Apple Inc. named its third retail chief in seven years, seeking to shake up store operations while casting about for the next big hit as the iPhone era wanes. On Tuesday, Apple said company veteran Deirdre O’Brien will replace Angela Ahrendts, who served in the role for about five years. O’Brien is the first insider tapped to run the Apple division since Ron Johnson opened the first Apple store in 2001 and left a decade later.
The departure of Ahrendts, Apple’s top female executive, was a surprise. But it also marks a turning point for the company and its approach to retail. Sales of the iPhone — Apple’s biggest product line — peaked last year, putting more pressure on Cook to find new revenue streams while experimenting with promotional pricing tactics that Ahrendts eschewed.
With smartphone demand stagnating, Apple is building new digital services and subscription businesses that don’t need a large network of retail stores as much as its consumer hardware operations. For the first time, the retail chief will also have other priorities because O’Brien will continue to lead human resources.
When Ahrendts joined Apple in 2014, she brought a luxury focus from her time running designer apparel company Burberry Group Plc. She quickly turned Apple stores into stylish showcases for the company’s high-end devices, including the Watch which was initially marketed as a luxury product, with some models costing more than $10,000.
Under her guidance, Apple avoided cut-price deals for most of its devices on big shopping days like Black Friday, in favor of gift cards attached to purchases.
The pricey Watches didn’t sell well and Apple has re-focused the device as a health-tracking accessory. And more recently, the company has relaxed its strict pricing approach for iPhones as demand fell for the latest models. About month before Ahrendts’ departure was announced, Chief Executive Officer Tim Cook warned the company would miss its holiday sales target for the first time since 2001.
In December, as Apple executives worried about demand, the company asked retail employees to promote the new iPhones using methods not seen before. Technicians were told to push iPhone upgrades to consumers with out-of-warranty devices. Senior sales staff had to make sure other retail workers were suggesting upgrades, and easels offering generous trade-in deals for the iPhone XR were erected in stores. Apple’s online homepage was also replaced with reduced iPhone pricing that required a trade-in of older models.
Those tactics may not have gelled with the retail environment Ahrendts tried to create. In an interview with Vogue magazine last week, she said “the tragedy in retail is that it has become about numbers.” She also said she missed some things about the fashion industry.
Ahrendts was credited with modernizing Apple’s store designs, integrating the online operation and developing extensive workshops that kept customers coming back to the retail locations. But some consumers in recent years have complained about long wait times to purchase products and get appointments with technicians. For many months last year, customers seeking to exchange batteries, as part of a low-cost battery replacement program for iPhones, had to wait several days for their repairs to take place in stores.
“Her focus was integrating the online and offline experience, which in some ways took the focus away from an excellent in-store experience,” said Gene Munster, managing partner at Loup Ventures. “The brick-and-mortar store still has friction around the consumer experience, and Apple is committed to making it better.”
Cook called the announcements “bittersweet” on Twitter, thanking Ahrendts and saying that he could think of “no one better” than O’Brien to run Apple’s retail.
O’Brien has worked at Apple since the 1980s and before taking over the company’s human resources function was a vice president in charge of sales and operations. She had to anticipate product demand and make sure the company could reach and sell new devices to consumers. As vice president of people, she oversees worker development, recruiting, and employee support.
“We are encouraged that a core Apple insider took over the reigns at this juncture,” said Dan Ives, an analyst at Wedbush Securities. “An outsider running retail going into one of the most pivotal, defining periods for Cook & Co. in the company’s history would have been a risky endeavor.”
Still, others questioned O’Brien’s dual role. “Combining HR and retail into one position is more than a little bit odd,” Michael Gartenberg, a former senior marketing executive at Apple, wrote on Twitter. “Apple clearly didn’t want the retail position to be left blank. It will be interesting to see how this plays out long term.”―Bloomberg Quint