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

Posted:
in General Discussion edited January 2014
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.
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Comments

  • Reply 1 of 32
    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.
  • Reply 2 of 32
    crebcreb Posts: 276member
    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.
  • Reply 3 of 32
    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.
  • Reply 4 of 32
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by mrjoec123 View Post


    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.
  • Reply 5 of 32
    crebcreb Posts: 276member
    Quote:
    Originally Posted by solipsism View Post


    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.
  • Reply 6 of 32
    SpamSandwichSpamSandwich Posts: 33,407member
    Analysts, analysts... cluck, cluck, cluck.
  • Reply 7 of 32
    aaarrrggghaaarrrgggh Posts: 1,608member
    Quote:
    Originally Posted by solipsism View Post


    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.
  • Reply 8 of 32
    ipeonipeon Posts: 1,122member
    Quote:

    "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?



  • Reply 9 of 32
    bageljoeybageljoey Posts: 1,961member
    Quote:
    Originally Posted by iPeon View Post






    I'm speechless.



    Could someone translate that to English?







    Stock might go up. Or it will go down. Unless it stays the same.
  • Reply 10 of 32
    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
  • Reply 11 of 32
    iposteriposter Posts: 1,560member
    Quote:
    Originally Posted by aaarrrgggh View Post


    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.



    Quote:
    Originally Posted by solipsism View Post


    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.



    \
  • Reply 12 of 32
    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.
  • Reply 13 of 32
    piotpiot Posts: 1,346member
    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)?
  • Reply 14 of 32
    bageljoeybageljoey Posts: 1,961member
    Quote:
    Originally Posted by anantksundaram View Post


    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...
  • Reply 15 of 32
    bageljoeybageljoey Posts: 1,961member
    Quote:
    Originally Posted by piot View Post


    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...
  • Reply 16 of 32
    So just fire half of the workers in each store. That'll boost the profit quickly enough.

  • Reply 17 of 32
    suhailsuhail Posts: 192member
    Quote:
    Originally Posted by iPeon View Post






    I'm speechless.



    Could someone translate that to English?







    good one!
  • Reply 18 of 32
    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.
  • Reply 19 of 32
    stubeckstubeck Posts: 140member
    Quote:
    Originally Posted by iPoster View Post


    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.
  • Reply 20 of 32
    stubeckstubeck Posts: 140member
    Quote:
    Originally Posted by piot View Post


    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.
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