The Subtle Seismic Shift of the Apple Watch Specialty Store?

[NOTE: This post is essentially a 2-parter. Part 2 is even more of a thought exercise, so don’t click the above link/read “after the jump” if you’re not a fan of “wild speculation”.]

Galeries Lafayette. Isetan Shinjuku. Selfridges London.

We know what they are, at least I do now. (Storied retailers in France, Japan and the UK.) We know which company they’ll soon be hosting. We have some pretty solid, though not complete, information/intel of what they’ll be (the stores won’t open until April 10, after all, and they may “change their stripes” over time, you never know). And since they went through the trouble of establishing retail presences, and actual websites, I’m gonna take a wild guess and say these stores are meant to be permanent, not “pop-up” (which Apple has done at least once before).

I understand why, from my little listening post on the Web, there just hasn’t been much discussion about those “three little stores” (operated and staffed by Apple) dedicated to Apple Watch. I mean, they literally could be three of Apple’s smallest Retail outposts by square footage. And, to some degree, they may simply be the Apple-owned “counterpart” to Apple Watch’s retail partnerships at other fine department stores around the world.

On the other hand, what some might see a one-off or too insignificant to spill much digital ink over? Well, it could be the biggest thing to happen to Apple Retail since the first store at Tyson’s Corner, Virginia. And I’m actually not talking about sales per square foot at all. (An additional Fun Maybe-Fact: The Layafette/Isetan/Selfridge stores may be the first Apple retail stores ever to not bring in a single yen/franc/shilling of revenue on Day 1…through 13.)

It could also just be me, of course. I’m often wrong. So, read on if you like, and then we’ll see about the next one, two, five years.

“Obscurity Through (Relative) Obscurity”

Nope, I’m not talking about the “low share, unattractive malware target” or whatever “security-through-obscurity model” that Mac OS was said to benefit from for some years. Rather it’s my pet theory as to why no one seems to care much about the new Apple Watch specialty shops. After all, we’re talking a mere 3 out of over 450 Apple Stores.

As mentioned earlier, some think these three stores are ephemeral (perhaps in part because they don’t fit the long-established norm – more on that later). Plus, while they’ll be very high-profile, they’ll still only sell the “unproven” Apple Watch, which is essentially an accessory; probably some core accessories for the accessory; and as of now, do nothing else (yep, you’ll have to go to a regular Apple Store for Genius Bar service). That also lends some “relevance obscurity” in the minds of many, I suspect – and that’s before the “sounds nice and all, but I won’t be visiting a luxury department store in France/Japan/UK anytime soon” element.

Amusingly, Retail itself is mildly “obscure”. While an enterprise operating at an over-$20B annual revenue run rate since FY 2014 (all the Retail-specific data we’re ever likely to have moving forward, thanks to the accounting change), that’s still a “mere” 11.7% of Apple’s FY2014 revenues. So to oversimplify, Apple Watch stores are a bit less than 0.7% of 11.7% – meaning there is an objective basis for deeming these three Apple Watch shops as having “negligible” impact, even if they significantly outperform the “average” Apple Store. To do that at the present run-rate (assuming a “Watch ASP” of around $600 inclusive of extra bands, other accessories and AppleCare+), each Apple Watch-only store would have to sell more than 19,000 or so units per quarter per Watch store, or about 210+ units per day.

So when you step back, let’s be honest. Apple’s bread-and-butter, Mac-and-iPad-and-iPhone-and-all-that-other-stuff-selling retail store push in China is the biggest news for that segment.

…or is it?

Sea Changes in Apple Retail

When you think about it (or, overthink about it?), Apple Watch specialty stores at Galeries Lafayette/Isetan/Selfridges (if that isn’t an Ahrendts signature, what is?) are the most exciting, daringly different Retail operations Apple’s done in years. Even as they’re pretty much destined to be the most “architecturally unimpressive”. Even if, at present, they look like nothing more than “tiny experiments” at the most.

