Kneale: Why Apple Is the World's Best Retailer

Let’s just admit it: Apple, one of the coolest companies in the world, also is the best retailer on the planet. This is especially impressive given what Apple’s company-owned stores sell: high-tech gadgets that often befuddle “the rest of us.”

Great service, fiendish efficiency and a cultish devotion to its wares spark higher sales for Apple. One example: The other day I made a quick fly-by to an Apple store in the Big Apple, on 14th Street at Ninth Avenue in Manhattan. It started as a search for a simple $29 software upgrade.

Dennis Kneale
CNBC Media &
Technology Editor

I didn’t leave until three hours later—after spending $1,053.88. And yet, I was happy with the whole experience. How could this be?

I’ll reveal that in a moment, but first let’s zoom out to the panorama shot:

In some ways Apple stores started out of necessity. In 2001 retailers gave short-shrift to Apple and its declining market share, focusing instead on utilitarian “Wintel” systems based on Microsoft Windows software and Intel microprocessors and sold under Dell, IBM, Hewlett-Packard and other brand names.

Apple

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[AAPL  Loading...      ()   ] opened its first two retail stores in May of that year, in Glendale, Calif. and Tysons Corner, Va. It had 30 stores 12 months later. It now has 273 outlets, including four new stores that just opened over the past weekend. A total 217 stores are open in the U.S., plus 22 in Great Britain, 14 in Canada, seven in Japan, a smattering across Europe and even one outpost in Beijing. (Build a few more behind the Great Wall, guys.)

The stores act as a luminous, three-dimensional ad for Apple, a kind of DisneyWorld meets Tron. To be inside one is to be immersed in an all-Apple world, filled with Apple-lovers on both sides of the sales counter. But the retail chain churns a hefty amount of revenue, as well, sparking $1.5 billion or 18% of sales last quarter.

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The Apple corps’s key differentiator: great customer service, an elusive elixir in desperately short supply at retailers of all stripes. More than half the store employees are devoted to after-sale service, an Apple spokesman says. Free troubleshooting advice is offered at the humbly named Genius Bar in every store (though I did have to wait two days for an appointment).

My ascent into this heavenly retail experience started with a basic need: a new video-editing

Kirsty Wigglesworth / AP A flag showing the Apple Computer logo flies outside the Apple shop in Regent Street, London

program balked when I tried to install it on my PowerBook laptop. It told me I needed to update the laptop’s operating system and pointed to a $29 upgrade.

Cut to the Apple store on 14th street, with its shimmering, glassed-in façade and translucent, corkscrew staircase. Immediately you are greeted by a sea of t-shirted techies, all of them Apple seedlings: orange for greeters (concierges in Apple-speak) who point you in the right direction; pale-blue for folks who actually sell you stuff; dark-blue for the experts who then try to help you figure out how to use what you just bought; and black for the beasts of burden who keep the shelves amply stocked.

Soon I learn my machine can’t take the $29 upgrade. It is stuck in the days of Tiger (the original OS X), and I need to install the latest iteration: Snow Leopard. New cost: $152.43. No problem.

Whoops. Yes problem: The laptop hard drive is too crammed to take the upgrade. Ring up $30 for an 8-gigabyte flash drive. Spend 40 minutes loading video files from laptop onto the teensy flash device. Now wait 40 minutes more for Snow Leopard to land with little cat feet onto my suddenly unfettered hard drive.

Meantime, though, it occurs to me: I’m gonna need a bigger drive. Voila! Spend a few hundred bucks more for a massive, two-terabyte external drive from Western Digital. It holds 2,000 gigabytes in a slick grey box smaller than an old Webster’s dictionary.

But what about backing it all up? Ah, here comes a new Apple wi-fi set-up with router and wireless disk. It will automatically back up my laptop without my having to tell it to do so. That and the two-terabyte drive add another $870 or so.

With each purchase, a nice-guy techie holds my hand through the process. Instead of having to wait in line at a cash register, you hand your credit card to the helper, who swipes it through his wireless handheld and racks up the purchase.

I might have bought even more gear—How about some games? Or the new iPod Nano with the video camera?—but I had to leave for other commitments.

The financial upside of such doting service is abundantly clear. Apple’s flagship on Fifth Avenue is said to rack up annual sales of $35,000 per square foot, twice the metric at Tiffany & Co., which has a lot of products with far higher prices.

Apple’s own retail efforts are just small enough—still at less than 20% of total revenue at the company—that it hasn’t yet riled retailers such as Best Buy for essentially competing against them. Given the excellence inside Apple stores, compared with the shabby treatment we get at so many other electronics outlets, we’ll see how long that truce lasts.

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