I’m not lighting up any birthday candles for the four-month anniversary of Apple’s mini-stores, since the stores have hardly lived up to the hype or promises that were made when they opened last October. The stores seem to have been hastily rolled out, are expensive to build, have nearly-useless point-of-sale machines, and suffer from a sterile design.

The stores were inspired by the Mini Cooper auto, Apple said. “This design will help us carry our philosophy to even more people,” Steve Jobs said at the official unveiling at the Stanford Shopping Center (N. Calif.). The “cool” and “hip” design was intended to attract a younger and hipper visitor, the company said.

But in reality, the stores don’t live up to any of that. Three of the first and only five mini-stores were sited very close to existing retail stores. In fact, the Stanford mini-store is just 1,300 feet away from the Palo Alto store. So it certainly doesn’t seem the mini-stores extend Apple’s retail reach to new audiences.

The stores are certainly smaller, but the lease costs aren’t necessarily less. The Oak Ridge (N. Calif.) store is about 25 feet wide, but is set into a 35-foot mall space. At other mini-stores, the stores are narrow, but extend way back into the mall.

The construction costs of the stores may not be cheaper, either. The entire interior of the stores is bead-blasted stainless steel manufactured in Japan, and laser cut to exacting specifications. You can only imagine how expensive this type of interior must be to install.

That also doesn’t take into account the tens of thousands of dollars that Apple spent on the flooring. You may recall they originally installed carpet, and then ripped it all out and put in a white, translucent epoxy flooring.

Those point-of-sale terminals were also an expensive and ill-designed project. They were expensive to custom-design and build, and have yet to fulfill their promise of allowing customers to process their own purchases. When Apple rushed to open the mini-stores before the holiday shopping season, they left behind the necessary software to allow customer operation. And now, four months later, the software still hasn’t been finished or installed. Only store employees can use the machines, which also have an awkwardly-positioned video screen where customers must sign their name, and an eye-level, laser bar-code scanner that zaps your cornea as you walk through the store.

Who came up with the concept of customer-processed purchases in the first place? Sure, 80% of Apple retail store customers use a credit card to make their purchase. But how many of those people want to take over responsibility for scanning their products, swiping their card and signing their name on a video screen? How many customers will be able to understand the check-out machine even if they want to use it–it’s completely non-standard and non-intuitive when you approach it.

That nice white epoxy flooring was spectacular on grand opening day, but weeks of foot traffic have reduced the floor to a abstract painting, filled with back heel marks, leaves, hairs and all sorts of other debris. The floor has also suffered two rounds of structural problems, requiring costly repairs at some stores.

And the lighting–whoa! It’s a retinal blast-off inside the mini-stores, with strong lights behind the one-piece ceiling, and bright, back-lit wall graphics. Stop at the Sunglass Hut for some ultraviolet protection before you visit a mini-store.

Lastly, where are the rest of the mini-stores? Are we going to see a flood of them in the next few months? And where will they be located? The original plans had mini-stores on university campuses, and Apple has hinted they would fit perfectly in places like airports. But so far, Apple is moving slowly to install new mini-stores. Is this a sign of patience, or an acknowledgement that the stores aren’t wildly popular?

It may be early in the mini-store cycle, but not too soon to wonder why this project landed so far off-track. The mini-stores should have been designed more modestly, with less stainless steel and a less sterile flooring material. They should have been located at locations that had no nearby Apple stores–and there are plenty to choose from. They should not have included the “EZ pay” stations, to allow more shelf space for popular items the stores can’t now display (G5s and 23-inch Cinema Displays). And they should have installed dimmers on those lights!

Not surprisingly, there appear to be no new mini-stores in the pipeline.

But still…Happy Birthday, mini-stores!

It’s pretty obvious that Apple products have become more popular, which has increased the traffic to its retail stores. This is a critical period for the stores, as they are forced to re-engineer their staffing and sales practices in the face of more visitors, all to maintain the excellence of the customer experience.

Apple’s retail stores were constructed on a particular staffing model: highly-trained employees would act as both sales persons and cashiers. At the same time, the Mac Geniuses are expected to handle sophisticated trouble-shooting at the Bar, yet also handle sales and check-out activities.

But as store traffic increases, this model doesn’t provide sufficient staffing for check-out duties. Apple’s stores allow visitors to pluck products off the shelves themselves, without saleperson assistance. That creates the possibility that several persons will come into the store, grab something to buy, and head for the cash register. You’ve probably seen it yourself– a long line of people waiting to pay for items, while the store staff is engaged full-time with customers who need more time-consuming attention.

The same situation exists at the Genius Bars, where an increasing number of people come in for problem solving. In some cases the Mac Geniuses are busy with paying customers (since they also perform those duties), and sometimes they’re bogged down in a lengthy trouble-shooting session with a customer.

During this past holiday shopping season Apple tried to manage the longer check-out lines by adding positions, in some cases on rolling carts. They beefed up staffing to help handle the flow of visitors. Apple previously acknowledged the Genius Bar traffic tie-up by instituting a reservation system, which allows visitors to sign up for service via the Web before they even arrive at the store.

