At Providence's Success by Design conference, Apple executive Ron Johnson says while investors were wary, the science museum-like stores work.

09:08 AM EDT on Friday, April 23, 2004

BY TIMOTHY C. BARMANN
Journal Staff Writer

Journal photo / Sandor Bodo Ron Johnson, who previously brought design to Target, says Apple sought "an atmosphere that was inviting, ... forward-looking, warm, interactive."

PROVIDENCE -- It surely wasn't the first time someone called Steve Jobs crazy.

Three years ago, the chief executive officer of Apple Computer stood in front of investment analysts and journalists to unveil Apple's well-kept secret: it was jumping into the retail store business.

The timing raised eyebrows. Internet and other technology companies were doing poorly. The Nasdaq Composite Index had dropped 55 percent from its peak in 2000. Sales of personal computers were declining. And the only other computer maker with retail stores -- Gateway -- was imploding.

"The whole group had one reaction," said Apple executive Ron Johnson. "Are you serious?"

Johnson, who heads Apple's retail operations, recalled yesterday that skepticism during a keynote speech at the seventh annual Success By Design conference at the Rhode Island Convention Center.

The event is held by the Center For Design & Business, a joint venture between Bryant College and the Rhode Island School of Design. The center's mission is to develop stronger and more profitable businesses by combining design and business skills.

"Steve's a pretty persuasive guy," Johnson said, "but I don't think he convinced one person in that room."

Johnson came to Apple at Jobs' urging after a stint at retail giant Target. Johnson headed that company's retail strategy and is credited with bringing stylishly designed, high-end products, such as the Michael Graves teapot, to the store at prices the average shopper could afford.

He said he told Jobs that he didn't want to create just another computer shop. Johnson's challenge was to come up with something different.

What he came up with was indeed unique. Unlike most retail outlets, Apple stores are sparse, open and have a feeling that's more like a hands-on exhibit at a science museum.

The idea, Johnson said, was to make customers feel as though they are in a public place, like a library.

Only 25 percent of a store's floor space is devoted to products, he said, such as the company's popular iPod music player. Products are stocked, but they are kept in the back, out of view.

"We wanted an atmosphere that was inviting, not intimidating, forward-looking, warm, interactive," he said. "And it makes you feel intelligent just by being there."

The interiors are made with common materials -- wood, stone and glass -- applied in uncommon ways.

For example, the SoHo store in New York has a glass staircase to encourage people to visit the second floor, which is often a challenge for retailers. The store in Tokyo, Japan, has glass elevators with no buttons. They are constantly moving, transporting people between floors.

One of the most popular sections of the Apple stores are the banks of Macs connected to the Internet that serve as a kind of cyber-cafe, offering free Internet access to anyone. The high demand for an empty seat is a benefit, Johnson said. "Busy stores create buzz."

That section is not hidden away, but intentionally placed in the most attractive space in the store, he said.

"We devote the best space to the free service," Johnson said. "We give that, in effect, back to the public."

Then there's the genius bar, where customers can walk up and get help from a staff "genius." That's free too.

Has this different approach worked?

Johnson said it's been very successful. The company has opened 78 stores in the past three years. (There is no Apple store in Providence. Johnson said the company has been working on getting into the Providence Place mall for about a year, but hasn't been able to secure the kind of space it wants.)

He said that the stores will take in $1.2 billion in revenue this year and will earn $30 million in profits. The average revenue per square foot is $3,000 annually, he said.

It's not easy to track sales made through the stores compared with other avenues, such as online purchases, he said. A shopper may see a product in a store and then go buy it later on the Web when he or she gets home.

But he said that Apple has gained a small percentage of market share in areas where the stores are located. And in most cases, other retailers that sell Apple products in the same area as an Apple store are seeing sales increase, rather than decrease.