Cook’s Plan: Grab iPhone Sales Share From Resellers

July 5, 2013

Even as Apple is reinforcing its image as a company trying to improve the human experience, Apple CEO Tim Cook has reportedly told retail store leaders he’s interested in more iPhone revenue, by taking sales away from resellers and bringing it to Apple’s own retail stores. As first reported by the 9to5Mac Web site, Cook’s remarks seem to contradict the company’s retail culture that focuses on excellent customer service and satisfaction, not profits. In fact, Apple’s last top retail executive, John Browett, was fired last October largely because he focused more on sales, market share and profits than customer service. But Cook’s three-hour talk to the retail team raises a bigger question about how the current number of stores and staffing levels will handle the millions of additional customers he wants to bring into the stores.

Specifically, Cook said that 80 percent of iPhones are now sold through other outlets, not in Apple’s stores. He said he’d like to see that figure reduced to 50 percent, alluding to a corresponding 30 percentage point increase in iPhone sales for the retail stores. Cook mentioned both price-matching and an iPhone trade-in program as possible incentives to bring more buyers to the stores.

Based on that figure, and assuming one-person, one-iPhone purchases, 7.5 million people bought an iPhone at an Apple store during Q2 2013. Under Cook’s plans, that figure would increase to 18.7 million iPhones, or more than double the latest figure.

On a per-store basis, the average number of visitors would increase from about 227,000 each quarter to 255,000, up about 12 percent.

Incidentally, Cook also revealed that 25 percent of Macs are sold through the retail stores, a sales figure that Apple just recently stopped providing during its quarterly financial conference calls. Based on that figure, the retail stores sold about 1 million Macs, in line with the figure that was last disclosed in Q4 2012.

The sources also said Cook and several other headquarters executives specifically told the group how critical the retail stores are to Apple’s success.

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{ 17 comments… read them below or add one }

Andy July 5, 2013 at 0541

I disagree that this is simply about collecting a few more dollars per iPhone sale. On the contrary I think it is very much about improving the customer experience. I recently purchased an iPhone from Best Buy because I was attracted by the $50 discount and it was horrid compared to an Apple store. (I can only wonder how many unfortunate customers are tricked into buying a Best Buy service plan because the sales people there either pretend it is AppleCare or insist it is better than AppleCare.)

I also wonder if this push is timed to coincide with the release of a rumored new iPhone accessory, the purported iWatch. That would seem to make a lot of sense to me as it would be yet another new product that Apple would want people to see and interact with in person, in an Apple Store.

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gprovida July 5, 2013 at 0751

Aside from the pie getting bigger in general so number of sales and percentage are not the same thing. If my memory holds, most iPhones are sold through TELCOs who are pushing non-iPhones really really hard. This involves disparaging the Apple product and not really vesting in skills to understand the iPhone. Recall, Apple does not provide “rewards” to sales staff. The partnerships with Best Buy and Walmart to create Apple-like areas in their stores for Microsoft and Samsung diminish the Apple brand and quite frankly do not reflect the full value of Apple products.

Therefore, I am not sure the intent is so much to increase iPhone profits at stores as protecting Brand and enhancing the Halo effect.

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Actual employee July 5, 2013 at 1131

Yep. Telecos have no issue shitting on iPhones but Apple policy is that we don’t say negative things about our partners. So we can’t say anything about how Sprint has crap customer service or how they keep screwing up their iPhone support so there are daily advisories of issues which they don’t bother to tell their own staff about, but instead the staff tells them it’s that their iPhone is defective blah blah

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Mark July 5, 2013 at 1236

If Sprint is giving crap service as you suggest, what would you call the pathetic lack of service I received from T-Mo prior to spending big bucks to switch? Personally, I think you are trolling.

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Another Retail Employee July 5, 2013 at 2118

I will have to agree with Mr. Actual here and say that Sprint customer service is not the best. I have to contact them quite often, and they keep telling customers to come in to the store to replace their iPhone because it is defective. They fail to mention that the towers in the area are being upgraded, and have been in this process for the last month. Nobody with Sprint is getting good service in the area, even our manager with a Droid is getting lousy service.

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AdamC July 5, 2013 at 2222

Read his reply before commenting, your comment didn’t reflect well of you.

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Throwthatham July 5, 2013 at 1011

Don’t kid yourself, this is all about the money.

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Actual employee July 5, 2013 at 1129

It’s not just profits. It’s about being able to properly educate folks at the time of purchase about their warranty rights and the proper procedure for exercising them, educating folks about the existence of Apple Care Plus which many third parties don’t bother trying to sell so they can sell their own program or because they get no commission. It’s about having folks buy at Apple which gives them a minimum 14 day return/exchange policy rather than the carriers who will fight you after even an hour especially if you claim the item you bought is defective. It’s about helping folks set up their phones to be useable when they walk out of the store which is rarely to never done at third party shops or at least isn’t done right. And when folks can’t figure it out on their own they show up at an Apple Store for help that is often due to things Apple can’t help with like they forgot their yahoo email password and don’t remember the answer to the security question they set up with yahoo.

