Apple stores pin hopes on ‘genius' staff
By SIMON AVERY
Wednesday, May 18, 2005 Updated at 9:09 PM EDT
From Thursday's Globe and Mail
Apple Computer Inc. hopes to shake up retailing in Canada in the same way it has changed the way consumers listen to music. Its secret weapon? “Genius” sales clerks, which it will have on hand when it opens its first Canadian store on Saturday in Toronto.
The Cupertino, Calif.-based company launched its retail concept four years ago in the United States, believing that the only way to attract more computer users away from Microsoft Corp.'s ubiquitous Windows software to Apple's niche line of products was to create showcase venues where it could control every aspect of the shopping experience.
There are now 100 Apple stores in the United States. The layouts are simple, stylish and expansive and customers of all experience levels can take their queries to “the Genius Bar” where specially trained staff provide answers and solve problems at no charge.
The strategy has already proved to be a big success in the United States, where a higher level of customer service has helped drive sales through the stores. But it has also attracted the ire of resellers of Apple products, who now face a new form of competition and rely on commissioned sales staff who don't have the same amount of time to devote to questions and tips.
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The stores are about more than just selling products, they exist to “drive brand equity,” said Asad Amin, an account manager with NPD Canada, who includes Apple among his clients. With an advice counter, free public Internet access and an up-market setting, the stores have become both knowledge hub and social environment and help drive the “hype-factor” around Apple products, he said.
Company executives declined to be interviewed for this story, but when Apple opened its first two stores in May, 2001, Steve Jobs, co-founder and chief executive officer of Apple, explained the importance of the move this way: “Rather than just hear about megahertz and megabytes, customers can now learn and experience the things they can actually do with a computer, like make movies, burn custom music CDs, and publish their digital photos on a personal website.”
Apple stores look to have been a huge success for the company so far, with sales more than doubling to $1.1-billion (U.S.) in the first half of its fiscal year ended March 26, compared with a year earlier. During that period, Apple increased the number of stores to 103 from 78. Three are in Japan, two in Britain and the remainder across the United States.
But some of the independently owned stores that have traditionally sold Apple's products now feel they are being undercut. More than a few of Apple resellers in the Toronto market are watching the launch this weekend with some trepidation.
“It is very possible for some resellers who have put a lot of money [into inventory] and overextended themselves ... that some businesses may go out in the next year or so,” said Nick Siriopoulos, owner of ClickOn Mac Solutions, a reseller of Apple products in Toronto.
Mr. Siriopoulos said he could see his sales fall almost 10 per cent when Apple opens its store on the other side of the city at Yorkdale Shopping Centre, but he's hoping he can eventually recoup those sales in the form of additional servicing and the sale of peripherals to new customers won over to the Apple line at the company's outlet.
“It makes the competition a bit bigger,” added James Carpenter, retail manager at Computer Systems Centre, which sells Apple products in downtown Toronto. He said he expects to lose some business on smaller purchases, such as iMacs and iPods, but customers buying bigger items such as G5 desktops and large monitors will not be drawn away from his store. Where he can't compete, he admits, is providing free seminars and advice to the public.
“My guys pay their rent or mortgages with their next sale. [Apple stores] have bouncy, young, very enthusiastic Apple evangelists who have the time ... they've just got nothing but time in there,” he said.
Mr. Carpenter said he will have to learn from the Apple outlet in Toronto. But in the United States, numerous vendor partners blame the company for hurting their operations and several former resellers are suing Apple, accusing the company of interfering with their business and giving its own stores preferential treatment.
One challenge for Apple will be managing the new store in a way that doesn't cannibalize sales from existing vendors. The company will have to learn to balance the two lines of businesses, similar to how Sony Corp. has done with its stores, and that means not underselling vendors and not giving Apple stores a first-time advantage on new products, Mr. Carpenter said.
Apple denies that its own stores are hurting the businesses of its channel partners. A “substantial portion” of the company's retail sales are incremental to overall sales, it said in a financial filing.
