Apple CEO on stores' biggest problem: They're not 'big enough'

Apple CEO on stores’ biggest problem: They’re not ‘big enough’

By Chris O’Brien

Feb. 12, 2013 12 AM PT

Apple’s retail stores have been a phenomenon over the last decade, a cornerstone of the company’s revival. But with some changes in leadership over the last year, there have been questions about the direction of Apple’s retail strategy.

During his appearance at the Goldman Sachs technology conference Tuesday, Apple chief executive Tim Cook reemphasized how crucial the stores remain to Apple. And he discussed the company’s expansion plans for its stores by noting that they were becoming so popular, their capacity was being strained by the number of visitors.

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“Some of our stores aren’t big enough,” Cook said. “It’s a privilege to have this kind of issue.”

To that end, Cook said the company is shutting down 20 stores and moving them to locations where they can be expanded. In addition, the company will open 30 stores at new locations, mostly outside the U.S., including its first in Turkey. Apple will now have stores in 13 countries.

Still, Apple’s retail division hit some bumps in the road last year. The architect of that retail strategy, Ron Johnson, left Apple last year to become chief executive of J.C. Penney. Johnson was replaced as senior vice president of retail by John Browett of Dixons. But Browett was fired nine months later.

Then in January, Jerry McDougal, vice president of retail, resigned. He was replaced by Jim Bean, former Apple vice president of finance. However, the company is still looking for someone to fill the top retail executive job.

Cook was not asked about these departures, and did not offer any additional information on the search for a replacement.

Last year, Apple’s 400-plus stores attracted about 120 million people. Cook said the stores’ popularity reflected the different philosophy that went into creating them.

“It’s a retail experience where you walk in and you realize the store is not here for the purposes of selling, it’s here for the purpose of serving,” Cook.

Cook said many Apple stores have evolved to become community gathering places, hosting schoolkids and local events.

“I’m not even sure ‘store’ is the right word any more,” Cook said. “They are the face of Apple for many of our customers.”

Apple spends about $1 billion annually on capital expenditures related to retail. Cook said the stores have been essential in terms of introducing people to new products. He said it’s hard to imagine the iPad being as successful as it’s been without having a place where customers can see and touch something they had never experienced.

“There’s no better place to discover and play and learn about our products than in retail,” Cook said.