Apple sells computers boutique style

By Peter Henderson

PALO ALTO, Calif.: On Sept. 12, as the United States was trying to absorb the

enormity of the previous day's deadly hijacking attacks on New York's tallest

buildings and the Pentagon, Apple Computer Inc. 's new retail stores were

jammed. Lured by free Internet access, stranded travelers marched in to reassure

loved ones and the curious - most of America - could pull up the latest news

reports, said Ron Johnson, senior vice president of Apple.

"Our stores became kind of an impromptu gathering place," said the

executive who runs the growing retail chain. "Their minds were probably not

on buying a Mac, but we had our stores fully staffed."

Apple, which changed the face of computing in 1984 by introducing the

Macintosh and its mouse and graphics-oriented display, is now taking a novel

approach to selling computers with a chain of highly visible stores. Rather than

using crowded cavernous retail space in a far-out strip mall where the

employees' earnings are contingent on how much merchandise is moved, Apple's

stores are light and airy, and centrally located.

Apple has opened about 10 of the 25 stores it plans to launch this year.

Located on some of the most expensive real estate around, they are staffed by

Apple buffs who do not work on commission and whose instructions on the hard

sell are clear: Don't do it.

"It's a pretty big bet," Johnson says, but with more than $4

billion in cash, Apple has room to maneuver. "The reason we can turn the

model on its head (is that) Apple has an incredible balance sheet," he

said.

Boutiques

Each of the stores looks more like a designer boutique than a place to buy a

cheap computer. The curious don't even have to come into the store. Apple's

wireless Airport network has the capability to reach out and connect passing

computers to the Internet.

At the front of the store in Palo Alto, California, a short drive from

Apple's Cupertino-based headquarters, half a dozen desktop and notebook

computers are plugged in to the Web and ready for play - no password required.

As the computer becomes the hub of a web of music, video and more that together

make up a digital lifestyle, Apple has hooked up digital cameras and camcorders

to machines farther in. Those who wish to can take films, move them to Macintosh

and edit them online.

Macintoshes loaded with games keep the kids occupied while parents shop, and

in back of the spacious room is a theater that shows the latest products. There

is also a small bar, where Apple "geniuses" are ready to answer

questions, and a prominently displayed Red Phone - a direct connection to

Cupertino - they can pick up if they are stumped.

The 95

Apple talks about its community as much as about sales, although Johnson said

the idea is to expand market share beyond Apple's current 5 per cent of the

personal computer market, the key to success. "Our stores are designed

entirely to introduce new users to Apple," he said. "We've got to

know, are we talking to the 95?"

Apple will neither disclose the number of converts it has made nor the sales

data for its stores, except to say it still plans to make a profit. Johnson says

that traffic at one of the first stores, which opened at the beginning of

summer, was as strong on a recent weekend as on the second weekend after its

opening.

The push comes in the middle of a slowing economy and still may upset

independent Apple retailers who must compete with the Apple stores. The

retailers are in less expensive locations and cater to Apple's loyal following,

Johnson says, adding that the resellers' real estate strategy is closer to what

personal computer maker Gateway Inc. is trying to do with its showrooms.

Analysts are mixed on the wisdom of spending valuable cash on the stores, but

Stephen Baker, a computer retail sales analyst at PC Data, Inc, says Apple is

defining itself and the brand as well as selling computers. He compares the

stores to boutiques for fine china and designer clothes rather than the

"Crazy Eddie" type of hard-sell retail chain.

And Apple needs something to increase its customer base, he said. "They

are capped right now. "They needed to find better ways to get in front of

current customers and future customers." And perhaps that means that even

in a bad economy, Apple should go its own way. "They are opening against

the wind, so to speak," Baker said.

(C) Reuters Limited 2001.