“Our average store does $50 million in revenue,” Cook said in some amazement. “Who would have thought of that!”

He also likened Apple’s stores to a drug, saying that he uses them as a quick pick-me-up if he ever gets depressed.

“If I ever feel I’m dropping down from an excitement level, I go in a store … it’s like a Prozac,” Cook said. “It’s a feeling like no other.”

Apple currently has 400 stores in 12 countries. One of the 30 new stores the company is adding in 2013 is its first in Turkey, which will be Apple retail’s 13th country. Last year, Cook said, 370 million people came in to an Apple store, including 120 million in the last quarter alone.

Cook credits the stores for at least part of the iPad’s success:

“I don’t think we’d have been as successful with iPad if we didn’t have our stores,” he said. “I don’t think the launch would have been nearly as successful. They’re an incredible competitive advantage … that is not so easy to replicate.”

Analysts had questioned earlier in the call what Apple is doing with its $137 billion in cash, and Cook said that opening more stores was one way the company would be putting that money to work. The new stores help Apple launch new products and educate customers on new categories, he added … perhaps a hint that Apple will launch some entirely new category of products (Apple TV, anyone?) at some point in the future.

Cook also said that perhaps “store” was not the right word for Apple’s retail endeavors anymore, noting that local musicians play gigs there, people come in for a social experience, and that each store is, in some way, becoming a focus for local community events.

None of which detracts, of course, from that $50 million in revenue per store.

What were you doing at 7 a.m. this beautiful Saturday morning?

If you were one of the 12 construction workers building Apple’s new “prototype” store in Palo Alto, Calif., you were working hard as the sun came up. Seven workers were pouring concrete, and another five were working on the roof.

Since hiring construction workers to be on the job early Saturday usually means paying them double time (or at least time and a half), that suggests that the contractor is in a big hurry to get the job done before a hard deadline. That could be October, when Apple is rumored to be planning another major announcement — perhaps for the iPad mini, but also possible for a new TV product from Apple.

Apple hasn’t officially acknowledged that this store belongs to it. But many details, including the store’s design, strongly suggest that it is a new Silicon Valley flagship location for the consumer electronics giant. In addition, the store’s location puts it directly adjacent to two of the highest-bandwidth Internet connection points in the Valley: the Palo Alto Internet Exchange (PAIX) and a big AT&T switching facility. The store includes direct connections to both of these facilities, which suggests that it has an unusually high need for fast, low-latency Internet connectivity.

In short, it’s a fantastic location for a showcase of streaming video and Internet TV products.

It’s circumstantial evidence. But it’s another strong suggestion that Apple is planning to unveil a new TV product in October.

The photo above show the storefront as it appears today. Below, planning documents show what the storefront will soon look like.

Top photo: VentureBeat. Bottom image: Via Palo Alto Online.

Apple is building a new store in the heart of Silicon Valley with an extremely high-bandwidth connection to one of the Internet’s major hubs.

With the 16,600-square-foot, two-story store, Apple will be trying out a “new prototype” of its retail environment, according to documents filed with the architectural review board in Palo Alto, Calif., where the store is located. Along with the familiar all-glass storefront and the prominent use of stone, the new store will include interior trees and a skylight.

It will also be linked to one of the busiest and highest-capacity access points on the Internet, the Palo Alto Internet Exchange (PAIX), which will give Apple the ability to demonstrate bandwidth-hungry services — such as live, streaming video — to hundreds of individual customers at a time.

Photographs of the building site at 340 University Ave. in Palo Alto, as well as construction documents filed with the city of Palo Alto, strongly suggest the company’s plans. None of the public documents name Apple, and the storefront does not yet carry the company’s name, but multiple strands of evidence point towards the site’s ultimate tenant being Apple.

