Fortune: Apple is best retailer in US

Apple's retail efforts have paid off in spades, despite serious doubts and criticism from prominent industry figures in the past. BusinessWeek challenged the Cupertino-based company's retail strategy in 2001, writing "Sorry Steve, here's why Apple stores won't work." TheStreet.com said "It's desperation time in Cupertino," and retail consultant David Goldstein chimed in with "I give [Apple] two years before they're turning out the lights on a very painful and expensive mistake." Five years later Apple opened its flagship store on Fifth Avenue in New York, and generates $4,032 in sales per square foot per year. In 2004 Apple reached $1 billion in annual sales faster than any other retailer in history, according to Fortune, and last year the company saw sales reach $1 billion in a single quarter. "Our stores were conceived and built for this moment in time - to roll out iPhone," said Apple CEO Steve Jobs, who recalled the decision to move into retail.

"We looked at it and said, 'You know, this is probably really hard, and really easy for us to get our head handed to us'," Jobs said. "So we did a few things. No. 1, I started asking who was the best retail executive at the time. Everybody said Mickey Drexler, who was running the Gap (Charts)."

Drexler joined Apple's board, and Jobs worked to moved to recruit the head of merchandising at Target, Ron Johnson.

"One of the best pieces of advice Mickey ever gave us was to go rent a warehouse and build a prototype of a store, and not, you know, just design it, go build 20 of them, then discover it didn't work," Jobs noted.

Jobs and Johnson built the first Apple store in a warehouse near the Apple campus, but soon realized that they had laid out their hardware by product category rather than how customers were likely to shop for items.

"We were like, 'Oh, God, we're screwed!" Jobs said, who had wisely created the mock store prior to opening a public retail center. Jobs and Johnson redesigned the store at the cost of 6-9 months, but "it was the right decision by a million miles," Jobs recalled.

The first store opened in Tysons Corner, Va. with three quarters of its space arranged around customer interests, rather than the products themselves.

Since then Apple has done exceptionally well with its retail efforts, and was recently named by Fortune Magazine as the no. 1 most admired company for innovation.

"You could say that Apple has landed — not only on our street corners and in our malls but also, for the first time, on the top ten of our Most Admired Companies list," Fortune wrote.

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