Apple's new store on the Upper West Side opens on Saturday at 10 a.m.
(Credit: Marguerite Reardon/CNET)NEW YORK--Apple hopes to grow its market share with an increasingly aggressive retail strategy that includes opening bigger stores in more locations.
At a media preview of its fourth store here, which is located on the Upper West Side, Ron Johnson, Apple's senior vice president of retail, said Apple's retail strategy is all about getting consumers to switch from PCs to Macs.
"Our Apple stores are a magnet for switchers," he said. "About half the people who come into our retail locations are first-time Mac buyers."
Johnson said that Apple's Genius Bar, which provides face-to-face customer service and support, and other services, allow people to switch from a PC to a Mac with confidence. For example, Apple offers its One-to-One service, which allows new Mac users to drop off their old computer so that files can be transferred from the older computer to a new Mac.
The new Apple store on the Upper West Side is the first to have a glass ceiling.
(Credit: Marguerite Reardon/CNET)The service, which costs $99 for one year, then allows users to meet one-on-one with an Apple representative to discover where the new content is on the computer and to learn how to use more advanced features. Customers can use the one-on-one instruction service as much as they like for that one-year period.
Johnson also said that the Apple stores provide a good way for customers to test out and play with new products before they buy them. Even if customers don't buy their Mac, iPhone, or iPod in the Apple store, the experience they get from looking at it in the store is often enough to help them make a purchasing decision.
The strategy seems to be working. Apple has been increasing its overall sales and market share for its products over the past year, particularly for its Macs. In the third quarter of 2009, the company sold about 3 million new Macs, which was a 17 percent increase compared to a year earlier, according to IDC. This was well ahead of the overall global PC market, which grew by only about 2 percent, according to IDC. For 19 of the last 20 quarters, Apple has outpaced the market in terms of sales.
Even though overall sales have increased, Apple hasn't made huge gains in market share. But it has made modest improvements. Over the past year, the company has managed to bump its market share up to 9.4 percent in the third quarter of 2009 from about 8.6 percent in the third quarter of 2008. Apple is in fourth place in the overall computer market, lagging PC makers Hewlett-Packard, Dell, and Acer.
In 2001 when Apple opened its first store, plenty of people questioned whether Apple's retail strategy would even work. But eight years and 279 stores later, the retail business has become a big revenue driver for the company. In fiscal 2009, Apple generated $6.6 billion of the company's $29.9 billion in revenue from its retail stores, Johnson said.
Some of the stores, such as the Fifth Avenue store in Manhattan, which sits below a glass cube across the street from the Plaza Hotel, have become tourist destinations.
Apple purposely puts stores in high-traffic areas to attract customers, Johnson said. And in the case of big stores like the ones in Manhattan, it's also important to put them where people visit. Worldwide some 170 million visitors entered an Apple store in fiscal 2009.
Apple's flagship stores, or as the company calls them "significant stores," are especially designed to draw in visitors with eye-catching design and architecture. And the new Upper West Side store at Broadway and 67th Street is no exception. The new store features a glass roof, the first ever for an Apple store. And it also features 45-foot-tall stone walls, a large ground floor to showcase products, and a glass spiral staircase that leads to the lower level of the store where Apple provides service.
Apple plans to open between 40 and 50 new retail stores in 2010. More than half of these new stores are expected to be outside the U.S. Some of the countries where Apple will open new stores include the United Kingdom, Canada, Australia, Italy, Switzerland, Germany, France, and China, Johnson said.
Apple's main competitor, Microsoft, is trying to emulate Apple's retail success by opening up stores of its own. Recently, the software maker opened locations in Scottsdale, Ariz., and Mission Viejo, Calif.
Apple's latest Manhattan store on Broadway at West 67th Street will open to the public at 10 a.m. EST on Saturday.
Apple's newest retail store is on Broadway and 67th Street in Manhattan.
(Credit: Sarah Tew/CNET)Apple's latest Manhattan store doesn't officially open until this Saturday, but it had the press in today for a sneak peek. Of course, because the store's made mostly of glass, the general public can get a pretty good idea of what everything looks like inside--except for what's below ground.
Click on any of the images to launch the slideshow.
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Microsoft's retail plans are getting a big boost as the company confirmed to TechFlash that it has hired a former Apple retail executive to help with its store openings.
Here's an Apple store in Scottsdale, Ariz. Will a Microsoft store pop up nearby?
(Credit: Apple)George Blankenship, a Gap executive before joining Apple, was in charge of finding the prime locations that Apple picks for its retail stores. His work with Apple goes back to the start of the decade when Apple kicked off its retail endeavor.
Blankenship is working for Microsoft as a consultant, not as an employee, according to a report on TechFlash.
Whatever his role, Blankenship will be an important addition to Microsoft's retail team, especially considering the strategy it announced last week. Microsoft representatives told CNET that some of the stores will be close to existing Apple retail locations, hinting that it isn't afraid to battle Apple head-on.
