Apple Stores

CASE ANALYSIS

Submitted By:

Abhinav Sahani-04
Ankita Koshta-06
Meghna Chauhan-37
Mohit Manekar-35
Nilesh Agarwal-41
5 C Analysis:
Company:

Apple Computers was founded in 1976 by Steve Jobs and Steve Wozniak. The brand was
based on constant innovation, design, and brand image and product integration. Its
mantra was Think Different. To leverage their value proposition, it opened Apple Stores
with the intention to engage consumers in an active exploration of their digital needs. They
had opened 28 such stores in US by 2001. The topline for the year 2001 was $ 5363 million
but reported a loss of $25 million. Apple aimed at creating a digital hub where consumers
could control their digital lifestyle.

Competitors:
Its main competitors were Dell, Compaq, Gateway, IBM, HP and 50% of the market
belonged to small producers and less established brands. Dell was the market leader with
14 % market share followed by Compaq with 12% market share, gateway with 8% market
share and HP with 7% market share. The personal computer industry didnt focus on
innovation as a driving force.
Customer:
Most of the consumers in the personal computers industry buy PCs without spending much
effort spent thinking about what they will need it for. The customer segment of Apple caters
to high end technology users. 25 Million Mac users worldwide. This concentrated group of
customers has become very huge owing to the brand name. Current Apple consumers
were adapting in a better way with the new digital environment. (Eg. 62 % of apple users
owned a digital camera compared to 33% of PC users)
Collaborators:
Large base of loyal Apple users working in Apple stores, dealers (3000) involved in selling
Apple products, professionals who volunteered for presentation in the store theater. The
Apple stores were located in high- traffic malls. Professionals volunteered to come to the
stores and present and share their experiences with Apple products. Also the employees
proved to be a great support as their turnover was exceptionally low compared to the
industry standards.
Context:
Two-third of the people who bought PCs didnt consider Apple and therefore Apple
needed a tool to breakthrough consumer minds. They thought that their value proposition
could not be supported in the conventional retail environment and the need for Apple
stores emerged.
Problem Statement:
Owning to the decreasing profits, Apple has to come up with the right distribution channel for itself.
For the same, Johnson has to determine the right locations, selecting and training knowledgeable
and dedicated employees, and defining the most effective utilization of the innovative store
elements. They also needed to determine the best way to evaluate the success of the stores.

Framework : Designing Channel Strategy

Apple Stores primary requirement was to enhance effective delivery of the customer value proposition.
The Channel must meet the requirements of:
Effectiveness: Apple wanted consumers to know what the computer can do it for you. For that,
each product in their store was connected to the internet and equipped with all the major
applications.
Coverage: The first 2 stores had 7700 visitors in the 1st weekend and sales of $600,000. Later, the
stores generated $48 million in sales and around 0.8 million visited the stores in December 2001.
Cost-Efficiency: Their budget for 25 retail stores was $ 84 million. The current sales were $5363 million
and the forecasted total sales for the year 2002 was $6235 million. Although the capital expenditure
for starting the stores was high, however seeing the sales forecast, they would recover all these
costs.
Long-run adaptability: The stores were designed with different sections for products, solutions and
customer services. It had different workstations for computers and software for music, movies,
photos and kids too. All the apple products were on display in the stores and thus all the incoming
and new apple products would also be accommodated in the stores.
Alternatives and Evaluation of Alternatives
Alternatives
Hard sales by more efforts
by salespeople
Improving the store More Persuasive materials
in theaters
Focus on places where
Apple is popular
Expansion
Should it diversify to areas
where it is not popular
Conversions in store
Evaluation
Response to Questionnaire
Pros Cons
More conversions and More efforts to motivate
higher revenue salespeople
It would make the store
Targeting consumer more like a showroom
interests rather than an experience
store
Conversions would be
Easy to leverage and
poor. Also would lead to
attract consumers
cannibalization
Access to new markets and
More investments required
thus new consumers
Easy to gauge conversion No mechanism to trace
stages and refine the stores back the influence of the
accordingly store experience
Easy to track the store
Information distortion
impact
Recommended action Plan:
These virtual social connections that Apple technology enables
now become real, meaningful and personal at each Apple Store,
the theatre presentation should emphasized on and more
employees can be put in a store.
Apple Stores must promote community hub bound by shared
technology and that lubricates personal connections, presentations
from personalities.
Apple stores should focus on the experience without pressing on
consumers to sale, to engage customers in exploration of their
digital needs.
Thank You