Report: Apple stores' Mac sales beat PC stores by 10-to-1

[AppleInsider]

An average Apple retail outlet easily outperforms its generic counterpart in terms of revenue and sales -- but the expense of supporting all those customers may be pulling Apple down, says a new investment note from Bernstein Research.

Senior analyst Toni Sacconaghi expresses surprise at the numbers in the report, which observes that the typical Apple retail location sells about 21.4 Macs every day versus "less than 2" for many less specialized electronics shops. This amounts to about 8,000 Macs per store per year and played a crucial role in expanding the Mac's appeal: about two-thirds of store revenues came from the computers and likely earned Apple the lion's share of its converts.

"We estimate that the stores, which collectively represent just 2.5% of the Mac's global distribution points, drove more than one third of its market share gain during the year," Sacconaghi says.

The average Apple retail space grew its Mac sales by 26 percent year-over-year.

Apple was also the most efficient overall for retail stores, the researcher adds. For fiscal 2007, all of the Cupertino, Calif.-based firm's retail space earned roughly $4,500 per square foot. The figure contrasts starkly with big-box retailer Best Buy, who despite its success has only managed to earn $930 for the same floor space. Even the very profitable jeweler Tiffany & Company netted just $2,750 for every square foot in the same timeframe and was free from the competition of a shopping mall.



This could increase Apple's total revenue by almost $1.4 billion in the fiscal year, especially as the Mac maker earns the full retail price from each sale rather than just the wholesale price passed on to a third-party store. It also opens the door to third-party accessory sales that wouldn't be possible if Apple relied solely on resellers.



However, Apple may be sitting on a number of potentially volatile factors that could sink their success rates, the Bernstein analyst says. With staffing levels to provide sales and technical service climbing much higher than they normally would be at other stores -- averaging at 40 workers per store -- Apple's expenses for taking care of customers are growing faster than for store profits. Profit margins at the retail stores were just 21.3 percent during fiscal 2007 versus 24.7 percent for every other division.

iPod sales for each official store have also dropped by about 50 percent on average over the last year, the researcher says, placing more pressure on Apple to fare well in its Mac business. But as long as new efforts such as the iPhone continue to generate healthy profit margins and sales numbers, the threat of a sudden collapse is remote, Bernstein Research observes.

"We ultimately believe investors should look to maintain a market-weight in Apple, as we see explosive, yet balanced, risk on both sides," Sacconaghi says.

[ View this article at AppleInsider.com ]

[VinitaBoy]

Every time there's an overwhelmingly positive report about Apple, it also includes an overwhelmingly negative note. Just another analyst (emphasis on the first four letters) covering his anus.

[CREB]

I just want Apple to tread conservatively while maintaining its progressive thinking. There has been too much hype around Apple driven by people who primary goal is to manipulate to make money off the financial markets. I do not see these people stopping anytime soon, but in the longrun I believe that they actually hurt Apple; in the short run those people could give a damn.

[mrjoec123]

Apple Retail is the unsung hero of Jobs' post-return success. Everyone talks about the iMac, the iPod, the iPhone, iTunes, expanding the company into consumer electronics, etc. But none of that would have really been possible without the retail initiative. iPods would have gotten buried on CompUSA and Best Buy shelves.

It was his boldest and riskiest move, one that very few gave any chance of succeeding. But it was the foundation for everything that has happened since, and it will pave the way far into the future.

People don't realize that Apple Retail has broken all kinds of records. Fastest retail chain to ever get to 100 locations. All kinds of sales and revenue records, etc. It's a remarkable story.

I don't understand the ding for making a lower percentage profit because of hiring more workers and putting them in a place that's actually inviting. The profit margins on Apple products are already higher than on other consumer electronics and computers, anyway. And, as the analyst mentioned, Apple avoids the middle man by selling its own products directly. I think the extra money for slightly better trained employees and a clean atmosphere is money well spent. I actually wish they hadn't stopped some of the other more expensive features of the Stores, like large-screen theaters and the free water. But you have to make cuts somewhere, I suppose. I just hope that Apple continues to draw that line between profits and customer experience.

[solipsism]

Originally Posted by mrjoec123

Apple Retail is the unsung hero of Jobs' post-return success. Everyone talks about the iMac, the iPod, the iPhone, iTunes, expanding the company into consumer electronics, etc. But none of that would have really been possible without the retail initiative. iPods would have gotten buried on CompUSA and Best Buy shelves.

