February 4, 2009
Apple Goes Soft in Fourth Quarter
Apple
Stores open at least a year saw customer traffic fall off 1.8 percent in
the December quarter and sales drop 17.4 percent, according to Charlie
Wolf, a hardware analyst with Needham.
Mr.
Wolf said that visitors to Apple Stores during the holidays "were not
in a spending mood."
This
has to be a concern to Apple, which a Barron’s article points out,
sells computers and other gadgetry that tends to be more expensive than
competitive products on the market.
A
falloff by Apple has to be a concern to mall owners and managers since
the chain has consistently attracted consumers and registered sales that
Mr. Wolf said were "undoubtedly
the highest among retail chains in the country."
According
to Mr. Wolf, the typical 6,000 square-foot Apple outlet averages sales
of approximately $4,700 per square foot.
Discussion
Questions: Is there cause for concern for Apple Store operations? Where
do you see opportunities for Apple to benefit during the economic
downturn?
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Apparently this question comes from the know-nothing media. First of all, someone please tell the questioner to ask anyone in retail if they wouldn’t kill to have Apple’s numbers? Also ask the questioner if he thinks that Apple might have decided to sacrifice some retail sales at their Company Stores for the unimaginable buzz that was created when Apple announced that they would sell the iPhone through Walmart. How many Apple purchasers put off a trip to the Apple Store and bought at Walmart?
Honestly, you guys stay in a gotcha mode, always looking for a little dirt and taking your eye off the big picture. Just so you understand, the big picture is to get an Apple product into the hands of as many consumers as possible. The Apple Store is a means towards accomplishing that task but it is not the only means. If the rest of the techie world was as focused as Jobs and company, Apple wouldn’t stand a chance, but they aren’t and probably never will be. So Apple will continue to create a path on which everyone else will be delighted to walk.
Despite the universal falloff in retail spending across all categories, including luxury retailers, it will shock many to see Apple participate in the malaise. To this point their focused vision, gorgeous stores, innovative products and flawless execution have enabled them to deliver stunning results and to this point defy the economic downturn.
I believe that this is not a major long term concern for Apple. It is merely the reality that consumers are cutting back on all but the essentials, including iPods and other cool Apple products. The relatively small drop in visits (-1.8%) shows that people still love the product but just can’t part with the money at the moment–but will be back to buy as their confidence in their financial situation improves. Apple has the financial strength to weather this storm–which for them will be relatively brief compared to the majority of boring me-too retailers out there.
Apple is a brand that commands a premium for its products (computers, MP3 players, cellphones) compared to just about any competing product on the market. It has done a wonderful job over the years developing a brand image (as well as innovative product) to help justify that premium. The Apple stores reinforce the brand image through their design, innovative customer service and hands-on appeal.
Clearly, Apple is facing the consequences of its own decisions to distribute its products more broadly through Best Buy and Walmart stores, as well as intense price competition from iPhone wannabes and sharply discounted laptops. Apple needs to walk a fine line through the current economic downturn between its premium image and the consumer’s search for value. If anything, it needs to work harder to sell the “sizzle” of its products rather than deciding to drive sales through discounting.
With all due respect, what are you talking about? Apple just had their best quarter – ever. Apple has a culture that continues to grow with innovation from their Apps for the iPhone to their new iLife with face recognition software. They will continue to be a destination that draws people because unlike many retailers today, Apple understands they don’t have to make the sale the day someone walks in, they are nurturing a relationship which continues to pay off.
I don’t understand the doom and gloom nature of this topic. Apple just posted strong quarterly results and their sales, while being hurt by the bad economy, have declined far less as a percentage than their competitors’.
Apple’s prices are higher than other stores but you do get more for your money there. During this economic time (but honestly, this should be done during ANY economic time) stores must have a balance of price and service.
I would love to do a study of Apple Stores in relation to a Walmart or Best Buy. How many customers are going to Apple for information and suggestions, but then walking across the street to buy their iPod or MacBook at a cheaper price?
Apple has to budge on pricing. Dare I say, have a sale? And those Apple people are just so darn nice, they don’t have to feel bad about suggesting better earphones or adding software or a digital camera to the ticket. Apple is in a unique position where they can massage the sale. The one-on-one time Apple spends with the customer should be utilized for sales while offering an exceptional customer service experience at the same time.
