Lessons in retail experience
by petermeI’m belated in posting this (I blame SXSW) but two things in my inbox seemed related.
One was David Pogue’s newsletter column on CompUSA closing many of its stores.
The other being the Fortune article on how Apple is America’s best retailer.
As a reader of this blog you probably know where my post is heading. CompUSA fails because it plays in the commodity-and-low-margin space, squeezing as much as it can out of efficiencies and low labor costs; it is unable to compete with online retailers who can discount even further. Apple succeeds because it plays in the experience-and-high-margin space, providing tantalizing environments that compel visits.
CompUSA thought that what they got with real estate was shelf space. And so they crammed stores with as much product as they could. But they’ll never be able to compete with an online retailer’s infinite shelf space.
Apple realized that there’s a lot more that you get from real estate. There are things you can do in a physical environment that you can’t do anywhere else — play with products; getting immediate servicing when a product needs support; take classes on tools. At an Apple Store, there is remarkably little “shelf space.” Yet their $/sq.foot ratio is unparalleled. You do the math!
March 14th, 2007 at 12:47 pm
But let’s be honest… Best Buy swallowed up CompUSA’s market share, not the Apple Store. The Apple Store’s $/square foot ratio is still the best in the category, but they weren’t in direct competition with CompUSA in the way Best Buy is. Best Buy, while clearly not an Apple Store, developed a better lower-cost/higher-value experience than CompUSA and has made meaningful extensions on top of it (e.g., Geek Squad). You could say Best Buy is the Target to CompUSA’s K-Mart.
March 15th, 2007 at 2:51 pm
Good point Brandon. Also an important metric in retail success is comp store sales. It would be interesting to see how they compare to Bang & Olufsen…kinda the same approach for high-end home electronics.
Also,I wonder how their in-store experience will be affected with the launch of the iPhone…it’s kinda like physical IA with the need for space for the product(s) and it’s service subscription (ie. cingular and other telcoms who will carry the phone). What product category do they reduce to accommodate the new product or do they bundle it with the other displays?