When assessing how the Apple store has changed over the years, there have been three distinct phases:
Lifestyle Experience. In the beginning, Apple stores were locations to touch and see the Apple lifestyle experience. Since Apple only sold a few Mac models, the stores were designed around five core tenets: "Home" and "Pro" (containing Apple's products), solutions (music, movies, photos, and kids), accessories, software, and the Genius Bar. Another way of thinking about Apple stores was that they let people see what can be done with a Mac.
New Product Experience. As Apple's product line gradually expanded, the Apple Store turned into the best way for consumers to play with new products. Between 2010 and 2015, Apple’s installed base grew by 530 million people.
Customer Service / Product Support / Education. Starting around the mid-2010s, Apple stores embraced more of a customer service / product support feel as the number of users and devices continued to shoot higher. Between 2015 and 2020, Apple’s installed base grew by another 400 million people.
Head of Retail Succession
As head of Apple Retail from 2014 to 2019, Angela Ahrendts took over an operation that wasn’t too far away from collapse. The division had been leaderless for two years, and stores were feeling major strain under Apple’s ecosystem growth. Complaints of stores being too chaotic grew louder by the month. Average store traffic was declining. Things got so bad, many began to suggest Apple drop its unique retail thinking and embrace traditional ideas like cash registers and queues in an attempt to reduce the store craziness. After quickly admitting it had made a mistake hiring John Browett to lead retail, Apple went back to the drawing board and eventually landed on Ahrendts, a rising executive in the retail space that had transformed Burberry, to lead its retail stores.
Judging from reaction to her surprise Apple departure announced in early 2019, Ahrendts’ five-year tenure at Apple was massively misunderstood. One of her not-so-publicized achievements was modernizing Apple’s retail backend so that Apple’s website, online store, and in-store experience weren’t disconnected.
A more public objective for Ahrendts was managing a massive Apple store remodeling plan overseen by Jony Ive and Apple’s design team in addition to Foster + Partners. The store redesign included Apple moving away from its smaller store footprints, embracing more open spaces centered around “forums and “video walls,” and expanding the Genius Bar concept to handle more customers. Another goal for Ahrendts was defining Apple’s retail culture.
By choosing Deirdre O’Brien to be Ahrendts’ successor, Apple gave a pretty clear signal that it wanted to keep employee culture and morale at the center of its near-term retail strategy. Instead of new objectives in terms of the backend or store expansion plans, forward changes to retail operations would be more focused. Of course, the pandemic changed those plans in a very big way.
Store of the Future
It’s easy to say that brick-and-mortar retailers need to rethink the store concept and embrace experiences to compete with e-commerce. In practice, such a strategy is incredibly difficult, and few retailers will be able to pull it off. Microsoft thought adding Xbox consoles would turn its stores into experience centers. It didn’t work. The company made the right decision to get out of retail – it just took a pandemic for the company to reach that decision.
Disney’s recent announcement that it will close 20% of its stores is the latest sign that turning stores into experience centers may make for a good presentation but be extremely difficult to pull off. Disney stores aren’t turned into experience centers by just having some TVs play Disney+ while Mickey and Minnie stroll around the store. The company is likely coming to the realization that its customers prefer consuming Disney stories in the comfort of their own home rather than inside a store at the mall. For those who want Disney stories outside the home, vacations to Disney theme parks are in order. Similarly, Nike knows its experiences are going to be found not in mall stores, but with people using their products at home, at gyms, and outdoors.
Where does this leave Apple and its long-term strategy for brick-and-mortar stores? When assessing Apple’s current ecosystem and where the company needs to go in the future, Apple stores need to play three vital roles:
Brand Embassies. With the Apple installed base now exceeding 1 billion users, 87% of the world’s population doesn’t use any Apple products. Apple stores need to serve as the initial point of contact with the Apple brand for these 87% of people. Having control over someone’s first impression with the Apple brand plays a key role in that person’s likelihood of entering the ecosystem. There are two ways for Apple to reach the 87% of people who don’t own any Apple products – go to them by opening stores in India, China, Brazil, Africa, etc., or have them come to Apple as they visit the world’s largest cities for business and pleasure. As we will discuss shortly, the latter will likely be the option Apple chooses. Upward social mobility will be a defining social-economic trend for decades to come.
Ecosystem Support. Given how everyone is at a different stage when it comes to involvement with the Apple ecosystem, there is a strong need for Apple stores to represent different things to different people. After leaving Apple, Ahrendts commented that roughly a third of Apple store visitors were there to buy products, a third were there to get service for their Apple products, and a third were there to learn about the latest gadgets and attend Today at Apple sessions. Focusing Apple stores on just one of those tasks won’t work.
Distribution Hubs. It is essential that Apple remain a realist with the way shopping habits are evolving. Convenience determines where retail is headed. Using Apple stores as distribution hubs for same day or 2-hour delivery will prove valuable. Ordering a product online from Apple’s website and using an app to track the product being brought to you from the local Apple store via courier is up there with using Uber or Lyft for the first time. The experience makes you look at retail stores differently.
Retail Store Count
As shown in the following exhibit, Apple’s retail store count has plateaued at 510 stores despite continued growth in the installed base. Instead of creating large-scale store expansion plans involving dozens of new stores, Apple has been opening a few stores in a handful of the world’s top cities. The strategy was driven by Ahrendts’ bet on cities not countries, which came from her roots in high-end fashion.
Exhibit 2: Apple Retail Store Count