It was his boldest and riskiest move, one that very few gave any chance of succeeding. But it was the foundation for everything that has happened since, and it will pave the way far into the future.

People don't realize that Apple Retail has broken all kinds of records. Fastest retail chain to ever get to 100 locations. All kinds of sales and revenue records, etc. It's a remarkable story.

I don't understand the ding for making a lower percentage profit because of hiring more workers and putting them in a place that's actually inviting. The profit margins on Apple products are already higher than on other consumer electronics and computers, anyway. And, as the analyst mentioned, Apple avoids the middle man by selling its own products directly. I think the extra money for slightly better trained employees and a clean atmosphere is money well spent. I actually wish they hadn't stopped some of the other more expensive features of the Stores, like large-screen theaters and the free water. But you have to make cuts somewhere, I suppose. I just hope that Apple continues to draw that line between profits and customer experience.

Without the hands on experience offered in these stores Macs wouldn't have grown nearly as much. WIh Apple Stores nearly doubling the 2nd largest retailer in terms of dollars per square feet, Apple can afford to hire a few more techs to service the machines that are purchased.

[CREB]

Originally Posted by solipsism

Without the hands on experience offered in these stores Macs wouldn't have grown nearly as much. With Apple Stores nearly doubling the 2nd largest retailer in terms of square feet, Apple can afford to higher a few more techs to service the machines that are purchased.

I agree with you. Also, most of what I hear today is that Apple is now too mainstream.

[SpamSandwich]

Analysts, analysts... cluck, cluck, cluck.

[aaarrrgggh]

Originally Posted by solipsism

Without the hands on experience offered in these stores Macs wouldn't have grown nearly as much. WIh Apple Stores nearly doubling the 2nd largest retailer in terms of dollars per square feet, Apple can afford to hire a few more techs to service the machines that are purchased.

Spot on. While retail profitability might drop somewhat, it is a cost of doing business for all sales, not just in-store sales. People are faster to buy from apple.com or amazon knowing they can get service in the local store. The quality of service is what makes things most effective for retaining customers.

That said, my local apple store is a mess. So many employees, so many customers... it is a madhouse. Traffic flow is not well thought out, and the store on the whole is not effectively used. The clean lines of the design only show up when it is empty; they are awkward the remainder of the time.

[iPeon]

"We ultimately believe investors should look to maintain a market-weight in Apple, as we see explosive, yet balanced, risk on both sides," Sacconaghi says.

I'm speechless.

Could someone translate that to English?

[Bageljoey]

Originally Posted by iPeon

I'm speechless.

Could someone translate that to English?

Stock might go up. Or it will go down. Unless it stays the same.

[Kontra]

I explored the design strategy of Apple stores in:

Apple Store strategy: “Position, permission, probe”

and also published an exclusive interview with Alex Frankel whose recently released book details the preparation given to Apple store employees for that unique experience in:

Author interview: “Punching In” at the Apple Store

[iPoster]

Originally Posted by aaarrrgggh

The quality of service is what makes things most effective for retaining customers.

That said, my local apple store is a mess. So many employees, so many customers... it is a madhouse. Traffic flow is not well thought out, and the store on the whole is not effectively used. The clean lines of the design only show up when it is empty; they are awkward the remainder of the time.

Originally Posted by solipsism

Without the hands on experience offered in these stores Macs wouldn't have grown nearly as much. WIh Apple Stores nearly doubling the 2nd largest retailer in terms of dollars per square feet, Apple can afford to hire a few more techs to service the machines that are purchased.

Being able to get your hands on a new Apple product is a huge plus IMHO, I previously lived in a state without an Apple store, and had to base my options from articles and the internet.

Unfortunately, I dread going to the local Apple store, the sales people there are among the most intrusive and pushy I have ever seen in any store, at least on the few occasions I have ventured inside. I know they are not supposed to work on commission, but after going to an Apple store, I believe the reports that they have unofficial quotas and so on.

[anantksundaram]

Let's not get ahead of ourselves here. I think that, overall, this guy sort of makes sense. (And, he is actually positive about Apple's retail in the near-term, as far as I can tell.)

Retailing always looks great in the early stages. But it can very quickly start to be a drain on cash flows -- depending on how quickly it grows, it can get to be a low-margin, high-capex, high-touch (and hence, high-wage) business.

