So what does a company owe its workers? I mean all of its workers. Specifically, how should the spoils of the firm be shared with workers when it is hiring employees across several distinct labor markets? Some of those markets might be tightly constrained with a limited supply of top workers while in another the firm might be the employer of choice — forced to beat off applicants with a stick.
These essentially are the questions that make a New York Times story on the Apple Store so intriguing (Apple’s Retail Army, Long on Loyalty but Short on Pay, Jun 24). The point of the story is that while the corporation as a whole has been on a tear, the workers in the company’s stores haven’t necessarily benefitted.
Within this world, the Apple Store is the undisputed king, a retail phenomenon renowned for impeccable design, deft service and spectacular revenues. Last year, the company’s 327 global stores took in more money per square foot than any other United States retailer — wireless or otherwise — and almost double that of Tiffany, which was No. 2 on the list, according to the research firm RetailSails.
Worldwide, its stores sold $16 billion in merchandise.
But most of Apple’s employees enjoyed little of that wealth. While consumers tend to think of Apple’s headquarters in Cupertino, Calif., as the company’s heart and soul, a majority of its workers in the United States are not engineers or executives with hefty salaries and bonuses but rather hourly wage earners selling iPhones and MacBooks.
About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year. They work inside the world’s fastest growing industry, for the most valuable company, run by one of the country’s most richly compensated chief executives, Tim Cook. Last year, he received stock grants, which vest over a 10-year period, that at today’s share price would be worth more than $570 million.
I know what you are thinking: Didn’t Apple just announce significant raises for its store employees. Yes, they did. Of course, the cynics over at the LA Times are suggesting this was just an pre-emptive damage control ahead of the NY Times article. Even with the impending raises, Apple Store employees will capture relatively little of the sales they generate in comparison to other retailers. Check this out:
So is any of this surprising or even per se bad for employees?
I think it is hard to paint Apple as the bad guys here. First, just because they aren’t turning over the same share of revenue to retailer employees as, say, Costco, doesn’t mean they are tight-fisted on an absolute basis.
By the standards of retailing, Apple offers above average pay — well above the minimum wage of $7.25 and better than the Gap, though slightly less than Lululemon, the yoga and athletic apparel chain, where sales staff earn about $12 an hour. The company also offers very good benefits for a retailer, including health care, 401(k) contributions and the chance to buy company stock, as well as Apple products, at a discount.
They are also in some ways following many standard recommendations for good retail operations in how they treat their staff. We have had a couple of posts related to by Zeynep Ton’s recent HBR on retail staffing (Why “Good Jobs” Are Good for Retailers, Jan-Feb). She argues that retailers benefit from investing in workers — providing training and aiming for longer tenures. Apple does this. The article reports that training can run from a few days to several weeks (also see this post). And while turnover may be higher than they hope for, it generally seems better than most retail firms.
Managers often tell new workers that they hope to get six years of service, former employees say. “That was what we heard all the time,” says Shane Garcia, a former Apple Store manager in Chicago. “Six years.” But the average tenure is two and a half years, says a person familiar with the company’s retention numbers, and as foot traffic has increased, turnover rates in many stores have increased, too. Internal surveys at stores have also found surprising dissatisfaction levels, particularly among technicians, or “geniuses” in Apple’s parlance, who work at what is called the Genius Bar. Apple declined requests for interviews for this article. Instead, the company issued a statement:
“Thousands of incredibly talented professionals work behind the Genius Bar and deliver the best customer service in the world. The annual retention rate for Geniuses is almost 90%, which is unheard-of in the retail industry, and shows how passionate they are about their customers and their careers at Apple.”
One thing that Apple might not do well is provide opportunities for advancement.
At some point, employees either realize they won’t rise, or rise as high as they can.
“The disillusionment settles in not because of pay,” says Graham Marley, the former part-time salesman, “though pay is part of it. What happens is you realize that they want you to spend years there, but there is no actual career path.”
An exception is the job of manager, and Apple is often diligent about elevating from within its ranks of high achievers. Though not always. After the great influx that started with the iPhone, the company started plucking managers from stores like the Gap and Banana Republic. From employees who were around in the pre-2007 era, you can hear occasional laments about the gradual “Gapification of Apple.”
At many levels, this is also not surprising. Apple unlike, say, Target, isn’t first and foremost a retailing company. The real driver of the firm’s success is its engineering and design prowess. Being able to sell iPads doesn’t necessarily qualify one for working on the next version of the product. Even if we focus on the retailing side, there does not seem to be much of a role for say merchandising or purchasing expertise. Beyond accessories, everything is coming from Apple and you sell the amount the company sends you. That does not seem the broad set of skills one might gain working up the retail ladder at another mall-based retail chain.
So is working at the Apple Store a bad job? I think not — certainly not as retail jobs go. Working in retail is largely miserable. Apple offers enough that it has plenty of applicants. The actual job might not be harder than people expect but the workers are at least trained to be successful at it. Further, I would expect that ex-Apple workers are attractive to other organizations. These people have been trained to serve (over selling outright) and have to function in high volume, stressed environments. Shouldn’t other service organizations want workers who have proven they can work in such settings?