Contract Manufacturers RetailersDistributorsCustomers

For Apple, after retailcustomer.

Apple Stores:With 324 stores, in 10 countries, and almost 31,000 employees – Apple Retail has become the quiet giant of international retailing.

1. Description of logistical practice:

When the Apple iPhone debuted, in thirty hours, the company sold 270.000 units, a pace of 1.50 per minute, each priced belore contract fees al $4f)y-$599. By early September, sales had crossed the one Trillion (jn mark—an adoption rate roughly ten times faster than for the original iPod. Apple then cut the iPhone's price by $200; its sales pace doubled. If either demand or inventory management goes wrong, it could result in huge monetary as well as reputation loss for a company. So how does Apple forecast demand for a product that is so new to the market? The answer lies in its retailing practices. Although Apple initially depended heavily on big box retailers such as CompUSA to showcase its Macs, with time it realized that the product visibility was getting lost in the crowd of products housed at multi-brand stores. Hence it moved to a store-within-a-store model in retail stores such as CompUSA and set up its own exclusive Apple retail stores throughout the country. Given below is the list of stores till date.

Apple stores across the Globe

Country Opened in Open Stores Planned storesUS 2001 246 2UK 2004 33 -Canada 2005 22 4Australia 2008 13 2France 2009 9 2Italy 2007 9 2Germany 2008 8 1Japan 2003 7 -China 2008 5 25Spain 2010 5 3Switzerland 2008 3 -Hong Kong 2011 1 3Netherlands 2012 1 -Sweden 2012 0 1

Total 361 46

Store-within-a-store Concept: Approximately 15% of each CompUSA store would be

set aside for Mac hardware and software (including non-Apple products) and would play host to a part-time Apple salesperson.

Apart from these the online Apple store is key to inventory management. As opposed to Just-in-time practices followed by many organizations today, Apple believes in producing high volumes and this practice has been successful for Apple so far. Apple has a separate store for merchandises and does not keep them along with the products.

2. Benefits of this practice: (ENABLERS)Apple products are innovative, new and revolutionary. Placing these in a multi-brand would mean that not much time and space can be allocated to it and the personnel would not know the technical-knowhow of the products. The main benefit of the Apple stores is to give an experiential feel to the products, and a simulated-environment to get a touch and feel of the product along with trained staff to engage and educate the customers. Thus the product visibility is enhanced.

Yet another key point about Apple’s retail stores is Operational Effciency. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If It becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck. The benefit here is that they have very good tracking tools for demand forecast, such as Web analytics to guage customer preferences and this IT involvement in their Supply Chain along with their technological innovation ensures operational efficiency.

Apple has always enjoyed a high-bargaining power, be it with its suppliers or customers. This exclusive retail store and store-within-a-store retail format helps Apple retain its exclusivity and control and dominance over its competitors.

Here is an indication of its success: A frequent statistic of performance for retail stores is the number of visitors they host over a period of time—the more the better. At its peak in 1996 the Gate Computer retail store chain reportedly hosted an average 250 visitors a week. In contrast, during the third fiscal quarter of 2011 the Apple stores hosted an average of of 2,491 visitors each day.

3. Risks/Costs of the practice: (BARRIERS)Several publications and analysts predicted the failure of Apple Stores because they flouted computer retail practices. Retail space is evaluated by the amount of sales made per square foot. It was thought that because of the stores' diminutive size and non-aggressive sales team, Apple would succeed in presenting the Mac but fail in making a significant number of sales.

This is because by placing the products in many more retail outlets, the reach would be higher and a customer with no-brand in mind just looking for a good product may buy it rather than having to visit an Apple store. Apple stores would definitely attract Apple-product users but what about new customers?

The store –within-a store concept is highly subjective and dependent of the location of the inner store. For example, it was located in the back of CompUSA stores, where foot traffic and sales were the lowest.

Apart from this, the obvious cost is the expense incurred for opening and running exclusive retail outlets, and tracking equipment, but this is more an investment than a cost.

4. Key issues in designing and implementing the practice:

Before 2001, Apple was still thwarted in the staging of its products. The company had control over its online store and through its catalog, but like most other consumer electronics companies (with the notable exception of Dell ), it relied heavily on big box retailers like CompUSA and Sears to sell the Mac. After the decision to move to a different format of retailing (namely single brand), the design and implementation involved the following:a. Design Team:

In 1999, Jobs personally recruited Mickey Drexler, who had been at the Gap since 1983, to join the board of directors.The next key hire was Ron Johnson, who had turned Target from an upscale K-Mart into a top-notch consumer products retailer.The team was of experienced people from the world of retail, from interior design to point-of-sale systems. It also invoved a mock-Warehouse near Apple's campus in Cupertino, wherein the products were organized by the product matrix used almost exclusively by Apple and journalists, which is:

Consumer Pro

Desktop

Portable

Design: The architectural firm was Eight Inc. The challenge was to not just have a unique layout but also a unique product targeting.

Apple has created its own brick-and-mortar retail channel. Although, the iPod, i-pad and Macs could have been shelved in a large retailer without the effective sales efforts and attractive displays, the Apple Store was a co-specialized asset that made sense to provide internally; the products needed such distribution, and the Apple Store needed a hot product to drive traffic in order to succeed. Retail distribution as an important complementary asset.

Implementation:Apart from the selling area,in the back there was a Genius Bar, an area where Mac-heads could get their Macs diagnosed and fixed - or just hang out. In later stores, there were actually theaters and classrooms in the back for live Apple events and workshops.The challenges in its implementation were primarily flouting the rules of computer retail stores. Compare this with a HP showroom for instance (HP also places its products in multi-brand retail outlets). It just has a selling area, and a handful of personnel to help you around, nothing in comparison to the stylish Apple stores that provide an exhilarating customer experience.

The most striking thing about the stores is the absence of clutter. Jobs has focused Apple's resources on fewer than 20 products, and those have steadily been shrinking in size. Backroom inventory, then, can shrink in physical volume even as sales volume

iMac G3

i-pod Power Book

grows. Also missing, at the newest stores, anyway, is a checkout counter. The system Apple developed, EasyPay for payment through credit

5. Practices followed by other companies

A product can be sold through direct sales or channel sales. Direct sales, is when a company sells its products and services ‘directly’ to its client or customer base without an outside party or middleman involved. Channel sales( or indirect sales) on the other hand is where the company employs a third party, a reseller to sell their products on to their customers. An example of Channel sales would be Microsoft. The benefit of channel sales is reduction in costs of maintaining a retail operation as well as costs of training personnel. Instead the retail operation is outsourced and focus can be on product innovation and development. Dell on the other hand uses a mixed approach of direct and indirect and through its online store it exercises sufficient control

Apple’s practice of mostly selling through single brand exclusive stores and an online store is an example of Direct sales. However to increase the reach of popular products,like the i-pod, it houses them in select stores such as PC world through store-within-store design.

Amazon would be the example of a purely direct sales company that sells its Kindle e-book reader and other products exclusively through its own online store

The form of selling depends on the extent of control desired and prioritization of operational efficiency in retail and product innovation. Not every company is competent at both, like Apple.