Sorry, Steve: Here's Why Apple Stores Won't Work (2001)

What the article missed on is the economics of Apple. They don't sell at 10% margins, they sell at like 30 or 40% margins. So, at the same $8 million/store/year they would make 3-4x the profitability of a Gateway store. So, based on the estimates of needing to make $12 million a year they only needed to make $3-4 million a year for it to make sense to run the stores.

The writer was focused on market share, not margin. That is a common mistake that people make when they look at Apple and it's been wrong over and over again for over a decade now.

If there is one "secret" to Apple, Google, Microsoft, and Intel it's profit margin. All of those companies have solid margins that allow them to invest in growth over time. Somehow other companies seem to believe that you can run at break even or a loss and somehow turn on the profits once you reach some huge scale.

Smart, successful companies are turning a profit consistently on just about everything they do at any significant scale and they shut down projects that don't.

Sure its fun to laugh at things people said that turned out very, very wrong. I think one of the basic premises isn't all that far off though:

>The way Jobs sees it, the stores look to be a sure thing. But even if they attain a measure of success, few outsiders think new stores, no matter how well-conceived, will get Apple back on the hot-growth path.

Sure, that's short sighted but its not quite wrong. The stores worked out because new and exciting products drove people there. Apple finally had a way to sell their vision the way they wanted to.