Apple acknowledged the increased customer traffic recently by posting job positions for Cashier and telephone Operator at selected stores. Both are reduced task positions that focus only on the customer service part of the store’s operation. It’s an odd reaction to the problem–these positions don’t perform sales tasks, and so will be generally useless when there’s no one waiting to make a purchase. Whey would Apple recruit, hire and train someone for fewer responsibilities, and more specialized responsibilities at that? Why not simply staff an additional Mac Specialist position for busy periods who could both provides sales help and check-out assistance? It can’t be because Apple wants to save money–how much less could a Cashier make than a Mac Specialist, who’s working at the bottom end of the pay scale already?

The Genius Bar will be the most critical area for Apple: increased visitors have created more work, and the “generalist” role of the Mac Genius position is beginning to buckle under the load. The reservation system hasn’t improved the distribution of the workload. Instead it’s simply tacked certain customers to certain times of the day to make contact with the Genius. The system doesn’t create any more hours in the day, or any more Geniuses to perform the work. So people come in, find out their appointment is delayed, and are forced to wait for help.

Apple’s stock has hit a 52-week high, store visitor statistics increase consistently each quarter, and store sales are going upward. But unless the staffing and sales model gets tweaked, visiting an Apple store won’t continue be an enjoyable experience. Instead, the store will be filled with long lines full of frustrated customers.

Somewhere along the line the model has to change. Apple needs to staff additional Mac Specialist positions at the stores, staff Cashier and Operator positions at more stores, and revamp the operation of the Genius Bars to separate the Bar work with the backroom repairs.

Now, the question is simply–will Apple be able to make an intelligent transition from small-time retail operation to big-time retail, and can they continue to pull in the customers? At the same time, will the Genius Bars be able to provide top-notch customer service for the increasing number of customers?

Unless Apple can maintain the same level of customer experience, the retail stores could be the first point of suffering for a company that at last is gaining some momentum. The stores could be the “canary,” if you will, to indicate the success or failure of the company’s transition to bigger and better times.

A variety of topics this time…

Gag me with a spoon! In a story under the headline, “H-P Gains Applause as It Cedes PC Market Share to Dell,” a Wall Street Journal newspaper story details how Hewlett-Packard has lately traded market share for profitability. “H-P is now backing off from seeking market share at all costs,” the story says, “or going all-out to unseat Dell from the top slot.” If this philosophy sounds familiar, you might be an Apple enthusiast! Apple was profitable overall for fiscal 2004, and the Retail segment has been generating profits for the past six quarters. And all the while, with less than a 5% market share (estimates vary). So Apple’s been interested in profitability for years, but hasn’t received any respect for it.

I’ve received additional feedback on the Nagoya Sakae (Japan) store grand opening–it sounds like Apple traded the traditional brawl for Lucky Bag purchases for a scuffle over the iPod shuffles. Photos of the iPod shuffle table showed some madness as people tried to grab their preference of mode. As I’ve heard before, some people grabbed several iPod shuffles for purchase. There has to be a better way to create excitement for the grand opening, without making it into a product grab.

It’s very easy to forget how many people are involved in creating and supporting Apple’s retail stores. I’ve collected a list of 55 job positions within Apple, but I know there are many more company personnel and private contractors that work hard to get the stores open and keep them running. For most shoppers, they see and know only the retail store staffs. If you’re one of them, remember it takes lots of work to design, plan and build the stores, and then to keep them staffed with trained personnel and stocked with merchandise.

Because of the Web site I receive lots of e-mail questions from people who can’t find a source of information elsewhere. Sometimes the questions are related to the retail operation, but sometimes they’re from ordinary consumers trying to contact someone within Apple for a problem or answer. I try to provide them with as much positive information as possible, and give them an Apple contact. Hey, I do what I can for the cause!

I can’t begin to fully analyze this year’s future stores. I can only say there will be 24 new stores by the end of the year, with 10 of those in other countries. I’d predict there will be additional stores in some regions, but also stores in new cities–how many new cities is the key question. I would have guessed that at least one or two new countries would receive Apple stores during 2005 (not including Canada, which we’ve all known about). However, CFO Peter Oppenheimer said the 10 stores would be in Canada, Japan and the UK, seemingly excluding any other countries. I can only assume that appropriate spaces haven’t been leased in France and Australia, which are my two current favorites.

God bless the ASCs! Without them, the CompUSA stores of the world would be completely useless as an Apple sales or marketing tool. But if you ever go into the Apple store-within-a-store of a CompUSA when the ASC is gone, you’re in for some entertaining salesmanship: the staff don’t know the answers to most elementary questions, and have no interest in figuring or finding out the answer. Even your best Windows-user friend would be more motivated to help you! It’s just sad to see people milling around the Apple area bewildered.

Even more pathetic is to visit a CompUSA that’s less than a mile from an Apple retail store. Here are these people trying find information, potentially buying a Macintosh, and having no luck. And they have no idea that within a mile they could be in the safe arms of an Apple expert who would move heaven and earth to sell them a Macintosh or other product. But….ahem, without advertising, these people have no idea there’s an Apple store nearby. As I said, it’s pathetic.

I’m happy to pass along a couple of store experiences that others have told me. One person said he purchased ProCare service with a desktop, and then called the store to speak to a Genius by phone about a problem, believing that’s what ProCare was all about. The Genius offered to take his name and call him back at the end of the day, which this person feels is totally unacceptable. All I can say is that you really have to read the ProCare terms and conditions carefully before you plunk down your $99. Is it Genius Bar+, better than Apple Care or something else? In this case, the person misunderstood what ProCare is all about, but whose fault was it–the person who made the sale or the buyer?

