Going into the most critical sales period of the year, Apple’s retail ship has no captain. Again.
On Monday CEO Tim Cook let two of his top executives go. While the departure of iOS software honcho Scott Forstall is getting most of the attention, the retail operations department lost its leader too: John Browett, who just joined Apple in January, was also shown the door Monday. It’s also nearly a year to the day that Apple’s valuable retail empire lost Ron Johnson, who had built Apple’s formidable retail operation from scratch, to JCPenney. But this time, Apple has to start a sudden search for a replacement from scratch and the timing is far from ideal.
Hoping for happier holiday sales
Between October and December 2011 the the company saw its best quarter ever; Apple sold 37 million iPhones, 15 million iPads, more than 5 million Macs and 15 million iPods. The retail operation alone made $6.1 billion in sales during that quarter, and Apple stores sold more iPhones, iPads and Macs than ever before. And it’s no coincidence it happened when it did: the last three months of the calendar year have long been the most lucrative for PC and consumer electronics companies.
Of course, the holiday shopping time is big for any retailer. But for Apple it’s becoming critical to its success — last holiday quarter brought in more than half of the company’s net income for the entire year. But as big as last year was, Cook is actually putting more pressure than ever on holiday sales now, and likely for the foreseeable future: he’s lined up all of Apple’s most important products for a holiday season debut. Every department is looking to beat last holiday’s record sales, but the iPhone and iPad teams are done pushing out products; it’s up to Apple’s retail and operations department to get those devices and services into customers’ hands now.
Who will lead them?
Browett’s exit was not surprising to people paying attention. He made a series of bad moves once he arrived from U.K.-based Dixon’s, most notably trying to cut back on staff in Apple stores in hopes of boosting profit. He also failed to open new stores in China at the rate Apple had forecast.
Still, his departure is not the same as Johnson’s planned exit — Johnson gave more than four months notice before he left to assume the chief executive spot at JC Penney. This was a quick firing and now Cook has to start an executive search. To figure out who he could be looking for, it’s useful to look back at what he did last time.
Finding the right resume
The 10-month long search took him to a company outsider with international experience from an electronics retailer. On paper, that reads well. In practice? It didn’t work out because Cook chose someone with a discounting and cost-cutting mentality.
This time around, Cook could look inside. Apple retail operations veterans were passed over before, such as VP of Retail Jerry McDougal. Would Cook give insiders who know Apple’s culture and corporate expectations a better look this time?
It also seems like going with an electronics industry veteran wasn’t a great move. Apple doesn’t do electronics retail the way that Dixon’s, Best Buy or Fry’s does it. Perhaps Apple would be better suited to branch out to someone with experience in lifestyle retail, from Nike or Coach, someone who understands Apple’s extremely valuable brand. After all, Apple Stores are more lifestyle boutiques that happen to sell a limited amount of gadgets than a traditional electronics store anyway.
Global brand experience is a must, as is someone who knows how to operate a network of international stores. Apple’s growth is coming from outside the U.S.: Last holiday quarter in particular international accounted for 58 percent of Apple’s sales. Apple continues to grow in China — it will open its seventh store there next week. Apple had planned to hit 25 stores by the end of 2012, a goal it didn’t come close to hitting, so that’s likely to be an important priority for whoever fills this position. But it’s not just the Greater China region. Cook has said in the past the Apple would like to grow more in Brazil somewhere down the road too.
Whatever decision Cook makes is going to be watched carefully and have implications for the future of Apple’s growth and its very valuable retail brand. Doing this search while ramping up for the holiday isn’t ideal, although it’s possible Cook has been planning this move for a while: Browett was known to be on thin ice. But this does represent is a bigger and more symbolic opportunity for the company: to mix up the makeup of the leadership team so it’s not uniformly male and white.
As long as Cook is remaking the company into his own, it’s as good a time as any.