Besides the design, one thing that has continually set the Apple retail stores apart from other computer outlets is the location Apple chooses for them. While many computer retailers put their stores in high-traffic malls, Apple tends to choose trendy, upscale locations.
Apple has chosen Scottsdale, Ariz., to showcase its latest retail store designs. The new Apple store is opening Friday night and features some firsts for the company.
Pictures of the Scottsdale first appeared on The Loop late last night. With its cube-like structure, the store, which is set to open at 6 p.m. local time, is reminiscent of the company's in Manhattan. The difference is, in Scottsdale, the cube is the store, instead of just one of its architectural features.
When looking through the wall of windows on one side, you can see straight through to the other side of the store and out another wall of windows. If that wasn't enough to give you a feeling of space, the Scottsdale store also has a 75-foot long skylight.
While design is important to Apple, there are some enhancements to help customers in the new store, too. Like most stores, the new location will have a Genius Bar to assist customers--but this Genius Bar is 50-feet long.
With so much space, Apple will use some of it to train customers, offering free courses on its professional photography, music, and video editing applications.
In May, Ron Johnson, Apple's senior vice president of retail, said the company was going to continue to renovate its retail locations through the recession. He said the company plans to remodel a total of 100 locations this year and continue to open new stores.
The recession has been difficult for every segment of the economy, from tech companies to the retailers, but Apple plans to spend its way through the downturn, according to USA Today.
Ron Johnson, Apple's senior vice president of retail, was brought into Apple by Steve Jobs to start and build the company's retail store strategy. And he has done just that, very successfully.
While many companies have been forced to cutback on their investment or close their doors completely, Apple is expanding its retail presence. Not only is the company building new retail stores, it is also renovating existing stores to better fit the messaging of the company.
Johnson told USA Today that Apple plans to remodel 100 locations this year. The changes will give the company more room to display products and offer bigger spaces for customer training.
One of the highlights of the stores that have them are training theaters. Apple Store employees, third-party companies, and other professionals often put on seminars showing users how to get the most out of software and hardware products.
Apple even participates in events like the trendy Tribeca Film Festival, inviting entertainers like Spike Lee and Natalie Portman to give sessions.
In reporting its second quarter financial earnings in April, Apple said it had 252 stores worldwide. Its retail stores sold 438,000 Macs and accounted for $1.47 billion in revenue for the quarter. Visitors to its retail locations topped 39 million in the second quarter.
Apple is in excellent financial shape, but at the expense of about 1,600 full-time retail positions.
(Credit: Corrine Schulze/CNET)Apple's retail group shed about 1,600 full-time equivalent workers during its second fiscal quarter.
Apple's second fiscal quarter was a blowout considering the state of the economy, but executives noted that the retail division took a hit during the quarter, with average revenue per store declining to $5.9 million from $7.1 million a year ago. With overall revenue from that segment increasing just 1 percent to $1.74 billion and with 45 new stores having been opened since last year, something had to give.
The retail arm of the company now employs 14,000 full-time equivalent workers, down from 15,600 at the end of Apple's first fiscal quarter, according to a filing with the SEC. Reports surfaced late last year that Apple was looking into ways to reduce the number of hours worked by part-time employees as a hedge against a coming recession.
Apple opened just one store during the quarter. In January it said that it plans to ease back on the number of stores it opens in 2009, which seems prudent amid a global economic downturn.
One of the first things you'll see at Apple's downtown San Francisco store is a new pitch for the Mac, nudging aside a table reserved for iPhones.
(Credit: Tom Krazit/CNET Networks)Apple has started rolling out a major redesign of its retail stores in order to focus on software and switchers.
IfoAppleStore, which tracks the Apple retail operation almost as closely as Cupertino does, first noticed the switch. It's already underway at the downtown San Francisco Apple store, with signs placed near the front of the store designed to entice new converts to the Mac with slogans like "It's easy to love a Mac" that highlight the differences between Windows PCs and Macs.
Apple's retail operation is a very important part of its marketing strategy, beyond its role as a distribution channel. Apple executives have pointed out several times over the last couple of months that far more people visit an Apple Store in a given week then attend Macworld, and have noted on many earnings conference calls that roughly half the Macs sold in its retail stores are to new Mac users. But Apple is easing back on the pace of its retail expansion this year given the economic conditions, increasing the need to get more results from existing stores.
Over the past several months, the flagship stores like the downtown San Francisco one have tended to showcase the iPhone on the tables on the left side of the store near the entrance, and the newest Macs on the other side. But Apple has moved the iPhone table on the left side back a level in favor of a display table that highlights the Mac/iPhone setup, and organized the Mac table on the right side by new features in iLife '09 and iWork '09, such as the Garage Band artists lessons and new version of Keynote.
Apple store customers and employees check out Apple's latest MacBooks, which are now being sold by highlighting the new features of iLife '09.
(Credit: Tom Krazit/CNET Networks)It's an interesting gambit; after all, why do people buy computers? With the Mac, Apple has traditionally focused on both hardware and software, emphasizing the hardware design aesthetic along with the benefits of Mac OS X.
