How Apple’s store strategy beat the odds
When Apple Computer Inc. opened its first Apple retail store in 2001 in a shopping mall in McLean, Va., critics saw the initiative as an expensive, dubious gamble. But as Apple prepares to take the wraps off its latest, most ambitious store yet — on New York’s Fifth Avenue, opposite the Plaza Hotel and Bergdorf Goodman — there are few doubters left about Chief Executive Steve Jobs’s retail strategy.
On Friday evening, five years after opening its first store, Apple will unlock the doors to a subterranean store that sprawls beneath the plaza in front of the General Motors Building, just across from Central Park. In keeping with Jobs’s penchant for eye-catching designs, all that will be visible from the street is the entrance, surrounded by a roughly three-story-high glass cube jutting from the ground, reminiscent of I.M. Pei’s glass pyramid at the entrance to the Louvre museum in Paris.
The store is located in one of the most highly trafficked tourist and retail corridors in the world. If it is successful, it will enhance Apple’s visibility as the company attempts to grab a bigger slice of the computer and electronics industries. Charlie Wolf, an analyst at Needham & Co., says an Apple executive told him the store will be open for business 24 hours a day, a first for the company.
“It really is the center of gravity of Fifth Avenue,” says Robert Futterman, Apple’s real estate broker, of the new store location. Apple declined to discuss details of the new store ahead of its official unveiling later this week.
Apple’s stores are an unlikely success story in an area littered with failures — and another vindication of Jobs’s marketing savvy. In April 2004, computer maker Gateway Inc. shuttered a chain of 188 company-run retail stores after an aggressive expansion, eliminating 2,500 retail jobs. More recently, hand-held device maker Palm Inc. has attempted to mimic Apple’s success, opening its own gadget shops in airports and shopping malls.
Apple started its line of stores in the first place because it believed other retailers weren’t doing an effective job of showcasing its Macintosh computers. Mac displays were often buried inside other major retail stores, surrounded by PCs running Microsoft Corp.’s far more common Windows operating system. Apple hired a seasoned retail executive, Ron Johnson, formerly with Target Corp., to craft its retail strategy.
Apple stores have gained a strong following among young consumers, who flock to the stores to check their email using the free Internet connections and to snap photos with the digital cameras on display.
William Mon, a student at Rutgers University, New Brunswick, N.J., who will graduate later this week, says he tries to visit his local Apple store whenever the company introduces new iPods and other products. Mon, 21 years old, says that by using large open tables to display its products, rather than cluttering them on store shelves, Apple makes it easier for visitors to play with them.
“It’s not like a regular store,” he says.