As overall retail revenue declines, Apple Stores carry on original goal of growing Mac hardware sale
Though revenues from Apple Stores have actually been shrinking in recent quarters, the company's brick-and-mortar operations have continued to play a pivotal role in courting Windows switchers and driving sales of Mac hardware to new heights.
Apple's Causeway Bay retail store in Hong Kong
The "implausible odds" overcome by Apple show that its initial goal with its retail stores --?to boost Mac sales --?continues to work some 13 years after the first Apple Store opened, according to Needham & Co. analyst Charlie Wolf. In a note to investors on Wednesday, a copy of which was provided to AppleInsider, Wolf noted how back in 2001, Apple barely had enough products to fill a 6,000-foot retail space, while now it has a blockbuster lineup of products that bring in customers in droves.
Still, Apple's success in retail revenue has plateaued: Same-store revenues fell 4.9 percent year over year in the June quarter. That slide has continued since the March quarter of 2013.
While overall sales at Apple retail locations, no doubt heavily driven by the iPhone and iPad, have fallen, the Mac has returned to growth. Same-store Mac unit sales actually grew 11 percent year over year in the June quarter, while non-Mac revenues fell 8.8 percent.
The numbers suggest to Wolf that sales of non-Mac products, particularly the iPhone, are "hostage" to the company's overall distribution strategies. To him, the data suggests that the growth of non-Mac sales at Apple Stores may have peaked.
And yet the Mac continues to grow, carrying on the goal set by late company co-founder Steve Jobs more than a decade ago. Wolf believes this trend will continue, as Apple has recently cut prices on some of its most popular models, while the Mac has seen sales accelerating in emerging markets.
Apple's retail operations have helped the Mac outgrow the PC market in 33 out of the last 34 quarters. Wolf noted that Apple Stores have consistently accounted for between 20 and 22 percent of worldwide Mac sales.
Although overall sales have slowed recently, the analyst said that Apple's stores continue to play a key part in building the company's brand. He views Apple's retail locations as the "face" of the company's brand, offering customers a buying experience that no competitor can match.
"Through their array of post-sale services, the stores have become a magnet in attracting Windows users to the Mac platform," Wolf wrote. "In the June quarter, we estimate that Windows switchers purchased over half of the one million Macs sold in stores. This represented half of the estimated number of Windows users who switched to a Mac in the quarter."
Apple retail gained a new leader this year, as former Burberry CEO Angela Ahrendts took the reins in an effort to turn around declining sales. While Wolf isn't convinced that she will be able to accomplish that task, given the aforementioned distribution strategies that are hurting iPhone and iPad sales from Apple Stores, the analyst does have hope that she will be able to maximize returns from the company's growing retail presence in China.
Apple's Causeway Bay retail store in Hong Kong
The "implausible odds" overcome by Apple show that its initial goal with its retail stores --?to boost Mac sales --?continues to work some 13 years after the first Apple Store opened, according to Needham & Co. analyst Charlie Wolf. In a note to investors on Wednesday, a copy of which was provided to AppleInsider, Wolf noted how back in 2001, Apple barely had enough products to fill a 6,000-foot retail space, while now it has a blockbuster lineup of products that bring in customers in droves.
Still, Apple's success in retail revenue has plateaued: Same-store revenues fell 4.9 percent year over year in the June quarter. That slide has continued since the March quarter of 2013.
While overall sales at Apple retail locations, no doubt heavily driven by the iPhone and iPad, have fallen, the Mac has returned to growth. Same-store Mac unit sales actually grew 11 percent year over year in the June quarter, while non-Mac revenues fell 8.8 percent.
The numbers suggest to Wolf that sales of non-Mac products, particularly the iPhone, are "hostage" to the company's overall distribution strategies. To him, the data suggests that the growth of non-Mac sales at Apple Stores may have peaked.
And yet the Mac continues to grow, carrying on the goal set by late company co-founder Steve Jobs more than a decade ago. Wolf believes this trend will continue, as Apple has recently cut prices on some of its most popular models, while the Mac has seen sales accelerating in emerging markets.