The second story raises a question about warranties. Someone took in a laptop with a power adaptor problem. The Genius said it wasn’t covered, and the store manager said it wasn’t covered. But neither could come up with a copy of the Apple Care terms and conditions, and neither could articulate them, or explain who really was the finally authority on the question of what’s covered (or not). Don’t tell me that Apple doesn’t provide its personnel with training on handling “It’s not covered” situations. There have to be standardized ways of handling these situations, with wording that helps get the point across, while still providing a positive customer experience.

TiVo is the perfect example of a tech company with a good concept, but with absolutely no clue how to take advantage of it. I have a TiVo and its a fantastic way to squeeze the fixed schedule of television into a non-scheduled lifestyle. But TiVo doesn’t know how to market it, hasn’t taken advantage of its loyal users to create a community of “buzz,” has refused to open up the device for improvements or add-ons, and has no insight into media, TV, computers and other technology, and how they’ll all converge (or stay apart). They’ve lost money every quarter–big money. Their top executives have recently resigned (wonder why?!), and there’s a serious possibility of bankruptcy. If I were president: I’d start at the top and determine exactly how I wanted the TiVo device to fit into the future world of media. I’d begin making the device and interface more open for the addition of new features (TiVo hasn’t even formally approved the 30-second jump hack!). I’d create a TiVo users club to get some Scion-like loyalty going, and I’d advertise on TV. How much brain power does it take to see that TiVo is going nowhere without some major shake-ups?

How Much Proof Do You Need?

Apple’s most recent financial results are pretty impressive, but if you consider it as just dollars and cents, you’re missing the point.

For investors or Apple’s critics, it’s all about market share, revenues, profits and other numbers. They want higher numbers, better numbers and more numbers. I suppose in the world of profits and losses, that makes sense. But that certainly isn’t the only criteria for success, and it’s time everyone started to realize that with Apple.

The company is profitable. At the end of the day, they created, designed, manufactured and sold products that allow people to be creative and productive, and they have money left over! What more do you want? Overall revenues were up 17% compared to the previous quarter, while profit was up a whopping 75%.

More to the point, the retail store financial results were almost off the charts: six more stores opened during the quarter, revenues were up 39% compared to the previous quarter, and profits were up 157%! You might attribute this to the six additional stores that opened during the quarter, except for one more amazing statistic: visitor traffic during the quarter increased by 34%. The average per-store weekly traffic actually increased from an average of 5,650 to 7,800 during the quarter. So even as Apple builds more stores, they’re not simply spreading a fixed number of store visitors around to more stores. They’re attracting more customers to more stores. Makes you wonder what the maximum number of Apple stores might be.

At the same time, average per-store CPU sales were up about 31%, again, even as the number of stores increased during the quarter. Once again, the additional stores aren’t taking away revenues from other stores. Instead, they’re actually creating new revenues–actually, new, increased revenues. More stores seems to translate into more revenue per store, at least so far. Sorta makes me recall the movie line, “If you build it, they will come.” Apparently lots of people have been waiting for an Apple store to arrive in their home town.

So obviously, something is on-track here. The location of Apple’s retail stores is right, the store design is right, and the products are right. You can imagine the glow around the offices of the retail team and at the stores themselves. And you can imagine how the financial results might provide the answer to the traditional retail question– what should we do next? It’s not a stretch to believe that, with Gateway out of the retail business and Dell confined to puny mall kiosks, Apple may see a huge opportunity to make an unobstructed run at the retail computer market and be successful. Where else are you going to go to buy a computer–Circuit City?

And consider this: chief financial officer Peter Oppenheimer said that from 40% to 45% of retail store computer sales are to persons who were either buying their first personal computer ever, or who were buying their first Macintosh. That means that almost one-half of Apple’s sales represent new Mac users, and brand-new computer users, the latter who add to the total PC market share. Add one new computer user to the world’s statistics, and mark that user down in the “Apple” column. You can’t do better than that.

Lastly, last April Sr. V-P Retail Ron Johnson forecast the retail sales at $1.2 billion, and it came it at $1.185 billion. He forecast Retail segment profit at $30 million, and it actually shot up to $39 million. Next time he makes a forecast, I’m listening.

If you’ve been surfing this Web site since February, you had an 8-month headstart on the official announcement of mini-stores. It was obviously a big secret around the company, even among retail store staffers. I can only say that my coverage resulted from an extremely wide variety of far-flung tipsters, several coincidences, hours of Internet searching, and some incredibly good luck. And, yes, I’m working on the next big thing…..

Despite the presence of a large contingent of press at the mini-store event, there is only one photograph of the gathering: Steve Jobs standing in front of the black curtain that temporarily obscured the new mini-store design. There’s no video of the event, even though Apple arranged for a satellite truck, a video crew and up-link time. And along the same lines, neither the nation’s premier financial newspaper, The Wall Street Journal, or Apple’s “home town” newspaper, the San Francisco Chronicle, even mentioned the mini-stores after Wednesday’s financial conference call. They apparently were so overwhelmed by the revenue and profit figures that they overlooked the Retail segment’s big news.

Thanks to Business 2.0 magazine for their timely coverage of Apple’s mini-store concept–their November issue hit the newsstands just days before Apple made the official announcement, making them the first and only print publication to cover the story.

I just replaced an 8 year-old Powermac 7600 computer with a G5 system, taking a leap from OS 8.6 straight to OS X. Whew!

