Steve Jobs on Apple Retail Strategy: The Fifth Avenue Store

Welcome back to Street Signs, Apple making a big bet on the Big Apple. The computer giant now is a prime piece of real estate on Manhattan's luxury-lined Fifth Avenue. Apple's new showcase store opens tonight in the city that never sleeps, and fittingly, it will be open 24-7, 365 days a year. What is behind this retail strategy? Joining us live from Apple's newest store is CEO Steve Jobs. Mr. Jobs, it's a great pleasure to have you with us. Thank you. Glad to be here. Well, I want to start off first with exactly where you are, Midtown Manhattan, the home of Bergdorf. You're right across the street, Prada, Cartier, a lot of stuffy luxury stores.

Perhaps the biggest headline here is that Midtown Manhattan is finally cool enough for an Apple store. Well, you know, we went into retail about five years ago, opened our first store actually five years ago today, and they've succeeded beyond our wildest dreams. And one of the stores was here in Manhattan in Soho, and it was our most expensive store to build, and we were a little concerned that, you know, how much business would it do? And it's just, again, done phenomenal business. We've got so many Mac users here in New York, and that store has gotten so crowded that we realized we had to open a second store in New York City.

And we found this incredible location where the largest real estate developer in New York, Harry Mackleau, had just bought the GM building. And he saw our Soho store, and he said, you've got to be in my new building. And we said, well, where do you have in mind? And he said, well, underneath the plaza, there's some stores. And we said, subterranean? Are you crazy? But we called him back a day later, and we said, we have this crazy idea. What if we could redo the plaza and make it this beautiful plaza? We'll put our store underneath it, and we want an entrance right in the middle of the plaza. And he said, what kind of entrance? We said, how about a 32-foot glass cube? And he loved the idea, and we got it through the city, and we built it, and it's opening tonight.

And we're pretty excited about it. Now, you said that the Soho store was extremely expensive. I've got to imagine, given all of the enthusiasm with which you described everything down to the cube, that this one was even pricier. Well, you know, what's interesting is we've never believed in the philosophy of having flagship stores that don't make money. Every single one of our stores makes money. And so, although we do spend a little more on these stores in New York, you know, construction is more expensive. And we also, you know, they have to stand up to a lot of abuse. They still do very well for us. And now, here's the big question. And our producer, Ellen Igges, she was very interested in this one, the 24-hour concept. What is this going to be, the biggest pickup location in all of greater New York?

You know, one of the things we decided very early on was we wanted to provide great service to our customers. And so, half the employees, we have 300 employees that will work in the store. Half of them are dedicated to things like our Genius Bar, which you can come in and for free get your questions answered, get your computers repaired, whatever you need, we try to take care of for you. And so, we're highly service-oriented. It's gotten to the point with our Soho store where we open at 6 o'clock in the morning to serve people at the Genius Bar, and we don't close till midnight. And we thought, you know, it isn't very much further to go where we could just try a store that's open 24, 365.

And so, if you're, you know, you're working on your film editing and at 2 o'clock in the morning you've got a problem, we're going to be there for you. All right. So, a genius can meet a Bergdorf blonde. But here's the big question. Is this another way of your saying to your customers that you're continuing to expand in retail and they're not going to be able to buy a Mac ever in a Circuit City or a Best Buy? Oh, no. You know, I think, again, we have partnerships with both Circuit City and Best Buy. We sell primarily iPods through them. But you can buy Macs in a lot of independent resellers. It's just that we want to invest more to make an even better buying experience. And I think the buying experience and the ownership experience of owning a Mac is maybe the best of any product I know.

And, you know, it's because of the investment we're making in these stores and because of the passion we have for really taking care of our customers. But you're willing to expand, then, the distribution beyond the stores because it's interesting. You've got the Intel chips now. You've got computers that can run OS X as well as running Windows. Is your goal eventually to have Apple be even bigger, to sell to corporations, so that there's not a Dell here on my desk at CNBC, but a Macintosh? Well, you know, one of the advantages we have is we have a market share of around 5 percent, depending on which market research firm you listen to. And you know, you could say, well, that could be bigger. And of course, we'd like it to be bigger. One of the advantages is, you know, we've only got to convince 5 percent of the rest of the world to buy a Mac, and we've doubled our market share.

So clearly, these stores we're hoping will help us grow our company. And indeed, almost half the computers we sell in our stores are to people that have never owned a Mac before. But you think you're going to get a 10 percent market share in the U.S.? You know, we don't predict, but we'll be glad to tell you how we're doing. All right. Well, let me ask you this, then. In terms of your growth internationally, you talked about that. Is that going to be a big focus for you? Because a lot of analysts I spoke with, they said, hey, the one thing we want to hear from Mr. Jobs is, are we going to hear any plans about a big overseas expansion? Because I don't feel they've quite heard it yet. In terms of our retail stores? In terms of Apple overall, one of the best-known brands in the world. But in the iPod, for example, not as ubiquitous, certainly, in Europe as it is here.

Well, iPods are extremely successful in the U.K. And I think we are the number one MP3 player in France and Germany and many other countries in Europe. But we can always do better. And as you know, we sell, I think, over 40 percent of our revenues come from international sales today. So we could do better than that. But I think we're doing pretty well now. And in terms of your chips, I know you've expanded, obviously, to Intel. That shook the tech world. What about AMD? You know, AMD's got some interesting products at the very high end of the server space. But the part of the market that we concentrate on the most is notebooks and consumer desktops.

And for that, Intel's got the best chips. This Yona chip, or the Core Duo that they have right now, is the best chip in the world for notebooks and for consumer desktops. So right now, I think Intel's roadmap looks very, very strong for the kind of products, the processors we need to build the products that we build. And Mr. Jobs, last question. I have an iPod Shuffle, and I am very curious and eager to know when I might be able to buy an iPhone. Can you tell me when that will be available? You know, we never talk about unannounced products. So if we ever do announce something like that, I'd love to talk to you about it then. All right. Well, we appreciate your joining us. Thanks again. And good luck with your newest store. Thanks a lot. All right.

Steve Jobs, the CEO of Apple. Well, Intel and Dell no longer joined at the hip, and the NASDAQ is headed for the worst losing streak of the millennium.