Apple's retail operations have helped the Mac outgrow the PC market in 33 out of the last 34 quarters. Wolf noted that Apple Stores have consistently accounted for between 20 and 22 percent of worldwide Mac sales.
Although overall sales have slowed recently, the analyst said that Apple's stores continue to play a key part in building the company's brand. He views Apple's retail locations as the "face" of the company's brand, offering customers a buying experience that no competitor can match.
"Through their array of post-sale services, the stores have become a magnet in attracting Windows users to the Mac platform," Wolf wrote. "In the June quarter, we estimate that Windows switchers purchased over half of the one million Macs sold in stores. This represented half of the estimated number of Windows users who switched to a Mac in the quarter."
Apple retail gained a new leader this year, as former Burberry CEO Angela Ahrendts took the reins in an effort to turn around declining sales. While Wolf isn't convinced that she will be able to accomplish that task, given the aforementioned distribution strategies that are hurting iPhone and iPad sales from Apple Stores, the analyst does have hope that she will be able to maximize returns from the company's growing retail presence in China.
Comments
There are two beneficiaries in that transaction and the AI reader is not one of them.
Research notes are proprietary copyrighted material identified as something that cannot be reprinted with permission from the author. As such, AppleInsider doesn't have the right to republish those in their entirety.
In this case, AI is not likely a subscriber to the Needham & Co. analyst notes, so they are receiving a copy of someone else's surreptitiously. AI can quote media rights in protecting their sources.
That said, the mid-term growth opportunities are in emerging markets like China and India.
I think Apple Stores could do more now...They're just doing the same ole, same ole, and quite frankly, unless I want to see a new product or buy a Mac (which is very rare) then I don't have any reason at all to visit an Apple Store. Nothing makes me want to go there anymore like it used to. Maybe Angela can spice things up a little more and get people back into the stores to actually buy things.
That being said, whenever I do go in, I see more people playing with the iPads and iPhones and less actually using the Macs. I do see Macs going out the door though which is always a good thing as well as Macs being dropped off and picked up from the Genius Bar.
Locations in some areas which can disperse same store sales, and the retail side
Had been on auto pilot for a good while. Now they have a leader.
The ios8 integration of Yosemite should help sell more macs.
Agreed Eriamjh. I'm one of those you speak of.
I'm working more on an original intel 20" white iMac. I got the original iPhone (now using a 4s), sold my original intel MacBook and got a second gen. iPad. I changed all my newspapers and magazines subs. to digital. My goal was to go completely mobile, i.e., iOS.
But that has changed. I was extremely impressed with Yosemite at WWDC and will most likely now go with a next gen. 27" iMac and an iPhone 6.
I sold my iPad and have gone back to old school newspapers, magazines, and books. (I do recycle.) For some reason I just enjoy the tactile feel of reading non-digital stuff. Probably on the Autism Spectrum, somewhere!
Best.
Two dynamics are at work here. Apple has been building out multiple
Locations in some areas which can disperse same store sales, and the retail side
Had been on auto pilot for a good while. Now they have a leader.
According to the article, Wolf says the reason for the decline is that Apple store sales are "hostage to the company's overall distribution strategies". By that he means that Apple is increasingly distributing its products through third parties (cell phone carriers, Best Buy, Staples, Walmart, Costco, etc.). Nothing wrong with the stores, just a change in distribution strategy. This is particularly important in countries where Apple has few stores: Apple only has 12 stores in China, and sold something like 17 million iPhones there in the past year.
Tablets are overrated. Laptops and desktops are where it's at.
Said no-one.
Let's see if we can do basic arithmetic and common sense proof-reading: what is $50,000 times 1 million? $50 billion. The intent, I'd bet, was $50 million per Apple Store, which means either you change the numbers so the chart is "in millions" with a scale of 10, 20, etc. to 60 or you say it's "in thousands" and leave the scale as is.
I think you're interpreting the chart as sales-per-store. I don't think it is that, but total sales of same-store. that is, excluding new stores in their first year. That seems to be a weird way to do it but I think that's what it is.