Apple's retail strategy pays off

A recent visit to a bustling store in San Francisco yielded only positive comments:

• Mike Greaves, 28, used to drive miles to get to a shop that serviced Macintoshes. "And you didn't get as good quality of service," he said, picking up his Mac Mini from a free repair at the "Genius Bar."
• Sarah Bunje, 67, sat through her sixth in-store workshop on iPod-iTunes since last November. "I always learn something new," said the Foster City, Calif. resident.

Apple stores have been profitable since September 2003, but when Apple first launched its retail initiative amid a declining PC market and other failing electronics retailers, most notably Gateway's stores, it was viewed as a risky move.

Apple saw it as a way to improve its reach.

"The stores offered a much better way to deliver the product than being in the back of a Best Buy," said Andrew Neff, an analyst at Bear Stearns & Co. Inc.

Jobs and his lieutenants paid careful attention to every detail — from the nuts and bolts of the stores' designs to its operations and customer service. Ron Johnson, a veteran retail executive who worked at Target before Jobs recruited him to lead the Apple stores, still personally interviews each store manager.

"A lot of people thought we'd fail," Johnson said. "But five years later, there's a lot of evidence we're successful."

The popularity of the iPod helped drive traffic and sales, but computer sales have also steadily grown. In fact, more than 50 percent of the computers sold at Apple's stores each day go to customers buying their first Mac.

The new Fifth Avenue store, next to FAO Schwarz and across the street from Bergdorf Goodman, will be Apple's 147th, and its first to stay open around the clock. It will also have the largest staff of 300 workers.

Other Apple stores are scattered throughout the United States in high-traffic shopping locations. There also are six each in Japan and the United Kingdom, and two in Canada.

The striking Fifth Avenue entrance — a 32-foot glass cube emerging from a gray and white marbled plaza — was inspired by I.M. Pei's glass pyramid at the Louvre in Paris, said Jobs, who helped design it.

Wide doors lead pedestrians down a circular glass-and-steel staircase, swooping them into the inner sanctum of the subterranean but well-lit store.

The property's owner had solicited Apple to set up shop there, Jobs said.

And now, Johnson said, "in the city that never sleeps will be this store that never closes."

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