• The architectural firm Bohlin Cywinski Jackson, which submitted the architectural review for the site in 2010, has designed many Apple stores around the world.
• At the time of the architectural review, Palo Alto city officials were convinced Apple would be the store’s ultimate tenant, based on the details of the application. “It was clear, when they said where the sign was going to go and when they talked about the project details, who the tenant would be,” an architectural review board member said, according to Palo Alto Online in 2010. “It was just really obvious.”
• The construction firm overseeing the remodel of the site is DPR Construction, which also built Apple’s flagship store in downtown San Francisco.

As for the location, it’s just one block from the current Palo Alto Apple store. But the new location is just around the corner from PAIX, on Bryant Street. Located in the old “Telephone Co. Building,” PAIX is an interconnection point for Internet service providers including Equinix, Bell Telephone Canada, and others. Although crowded, this site still offers massive pipes for anyone who needs to send and receive a lot of data and wants to get its equipment close to the Internet’s major backbones. For instance, Facebook is a PAIX tenant.

PAIX is a high-security facility, whose windows have been replaced with opaque barriers. Guards and surveillance cameras guard the site. Behind PAIX and adjacent to the new retail storefront is a large private switching facility for AT&T.

Notably, the current construction connects the Apple store (or whatever it is) with both PAIX and the AT&T building. Plans filed with the city of Palo Alto call for a pedestrian tunnel, presumably leading between the Apple store and the telco facilities next to it.

Why would Apple need such high-bandwidth neighbors for its “prototype” store? Well, one explanation is that it wants to give the best possible showing to new video services, such as a revamped Apple TV. The company was recently reported to be negotiating with cable companies to offer them an Apple-made set-top box that would work with cable services, and it’s reportedly building a Apple TV that will blur the distinction between live and on-demand video.

But what if Apple decided to offer an Apple TV that worked with its own internet service, bypassing the cable providers that have so far rebuffed it? It certainly has the data centers and high-bandwidth server centers capable of delivering live video; it’s long been a leader in streaming video over the internet.

If you were showing off video services to an eager public, you’d want to make extra sure that your storefront had the best, most reliable, highest-bandwidth connections to the Internet. In other words, you’d want to make those connections as close to major interconnection points as possible.

340 University Ave. would be a very good location indeed.

Image credits: VentureBeat, Google Maps, Palo Alto Online

Startup StackSocial has raised $800,000 to help take its tech deals platform public, the company announced today.

StackSocial basically provides a white-label daily deals-like store for news publications to place within their website. The startup drums up a number of hand-picked, tech-oriented deals (software bundles, tutorials, select hardware, etc.) that appeal to the publication’s audience. Sales run for about two weeks, and there are about 3 to 4 new deals every week. For example, the site is currently offering a $49 Mac software bundle with 10 apps valued at over $900. The clear star of the bundle being Parallels 7, which alone retails for $80.

The startup has been beta testing its e-commerce platform, which has a reach of about 6 million unique visitors per month, on partnering sites like Cult of Mac for the last few months. Along with the funding news, StackSocial also announced partnerships to bring its platform to a number of other tech sites, such as TechRadar, MacLife, Maximum PC, and GamesRadar.

“We think handpicking deals and offering them in a prominent store page is much more effective than the daily email recommendation services,” Stack Social founder Josh Payne told VentureBeat in an interview.

The startup currently has four employees and is on track to generate $1 million in revenue after its first year. In the future, Payne said, the company will hire additional employees and expand its white-label stores into new categories.

Founded in 2011, Venice, Calif.-based StackSocial is part of the first batch of companies from the LA-based startup accelerator Amplify. The new seed fund includes investments from 500 Startups, Tim Draper, Paige Craig, Siemer Ventures, EchoVC Partners, and others.

How are Amazon’s sales growing so dramatically — 30 to 40 percent quarterly for the last umpteen quarters — when even the big retailers are struggling to grow 1 to 2 percent? In record time, Amazon has taken on the Goliaths of retail yesteryear with their massive resources, nationwide store footprints and well-known brands, and turned them into isolated Davids.

