ROME, ITALY - APRIL 21
Steve Jobs could not persuade retailers to present his products in the elegant manner that he visualized. Jobs’ answer was to start Apple stores. The big success of Apple stores is indisputable. Jobs reinvented retail with help from Ron Johnson.
Before joining Apple, Ron Johnson had a successful tenure at Target (TGT). Johnson left Apple to become CEO of J.C. Penney (JCP), a difficult situation at present. Johnson was replaced at Apple by John Browett as Sr. Vice-President of Retail. John Browett was fired in October.
Browett had been chief executive of British electronics retailer, Dixons. Dixons has approximately 1,200 stores. By all accounts, Browett did an excellent job in turning around Dixons under bad economic conditions. When Browett’s leaving was announced Dixons’ stock fell in London by 10% wiping around £50 million from the company’s value. This indicated that the stock market in London thought very highly of Browett.
Before joining Dixons, Browett headed online operations of Tesco, the biggest retailer in the U.K. As Browett’s firing at Apple indicates he was not successful at Apple.
The current news is that Jerry McDougal, vice president of retail has left Apple. His leaving occurrs at a time when the position of his boss is vacant.
It seems conceivable to me that McDougal’s leaving has nothing to do with problems at Apple Stores and he simply left because he was not chosen for the open position of Sr. Vice-President of Retail; there have been reports that Apple is close to filling the position. Apple moved swiftly by naming Jim Bean, previously Vice-President of Finance, to replace McDougal.
The real problem with Apple Stores runs deep. Apple sells high end products mostly to the affluent segment of society. Apple has mostly saturated the developed world with its stores. Continuing expansion and promotion of Apple products at stores such as Wal-Mart is not helpful to Apple Stores.
There is a lot of room for growth of Apple Stores in emerging markets. However, Apple faces a problem; its products are simply too expensive relative to median income levels in emerging markets. For example, it is estimated that India has only 30 million smartphone users out of a population of over 1.2 billion people.
China may become the largest market for Apple products surpassing the United States, but the disparity between the rich and poor in China is far greater than in the United States. To achieve further success in China Apple needs China Mobile and cheaper products. Apple has only eight stores in China compared to 250 in the United States.
The point is that until Apple comes up with new products more suitable for emerging markets, no amount of executive shuffling at Apple Stores is going to make much difference.
About Me: I am an engineer and nuclear physicist by background. I founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report, which publishes four newsletters to help investors profit from change. Write me: Nigam@TheAroraReport.com. Follow me here. Subscribers to The Arora Report are long Apple from $131 and have taken partial profits at $360, $525, $629, $568 and $610.
