Inside Steve's Brain - Leander Kahney [74]
Jobs hired Johnson, a big, friendly Midwesterner with floppy gray hair and a wide smile, in January 2000. His first three words to him were “Retailing is hard.” Jobs added, “We’re going to operate with a little bit of fear, because retailing is a hard business.”30
At first Johnson couldn’t tell anyone he was working for Apple. He used the alias John Bruce (a variation on his middle name) and a phony title to keep competitors from getting wind of Apple’s retail plans. Johnson didn’t start using his real name, even inside the company, until after Apple had opened several stores.
When Apple opened its first retail store in May 2001, most pundits thought the company was making a costly mistake. Gateway, the only other computer company with its own retail stores, was closing them down. Gateway’s stores weren’t attracting customers. Inexplicably, the company’s stores didn’t carry any inventory. Customers could check out the goods, but had to order them online, which killed the opportunity to make impulse sales. Instead, Gateway’s customers gravitated to the big-box stores, where they could compare offerings from different manufacturers—and buy what they wanted there and then.
Meanwhile, Apple hadn’t yet shown much sign of a turnaround. The Internet bubble was bursting, the NASDAQ was in the tank, and Dell, which seemed to have the perfect business model for computers—sell direct over the Internet—was crushing all comers. Apple’s revenues had shrunk from $12 billion to $5 billion, and it was only just posting a profit. The iPod wouldn’t be launched for another six months (and no one had any idea of the smash hit it would become). It seemed like the worst possible time for a struggling company to embark on an expensive, unproven experiment in retail.
“I give them two years before they’re turning out the lights on a very painful and expensive mistake,” retail expert David A. Goldstein told Business Week, echoing a sentiment widely held at the time. Not one industry watcher, Wall Street analyst, or journalist went on record to say it was a good idea. “Few outsiders think new stores, no matter how well-conceived, will get Apple back on the hot-growth path,” Business Week said.31
Enriching Lives Along the Way
Until the 1990s, most stores sold goods from a variety of manufacturers—the department store model. But in the late 1980s, The Gap revolutionized retail by dropping other brands and concentrating on its own line of clothing. Peddling mountains of stylish but affordable “casual basics,” The Gap took off like a rocket. It went from $480 million in revenues in 1983 to $13.7 billion in 2000 and entered the history books as the fastest-growing retail chain. (It went sideways after that, but that’s a different story.) Now The Gap’s model has been emulated by dozens of retailers, especially in apparel, but also by tech firms like Sony, Nokia, and Samsung. Even Dell, the perennial Web-only retailer in the boom years of the nineties, is opening booths at malls and selling computers through Wal-Mart, Costco, and the French Carrefour supermarket chain in Europe.
Most retailers are interested only in selling as much merchandise as possible. Gateway called it “moving metal.” This philosophy led Gateway to certain inevitable conclusions: be low cost, compete on price, and put stores where real estate is cheap, like out-of-the-way parking lots. But all these decisions turned out to be disastrous.
The biggest problem: no one visited Gateway’s stores. Most people buy a new computer every two or three years. To shop at a Gateway store, customers had to go out of their way. The store wasn’t located where they did their shopping—in the mall. The store was in a remote parking lot. At the height of Gateway’s retail operation, when the company owned nearly two hundred stores employing about 2,500 people, traffic was 250 people