Retail Strategy of Apple
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Transcript of Retail Strategy of Apple
RETAIL STRATEGY – APPLE STOREGroup 5 – Sec ‘A’
Madanish Kanna PGP/15/023Lakshmi Nirusha PGP/15/134
Baing Sanket Suresh PGP/15/135Chandra Prakash Gaund PGP/15/138
Sarada Prasanna Dalai PGP/15/179Sangam Hariprasad PGP/15/314
RETAIL MANAGEMENT PROJECT
CONSUMER ELECTRONICS AND APPLIANCES RETAILING
2004-09: Strong growth in this retail sector, expanding by 39%
2009-14: channel’s strong performance is expected to continue with an evolving retail environment
Drivers of growth
Increased per capita income
Increased consumer spending
Automation & Technology
advancement
Product Replacement and
upgradation
Life style changes
Knowledgeable consumers
Price comparison
Brand awareness
High online purchase
Compatibility issues
One place shopping is preferred
Accessories and spares
Support and issue resolution
Customer loyalty can be built
Consumer DemographicsTech savvy youth and early adopters of innovationPeople who want to set themselves apart – personality relevance
CON
SUM
ER P
REFE
REN
CES
& B
EHAV
IOU
R
APPLE Inc.Founded on April 1970, Apple Inc is an American MNC that designs, develops and sells consumer electronics, computer software, personal computers
World’s third largest mobile phone maker after Samsung and Nokia
As of Nov 2012, Apple has 395 retail stores in 14 countries along with online Apple Store and iTunes Store
BUSINESS STRATEGY Commitment to bring the best user experience to customerHigh quality and innovative products to stay ahead of the curve Best buying experience through knowledgeable salespersons Business management is on geographic basis for better insights into consumer preferences and demand
•Global economic condition and financial turmoil has materially adverse effect
•Highly competitive market subject to rapid technological change
•Frequent product introductions and transitions necessary
•Inventory risk, asset risk, purchase commitment cancellation risk
•High dependence on manufacturing and logistic services from outside US
•Intellectual property ligitation issues
•Support from third party developers
•Quality problems•Risk of international operations and rules and regulations
•Legal issues
Economic and Environmental
factors affecting business
Target Audience
PC users wanting to
be perceived as unique
and different
Willing to have fun
with technology
EVOLVING CONSUMER
PROFILES
Younger consumers
Photographers and creative professionals for graphical performance
Early Adopters of technology
Apple targets people and not markets, Focuses on users and lets them decide how and where they will use its products
Affluent people and less price sensitive
Music enthusiasts
and fans (12-35)
POSITIONING
Apple’s differentiation strategy
•Think different•Management style – a single executive committee•Design DNA
Positioned as a premium brand that meets a need – Needs based positioning
Samsung holds a leadership position in the smart phone market
•Broad, deep and refreshed Android offerings•Has multiple mid-range and mass market models
Apple iPhone is more reliable than Samsung, Nokia or Motorola phones (reliability scores)
• In terms of the number and frequency of issues and complaints
Highly innovative products and supreme quality of service
Apple (24%) Nokia(12%) Samsung(29%) Blackberry(10%)
•Product innovation•High quality user experience• More dependent on profits from smart phones than Samsung
•High reliance on Windows Phone•Need to convince leading carriers to support Windows•Advertising efforts are required
•Strong execution of product design, distribution and marketing•Smart phones on multiple OS platforms•Risk diversification
•Declining shipments•Future performance highly dependent on the new generation Blackberry 10 OSCOMPANY IMAGE wrt.
COMPETITION
CORPORATE STRATEGY• Help Apple stay relevant in the digital music era
iCloud and iTunes
• Apple’s retail shift entirely away from boxed software• Price of digital downloads cheaper than boxed retail
Launch of the Mac App store
• CDMA version of iPhone was developed• All US networks can sell iPhone• User base grew from 97 to 327 million
AT&T and iPhone exclusivity ends
• On Android users HTC, Samsung
Patent Wars
Product portfolio•Macintosh (Computing Systems)• iPods(Portable Digital music and video players)
• iPads (portable multimedia players)
• iPhones
Also a variety of•Related Software, services, peripherals
•3 party digital content and applications
•Networking solutions
Primary Business
BUSINESS MODEL
Vertical Integration is the key to success Major products sold through third parties B2B sales also play a major role
THE APPLE STORE
GENIUS BAR
Technical Support and troubleshooting The ‘heart and soul’ of Apple Stores technician retention rate >90%
Apple observed declining customer loyalty due to ill-trained and maintained Mac sections at big box computer stores
Apple store- core touch point to drive the Apple brand experience
First Apple store was opened in Virginia on May 15,2001
Vertical integration of the Apple products, retail and customer experience within the store
395 stores worldwide as of Aug 2012 – US $ 16bn worth merchandise
Genius Bar at all apple stores for support, repairs and workshops for the public
Better customer service and efficient processing of transactions
More control over the presentation style of Apple products and the Apple brand message
Effective brand building by interacting directly with customers
“Apple stores have been responsible for turning the boring computer sales floor into a sleek playroom filled with gadgets”
-Ron Johnson, Former Sr. VP (Retail Operations)
THE RETAIL MIXStore design and display
Communication Mix
Location Strategy
Merchandise & Assortment
Customer Service
• Apple also uses e-commerce to sell its products online – Online Apple Store, iTunes Store• Warehousing, distribution and other outsourcing operations are controlled by a central data center in the Headquarters
• Design patented stores• Open display• Touch and feel products
• Premiun segment• 2 pronged strategy
• Low discount on products
• Supplementary incentive for advertising
• Exciting logos and taglines• Adverting, Personal selling
• Well trained staff• ‘What would like to do today’•Genius bar, Personalized approach
• High traffic locations, cities•Malls•Urban shopping centers
Pricing
• Wide variety•No product boxes• hands-on experimentation
APPLE ABROAD…
iTunes
•Apple launches iTunes availability in a market with language and content specific media.