There are any number of examples of firms falling victim to this. The latest (and quite brutal) example being Starbucks, whose stock is down 50% last year, thanks to too much growth in the US.

I think the analyst is suggesting that Apple needs to be (and probably will be) careful, that's all.

[piot]

Can someone explain to me how "iPod sales for each official store have also dropped by about 50 percent" when total iPod sales are up 20% (Y on Y)?

[Bageljoey]

Originally Posted by anantksundaram

Let's not get ahead of ourselves here. I think that, overall, this guy sort of makes sense. (And, he is actually positive about Apple's retail in the near-term, as far as I can tell.)

Retailing always looks great in the early stages. But it can very quickly start to be a drain on cash flows -- depending on how quickly it grows, it can get to be a low-margin, high-capex, high-touch (and hence, high-wage) business.

There are any number of examples of firms falling victim to this. The latest (and quite brutal) example being Starbucks, whose stock is down 50% last year, thanks to too much growth in the US.

I think the analyst is suggesting that Apple needs to be (and probably will be) careful, that's all.

What you say is true. The problem with the analyst is that the only information put forth with the "Beware of this future drain!" comments was that the profit margin from the retail stores was only 21% as compared to 25%.

There are thousands of businesses that would love to do 20% on record sales per square foot!

What you say may be true, but it is not what Toni Sacconaghi was saying...

[Bageljoey]

Originally Posted by piot

Can someone explain to me how "iPod sales for each official store have also dropped by about 50 percent" when total iPod sales are up 20% (Y on Y)?

People know the iPod by now. Maybe they don't feel the need to go out of there way to see it and are getting them from Amazon. Or Best Buy. Or that vending machine in MACY*S. Or online from the Apple Store. Or...

[Constable Odo]

So just fire half of the workers in each store. That'll boost the profit quickly enough.

[suhail]

Originally Posted by iPeon

I'm speechless.

Could someone translate that to English?

good one!

[lenoleno]

Many times i look inside the Apple store and then later on purchase online. SO the stores are doing way more than their retail figures let on.

[StuBeck]

Originally Posted by iPoster

Being able to get your hands on a new Apple product is a huge plus IMHO, I previously lived in a state without an Apple store, and had to base my options from articles and the internet.

Unfortunately, I dread going to the local Apple store, the sales people there are among the most intrusive and pushy I have ever seen in any store, at least on the few occasions I have ventured inside. I know they are not supposed to work on commission, but after going to an Apple store, I believe the reports that they have unofficial quotas and so on.

I agree. You need to like your product to sell well, but some of them are downright retarded about it. I also had the awkward challenge of when I bought my macbook pro NO ONE would help me (spent half an hour looking.) I just wanted to give someone a sale for their quota (they should sell 4 computers a shift,) and it probably went to the guy who I gave money to at the register.

I also hate what some of them talk about. "Oh yeah, everyone in IT uses PC's, but absolutely hates them, they all use Macs at home." No, thats not right at all.

[StuBeck]

Originally Posted by piot

Can someone explain to me how "iPod sales for each official store have also dropped by about 50 percent" when total iPod sales are up 20% (Y on Y)?

Most people could only see one in an official apple store before. Now they're at best buy, circuit city, etc. My apple store in the states is half an hour away, the one here in the UK is an hour away. Its cheaper for me to buy from amazon now (lower prices) so I'd rather do that, or just go to a local tesco and buy it from there instead of heading into London.

[tadunne]

I'm not sure the free support thing is such a drain, let me tell you a story:

I was in the apple store the other day and a woman was at the genius bar with her iphone. She was complaining that the sound during calls was not very good. The Genius looked at the phone an noticed she had a stick on screen protector and it was covering up the speaker. So he asked if he could take it off. It was taken off and she made a call and it was fixed.

The Genius then showed her to the iphone accessories where she could buy a proper iphone screen protector.. sale!

I wonder how many of these support calls can translate into a sale. Calls to the applecare phone support can not do that and apple is going to have to answer the support calls anyway!? so why not in store where they can easily recommend something to help them.

Pure Genius!

[digitalclips]

Originally Posted by aaarrrgggh

Spot on. While retail profitability might drop somewhat, it is a cost of doing business for all sales, not just in-store sales. People are faster to buy from apple.com or amazon knowing they can get service in the local store. The quality of service is what makes things most effective for retaining customers.