Okay…I also have had a Powermac G4/450 that I use for writing, GoLive production of this Web site, and some photo editing. But my primary computer was still that old 7600 and 17-inch Sony CRT display for e-mail, browsing, text editing, personal and business accounting, and even page layout of a monthly magazine with Pagemaker. And this story is about how I made the transition in less than 48 hours, including a 22-hour trip to Tigard (Ore.) to buy the new gear with a 10%-off card and no sales tax.

It’s a great compliment to the Macintosh system that you switch from software that is at least 8 years-old and designed for an older operating system, to a new operating system, all with virtually no glitches. I purchased some updated versions of software, switched to different software, and simply moved data files to the new computer in order to complete the transition. Here’s my story of converting existing applications to the new G5, step-by-step:

E-mail — I had V5.x of Eudora, a very capable e-mail client, and had created a very efficient set of folders for organizing my messages, and an address book of critical contacts. I copied over the entire Eudora folder to the G5 and used OS X Mail’s built-in import capability to create an exact replica of my folder organization. I then used Eudora vCard Export to export my Eudora address book into a .csv format file, and then imported it into OS X’s Address Book program. I then had to hand-copy my Eudora filters into Mail’s rules, but I had only about 15 rules to create. Mail’s spam filters took care of the other Eudora filters that I had laboriously created to eliminate spam. [total time spent: 10 minutes]

Quicken — I purchased a copy of Quicken 2004 to replace the Quicken 98 program I had been using. After installing the program, I copied over the data files to the G5 and opened them. The new Quicken version updated the file to the newest format. [5 minutes]

Word — I have several standard letters and forms prepared in Microsoft Word V5.1. I purchased the latest update for Microsoft Word 2004, installed it on the G5, copied over the files to the G4, and was immediately able to open the files and use them. [5 minutes]

Internet Explorer — I was using V5.2 of the browser, and had collected lots of bookmarks. I found the bookmark file, and copied it over to the G5. Safari will automatically import Explorer bookmarks, but only when the program is first run. Since I had already run Safari to confirm my Internet connection, I had to fool Safari into thinking it was running for the first time. The technique is simple–you just delete two lines from Safari’s preference file. The file is located at:

/Library/Preferences/com.apple.Safari.plist

Use a text editor to find the two lines:

IEFavoritesWereImported

Change the two lines to:

IEFavoritesWereImported

Save the preference file, return to Safari and run the program. The imported bookmarks should be contained within a separate folder named “Imported Bookmarks.” [12 minutes, including Internet research for a solution]

Textwrangler — I was using BBEdit 4.x on the Powermac 7600, so I simply downloaded a copy of Textwrangler (I already had a license) and I was back in the text-editing business. [2 minutes]

PhotoDeluxe — Whoa! I had been using an old version of PhotoDeluxe to do some very simple graphics work. Since I had just purchased Adobe’s Creative Suite collection, I installed Photoshop CS and began using it to edit graphics files. [5 minutes]

Fireworks — I was using V4.x to create various graphics, including those with drop shadows and other effects. I had purchased a copy of Fireworks MX, loaded it on my G5 and was able to open all my files. [5 minutes]

Filemaker — I was using V4.x to track all sorts of information for my publishing business, including subscribers, advertising and books inventory. I copied the databases over to the G5, opened them in the new V7.x, and the program created updated copies of the files. I encountered one printer form that needed the slightest tweaking, but otherwise the transition was seamless. [6 min.]

GoLive — I was using V4.x to manage a Web site, but it was really slow. I copied over the Web files, and they opened immediately with GoLive CS that I had installed as part of Adobe Creative Suite. [5 minutes]

Pagemaker — I have been using V6.x to lay out and print masters of my monthly magazine for the printer. I copied the Pagemaker master publication template over to the G5 and opened it in InDesign 2.x. It opened with all the features intact, although I did have to perform about 30 minutes of very fine-tuning and checking to make sure the lay-out was perfectly duplicated. Some of the tweaking involved fonts I had forgotten to transfer to the G5, and some involved tabs that resulted in misplaced text. The time I spent was more the result of my being extra careful, than with any problems reading the ancient Pagemaker file into InDesign CS. [30 minutes]

OK…that took care of the critical applications I had to upgrade or convert. I then installed entirely new software on my G5, including NetNewsWire, Omnigraffle, Fetch, and PhotoReviewer.[30 minutes]

I ran Software UpdateSoftware Update to bring in the latest versions of all the Apple software. [60 minutes]

I created a print queue. [2 minutes]

I tweaked several preference panels, including Network, Keyboard and Mouse, Energy Saver, Date and Time, .Mac and Accounts. [10 minutes]

I used Chronosync to create four, rotating back-up routines for my data files, and one back-up for my Applications folder. [10 minutes]

I performed this entire transition over a 12-hour period of one day, right after arriving home from Oregon with the new G5. By the next day I had the G5 operating exactly as the Powermac 7600 had been for the past 8 years. I left the 7600 set up on the floor nearby in case I encountered any missing files or other glitches. I restarted it once to check on some obscure Pagemaker hyphenation settings, but it turned out that InDesign had properly read them from the original Pagemaker document.

By the way, about four days after this set, my fax machine ran out of paper–and I found I forgotten to buy more. Rather than immediately run down to Office Depot, I simply clicked two check boxes on the “Print and Fax” preference panel, and I had fax sending/receiving paintlessly implemented. It took me 15 seconds to accomplish, and now the fax is ready for the recycling pile, just like the 7600 and 17-inch CRT monitor..

