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The future of retail (Part II)

In my last blog post I listed a few observations about why some retailers are struggling and specifically how failure to react to changing consumer expectations and the arrival of new online competitors is probably terminal for some big brand name retailers.

But it’s not all doom and gloom and there are examples where specialist retailers have found higher ground where they can add discernable value and differentiate themselves from competitors, both online and offline.

While this blog post is focussed specifically around retail, the thematic arc is a common one in that significant structural change is unfolding across all industries and throughout broader society as we change and adapt to a new technology empowered age.

In round terms, some basic facts hold true.

  1. Offering mainstream value is a race to the bottom.
  2. Differentiation is key.
  3. Online is no longer a trivial adjunct to your core offline operations.

Amid a broad collapse in specialist retail, the Apple Store shines as a prominent example of how vibrant and successful post-web retail can be in 2013.

Apple Store Facts

  • The average store attracts 20,000 visitors a week and generates USD $49 million in sales per annum.
  • In terms of sales per square foot in the US, Apple Stores are number one with over $6,000 per square foot, twice that of the company in second place, Tiffany & Co.
  • Apple’s 400+ retail stores collectively generate almost $20Bn of revenue with year on year growth last year of 38%.
  • Apple stores deliver profit margins of 26%.

Instinctively, you could be forgiven for justifying the success of Apple stores on the grounds that Apple’s products are among the most sought after gadgets and devices on the planet.

While that’s certainly a factor there are weighty counterarguments; you can freely purchase Apple products in many other retail outlets (and often at discounted prices because Apple’s own stores rarely if ever discount) plus, if it was just about demand for Apple products, we’d have seen swathes of independent retailers opening stores dedicated to selling Apple kit in competition to Apple’s own stores.

So, alongside cool products and brand cachet, there have to be other factors at play, something in the mechanics of an Apple Store that makes them such a successful retailer.

Reverse Webification

Having given this some thought, my theory is that Apple’s retail stores have much more in common with a great online shopping experience than great physical retail shopping experience.

  • The store designs and layouts are crisp, clean, uncluttered and easy to navigate just like a great website. They’re also consistent worldwide.
  • Throughout each store there’s extensive deployment of the same high quality colour graphics you see on Apple’s website.
  • Each store has a prominent Genius Bar, just like a Support tab on a website, which dresses up the conventionally grotty functions of problem solving and complaint resolution as premium services.
  • Regardless of how busy the stores can get there are no visible checkouts or associated queues to put you off making a purchase.
  • For low value items you can now self-serve with their iPhone app, scan your product, pay with your phone and just walk out with zero interaction with Apple staff, like a physical equivalent of the e-commerce One-Click purchase.
  • The stores deploy custom designed iPads next to each device with in-store renditions of their web based product specification pages, helping the casual browser.

While there are other factors such as brand appeal, the in-store training, the restricted range of products and what appear to be very well trained staff – the broad point is that where it matters, the design of Apple’s stores borrow more from an online shopping experience than conventional retail design.

And it’s no co-incidence that the first Apple Store opened in 2001, long after we had fallen in love with online shopping. So, while an established retailer will have understandably approached the design of their online presence such that it echoed their existing physical retail experience, Apple has done it entirely the other way around.

Which makes a good deal of sense because rather than trying to fight against the trend to shopping online, Apple has tried to capture the best aspects of online shopping and recreate them in a physical retail context. Whether you shop in an Apple Store, or in Apple’s online web store – the main touch points of both experiences are consistent where it matters.

I also think it’s reasonable to logically extend this reverse webification thinking not only to other specialty retail categories, but also other industry categories altogether.

If your website bears little resemblance to the way your organization operates and services your customers – or vice-versa – I’m afraid you won’ t be permitted to use the “We just can’t compete with online competitors’ excuse in five years time when you’re winding up.

If Apple’s success in retail tells us anything, it’s that online and offline can be one the same thing.

 

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2 comments

Richard Adams
30 January 2013 #

Many thanks again Gary. Spot on in my opinion. We’ve watched Apple buck trends left right and centre. I’d like to see those retail figures compared to independent UK apple dealers such as iStore and others.

Apple have got it right on do many levels and we as an accountancy firm have been quietly lifting ideas from them. Most of which will be implemented in the coming year.

Retail and B2B services are changing rapidly. The environments in which operated in even 5 years ago outdated.

Look forward to a Part 3?

MC Carter
1 February 2013 #

If there’s a core value that shines brightly out of everything Apple does, it’s design. Great post Gary. Their retail stores again show how stepping back and reinventing something–and NOT looking at what ‘the competition’ are doing–allows ‘a brand new way’ to be created, not just an incrementally better way.

In the accounting and bookkeeping industry, those firms who have leaders who ‘get’ design (and therefore invest in it), shine like beacons amidst the sea of mediocrity in this aspect of business. Your Xero Partner of the Year in Australia, Growthwise, are great examples of this.

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