The New Year is, of course, an arbitrary milestone, yet a popular one for analyzing the past year and then looking ahead. So…here goes my take on 2005 and what’s ahead for 2006.
What can you say about a retail operation that has no competition, does no advertising, rarely has sale prices, and has doubled its revenue in each of the past two years? Apple opened even more stores (38) during the year, and the Retail segment’s $2.35 billion in sales makes it #90 among the nation’s other retailers (behind the Home Shopping Network). The store staff was boosted by 1,500 during the year, profit zoomed by 290%, and visitor traffic doubled, certainly aided by the huge success of the iPod.
But the two biggest changes during 2005 were more subtle. First, the stores reshuffled their product lay-outs to accommodate the increased interest in iPods: the front-most ‘home’ and ‘pro’ sections were relocated to the left side, and the ‘photo’ and ‘movie’ sections were merged into an ‘iLife’ section. On the right side of the store, two new ‘iPod’ sections debuted. And all around the store, each display computer is accompanied by a connected iPod. At most stores there are now about 50% more iPods than computers available for handling by customers.
There have been personnel changes as well. Apple is in the process of staffing Creatives at virtually all its stores to meet the growing customer expectation of help with applications. They have beefed up administrative support of the Genus Bars and instituted the new Concierge reservation system to speed up service. The Keyholder position disappeared, and a new Sr. Assistant Manager position was created to better align the positions with their duties.
Along the way Apple announced it will open 35 to 40 new store between now and Oct. 2006. The company began recruiting personnel to staff a store in a brand-new country–Italy. It will be the first continental European store when it opens this year, and the first new country added to Apple’s chain since Yorkdale (Canada) in May 2005.
At the same time, capital expenditures for the retail segment hit a new quarterly high of $49 million, and Apple committed to $210 million in capital expenditures for fiscal 2006, a 59% increase from 2005. Lease commitments now total a whooping $606 million for the retail store properties.
The mini-stores received a make-over during the year, swapping the bright-white epoxy floors for gray Italian stone, and installing a center display counter. Several stores received a Studio bar, in some cases in place of their Internet café. The front windows continued to be interesting and cutting-edge, including the library window that included some pretty interesting titles.
I should note the year’s continuing dissatisfaction among many Apple resellers over their relationship with the company. A civil lawsuit against Apple by one reseller is continuing towards a jury trial in a Santa Clara County (Calif.) Superior Court. I also acknowledge the information I’ve received over the past year on a wide range of personnel issues at the stores. Like any retail company, issues arise of hiring, training, pay, benefits and supervision. I don’t deny them, but find they are too sensitive and too complex to cover on a Web site like mine.
Now for the year ahead… Apple will be opening some significant stores during 2005, including one in Rome and a blockbuster in Manhattan (NYC). There are rumblings that other countries will receive their first Apple store, including Germany and Australia. Oh, and we’ll always have Paris. Back home, Apple has been focusing on existing store territories for new stores, but perhaps Apple will finally target some new regions, including a huge swath of the south, including Albuquerque, Boise and the long-planned Spanish Fort (Ala.) store.
What ever happened to the mini-store concept? It withered during 2005 and now seems to be a dormant project, including plans for unconventional locations such as airports and universities. But don’t be discouraged–Apple may yank this concept out, polish it up and turn it into specialty stores: iPod only?
As the number of stores nears 175, issues of recruiting, hiring and training will continue to become a larger part of the new store roll-out. Apple has standardized and streamlined the architecture and construction process, and it works well for virtually every type of space. But as the stores become more far-flung and international, and the staff becomes larger, it will become more difficult to keep policies and procedures in force, and keep the staff trained on new products. Even now there are 512 retail job openings posted on Apple’s Web site, indicating the scope of staffing 135 stores. It’s not an impossible challenge, but one that Apple’s growing retail operation will have to overcome as they move forward.
The iPod and the Genius Bar will continue to steer much of the retail store efforts: store traffic will increase from both those making purchases and those needing help. There will be a need to differentiate visitors into iPod buyers (pluck’em off the shelf and go), computer buyers (take the time to sell them right), and those needing help (Genius Bar here, Studio over there). The Concierge reservation system has only marginally improved the wait for Genius Bar service, and it’s only going to get worse as more Apple products are purchased and Apple’s market shares increases.
Apple says that “over 45%” of Macintosh computer buyers at the stores are new-to-Macintosh. As you can imagine, this increasing number will put enormous additional pressure on the Mac Genius and Creative personnel as the Apple becomes more popular from non-Mac users. These visitors will require more hand-holding than Mac-friendly buyers, since they’re unaccustomed to Apple’s hardware and software, or the capabilities of the combination. Does this means additional staff or the creation of a special “Switcher” bar? It’s not clear, but the last thing you want is a bunch of Windows switchers elbowing out Mac enthusiasts at the Genius Bar every Saturday, asking how to right-click.
Finally, the next year could set the stage for future store development–will Apple take the stores to 250, will they start a more general roll-out of stores to Europe, and will we ever see company stores compete with established Apple Centres in South America or Europe? The answer to the latter question alone will be worth the price of closely tracking Apple’s retail operation through 2005.
Also see my chart that maps out the issues and questions that are handled at a typical Genius Bar.
