Retail Done Right, Take 2 (5/16/01)
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With the advent of every great Apple risk comes a swarm of people who just don't "get it." These are the people who predicted that the original iMac would never sell, because nobody wants a see-through blue computer with no floppy drive. They're the ones who said the first-generation iBooks would sit on the shelves gathering dust because they were too "girly." And they're the ones who are now picking apart Apple's imminent dizzying plunge into the wonderful world of retail by focusing on entirely the wrong things-- like rental costs, supply chain logistics, and whether these Apple-owned and -operated stores will actually be able to turn a profit, especially in an economy where people are less likely to buy a new personal computer than they are to pick up a case of generic dog food to make dinner for the next month.

Was it an accident that the good folks at MacSurfer put our own wildly enthusiastic fanboy coverage of the retail announcement ("Finally, Retail Done Right!") directly after a link to Business Week's naysaying doom-and-gloomer ("Sorry, Steve: Here's Why Apple Stores Won't Work")? We doubt it. In fact, those two opinion pieces are even separated from the rest of the retail coverage, apparently to stand alone as a happy little battle between Light and Dark. Perhaps the idea is that after the negativity of Business Week's take of the subject, a bit of rabid optimism might help clear the palate.

Allow us to take a moment to enumerate the various bits of the Business Week article that had us hooting out loud. First of all, there's the notion that "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." But consider the source of that quote: Joe Graziano, Apple's former Chief Financial Officer-- a guy who was actually fired by Apple's board under the reign of Gil Amelio. (An old Business Week article even features a choice description of "a shell-shocked Graziano sobbing to Amelio" after getting canned.) Seriously, how inept do you have to be to have been kicked out by a board for whom Gil seemed like a good hire? So we're perfectly comfortable assuming that ol' Joe likes sour grapes with his cheese and crackers. (As for the argument itself, let's not forget the Amelio-era Power Mac 4400, which was an obvious cheese-and-crackers system. On second thought, let's forget the 4400, and never speak of it again.)

Then there's the argument that "the numbers don't add up." Since Apple's setting up shop in extremely visible, high-traffic, trendy areas, the rents are high, and yes, Apple would need to sell a slew of Macs to cover its costs. But that misses the point; this is about expanding brand awareness, not making a profit through retail. And while we may be misinterpreting his numbers, our gut feeling is that David A. Goldstein's math is woefully uninformed, since he assumes that Apple's gross margins are in line with the rest of the PC retailing industry: "10% or less." (Apple's actual gross margin hovers around 27%, though that obviously doesn't take retail overhead into account, so maybe the point is moot.) In any case, Goldstein makes a bold prediction: "I give them two years before they're turning out the lights on a very painful and expensive mistake." Hey, we may be wrong (we often are), and we're the first to admit that we know zilch about business, but we have a gut feeling we're going to be writing an "I told you so" letter in two years' time. The stores may not turn a profit on their own, but they're going to be the best Apple ad campaign since "1984."

Besides, according to a Reuters article, Fred Anderson (you know, the Apple CFO who has not been fired) predicts that the company's retail stores will break even this year, and will even become profitable in 2002-- and Fred's rarely wrong. And even if Apple does lose money on the stores themselves, we bet Mac sales overall are going to benefit in a big way. Look, you folks are Mac users; you know that when a person with any sense of style and appreciation for Things Done Right first test-drives a Mac, he or she is often hooked for life. But where are the uninitiated going to try a Mac these days? CompUSA? Puh-lease. Sticking AirPorted Macs of all shapes and sizes in well-staffed, inviting stores situated in high-traffic, trendy areas is going to grow market share by showing people what a Mac can do. It's about giving people their first tastes for free. In our minds, it's as simple as that.

So we're not saying that author Cliff Edwards and the various people he quotes don't make some valid points, but the way we see it, those points are largely irrelevant. Blatant factual errors-- such as reporting that Best Buy ditched the iMac because Steve tried to force them to stock "all eight colors" (what, you never heard of Banana, Kiwi, and Oops-boy-is-my-face Red?)-- don't inspire a whole lot of confidence in the overall "retail's a mistake" argument, either. And what about the proposal that, instead of opening its own retail stores, Apple should just work on "improving how it works" with existing retailers? Wow, now that's a novel approach! Maybe Apple could try putting little stores-within-stores in a big chain like CompUSA. We bet that'll fix everything!

It's worth noting that not everyone at Business Week is down on Apple's retail initiative, as evidenced by Charles Haddad's latest piece, "Apple's Counter Attack," which underscores a fact of which we Mac users have long been painfully aware: trying to buy Apple gear at retail currently sucks rocks-- and we're using the term "sucks rocks" in its strictest technical business-school sense. Haddad, at least, "gets it"; with a third of Apple's sales coming through its online Apple Store (where prices are the highest you'll pay anywhere, not to mention that pesky sales tax), it's clear that retail just isn't working. It's high time Apple jumped in and showed the slack-jawed retail dorks of the world the real way to sell a Mac. Personally, we can't wait.

 
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The above scene was taken from the 5/16/01 episode:

May 16, 2001: Business Week goes multiple personality disorder on the whole Apple retail issue. Meanwhile, rumors of a tablet-style Mac resurface with tantalizing (though questionable) details, and dark sources whisper that Apple is working on a rack-mount Mac to go along with its alleged "big iron" server...

Other scenes from that episode:

  • 3056: Keyboards Are SO Passé (5/16/01)   Now that Apple's retail stores are officially public knowledge-- as opposed to unofficially public knowledge, which they've been for the better part of a year or longer-- it's probably a good time to turn our attention to the far less concrete areas of wild rumor and speculation...

  • 3057: "Give The Rack... A Turn!" (5/16/01)   Wouldn't you know it? We mentioned whispers of gigantic fault-tolerant enterprise Mac server hardware just a couple of days ago, and hot on the heels of that fun little subject comes yet another rumor of Apple's imminent Mac OS X-inspired leap into the world of big business computing...

Or view the entire episode as originally broadcast...

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