24 years after Steve Jobs was told stores won't work

From the «ask a pro» department:
Title: 24 Years After ‘Sorry, Steve: Here’s Why the Apple Stores Won’t Work’
Author: John Gruber
Date: Thu, 22 May 2025 21:04:54 +0000
Link: https://ritholtz.com/2025/05/sorry-steve/

Barry Ritholtz, in an excerpt from his brand-new book, How Not to Invest[1],
marking the occasion of the 24th anniversary of Cliff Edwards’s claim chowder
hall of famer[2], predicting doom for Apple’s then-new foray into its own chain
of retail stores:

There are many genuinely revolutionary products and services that, when they
come along, change everything. Pick your favorite: the iPod and iPhone, Tesla
Model S, Netflix streaming, Amazon Prime, AI, perhaps even Bitcoin. Radical
products break the mold; their difference and unfamiliarity challenge us. We
(mostly) cannot foretell the impact of true innovation. Then, once it’s a
wild success, we have a hard time recalling how life was before that product
existed.

The Apple Store was clearly one of those game-changers: By 2020, Apple had
opened over 500 stores in 25 countries. They are among the top-tier retailers
and the fastest to reach a billion dollars in annual sales. They achieved the
highest sales per square foot in 2012 among all retailers. By 2017, they were
generating $5,546 per square foot in revenues, twice the dollar amount of
Tiffany’s, their closest competitor. Apple no longer breaks out the specifics
of its stores in its quarterly reports, but estimates of store revenue are
about $2.4 billion per month.

May 2001 is so long ago, Daring Fireball hadn’t yet launched. So I can’t say I
predicted the success of Apple’s retail stores. But what I recall thinking, at
the time, was that it might work, and was definitely worth trying. Here’s the
nut of Edwards’s 2001 piece:

Since PC retailing gross margins are normally 10% or less, Apple would have
to sell $12 million a year per store to pay for the space. Gateway does about
$8 million annually at each of its Country Stores. Then there’s the cost of
construction, hiring experienced staff. “I give them two years before they’re
turning out the lights on a very painful and expensive mistake,” says
Goldstein. [...]

What’s more, Apple’s retail thrust could be one step forward, two steps back
in terms of getting Macs in front of customers. Since most Mac fans already
know where to buy, much of the sales from Apple’s stores could come out of
the hides of existing Mac dealers. That would bring its already damaged
relations with partners to new lows. In early 1999, Best Buy Co. dropped the
iMac line after refusing a Jobs edict that it stock all eight colors. Sears,
Roebuck & Co. late last year dumped Apple, sources say, after concluding that
sales were too hit or miss. And in recent weeks, Mac-only chains such as The
Computer Store and ComputerWare have closed down, citing weak margins. Now,
faced with competition from Apple, others may cut back. “When you choose to
compete with your retailers, clearly that’s not a comfortable situation,”
says CompUSA Chief Operating Officer Lawrence N. Mondry.

Two decades later, talking about the importance of Sears as a retail partner
looks pretty dumb. But to me, the obvious problem with this argument in 2001 is
that if Apple’s existing retail partners in 2001 were doing an even vaguely
good job, why was the Mac’s market share so low? At the time they were only a
handful of years past the crisis where the company almost went bankrupt. Apple,
in the old days, had some fantastic small mom-and-pop official retailers, but
they were small. And the big partners, like CompUSA, absolutely sucked at
showcasing the Mac. Their demo machines were frequently broken.

If you understood and believed that the Mac was a superior product, it was easy
to conclude that its relatively low market share must have been a function of
problems with its marketing and retail strategy. Gateway’s fundamental problem
had nothing to do with the fact that it was running its own retail stores — it
was that they were selling shitty computers. Apple was selling great computers,
but had shitty retail partners.

(I’m a longtime fan of Ritholtz’s writing; I’ve got a copy of How Not to Invest[1]
 — here’s a make-me-rich Bookshop.org link[3] — and it’s next on my reading
list after I finish Patrick McGee’s Apple in China[4].)
★ [5]

Links:
[1]: https://www.hownottoinvestbook.com/ (link)
[2]: https://www.bloomberg.com/news/articles/2001-05-20/commentary-sorry-steve-heres-why-apple-stores-wont-work (link)
[3]: https://bookshop.org/a/56320/9781804091197 (link)
[4]: https://bookshop.org/a/56320/9781668053379 (link)
[5]: https://daringfireball.net/linked/2025/05/22/ritholtz-sorry-steve (link)