Lessons from Apple's Retail Success
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Among other outstanding merits, Apple (NASDAQ: AAPL) has revolutionized the retail business. According to data from Asymco, the Cupertino giant is not only the company with higher sales per square foot in the retail space but also has the highest growth rate in the industry, and by a wide margin.
Apple has two times the efficiency of Tiffany (NYSE: TIF), an extraordinary accomplishment considering that Tiffany sells high-end jewelry, which means high prices for small products. When compared to other electronics retailers like GameStop (NYSE: GME) and Best Buy (NYSE: BBY), the difference is even more extraordinary in both efficiency and growth rates. Both electronics retailers are showing sluggish sales growth, particularly Best Buy, which is moving in the wrong direction lately.
The world of retail is notoriously competitive, with gigantic companies like Wal-Mart permanently incorporating new products into their wide distribution network at very low prices. Amazon has been responsible for deep troubles and even the disappearance of many brick and mortar retailers that were unable to compete with Amazon´s efficient business model and aggressively competitive practices.
Apple opened its first retail store in 2001 and analysts were quite pessimistic about the company's new venture back them. Many companies have failed when moving outside their expertise area into businesses like retail, which is full of competition and demands a high level of specific knowledge.
Apple products have been enormously popular, and that obviously helps at explaining the success of the company's retail stores, but Apple still sales its products through different channels, so customers could choose other alternatives if they liked the products and not the stores. This, however, is clearly not the case as the numbers so compellingly show.
There are many aspects that make Apple stores unique: their design, internal distribution and overall esthetics were obsessions for Steve Jobs, and customer service and product availability are also excellent. But Apple stores are not just about buying a product; they provide an integral experience for clients.
Frontline employees play a critical role at helping customers in a very dynamic and personal way; they may show you a Disney movie on an iPad if you are in the store with your kid, and recommend some cool headphones if you are wearing a rock band T-shirt. They are ethnically diverse and modern, in a good representation of the brand's culture.
Many other retailers have taken the opposite road in the last years, lowering headcount and reducing interaction among customers and employees as much as possible. That may not be such a bad idea when your employees feel upset about too many questions or customers who are just looking at the products without planning any purchase in particular. When store employees don't help at creating a positive experience, fewer employees may be smart idea.
On the other hand, people who work at Apple stores allow customers to play with the products freely without annoying bad looks or "may I help you" comments. They even recommend ways of enjoying the products as much as possible, even if you explicitly state that you are not planning any purchase in particular.
Apple stores provide an extraordinary experience for customers; the company operates under a different strategy than most other retailers and its results have been notoriously better. Innovation is not only about technology or artistic design; it can also be about something so basic, yet important, like a good customer experience.
Motley Fool newsletter services recommend Amazon.com, Apple, and Wal-Mart Stores. The Motley Fool owns shares of Apple, Amazon.com, Best Buy, GameStop, and Wal-Mart Stores. acardenal owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
