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

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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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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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