Apple's retail store operating secrets to maintain sales

There was an article about Apple retail stores that published some data about Apple's operating performance and employee wages, and based on the data, it was inferred that about 7% of Apple retail store sales were used for service or operating costs, most of which were employee wages. The following is the latest profit and loss statement of the retail store (calculated per customer):

According to the above figure, in the last quarter, Apple retail stores had revenue of $49.2 per customer. The profit of the retail stores was $10.46 per customer, and the consumption time of each customer was 14 minutes (this data is calculated based on the number of full-time employees in the retail stores - there are 41,000 employees in all retail stores, and an average of 112 employees per retail store). Assuming that the time spent by customers is included in the employee salary, that is, $15 per hour (including various benefits), then the service cost can be calculated based on the above data to be $3.55 per customer, so the cost of goods sold is $35.2 per customer.

From the above data, we can calculate that the ratio of service cost to sales is 7% [1].

To solve this problem, first you need to understand most stores. In fact, electronics retailers don't spend too much of their sales on employee salaries, but they do pay a lot of commissions. From a related article, I collected the commission rates paid by different retailers:

Mobile phone store: $25 phone registration fee, 10% of which goes to accessories sales

Cosmetics or handbags sold at department store counters: 3%~5%

Shoes, various electrical appliances, and electronic products: 8%~10%

Furniture: 2%~6% (low commission rate including salary)

Real estate: 2.5%~3% (no salary)

Car salesman: 30% minus operating costs

Given the above data, it makes sense that Apple would spend 7% to 10% of sales on employee wages, which is comparable to what other retailers set aside from sales.

Of course, this is different from other retailers because Apple does not pay commissions, but only uses 7% to 10% of sales to pay such a large staff. This means that Apple employs five times as many people as its retail store sales staff (the average Apple retail store has 112 employees, which is the same size as the Polo Ralph Lauren discount store).

So Apple has to pay more than 100 employees a pittance instead of paying commissions to a small group of employees. Since Apple makes the same profit, why does Apple use a portion of sales to pay employees' salaries instead of paying commissions to its best sales staff?

In fact, Apple is different because its customers buy different things. That is, a large number of employees in a store are hired to provide different services to customers, rather than just doing sales work.

Although the operating cost ratio is the same, customers feel that they are enjoying a service in Apple stores instead of being sold products. This is why Apple has so many customers. Customers will buy more products in Apple retail stores and pay more attention to the brand.

At the same time, this is a virtuous circle. More customers means higher visibility of Apple retail stores, which in turn attracts more customers and more employees.

Therefore, hiring based on service levels and hiring based on sales are two different approaches and will produce different results.

But this does not mean that Apple's model can be used by other companies. The whole system depends on the correct understanding of the product and the accurate positioning of the brand image. It must be said that if Apple only paid commissions to its employees, the sales of Apple products would not be as impressive as they are now, and sales would also decline.

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Notes:

【1】This figure may be underestimated and the actual service cost may be 10%.