What Apple means to retailers

A pple has had a good few weeks. As queues snaked outside its iconic retail outlets in anticipation of the UK debut of the iPad tablet computer on May 28, the markets rewarded the computer firm by rocketing its market capitalisation beyond its traditional rival Microsoft to make it the world’s largest technology firm.

But since Apple founder Steve Jobs returned as chief executive to begin the company’s turnaround more than a decade ago, there has been a much greater impact on retailing than an uptick in electricals sales with each new much-hyped, must-have gadget.

The brand has influenced store design with its iconic, simple formats; legitimised and come to dominate the legal downloads market for digital music; created the devices that are provoking a revolution in mobile commerce; and built a demand for these gadgets that has people queuing up overnight for them worldwide.

Apps and the iPad

All iPhone applications work on Apple’s new iPad platform, but some retailers are already exploring the improved characteristics of the larger device.

“There is not much difference between the iPad experience and the online experience, but it’s an alternative time and place to purchase,” says Rob Millar, director of strategy at technology consultancy CVL.

“Screen size is better for the buying experience than the iPhone as products are larger,” Millar adds. This would certainly solve the problem that was experienced by Argos. The retailer’s head of multichannel development David Tarbuck explains that one of the reasons behind launching its iPhone app was that the website was appearing too small when loaded in a web browser on a mobile phone.

So how can retailers take advantage of the iPad platform?

Gap launched its ‘1969 Stream’ iPad app in the US in April. A Gap spokeswoman says: “The pages of our customised spring lookbook turn like a book. The functionality of the iPad works well for this, because it’s like you’re reading an electronic magazine.”

To take advantage of the full-screen video, Gap has used in-video purchasing. When consumers click on an item, the page folds up and they can make a purchase.

Millar predicts that there will be more iPad apps in the UK that will make use of in-video purchasing in a year or two.

iPhone

Apple’s dominance of digital extends to the mobile application market. Downloads from the online App Store by iPhone and iPod touch users worldwide hit 3 billion in January. Retailers are attempting to leverage this popularity by developing their own iPhone apps.

Argos announced last month that it was launching an iPhone app as more of its customers are using Apple devices. “We found the number of people accessing the Argos website were polarised into Apple and non-Apple devices, and customer panels on the website said that they are shopping on their iPhone,” says Tarbuck.

He adds that Argos is considering launching apps on other mobile devices. Ocado and Tesco have already taken that decision.

So why aren’t more retailers rolling out their apps onto other platforms? “The returns are not good enough to justify rolling an app out across platforms. It’s cost-prohibitive unless it’s a basic app,” says Millar.

Keeping it basic is what Argos has managed to do with its 1.2MB iPhone application. “The Argos catalogue doesn’t download onto the phone. The app connects with our servers to provide the most up-to-date stock information. This makes transferring the app to other platforms straightforward, as we connect the apps to the same infrastructure,” he adds.

Digital content

With the introduction of its iTunes music downloading service in 2004, Apple created a legal market in digital music, a space until then largely the preserve of pirates.

ITunes has a 14.3% share of the total music market, second only to HMV, which has a 31.1% share, according to research published by Verdict in March.

In the UK, downloads accounted for 18% of music sales last year, up from 12.4% in 2008, according to data from the Official Charts Company. And the shift of music sales online is forcing bricks-and-mortar entertainment retailers to adapt.

Waterstone’s plans to introduce four or five e-reader devices to its range by the end of 2010.

“We expect 8% of the book market to be digital by 2013. The physical book market is flat, but we expect the e-book market to double every year,” says Waterstone’s head of ecommerce David Kohn.

“Downloads through wireless networks and 3G devices in the larger stores is the agenda for 2010. Perhaps, we’ll provide these wireless networks,” he adds.

Influential store design

Stores are a vital part of providing a unique offering to consumers, and this is something Apple does well. “Stores are beacons for Apple, where it can display everything the brand is about and control everything in-store,” says David Roth, chief executive of WPP’s Global Retail Practice The Store. And its easy and unthreatening, iconic store design has crept into other retailers’ formats.

At the Currys store in Thurrock, Essex, Apple’s signature wooden tables and use of open space can be seen.

Design consultancy 20/20 managing director Jim Thompson says of Apple store design: “The fear barrier of the unknown of technology is broken down by kitchen tables - a community base - which are open and comfortable.”

It has been especially difficult for brands to launch successful stores, adds Thompson. Apple has managed to provide the “halo effect”, where customers buying one Apple product will purchase another, as it offers a range of supporting items.

The brand

Before its launch, ads for the iPad were few and far between, but as soon as the gadget was released anyone travelling on the London underground could not forget that the iPad is on sale.

“Apple understands that marketing and products are equally important,” says Roth.

Apple’s high standards for its products helps make it such a desirable brand. “Apple doesn’t release products until they are 100% right. It controls the supply chain and creates hype by delaying the products,” Roth adds.

This control is certainly true with the iPad, when it was only announced three days from the launch date that DSGi had agreed a 60-day window with Apple to sell it.

But the secret to Apple’s popularity goes beyond the hype surrounding its products; it’s about the credibility of the brand. In the recent Trust R metric - a measure of how a brand is trusted and recommended developed by WPP in March - Apple came top of the list as the highest recommended brand by consumers in the UK.

So how does Apple foster such loyalty in its consumers?

“Apple is a generous brand. When it launched its stores, it was one of the few places where you could go to use the internet for free and get advice from the absolute experts,” Roth says.

Workshops, summer camps and one to ones dominate Apple’s customer service offer to create the added value of shopping at Apple for consumers.

Apple is revolutionising mobile commerce and retailers are taking advantage of the functionalities that its technology provides. In terms of Apple’s own success as a retailer, it is difficult to see any single factor that sets it apart.

Currys’ staff “pass on knowledge in a non-patronising way”, says Thompson, just like Apple’s blue T-shirted staff, who are more than willing to have a chat about their products. Yet it was Apple that made it into the top 10 in a Which? consumer survey released last month of the top 100 high street stores, while Currys was placed in the bottom 10.

Apple’s ability to tie its marketing, product, customer service and store strategy together not only defines its success but provide a blueprint for how brands will succeed in the future.