Metrics Are Part of Retail Reality

February 23, 2006

Apple’s retail stores might be all about the experience, but for employees and the HQ financial staff it’s all about metrics. But exactly what are metrics and how do they fit in to Apple’s store operations?

“Metrics” are simply measurements of financial performance that can be used to evaluate operations and employees. Armed with the numbers, supervisors and managers can decide how to revise, eliminate or add procedures, how to tweak training, and how to provide feedback to employees on their performance.

One of Apple’s main sources of statistics is the Shopper-Trak systems installed to count customers and feed the data back to the Cupertino headquarters in near real-time. Not only do these fundamental numbers help plan staffing, but they also indicate a store’s conversion rate, the critical measure of how many visitors purchased a product while in the store. That percentage figure helps determine any necessary tweaks in training (tech and product knowledge, etc.), product displays (configuration and mix) or sale approaches (greetings, questioning, fulfilling, pricing, closing, etc.).

Another common measure of retail sales is revenue per square foot. An very successful “ordinary” retail store might reach $600 in sales per s.f. annually. As of June 2005, the U.S. average sales per s.f. for non-anchor tenants was $366. Apple’s sales exceed this figure by a wide margin: in June 2005 they were approaching $4,000 per s.f. and continuing to increase.

But what metrics does Apple use for employees? There are four main metrics for employees: three so-called attach rates and sales. Apple establishes goals for its employees to sell certain products as add-ons to every computer that’s sold. Specifically those add-ons and attach rates are Apple Care Protection Plan (60%), .Mac accounts (40%) and ProCare (20%). In addition, all sales are accrued to individual employees, and are tallied by Apple’s retail computer systems. These figures, and others (promos, third-party products) are used to measure routine performance over time, as well as the success of newly-introduced products or service changes at the stores.

So much for the goals….what’s considered success? Figure are difficult to come by, but I do know that to break into the Top 50 retail store employees, you should have over a 100% Apple Care attach rate (sales beyond initial CPU sales), over 50% for .Mac and over 45% for ProCare. Incredibly, it’s not uncommon for a single employee to have $1 million in sales attributed to him/her per quarter (although in many cases the customer required no actual sales work to make the purchase). A part-timer could log $300,000 in quarterly sales working 25 to 30 hours a week.

At the very top, information from a public Web site identifies Apple’s #1 retail employee as Joey Dembner, a 4-year veteran now at the SoHo store who is also an independent filmmaker. In 2004 he was the first and only staffer to tally $2 million in sales for a single quarter, and he then went on to record $7.6 million for the year. For 2004 and 2005, he logged over $15 million in sales, putting him in the top spot.

How about the stores themselves? Apple officially reports that its stores average $33.2 million in sales per year (extrapolated from the latest quarterly results). In fact, several mature stores are on track to deliver sales in the $40 million range this year, with new and smaller stores racking up $25 million in sales. Sales figures for Apple’s flagship stores skew the sales average considerably higher, with sales three to four times what standard stores generate. For example, the SoHo (NYC) store tallied almost $150 million in fiscal 2005.

All of these metrics feed into the quarterly bonus system, which rewards employees for store and individual performance. Interestingly, as Apple’s revenues continue to skyrocket, the company changed the way it figures store employee bonuses last September–the formula of sales and attach rates was tweaked to more heavily weight attach rates. The result was that, despite a very successful holiday sales season and continuing retail success, there were reportedly fewer bonuses for individual employees.

It’s all about the experience for customers, but for retail store employees, it is more about the metrics.

Update: In early April I was told that the metrics were revised for the third quarter of 2006: from 60/40/20 to 60% AppleCare, 30% .Mac and 30% ProCare.

[Update: There is word that speed of service/repair is also a metric that may influence management rewards.]

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