How Steve Jobs saved Apple with the online Apple Store

Posted:
in General Discussion edited November 2020
Alongside the return of Steve Jobs and the advent of the iMac and iPod, Apple's first online store played a crucial role in the company's survival and resurgence. It officially opened for business on November 10, 1997 and has been online ever since -- except when Apple takes it offline to promote the launch of new products.

Detail from an early appearance of the Apple Store online
Detail from an early appearance of the Apple Store online


It wasn't enough that Steve Jobs came back to Apple and stripped its messy range down to a few core products. The iMac wasn't enough to turn the company around either -- not by itself. While it may not have seemed it at the time, the launch of the online Apple Store on November 10, 1997 turned out to be crucial component of the company's survival.

There's an argument that it was born of irritation rather than anyone seeing how useful it would be. But while there is truth in that, the full story is that Apple badly needed its own online store.

Back in the 1990s, there were no bricks-and-mortar Apple Stores. You had to buy Macs through specialist dealers or through big chain stores. The chains famously employed whatever the opposite of Geniuses is, and they all pushed whichever box they got the most commission on.

Given that Apple was rarely, if ever, the most profitable sale for someone in a store, what Macs were there tended to be ignored. And you don't run a retail store by taking up space with inventory that isn't selling, so Apple was being stocked by fewer places.

Shortly before the launch of its own online store, Apple announced a deal with CompUSA to create what it called a store-within-a-store. It meant a higher profile for Apple than before, but it was still under someone else's control.

A Sears store selling a Macintosh Performa back in the day. Are those washing machines behind them?
A Sears store selling a Macintosh Performa back in the day. Those are washing machines behind them.


"All that the salesman cared about was a $50 spiff," Steve Jobs later told Walter Isaacson. "Unless we could find ways to get our message to customers at the store, we were screwed."

Whereas apple.com/store was owned and run by no one but Apple itself.

There were few online stores for computers in the late 1990s, but what there was proved to drive Apple down this road though a combination of irritation and insight.

Dell

There was really only one significant online store for computers at the time, and that was Dell's. The company didn't design computers in the sense that Apple did, it really just packaged them, but at the time, it packaged them extremely successfully.

Dell had also circumvented the need for resellers and chain stores, by chiefly selling over the phone. Not only did it cut out the need and the cost of these other companies, it meant Dell could ask customers what they wanted and then give it to them.

Just as Apple was starting to do, Dell had got its stock of completed computers down to a minimum. "If I've got 11 days of inventory and my competitor has 80," said Michael Dell at the time, "and Intel comes out with a new 450 megahertz chip, that means I'm going to get to market 69 days sooner."

While few or no other sellers were doing much online, in 1995 Dell began to create its web store. It launched in July 1996 and by that December was earning $1 million per day.

Apple had to be aware of this success and had to see that it was a way that it too could go around resellers and get Macs in front of people. However, this was also Dell. This was the company whose owner Michael Dell famously wrote off Apple's chances. "I'd shut [Apple] down and give the money back to the shareholders," he said in October 1997.

And it is also the company who originally built this extremely successful online store using WebObjects -- software tools created by Steve Jobs's NeXT firm.

How Dell's hugely successful online store looked around the time Apple launched its own
How Dell's hugely successful online store looked around the time Apple launched its own


So Apple, having bought NeXT and brought back Steve Jobs, had the talent to make a store but it also had the need if it were to make its machines as easy to buy as they were intended to use. Michael Dell's comment came after Apple had started to develop its online store, but it definitely smarted -- as you can see in video of Steve Jobs launching the Apple online store.

You can see it, but you can't really hear it. Video survives of the presentation, but it is close to inaudible.

What Jobs says in it, though, is directed both at potential buyers -- and at Michael Dell.

"In 1996, Dell pioneered the online store and Dell's online store has become, up till now, the standard of ecommerce sites," said Jobs. "We're basically setting a new standard for online ecommerce with this store. [And] I guess what we want to tell you, Michael, is that with our new products and our new store and our new build-to-order manufacturing, we're coming after you, buddy."

Instant success

The new online Apple Store brought in $12 million of revenue in its first 30 days, for an average of $730,000 per day. That's three-quarters of where Dell's daily revenue had reached after its first six months.

It's not possible to compare Apple's online sales then with how the online store does today. Apple doesn't release figures that would help, and the company itself is radically different today. Back in 1997, there were no services, for instance, it was all hardware sales. And while there were physical stores you could Macs in -- in October 1998, Apple announced a deal with Best Buy -- there were no Apple Stores.

