Apple Retail Feels the Pinch
What if Apple Computer opened a store and nobody came?
Thats a question Ive been asking myself as the Mac maker heads into its first holiday shopping season as a bona fide shopkeeper in the classic -- not the virtual -- mold.
Apples fledgling chain of brick-and-mortar retail outlets (which CEO Steve Jobs unwrapped with signature flourish back in May after years of speculation in the Mac community) remains on track to total 25 by years end.
But considering current, baleful economic and geopolitical conditions, how close can these boutiques come to fulfilling the lofty goals Jobs & Co. sketched out for them last spring?
Back then, Apple came close to characterizing the new outlets as the magic bullet that could tilt the wildly skewed balance of platform power back in Apples direction.
As it flung open the doors on the first shops in McLean, Va., and Glendale, Calif., Apple also took the wraps off a marketing slogan: "5 down, 95 to go," denoting the current Mac minority and the companys bullish aspirations.
Jobs told journalists he hoped a Mac retail presence in upscale shopping malls would turn heads among that holdout majority: "We want to convince the other 95 percent that Apple offers good products," he said. "If only five of 95 people in this group become Mac users, well double our market share."
That was then; this is now. For reasons Apple couldnt have predicted while framing this scheme, it would be hard to think of a less fortunate moment than 2001 to launch a major retail initiative intended to move expensive technology to mall visitors.
Consumer confidence has dropped like a rock in recent months; judging from the sales performance of the nations PC manufacturers, public appetite for glitzy computing kit has been among the most notable casualties of the recessionary slump.
But thats only the beginning of Apples challenges. If customers are singularly disinclined to buy PCs this season, theyre doubly averse to flocking to the kinds of shopping emporia where Apple has established a beachhead.
Retail zones across the company have been sorely challenged by public apprehension in the wake of Septembers terror attacks and the lasting fears over bioterrorism and other ghastly scenarios.
Upshot of this one-two punch: Foot traffic in the nations shopping centers is way, way down as customers scale back on their purchases in tight times and turn to the relative safety of catalog shopping and Internet transactions.
No lesser technology light than Microsoft recently had to face the same grim facts when it pulled the plug on its own tiny retail effort: MicrosoftSF, a shop the software titan opened in Sonys Metreon when the fancy San Francisco technology mall and amusement complex went live in 1999. Its not just Microsoft, either; San Francisco Chronicle reporter David Lazarus notes that MicrosoftSF is just the latest in a recent spate of Metreon closures.
If there ever was a holiday season for high-ticket, high-tech impulse shopping, this is most assuredly not it.
This observation isnt rocket science, and the savvy people running Apple have assuredly come to the same conclusion. When he announced the companys results for fiscal Q4 in October, Apple CFO Fred Anderson sounded a cautionary note about the stores performance this season. "We expect it to result in a small loss for the stores rather than the break-even wed expected," Anderson admitted. If its only a small loss, Apple will be getting off easy.
So should Apple fold up its tent and go home? Not at all; the company and its boosters have to recalibrate their expectations for now.
There may be a dearth of well-heeled Windows users ready to part with a few thousand dollars after popping into the new Apple store en route to Nordstrom or Restoration Hardware. However, theres still a wealth of platform partisans anxious for a local Mac showcase where they can check out the latest gear, get answers to their technical questions -- and maybe even drag along their Windows-using friends and family. For a user base with a serious stake in demonstrating its cohesion and viability, they also act as a valuable focal point for platform pride.
The outlets may not be profit centers this year, but theyre still manna to Mac boosters frustrated by a local dearth of dealers.
Meanwhile, Apple sales may well benefit from consumers decision to avoid the malls and do their holiday shopping online. Long before it dipped its toe into the intricacies of retail real estate, Apples e-commerce site led the hardware industry; in recent quarters, its driven close to half the companys total sales.
During this difficult season, Apples brick-and-mortar loss may prove to be Apples online gain. The "other 95 percent" may have to wait until next year, but at least the current 5 percent will be well-served by this two-track effort.