These days, there are about 550 Apple Stores around the world, with locations popping up in countless major cities and across five of the planet’s continents. They are, in other words, a serious success story for Apple.
Today marks the 25th anniversary of the opening of the world’s first two Apple Stores. Found in McLean, Virginia, and in Glendale, California, they were opened on this day way back in 2001.
Far from those humble beginnings, Apple Stores today are the gateway into the company’s ecosystem and are a thriving segment of Apple’s business that bring in billions of dollars in annual sales. Here’s the story of how that happened.
Apple goes its own way
By the late 1990s, Apple had spent many years trying to get by on the “store within a store” model. It didn’t work.
Apple would be assigned a corner within a big-box retail store. Sure, it would have its own little display area, but its products would be presented and sold by the employees working for the host store, not Apple.
This frustrated Apple CEO Steve Jobs, who prickled at the way his company’s products were being offered to customers by staff who were not passionate about them and who didn’t even understand them particularly well.
Speaking to biographer Walter Isaacson, Jobs put it this way: “All that the salesman cared about was a $50 spiff.” These salespeople weren’t well-trained in what made Apple’s computers distinctive. Customers might just see the higher Apple price tag without learning about its innovative features, Jobs worried. “Unless we could find ways to get our message to customers at the store, we were screwed,” Jobs declared.
After growing frustrated with this situation, Jobs decided that Apple should go its own way. After all, Jobs was famously obsessed with control. Running its own stores would allow Apple to ensure everything was to its liking instead of relying on a half-hearted effort from one of its retail partners.
In 1999, Apple began secretly interviewing outside executives for a role developing a chain of Apple-branded stores. In the end, they settled on Ron Johnson, Target’s vice president for merchandising. He was a good pick: someone who shared Jobs’ passion for design and interest in shaping the user experience.
In planning the new range of Apple Stores, Jobs and Johnson made a number of key decisions. For one thing, there should only be one entrance to the store, allowing Apple to control what the user saw and experienced. Further, instead of placing its stores in remote, out-of-town locations, Apple should be present on Main Street, no matter how pricey the rent was. High footfall was important, as it would allow people to drop by on a whim — something particularly helpful for converting Windows users.
The stores also had to be the right size. Too large and visitors wouldn’t understand where to find what they needed as soon as they entered. But downsize them too much, and they would signal that Apple had limited, small-scale ambitions.
Even the Genius Bar was a unique stroke of, well, genius.
Perhaps most importantly, Apple’s limited range of products was a strong advantage. It would allow Apple Stores to be airy and minimalist, with plenty of space for people to try out the company’s products. This was vital for enticing loyal fans and total newbies alike. In other words, the goal was to be the complete antithesis of every other computer-buying experience. This was a competitive edge for Apple.
Even the Genius Bar was a unique stroke of, well, genius. Johnson had asked his staff to name the best customer service experience they’d ever had, with almost all of them mentioning a stay at a fancy hotel. So Johnson sent his first store managers on the Ritz-Carlton training program, then translated what they’d learned into what would become the Genius Bar. Apple, Jobs, and Johnson decided Apple Stores would offer service like no one else in the retail industry.
Put together, everything about the Apple Store had to “impute” — or convey — the values of the company. As Johnson put it, “the store will become the most powerful physical expression of the brand.” Apple wasn’t just dreaming up a store — it was planning a new way to dominate tech retail.
Predictions of failure…
At the time, there were myriad predictions that the Apple Store would fall flat. “Maybe it’s time Steve Jobs stopped thinking quite so differently,” said Bloomberg Businessweek under the headline “Sorry Steve, here’s why Apple Stores won’t work.” Retail consultant David Goldstein, meanwhile, predicted the concept’s imminent failure: “I give them two years before they’re turning out the lights on a very painful and expensive mistake,” he forecast.
Even Apple’s former chief financial officer, Joseph Graziano, was skeptical, saying “Apple’s problem is it still believes the way to grow is serving caviar in a world that seems pretty content with cheese and crackers.”
And there were moments when it could have gone wrong. One morning during development, Johnson woke up with a sudden thought: instead of arranging the stores around Apple’s product lines, as the company had planned to, they should instead be centered on the things people could do with the products, like import movies or edit photos. This would fit in much better with Apple’s emerging idea of the Mac as a digital hub, but it would also mean delaying the opening of the first store by three to four months.
I give them two years before they’re turning out the lights on a very painful and expensive mistake
David Goldstein
At first, Jobs exploded in a rage at the disruptive idea. But after calming down, he realized that Johnson was right.
As he said to Isaacson, “If something isn’t right, you can’t just ignore it and say you’ll fix it later. That’s what other companies do.” Apple pressed ahead with the change — and the stores were better off for it.
…that never came to pass
Right from the get-go, the first Apple Stores were a success. Computer retailer Gateway had its own stores, and they’d been getting a paltry 250 visitors a week on average. Apple Stores, in contrast, averaged 5,400 visitors a week by 2004. The Manhattan store, opened in 2006, averaged 50,000 visitors a week in its first year. Jobs’ idea of opening in high-footfall locations was paying off.
Apple Stores took in $1.2 billion in revenue in 2004, setting a retail industry record for time taken to hit that billion-dollar landmark. Around a decade after the first Apple Store opened, their total revenue was $9.8 billion, with each store taking in $34 million a year.
Today, Apple is thought to make around $4,000 to $5,000 per square foot at its stores. Compare that to the US average, which is around $400 per square foot, and it’s obvious that Apple’s decision to launch its own retail outlets has been an unmitigated success.
But more than just raw sales, Apple Stores have helped create a buzz around new Apple products. People camp out overnight to be the first ones inside a new store or the first to buy a freshly released device. Their minimalist designs and prominent city center placements made them a retail fixture for people around the world, whether they were loyal Apple users or had never heard of the brand before.
Despite the odds, the Apple Store has been wildly successful for Apple and has led other tech firms to follow its lead. Samsung has its own line of shops, as do Microsoft and Google. But none of those imitator stores would exist if Apple’s first retail outlets had not opened a quarter of a century ago — and changed the way you shop in the process.
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