However, there surely wouldn't be physical Apple Stores today if the online one hadn't succeeded and if it hadn't helped Apple survive. Similarly, resellers were declining, so even if Apple had managed to get through the 1990s, it's likely that there would be few physical places to buy Apple gear.

Back in the day, this was considered high resolution. A typical opening screen from the online Apple Store in its earliest days.
Back in the day, this was considered high resolution. A typical opening screen from the online Apple Store in its earliest days.


Even if it can only give a taste of how Apple has changed, though, it is possible to pick out certain figures from the company's finances and gain at least a slight basis for comparison.

Taking Apple's Q4 2019 earnings -- the last before all of its newest services had launched and been running for at least an entire quarter -- you can deduce that Apple sold $570 million worth of hardware devices every day in that period.

This means that every day, Apple typically earned 781 times what it got from the Apple Store's initial daily revenue. And if it's impossible to calculate what percentage of that came from the physical stores and what from online, it's now also impossible to imagine how crucial online sales became as stores closed during the coronavirus.

Changing fortunes

The online Apple Store was key to getting Apple back up on its feet, but it's also proved to be instrumental since the company became a born-again success.

It's now a promotional tool as well, as Apple makes a big deal of taking down the entire store for hours when it is about to announce a new product.

While any other company would long for the world to notice when its online store is down, Apple has also used it to pull off something that surely no other company would dream of.

We no longer see the huge lines around the block as people queue up and camp out to be first to buy a new device. You can question why anyone would ever do that -- though trust us, it is remarkably fun -- but the optics were fantastic. News coverage never seemed to tire of showing us these lines of people, and that was free advertising that kept reminding the world that Apple was this popular.

And yet during Angela Ahrendts' time as head of retail, Apple worked to at least reduce those lines.

Maybe the company saw that the furore was dying down by itself, but Apple took steps to instead have us waiting in front of our computers or iOS devices for the launches.

It's done that by opening pre-orders ahead of the release date, and opening them at a specific time.

Nobody else gets worldwide headlines for taking their web store offline.
Nobody else gets worldwide headlines for taking their web store offline.


Now instead of the lines around the block, the news is always that devices have sold out in a very short time.

Apple's online store is an incredible operation that usually manages to look simple. It's hard to grasp just how many transactions go through it. But what's easy to comprehend is that Apple owns and runs the whole process without any retailer or big chain reseller in the middle.

As it does with its hardware and software, Apple owns the whole stack in its online store and it absolutely maximises every benefit that brings.



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Comments

  • Reply 1 of 21
    It is truly unbelievable how much Apple got right in the many departments necessary to make a good sale. And, in as I think I see, still continues to do so. Like a Midas touch. Was Tim Cook there all the time when Steve Jobs was rebuilding Apple? He was truly the visionary, but to get so successful you also need more mundane stuff like logistics expertise, that Tim provides. 
    lkruppsunman42flyingdpapplesnorangeshcrefugeewatto_cobrajony0mwhitedewme
  • Reply 2 of 21
    macxpressmacxpress Posts: 5,138member
    Tim Cook was pretty much with Apple the entire time. He joined Apple in 1998 after meeting with Steve Jobs (at the request of Steve) and Tim was quite phenomenal at fixing Apple's inventory issue(s) and I think that still continues today. 
    applesnorangeshcrefugeewatto_cobracornchip
  • Reply 3 of 21
    "[W]hatever the opposite of Geniuses is." As I recall, it was clueless high school students at most of the places that sold Apple hardware in those days. The few Apple specialist outfits that provided real VAR services were almost all eventually pushed out of business by Apple's retail Store model. But the Store has definitely been, and continues to be, a big part of Apple's success.
  • Reply 4 of 21
    Jessee MichaelJessee Michael Posts: 8unconfirmed, member
    I was in San Francisco for a friend’s wedding and a job interview, and the one day I had free I decided to finally make my pilgrimage to 1 Infinite Loop. I parked in visitor parking and walked to the company store. The place was absolutely dead, and when someone finally came to ring me up, they apologized because the site had just launched so everyone had gathered to see it go live. I may have made the last physical purchase on hallowed grounds before the online store came to life.
    Bombdoebloggerblogmangakattenhcrefugeewatto_cobrajony0cornchip
  • Reply 5 of 21
    Lou MLou M Posts: 2unconfirmed, member
    macxpress said:
    Tim Cook was pretty much with Apple the entire time. He joined Apple in 1998 after meeting with Steve Jobs (at the request of Steve) and Tim was quite phenomenal at fixing Apple's inventory issue(s) and I think that still continues today. 
    "...the entire time."  Ah, youth.  Apple started in 1977.  Tim joined in '98.  Apple was successful when it started, and then it wasn't.
    More has been written about that than is known.  When Steve returned, Compaq was killing it in the PC space and Tim was the brains
    behind their logistics operations.  Steve poached him from Compaq, and the rest we know.
    hcrefugeewatto_cobra
  • Reply 6 of 21
    Those were such exciting times in the rebirth of Apple!
    hcrefugeewatto_cobra
  • Reply 7 of 21
    You left out the oddest interesting moment in the transition to the official Apple stores. Volunteers who went to CompUSA and helped promote the Apple section. I know, as I was one.  We got free shirts and encouragement, but what other company could motivate volunteers to support their cause?  It was fun and interesting and we did what we could to help folks. And, indeed, many salespersons at those stores wanted to sell PCs to earn their $50.  And then more for the special coverage package.  Ugh!  But at least to some degree it worked, for the price of shirts.  
    watto_cobrahcrefugee
  • Reply 8 of 21
    And Apple royally screwed their so-called "partners" in the Apple Certified Reseller programme. But we were small, they were big, and that was all she wrote.
  • Reply 9 of 21
    R LubinR Lubin Posts: 1unconfirmed, member
    This story left out a VERY important part.

