Apple Computer's strongest marketing tool its hip retail boutique lands in Cairo
In the recent expansion of upscale retail locations at malls and boutiques in five-star hotels, one thing was missing until last month a large glowing Apple with a bite taken out of it.
In addition to aggressive restyling of its hardware and the immense popularity of the iPod, analysts credit Apple Computer's decision to open its own retail locations with pumping new life into the company in the late 1990s. The ultra-chic stores not only cut out the middleman for Apple, they have become one of its best marketing tools.
Although Apple has not franchised the model in the United States, it appears to be allowing its independent marketing centers (IMCs) abroad to license the business model and appearance of the 'Apple Stores' to official distributors.
Local computer retailer and repair center BestBuy has built Egypt's first Apple boutique, dubbed the Apple Center, in an agreement with Apple's Middle East IMC, Dubai-based Arabian Business Machines. BestBuy Managing Director Moamen Safa declined to explain the nature of the company's agreement with Kuwait-based Arab Business Machine [ABM]; Apple Computers did not return calls for comment by press time.
From the carved brushed-metal logo towering over Midan Shawraa to the matching white tables, walls and desktop computers, the BestBuy showroom looks just like the American Apple Stores.
"When [customers] come in, if it's not as good as in the States [they're] going to dislike it," says Habiba Labib, store operations manager, of the meticulous adherence to every element of the store's appearance.
Through its original Kasr El-Aini location, BestBuy offers a wide range of electronics products from companies like Panasonic and Motorola in addition to traditional software and computer equipment. The company has been selling and servicing Macs since it opened in 1985, and hopes an official-looking showroom will open their market beyond well-informed consumers with specific queries that are their typical clientele.
For example, BestBuy follows Apple's sales staff guidelines. English language is a priority, since that is how they learn most of the technical information. More significant, however, is that customers can come in the store, which is at street level, and play with all the toys Apple offers. Cameras built in to all new iMacs display passersby on their crystal-clear 17-inch screens. The brand new MacBook Pros now powered with Intel processors and able to run both Macintosh OSX and Windows operating systems are on display for the tempted tech nerd and curious kid alike.
"We set up the video and display so the customer can see the whole solution," says Ahmed El-Goumy, Apple Center's store manager. "The idea of the Apple Center is for the customer to live the Apple experience.
Anything and everything Apple can be experienced."
Although the products available are the newest Apple has to offer, and the sales staff is up to date, the whole experience is still a work in progress. American Apple Stores have a Genius Bar staffed with employees who can make on the spot repairs while the store is open. They offer a broad range of software, and anyone who buys a product gets a free tutorial in a plush room with leather couches and flat-screen displays.
BestBuy officials say they'll have the courses and a similar array of software at the Apple Center when there is demand for them.
Orchards overseas
The Apple Center's problem could be in timely service. Company officials insist they can fix computers bought in Egypt in a matter of days, as long as it is a new-model computer and the parts are in stock. But the story is different for machines covered under an international warranty.
"Apple [has] a relationship between the distributor and the Apple branch," says BestBuy's Safa. "The IMC is responsible for each country. ABM is the IMC for the region. It started with Kuwait, then Dubai and the rest."
Theoretically, BestBuy should be able service international warranties the same as local ones. Apple has what it calls a Global Service Exchange with all the customer data including personal information and applicable warranties. As long as the service center types in the serial number of the computer and the warranty is in order, then it should not be an issue.
But because BestBuy must authorize service through its IMC, which is given rights to authorize resellers and service centers, BestBuy cannot fulfill its service expectations quickly. For example, if someone brings in a broken computer bought abroad, BestBuy has to receive permission from the office in Dubai, which in turn gets authorization from France, the office coordinating the Middle East and North Africa.
Service orders are sent to Dubai every Tuesday. Once BestBuy is insured it will be reimbursed for the parts, it places the order, which is also on Tuesday. Even if the part is in stock, BestBuy will still order the part from abroad. It can take weeks to arrive. BestBuy pays the freight and the 10% sales tax, but no duties.
It is not clear if these additional costs will be passed on to the customer. According to the managers, the average wait time for replacement parts for a computer bought outside Egypt is six to eight weeks for what often takes a matter of hours in an American Apple Store.
Egyptians: think differently
Apple has been a preferred tool for educators in America because of an intuitive operating system that children can learn quickly and because in the past Apple has specialized on instructive software. Apple also offers significant educational discounts as an incentive. The recent tech learning initiative by the ministries of education and communication technology might help BestBuy get into the lucrative education market. The individual retail sales are good to establish a customer base, but the large orders are the moneymakers.
"Maybe we can have a good route in the next two years in telecom and education, which are the big tenders," says Safa.
BestBuy has not yet been able to sell its iPods with much success on the local market. While the tiny white earbuds of MP3 players are practically ubiquitous these days in American and European cities, they have not caught on here because the Customs Authority has classified the iPod a consumer electronic good, instead of a computer accessory. As a result, instead of a 10% sales tax by itself, BestBuy pays an additional import duty. The Apple Center is supposed to help that problem by playing up the iPod's chic.
Safa says his margins are pretty slim. His retail prices are largely based on European prices, which are already a bit higher than America. A MacBook Pro runs about LE 18,000 ($3,166) while it costs about 1,429 ($2,561) in Great Britain. Safa says the 30-gigabyte video iPod costs LE 2,350 ($413) as opposed to 219 ($392) in Britain. He hopes he can use the angle that iPods are not simply MP3 players, but also external hard drives, organizers and can be used to complement advanced programs, to get the duty switched back.
"For the iPod we have a strategic problem that we are trying to resolve with the Ministry of Finance," says Safa. "They consider it a video tool or an MP3 tool, so they increased the sales tax from 10% to 70%, which is ridiculous to work with. After you make contracts you find out that 'We increased [duties on] the item.' We have a serious problem for the next quarter.
"If we don't solve this with the ministries maybe we can't import [the iPod]. We can't [do so] illegally."
By Andrew Bossone
© Business Today Egypt 2006
