Despite revenue decline, Apple Stores "turn the corner" - report
Apple's retail stores continued their year-over-year revenue slide last quarter, but a new report predicts that the brick-and-mortar locations could show growth again before the end of 2009, thanks, in part, to Windows switchers.
In a new investment analysis from Needham & Co., Apple's retail outlets are described as the "fourth leg of the stool." That echoes Chief Executive Steve Jobs' comments that his company is built on three legs: the iPod, the iPhone and the Mac. But analyst Charlie Wolf believes that Apple Stores justify the fourth leg because they play an instrumental role in attracting Windows users to the Mac platform.
Wolf highlights the stores' minimalist design and simple shopping experience; the abundance of employees and its effect on wait times; and the plethora of experts available to help customers.
"We estimate that Windows visitors represented well over half of the 150 million visitors to the stores in fiscal 2008. Indeed, the growing volume of traffic has created its own challenges," the report states. "With the growth of the Mac community, Apple has had to allocate increasing resources to servicing this community through the Genius and iPod bars."
He added: "These post-sale services are, of course, a major reason Windows users have switched despite the perceived premium at which Macs are priced. So it’s imperative that Apple maintain the level of service it provided when the Mac installed base was much smaller."
Wolf estimates that since 2004, Windows switchers have nearly doubled the size of the Mac install base. Of the 492,000 Macs sold in Apple Stores in the third quarter, more than half were bought by Windows users. That means that about 25 percent of Windows switchers bought their Mac at an Apple retail location.
Though the Mac-maker's retail year-over-year revenues increased 3.5 percent, the company expanded its total number of stores in the same period by 20 percent. As a result, the recession had a major impact: Year-over-year revenue for the June quarter, based on same-store totals, declined 14 percent.
But the June quarter showed a noteworthy improvement over the March quarter, when the year-over-year impact dropped retail revenue 17.2 percent. Similarly, same-store Mac sales were down 14.1 percent in June, compared to the 21.9 percent decline in March. The June quarter was boosted by the debut of new MacBook Pro models and a price cut.
A Needham & Co. chart shows the exponential growth of the total install base of Windows switchers.
"In our view, this signals that the recession-induced decline in same-store sales should diminish going forward," the report states. "In the year ago September quarter, same-store revenues grew 15.5 percent, setting up a difficult comparison for this September. However, same-store sales growth could conceivably turn positive in December."
The nearly half-million Macs sold at retail locations was 16,000 more than the 476,000 consumers bought in Q3 2008. With half of all new Mac purchases coming from customers who never owned a Mac before, Apple's One to One program might play a large role for those consumers. This past quarter, the "new and improved" One to One Program launched. The new program resulted in a record 667,000 personal training sessions, designed to help people become acquainted with their new Mac.
Taking a cue from Apple, Microsoft intends to open its own retail locations this year. One of the Windows-maker's first stores will be located near an already-established Apple Store in Mission Viejo, Calif.
In a new investment analysis from Needham & Co., Apple's retail outlets are described as the "fourth leg of the stool." That echoes Chief Executive Steve Jobs' comments that his company is built on three legs: the iPod, the iPhone and the Mac. But analyst Charlie Wolf believes that Apple Stores justify the fourth leg because they play an instrumental role in attracting Windows users to the Mac platform.
Wolf highlights the stores' minimalist design and simple shopping experience; the abundance of employees and its effect on wait times; and the plethora of experts available to help customers.
"We estimate that Windows visitors represented well over half of the 150 million visitors to the stores in fiscal 2008. Indeed, the growing volume of traffic has created its own challenges," the report states. "With the growth of the Mac community, Apple has had to allocate increasing resources to servicing this community through the Genius and iPod bars."
He added: "These post-sale services are, of course, a major reason Windows users have switched despite the perceived premium at which Macs are priced. So it’s imperative that Apple maintain the level of service it provided when the Mac installed base was much smaller."
Wolf estimates that since 2004, Windows switchers have nearly doubled the size of the Mac install base. Of the 492,000 Macs sold in Apple Stores in the third quarter, more than half were bought by Windows users. That means that about 25 percent of Windows switchers bought their Mac at an Apple retail location.
Though the Mac-maker's retail year-over-year revenues increased 3.5 percent, the company expanded its total number of stores in the same period by 20 percent. As a result, the recession had a major impact: Year-over-year revenue for the June quarter, based on same-store totals, declined 14 percent.