The following observations may well be highly unoriginal. But since I haven’t really seen them elsewhere, I think they’re worth pointing out. In no particular order:

Addition by Subtraction

With the exception of the Apple Company Stores and one-off(s) like the purpose-built, temporary SXSW “iPad 2 launch store”, there has never been an Apple Store that wasn’t full-service in my recollection. Which is to say, regardless of size, Apple Retail Stores have always offered core products plus a Genius Bar. Galeries Lafayette, Isetan and Selfridges will be the first, stark exceptions to this rule. Meaning Apple Watch locations’ stock-in-trade will (have to) be sales experience – translating, ideally, into the “highest-touch” Apple retail establishments ever.

You might not be able to eliminate all of the distractions of “popularity”, but by dedication to a particular subset of Apple product and eliminating formal post-purchase support, a “pure Apple Watch [Edition] customer” should have a much more pleasant (ahem) time than braving the supposedly overcrowded-yet-admittedly-less-“personal” full-scale Retail stores. It may not seem like much now, but in my exceedingly humble opinion, Apple’s laying the foundation for future specialty store concepts centered around product categories which we outsiders know nothing about.

The Next Generation of Retail Partnerships

To those still thinking that Apple doesn’t partner well, this should serve as a powerful counterargument on the retail side. Apple may be a tough negotiator, but it’s got itself some prime retail space within three high-end department stores. According to Wikipedia, Galaries Lafayette was founded in 1912. Isetan, 1886. Selfridges, 1909. You don’t just bully your way into retail kiosks at those establishments, and even if you could, it wouldn’t escape notice.

If these particular department stores are happy to host Apple-operated store-in-stores (a bit different than Best Buy, etc.), well, there’s plenty more, and the Watch Store concept can be replicated at any number of malls around the world.

Apple also mentioned Apple Watch being available “at boutiques in major cities across the world including colette in Paris, Dover Street Market in London and Tokyo, Maxfield in Los Angeles and The Corner in Berlin.” While it’s important for Apple Watch to make a “fashion statement” at launch, Apple really doesn’t need these boutiques to help Watch succeed – you can have it shipped-to-door just like always. Sure, it’s a savvy move to increase Apple Watch’s visibility and street cred, but really, who benefits more from these partnerships, Apple or the boutiques?

New Retail Spokes and the Possibility of Other Apple Specialty Stores

Apple’s now comfortably at the point where it can refer post-purchase support to nearby Genius Bars (included with each “full Retail” store), rather than having a discrete in-Watch Store repair center (though that isn’t necessarily a bad idea, or something that Apple won’t roll out in the future). In other words, it’s ready to create a system of retail spokes.

The Mac was imagined by Steve Jobs as the digital hub in 2001 (the iPod being Apple’s first self-designed “spoke” product), and now the full-service Apple Retail Store has taken its place as the center of Apple’s brick-and-mortar world. Unlike Mac, as long as iPhones, iPads, Apple Watch, Macs :D, and similarly-sized key hardware products are sold in increasing numbers, this will continue to be the case for Apple’s original do-it-all retail concept. Apple Retail Store expansion should continue, basically as long as Apple Inc. continues to grow. But it’s no longer the one-size-fits-all solution to a given retail problem.

Apple’s next product may be best-served by a custom retail solution (well, let’s leave TVs and cars aside for the moment). And why not a custom service?

[NOTE: Part 2 is even more of a thought exercise, so don’t click or read on if you’re not a fan of “wild speculation”.]

And Now for a Totally Different Brick-and-Mortar Concept

The other month, Tim Cook envisioned a post-wallet world where, say, a passport and a driver’s license (and a health insurance card, and so on) can be kept in digital form (about 8:30 in). The obvious silent assumptions – that they’re provisioned to a device, one designed by Apple and purchased by its customers (say, a future iPhone, at least for now).

“Wait a minute. You’re not suggesting, even in a far-future, potentially-highly-unlikely scenario, that Apple will actually set up brick-and-mortar establishments to directly support your digital identity? As in, an Apple ID Store?!”

