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Is Apple Changing Its Retail Store Strategy?

by: Mark Reschke | Jun 13, 2014
Apple_store_portland
Apple’s Newest Retail Store in Portland, Oregon | View Gallery >

Apple's new Senior Vice President of Retail and Operations, Angela Ahrendts, recently attended the opening of Apple's new London store. Ahrendts was in Omotesando, Japan to unveil another large-scale, two floor Apple retail storefront yesterday. While much of the media focus has been on Ahrendts herself — and the amazing retail glass architectural wonders Apple continues to erect — it is Apple’s direction for retail outlets that merits investigation.  

On the international stage Apple is loudly promoting its large, standalone retail stores. However, in the U.S., Apple is very quietly moving into ever larger spaces.

In 2001, Steve Jobs invited the media to Apple's first-ever retail store in Tysons Corner Center mall in Virginia. The first Apple store, and subsequent retail locations that followed, were well lit, spacious, and had plenty of room to roam. At the time Apple’s consumer market share was small, corporate customers were nearly non-existent, and the iPod had yet to be announced.

In 2003, 13.9 million people visited an Apple store. Today, Apple has 425 retail locations, and sees over 425 million customers annually. The original sizes of Apple’s mall stores are no longer able to handle the ever-growing traffic the company creates with its constant flow of never ending products. Apple’s mall storefronts also struggle mightily in being able to adequately service customers due to the massive amount of foot traffic. The majority of Apple’s retail stores no longer represent the open, friendly vision Jobs brought to market. Rather, the stores are now cramped, loud and physically difficult to navigate. 

Apple’s waiting for long-term mall location leases to expire isn’t a strategy Apple can control or leverage as they grow. The result is Apple retail is moving in a new direction, building more of its own stand-alone storefronts. The pursuit of more square footage moves Apple back to Jobs' original vision of customer service and open spaces. The stores are now facilities which people can utilize to “meet up” and share a coffee in the outside seating areas, or get one-on-one training in an area where one can actually hear the trainer.

Nearly everyone thought Jobs was crazy for building retail stores during a time of Gateway’s failed retail experiment. The future (everyone thought) was Dell’s model of ordering customized-made computers online. Sony also tried the retail space, but continued to stumble with its massive Sony Metreon store in San Francisco, leading the way to financial disaster. Jobs’ vision for retail represented a huge risk, but today Best Buy Mobile, Sony and Microsoft are all copying Apple — opening up stores in suburban malls. Apple isn’t fond of others copying their vision, and with the number of Apple wanna-be's popping up along side their retail spaces in local malls, Apple is once again reinventing itself, just as did when it first jumped into retail in 2001.

Apple’s latest evidence it is moving away from mall locations is its all-new Portland, OR location, which opened just two weeks ago. The store is 5x the size of  the previous mall store it replaced, and the foot traffic has been staggering. Many more mall located retail stores are likely to close in the coming years, replaced by Apple's own pantheon storefronts in nearby locations. Skeptics do not see this taking place on a wide scale. However, with an all new iWatch device likely to launch this fall, the possibility of an Apple UHD (4K) TV solution, and the recent acquisition of Beats Electronics, Apple absolutely requires significantly larger stores for future growth. Current retail mall stores that opened — and have not expanded since their opening — are having difficulty today handling the foot traffic. Imagine how poorly these legacy stores will handle foot traffic if just one of the fore mentioned products were announced.

Apple, once again, is changing the game in retail, and it appears Angela Ahrendts is more than onboard with the new direction. The march into larger retail spaces will continue, while Apple quietly continues shutting down its mall locations in order to meet retail needs for the next decade.

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2 Comments

  1. Mike ~ June 13, 2014 13:25

    Apple needs to look closer at it's retail employees who are leaving in record numbers, they are burned out, underpaid and being forced to have open availability with their work schedules. Apple claims that its employes are its greatest assets but doesn't treat them that way. Something better change fast, or pretty soon your Genius Bar experience is going to be the same experience you get a Best Buy. #
  2. Todd ~ June 13, 2014 21:32

    I'm from Portland, OR and just the other day I noticed at Washington Square Mall (suburban mall in Portland) right across the hall from the existing Apple store is a store front under renovation at least double the size of the current Apple store. I wouldn't be surprised if apple is simply moving to a bigger space in this case. #

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