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RETAIL MANAGEMENT PROJECT

RETAIL STRATEGY APPLE STORE


Group 5 Sec A Madanish Kanna PGP/15/023 Lakshmi Nirusha PGP/15/134 Baing Sanket Suresh PGP/15/135 Chandra Prakash Gaund PGP/15/138 Sarada Prasanna Dalai PGP/15/179 Sangam Hariprasad PGP/15/314

CONSUMER ELECTRONICS AND APPLIANCES RETAILING


2004-09: Strong growth in this retail sector, expanding by 39%

Increased per capita income

2009-14: channels strong performance is expected to continue with an evolving retail environment
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

Life style changes

Drivers of growth

Increased consumer spending

CONSUMER PREFERENCES & BEHAVIOUR

Product Replacement and upgradation

Automation & Technology advanceme nt

Consumer Demographics Tech savvy youth and early adopters of innovation People who want to set themselves apart personality relevance

APPLE Inc.
Founded on April 1970, Apple Inc is an American MNC that designs, develops and sells consumer electronics, computer software, personal computers Worlds 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 customer High 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 Early Adopters of technology Affluent people and less price sensitive EVOLVING CONSUMER PROFILES

Apple targets people and not markets, Focuses on users and lets them decide how and where they will use its products

POSITIONING
Apples differentiation strategy Music enthusiasts and fans (12-35)
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

Younger consumers

Willing to have fun with technology

Photographers and creative professionals for graphical performance


Apple (24%) Product innovation High quality user experience More dependent on profits from smart phones than Samsung

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


Nokia(12%) High reliance on Windows Phone Need to convince leading carriers to support Windows Advertising efforts are required Samsung(29%) Strong execution of product design, distribution and marketing Smart phones on multiple OS platforms Risk diversification Blackberry(10%) Declining shipments Future performance highly dependent on the new generation Blackberry 10 OS

COMPANY IMAGE wrt. COMPETITION

CORPORATE STRATEGY
Help Apple stay relevant in the digital music era iCloud and iTunes

Primary Business

Product portfolio
Macintosh (Computing Systems) iPods(Portable Digital music and video players) iPads (portable multimedia players) iPhones

Launch of the Mac App store

Apples retail shift entirely away from boxed software Price of digital downloads cheaper than boxed retail

Also a variety of
CDMA version of iPhone was developed AT&T and iPhone exclusivity All US networks can sell iPhone ends User base grew from 97 to 327 million On Android users HTC, Samsung Patent Wars
Related Software, services, peripherals 3 party digital content and applications Networking solutions

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


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

GENIUS BAR

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)

Technical Support and troubleshooting The heart and soul of Apple Stores technician retention rate >90%

THE RETAIL MIX


Design patented stores Open display Touch and feel products

Store design and display

Customer Service
Well trained staff What would like to do today Genius bar, Personalized approach

Premiun segment 2 pronged strategy Low discount on products Supplementary incentive for advertising

Pricing

Merchandise & Assortment


Wide variety No product boxes hands-on experimentation

Communication Mix
Exciting logos and taglines Adverting, Personal selling

Location Strategy
High traffic locations, cities Malls Urban shopping centers

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

APPLE ABROAD

3 Phase entry to minimize risk


Apple launches iTunes availability in a market with language and content specific media. iTunes is available in 111 markets in 2011. Apple adds hardware to retail offering. Apples online store is available in 37 markets in 2011.

iTunes Apple Online Store

Store-based entry typically marked by flagship stores with smaller regular Apple stores following subject to demand. Full Retail Apple operates retail stores in 12 markets in 2011. Presence

PRICING STRATEGY iPad Mini created barriers to entry and kept price at floor Perceived switching costs when owning >1 device Increased perceived switching costs if they own more than 1 device iPhone maintaining ~70% manufacturing margin, enabling positive long-run economics

Apple store geogrpahical distribution


US local
22%

International

78%

HUMAN RESOURCES Apples 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 practices

SW
STRENGTHS
One of the oldest PC hardware manufacturers One of most globally recognized brands Leader in product innovation Incredible brand loyalty Unmatched product quality

T
WEAKNESSES
New top management Resources incompatible with other computers Limited distribution channels High prices of products Low preference in the IT system for businesses

OPPORTUNITIES
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

THREATS
Intense rivalry from competitors Substitution effect Law suits for innovation infringement can hamper the brand Open source android/linux market Continuous innovation

App Stores : The future cash cow


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

600

20,000 18,000

500

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 No. of downloads - million

APPLE
23/04
11/07 09/09 16/01 11/07 09/09 04/11 20/03 29/04 01/09 22/01 07/07

No. of Apps - 000

400

300

200

100

Software developers pay $99 per year to access iOS development tools

30% of revenue generated through App store

Revenues from mobile advertising platform iAd

2008

2009

2010 Apps Downloaded

2011

Strengths APPLE RETAIL Threats

High level of customer service Innovative store designs Appealing to customers Apples move to vertically integrate created one of its biggest strength of controlling a future cash cow (App Store)

COMPETITION
Direct -> Samsung, Blackberry, Nokia Indirect -> Multi Brand electronic Retailers

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

Financial Analysis
Company Return on Invested Capital Apple Samsung 32.8% 14.36% Return on Assets 21.3% 10.78% Gross Margin 44.4% 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

The future of

Future Strategy
The entry level segment Can thrive in this segment by addressing product quality Come close to the customer More no. of retails stores & improved after sales support Diversification Huge opportunity in TV, AI, Search engine, Pay & Business IT Systems

iCloud
Data security and portability

Pay
Use phone as credit card

Search
Next-Gen search interface, extending Siri (intelligent PA & knowledge navigator
Store based expansion
Tap opportunities in emerging markets like China and Brazil by opening more stores in high income centers

TV
Huge opportunity in the LED TV market

Hardware innovation Improve desirability of Apple hardware through innovation thereby preventing customers from shifting to other brands

Artificial Intelligence
Using state-of-the-art product development & innovation to enter robotics market

Bridge price gaps But this could lead to downgrading the brand image and affect brand perception

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-ElectronicsAppliances-Stores-7250364/ www.forbes.com/sites/matthewcarroll/2012/06/26/how-retailers-canreplicate-the-magic-of-the-apple-store-online/ appleinsider.com/articles/12/11/27/apples-ipad-driving-e-commerce-asmarket-shifts-from-desktop-based-purchases www.brighthand.com/default.asp?newsID=19827&news=Apple_verses_Sams ung_Nokia_Motorola_Reliability FixYa report on mobile phone reliability 2012 articles.businessinsider.com/2012-04-27/tech/31415422_1_smartphonescellphone-market-apple-and-samsung/2 Wikepedia.org switchtoamac.com/site/understanding-apples-positioning-part-1-a-premiumbrand-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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