Will Apple change its strategy after retail leadership revamp?

SC Yeung February 08, 2019 13:00

Apple Inc. has reclaimed its position as the world’s most valuable listed firm earlier this week as the company's share price returned to the US$170 level, bringing its market capitalization to more than US$820 billion as of Wednesday.

The technology giant also surprised the market on Tuesday by announcing that its head of retail business, Angela Ahrendts, will leave in April after five years with the company. It also announced that Deirdre O’Brien, currently the vice president for human resources and a 30-year veteran at the company, will take new responsibilities for Apple’s retail and online stores in an expanded role as senior vice president of Retail + People.

The changes came after Apple suffered a decline in sales and earnings during the holiday season quarter for the first time since iPhone launched a decade ago.

Market analysts speculated that Ahrendts was to bear part of the responsibility for the poor results, particularly with regard to the iPhone XS and XR series. The company, of course, will deny any connection between the poor holiday sales and Ahrendts' decision to leave, but given her position in the retail and online store business, it's hard to ignore her role in setting the product prices as well as the marketing strategy before the product launch.

The expensive price tags of the new iPhones are chiefly to blame for the poor performance. And during Ahrendts' term, Apple has been positioned as a luxury brand in the technology sector. This allowed the company to set its pricing at a level higher than that of its peers, while at the same time reducing its competitiveness in certain emerging markets such as China and India.

In an internal staff memo issued on Tuesday, Apple CEO Tim Cook said the company is searching for new ways to elevate in-store and online experiences while forging deeper relationships with customers who love Apple’s products.

In a press release announcing the latest appointment, Apple said: “O’Brien will bring her three decades of Apple experience to lead the company’s global retail reach, focused on the connection between the customer and the people and processes that serve them."

The main idea here is "connection" between the customer and Apple's frontline people. There is no doubt that Apple is providing good service to its customers, both online and offline. But many users think that the quality of its service is declining as the company puts more focus on sales rather than maintaining a high level of after-sales service.

The "town hall" concept of Apple retail stores, initiated during Ahrendts' term, is part of the company's efforts to maintain its image as a luxury brand.

Moreover, iPhone prices surged to more than US$1,000 each last year, up from just US$399 when the first model launched 11 years ago.

However, Apple fans are finding it increasingly difficult to make appointments for repair services, as store staff are spending more of their time on sales.

Some customers complain that they need to wait for three weeks for a repair appointment at the store. This is but one of the signs that the company is not devoting enough manpower and attention to customers' service needs.

People will surely watch how O'Brien will address this pain point in Apple's retail business as the company faces stiffer competition in the market.

Apple now has more than 900 million active iPhone users. With such a wide customer base, the company can no longer afford to focus on top-tier customers with the highest spending power. It has to broaden its reach to include smartphone users who want to own an iPhone but at a more affordable price.

The company's current approach is turning this group of users to other brands.

With the global demand for smartphones slowing, Apple is building new digital services and subscription businesses that do not need a large network of retail stores as much as its consumer hardware business.

We hope that Ahrendts' resignation is a signal that Apple wants to return to a more realistic view of the market, and a desire to achieve its avowed mission of using the latest technologies and products to change the world without limiting itself to an exclusive and privileged group of customers.

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CG

SC Yeung

EJ Insight writer