Let’s not forget that there’s a recession. And sales are down across the board for all manufacturers of computer hardware and software. So does this mean Apple needs to worry? I don’t think so. But they do need to understand the situation and adjust accordingly.
Hey here’s a thought. How about having a freakin’ sale!?
On another note, they are still making over $3800 per square foot. Not too shabby in any economy.
If analysts are worried, it is ANOTHER indicator that analysts like to express their concern simply to get their names into the media. The fact is, we are in the worst economy in decades and everyone is cutting back on spending. So to have a drop-off in sales, no matter who you are, is not unexpected.
That being said, Apple sells its products in numerous ways, and the Apple Stores, while a great profit center, is also a showcase of their products that ultimately get purchased elsewhere (Amazon, Best Buy, etc.) I am not worried about Apple stores. All retailers should watch them carefully, not to see how they might be faltering, but to emulate the Apple experience.
And analysts should spend a week working at retail before they start to analyze.
I’m still trying to figure out where the numbers came from. As best I can tell, some equities analyst made an estimate that Barron’s picked up, but there is very little justification of that number (the 17% drop in sales). I just can’t reconcile that with the Apple store in my local mall, where the day after Christmas, not only was the store packed–and not just at the demo stations, at the registers too. The assistant manager there said they had 120 iPod Touches available for sale for after the holidays and they sold out of them in the first hour they were open that day.
Something’s not adding up….
As the famous line from When Harry Met Sally goes, “I’ll have what she’s having.” I don’t know a retailer out there who wouldn’t take Apple’s traffic and sales.
Apple stores continue to generate incredible in-store sales and a world-class customer experience. I would expect a small decline in a difficult economy, but go walk the mall and you’ll see a lot more retailers who deserve a doom and gloom story.
FULL DISCLOSURE: We are a Mac only company and have purchased all of our computers at the Apple store.
Determining success of the retail stores is an interesting issue for Apple. On the one hand, many Apple products are sold in other retail outlets so what is the value of the Apple store? With the Genius program for repair and the Personal Training program for assistance with the use of software and the knowledgeable employees, the Apple store is also about repair, assistance, knowledge AND sales. Counting customer visits and appointments and sales seems like a better metric for evaluating the success of Apple stores.
I’m shocked that so many people think Apple has no cause for concern. Apple makes products that are both expensive and completely optional in people’s lives. For many consumers, they are marginal expenditures–just like Starbucks, another company formerly alleged to be “recession-proof.” In an environment where people are waiting in line 3 hours for a free $6 Grand Slam Breakfast at Denny’s, unless the economy magically gets much better in the next few months, how could Apple’s sales not be affected this year?
I’m not worried about Apple (retail or otherwise) and in fact, I would put them on my short list of brands that will return to “the way we were” when the economy bounces back. Why? For one thing, Apple’s highly-experiential and accessible stores are a great distraction during tough times; that that means that Apple is building loyalty, and consumers are forming attachments to the brand, even if folks aren’t loading up on gear for the short term. One of yesterday’s discussions centered around Starbucks’ about-face on its market positioning (“value” not “premium” say they) and others have chosen to attempt downturn-driven flip-flops as well (at the risk of brand equity and credibility). I would encourage Apple to stay the course, own its premium positioning and look forward to the rewards to come.
The stat comes from Apple’s year over year same store sales. The same article goes on to note that the drop was more severe than at other retailers because Apple stores are so narrowly focused, and that the sales drops at stores like Best Buy and Walmart were mitigated by big ticket, low-margin items like washing machines and refrigerators. Apple stores are still among the highest revenue per square foot for mall owners, and the Barron’s article points out that when consumers start spending again, they will likely again outperform other retailers.
Apple has an incredibly strong brand and customer loyalty to match. Apple fans are some of the most dedicated consumers and a dream for other retailers and marketers. Sales will dip as people are slow to upgrade or won’t make the switch to Mac while their PC is still running. They will stick with their last generation Nano and decide not to buy new accessories for their iPhones.
But when cash is freed up, the consumer will return to Apple. They build a genuine relationship with their consumers and will continue to build that bridge during this downturn. The ROI will be there when the economy bounces back.
I think the numbers that need reconciliation here are only a 1.8% reduction in traffic, yet a 17.4% reduction in sales? Something doesn’t add up here. Are we really to believe traffic was off only a little, but sales dropped like a rock? Window shopping in a recession? Maybe, but from my view the numbers just don’t connect to making any assumptions.
