The Apple Stores: How a Sales Floor Became a Brand Experience

Why a computer store is instructive for small businesses

Around the turn of the millennium, computer makers sold their devices through dealers, electronics stores, and mail order. A store of one’s own was considered expensive and risky. Apple nevertheless opened its first own stores in 2001. Today, according to various counts, the company operates more than 500 of them worldwide, and the Apple Store is regarded as a model of a sales floor where you are meant to experience a brand rather than merely buy goods.

The guiding question of this case study is: How did a sales floor become a brand experience, and what of this can be transferred to a small business’s showroom, workshop, or trade fair booth? To answer it, we first compile the documented facts, then explain a mental model with the experience economy according to Pine and Gilmore, weigh two readings, and finally turn to transfer and its limits.

A store where you can only buy competes with every other store. A store where you come to understand something competes with no one.

The documented facts

On May 15, 2001, Apple announced it would open 25 of its own stores in the US that year. The first two opened on May 19, 2001, at the Tysons Corner mall in McLean, Virginia, and at the Glendale Galleria in California. According to press reports, almost 8,000 visitors came on the first weekend, and sales were about 600,000 dollars; the figures vary slightly by source. Responsible for building the stores was Ron Johnson, who had previously worked at the retailer Target.

The press release describes the store layout. Alongside areas for the devices, there were four areas for solutions: editing movies, editing photos, managing music, and educational software for kids. In addition came the Genius Bar, a staffed counter for questions, contact with the local Mac community, and service, as well as a theater with a large screen for demonstrations. At the opening, Steve Jobs said in essence that the stores offered a new way to buy a computer: customers could experience what a computer does instead of just hearing about megahertz and megabytes.

The mental model: the experience economy according to Pine and Gilmore

In 1998, Joseph Pine and James Gilmore described a progression of economic value in the Harvard Business Review. They illustrate it with the birthday cake: mothers once mixed flour, sugar, butter, and eggs that cost mere dimes. Later they bought a cake mix for a dollar or two, then ordered the finished cake from a bakery, and today many hold the entire party with a provider that sells an experience. Each stage sets the offering apart from the previous one and permits a higher price.

The core of the model: when goods and services become interchangeable, the next competition lies in designed experiences. According to the authors, an experience is not a vague feeling but an offering like any other. Many companies merely wrap experiences around their existing offerings to sell them better. According to Pine and Gilmore, however, the full benefit only goes to those who deliberately design experiences and charge a fee for them.

What the Apple Store did differently

The documented features show how the store connected the stages. The device itself is a good. The Genius Bar is a service. The areas for movies, photos, and music and the theater turn this into an experience: the customer sees not technical data but what they can do with the device. Jobs’ remark about megahertz describes exactly this shift from product to application.

Research on brand stores supports the idea that the store changes the image of the brand. Jahn, Nierobisch, Toporowski, and colleagues (2018) simulated a visit to an ordinary brand store and a flagship store in an experiment. The in-store experience updated participants’ brand experience. In the flagship store, this worked better when visitors came for enjoyment; in the ordinary store, when they wanted to get something specific done. For a business, this means: an experience space works mainly on visitors who bring time with them.

Two readings: experience as product or as sales floor

The first reading follows Pine and Gilmore. On this view, the Apple Store is an experience offering that lifts the brand above the product. It turns buying a device into a memorable encounter and thereby creates value an electronics store does not offer.

The second reading disagrees on one point. Pine and Gilmore recommend charging separately for experiences. Apple does not: admission is free, demonstrations cost nothing, and customers pay for the device. On this reading, the store is not an experience product in its own right but an exceptionally well-designed sales and service space that makes the value of the product tangible. The experience is financed through the price of the devices, not through a fee.

I consider the second reading the more useful one. It explains why the concept works at Apple: the products have high margins and a brand that attracts visitors before they enter the store. Without these preconditions, a space with a lot of floor area, staff, and free demonstrations could hardly be paid for. For small businesses, it follows that an experience space must pay for itself through the sales it triggers. What surrounds a service in B2B is described in the essay Service as a differentiator.

Limits of transfer: the JCPenney case

A documented case shows how hard the concept is to transplant. Ron Johnson became CEO of the US department store chain JCPenney in November 2011. He abolished coupons and most promotions in favor of permanently low prices and redesigned the stores. According to press reports, customers reacted with confusion, sales fell by about a quarter in 2012, and in April 2013 the company parted ways with Johnson. His predecessor returned.

The case is instructive for this case study for two reasons. First, it shows that a concept that works in one setting can fail in another if customers have different expectations. JCPenney’s customers were used to promotions. Second, it fits the findings of Hoch, Drèze, and Purk (1994), described in the case study dm-drogerie markt: a switch to permanently low prices only works if cost structure and price image fit. There are differing accounts of the reasons in detail; this case study does not evaluate the decisions of those involved.

What small businesses can transfer

A small business does not have a store in a prime location. But it almost always has a place where customers experience it: a showroom, a workshop, a trade fair booth, a site where references are visible. Three ideas from the Apple Store can be transferred.

1. Organize by application, not by product

   Show not what you offer but what the customer achieves with it. A bathroom showroom organized by life situations rather than by manufacturers follows the same logic as the solution areas of 2001.

2. Let customers try things out

   Let the customer work with their own case: their workpiece on your machine, their data in your software, their floor plan in your design.

3. Bring advice and service into one space

   A fixed point of contact for questions, including after the purchase, connects sales and support. On a small scale, it corresponds to the Genius Bar.

4. Measure the effect

   Decide which figure shows that the space pays off: share of visitors with a follow-up appointment, win rate after demonstration, revenue per visit.

How a business builds its brand through consistent behavior rather than budget is described in the essay Branding for small businesses. How customers can be involved in the process is shown in the case study IKEA. For the trade fair booth as a small experience space, the guide Trade fairs and events offers pointers.

Conclusion: how the sales floor became a brand experience

How did a sales floor become a brand experience, and what can be transferred? In 2001, Apple organized its first stores around what customers can do with the devices, let them try things out, and brought advice and service into the same space. The experience economy according to Pine and Gilmore explains why this works: where goods are interchangeable, a designed experience sets the offering apart. Unlike what the authors recommend, Apple charges no fee for it; the experience serves the sale of the devices and is carried by their margin. The JCPenney case shows that the concept cannot be transplanted without regard to customers, prices, and costs. What a small business can transfer is organizing by application, trying things out with the customer’s own case, and connecting sales and service, each measured by the sales it triggers.

1. This week: Write down where customers experience your business and what they see there today.
2. Next week: Mentally reorganize this place around your customers’ three most common applications instead of products.
3. In a month: Offer your next five prospects a demonstration with their own case and measure the win rate.

The Apple Store shows that a space can sell without pushing. It also shows that this only works if what you experience in it genuinely makes the product better.