Apple should ditch sales 'imbalance' and build more stores

Apple should ditch sales 'imbalance' and build more stores

Summary: The number of Apple Stores worldwide is lagging behind the booming sales at the company, an analyst has said.

TOPICS: Apple, iPhone
Apple Store
Apple Stores are not spreading fast enough compared to the company's rise in sales.

Apple's retail stores are often viewed as the cornerstone to its success in the US and internationally, but they've become a smaller and smaller component of its overall sales, according to new numbers by Asymco mobile sector analyst Horace Dediu.

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The company opens about 30 to 40 new retail stores each year, but that's remarkably flat compared with sales growth, according to Dediu, and highlights why Apple is focussing on new international outlets over the US.

The analyst notes that in 2007, when Apple's net sales grew at $7bn a year, it opened 34 stores, most of which were located in the US. In 2012, sales grew about $37bn or five times the 2007 rate, but only 41 new stores were opened. (An interesting aside that Dediu notes in an earlier analysis is that Apple's store employment grew by seven times during this period, from 6,400 in 2007 to 42,200 in Q1 2012.) 

Still, he calls Apple's retail store growth rate of 33 percent between the periods "frustratingly slow", leading to more sales occurring outside its retail store channel. Dediu notes that in 2007 retail revenues were $4.7bn, or 17 percent of Apple's total, falling to 12 percent, or $19.1bn, by 2012.

But the analysis suggests that the mix of US versus international retail openings rather than just the speed of openings is the problem.

Not enough international stores?

US stores account for 63 percent of its roughly 400 retail outlets worldwide today but about 37 percent of Apple's revenue. At the other extreme, China has accounted for between 19 and 13 percent of its revenues in recent quarters, but is home to only three percent of Apple's stores. Europe meanwhile accounts for 23 percent of sales and has 22 percent of its stores.

Perhaps Apple has not been fast enough to align its retail strategy with sales, but it is addressing the issue. Dediu notes that in 2012 only 15 percent of Apple's 30-odd new retail stores opened in the US, which is a trend he expects will continue to correct the "sales/retail presence imbalance".

Apple did actually outline this in its 10K SEC filing (PDF) from September 2012, which notes that three-quarters of the 30 to 35 new stores will open outside the US. 

Topics: Apple, iPhone

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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  • Not fast enough?

    I live in rural Minnesota. It's a two hour drive to an Apple store. It's a one block walk to a PC store. I don't want Apple to grow in China when they still need to grow in the U.S. but they need to grow everywhere. How many years ago was it that they didn't even need stores? How many product launches ave been sold out before the stores even opened?

    I have a hard time recommending to PC users to switch if they are not close to a Mac genius. That said, I just had two visitors from Japan last week. Both with MacBook pros and iPhone 5's. something's people feel more comfortable buying online. Products that are essentially online products are some of those. People buying Apple products are above average Internet savvy, so more likely to buy online.

    Lastly, while apple stores have a look and feel, they spend a lot of time on location and aesthetics unique to that location. They are not taking the Best Buy box store approach. There's a reason why Apple stores are so very successful and profitable and it's not due to mass production.
    • That look and feel cost a lot of money.

      The reality is that most of their income comes from iPhone. Most iPhones are sold on carrier price plans, and those plans are usually sold from the carrier or carphone warehouse type operation.

      If you were apple and this is where your income comes from, where would you invest?

      Remember the king is dead and accountants and bean counters run the game now.

      Think sir hiss helping prince John count his money while king Richard is away. As I recall it ended really well for them.

      Apple need to remember that it was spending money that made the brand, not just hoarding it.
  • Running out of options

    Not sure what would turn the stock around. Apple is not cool anymore. They haven't invented anything new in 2 years. Tim Cook is all talk no bite. If "more stores" is the answer I would be shocked.
    Sean Foley
  • Apple should ditch sales 'imbalance' and build more stores

    No reason to do that. The last time I went into an Apple store there were more employees than customers in it Their stores outside of the NYC area don't generate much traffic.
    • LOL

      Come down to Baltimore sometime. Our Apple store is packed whenever I go by. Looks like a dance club more than a store.
      • Los Angeles Anecdotes

        We have a lot of stores, Beverly Center, The Grove (a mile east), Santa Monica, whatever they call Woodman and Riverside (Studio City adjacent?), Pasadena, Glendale, and Santa Monica. I also will visit the Santa Barbara one. Generally populated with visitors when I'm there. Scratch that, sometimes the Beverly Center store is a bit light (it is real close to The Grove which did pull a lot of the Beverly Center's traffic — Beverly Center used to have a movie theater, now, nope.) So, if I want to get something done without battling crowds, to Beverly Center I go.

        I daresay, Mr. Davidson seems to have a busy life. I would be surprised if gathering comprehensive Apple Store traffic data would be a priority and his knowledge of Apple stores outside of NYC may be incomplete.

        Regarding the article, I believe it is Mr. Tung who took the analysis and came up with an Apple-must-do. If sales are good, does it really matter if it's 40-60 retail-online or vice versa? If international stores are slow to open — and I take the following observation from Mr. Dediu's The Critical Path podcast — it may be because opening a retail store in other countries involve different problems to solve.
  • Hmm...

    One would think having only 3 stores and raking in more than 60% of sales is a smart investment because your not spending "overheads" on the other 30-40%?!
    I dont know.