Even Apple is not immune to bad economic conditions, so some decline was expected. I have friends that want to buy Apple’s products, but they are delaying their purchases, waiting to feel more confident about the economy. As soon as things get better, Apple stores will return to growth. In the meantime, it’s important that Apple not diverge from their premium branding. The words “Apple” and “bargain” do not go together.
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Apparently this question comes from the know-nothing media. First of all, someone please tell the questioner to ask anyone in retail if they wouldn’t kill to have Apple’s numbers? Also ask the questioner if he thinks that Apple might have decided to sacrifice some retail sales at their Company Stores for the unimaginable buzz that was created when Apple announced that they would sell the iPhone through Walmart. How many Apple purchasers put off a trip to the Apple Store and bought at Walmart?
Honestly, you guys stay in a gotcha mode, always looking for a little dirt and taking your eye off the big picture. Just so you understand, the big picture is to get an Apple product into the hands of as many consumers as possible. The Apple Store is a means towards accomplishing that task but it is not the only means. If the rest of the techie world was as focused as Jobs and company, Apple wouldn’t stand a chance, but they aren’t and probably never will be. So Apple will continue to create a path on which everyone else will be delighted to walk.
Despite the universal falloff in retail spending across all categories, including luxury retailers, it will shock many to see Apple participate in the malaise. To this point their focused vision, gorgeous stores, innovative products and flawless execution have enabled them to deliver stunning results and to this point defy the economic downturn.
I believe that this is not a major long term concern for Apple. It is merely the reality that consumers are cutting back on all but the essentials, including iPods and other cool Apple products. The relatively small drop in visits (-1.8%) shows that people still love the product but just can’t part with the money at the moment–but will be back to buy as their confidence in their financial situation improves. Apple has the financial strength to weather this storm–which for them will be relatively brief compared to the majority of boring me-too retailers out there.
Apple is a brand that commands a premium for its products (computers, MP3 players, cellphones) compared to just about any competing product on the market. It has done a wonderful job over the years developing a brand image (as well as innovative product) to help justify that premium. The Apple stores reinforce the brand image through their design, innovative customer service and hands-on appeal.
Clearly, Apple is facing the consequences of its own decisions to distribute its products more broadly through Best Buy and Walmart stores, as well as intense price competition from iPhone wannabes and sharply discounted laptops. Apple needs to walk a fine line through the current economic downturn between its premium image and the consumer’s search for value. If anything, it needs to work harder to sell the “sizzle” of its products rather than deciding to drive sales through discounting.
With all due respect, what are you talking about? Apple just had their best quarter – ever. Apple has a culture that continues to grow with innovation from their Apps for the iPhone to their new iLife with face recognition software. They will continue to be a destination that draws people because unlike many retailers today, Apple understands they don’t have to make the sale the day someone walks in, they are nurturing a relationship which continues to pay off.
I don’t understand the doom and gloom nature of this topic. Apple just posted strong quarterly results and their sales, while being hurt by the bad economy, have declined far less as a percentage than their competitors’.
Apple’s prices are higher than other stores but you do get more for your money there. During this economic time (but honestly, this should be done during ANY economic time) stores must have a balance of price and service.
I would love to do a study of Apple Stores in relation to a Walmart or Best Buy. How many customers are going to Apple for information and suggestions, but then walking across the street to buy their iPod or MacBook at a cheaper price?
Apple has to budge on pricing. Dare I say, have a sale? And those Apple people are just so darn nice, they don’t have to feel bad about suggesting better earphones or adding software or a digital camera to the ticket. Apple is in a unique position where they can massage the sale. The one-on-one time Apple spends with the customer should be utilized for sales while offering an exceptional customer service experience at the same time.
Let’s not forget that there’s a recession. And sales are down across the board for all manufacturers of computer hardware and software. So does this mean Apple needs to worry? I don’t think so. But they do need to understand the situation and adjust accordingly.
Hey here’s a thought. How about having a freakin’ sale!?
On another note, they are still making over $3800 per square foot. Not too shabby in any economy.
If analysts are worried, it is ANOTHER indicator that analysts like to express their concern simply to get their names into the media. The fact is, we are in the worst economy in decades and everyone is cutting back on spending. So to have a drop-off in sales, no matter who you are, is not unexpected.
