Apple opens first Manhattan store: So Ho debut kicks off string of store-openings

DSN Retailing Today, July 29, 2002 by Linda Saucerman

NEW YORK -- It's a Mac, Mac world. At least that's the hope of Steve Jobs, whose company began an aggressive store roll out on July 18 with the grand opening of its most ambitious Apple store to date in New York City.

The Apple Computer Inc. ceo, who spoke a day earlier at the Macworld Expo at the city's Jacob K. Javits Center, looked on as die-hard Mac fans and the tech-curious clicked their way through the 16,000-square-foot, two-level store--a format that is more than twice the size of Apple's other retail locations.

"We have other stand-alone stores, but this is our biggest store, our first big-city store and our first two-level store," said Ron Johnson, senior vp of retailing.

While Apple would not say if this new format would serve as a prototype, the SoHo location does kick off a store-opening frenzy. The company, which began its retail store concept last year and had 29 stores prior to July, said it would have at least 50 units by year's end.

"We'll open one store a week from now until Thanksgiving--20 stores in 20 weeks," said Johnson. "By Thanksgiving, 85 million people will live within 15 miles of an Apple store."

This aggressive new approach to store openings contrasts sharply with the cautious, noncommittal frame of mind Apple displayed earlier in the year, when it declined to publicize plans for the new retail concept. Such a change in tone has led some industry watchers to speculate that success at the new stores has been better than expected. However, Apple closely guards the performance results of its new stores, and results for its retail division as a whole have not been strong.

For the quarter ended March 30,2002, Apple's retail segment showed net sales of $70 million and an operating loss of $4 million. On a per-store basis, quarterly sales performance has averaged roughly $2.6 million, which translates to roughly $10 million in annual sales per store.

A company press release said the quarterly retail segment figures were an "improvement" over the $8 million loss in the first quarter of 2002. Apple also reported that it looks to make further gains in the retail segment as the year progresses, but ultimately expects the segment to report a loss for all of 2002.

"We're doing well in a soft economy and expect to do better when things pick up," added Johnson.

To jump-start retail sales and increase what is now only 5% of the marketshare, Apple will continue this fall to position a handful of new retail stores in high-exposure, luxury markets, including The Grove shopping center in Los Angeles; Oakbrook Center, an outdoor mall located in the Chicago suburbs; and the Fashion Show mall in Las Vegas.

But the new SoHo store is by and far Apple's biggest retail marketing coup to date. Unlike Apple's other freestanding stores, the SoHo location is on a small, cobblestone street surrounded by ornate buildings often featured in architectural guidebooks.

Once a gritty industrial area favored by starving artists, in the past 10 years, this neighborhood has become a retailer's delight. Apple's neighbors include the posh--Prada, Chanel and Louis Vuitton--to the preppy--J. Crew, Tommy Hilfiger and Kate Spade. And the hip, young shoppers who frequent these stores, along with the busloads of tourists, are exactly the demographics Apple hopes to reach.

With music by techno artist Moby pumping and staffers bearing shirts reading, "My PC is listed on eBay," the store's location also is in sync with a format that lies somewhere between retailtainment and one that is strictly showroom. A simple metal sign with an Apple cutout serves as signage to the store. For the grand opening, the display windows were filled with photos from Apple's "Switch" ads, a print and TV campaign using real people who have gone from using a PC to a Mac. Once inside, the centerpiece of the store is a glass-encased staircase that adds to the airy feeling created by the blond butcher block-like display tables and large skylight.

The first floor is dedicated to product and is divided into five categories: music, movies, photo, home and pro. Within the first four categories, there is a mixture of both Macintosh products, as well as third-party merchandise, such as Canon digital cameras and Sony camcorders. The idea is to show store visitors how compatible Macs are with the equipment they may already own.

Up the glass staircase and here begins the retailtainment portion of the store. At the top of the staircase visitors are greeted by a 46-seat theater, where customers can participate in product demonstrations or attend classes. At the SoHo store, a "Made on a Mac" presentation will be held in the theater every day in July. The talks are led by successful professionals, such as a National Geographic photographer and a MW producer, who will discuss how they used a Mac to create both at work and at home.

Also on the second floor is an Apple store staple--the "Genius Bar" service counter. But unlike other stores, there are two bars here, totaling 40 feet and providing plenty of room for customers to step up and ask questions.