Wednesday 20 February 2019

Luxury out, sales deals in as Apple changes retail tack

 

New Apple retail chief Deirdre O’Brien
New Apple retail chief Deirdre O’Brien

Mark Gurman

Apple has named its third retail chief in seven years, seeking to shake up store operations while casting about for the next big hit as the iPhone era wanes.

Apple said company veteran Deirdre O'Brien will replace Angela Ahrendts, who served in the role for about five years. Ms O'Brien is the first insider tapped to run the Apple division since Ron Johnson opened the first Apple store in 2001 and left a decade later.

The departure of Ms Ahrendts, Apple's top female executive, was a surprise. But it also marks a turning point for Apple and its approach to retail. Sales of the iPhone - its biggest product line - peaked last year, putting more pressure on Cook to find new revenue streams while experimenting with promotional pricing tactics that Ahrendts eschewed.

With smartphone demand stagnating, Apple is building new digital services and subscription businesses that don't need a large network of retail stores as much as its consumer hardware operations. For the first time, the retail chief will also have other priorities because Ms O'Brien will continue to lead human resources.

When Ms Ahrendts joined Apple in 2014, she brought a luxury focus from her time running designer apparel company Burberry Group. She quickly turned Apple stores into stylish showcases for the company's high-end devices, including the Watch which was initially marketed as a luxury product, with some models costing more than $10,000.

Under her guidance, Apple avoided cut-price deals for most of its devices on big shopping days like Black Friday, in favour of gift cards attached to purchases.

The pricey Watches didn't sell well and Apple has refocused the device as a health-tracking accessory. And more recently, the company has relaxed its strict pricing approach for iPhones as demand fell for the latest models. About month before Ms Ahrendts' departure was announced, CEO Tim Cook warned the company would miss its Christmas sales target for the first time since 2001.

In December, as Apple executives worried about demand, the company asked retail employees to promote the new iPhones using methods not seen before. Technicians were told to push iPhone upgrades to consumers with out-of-warranty devices. Senior sales staff had to make sure other retail workers were suggesting upgrades, and easels offering generous trade-in deals for the iPhone XR were erected in stores. Apple's online homepage was also replaced with reduced iPhone pricing that required a trade-in of older models.

Those tactics may not have gelled with the retail environment Ms Ahrendts tried to create. In an interview with 'Vogue' magazine last week, she said "the tragedy in retail is that it has become about numbers". She also said she missed some things about the fashion industry. Ms Ahrendts was credited with modernising Apple's store designs, integrating the online operation and developing extensive workshops that kept customers coming back to the retail locations. But some consumers in recent years have complained about long wait times to purchase products and get appointments with technicians.

"Her focus was integrating the online and offline experience, which in some ways took the focus away from an excellent in-store experience," said Gene Munster, managing partner at Loup Ventures. "The brick-and-mortar store still has friction around the consumer experience, and Apple is committed to making it better." Cook called the announcements "bittersweet" on Twitter, thanking Ms Ahrendts and saying that he could think of "no one better" than Ms O'Brien to run Apple's retail. Ms O'Brien has worked at Apple since the 1980s and before taking over its HR function was a VP in charge of sales and operations.

Bloomberg

Indo Business

Also in Business