What is Apple’s Pocket Store Strategy? Why Its Next SVP Retail Must Have One

September 13, 2013

in Pocket Strategies, Scenarios & Futures, Smart Retail, Strategic Convos, Strategic Foresight, Strategy Formulation

Apple Stanford StoreI’ve been mulling over the job specs for the next SVP of Apple Retail. What qualifications and experiences does he or she need to have? The job is still vacant. In January 2012 Apple hired John Browett (ex Dixons) as SVP Retail. He was fired in July 2012 and the position has been “open” since then, with Retail operations reporting to Tim Cook. As a customer I felt the stores took a service dive during that short period and then recovered in time for last Christmas.  Today Egon Zehnder is apparently still managing the search. So what gives? Why is it so hard to find an SVP for Apple retail?

The answer is “Mobile” is at the forefront of a retail change and candidates just don’t have the experience. Mobile technology is only just at the point where disruptive changes are likely. Apple Stores are uniquely positioned to be at the leading edge of disruptive retail practices. Their biggest advantage is more customers on iPhones than in any other store. That’s a huge opportunity for leadership to define the future of retail.

This post is part thought experiment built on the idea the Apple Store today could be a iStore platform for millions of entrepreneurs. Upstream is an opportunity to create iStore, like iWork, or iLife as a way for Apple customers to do better business and prosper. That huge stretch starts with Apple Retail, their platform for enabling the shopping experience and empowering customers from start to finish. And that is why we don’t yet have a hire. How many retailers actually get the mobile pocket shopping revolution? Who out there could bring this stretch and leadership to Apple?

What the new SVP Retail job specification should include:

  • Global Retail Vision with Emerging Market Understanding
  • Simplicity – Elegance – Experience – Brand Champion
  • StoryTelling Required
  • User Experience Design – Pocket Retail
  • Payments Innovation – Platform for 500 million Customer stores

I’m sharing some of my thoughts around each of these areas below as a way to frame the challenge for an Apple  SVP Retail over 5+ years.  

Global Retail Vision with Emerging Market Understanding

Let’s step back. Apple has the most profitable stores in the world ($’s/sq ft). This includes some of the most iconic storefronts; many marque stores with impressive architectural input. They are a statement about Brand. This is a model that can’t be rolled out to 1000’s of stores without impacting the brand. This steady rollout is working ok although internationally it appears slow. 

In a global context, Apple stores have a new opportunity and clientele. We tend to think of Apple as the consumer market leader. In the West we’ve brought iPhones into the enterprise. And Enterprise is now adopting them. In the western world the phone is part of a changing life, rather than a tool for life and economic improvement. In emerging markets the mobile continues to create wealth and provide economic benefits. As a result even the simplest business practices have changed (think rickshaw driver for example). It is these small businesses, entrepreneurs, that are just now beginning to harness the “computer in their pocket”. From the rickshaw walla, to the real-estate agent, or small shopkeeper they are now looking to take their business to the next level. They are also serving an increasing number of smart phone users. This presents a golden opportunity. The opportunity to put every little enterprise on iOS as well as every wealthy aspiring college student. For the only way to make Apple devices sticky in places like India and China where apps are free and Android phones are priced significantly lower is to make business simpler. Importantly, this is not a challenge any IBM will take on. These are not Fortune 500 cos. No these are the entrepreneurs that Facebook will go after if you don’t!

Apple growth will come from new retail. The best retail may actually be helping others into the business of retail. A global vision that sees 500m stores in 5 billion pockets may really redefine how things work. Apple is also in a battle with Amazon for this opportunity. When will Amazon go local? Will will their resellers get to promote their physical presence?

Simplicity – Elegance – Experience – Brand Champion 

It may not seem obvious from the outside. Stores are just one sales channel to many. I see Apple Stores as the barometer of the business, the bearer of the message, the brand and the Apple experience. Over the last few years they have brought millions of new people into the Apple fold. While Marketing can continue promoting products with advertising, the stores are the lifeblood of what customers want, see and experience. They are also not perfect. When the receipt comes on my iPhone I don’t always get a follow-up feedback questionnaire or the opportunity to remember who I dealt with. I’m still dealing with those Designed by Apple in California characters. The choreography of the personalized transaction remains poor limited.

