Retail Stores’ Importance Highlighted

August 17, 2007

A review of the financial figures of Apple Inc. starting before the opened the first retail stores in May 2001 shows the impact of the chain on the company’s performance. The stores operated at a loss for the first seven quarters they were open, but then began slowly turned into the black. Profit started at just $1 million in the fourth quarter of 2003, but jumped to $45 million by the first quarter of 2005. The Retail segment’s overall contribution to the company’s revenues also increased over those first four years, starting at just three or four percent, but reaching 16 percent by the first quarter of 2005.

Profit and loss have gone up and down since Q1 2005, influenced by the retail selling seasons. The first quarter of 2006 generated $90 in profit, based on huge holiday sales, but slipped back to $29 million the very next quarter. Since then profits have been as high as $89 million and as low as $32 million.

In the latest quarter, Apple changed its accounting rules so that its profit takes into account different cost of sales. The latest profits total $184 million.As for percentage contribution since 2005, it’s been as high as 19.4 percent in the fourth quarter of 2006, and a low as 14.5 in the second quarter of 2006. It now seems to have settled into the range of 15 to 16 percent.

The chart below show the Retail segment’s contribution to Apple’s revenues, starting when the first stores opened in May, 2001: the blue chart speculates what Apple’s results would look like if they had not opened retail stores, and developed not other additional sales outlets. The green chart shows Apple’s actual revenues, with the benefit of the Retail segment revenues. More “green” is visible since 2002, and the two tall spikes in 2006 and 2007 are more prominent with the Retail revenues. 

Click here for a larger version of the chart.

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{ 7 comments… read them below or add one }

Name Anonymous August 17, 2007 at 0525

Of course you don’t realy know what Apple’s sales numbers would be like without their retail stores. Every bit of success helps them sell product through non Apple stores as well.

I think their retail stores probably have helped more than the green indicates.

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CopyChief August 17, 2007 at 0611

Of course the stores are important. Before they opened, no retailer could do a good job displaying and demonstrating the true strength’s of Apple’s OS and hardware. The stores are strategically located and, in general, expertly managed to provide a unique shopping experience, excelling where commodity computers like Gateway faltered seriously.

Anecdotally, the stores are booming. Every time I am there, even just to get an iPhone or iMac fix while I save my pennies, people are dropping big bills on computers, iPods, accessories and more.

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Mark Wilson August 17, 2007 at 1005

The retail stores were never originally designed for profit. It was to first answer the question of PC users, Where do I buy, service, train, find accessories, etc. for a Mac. But the real reason was that at the time Apple was considering its own retail stores was when they were trying to switch OS X. Developers were not making money writing for the Mac market and were asking why they should support an even smaller OS X market. Who would buy their software, Finally Apple could say “we will at our own retail stores.”
Now that all of this has succeeded, Apple is gaining market share and making profits.

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Jose August 17, 2007 at 1319

I most likely would not have switched to Apple if not for the exposure the stores have given them starting in 2001. Apple displays in Comp-USA were never very appealing and NEVER well staffed. The new OS X helped too.

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MoreTimeAndMoney August 20, 2007 at 0505

Your “new via PDA” pic shows a stone-age PDA. How ’bout a modern one, like the iPhone.

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Dave Barnes August 20, 2007 at 1148

@Jose (#4)

Your comment demonstrates exactly why the Apple retail stores were necessary.

I did buy my Macs from CompUSA and the experience was painful even with a fabulous full-time Apple employee in the store. I bought at CompUSA to help this particular excellent Apple person and because I could get CompUSA to “throw in” something at purchase time (and no way would I get that at the Apple store).

Last Saturday, Apple pulled 3 of their employees out of local CompUSAs and sent them to man the Apple area at Worst Buy. For “my” Apple rep, this meant walking across the parking lot.

My prediction is that Apple will be gone from CompUSA within 6 months and that CompUSA will be out of business in 2 years.

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FRMRApple August 20, 2007 at 1200

The stores were the best thing for the company/computers. But don’t underestimate the power of iPod. I would say that the popularity with iPod (and them going from Mac only to a Mac/PC device) along with the stores were a two-pronged attack that simply could not have been planned.

Also, the stores were originally opened as a showroom and a place to get info. But they were not intended to stay that way. It was a slow, methodical process to get to the place they are now. This worked for and against the stores. The stores benefited in the early years to keep them afloat. But these days when they are busy and when employees try to (GASP!) SELL things to people, people are surprised! And the Genius bar being a place to hang out and chat now being a place to get work done has hurt the rep a bit. But that is more due to the expectations of customers rather than the work or service of the stores. Even with a wait, the Genius Bar is still the BEST deal on tech support around. No where else can you get free tech support (with people who actually know what they are talking about) where all you have to do is wait to get it. Try THAT at Best Buy!

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