In 17 short years, Amazon has grown to be the 12th largest US-based retailer, larger than even Macy’s or Staples.  Amazon’s 2011 online sales of $48 billion dwarf every competitor’s online sales, and are larger than the next ten online competitors combined including Staples.com, Apple.com, Walmart.com, Dell.com, OfficeDepot.com, QVC.com, Sears.com, Netflix, CDW, and Bestbuy.com.

What is driving Amazon’s amazing growth is a network effect, the likes of which have never been seen before in retail. For many customers Amazon is the one-stop shop where they start and end their shopping.

This suggests the question: how did it get that power?

Amazon’s incredible network effect has exponentially sped up, allowing it to enter new categories with ease thanks to a massive customer base of at least 160 million customers and tens of millions of items from thousands of retailers (and Amazon itself).  Amazon is indisputably winning the war for online market share. But this war is not just an online war.

Amazon’s wickedly effective loyalty program, Amazon Prime, has made it really easy to buy across product categories too. Netflix now faces a formidable foe with Amazon’s entry into video (conveniently bundled into Amazon Prime).  And the entire B2B sector is wondering about its fate with Amazon’s recent B2B launch of AmazonSupply.com offering 500,000 industrial and commercial items at launch.

For these diminished Davids, a trail of dead and struggling retailers in books and consumer electronics is just the beginning. And thus far, nary a retailer could stop formerly loyal consumers from leaving their stores.

With mobile devices entering into retail stores, the war has also become a physical store war which will affect retail survival.  Few retailers have the customer base and product selection to go up against Amazon alone.  Retailers have their backs against the walls trying to defend their higher cost structure and often higher prices against Amazon’s likely lower prices accessible on every smart-phone in the middle of their stores.

In this war for retailer survival, retailers can employ four stand-alone strategies to improve their odds:

1.       Offer exclusive products that aren’t easily found elsewhere – Retailers can’t just sell commoditized products and hope to be successful.  They need to sell custom products or unique products that are exclusive to them.  This will require retailers to vertically integrate and become product designers and not just product sellers.

2.       Add services that can’t be shipped in a box – Retailers that invest in services which customers value have a defensible proposition. As one example, pet retailers now offer in-store grooming, vet care, boarding and day care, all services that can’t be duplicated online.

3.       Retailers need to double-down on their digital focus and investment, not brand legacy. Whatever they’re doing now, it’s just not enough.  Retail CEOs spent far too much time on their legacy business of retail stores and not enough time on their future business of online and mobile retail.  Digital strategy cannot just be delegated to the “SVP of Digital” but rather needs to be part of a CEO’s day-job.

4.       Lead digitally, support physically – Retailers need to flip their mind-set from using websites to support stores, to using stores to empower websites to compete against Amazon (and all competitors).  Retail stores can be potent weapons in retailers’ business plans.  Hundreds/thousands of retail stores provide the proximity to customers that Amazon lacks despite dozens of fulfillment centers.  With buy online, fulfill from stores, online customers get next day gratification.  With buy online pick up in store today, online customers enjoy same day gratification, a superior option to Amazon’s delivery times.

And if any or all of the above stand-alone strategies aren’t good enough (and they likely aren’t), retailers need to find allies in the customer loyalty war.  Taking a historical perspective that retailers should heed: great wars in history are rarely won alone, but rather with the help of allies.  There’s no reason to attack each other when they share a common foe. In an alliance, they have a fighting chance of survival.

Retailers should join a network solution like ShopRunner – a growing consortium of over 60 retailers harnessing that alliance including ToysRUs, PetSmart, American Eagle, Sports Authority, Newegg and Blue Nile who are cooperating to provide a wide product assortment to ShopRunner members driving sales across the network.  ShopRunner’s members are motivated to buy across the coalition’s websites with unlimited free 2 day shipping and return shipping, and across retailers’ stores with the option to pick up packages at designated ShopRunner PickupPoint locations.  As such, ShopRunner members end up buying more from ShopRunner participating retailers (which of course, don’t include Amazon).

