Apple’s plan to triple store count makes it its own worst enemy, retail advisor says

“Apple Inc. Chief Executive Tim Cook disclosed on Wednesday the tech giant’s retail ambitions: Triple its store count over the next two years – not in his prepared remarks, but buried in the Q&A session,” Andria Cheng reports for MarketWatch. “He didn’t disclose the company’s specific expansion plan, and an Apple spokesman didn’t immediately respond to a request seeking additional comment. Apple, which didn’t give an update of its latest store count, had 420 stores, including 254 in the U.S. and 166 overseas, as of Dec. 28. The company has opened its first stores in Brazil and Turkey to expand its footprint to 15 countries.”

“Apple grew its retail sales to $20.2 billion last year, or 12% of the company’s total, from $14.1 billion in 2011. In the U.S., its share in the specialty electronics retail space also has surged to 15% from 10.8% to be the No. 2 player between 2011 and 2013, while Best Buy’s share has dropped to 31.3% from 32.7% during the same period, according to Euromonitor International data,” Cheng reports. “However, the headline of Apple’s retail expansion isn’t about the incremental pressure that it will put on Best Buy, but how Apple will get out from behind its own shadow.”

“The company’s retail sales in the quarter ended March 29 actually dipped slightly to $5.23 billion to 11% of Apple’s total sales, from 12% a year earlier. In fiscal year 2013, the retail segment’s operating profit dropped 13% to $4 billion as gross margin declined, according to the company’s annual filing in October,” Cheng reports. “‘Apple is still an iconic, exceptional brand,” said Customer Growth Partners President Craig Johnson in an interview. “It’s the biggest style-setting brand. But the stores aren’t providing the compelling range of newness that they did a year or two ago. The brand is a little dated. It’s not as novel anymore.’ Johnson, whose firm advises both retailers and institutional investors, said his 16-person field team’s Apple store checks in the U.S. and U.K. in more than 60 shopping venues found that Apple retail store sales had peaked, as comparable sales have declined ‘significantly’ for the first time.”

Cheng reports, “The company’s retail sales per selling square footage has declined to $4,410 in the first half of this fiscal year, from $4,650 in 2013 and $5,230 in 2012, Johnson said. ‘Any other retailer in the world would give their left arm’ for $4,000 sales per square foot, Johnson told MarketWatch. Still, ‘the stores aren’t as productive as they used to be. To keep expanding in the U.S., they may not always have the tier-1 locations. (But) internationally, the brand has a lot of legs. There’ll be appetite for physical Apple stores in Asia and all over the world. The question is at what pace do you expand?'”

Read more in the full article here.

MacDailyNews Take: With some actual leadership finally coming on board next week in the form of Angela Ahrendts, we expect Apple’s Retail segment, which has been rudderless and just coasting along for far too long, to pep up significantly as the vestiges of Browettization are wiped clean.

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42 Comments

  1. I know that sales per square foot are what get measured, but I think the benefits go beyond that. Quite a few people whom I know have shopped in the stores while on trips and so forth, and then come back home to order from Apple via the Internet. Quite a few Internet sales are probably thus driven by people who first get hands-on time in the stores. Plus, the availability of fast service from the stores is a HUGE benefit, especially to those of us who use our machines for business. Apple’s store locations and the service they provide are one reason I’m going with Apple for my next PC purchase.

  2. I don’t want to see Apple expand retails stores for the sake of expanding. I think they need to keep the amount of retail sales per selling square footage as high as possible. Maximize sales while keeping operating and capital expenses low. If they want to make the retail experience better, hire more employees so it is easier for customers to get assistance.

    1. Cook did not say he is going to expand in USA, so whole point of this article is useless. Current 254 in USA versus 166 overseas ratio makes no sense, considering sales ratio. Apple has to have over 500 retail stores overseas.

  3. I read this article and immediately knew the author had mis-heard what TC said and sent her the following email.
    As soon as I saw your article I knew you had mis-heard the comment.

    “I listened to the earnings call and believed that TC stated the tripling in regard to the number of Apple company stores in China only.
    To verify my memory I re-listened to the broadcast (start at 52:10 where the question about China is asked) and confirmed that
    TC’s entire response to the question was in the context of actions and activities in China only. What may have mislead your understanding
    in hearing the 40,000 points of sale data point and thinking that was worldwide. That is China only (mostly carrier outlets) with its over a
    billion wireless subscribers. (That is about one outlet for every 25,000 subscribers.)