•iTunes is available in 111 markets in 2011.
Apple
Online Store
•Apple adds hardware to retail offering.
•Apple’s online store is available in 37 markets in 2011.
Full Retail Presence
•Store-based entry typically marked by flagship stores with smaller ‘regular’ Apple stores following subject to demand.
•Apple operates retail stores in 12 markets in 2011.
3 Phase entry to minimize risk
PRICING STRATEGY iPad Mini created barriers to entry and kept price at floor Perceived switching costs when owning >1 deviceIncreased perceived switching costs if they own more than 1 deviceiPhone maintaining ~70% manufacturing margin, enabling positive long-run economics
HUMAN RESOURCES – Apple’s Greatest strength to deliver quality products On the job attitude – extensive training Some HR nuggets•Its not about selling•There is cutesy acronym•Steve Jobs was involved very much•The customer is always right•Fire for being late•Highly criticized practices78%
22%
Apple store geogrpahical distribution
US local International
SW TSTRENGTHS WEAKNESSES
One of the oldest PC hardware manufacturers
One of most globally recognized brands
Leader in product innovation
Incredible brand loyalty
Unmatched product quality
New top management
Resources incompatible with other computers
Limited distribution channels
High prices of products
Low preference in the IT system for businesses
OPPORTUNITIES THREATS
The market gap
Huge opportunity in the entry level segment
Cater the low-end segment with quality as focus
Business IT system centric product development
Improves after sales support
Intense rivalry from competitors
Substitution effect
Law suits for innovation infringement can hamper the brand
Open source android/linux market
Continuous innovation
11/0
714
/07
09/0
922
/10
16/0
117
/03
23/0
408
/06
11/0
714
/07
09/0
928
/09
04/1
105
/01
20/0
308
/04
29/0
407
/06
01/0
920
/10
22/0
106
/06
07/0
704
/10
2008 2009 2010 2011
-
100,000
200,000
300,000
400,000
500,000
600,000
0
2,000,000,000
4,000,000,000
6,000,000,000
8,000,000,000
10,000,000,000
12,000,000,000
14,000,000,000
16,000,000,000
18,000,000,000
20,000,000,000
Apps Downloaded
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of A
pps
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of d
ownl
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Focus on media devices helped in Vertical Integration Apple transformed itself from a computer brand manufacturer to a media device manufacturer and retailer Multiple revenue streams from App store – revenue per store is up with a 19% increase to $51.5 Mn, compared to $43.3 Mn in 2011
APPLE
30% of revenue generated through App store
Software developers pay $99 per year to access iOS development tools
Revenues from mobile advertising platform iAd
•High level of customer service•Innovative store designs•Appealing to customers •Apple’s move to vertically integrate created one of its biggest strength of controlling a future cash cow (App Store)
Strengths
•Retail future is dependent on predicting the next “MUST – HAVE” electronics
•Should try to launch a new device before smart phones run out of growth
Threats
APPLE RETAIL
COMPETITION
Direct -> Samsung, Blackberry, Nokia
Indirect -> Multi Brand electronic Retailers
App Stores : The future cash cow
Financial Analysis
Company Return on Invested Capital
Return on Assets Gross Margin
Apple 32.8% 21.3% 44.4%
Samsung 14.36% 10.78% 37%
Growth is high in both Apple and Samsung
However more margin in case of Apple products
Blackberry is no more competitive as it used to previously
Apple products launch philosophy different from Samsung
Microsoft Office Excel Worksheet
iCloud• Data security and portability
Pay• Use phone as credit card
Search• Next-Gen search interface, extending Siri
(intelligent PA & knowledge navigator
TV• Huge opportunity in the LED TV market
Artificial Intelligence• Using state-of-the-art product
development & innovation to enter robotics market
The future of
Bridge price gapsBut this could lead to downgrading the brand image and affect
brand perception
Hardware innovation
Improve desirability of Apple hardware through innovation thereby preventing customers from shifting to other brands
Store based expansion
Tap opportunities in emerging markets like China and Brazil by opening more stores in high income centers
Diversification
Huge opportunity in TV, AI, Search engine, Pay & Business IT Systems
Come close to the customer
More no. of retails stores & improved after sales support
The entry level segment
Can thrive in this segment by addressing product quality
Future Strategy
REFERENCES www.apple.com/retail/ www.euromonitor.com/electronics-and-appliance-specialist-retailers www.datamonitor.com/ www.idc.com/getdoc.jsp?containerId=prUS23455612#.UStC2jByDSs www.marketresearch.com/First-Research-Inc-v3470/Consumer-Electronics-Appliances-Stores-7250364/ www.forbes.com/sites/matthewcarroll/2012/06/26/how-retailers-can-replicate-the-magic-of-the-apple-store-online/ appleinsider.com/articles/12/11/27/apples-ipad-driving-e-commerce-as-market-shifts-from-desktop-based-purchaseswww.brighthand.com/default.asp?newsID=19827&news=Apple_verses_Samsung_Nokia_Motorola_Reliability FixYa report on mobile phone reliability 2012 articles.businessinsider.com/2012-04-27/tech/31415422_1_smartphones-cellphone-market-apple-and-samsung/2Wikepedia.org switchtoamac.com/site/understanding-apples-positioning-part-1-a-premium-brand-at-a-premium-price.html techland.time.com/2012/05/07/six-reasons-why-apple-is-successful/ gigaom.com/2010/08/26/apple-doesnt-target-markets-it-targets-people/
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