Retail is about statistics, about growing the business. Same store sales up, $’s per sqft up, revenue per employee up, etc. Reduce / eliminate leakage, efficient returns etc. Yet this focus is where Browett made his biggest mistakes forgetting why we love Apple and their stores. Apple is about service first. It is more Disney than any other chain. Yet Apple still doesn’t know me by name when I walk in (although I suspect given the service I get they quickly know how many 000’s I’ve dropped there)

So where must the new SVP Retail champion a difference? I don’t believe Ron Johnson ever influenced the product. Steve Jobs did, and the stores were his storytelling outlet. I suspect with each new product he asked himself how can I also use this to improve the retail experience? I suspect that the next retail executive must influence product, developers, and marketing. Retail leadership can continue to make buying and selling simpler, easier, and more beautiful. People get that. It reinforces the brand. I suspect that Jony Ive also gets it.  This is why it is so hard to find a new Retail SVP.  The retail challenge is a fine balance between keep the product sku’s down in the store and broaden the product range possible in my pocket and speed delivery. Apple already has an app for that. Still when a buyer can’t find what they want at the Apple Store they open up Amazon and a sale is lost.

The Apple Store must live in my pocket as well as my mind. To make it more relevant I must shop there more often. That means opening it up. The Apple model for that is probably more like AppleTV. Bring in Macy’s, Nordstrom etc. This could create a possible virtuous circle of expansion while retaining and enhancing storytelling in-store and building on the platform that supports them. Stores are part of the brand image. Apps are intangibles. Marissa Mayer gets it. There are only a collection of Apps that really get people going. They include text, mail, calendar, photos, weather, sports, finance. Marissa Mayer Biography – Business Insider. The trick is not to just make the Apple Store one of the greatest on earth. The trick is to make the one in your Pocket every bit as elegant. The Apple story for the next five years should be the Appleization of Retail.

StoryTelling Required: 

15+ years ago when I was running stores the interaction I most enjoyed was with Visual Merchandising. I led marketing for two chains. One a lifestyle chain and another a chain of Garden Centers. Both these businesses had a “color” story. “Color” sold the plants, and it built the dreams inside one’s home too from accessories to paint. Still, many years earlier when I was retailing bricks and genuine brick transformations (new patio, BBQ, mailbox etc.) it was the demos that sold the weekend pallet that the homeowner was going to DIY. You have all walked into the store where the entrance display grabbed you. Yet what do you do when the store you are now so familiar with isn’t really changing? You want something new. In fact you need a plan that matches shopping frequency.

That’s an underlying Apple Store problem. Yes it is getting new products over the next few weeks and that is part of a story but not the real story. Fact is Apple stores today are well known, understood, we expect great service, we go in to buy a new iPad or yet more Apple products. Yet when you are satiated and can’t do with another accessory what’s the real story that is going to bring you in. More importantly what’s the story  or set of stories that will broaden Apple’s appeal. What will you notice next time that is different about the way you shop?

At retail Apple must simple tell more powerful stories. It must continue to push the boundaries. Fitness, Health, Smart Home for example. It’s may have to think out how to become an ATM/Bank and Business Center although most of that could be done at home. Then the example of that is Apple sold Music in the stores (although no records, DVD’s etc) and supported it with iTunes. Before Apple launched their first store they spent ages building one inside a warehouse till they got it right. Now with 100’s of stores it isn’t quite so easy to change the formula. Yet that is still where the storytelling starts. The product isn’t the whole story the user experience is. When every phone looks alike or close to the same how can Apple change their stores. The truth may be in staffing up more and reducing products. Make the experience more bazaar like, more marketplace than static product displays. In a Disney context create more characters and more entertainment. Close the gap between the phone and magic as for many of us the mobile is now just like magic and the power we find with an always on connection.

User Experience Design at the Mobile Level 

Apple Store is one of the best mobile shopping apps out there. I can even use it to pick up and walk out the store with goods in hand. No interaction required. While I suspect this is hardly ever done, it points to experimentation to reduce the friction around payments and collection. I’ve written elsewhere about Pocket Retail and why putting the Cash Register in the customers pocket is smart. Apple with iOS 7 has also launched iBeacon. We don’t know yet how that will roll out in Apple stores (on September 20th with the new iPhones?). As in recent discussion iBeacon, matched with Bluetooth LE is a potential game changer for both payments and store visits which means “experience” and behavior changes. The combination of mobile and stores puts Apple at the intersection of this disruptive change.

