Apple Store sales fall 3% as iPhone, iPad distribution network grows
Apple Store revenues have not kept up with the parent company's overall growth, as distribution of the iPhone and iPad through third-party resellers has helped push some sales elsewhere.
Same-store Apple Store sales were down 3.3 percent in the September quarter, which was still an improvement from the June quarter when same-store sales were down 9.6 percent. Apple's retail performance was highlighted on Monday by analyst Charlie Wolf of Needham & Company, who said he expects the pattern of Apple's retail stores not keeping pace with the company's overall growth to continue.
Non-Mac same-store revenues were up 9.7 percent for the quarter, while same-store Mac unit sales fell 15.1 percent. But customers can increasingly buy an iPhone or an iPad at new locations, including carrier partners' retail stores, limiting sales growth of those devices at Apple's own stores.
Apple's stores will soon find themselves under new leadership, as Burberry CEO Angela Ahrendts is set to take over the company's retail operations next spring. Wolf noted that while the hiring of Ahrendts has been praised, it will be difficult for her to accelerate Apple Store sales, which "have become increasingly hostage to Apple's overall distribution and product strategies."
One area where Wolf does see potential for growth, however, is China. Apple has big plans for retail expansion in China, but in recent quarters has fallen behind its initial projections for opening new retail locations.
Regardless of any slowdown, Wolf believes Apple's stores are a crucial component of the company's business, serving as the "face" of its brand.
"Through their array of post-sale services, the stores also seem to have become a magnet in attracting Windows users to the Mac platform," he said, noting that about half of the estimated 1 million Macs sold in Apple Stores last quarter were to Windows "switchers."
Despite recent slowdown, the success of Apple's retail stores is unparalleled. The average annual rate of sales growth from 2002 to 2013 was 15.9 percent -- non-Mac sales grew at a 23.2 percent rate, while Mac units sales grew 9.3 percent each year.
Visitors to Apple's stores have also grown over the last 11 years by 13.1 percent annually, forcing the company in recent years to build larger locations to accommodate customer traffic.
Same-store Apple Store sales were down 3.3 percent in the September quarter, which was still an improvement from the June quarter when same-store sales were down 9.6 percent. Apple's retail performance was highlighted on Monday by analyst Charlie Wolf of Needham & Company, who said he expects the pattern of Apple's retail stores not keeping pace with the company's overall growth to continue.
Non-Mac same-store revenues were up 9.7 percent for the quarter, while same-store Mac unit sales fell 15.1 percent. But customers can increasingly buy an iPhone or an iPad at new locations, including carrier partners' retail stores, limiting sales growth of those devices at Apple's own stores.
Apple's stores will soon find themselves under new leadership, as Burberry CEO Angela Ahrendts is set to take over the company's retail operations next spring. Wolf noted that while the hiring of Ahrendts has been praised, it will be difficult for her to accelerate Apple Store sales, which "have become increasingly hostage to Apple's overall distribution and product strategies."
One area where Wolf does see potential for growth, however, is China. Apple has big plans for retail expansion in China, but in recent quarters has fallen behind its initial projections for opening new retail locations.
Regardless of any slowdown, Wolf believes Apple's stores are a crucial component of the company's business, serving as the "face" of its brand.
"Through their array of post-sale services, the stores also seem to have become a magnet in attracting Windows users to the Mac platform," he said, noting that about half of the estimated 1 million Macs sold in Apple Stores last quarter were to Windows "switchers."
Despite recent slowdown, the success of Apple's retail stores is unparalleled. The average annual rate of sales growth from 2002 to 2013 was 15.9 percent -- non-Mac sales grew at a 23.2 percent rate, while Mac units sales grew 9.3 percent each year.
Visitors to Apple's stores have also grown over the last 11 years by 13.1 percent annually, forcing the company in recent years to build larger locations to accommodate customer traffic.
Comments
Can't wait for the haters to spin this one.
Easy fix. Just go the Browet route - Hire fewer people, cut benefits, make wages performance based, less training, more 'selling', and most important, reduce store design cost. What's this glass staircase malarky, anyway? Oh, and are you telling me people don't pay for a genius session?
Instead of trying to work the same patch of land to death, Apple needs to find a patch of land where Android doesn't exist. Apple needs to take some of that reserve cash and start a new business that isn't constantly being constrained by some free platform consisting of dozens of hardware vendors. Apple has ample amounts of money to get into any business it wants to. There's no reason Apple has to be restricted to just hardware sales for an additional revenue stream. Apple is certainly harming shareholders by only trying to increase hardware sales by trying to plant seeds in Android-owned soil.