    Macintosh clone company, Power Computing sold their poorly made but inexpensive Mac clones solely online via their very advance (for it's day) web site that allowed the customer to custom build their Macs with just a few mouse clicks. This was in 1993, before Steve Jobs returned to Apple. The Power Computing website was very effective and successful.

    When Jobs returned to Apple, he immediately cancelled all Mac clone licenses and bought the Power Computing store website.
    In very short time, the site was adapted to Apple's Mac line up.

    Original credit for the Apple Store website goes to Mac clone company, Power Computing.
    Japheywatto_cobracornchiphcrefugeeCurtisHightphilboogie
  • Reply 10 of 21
    Lou M said:
    macxpress said:
    Tim Cook was pretty much with Apple the entire time. He joined Apple in 1998 after meeting with Steve Jobs (at the request of Steve) and Tim was quite phenomenal at fixing Apple's inventory issue(s) and I think that still continues today. 
    "...the entire time."  Ah, youth.  Apple started in 1977.  Tim joined in '98.  Apple was successful when it started, and then it wasn't.
    More has been written about that than is known.  When Steve returned, Compaq was killing it in the PC space and Tim was the brains
    behind their logistics operations.  Steve poached him from Compaq, and the rest we know.
    Since the article is about the store opening in 1997, and he next said Cook arrived in 1998, I’m fairly certain Macexpress was referring to the online retail era of this story, not Apple’s entire history. 
    watto_cobrajony0mwhitecornchip
  • Reply 11 of 21
    mobirdmobird Posts: 544member
    kiowavt said:
    You left out the oddest interesting moment in the transition to the official Apple stores. Volunteers who went to CompUSA and helped promote the Apple section. I know, as I was one.  We got free shirts and encouragement, but what other company could motivate volunteers to support their cause?  It was fun and interesting and we did what we could to help folks. And, indeed, many salespersons at those stores wanted to sell PCs to earn their $50.  And then more for the special coverage package.  Ugh!  But at least to some degree it worked, for the price of shirts.  
    I was involved in that program as well, we also visited college book stores where Apple was sold. I have a bunch of the trinkets and trash that Apple kept sending me. Just opened a box the other day that had Apple calculators and keyring flashlight?
  • Reply 12 of 21
    R Lubin said:
    This story left out a VERY important part.

    Macintosh clone company, Power Computing sold their poorly made but inexpensive Mac clones solely online via their very advance (for it's day) web site that allowed the customer to custom build their Macs with just a few mouse clicks. This was in 1993, before Steve Jobs returned to Apple. The Power Computing website was very effective and successful.

    When Jobs returned to Apple, he immediately cancelled all Mac clone licenses and bought the Power Computing store website.
    In very short time, the site was adapted to Apple's Mac line up.

