Samsung and Apple: tale of two approaches

A retail analysis firm recently published a report after studying 160+ US retail chains. In terms of sales per square foot, Apple ranked No.1 with sales of US$ 5626 (approx INR 258,000) per square foot. With that number, Apple is almost two times ahead of their closest competitor (Tiffany & Co), and almost five times ahead of the closest technology related retailer (GameStop). When the first Apple Store was launched in 2001, it was ridiculed as an expensive mistake. Today, Apple’s retail strategy is considered to be one of the cornerstones of its business success. The stores, which are owned and operated by Apple (as opposed to the re-seller stores in India) go a long way in building the halo around the Apple brand.

Apple is very choosy about the geographic location of Apple stores – both in terms of the exact physical location and the market potential. In Asia, Apple does not even have an Apple Store outside China (the Hong Kong one is set to open soon). And in markets where they do have an Apple Store, the location is carefully chosen to create maximum impact. Many of the Apple Stores are landmarks in themselves – the 5th Avenue Store in New York, the one  in Paris Louvre and the Regent Street one in London come to mind. The stores themselves offer a great immersive experience of the Apple brand – visitors are free to browse through Macs, iPads and iPhones. The staff is usually friendly and knowledgeable with every Apple Store readily accepting a service issue on an Apple product, irrespective of where its bought. Such steps go a long way in strengthening the Mac cult – of belonging to an elite club. In the PC world, such retail experiences are rare.

Among Apple’s competitors – especially in the mobile space, Samsung is considered to be the most serious threat. It’s Samsung Galaxy S2 and Galaxy Tab are seen as the threats to the popularity of the iPhone and the iPad.  In India, aside from the many multi brand outlets, Samsung has its flagship stores – which sell the range of Samsung products from TV to mobile handsets. In this context, its interesting to see Samsung announce the opening of a Smartphone Cafe in Bangalore.

The ad highlights the fact the ‘Live Demos’ are available at the store  - as opposed to merely holding a dummy handset in your hand in most of the gadget stores in India. In a way, Samsung seems to be taking a leaf out of Apple’s approach to retail.

In the larger context, these brands have divergent approaches to product portfolio, advertising and focus markets. In mobile phones, Samsung offers a wide range covering entry level to super premium – there could be 100s of handsets in their range. Apple simply focuses on one – the iPhone. The nomenclature adopted by Samsung (and so many other mobile handset manufacturers) is similar: the mother brand followed by a combination of numbers (GTX 3950 variety). With Galaxy, they made a departure to a sub-brand approach. Even with Galaxy there are sub-sub brands with Ace, Champ and so on – again an attempt to take the Galaxy equity from super-premium to mid-priced. In terms of focus markets, Apple has clearly chosen China as the one market to focus in Asia. And the results are staggering. Samsung on the other hand, has aggressively gone after the Indian market attempting to be the pre-dominant brand in mobile handsets & tablets. Their advertising visibility is huge here (remember the blitz for Samsung Galaxy Tab) and also spend a lot in terms of ground activation.

In my view, Apple is doing the right thing by focusing on China, at the expense of India (Apple’s sales in the China region were “key” to Apple’s third-quarter results after they surged sixfold to $3.8 billion). I don’t think Apple would have achieved those kinds of results in India. I think it fits in with their overall strategy of not chasing the ‘value for money’ segment and focusing on the premium end.The success parameters seem to be different too – Apple chases bottom line and not unduly obsessed with market shares. Samsung too is perhaps doing the right thing by focusing on India, offering a product at every price point and yet appealing to the cream of the market with high end smart phones and tabs here that ‘do everything’. It fits in with their strategy.

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