That said, my local apple store is a mess. So many employees, so many customers... it is a madhouse. Traffic flow is not well thought out, and the store on the whole is not effectively used. The clean lines of the design only show up when it is empty; they are awkward the remainder of the time.

It sound like a clear case for opening another Apple Store not too far away to me

[digitalclips]

Originally Posted by anantksundaram

Let's not get ahead of ourselves here. I think that, overall, this guy sort of makes sense. (And, he is actually positive about Apple's retail in the near-term, as far as I can tell.)

Retailing always looks great in the early stages. But it can very quickly start to be a drain on cash flows -- depending on how quickly it grows, it can get to be a low-margin, high-capex, high-touch (and hence, high-wage) business.

There are any number of examples of firms falling victim to this. The latest (and quite brutal) example being Starbucks, whose stock is down 50% last year, thanks to too much growth in the US.

I think the analyst is suggesting that Apple needs to be (and probably will be) careful, that's all.

I agree with you but there is also the possibility that because of the Starbucks situation grabbing headlines some writers are looking around for other fast growing companies that they can maybe grab a headline or two by suggesting they are or will have this same problem.

At the end of the day it's not a very good comparison. The staff at the Apple Stores do seem enthusiastic about the products (and why not?). At Starbucks the the server I get is usually talking about last night's date to another staff member while I wait 15 minutes for a coffee.

[anantksundaram]

Originally Posted by digitalclips

At Starbucks the the server I get is usually talking about last night's date to another staff member while I wait 15 minutes for a coffee.

And, their coffee tastes terrible, and is overpriced too.

[solipsism]

Originally Posted by digitalclips

It sound like a clear case for opening another Apple Store not too far away to me

I think Best Buy getting an Apple Store kiosk is the most likely solution considering the distance to other Apple Stores, population and demographics of Sarasota.

[solipsism]

Originally Posted by anantksundaram

And, their coffee tastes terrible, and is overpriced too.

Overpriced, perhaps; but it sure is good.

[Bergermeister]

Originally Posted by tadunne

I'm not sure the free support thing is such a drain, let me tell you a story:

I was in the apple store the other day and a woman was at the genius bar with her iphone. She was complaining that the sound during calls was not very good. The Genius looked at the phone an noticed she had a stick on screen protector and it was covering up the speaker. So he asked if he could take it off. It was taken off and she made a call and it was fixed.

The Genius then showed her to the iphone accessories where she could buy a proper iphone screen protector.. sale!

I wonder how many of these support calls can translate into a sale. Calls to the applecare phone support can not do that and apple is going to have to answer the support calls anyway!? so why not in store where they can easily recommend something to help them.

Pure Genius!

Apple (at least here in Japan) does not empower its Geniuses to do the job they are intended for. I tried returning a nano that had a tilted screen. The Genius said he'd be happy to exchange it, but the replacement would have a tilted screen because they all had tilted screens. Sure enough, every display model on the first floor had tilted screens; Apple Japan was knowingly selling a defective product. The Genius also said that buying a 1st generation Apple product was a risky move; he would not recommend me to buy the just released LED MBP (an Apple employee in an Apple Store could not recommend his own product!). The manager at the same shop completely ignored customers and only spoke to his staff, at least one of whom was practically illiterate.

Apple lost over $2000 in sales that day; my wife and I went to the electronics shop down the street; we simply did not feel like wasting any money in that shop. Due partially to that incident but mainly to several horrible run-ins with Apple over the past few years, our future computer purchases will be made only after looking at all options, including PCs (which is a tough place to be in for a guy who has used Apple computers since the IIe). The wife is teaching me to use Windows and there honestly may be a day when I switch to PC unless Apple gets their act together pretty soon. So not only did the Apple Store manage to lose a potential sale on one day, they managed to possibly lose many future sales. Between the two of us, we buy a new computer every year.

[eldernorm]

Originally Posted by aaarrrgggh

Spot on. ...The quality of service is what makes things most effective for retaining customers.

That said, my local apple store is a mess. So many employees, so many customers... it is a madhouse. Traffic flow is not well thought out, and the store on the whole is not effectively used. The clean lines of the design only show up when it is empty; they are awkward the remainder of the time.

One must remember that customers drive sales. I was sorry to hear that the store was full. Same here, I went in to a store a week after Xmas and it was full. Don't these people know that stores are suspose to be empty after Xmas, except for returns. :-)

But even though it was full, I was able to talk to several Apple workers. They were curtious and mostly knowledgable.

en

[eldernorm]

Originally Posted by Bergermeister

Apple (at least here in Japan) does not empower its Geniuses to do the job they are intended for. ..... The manager at the same shop completely ignored customers and only spoke to his staff, at least one of whom was practically illiterate.

