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Thursday, January 05, 2012, 09:41 am PT (12:41 pm ET)

The next ten years of Apple Retail


Building a retail strategy

Less than two years later, Jobs recruited Millard 'Mickey' Drexler, CEO of the Gap and later J. Crew, to Apple's board, as Apple began work to assemble its own team of retail, development, and real estate experts pursuant to building out its own retail stores. Apple subsequently hired Ron Johnson, a vice president of merchandising at Target, as its senior vice president of retail operations; George Blankenship from the Gap as its vice president of real estate; Kathie Calcidise as its vice president of retail operations; and Sony’s Allen Moyer as its vice president of development.

Between 1997 and 2000, Apple slashed the number of third party retail outlets that were selling Macs from 20,000 to 11,000. In 1998, Apple's then chief of operations Tim Cook explained that the company needed to “cut some channel partners that may not be providing the buying experience [Apple expects]. We're not happy with everybody."

Facing the dotcom crash and the economic downturn that affected most retailers in 2000, Apple decided to pulled its products out of Sears, Best Buy, Circuit City, Computer City and Office Max entirely to focus all of its retail efforts with its CompUSA "stores with a store." Apple later returned to Sears, only to pull out again in 2001. Apple also ended its shaky retail partnership with Circuit City in 2001.

Apple begins opening retail stores

In May of 2001, Apple began opening its first retail stores, rejecting the trend toward efficient big box retail and instead working with architects and interior designers to craft smaller boutique stores featuring flourishes including hardwood floors, glass stairways, presentation theaters and a Genius Bar providing technical support. The new stores also featured lots of usable Macs and iPods customers could try out in the store.

Apple's success in retail wasn't universally anticipated. The May 2001 MacWorld article "Apple Stores: Sale of the Century?" quoted consultant David Goldstein of Channel Marketing Corp. as saying of Apple, "it makes absolutely no sense whatsoever for them to open retail stores."

Goldstein complained that Apple's retail strategy wasn't going to work because consumers 'haven't indicated that they're having trouble finding outlets that sell Macs,' stating that "It's another case of Apple being Jobs driven and not consumer driven."

Goldstein also wrote his own article entitled, "Sorry, Steve: Here's Why Apple Stores Won't Work," where he said, "I give them two years before they're turning out the lights on a very painful and expensive mistake." TheStreet.com complained, "It's desperation time in Cupertino, Calif."

Apple was entering retail just as Gateway was abandoning its failed efforts to transition from a mail-order company to a retail chain. The most successful PC makers were Dell and HP, both of which relied up on third party retailers and direct sales, rather than trying to sell their products in their own stores. Goldstein's criticism of Apple's retail efforts were not unique.

Apple's stores also generated some controversy by shifting the company's attention from its old dealer network to the new retail operations that Apple maintained full control over and could change at will in reaction to what worked and what didn't.

Apple Retail


On page 3 of 3: Key to Apple's survival, future of Apple Retail