Many retailers are user experience experts although this will trace to the more visual merchandising and promotional skills. Yet few have any real experience managing apps adding to the in-store experience. Outside Amazon or perhaps eBay few candidates could provide a successful track record for online  and mobile store experiences. For the Apple candidate to be successful it requires them to be deeply passionate about mobile. As the online store increasingly moves from the web to the pocket the integration of this experience is key to the future of retail.

We can see how the iPad and iPod changed the Apple retail experience. iPods for Cash transactions as a register. iPad for product details (which you now see duplicated in other stores Nordstom and Comcast). Is it too far-fetched to believe an entrepreneurial Apple customer in India or China could walk into an Apple store buy an iPhone and walk out with a device and accessories that can help them run a simple iStore in the same way? It would really just be an extension of what’s already done well today. Providing a cash register, inventory management system, online store presence, and customer relationship manager. Could this help the small shop, the street vendor, the barber, the door to door salesman, etc.?

Is this Appleization of retail possible? Could Apple retail build a transaction platform for every small seller on the planet?  Wouldn’t this just extend the customer love? Help them handle their payments, make them rich and then the iPhone is really priceless. Could this be a huge reason why the current vacancy remains? Is there a retailer and candidate out there that can prove they have this vision?

Payments Based Innovation – 500m Cash Registers?:

Similarly, not many in a senior retail position knows much about the future of mobile payments. The jury is still out on what approach will win. Yet Apple Retail is in a box seat to lead innovation in this area. Let’s see if iOS, Passbook, Bluetooth LE, iBeacon hit the Apple stores in new ways before Christmas. While I’ve written more recently about Square  (Apple should probably buy) it is the movement to integrate the wallet into the mobile that will create the next real wealth/value situation for Apple shareholders. As I’ve suggested in the Square post, The company that provides the register may also be part of the payments system.

The next new head of Apple Retail must drive this change through, pioneering a radical change in the way we shop; everywhere. By proving it first in the Apple Stores and then potentially helping to open it up to customers and developers (WWDC 2015).   Apple must continue the revolution around how it sees its online store and physical store relationship. Where Apple captured the creative class – artists and designer with Macs, the mobile presents a more entrepreneurial opportunity. What Apple Stores need today is a personal individual store in everyone’s pocket. That’s the holy grail for every business today. Know your customer by name. Have the ability to go global while making local interactions more valuable than ever. So our Apple candidate must move the world from 1-Click payments to one where zero touch payments are the norm. 

Other Challenges:

There are probably some challenges and skeletons. I suspect that Apple’s store systems may not be as pretty on the inside as the outside. Turning stores into a full platform that works for everything from the small store to the diner with a minimum amount of fuss is a big undertaking. We all know how slowly iTunes store evolution moves.

The mobile payments race involves many factors. Everyone wants to clip the ticket just like Visa does. Yet the revolution will be in reducing Visa costs by a factor of 10. If a combination of mobile social business can achieve this then Visa will be challenged by  over the top OTT customer to seller payment relationships. If everyone phone is effectively a cash register almost everyone can re-think how payments happen. From running the garage sale to selling an item or service on Craigslist. When cashless is just easier, safer, and more likely to build relationships then literally business may again be just a hand shake. Now just think if an Apple store could be run like that.

So a post far longer than I expected to write. I want more work / projects in this area. Retail and payments are ripe for disruption. The majority of the world’s businesses are tiny and it’s quality of product and service that helps these entrepreneurs win. The dumb phone changed lives. So far the smart phone has changed few lives economically. When “data plans” and smartphones take on more basic economic meaning then we’ll see smartphones everywhere. Retailing provides a frame of reference for that. Note that Apple is already well positioned for this adventure. Still Windows / Nokia might get here too. Google without stores will likely find it a challenge. Facebook seems like it could be a good fit for an OTT type strategy in this area although needs strong partners. Amazon almost has all the goods already. Kindle Store – device coming?

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