Stockholder or User?

Apple serves two masters–its customers and its shareholders–and sometimes the goals don’t exactly match. In fact, lots of the stories, articles and opinion pieces you read are based on the contradictory nature of operating a tech company. And more specifically, most of the comments about Apple’s success, executive decisions and products are based on a shareholder points of view.

If you take the shareholders out of the equation, and their corresponding desire for the price of Apple’s stock to increase, the company’s operation becomes much clearer to understand. Apple creates products that help people accomplish tasks. In some cases the task might be as serious as keeping the books for a large company, or creating a college application essay. In other cases, the task might be more recreational, such as playing music with iTunes or editing a video of a child’s first step. In both cases, the key element of Apple’s hardware and software is that it works, and works efficiently. It lets people perform tasks that make their lives more useful and more enjoyable.

Apple users don’t care about how successful the company is, except to the point that the company continues to stay in business and develop new products. Users don’t care if the stock price goes up or down. They simply enjoy the experience of using Apple’s products, and appreciate what the products can do for them. They also don’t care if Apple’s share of the market is 4.2% or 5.1% or even 10%. In fact, what’s the difference, except to an accountant or someone with a financial interest?

I try to pay only glancing attention to the mountains of opinion that get posted and printed about Apple’s declining market share, and the doom-and-gloom talk. Instead, I listen to my inner self (?), sit down at my Macintosh and listen to some music, post some photos and videos, and generally enjoy myself. As long as Apple keeps up the good work, I’m happy.

Making Decisions

Did you follow the latest ho-ha between Rob Glaser of RealNetworks Inc. and Steve Jobs? Seems Glaser sent Steve e-mail asking for a meeting on a possible alliance on digital music. At least one columnist has suggested that Steve leaked the e-mail, and other press reports confirm that Apple wants nothing to do with Glaser’s offer. In fact, The Wall Street Journal quoted Steve saying, “The iPod already works with the No. 1 music service in the world, and the iTunes Music Store works with the No. 1 digital music play in the world. The No. 2s are so far behind already. Why would we want to work with No. 2?”

Some in the press and financial world are calling Steve’s remarks as nothing but arrogance, and note that a closed architecture pretty much scaled down Apple’s hardware line and reduced its market share. They warn that unless Apple opens up the iPod and iTunes, it’s risking the same fate for its now-successful music products. Well, let me just say that Steve’s attitude is really what executive decisions are all about. You don’t often get to see how tough decisions are made. In this case, Steve was upfront about his decision, and pretty pointed in why he made it. No doubt Steve, and everyone at Apple, is feeling pretty high from having such a huge market share. I don’t blame them at all for not wanting to share it. You go, Steve!

Argggh! Advertising!

I’ve been prompted several times to write about Apple’s advertising–or lack of it. Each time I sit down to begin writing, I don’t know where to begin… or where to end. In a world where McDonalds spends over $1.3 billion a year on advertising, it’s easy to feel that Apple doesn’t receive air time or space in magazines explaining the digital lifestyle and showing Apple’s products.

In fact, Apple’s advertising ranks way down the list of annual expenditures (less than $200 million), and behind even gum marketer Wm. Wrigley Jr. Co. For comparison, Dell Computer spends about $500 million a year on advertising, and H-P spends about $700 million yearly.

Instead of rehashing the advertising issue, let me point you to some other articles:

• Del Miller writers on the AppleLinks Web site
• Matt Coastes on the ATPM Web site has some specific advertising suggestions.
• Wired Magazine’s Web site also posted some musing on Apple’s advertising back in 2002 that are still pertinent.

More Stores

I’ve had time to digest the latest financial results and the announcement on future store openings. If I were a substantial stockholder or speculator, I’d be worried that the iPod revenues were the only thing propping up the stock price. I’ve seen other basically telling Apple–”OK, your music products are a success. Now get on with it!” Hey, I’d just be happy to see the latest G5 desktop upgrade so I can pull the trigger and get rid of my old Powermac 7600! But it certain is time for Apple to focus on the other products, including laptops and desktops, and to bring them into parity with the iPod.

Most interesting to me, of course, is that Apple bumped up the number of retail stores it will open in the next six months. Previously the company has said it would have 80 open by “back-to-school” of this year, but now says it will have 88 stores open by the end of fiscal 2004 (or about Oct. 1st), as well as a London store.

During the financial analysts’ conference call, CFO Peter Oppenheimer noted that V-P Retail Ron Johnson and his real estate team had secured some “great” store sites last December, and they would be opening this year. That suggests the decisions were made long before Gateway Computer announced their store closings. And yet…

More reasonably, Steve looked at the fiscal 2003 financial results for the retail stores, noted the continuing profit for the retail segment, and told Johnson to flip the switch on the other retail locations they had on a “potentials” list. This will certainly give 2004 a bump–the number of opened stores has declined each year, and even this year it will be fewer than in 2003. But even so, I think the big slug of stores set to open between now and year’s end signals a continued commitment to the retail operation.

Historic Buildings?

