When Apple Computer Inc. opened its newest store Friday on the same New York shopping strip as Prada, Tiffany & Co. and Saks Fifth Avenue, it marked five years of a distinctive retail style that reinforces the company’s brand cachet and pays off handsomely.
Like most other openings since Apple unveiled its first retail outlet in McLean, Va., in May 2001, visitors began forming a queue a day ahead of time.
It’s not because of Black Friday-like markdowns. Other than free computers and commemorative T-shirts being given to the first wave of visitors, the attraction is Apple itself. The company, with its Macintosh computers and iPod music players – and now its stores – has built its empire on simplicity and a user-friendly approach.
And other retailers have taken note.
“The stores have been super-successful and a real contributor to Apple’s success,” Apple chief executive Steve Jobs said in a phone interview. “It’s bringing a whole new generation of customers to Apple and the Mac, and that’s really important to us.”
Analysts predict the latest store will be a magnet. Others draw more than 10,000 visitors a week, on average.
Apple’s stores pulled in $2.35 bil lion in sales in fiscal 2005, making it one of the fastest-growing retailers in the world, according to Retail Forward, an Ohio-based consulting and market research firm.
The stores’ growth rate in revenue per store – an increase of 44 percent from 2004 to 2005 – eclipses industry norms. Major retailers like Target Corp., Wal-Mart Stores Inc. and Best Buy Co. Inc. saw growth rates of 3 percent to 6 percent in 2005.
The stores, along with innovative products like the iPod, helped Cupertino, Calif.-based Apple reach a record of nearly $14 billion in revenue last year.
“What the stores have done is really build the Apple brand,” said Charlie Wolf, an analyst at Needham & Co., an investment banking and asset management firm. “It’s so consistent with what Apple is that it has really added value to the entire enterprise.”
Apple stores feature stark white walls and wood floors. Web-connected computers and iPods are arranged sparingly on tabletops, beckoning for a test drive. An abundant staff of knowledgeable salespeople – who don’t work on commission – are there to help when needed but otherwise hang back, adding to the low- to no-pressure sales environment.
The larger stores host free how-to workshops, while all stores have “Genius Bars” where technicians fix Apple equipment and answer questions.
“Other retailers are also increasing the hands-on experience, but no one has done it as well as Apple,” said Mary Brett Whitfield, a Retail Forward analyst.
Apple stores have been profitable since September 2003, but when Apple first launched its retail initiative amid a declining PC market and other failing electronics retailers, most notably Gateway’s stores, it was viewed as a risky move.
Apple saw it as a way to improve its reach.
“The stores offered a much better way to deliver the product than being in the back of a Best Buy,” said Andrew Neff, an analyst at Bear Stearns & Co. Inc.
Jobs and his lieutenants paid careful attention to every detail – from the nuts and bolts of the stores’ designs to its operations and customer service. Ron Johnson, a veteran retail executive who worked at Target before Jobs recruited him to lead the Apple stores, still personally interviews each store manager.
“A lot of people thought we’d fail,” Johnson said. “But five years later, there’s a lot of evidence we’re successful.”
The popularity of the iPod helped drive traffic and sales, but computer sales have also steadily grown. In fact, more than 50 percent of the computers sold at Apple’s stores each day go to customers buying their first Mac.
