There was a time, back in the day, that whenever Apple launched something new, the company was met by two forces.
The first, tech pundits who criticized Apple’s every move, and predicted doom would soon arrive. The second, customers who lined up in ever growing numbers to buy the latest from Apple. Can you name one of Apple’s competitors that have as many elements to success?
It’s The Stores, Stupid!
Critics laughed at the original iMac. It was translucent, for crying out loud. It came without a floppy disk drive. The prediction? Apple was doomed.
Then, along came the iPod. It was too expensive and didn’t work on Windows PCs. The verdict? Apple was doomed.
After that it was a long string of Apple actions followed by equal reactions of negativity by most tech industry pundits, followed by lines of customers to buy Apple’s latest wares.
Just before the iPod was launched in late 2001, Apple launched the first of nearly 400 Apple Stores. The criticism was blistering. The stores were predicted to be failures within two years.
Instead, Apple launched hundreds of stores which now command nearly $20-billion in revenue and help to set Apple’s products apart from those by PC makers, Microsoft, Amazon, Google, Samsung and others.
Apple’s stores are a rousing success; so much so that Microsoft uses the Burger King approach to setting up their own stores. Burger King? Sure. McDonald’s spends millions to find good locations for new restaurants. Burger King simply waits and then opens up a restaurant across the street.
Apples stores rake in more money than any other retailer in the world. Double that of jewelry and diamond king Tiffany’s. Meanwhile, Microsoft is busy opening stores near Apple Stores.
What’s the difference? Apple’s stores have a broad product line, with all devices well integrated, elegantly displayed for the touch-and-feel crowd. And, they have customers. That sets Apple’s stores apart from any of the competition.
Wisely, Apple determined that the stores would be a good place to showcase products, and make them available to be held and used. But the stores also provide a stronger measure of psychological benefit in the Genius Bars. Whatever the Apple product, simply bring it to the Genius Bar for service and support.
The Stores also become a good place to receive product training from experienced users. Nearly every store I visit has a table or two or more reserved for small classes of new Mac users or new iPad users.
Amazon and the Kindle has met with resistance in the retail community. Many stores choose to no longer sell the Kindle as it competes with their own sales of CDs, DVDs, and books. Buying a Kindle Fire HD is a leap of faith.
The same holds true of Google’s Nexus line of smart phones and tablets. It’s difficult to try, touch, hold, and compare a Nexus device to an iPhone or iPad without a retail presence.
Is it any wonder that Amazon and Google do not release their sales numbers?
To be fair, the overhead in running an Apple Store is enormous. Apple associates are everywhere, usually an arm’s length away. That cost is mitigated by Apple’s sales volume, and notoriously high product margins.
Speaking of margins, Apple uses Mac, iPhone, and iPad margins to provide customers with a superb buying experience. Amazon tablets, and Google tablet and smart phone don’t have margins, as Apple’s competitors are forced to sell their products at or near cost to compete.
Apple’s Stores make it a great place for new or potential customers to try out Macs, iPhones, and iPad before purchase. That makes it easier for Apple to generate a higher level of customer satisfaction and repeat customers.
Apple may be on the road to doom and ruin, but there are no numbers that support that hypothesis or prognostication. The signs of gloom and doom may be evident first in Apple’s store revenue, margins, and profit numbers (not to mention employee layoffs). For now, predictions of Apple’s impending doom are mere exercises in the futility of using a crystal ball.
About Kate MacKenzie
Wall Street believes Apple retail stores have no future value to Apple. Supposedly, Apple will lose all loyal customers despite those retail stores. Wall Street seems to disregard anything Apple has or introduces as being viable for long-term profitability. That’s basically how Apple is being valued… As a company with no future growth and decreasing profitability. I see it being said all the time. I’m not sure how Wall Street has decided this but apparently any company that sells higher-priced products is doomed to failure.
Apple’s stock has been well rewarded in recent years, so there’s not much to complain about. It does seem as if the market has stopped rewarding the company’s performance, even as revenue and profits continue to increase.
The same thing happened to Microsoft. They made money hand over fist for a decade but the stock languished because the company couldn’t come out with a new revenue stream that was profitable.