“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.
Related articles:
Apple’s retail market share grows as RadioShack and Best Buy shrink – March 7, 2014
Angela Ahrendts could spark another Apple retail revolution – January 8, 2014
Apple’s incoming retail boss Angela Ahrendts: ‘I firmly believe in following your intuition’ – November 26, 2013
Fortune’s #4 Businessperson of the Year: Apple’s incoming retail chief Angela Ahrendts – November 21, 2013
Burberry’s Angela Ahrendts makes a smart move to Apple – November 8, 2013
Salesforce CEO Benioff: Angela Ahrendts the next Apple CEO – October 29, 2013
Angela Ahrendts: High-class CEO – not for the reasons you’d think – October 17, 2013
Apple’s newest exec Ahrendts should shake things up, fit like a glove – October 17, 2013
Apple Retail: Meet the new boss, better than the old boss – October 17, 2013
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Tim Cook’s email to employees announcing hiring of Angela Ahrendts as retail chief – October 15, 2013
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Burberry CEO discusses iPhone 5s collaboration with Apple – September 17, 2013
Apple grants Burberry early access to iPhone 5s for fashion show photography – September 12, 2013
Apple’s long hunt for retail store chief continues – January 7, 2013
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Hopefully Angela can spark some life into their website as well.
I’ll bet John’s Brow was Wet when he realized his actions were hurting and failing Apple, not to mention pissing off Tim Cook. He gave new meaning to the word(s) “wrong-headedness.”
Another advisor telling us all how smart he is and dumb the folks at Apple are.
The supply of these fools seems inexhaustible
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.
another benefit from the stores is that Apple get first hand feedback from customers, instead of made-up bullshit from bloggers, so Apple can really listen.
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.
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.
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?”
If so, nice!!
Yes, that exactly how I read it as Apple was talking about China when it mentioned tripling the number of stores.
+1
That’ sweat I heard as well.
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.
More UK stores please – it’s a two-hour drive to the nearest one from these dark parts.
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
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.)
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.”
All those retailing experts were hopelessly wrong when they predicted that Apple’s retail stores would prove to be an expensive mistake. Why would anybody take their opinions seriously now ?
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.
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.
Are you a fatty? You sound like a fatty.
Try carrying a 27″ iMac on your bicycle. Are you a moron? You sound like a moron.
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.
According to statistics you are more likely to be a fatty than not http://www.portlandpulse.org/overweight_obesity Maybe you should ask apple to add a drive through to the Portland store. Looks like there are plenty of other fatties who would appreciate it to.
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.
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!
It amuses me you feel the need to reply on my behalf zeke. What’s with the homophobia though?
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?
I don’t think most people realize how big the population of China is. There are 160 cities with a population over a million right now. If you put just one store in each of them, you haven’t even scratched the surface. There is plenty of room for growth worldwide, let alone in the US. Author has no imagination.
So many of Apple’s retail stores have been remodeled and enlarged. Has anyone taken this into consideration?
The store here in Delaware has been expanded a couple of times. According to the genius I spoke to it is the largest Apple store in a mall in the world. It’s still too small. Normal there are about three customers to every employee. I wish they would expand again. I guess it is one of the benefits of tax free shopping.
Incidentally there is a Microsoft store down the hall. It has plenty of excess room. With customer employee ratio flipped around. 3 employees for every customer. You wonder why they are still open.
Yep, no sales tax in Delaware makes that Apple store a very attractive destination for people in Baltimore, Philly, and most of South Jersey – it’s about an hour’s drive – worth it if buying a bigger-ticket item.
What Cook actually said was that Apple planned to triple the number of stores in CHINA in the next two years. Too many of these so called financial bloggers are apparently not EAL.
Tripling in two years seemed absurd – when I was listening, he made the comment while in the midst of talking about China – could he have meant tripling stores in China in two years?
Oops – just read the other comments. I appear to be a little late to the show…
As usual. Another person who hasn’t built a global multibillion dollar business has the answers Apple needs.
Dork.
A cursory look at the numbers would probably reveal that one of the main reasons for a drop in profit per square foot is in the operating expenses. Over the past two years, the economic recovery has caused commercial real estate rents to rapidly make up for lost ground during the downturn. Apple’s stores are always in premium locations, and these rents have been the first to catch up.
On a related note, I would NOT mind if the profit per square foot wend down further if that were a consequence of HR expenditures (in other words, if they paid workers more, or got more of them, or spent more on training / obtaining better people). Apple retail is ALL about service, and the foundation of that service are people who work there. That is the ONLY reason Apple retail has the highest profit margin per square foot than ANY other retail in America (twice as high as Tiffany). Maintaining and improving the level of service should be the main area for spending for Apple retail.
Does this guy have any clue just how off the charts $4k+ per SF is? If the sales per SF measure is a sign of Apple-in-decline, then how does he explain the market share jumping from 10.8% to 15%. I thought all these Wall Street hacks knelt at the market share altar.
As pointed out elsewhere, many of Apple’s most heavily visited stores have expanded over the last few years. In addition to new retail locations opening in some very high priced retail centers, the relocation and renovation costs would also put downward pressure on margins.
“The brand is a little dated. It’s not as novel anymore.”
So, I guess we should write off Tiffany & Co. (the #2-ranked store chain in sales per SF) as well because their brand and product line up aren’t novel either. Using “novelty” as a qualitative measure of retail success is flat out idiotic. Does the writer realize that Apple has been around since 1977, and their first retail stores opened in 2001? People don’t shop at Apple stores or buy their products because of novelty, but I guess this is news to these hacks.
Apple still has plenty of expansion opportunity. In North America, that might entail expanding into lower tier retail centers, since many of the highest prestige areas are now covered. But, across the rest of the world, there are a lot of prime locations where Apple can locate and generate huge buzz.
Using the short-sighted view shown in the article, retail expansion could trim the margins and lower the average sales per SF. However, it would still have a net positive gain for Apple’s overall bottomline. Part of this is because Apple’s stores keep the retail margins internal.
Looking at the retail operations in isolation does not account for the overall value that they bring to Apple. Rather than having that retail markup over wholesale cost go to an indifferent “partner” like Best Buy or Radio Shack or the AT&T store, Apple keeps that markup for themselves and uses that to pay for the retail store overhead.
The overhead to keep those stores open means that Apple also maintains control over the customer service experience, and uses prestigious locations to further burnish the company’s premium image. It’s a form of marketing, but it also provides a physical point of presence that connects Apple more directly to its customers on their own terms. Those are all qualitative benefits that “analysts” do not appreciate, but Apple’s customers do.
I have to believe that part of the reason for decline in same store sales is at least somewhat driven by the change in timing of product updates. Used to be that updates were spread out more during the year, providing more “reasons” for customers to go walk into a store to check out what’s new. When all products are updated at the same time in the fall…..fewer reasons to make the shopping trip and make a purchase. It certainly is that way with me personally. I visit less because I have less reason to do so.
Why does the author assume the stores will be in the United States?
Maybe I heard wrong but I’m pretty sure Tim Cook said Apple would triple the number retail stores in China, not ALL retail stores. Am I wrong?
I know that we could use more Apple Stores in Tokyo. There are only two, in the southern area. Getting to them is not easy for people in northern or western Tokyo. Opening a Shinjuku and/or Ikebukuro store would be a big deal for a lot of people here.