the need to have a bigger Genius Bar.

On a personal note, I used the Genius Bar at a local store. The staff was fabulous, the service appreciated, and was just another confirmation of why I am willing to pay a premium price to own a Mac.

Of course while I was there I was looking at a new iMac to go along with the two other Macs and two iPhones in our home. And that’s another confirmation on why Apple stores work.

Phil Rubin
Guest
11 years 5 months ago

Apple is staying far head of competitors and extending its brand as well. Most importantly, they are able to connect with customers – both consumers and, increasingly, businesses as well – in ways that very few other CE or technology companies can do.

Smart move. Better than advertising. The bigger they get, the more they need to invest in growth and building relationships with both prospects and customers. There are a lot of iPod users out there that are ripe to upsell and convert.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 5 months ago

Apple’s “significant” stores are all about scaling store size and design to meet the needs of the specific market and location. Thus, the highest traffic area in each store, the Genius bar, gets added space and prominence.

But the story is not just about scalability and size, it’s also about presence. Taking these larger stores and building them into showpieces consistent with their brand positioning, they continue to build Apple into an almost unassailable iconic brand.

Apple continues to demonstrate that they are the very best branded retailer there is.

Joel Warady
Guest
Joel Warady
11 years 5 months ago

Apple stores are less retail location, and more theatre. Different colored costumes for the performers. Bright lights. A lot of colors on the screens. Loud music playing. A lot of glass and white to create a striking stage. Theaters should be large spaces, not small. Theaters should be “significant.”

Once again, Apple shows the rest of us how to do it right.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 5 months ago

Certainly, Apple has the product line to justify “flashy” stores. And what great places to gather around the world to watch closed-circuit live broadcasts of Apple’s annual Macworld conventions and announcements of new products!

From ’88 through ’00 I was a Mac guy. As VP Mktng for a regional supermarket chain, my team operated nearly 20 top-end Macs for graphics production. My work-based Macs were purchased from a salesman who visited my office–no store visits because there was no store. And when I bought personal Macs, I visited a small warehouse facility behind a strip mall. If they’d had engaging stores with excellent service facilities, I never would have switched to a PC in ’01. But then, that was also before Apple’s glut of excellent new products like the iPod and iPhone. It’s time for Apple showcase stores, especially for hands-on customer introductions to new products.

Jerry Gelsomino
Guest
11 years 5 months ago

I’ve long felt that unless you are a grocer or drug store, and need to be on every street corner of America, opening significant, flagship, or destination stores is the best way to build a brand. Focus is given not only on the site and construction costs of building fewer, special stores, but also on the operations, management, and customer services delivered by fewer, highly-focused locations. Doing retail right, I think, is more important to the customer than being everywhere.

Mark Johnson
Guest
Mark Johnson
11 years 5 months ago

Being just in Chicago and walking down the Miracle Mile and having more computers than I know what to do with, I still was “drawn” into the store on the “mile.”

Apple is the king of branding and does such a great job with cross media, product, and branding touchpoints. Consistency in message, theme, product, positioning, “voice of the customer”; they do an amazing job at creating product loyalty and engagement.

Doug Stephens
Guest
Doug Stephens
11 years 5 months ago

To quote some of the language Kevin Maney uses in his book “Trade-Off,” Apple is currently delivering a very “high-fidelity” experience to its customers. Everything from the look of the store, to the merchandising, to the service is geared toward being highly experiential.

This sense of high-fidelity is compounded by the fact that there isn’t an Apple Store on every corner or in every state for that matter. Consumers may have to travel to get there. This only adds to the mystique.

The thing Apple needs to be cautious of is making their stores too convenient and too ubiquitous. The more convenient Apple stores become, the less fidelity they are likely to have.

One only has to look at Starbucks to see what happens when you try to replicate a high-fidelity consumer experience too many times.

Scott Knaul
Guest
Scott Knaul
11 years 5 months ago

Most retailers build these large flagship stores and they aren’t always profitable but they need them to establish themselves as “players” in their category. Apple’s flagship stores are extremely profitable. They have a solid strategy of targeting high-traffic areas and markets that will support their stores. I’ve had several discussions with the leadership of the 5th avenue store in NYC and that store is close to overtaking the Macy’s Herald Square store in terms of volume in about 1/10th the space.

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