But the June quarter showed a noteworthy improvement over the March quarter, when the year-over-year impact dropped retail revenue 17.2 percent. Similarly, same-store Mac sales were down 14.1 percent in June, compared to the 21.9 percent decline in March. The June quarter was boosted by the debut of new MacBook Pro models and a price cut.
A Needham & Co. chart shows the exponential growth of the total install base of Windows switchers.
"In our view, this signals that the recession-induced decline in same-store sales should diminish going forward," the report states. "In the year ago September quarter, same-store revenues grew 15.5 percent, setting up a difficult comparison for this September. However, same-store sales growth could conceivably turn positive in December."
The nearly half-million Macs sold at retail locations was 16,000 more than the 476,000 consumers bought in Q3 2008. With half of all new Mac purchases coming from customers who never owned a Mac before, Apple's One to One program might play a large role for those consumers. This past quarter, the "new and improved" One to One Program launched. The new program resulted in a record 667,000 personal training sessions, designed to help people become acquainted with their new Mac.
Taking a cue from Apple, Microsoft intends to open its own retail locations this year. One of the Windows-maker's first stores will be located near an already-established Apple Store in Mission Viejo, Calif.
Comments
"IB Windows switchers" vs. "New Windows Switchers"???
WTF?
Interesting use of a completely incomprehensible graph that is not explained in the text of the article.
"IB Windows switchers" vs. "New Windows Switchers"???
WTF?
I was wondering the same, i found some reference of IB in Wikipedia, but nothing that poped out.
http://en.wikipedia.org/wiki/IB
i also didnt found a link on the AI-article.
maybe IB Windows means something like "international business windows" while "new windows switchers" means "private user"
anyone?
I was wondering the same, i found some reference of IB in Wikipedia, but nothing that poped out.
http://en.wikipedia.org/wiki/IB
i also didnt found a link on the AI-article.
maybe IB Windows means something like "international business windows" while "new windows switchers" means "private user"
anyone?
It's in the graph caption.
A Needham & Co. chart shows the exponential growth of the total Install Base of Windows switchers.
...emphasis mine.
It's in the graph caption. ...
Yeah, *now* it's in the graph caption.
After all these years, you'd think this idiotic cliche would finally go the way of the Dodo bird. But you'd be wrong.
The experience of the Apple Store is a very powerful inducement. It removes the rumors and hype about what Macs supposedly can't do and lets you see what it's really all about.
For a Windows user, a Mac is a glass of ice water to people in hell.
I thought Ballmer's idiotic decisions were Apple's fourth leg.
Ballmer is the little rocket engine under the stool that's been propelling it skyward. So much hot air simply must cause an equal and opposite reaction somewhere
The graph also appears to have been created in a 1980s version of Excel.
Right on! I see so many of these lame charts! One of the best kept secrets is iWork's charting capabilities! Just excellent.
I thought Ballmer's idiotic decisions were Apple's fourth leg.
Apple has set the bar for computer retail extraordinarily high.
I'm not so sure on this one. Every time I've gone to the Apple Store to purchase something small, like a cable or piece of software, there is a lineup a mile long for the one cashier at the back of the store, and all those guys with credit card machines strapped to their hips are either busy with other customers, or busy chatting with their buddies.
I'm not so sure on this one. Every time I've gone to the Apple Store to purchase something small, like a cable or piece of software, there is a lineup a mile long for the one cashier at the back of the store, and all those guys with credit card machines strapped to their hips are either busy with other customers, or busy chatting with their buddies.
Wow, sounds like your store needs an upgrade. There are four cashiers in the one I go to, up front by the door, along with the usual mobile guys.
As someone who was a part timer on the opening crew of one of the first stores (Newport Beach, CA) the report that there are too many customers is sweet revenge against the many naysayers who predicted utter failure of this enterprise.
I do hope Apple takes note and you get better service in the future at your branch.
I'm not so sure on this one. Every time I've gone to the Apple Store to purchase something small, like a cable or piece of software, there is a lineup a mile long for the one cashier at the back of the store, and all those guys with credit card machines strapped to their hips are either busy with other customers, or busy chatting with their buddies.
So why don't you just walk up to one of those "chatting with their buddies", and say that you'd like to buy X? When I've "barged" in, and not even to buy something but to ask a possibly "dumb" question, I've yet to have any of them tell me to get lost.
How about an a new add campaign:
I'm a MacFaithful, I'm an IB.
This will work.