San Francisco “Chronicle” columnist John King recently questioned Apple’s choice of architecture for the San Francisco store, noting it was a window-less box covered in stainless steel, in an area of fairly historic stone buildings. It all reminds me that Apple has certainly converted older street-level spaces to retail stores, while retaining their former appearance. Take a look at:

• the Pasadena (Calif.) store, which retained the full facade of the block
• the SoHo (NYC) store, which retained all the outside features of the former post office
• the Palo Alto store, whose architecture was restricted by the city’s historic classification of the building
• the upcoming Regent Street (London) retail store, which is definitely historic, and will most likely retain the stonework features of the original building and surrounding area.

So Apple is certainly capable of accommdating the historic nature of the buildings. But whether they do it voluntarily or are forced to do it by law…that’s the question.

Is It The Resellers’ Own Fault?

With the grand opening of Apple 77th retail store in San Francisco, the complaints and debate by Apple’s resellers seems to have been sparked anew. Of course, the problem hasn’t really changed much from there were 70 stores, or 65 or even 50.

To me, the situation is complicated, but not entirely defined, by the fact that Apple depends upon its resellers to generate revenues, and are consequently bound (legally and socially) to do the best it can to support their efforts. That includes providing them prompt supplies of products to sell, offering them attractive financial terms, offering training and information about the products, and making them a part of the extended Apple family.

As you can imagine, Apple’s resellers represent a broad range of employee and store appearances, financial backing, markets, knowledge and training, and motivation to carry the banner for Apple products. In some cases the resellers’ stores are dark, cluttered and disorganized, and the employees are paid a commission, receive little training, and have no loyalty to Apple or its products. This really isn’t a value judgement, but rather just a fact of life–that’s pretty much the range at most retailers.

So, is Apple in competition with its resellers, or are the Apple stores simply intended for brand enhancement? That’s the key question.

Chief financial officer Fred Anderson has said many times that Apple’s original intent was for the stores to be profitable, yet their annual report also has stated several times that certain stores, the flagships, “have been intentionally designed and built to serve as high-profile venues that function as vehicles for general corporate marketing, corporate events, and brand awareness.” Anderson has also stated Apple’s intent to never have 300 stores like Gateway, and in fact the company will open about 4-5 more stores this year.

So with only 80 stores by back-to-school, does that really qualify as competition for the 400 or so resellers that Apple now has? Hardly. So the retail stores are a money-making marketing and advertising tool, not a way to take business away from the independent resellers.

You’ll recall an earlier “Rant” on how the music industry simply let music slip out of its grasp, not wanting to realize that the world really is changing, and taking music with it. They refused to believe that the decades-old model of music distribution was going to change. Instead of taking hold of the electronic distribution model and making it their own, they let Napster and others strip away their revenue, and then they turned tough. It took Steve Jobs and Apple to establish the music model of the future–and then the music industry wanted in.

Well, sitting around and denying isn’t limited to the music industry. Apple’s resellers also had a pretty exclusive deal for a long time. You couldn’t buy an Apple product a Wal-Mart or Costco (and still can’t!), and even now the number of big chain resellers is relatively small. So what did the resellers do to enhance their position and push the product?

Well, I’m sure they were doing something. But it certainly wasn’t anything to brighten up their stores, improve their employees’ training or motivation, or make their stores a community center for Mac enthusiasts. I grant you…they’re entirely dependent upon Apple for product, and for the financial terms on reselling them. And the independent resellers don’t have $4 billion in the bank like Apple.

But I have to raise the question– were the resellers just sitting back enjoying their exclusive deal, and not spending their money and efforts on improving their position? Or were they surprised and squeezed out by Apple’s move into the retail market?

I think Apple’s resellers should do less whining and more following– they should seize upon Apple’s model of retail by making some upgrades to their stores, making them a place for Apple enthusiasts to gather (the MUGs are looking for a place to call their own), and sucking up as much business as they can on the coattails of Apple’s retail store publicity.

Regent Street

After resting for three days, the experiences of the Regent Street grand opening are coming into better focus. First and foremost, it was another example of Apple enthusiasts coming together from various backgrounds, levels of experience and even different countries, and yet immediately finding a common bond. Yes, we were all there for the new store–the building. But it was really the people in the waiting line and inside the store who provided the real rewards.

I must have met and spoken to over 100 people over three days, and each one was interesting, excited, funny and interested in everything Apple. The store staffers were cordial, thankful for our presence and just as excited as all of us over the grand opening. So while the Regent House building is extraordinary, and the Apple store is a magnificent use of space, it was really the visitors and store employees who stole the show. It all makes me wonder what the exact nature of Apple Computer really is: a hardware company, a software company, or a “people” company? In the end, it really is about the people (where have I heard that before?!).

Now, about the mean streets of London. My grand opening diary can’t really convey the amount number of people walking the streets in some level of intoxication late at night. I don’t mean it as a condemnation of an entire country, but I do have to acknowledge what I experienced. There were lots of people stumbling by well after midnight. Some slipped and fell, one spit up virtually in front of the store, and some stopped to harass us because…well, because we were in their path along the sidewalk, and they simply couldn’t get around us. I’ve seen the same behavior in Japan, and I suppose if you hit the streets of other big “club” towns in the U.S. you’d see the same thing. Maybe I should hang around more on U.S. sidewalks at 3 a.m. for a more well-rounded perspective of my own country.

