Declining Sales At Apple Retail Stores
The heart of the problem, as Wolf explains is due to a lack of major new product introductions which traditionally drive consumers into Apple stores. For instance, iPhone which is a highly sellable product for Apple is distributed and sold through multiple channels which evidently reduce Apple Store crowd.
A deeper analysis reveals, “The sales performance of the Apple Stores is also hostage to the company’s distribution strategies,” Wolf explains. This means Apple’s distribution strategies could be the primary reason for declining sales falling prey to their retail stores. He cites an example of Mac—“To illustrate, Mac sales in the stores were adversely impacted in 2009, when Apple broadened Mac distribution in the U.S., adding other chains, such as Best Buy, as resellers. iPod sales in the Apple Stores tanked when iPod demand caught up with supply and Apple responded by vastly increasing the number of outlets selling the product. Same-store sales have also been affected by the roll-out of the iPhone to carrier stores around the globe.”
Consequently, Wolf asserts that same-store sales volume perhaps is not the only measure of the retail store’s success. Apple’s cumulative revenue have not fallen dramatically and the overall proceeds continue to be positive. Rather, the ability to capture and introduce Apple to new customers is a more important yardstick. “Despite the dramatic expansion of Apple’s distribution network to 250 stores, Apple stores have managed to almost hold their own as a percentage of total Apple revenues,” the note reads. “This underscores the vitality of the Apple Stores in creating a shopping experience that we believe is superior to that in any other retail chain.”
This means, in spite of the substantial expansion of Apple’s overall distribution matrix, Apple stores have managed to render profit and contribute to Apple revenues. Noticeably, this shows the energy which these stores pass on and how beautifully they attract shoppers towards a superior shopping experience. Another plus is the service and support mechanism which Apple has built into the Apple Store, which is considered an important factor for a paradigm shift from a windows-user to a Mac-user. The bank estimates that roughly, 50% of the Macs sold in the Apple Stores are to Windows switchers, who see the stores as the “Face” of Apple.
Eventually, Wolf states “Nonetheless, what we think the trajectory of same-store Apple Store sales in recent years underscores is that meaningful growth must await the introduction of new products in new product categories,” Wolf added. “Tim Cook has indicated that such products are on the way. However, it’s an open question whether they can be the blockbuster hits that the iPod, iPhone and iPad were.” What lies ahead is the entry of Angela Ahrendts as Sr. VP, Retail and Online stores, how she translates the company’s retail growth in China, where fashion house Burberry enjoyed notable amount of success under her leadership and the ability to have a constructive impact on the overall retail chain of Apple.