That being said, Apple sells its products in numerous ways, and the Apple Stores, while a great profit center, is also a showcase of their products that ultimately get purchased elsewhere (Amazon, Best Buy, etc.) I am not worried about Apple stores. All retailers should watch them carefully, not to see how they might be faltering, but to emulate the Apple experience.
And analysts should spend a week working at retail before they start to analyze.
I’m still trying to figure out where the numbers came from. As best I can tell, some equities analyst made an estimate that Barron’s picked up, but there is very little justification of that number (the 17% drop in sales). I just can’t reconcile that with the Apple store in my local mall, where the day after Christmas, not only was the store packed–and not just at the demo stations, at the registers too. The assistant manager there said they had 120 iPod Touches available for sale for after the holidays and they sold out of them in the first hour they were open that day.
Something’s not adding up….
As the famous line from When Harry Met Sally goes, “I’ll have what she’s having.” I don’t know a retailer out there who wouldn’t take Apple’s traffic and sales.
Apple stores continue to generate incredible in-store sales and a world-class customer experience. I would expect a small decline in a difficult economy, but go walk the mall and you’ll see a lot more retailers who deserve a doom and gloom story.
FULL DISCLOSURE: We are a Mac only company and have purchased all of our computers at the Apple store.
Determining success of the retail stores is an interesting issue for Apple. On the one hand, many Apple products are sold in other retail outlets so what is the value of the Apple store? With the Genius program for repair and the Personal Training program for assistance with the use of software and the knowledgeable employees, the Apple store is also about repair, assistance, knowledge AND sales. Counting customer visits and appointments and sales seems like a better metric for evaluating the success of Apple stores.
I’m shocked that so many people think Apple has no cause for concern. Apple makes products that are both expensive and completely optional in people’s lives. For many consumers, they are marginal expenditures–just like Starbucks, another company formerly alleged to be “recession-proof.” In an environment where people are waiting in line 3 hours for a free $6 Grand Slam Breakfast at Denny’s, unless the economy magically gets much better in the next few months, how could Apple’s sales not be affected this year?
I’m not worried about Apple (retail or otherwise) and in fact, I would put them on my short list of brands that will return to “the way we were” when the economy bounces back. Why? For one thing, Apple’s highly-experiential and accessible stores are a great distraction during tough times; that that means that Apple is building loyalty, and consumers are forming attachments to the brand, even if folks aren’t loading up on gear for the short term. One of yesterday’s discussions centered around Starbucks’ about-face on its market positioning (“value” not “premium” say they) and others have chosen to attempt downturn-driven flip-flops as well (at the risk of brand equity and credibility). I would encourage Apple to stay the course, own its premium positioning and look forward to the rewards to come.
The stat comes from Apple’s year over year same store sales. The same article goes on to note that the drop was more severe than at other retailers because Apple stores are so narrowly focused, and that the sales drops at stores like Best Buy and Walmart were mitigated by big ticket, low-margin items like washing machines and refrigerators. Apple stores are still among the highest revenue per square foot for mall owners, and the Barron’s article points out that when consumers start spending again, they will likely again outperform other retailers.
Apple has an incredibly strong brand and customer loyalty to match. Apple fans are some of the most dedicated consumers and a dream for other retailers and marketers. Sales will dip as people are slow to upgrade or won’t make the switch to Mac while their PC is still running. They will stick with their last generation Nano and decide not to buy new accessories for their iPhones.
But when cash is freed up, the consumer will return to Apple. They build a genuine relationship with their consumers and will continue to build that bridge during this downturn. The ROI will be there when the economy bounces back.
I think the numbers that need reconciliation here are only a 1.8% reduction in traffic, yet a 17.4% reduction in sales? Something doesn’t add up here. Are we really to believe traffic was off only a little, but sales dropped like a rock? Window shopping in a recession? Maybe, but from my view the numbers just don’t connect to making any assumptions.
Even Apple is not immune to bad economic conditions, so some decline was expected. I have friends that want to buy Apple’s products, but they are delaying their purchases, waiting to feel more confident about the economy. As soon as things get better, Apple stores will return to growth. In the meantime, it’s important that Apple not diverge from their premium branding. The words “Apple” and “bargain” do not go together.