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Apple gives stores a Burberry touch

Tech giant hires Angela Ahrendts, who turned around the British apparel firm

October 16, 2013|Chris O'Brien and Tiffany Hsu
  • During Angela Ahrendts' tenure as chief executive of Burberry, the British retailer's revenue grew to $5.1 billion in the year that ended March 31 from $1.1 billion in fiscal 2005, and its shares soared 268%.
During Angela Ahrendts' tenure as chief executive of Burberry, the… (Peter Foley, Bloomberg )

SAN FRANCISCO — Apple Inc. has hired Burberry Chief Executive Angela Ahrendts to run its retail division, hoping her background melding technology, fashion and commerce will be the right mix to navigate the future of the stores that have been a cornerstone of its success.

Although not a household name in the U.S., Ahrendts is a superstar in Britain because she led a turnaround of the revered but aging retail chain. The Midwestern native was the highest-paid CEO in Britain, where her leadership and tech savvy combined with her status as a rare female running a public company have drawn comparisons to Facebook Inc. Chief Operating Officer Sheryl Sandberg and Yahoo Inc. CEO Marissa Mayer.

Ahrendts "was able to take what was an iconic but stale brand and transform it back into a coveted, youth-centric fashion brand," said Marshal Cohen, an analyst at NPD Group Inc. "Before it becomes stagnant, Apple is looking to inject some new and exciting methods to keep the brand engaged with that ever-fickle younger generation."

Ahrendts will need that experience and confidence to hold her own as she becomes the lone woman among the top 10 senior executives at Apple. The company and its investors will be looking to Ahrendts to oversee Apple's online commerce as well as its stores.

When Apple opened its first store more than a decade ago, it bucked the conventional wisdom that said the days of bricks-and-mortar retailing were over.

Apple created stores with eye-catching designs where people could put their hands for the first time on revolutionary new products such as the iPhone and the iPad.

They became more than just stores, though. They became shrine-like destinations for Apple's growing legion of fans to congregate and experience the products with others. The stores offered powerful communal experiences, such as thousands of people lining up every year for the launch of new iPhones.

But there have also been signs lately that as the company's overall growth has slowed, the stores have also been seeing their ability to drive sales soften.

In the most recent quarter, which ended in June, Apple reported that retail sales fell slightly from a year earlier. In the first nine months of fiscal year 2013, which ended Sept. 30, average revenue per store slipped to $39.3 million from $40.3 million a year earlier.

Meanwhile, Apple was engaged in a prolonged hunt to find a new chief to oversee its retail strategy and operations. Ron Johnson, the architect of Apple's retail strategy, had left in 2011. His replacement, John Browett, lasted only a few months before being fired in October 2012.

In an email to employees obtained by the tech blog, Apple CEO Tim Cook said the search took so long because he wanted the new retail executive to run both the physical and online stores. Apple operates 415 stores in 13 countries.

"I have wanted one person to lead both of these teams for some time because I believe it will better serve our customers, but I had never met anyone whom I felt confident could lead both until I met Angela," Cook wrote. "We met for the first time last January, and I knew in that meeting that I wanted her to join Apple."

Ahrendts' official position will be senior vice president of retail and online stores. Analysts said that although Apple stores remain immensely popular, her biggest challenge will be keeping the experience they offer fresh.

"The Apple stores' metrics are absolutely off the charts in terms of productivity and customer visits versus essentially every other retailer on the planet," said Toni Sacconaghi of Bernstein Research. "I think the key questions going forward are the pace of store rollouts, where the geographical focus will be, and whether alternative store formats might be considered."

On that last item, several analysts said they think one possible change is a shift in focus from sales to services, such as its Genius Bar. The store Apple recently opened at the Stanford Center shopping mall, which is eight times larger than the one it replaced, is an example of how this might look.

The new store sports a "pavilion" design, with a front room dedicated to product displays. In the second half of the store, long wooden tables and stools offer places for workshops or deeper interactions with Apple staff.

Stephen Baker, NPD's vice president of industry analysis, said Apple stores may be making a broader transition toward being more focused on building the company's brand and customer loyalty, rather than just sales.

"This points to a little bit different future for what Apple stores mean to Apple," he said.

Delivering strong branding and retail experiences were among the achievements that helped make Ahrendts such a success at Burberry.

Born in Indiana, she had spent most of her career in the fashion industry when she was tapped to take over Burberry in 2006.

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