Really?

Hey, why not?

To be clear, I have no idea when even digital government ID pilot programs would begin. Mainstreaming? Feels like decades away. And yes, there are enormous barriers to Apple even getting peripherally involved in ID storage, provisioning and protection and it’s not hard to think of a few right off the bat.

• In the US alone, there’s 50 state governments to deal with, each with varying priorities and budgets, with up to 50 different approaches and possibly even more points of view on “privatizing” one of government’s essential functions. And if you can get past all that, there’s probably a competitive bid process, one that Apple, mighty as it is, is not guaranteed to win for any number of reasons.

• Even in such an iPhone stronghold market, the other half of smartphones run Android, complicating any common, secure digital ID platform whether in hardware or software. Will Apple join an existing standards consortium, or lead one of its own (say, in concert with IBM)?

• Lately, Apple’s taken a “hands off” approach to user data, on-device content/communications and payment info, rendering itself unable to see transactions and messages many other players are very keen on collecting, analyzing and profiling. Getting too involved in ID provisioning signals an opposite approach that would surely make privacy advocates wary.

And yet – national, state and local governments outsource to private companies (directly or indirectly) all the time. They don’t do full-in-house development of the software that takes your driver’s license photo. They didn’t in-house the computer, the printer or the plastic card stock/lamination.  Public universities partner with Google for e-mail and apps. CalPERS, one of the largest pension funds in the world with around $300 billion in assets under management, has a ton of external investment managers. Infineon (sound familiar?) is (or was) a supplier of the chip embedded in the current chip-embedded US passports. As I understand it, Smart Card Alliance members use their products and technologies to control facility access by government employees and authorized contractors across the globe.

Believe it or not, millions upon millions of customers place a lot of trust in Apple. Who’s to say Apple won’t have a seat at the table when demand, or necessity, for digital, provisionable identification reaches a critical point? By then, Apple will have had some time to prove it effectively safeguards payment information, and has a gold standard trusted security platform (given Apple Pay, probably co-developed or consortium-led) that states can build their ID provisioning upon.

Of course, that also means there may come a time where Apple will “cross a line” and need to take greater responsibility for digital ID provisioning, even identity protection. Hence, the need to be more than just online and on the phone.

So…will Apple issue your driver’s license? Yeah, probably not. But once your government ID’s been provisioned to a trusted, presumably secure electronic device such as an iPhone (hello, biometrics), you have the items needed (along with, in most cases, your biometrics and your face) for identity verification, no small or uncommon thing in this world. Most US citizens need only update their driver’s license/State ID every 4-8 years or so, and passports every 10. But they’re displayed and checked against much more often than that.

And there’s three firms that come to mind that do identity verifications quite a lot: Experian, Equifax, and TransUnion.

A retail installation that assists with identity integrity, maybe as part of a paid identity protection service? Offers notary/verification services for certain major online and offline transactions? Helps lock down all provisioned digital ID cards along with payment tokens in case of physical or virtual theft, and warns the major credit rating agencies? That’s crazy talk!

Then again, in 2001, no one thought Apple would become a worldwide music store, much less make a smartphone with biometrically-secured contactless payments. And a certain Channel Marketing Corp. president gave Apple Retail two years before it turned out the lights on a very painful and expensive mistake.

So who knows. Maybe there’s something to Apple brick and mortar expanding to support other aspects of customers’ digital lives after all. And to think the first signs might have been three Apple Watch stores nestled in Galeries Lafayette, Isetan Shinjuku and Selfridges London.

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2 thoughts on “The Subtle Seismic Shift of the Apple Watch Specialty Store?

  1. Interesting thoughts in the first half; second half on ID probably needs a separate thousand words (or graduate-level research paper).

    If the Watch is the first of Apple’s “wearable” line, then the personalization of the retail experience will very much be enhanced by these partnerships with high-end retailers.

    • It’s not really even a giant leap since I don’t know if it will ever happen. But Retail is finally changing from the first basic model. A lot more becomes possible now.

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