There are so many other ventures Apple could enter into. We're not talking about a penniless company with cash restraints holding it back. Apple has more money at hand than most financial institutions. Apple could easily become a top cloud server business if it wanted to. Apple could easily acquire a search engine business. The possibilities are endless without ever having to ever run into such a crowded field of Android devices in every direction. Apple is just being stubborn and it doesn't seem to be paying off.
You so not get Apple. It is, ah, never mind; you wouldn't be able to understand if people explained it to you.
Jared, I agree completely. The local AT&T store does everything in their power to denigrate iPhones and iPads. They put ? products as far away from the front door as possible and push Samescum's angry green trashcan Scheiße. I went to this store the other day to get a look-see with the new iPad Air, and AT&T put the biggest, ugliest, heaviest anti-theft device imaginable on the back of their display units, making it impossible to get a real feel for how light iPads are. I'm surprised they don't epoxy a brick to the back.
That's the results of 3Q, but let's wait for the 4Q (Christmas!) sales and its annual reports.... I think Apple will be better than fine...
Wall Street sees no growth from Apple and that's why Apple has become devalued the way it is. Some people keep trying to pretty up Apple's sales numbers but when push comes to shove every earnings call, Apple falls short in some respect and it has little to do with the retail stores. It has everything to do with Apple's overall business falling short on revenue. Apple keeps trying to grow its hardware business on some small patch of land surrounded by Android on all sides and its growth is being severely stunted.
Instead of trying to work the same patch of land to death, Apple needs to find a patch of land where Android doesn't exist. Apple needs to take some of that reserve cash and start a new business that isn't constantly being constrained by some free platform consisting of dozens of hardware vendors. Apple has ample amounts of money to get into any business it wants to. There's no reason Apple has to be restricted to just hardware sales for an additional revenue stream. Apple is certainly harming shareholders by only trying to increase hardware sales by trying to plant seeds in Android-owned soil.
There are so many other ventures Apple could enter into. We're not talking about a penniless company with cash restraints holding it back. Apple has more money at hand than most financial institutions. Apple could easily become a top cloud server business if it wanted to. Apple could easily acquire a search engine business. The possibilities are endless without ever having to ever run into such a crowded field of Android devices in every direction. Apple is just being stubborn and it doesn't seem to be paying off.
Wall Street always acts as if Apple's most recent new product is its last one. And you seem to be think the same way. Just because we can't imagine what Apple's next blockbuster product is going to be doesn't mean Apple has run out of ideas. The most successful tech company in the world and everyone thinks they could run Apple better than Apple does. Sheesh.
Maybe this is totally unrelated, but I went to the Apple Store this past Friday in Southlake, Texas at around 2:30 p.m. and the store was crowded. As I was leaving, I noticed that a line of people was forming, trying to enter the store. I don't know about sales, but a crowded store to me means that either there was nothing to watch on TV, or maybe people are buying Apple products. I also got to handle the iPad Air. It was light, small, and very nice. If I had the money, I would replace my iPad 3 with this one, and use it as my dash radio. (I currently use my iPad 3 as my streaming radio in my car).
Jared, I agree completely. The local AT&T store does everything in their power to denigrate iPhones and iPads. They put ? products as far away from the front door as possible and push Samescum's angry green trashcan Scheiße. I went to this store the other day to get a look-see with the new iPad Air, and AT&T put the biggest, ugliest, heaviest anti-theft device imaginable on the back of their display units, making it impossible to get a real feel for how light iPads are. I'm surprised they don't epoxy a brick to the back.
I agree with your take on how third party outlets display the Apple products. Impossible to tell "the feel" of the devices, and that's one of the areas of interest and where Apple shines. In general, I buy online with in-store pickup. I don't know which cubby hole get's credit for the sale, but would think the online Apple store gets the credit. It shouldn't matter to Apple's bottom line, but might skew the numbers since I am really using the local store - it's just an easy way to, essentially, put the Apple products on hold making sure it will be there when I get to the store.
I think there may be too much emphasis placed on an individual segment of Apple's distribution as it's the total picture that matters. The third party vendors, like AT&T, Best Buy, etc., do add to Apple's bottom line and there are most likely sales they make that wouldn't have been made otherwise. There is no reason for third party vendors to have the products (or push them) if they are just a display room and don't make money on them. In the end, giving a cut on a sale, is better for Apple than not to have the sale at all. Sharing a bigger pie is good for all ...
Jared, I agree completely. The local AT&T store does everything in their power to denigrate iPhones and iPads. They put ? products as far away from the front door as possible and push Samescum's angry green trashcan Scheiße. I went to this store the other day to get a look-see with the new iPad Air, and AT&T put the biggest, ugliest, heaviest anti-theft device imaginable on the back of their display units, making it impossible to get a real feel for how light iPads are. I'm surprised they don't epoxy a brick to the back.
