Has the Apple Retail Store Business Peaked?

Peter Oppenheimer sums up the Q1 2014 performance of Apple’s retail store business as follows: “Revenue for the Quarter was $7 Billion, a new quarterly record, and an increase of 9% from the year ago quarter”. The remarks are included in Apple’s webcast of its Q1 2014 Earnings Report. Readers assessing the real meaning of “record” need to keep the history of Apple retail stores in mind. The first store was opened 13 years ago, in 2011.

In comparison, McDonalds opened the first version of their current fast food restaurant brand in 1948. Despite 66 years of ongoing retail operation, same store sales for the chain, for the last quarter, decreased by only 1.4% (I excerpted this number from McDonald’s Reports Fourth Quarter And Full Year 2013 Results. There are other examples of retail brands, with many more years operating experience than Apple, still growing same store sales at a faster rate than Apple calls a “record”.

So readers might want to carefully study the performance of Apple’s retail store business, especially given the announcement of a new executive manager for this business, Ms. Angela Ahrendts, late of the Burberry women’s retail fashion business.

What I found particularly worrisome was Oppenheimer’s citing Apple’s use of RFID technology within the stores. He notes “[w]e were excited to roll out iBeacon technology at our stores in the U.S. during the quarter, enabling iPhone customers to receive notifications about products and services via the Apple Store App. . . . For example, customers walking by an iPhone table could receive a message offering to check their upgrade eligibility or trade in value”.

I have no issue with the use of location based services in the store, but I don’t like hearing about a business fine tuning methods of selling follow on products to the same customers and, perhaps, downplaying the importance of finding new customers.

Is Apple’s growth strategy built on re-eating its own lunch every year or so? If it is, then I fail to see the real growth opportunity in the retail business segment.

To sum up, I found Oppenheimer’s opening statements about iOS reach into global markets, and its dominance of those markets, to be inconsistent with his description of their retail business, which seems, to me, to be focused on a perpetual marketing strategy targeted to the same customer.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

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