Apple's Counter Attack

Given the typical computer retailer's disdain for Macs, Steve Jobs can't open his string of upscale stores quickly enough

By Charles Haddad

Last week, I saw firsthand why Apple needs its own stores. A good friend asked me to accompany him to CompUSA to pick out a new iMac. We arrived as the store opened for the day, and found the place empty except for idle salespeople.

Every CompUSA is supposed to have a special section dedicated to Macs. Could have fooled me. Standing in the front of this store, I couldn't figure out where it was. My friend and I wandered through the maze of aisles, finally stumbling on the Mac area in a back corner. It was cluttered, cramped, and unattractive, with few signs or price listings to guide us. Sales help? We had to wander around to find a Mac salesman, and, when we finally did, I wondered why we had bothered. He knew little about the machines except for the prices. Nor did he show much interest in making a sale.


  If I were that guy, I was thinking, I would try to engage us. I'd ask questions: "How do you use your Mac? Do you have kids?" The answers would have helped determine the appropriate configuration for my friend. Instead, the salesman stared at us blankly, apparently waiting for us to name a machine. No wonder my pal had insisted I accompany him. He needed me to fill in the blanks and direct him to the right machine.

What happened to us has got to be Apple's worst nightmare. Who'd want to buy a Mac after an experience like ours? Indeed, I'd wager most stores end up driving away potential sales, which explains why one-third of all Macs are sold through Apple's online store. The company isn't offering any great discounts -- people are just fed up with buying, or trying to buy, Macs in places like CompUSA.


  Now Jobs & Co. are going into high-end retailing, starting this summer. Not that Apple's Web-based stores pose any real threat to CompUSA. Nor is Jobs' strategy to copy Gateway's foundering effort to build a competing distribution network. That strategy has failed because Gateway seriously underestimated the expense and difficulty involved in running hundreds of stores nationwide. The company's inventory and costs soared out of control, especially as the demand for PCs weakened over the past year. Now Gateway is closing 40 outlets in a desperate drive to control costs.

Apple outlets are planned for a handful of places near the company's core demographics of the affluent and design-conscious. That means in the heart of big cities, near universities, and in upscale malls. The first store is expected to open May 19 in the affluent Virginia suburb of Tysons Corner outside Washington, D.C. Other expected locations are in the SoHo district of Manhattan, on University Avenue in Palo Alto near California's Stanford University, and on Michigan Avenue in the Chicago Loop.

These stores will be more about presentation of Apple products -- long an obsession of Jobs -- and less about moving computers off the shelves. Think of Sony and Nike's glitzy stores in upscale malls. You like to look. In fact, Jobs has already hired one of the architects who designed Sony's store in the convention district of downtown San Francisco.


  Actually, Sony's stores are more like giant demo rooms than retail outlets. And the same will be true for Apple's new venues. There won't be a lot of inventory. What shoppers will find are demonstrations of Jobs' concept of the Mac as "the hub of the digital lifestyle." We can dicker about what that means but the bottom line is this: Every store will display the latest in Apple technology, including iTunes, OS X, and iMovies. Visitors, guided by company-trained reps, will get hands-on demonstrations.

It's all part of an effort to raise the visibility of Macs and Apple technology. Jobs wants to show the world that Macs aren't fading or irrelevant but a vibrant and very real alternative to PCs. Apple's stores will be everything the big chain outlets are not.

The strategy is not without risk, especially in a weakening economy (See BusinessWeek, 5/21/01, for a different take on the store strategy, "Sorry, Steve: Here's Why Apple Stores Won't Work"). Jobs has to be careful not to spend too much on just making the stores look great. And these outlets alone can't serve as bulwarks against the rising PC hegemony. But, if they introduce a new audience to the pleasure of Macs, they will have succeeded.

Haddad, Atlanta-based correspondent for BusinessWeek, is a long-time Apple Computer buff. Follow his weekly Byte of the Apple column, only on BW Online

Edited by Thane Peterson

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