I also agree. My local Best Buy is a cesspool of pimpled, basement nerd teenagers, and now underemployed oldsters who needed a job. The Samsung store-within-a-store is looking you right in the face as you enter. Trying to find the iPhone kiosk, let alone the Apple store-within-a-store, is like Stanley trying to find Dr. Livingston. I’m not sure if this is because Apple won’t pay for the up-front positioning or the usual Best Buy bias. There was a reason that Steve Jobs decided to open retail stores and places like AT&T and Best Buy demonstrate that need constantly.
The only thing I would be concerned about is the stores starting to be a cost center (support) rather than keeping sales in-line.
Wall Street always acts as if Apple's most recent new product is its last one. And you seem to be think the same way. Just because we can't imagine what Apple's next blockbuster product is going to be doesn't mean Apple has run out of ideas. The most successful tech company in the world and everyone thinks they could run Apple better than Apple does. Sheesh.
IMO- historically consumer oriented hardware non-durable good products just don't translate well to long term growth. Think RCA, Zenith in the old TV/radio days and lately Sony, Palm, Booberry and on and on. They were all magically inventive 'at the time' with the smartest guys in the room. It just takes one company to come up with the next big thing, and the hot hit today could be left in the dust tomorrow. . Apple does not have other large money producers like Samsung with durable goods, components etc. Or Apple does not have a defacto standard like Windows and Office to keep an insane amount of steady cash rolling in. Essentially Apples valuation is due to one product... its the iphone((ok ipad also) company... yes extremely profitable now, but that one product makes people nervous it could get run over. Rightly or wrongly...this is what Wall Street is concerned about with Apple... IMO.
At an average of around $6,000 per Sq foot in annual sales, Apple retail stores' sales are almost DOUBLE the next highest sales' performance of any American retailer. (Number two is Tiffany & Co. at $3,000 per sq foot.) That's why any shopping center covets having an Apple Store on their premises, for the sales and quality foot traffic they generate. To all Apple fans and shareholders, I recommend you buy your Apple products at official Apple Stores whenever possible. In this way Apple doesn't had to share the profits with other third-party vendors like AT&T, Verizon, or Best Buy who often employ undisclosed COMMISSIONED sales staff who earn SPIFFS for steering unsuspecting consumers to (frequently) Samsung. (Samsung's marketing budget has recently been 4 times Apples of which, perhaps 50% is spent for Spiffs and commissions! Apple doesn't pay commissions, even in their own stores.) Avail yourself of Apple Stores' superior customer service and no-pressure shopping experience.
There's a difference between a commission and a spiff. A spiff is paid by the manufacturer and is a fixed amount. A commission is paid by the store and is usually a percentage, although the percentage can vary per product.
Back in the 1970s, I sold audio equipment and some products had spiffs. The running inside joke in the store was that the customers would ask about specs and we'd say something like, "it's 40 watts per channel at under 1/10th of 1% total harmonic distortion. It has seven line inputs, a turntable preamp and a built in spiff." No one would ever ask what the spiff did.
I really don't think most people care whether Apple has to share the revenue with anyone or not. I'm a stockholder and I barely care. The only reason I care is because I hate Apple less than I hate Verizon or AT&T.
As for the Apple stores, while I understood the original strategy that Apple wasn't sold well in most generic retailers (like CompUSA and the like), it never made sense to me that Apple would both create a substantial retail presence using its own stores but also sell to everyone else as well. I continue to think that Apple selling into places like WalMart has hurt the Apple brand. Frankly, I don't even think they should be selling in chains like Best Buy.
However, assuming that I'm wrong, it's no surprise that with the availability of Apple products everywhere - in both physical retail and in e-commerce sites - that Apple's physical store sales are down. It's also not surprising because for the most part, recent products have been evolutionary and you don't have to see the product to make a purchasing decision, because it looks and acts pretty much like the last model, except with slightly better performance. Maybe you want to check out the latest MacBook Pro or iMac to see how thin it actually is, but since there's no choice since older models are no longer available, maybe that's not even necessary. So one can buy online or from a different dealer.
Since Apple is at least partially responsible for the demise of the physical record store, they reap what they sow.
It's difficult to keep growing when your dollars per square foot income is already more than anyone else's. It is uncommon when I see an Apple store that isn't packed. Of course, it's also uncommon when I don't see a Walmart parking lot that isn't packed. Apple should be concerned and analysts will point to this as Apple being doomed yet again but the fact non-Apple stores are seeing growth simply means more people (like me) who don't live close to Apple stores are either buying on-line (does this count as Apple store income?) or through a variety of other stores. The point is people are still buying Apple products and overall there is growth.
Can't wait for the haters to spin this one.
"Of course, it's also uncommon when I don't see a Walmart parking lot that isn't packed."
Are you sure this triple negative is really saying what you wanted to imply?