But in the end--so long as the hardware works as designed--the software interface is where you form an attachment with a computer. It's where you spend your time working and playing, and is often the greatest source of pleasure or pain.
Apple has chosen this marketing strategy from the earliest days of the iPhone, spending more time showing off the features and capability of its software and emphasizing time and time again that it believes software is what will distinguish future mobile computers, not hardware. Recent iPhone ads highlight the App Store, attempting to sell both consumers and businesspeople on the variety of things you can do with an iPhone. Software has always been a huge part of the pitch for the Mac as well, but Apple appears to be shifting things more in that direction with the new store layout.
Apple is likely setting up to counter a significant marketing push expected from Microsoft around the Windows 7 launch, which will probably arrive before the end of the year. Apple has said it will release an updated version of Mac OS X this year, but has also said it expects that release to focus on improvements that won't jump out at the average user, such as improved support for multicore processors and new ways to tap into graphics processors.
Given that the early returns on the Windows 7 beta have been positive, Apple might have decided to prepare for the marketing blitz that will accompany such a launch by trying out a subtly tweaked pitch in the marketing laboratory that is its retail empire. This strategy would also make sense if Mac OS X Snow Leopard and new iMacs are the next major launches on Apple's to-do list, as many expect.
After all, hardware sells itself with just a glance. It takes a little more work to convince people to try new things.
Apple's downtown San Francisco retail store.
(Credit: Apple)Apple's fiscal first quarter was a blowout by any standard, but it's worth taking a look at one potential concern: retail.
CFO Peter Oppenheimer reported Wednesday that during the quarter just ended, average revenue per store declined 18 percent, from $8.5 million last year to $7 million this year. Margins were also hurt, declining from $405 million to $353 million, perhaps implying that Apple's decision to amplify its policy of matching discounts offered by other retail partners took a toll.
These numbers should be viewed against the economy as a whole, which was not kind to retail in general or to technology companies in particular (see Microsoft and Sony and Nokia). Retail sales declined by an estimated 2.7 percent in December, after declining by a similar percentage in November. Most of Apple's retail stores are in the U.S. as well, which bore the brunt of the slowdown caused by the credit crunch.
As a result, it seems Apple has decided to take its foot off the gas pedal in its retail segment, which has expanded at a dizzying rate over the last several years. Almost half of Apple's 32,000 employees now work in retail.
The company plans to open just 25 stores this year, with roughly half coming outside the U.S., after opening 50 last year. Apple retail chief Ronald Johnson is also being "very selective with real estate," Oppenheimer said. Apple ended last quarter with 251 retail stores around the world.
When you consider the retail climate in general, that seems prudent. Apple has already reportedly taken steps to reduce costs at its retail stores, cutting hours for part-time workers. And there's obviously some limit to how far Apple can expand; many a retail empire has been taken down by expanding too far, too fast.
Still, Apple will have to watch its retail store network very closely in 2009 for signs of weakness, given how much it has talked up the ability of those stores to reach its customers in a more direct fashion than big events like Macworld.
Apple retail stores will match the prices of products sold by other authorized retailers.
(Credit: Caroline McCarthy/CNET News)Apple has started reminding its store employees that they have the authority to match the prices of other Apple resellers.
IfoAppleStore reported earlier Tuesday that managers at Apple retail stores can honor the prices for Macs and iPods posted on other authorized outlets like Best Buy or Amazon.com. This has always been Apple's policy, according to AppleInsider, but it sounds like the company wanted to make it crystal clear ahead of a holiday season in which consumers are expected to be bargain hunters.
Apple posted some information on its Web site on Tuesday about the deals it will be offering through its online store this Friday, otherwise known as Black Friday. The company is believed to be planning "aggressive" discounts for the so-called biggest shopping day of the year.
Apple may be cutting the hours of part-time workers in its retail stores, such as this one in downtown San Francisco.
(Credit: Apple)Apple may be planning to shuffle its retail staffing plans in advance of what is expected to be a rough couple of months for the economy.
AppleInsider reports that the company's retail arm, which added 8,000 workers during the last year, is taking a few steps to reduce costs without laying off any employees.
According to the report, Apple is telling its part-time workers that they will be getting fewer hours for the foreseeable future, while full-time workers are going to be asked to do more.
Apple's retail operation uses a fair amount of part-time "Specialists" as greeters standing by the front door of its stores, directing customers to the appropriate parts of the store and answering basic questions. It seems that more and more of that role will be assigned to the fabled "Geniuses," who will have to get out from behind the service desk and walk the store floor more often, according to the report.
Nearly half of all Apple employees now work in the company's retail segment, which is probably the area of its business most exposed to a volatile economy. Apple has 32,000 full-time employees, 15,900 of whom work in retail.
The company has 3,100 part-time employees or contractors, but it's not clear how many of those people work in the retail segment. A call to Apple seeking comment on its plans for its part-time employees was not immediately returned.