Fiona Dias is the Chief Strategy Officer at Shoprunner and was formerly the head of e-commerce at Circuit City.

Photo via Robert Scoble/Flickr

Design is determining the winners in everything mobile. The most successful players are focusing on one thing: How to make products, services, and devices as compelling and delightful as possible – visually, and experientially. MobileBeat 2012, July 10-11 in San Francisco , is assembling the most elite minds to debate how UI/UX is transforming every aspect of the mobile economy, and where the opportunities lie. Register here.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

There is a strange duality in the world of brick and mortar tech stores today. In the last four years CompUSA, Borders, and Circuit City all went out of business. Many expect Best Buy to follow in the near future. At the same time, Apple has opened over 300 retail outlets worldwide. And recent reports indicate that Microsoft, Amazon, and Google plan to follow Apple’s lead.

The new Google store, which Bloomberg reported on yesterday, will be a relatively small affair outside its European headquarters in Dublin. Like Amazon, which has plans for a small Seattle shop, the search giant is trying to make it clear that it’s simply dipping its toes in the water. “We’ve not made any decisions, it’s simply a planning application,” Google told Bloomberg by email in its typical engineer speak.

When Apple launched its first retail stores back in 2001, as MacWorld notes, there were plenty of doubters. “I give them two years before they’re turning out the lights on a very painful and expensive mistake,” quipped one executive in BusinessWeek. Arne Alsin of Alsin Capital Management said in an article for TheStreet.com, “It’s desperation time in Cupertino, Calif.,” and, “this move is fraught with problems.”

These days, of course, Apple’s retail stores are credited with helping to drive the rabid adoption of its smartphones and tablets, boosting its profits to historic highs. But for the first two years, the company posted a loss on its retail division. And this was during a time when Apple didn’t have the mountain of cash it does today to backstop losses.

But like many of the Apple projects led by Steve Jobs, Apple never doubted itself or made excuses for its foray into retail. And that’s the thing that stands out about the recent moves by Amazon and Google; they lack commitment and ambition. Instead of the flashy glass temples that Apple erected to woo luxury consumers, Amazon and Google are planning small, tentative outposts.

Microsoft is the one company with a big stake in the future of phones and tablets that seems willing to open stores. But it too is avoiding any flagships in major cities, preferring to roll out small efforts in regional malls.

As consumer electronic shops and bookstores (remember those?) become a thing of the past, Amazon, Microsoft, and Google should follow Apple into the retail business with a bold hand. Otherwise, their forays are doomed to fail.

According to sources close to Microsoft, Chief Executive Steve Ballmer and Chief Operating Officer Kevin Turner are interested in matching or exceeding the number of Apple retail stores, which currently number over 300. Many attribute Apple’s success in recent years to the growth of its stores, which allow customers to interact with the company’s newest products.

Despite the push to follow Apple, Microsoft has only opened 8 stores since launching its retail initiative in late 2009, and has only announced two future stores.

Considering how expensive the stores are to build, and the fact that most of the existing ones are not profitable, it doesn’t appear to be the right decision to expand the number of retail stores. If Microsoft went ahead with CEO Balmer’s plan to match the number of Apple stores, it would certainly raise the eyebrows of investors.

This is particular true given the needed changes that could be made now at the existing stores, which currently only serve to remind consumers of how unhip Microsoft is.For example, Apple calls its technical gurus “Geniuses,” while Microsoft calls its equivalent employees “Retail Technical Advisors.” Microsoft has not paid attention to the uniformed brand image and attention to detail that have made Apple so popular.

Additionally, in contrast to Apple’s products, the products on sale at Microsoft stores are also available from hundreds of other outlets. Although customers may stop by the stores, there isn’t a large incentive to purchase products at one of the Microsoft stores when there are so many other options.

At this point, at least until the retail stores become profitable (unlikely for some time) or Windows Phone 7 devices begin selling well, it may be best if Microsoft holds back on Balmer’s retail ambitions.