Lastly, there was definitely a line-cutting problem at the grand opening that affected Lucky Bag sales. I’ve received multiple, specific accounts of people whose position changed significantly during the early morning hours. Some admitted that they naively failed to keep track of people coming and going around them, assuming it was people who had been in line for a long time. Others have told stories of out-and-out deception by people trying to cut in line. The fault also appears to rest with the lack of crowd barriers that weren’t erected until around 7 a.m., long after the line-cutters had arrived (line cutters certainly didn’t come at midnight, since they didn’t want to wait that long. But they didn’t want to arrive late, since everyone would be awake and standing up, and would notice their arrival).

I was told that Constables who arrived around 7 a.m. took action when line-cutting was pointed out, but that Apple-hired security guards were less likely to take action, apparently not sensing the importance of a place in line.

One person told me that his position in line changed during the early morning hours, putting him over the #300 position in line, and making him ineligible to purchase a Lucky Bag. He also claims that more than one member of the press admitted to the store was making Lucky Bag purchases. He pointedly brought the situation to the attention of store management. As a result, he states, Apple made an accommodation to him and several others. Perhaps most interestingly, they were also told that the Lucky Bag program was over–this was the last one.

You’ll recall that the Lucky Bag concept originated from the Japanese New Year’s “fukubukuro” tradition, but has been Americanized by Apple: the price of most Japanese surprise bags is considerably less, and the items more often are things you wouldn’t really buy yourself. In most cases, the merchandise in the bag is left-over inventory from the just-ended holiday shopping season rather than really popular, sought-after items.

I’ve wondered from the beginning why Apple used the Lucky Bag concept to promote its other flagship store openings, since they really don’t have to do anything to attract visitors. It seems that Lucky Bag sales have evolved more towards “outsiders” making a profit, rather than rewarding anyone at the front of the waiting line. It’s a custom whose original magic has passed… and Apple apparently has now realized that.

Being A Webmaster

The evolution of this Web site has been pretty significant. It began simply as a way to document some early overnight events for grand openings. And then someone told me an interesting story or piece of information about the stores, and I posted it. Pretty soon, there was more information, and that attracted people with questions, which I would then ended up researching and posting the answers. After about a year, the site became a fixture on Google searches–and as much a responsibility as a fun endeavor.

The evolution has also reinforced the reality that Apple doesn’t appreciate rumor Web sites, and consequently doesn’t interact with their operators in any way. No doubt posting certain information on ifoAppleStore runs contrary to many of Apple’s corporate goals, even though it’s not done maliciously. In fact, by some measure such postings might actually help create some buzz about the stores and more interest in Apple’s products. But I’m sure Apple sees any information on this Web site as deconstructing its carefully laid plans, or even providing valuable intelligence to competitors.

In any event, if you want to know what contact I have with Apple–I’m dead to them. But on the other hand, I didn’t really have any expectation of making new corporate friends with the Web site–it was created for Apple enthusiasts. So Apple’s attitude isn’t exactly a deal killer to me. They do what they do, I do what I do, and we all get by in a big world.

In the end, this Web site supports the people who are interested in Apple’s stores, not Apple itself. If I helped one person obtain a job at Apple, pointed someone to a nearby store, or made a grand opening more enjoyable for one person, then I’m happy.

Future Stores

The crystal ball is cloudy on the issue of future Apple stores. I’m basically guided by three factors now: a list of America’s 100 largest cities, Apple’s recent European commitment, and the information from ThinkSecret that Apple intends to open 40 more stores during 2005. Given that information, you have to assume that at least 10 new cities will receive their first Apple store, including those I’m asked about most often: Albuquerque, Salt Lake City, New Orleans, anything in Oklahoma and New England. Of course, Apple has stated that its mini-store design would fit into all sorts of smaller spaces, such as airports. So besides cities, we now have to look out for Apple stores at airports, campus bookstores and other smaller venues. I’ll keep my antenna up.

Oh, if you have a tip, let me know!

What’s the big deal with Apple stuff?

I’m frequently questioned about why I use Macintosh computers and why I like Apple Computer so much. It’s an easy question to answer, really.

First, I started my computer career way back, before the Macintosh and the IBM-PC. I bought an Apple IIe, hooked it to my 17-inch TV and was happy to load programs from a casette tape recorder, and dial up some crummy computer services using a 300 baud Hayes modem. Boy, seeing those letters paint across the screen, one-by-one, was a real thrill!

So my computer experience is not one of the typical computer user. And yet, I still have the same goals and needs as a person without early computer experience, without any program expertise, and who just wants to focus on the results.

That’s the key–the results. And in a nutshell, that’s what an Apple Macintosh allows you to do.

In fact, that’s what all of Apple’s products allow you to do: focus on what you need to get done. And in the end, that’s why I use them. They work together without problems to allow you to accomplish something meaningful.

Take music. Back in my college days I was “into” music, followed the Billboard Top 100, listened to the radio, played records and tapes, and knew the lyrics. I drifted away over the years, although I still enjoyed listening to music. It wasn’t until Apple’s iTunes came along that I began to see how it could help me return to enjoying music. Now I have downloaded iTunes Music Store songs, have a playlist and have returned to enjoying music.

The same with page layout. I used to type up mimeograph masters when I was in college for an underground newsletter. Later, I’d Xerox and staple together newsletters for various groups and organizations. When the Macintosh and Aldus Pagemaker arrived, I was overwhelmed with the possibilities. I no longer had to laboriously apply Letraset press-on type headlines! I could type in text, reflow it into columns and create instant newsletters. (However, for the record, I should say I used the “Ready, Set, Go” page layout software instead of Pagemaker because it was less expensive.)