Apple lost over $2000 in sales that day; my wife and I went to the electronics shop down the street; we simply did not feel like wasting any money in that shop. Due partially to that incident but mainly to several horrible run-ins with Apple over the past few years, our future computer purchases will be made only after looking at all options, including PCs (which is a tough place to be in for a guy who has used Apple computers since the IIe). The wife is teaching me to use Windows and there honestly may be a day when I switch to PC unless Apple gets their act together pretty soon. So not only did the Apple Store manage to lose a potential sale on one day, they managed to possibly lose many future sales. Between the two of us, we buy a new computer every year.

I have to wonder about this post. Its like saying that while driving my Ford pickup, the weather was terrible so now I am thinking of buying a Chevy so the weather will improve. :-)

In fact, all his comments were about Apple store service (and possibly over the phone) yet he is a long time Apple user who would love to go VISTA cause the Apple store was busy.

HMMMMM????????? :-)

en

[iPoster]

Originally Posted by anantksundaram

And, their coffee tastes terrible, and is overpriced too.

IMHO, the people who buy coffee at Starbucks are the same people who keep Monster Cables in business.

[frankiilacomposer]

Originally Posted by iPoster

Being able to get your hands on a new Apple product is a huge plus IMHO, I previously lived in a state without an Apple store, and had to base my options from articles and the internet.

Unfortunately, I dread going to the local Apple store, the sales people there are among the most intrusive and pushy I have ever seen in any store, at least on the few occasions I have ventured inside. I know they are not supposed to work on commission, but after going to an Apple store, I believe the reports that they have unofficial quotas and so on.

You know, I wonder why with all the profits, the people who work there (non commision) make so little money? You could make more at the GAP working retail and its not like these guys are circuit city employee's and haven't a clue about computers.

Very strange.

[Bergermeister]

Originally Posted by eldernorm

I have to wonder about this post. Its like saying that while driving my Ford pickup, the weather was terrible so now I am thinking of buying a Chevy so the weather will improve. :-)

In fact, all his comments were about Apple store service (and possibly over the phone) yet he is a long time Apple user who would love to go VISTA cause the Apple store was busy.

HMMMMM????????? :-)

en

You're new and have not followed my posts over the past couple of months, so I will forgive this.

Service at the store sucked. Service on the phone sucks. Computers have arrived DOA. Computers have arrived with problems that Apple has denied existed and thus refused to service only later for those problems to be widespread (Catch-22: if they don't know about the problem, it is not a problem so they need a prior case, but since nobody can be the first case there is never a prior case). Once they finally serviced the computer, it was returned with the same problem, sometimes new problems. A defective product being sold. Hmmm. You also have never spoken with Apple Japan as some of us here have; they are a disaster. My wife, over the same period, bought five PCs and has never had a hardware problem with any of them, and not many software problems, either, TBH, nothing at all like the Mac fan community likes to suggests exists.

For years, I was a loyal Apple customer out of blind support, perhaps, but my first Macs did last like they were built differently. However, as the ticks on the wall increased in number, I started growing weary of my faith. Then a couple of incidents sort of pushed me over the top.

I have worked at a company that had 50-odd PCs that never had problems with hardware. Over the same period, I had several bad machines form Apple including one they attempted to repair three times and then hassled with me before exchanging the machine. I also at one point wondered whether the Apple Store (online) in Japan was selling refurbished and possibly defective machines and new. I didn't have a functioning machine at work and all the while Apple's stock grew and grew. The company saw the problems and declared "no Apples" and later that year order 100 PCs, which a quick phone call yesterday confirmed: no hardware problems in four years. My new MBP has a bad button and a dead pixel, both of which Apple said were normal and I should tough it out. I can also almost cook breakfast on it after using it to surf the web for ten minutes. Yeah, it looks great and is thin, but my wife's PC notebook doesn't get nearly as hot even after editing video for an hour; it is slightly thicker and has bigger fans inside to help the machine function, with slightly less focus on form.

No. I don't think a PC world will solve all my problems, but I am tired of wasting my money on a company that doesn't give a crap about me as the customer and said I am going to look at all options before dropping my hard-earned money.