And so on.

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Mark July 5, 2013 at 1233

With the phone companies changing the upgrade requirements, Apple doesn’t have a lot of choice. Delaying the ability to upgrade to two years reduces sales of phones. Apple needs to make it as easy to upgrade to the new phone as possible to drive sales. I’m planning on trading in my 4S for the new one when it comes out.

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Gary Allen July 5, 2013 at 1712

Just to reinforce the premise of my own story, here are just two genuine Tweets from today reflecting on the state of Apple store crowding:

The chaos at this Apple store could easily drive me to alcoholism.

Why actually, yes, I do think waiting 25 minutes after my appointment time is excessive. Thx for asking.

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AdamC July 5, 2013 at 2224

Believing the the internet tells the truth all the time easily drive me to the bottle too.

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Throwthatham July 5, 2013 at 1915

I will say again, it’s about the money and getting more out of fewer specialists

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Martin July 7, 2013 at 0420

The iPhone ist the device that everyones know. Ten years ago, everyone wanted an iPod. Apple was able to sell a bunch of Macs to people who purchased an iPod because iPods were often sold in an Apple Store.
This opportunity is missing, when too many iPhones are sold everyone else but in an Apple Store.

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David July 13, 2013 at 1152

I would agree it’s likely about money. Part of it has to do with carriers stores that promote other competing handsets instead of the iPhone.

I don’t know how it works in the US, but here in Canada Apple stores are technically dealers for their carrier partners. As a result, every new customer addition or any customer the store upgrades from a voice only to a voice and data plan results in a hefty payout to the store. This payout is in addition to the subsidy that is paid out on the phone itself. Most dealers use that payout to provide their sales associates with a commission. Since Apple does not pay it’s employees commissions, that payout from the carrier is simply pocketed by the company, and contributes to their overall revenue. I know just before I left Apple, my managers were trying devise ways to dump customers who already had data plans on to the carrier stores in order to maximize the revenues they would gain from iPhone sales.

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alksej July 17, 2013 at 1429

The number of Apple stores in the United States is just insane, at least outside of California. Major cities are covered with only a handful of tiny stores (or in the case of New York City, a handful of giant stores). Major metropolitan areas like Dallas and Atlanta don’t even have flagship stores at all. Many smaller cities don’t have an Apple Store at all, or the closest one is over an hour’s drive away. So duh, if you want to sell more stuff in Apple stores, you’re going to need more Apple stores.

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Numbers Don't Lie July 23, 2013 at 0022

I think it’s important to point out the business side of “increasing” sales is not the same as directly “reducing” TELCO share. Apple can’t directly stop a customer from going to a TELCO store or third party reseller. But, it can increase its own store sales. So, Apple Retail’s current share of the pie at 20% of all iPhones sold can be increased to 50% by a 150% increase in sales (and not a 30% transfer from third parties as alluded in your article).

Increasing current sales by 150% is not an easy task. I would imagine that senior management is going to pressure the stores to make Specialists talk about iPhones to EVERY customer they interact with in the store. Walk in for a Mac? Expect to be asked about your current phone. Visiting the Genius Bar? Expect a question about your iPhone 4 and why you’re not using the 5. Etc.

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zoetmb July 23, 2013 at 1152

The problem is that Apple can’t seem to make up its mind what the retail strategy should be. When it first opened the retail stores, it was supposedly because they were unhappy with the presentation of Apple products in other retailers, such as the now defunct CompUSA.

But then even after opening a ton of stores, they did deals with every retail store imaginable to sell some or all of Apple’s product lines. You can even buy iPods at a BJs warehouse store and Apple products are sold at Wal-Mart and RadioShack. I always felt that while this made Apple products more easily available to people who didn’t have an Apple store nearby, it also devalued the brand. Apple was marketing itself as a BMW – why would they sell their products at WalMart?

So now they want to change it again and take more of the sales? This is why retailers have always hated Apple: you can’t reply upon anything they tell you they’re going to do. J&R in NYC used to be a big Apple dealer. Now they have Apple computers and Pads relegated to one table.

I think Apple needs to get their act together and decide what the strategy is and communicate it clearly. But if they want more people to buy from the Apple stores, one thing they can do is to stop selling third party products at full list price, especially in cities (like New York) where you can walk 10 blocks and get those same products at substantial discount.

And it wouldn’t kill them to have a sale once in a while.

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