    Original credit for the Apple Store website goes to Mac clone company, Power Computing.
    Close, not 100% – I heard good reports about Power Computing and in fact they were one of the reasons cloning was shut down by Jobs: they were cheaper than Apple and quicker to market with newer, faster designs. And beating Apple at winning large orders.

    And they actually started in 1995.

    hcrefugeeCurtisHightphilboogie
  • Reply 13 of 21
    I had a PowerCC Mac. It was great and I even upgraded all sorts of stuff in it myself, including the processor (I am not a build-your-own-computer guy). Played Civ 2 on it for sooooo many hours :-P
    watto_cobra
  • Reply 14 of 21
    R Lubin said:
    Macintosh clone company, Power Computing sold their poorly made but inexpensive Mac clones solely online[...]
    I bought about a dozen of them for my company. They were great- cheaper and better than Apple's Macs at the time. So much better than I "stole" one to use in my home office and replaced it with my personal genuine Apple Mac. It was surely the right move on Jobs' part, but at the time I was seriously aggravated when he shut down licensing.
    watto_cobracornchip
  • Reply 15 of 21
    Back in the 1990s, there were no bricks-and-mortar Apple Stores. You had to buy
    Macs through specialist dealers or through big chain stores. The chains famously employed whatever the opposite of Geniuses is, and they all pushed whichever box they got the most commission on.
    I have criticized your writing before and remain unhappy with it but credit where credit's due: that was a good one!
    The new online Apple Store brought in $12 million of revenue in its first 30 days, for an average of $730,000 per day. That's three-quarters of where Dell's daily revenue had reached after its first six months.

    As I've told my son: If you show your work, you might at least get partial credit.

    $12,000,000/30 = $400,000, not $730,000. (Online stores do not have "business" and "weekend/vacation" days, not that that calculation would have explained this error.)

    cornchip
  • Reply 16 of 21
    ... and Apple is returning or shifting back to that model from its own brick and mortar Apple Stores -- at least, that is, during the virus pandemic.

    After a less that Apple experience shopping at the Apple Store a store manager called me to follow-up on a survey I had completed.

    I of course relayed why the the experience was less than expected from Apple.  And, during the conversation he told me that store personnel -- including geniuses and technicians -- had been shifted out of the brick and mortar store and over to online support (and presumably the online Apple Store as well).

    Along with Apple's shift to third party vendors, one has to wonder if this shift away from brick and mortar Apple Stores will be permanent or end when the pandemic ends.
  • Reply 17 of 21
    Tim SavageTim Savage Posts: 2unconfirmed, member
    While in college, I scored a gig doing in-store demonstrations of the Newton (dating myself, I know). Listening to the department store sales droids steer first time computer buyers away from Macs and towards the PC's was excruciating.
    cornchipGeorgeBMac
  • Reply 18 of 21
    lmaclmac Posts: 204member
    If I recall correctly, the first version of Apple's online store was acquired when Apple shut down the clones and bought PowerComputing, which had a slick build to order website.
  • Reply 19 of 21
    Ooof...I can't believe people are praising Power Computing for anything beyond price. I had to use one of those machines in my first professional job and it was not all that reliable. The disc drive had issues and the overall system would crash/freeze much more often than 1st party Macs doing the same tasks and using the same software. 
  • Reply 20 of 21
    dewmedewme Posts: 3,529member
    This was such a brilliant move by Apple.

    Buying computers at pretty much any brick & mortar (B&M) store back in the day was pretty much akin to buying a used car and dealing with a huckster salesperson or the "Dude, you're getting a Dell" dude incarnate. I gave up on the B&M huckster salesperson model very early on and gravitated to mail order, as in Gateway 2000, Zeos, PC's Limited, and a variety of vendors who schlepped their wares in Computer Shopper magazine/catalog. When Dell (formerly PC's Connection) came along with online ordering with a lot of build-to-order flexibility I could never imagine going into a B&M computer store to buy a computer ever again, except under extreme duress. The Apple Store changed the whole dynamic of B&M stores and I've enjoyed that experience overall, even to the point of knowing some of the staff by names and learning a little bit about them as people and their personal lives. 

    Tim Cook definitely added immensely to Apple's success. It may appear as a slam-dunk amazing move to get Tim Cook into the Apple fold, but when he arrived and of course getting Steve Jobs back at the helm was not a guarantee of success at the time. Both men took on a big risk to their personal and financial futures to resurrect Apple to the point where it became relevant again and position itself to move into new businesses that would strap a rocket to Apple's climb to where it is today. 
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