    You may want to listen to the broadcast (available on the Apple website).

    I believe you jumped the gun on this one. (Your’s would not be a voice in the wilderness on this subject if TC had actually said what your article states.)

    You mentioned in your article that Apple (previously announced) plans to open about 30 new stores this year.
    You also referenced Angela Ahrendts who is coming aboard as head of Apple retail operations (next week).
    Do you really think Apple would have gone from a 30 a year to 240 over two years of store increases just before a new retail chief takes her position?

    A little thought would have prevented your gigantic foot insertion.

    Do you even have an editor?”

    1. Grouch (above) has it absolutely right. As soon as I saw this article I thought: this author clearly didn’t listen to what Tim said. He was talking about China, about opening new stores in China! He went on to mention adding additional points of sale (in addition to Apple) stores in China! Thanks, Grouch for filling in the details so that I don’t need to.

  4. She not the Messiah. The seas won’t part just because she’s at Apple . I think people are expecting way to much from her. She’s a fashion merchandiser- nothing more .I’m not expecting her to last more than a year- at best

    1. Hey, rob . . .

      Please, slow down and learn to PROOFREAD. Don’t make your reader do your work for you. (BTW: I don’t agree with anything you attempted to say, independent of HOW you said it.)

    2. From Forbes:

      “The historic transformation of Burberry is well documented in many interviews, case studies and the like, including HBR’s “Burberry’s CEO on Turning an Aging British Icon into a Global Luxury Brand.” In a nutshell, Burberry underwent a seven- year transformation from an underperforming, marginalized, over-licensed, decentralized brand, to becoming one of the most beloved and valuable luxury brands in the world, tripling sales in five years. It transformed from a stodgy, beige trench coat company to one of the leading voices on trends, fashion, music and beauty, all while redefining what a world class customer experience should be, digitally and physically.

      Angela Ahrendts, CEO of Burberry and soon-to-be head of Apple Retail, articulated this best when describing Burberry’s London flagship store. “Burberry Regent Street brings our digital world to life in a physical space for the first time, where customers can experience every facet of the brand through immersive multimedia content exactly as they do online. Walking through the doors is just like walking into our website. It is Burberry World [their website] Live.” Chief Creative Officer/Brand Czar (and incoming CEO) Christopher Bailey also recently declared that Burberry is as much a content-driven company as it is a leading fashion icon.”

  5. My goal in expanding the retail store count would be to ensure that 85% of the USA population could reach an Apple Store within a 45-60 minute drive. I don’t really think that more is needed except where stores are just plain overcrowded every minute they’re open.

    1. That’s not the only metric to use. Our closest store is in downtown Portland. Portland tries to actively discourage people coming into the city in cars. Thus, it takes as long to find parking as it does for us to actually go there, and when we do find parking it’s very expensive. We need more accessible stores.

          1. Yes, I’m a moron. I dropped out of high school so I could play ‘Magic, the Gathering’ professionally. I live with my friends and sleep on their couches until they get tired of me eating all their groceries and throw me out. I’d find a girlfriend to move in with, but women scare me. I walk around in Doc Martins and a black leather jacket with studs and chains all over it. It makes me look like a bad ass so people won’t hassle me. I got several tattoos and piercings too. I want to show people how edgy and original I am, just like everybody else I know. Well, I’d write more, but I have to go pick up my food stamps now.

            1. According to statistics internet trolls in Portland are typically under 18, have never worked a day in their lives, and are unsure of their sexuality. Go buy some acne cream. It might improve your social life and get you out of your mom’s basement.

            2. Well, you’re wrong. I’m 22 and I did work once as a camp counselor for a few days, until a 12 year old camper beat me up. I’m dead sure of my sexual preferences, and I don’t need cream for my acne. My boyfriend, Earl, says so. So there!

            3. Homophobia? Sorry, some of my best friends are gays and lesbians. But now that you mention it, your obsession with body fat does seem to call to mind bears and chubby chasers. Which are you?

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