For most people, the goal, or the enjoyment if you will, is not with the computer process. Rather, it’s with the product of the computer work: the music it produces, the artwork it displays, the presentation is allows you to display. Yes, there are people who enjoy working with the computer to produce the final result (and I’m probably one of them). But most people purchase the computer for the result.

Steve Jobs’ vision is to create hardware and software to allow the Macintosh to contribute to your quality of life: music, photos, video, information, business, etc. It’s designed to be easy to understand and use, to work with other applications, to be reliable, and to produce a result or product that you find valuable. It seems like a simple goal, yet it’s been elusive for almost 20 years.

iTunes lets you collect music, manage it, carry it around, and play it.

iChatAV lets you connect with other people around the world, either with text, audio or video.

iMovie lets you collect and manage video clips, and to edit them into videos for various formats.

iPhoto lets you collect and manage photographs, and to create presentations in various forms and formats (printed page or on-line).

iDVD lets you create DVD-based collections of photographs and videos.

And when I say “you,” I mean any “you.” The ordinary person, without any extraordinary knowledge or experience, can use iMovie to edit and output a music video. iPhoto lets the ordinary person take snapshots, and then create a printed book of their work. For example:

The Macintosh lowers the accessibility bar for many types of programs: video, audio, photography, page layout, Internet, etc.

The graph shows that the expert computer user has lots of features, but the level of initial accessibility is very high, and as features are added, the difficulty of use increases, too.

The non-expert computer user (you and I) need only some of the features that an expert requires. But the key is accessibility– the graph shows that initial access is easy, and it continues to be easy as features are added.

So, Apple hardware and software doesn’t necessarily bring Macintosh users vast capabilities. Instead, it lowers the difficulty of using a sub-set of features so non-experts can produce meaningful results.

Video production is perhaps the most obvious example of this principle. Previously, video production took expensive, sophisticated gear, which only those with lots of money, expertise and experience could perform. With iMovie, the required hardware and software has been reduced to just a few thousand dollars (or even less), experience has been reduced to zero, and expertise has been reduced to near zero. Now, anyone can produce an edited video production.

Macintosh computers bring capabilities to the ordinary user. Not extraordinary capabilities, but rather just capabilities. But for most folks, that’s all they want or need. They just need the ability to make a video, a basic video. They just want to listen to music, not Surround Sound music. They just need to post photos on a Web site, not an interactive Flash presentation. And the Apple Macintosh and its associated software allow them to do all this.

The end result is the fun part of using a computer. And Macintosh surely makes it fun!

Apple Introduces the Innovative iTunes Music Store and Sets Off a Tornado of Imitators

There’s a line in Rob Reiner’s “The American President” when President Andrew Shepherd (Michael Douglas) takes to the press room podium after recognizing several political and personal realities. At one point he says of his political opponent, “Bob’s problem isn’t that he doesn’t get it. Bob’s problem is that he can’t sell it.”

In the case of the music industry, they don’t get it and they can’t sell it.

Sales of CDs have dropped off, and the Internet has allowed music lovers to type in a URL and download any song, or hundreds of songs, without paying a center. The music industry has cried “Foul!”, has gone to court, has threatened lawsuits, and more recently has served ISPs with subpoenas to find out who is downloading songs.

The music industry, and by that I mean the big music companies, simply fails to realize that the world has pressed on beyond the world of long-playing records (LPs), 8-track cassetttes and, yes, even CDs. The world has moved on to the digital age, and digital thinking. The availability of free data, in all forms, is something that will never be put back in the bottle. Anyone under 25 now using a computer thinks differently (no pun intended), and those younger than 25 will have even most vastly different ideas about the source and value of data. Heck, even 50 year-olds are starting to think differently.

So some forward-thinking people decided to come up with an on-line music site. They put together a Web site, obtained the rights to license music, and started taking orders. But they were just doing the same thing the music companies have been doing for decades, and then using the Web only to automate the money-taking process. The restrictions were the same–you’re either renting the music for a period of time, and paying a monthly fee to do so, or you were seriously limited in how you could hear the music, burn it to CDs or transfer it to anyone or anything else (like an iPod).

And then Steve Jobs started thinking about it. He figured it out: the Internet only makes the music easier to obtain. It doesn’t offer any other “lifestyle” advantages. What you would really have to do was change the was the music is licensed. That would be the sea-change.

And so he lobbied the Big 5 music companies for reasonable rights to their music. Invisible rights that music buyers would never even notice if they used the music according to common behaviors. Buy it, download it, play it from the computer, burn a couple of CDs, transfer it to your iPod. You’ll never bump into any restrictions with an Apple-downloaded song.

And yet other companies still don’t get it. They’ve come up with “competitive” Web sites selling music, but they’re loaded with all sorts of restrictions on the purchase, or just extend the “rental” concept.

Apple’s use of the Internet wasn’t the key. It’s the rights management. It’s always been about rights management, and finding the appropriate balance between allowing free use of purchased songs, and the reasonable need to pay the artists for their music.

“Bob Rumson is not the least bit interested in solving it. He is interested in two things and two things only: Making you afraid of it and telling you who’s to blame for it. That, ladies and gentlemen, is how you win elections.” Now that I think of it, that’s pretty much how the music industry is operating.

The sooner the music industry realizes that no one is ever going back to the “old time” thinking about obtaining music, the sooner they’ll begin collecting those 99 cents. Get on board, guys.