Apple shows signs of sales stress: Is a missing retail chief to blame?

Apple shows signs of sales stress: Is a missing retail chief to blame?

Summary: The iPhone and iPad maker has been without a retail chief for almost a year. During that time, visitors to Apple Stores have declined, and revenues and sales are flat. While nobody has yet fit the bill to replace the retail boss, is Apple simply not in a rush to find a replacement?

SHARE:
TOPICS: Apple
41
20120316_iPad_Paris_gallery_009
Apple Store in Paris, France (Image: Stephen Shankland/CNET)

It has been about 10 months since Apple's famous out-of-nowhere management upending, just weeks after announcing the latest shiny rectangles of various sizes ahead of the December holiday season.

While many were looking at the apparent ousting of senior vice-president for iOS software Scott Forstall from the executive team ranks, many overlooked John Browett's departure, who managed the company's retail store efforts — most notably leading the push into China.

Read this

Apple hires retail chief in one interesting experiment

Apple hires retail chief in one interesting experiment

John Browett doesn't have a lot of fixing up to do with Apple's retail stores. On the flip side, he could be the one that botches a well-oiled machine.

Now, the Cupertino, Calif.-based technology giant is apparently waking up to the idea that there may be a connection between a lack of a retail chief and falling sales.

Browett's resignation couldn't come any sooner. This is considering that Apple spent the best part of six months unraveling some of his policies. Some were radical and others were off the mark. Some downright frustrated leadership, and some even annoyed customers, according to a report by The Wall Street Journal.

Almost a year later, senior Apple executives are unclear as to how its retail stores should operate. Despite policy rollbacks to a time pre-Browett, the status quo requires some level of maintenance.

What's clear is that it has to be sooner rather than later. Apple recently reported the first sales dip in years. While sales are still high and stable on the whole, despite a rocky global economy and tight customer pursestrings, cracks are beginning to show around the edges of Apple's retail strategy.

Breaking down the numbers:

At the end of Apple's fourth quarter (ended September 29, 2012), there were about 19,000 customers in each Apple retail store per week. Compare this to the end of Apple's third quarter (ended June 29, 2013) where the figure is significantly less at 16,000 per store per week. That's a 15 percent decline year in three quarters.

In total, there are 408 open retail stores as of Apple's third quarter, compared to 372 stores open on the same quarter a year earlier, according to a filing with the U.S. Securities and Exchange Commission, and 327 stores on the same quarter a year before that.

That's 3,000 per store per week in lost customers, despite a 10 percent increase in brick-and-mortar retail stores numbers.

And according to the Journal, Apple's store sales per square-foot have fallen over the last year from $4,754 to $4,542, which is just shy of a full 5 percent drop.

There's no doubt that numerous gears and cogs are at work. A lack of retail leadership is just one, albeit a significant factor. And Apple, of all companies, cannot afford to trim any aesthetic or use cost-reducing methods that Browett initially put over the company's top priority marker: customer experience.

Apple has to maintain customer experience above all else; one of the very reasons why the effects are Browett's tenure can no longer be felt. His focus on a U.K.-based technology retailer did not meld with the high brow, refined, and carefully-crafted and orchestrated experience that customers feel when they walk into Apple stores.

It ultimately boils down to investment, something Browett wanted to avoid. He wanted to cost cut, and cost cutting has not typically entered Apple's sight for some time. It hasn't needed to and it doesn't want to.

Focusing on high margin, perfectly-sculpted designs, the company bucks the trend of plowing money into areas of innovation, research, training, and development. And not just in its products. The Journal reports that Apple store "educators" were reportedly told to join the sales teams on the floor as part of Browett's slew of changes to the experience model. Just as an example alone, it can afford to offer free pre- and after-sales educative care to prospective and actual customers.

But that finely-tuned algorithm of ticking all the customer satisfaction boxes can easily go unchecked when the customer isn't the first and foremost on the business' mind.

For now, customer service has one again become the "mantra" of Apple retail. Though stores never dwindled in friendliness and openness, design and character, priorities have refocuses on the customer themselves.

Does Apple need a retail chief, based on what we now know? Likely not. But if it did, it would be a plate-spinning job. To keep the status quo intact, and chugging along like a finely tuned machine.

Topic: Apple

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

41 comments
Log in or register to join the discussion
  • Maybe

    It's the lack of anything remotely new or interesting arriving in the last 9 months.

    And currently they are saving the millions they would be paying a retail chief. Makes the books look a tad better.
    Boothy_p
    • Their products have stagnated.

      The drop in sales has nothing to do with lack of a retail boss. The workers in the retail stores just keep doing what they're doing, regardless of whether there is an overpaid hack at the helm.

      The drop in sales is solely due to the lack of recent innovation. The iOS devices are their cash cow. Android devices are appearing every day which have far more cutting edge features than the iPhone. Apple stood still, counting their cash, while everyone else sprinted past them. They're paying for their laziness now. In a market moving this fast, you can't stand still and expect to retain all of your customers, much less gain new ones.

      At this point, Apple is playing catch up. They lack a lot of cool features found on other devices. They need to add those features, just to catch up. Then, they need to innovate even further to regain their original lead. That's a tall order and I frankly don't think they're up to the challenge. They've become fat and complacent. Tiny incremental changes each year just won't cut it, anymore. They're going to need a giant leap to regain their lead.

      I don't know what happened to their development teams, but it seems like they've used up all of their creativity. Their products are stagnant and becoming more boring every day.
      BillDem
    • Or maybe you don't know what you're talking about

      … just like the author of this article.
      .DeusExMachina.
    • I totally agree...

      I don't stop in Apple stores anymore because there's nothing new to see. My only visit is if I have a problem that needs fixing.

      Apple had allowed Android to surpass the iPhone in nearly every measurable metric. From screen size, to OS features (like widgets), and other hardware upgrades that the iPhone and iOS lack.

      The fact that the iPad is nearly a 3 year old design that was first introduced with the iPad 2, made thicker and heavier for the iPad 3, and remained unchanged for the iPad 4. Talk about resting on your laurels!

      Seriously, there's nothing exciting coming out of Apple to make me want to go to the store and browse/purchase Apple product. I have a 4s and quite frankly the iPhone 5 was not enough to make me upgrade even though I was eligible. I expect the next iPhone to be the 5s in typical Apple fashion, in which case I won't upgrade again.
      Cl Reply
      • Really??

        I totally understand what you say. New colors would be innovative, a larger screen. say 6.5 inches, or some other goofy thing is required.
        Of course, teleportation and anti-gravity are required.

        Upgrade when your ready. Apple does not care. Samsung on the other hand would be glad to sell you a slightly phone every 6 months... ps they have NO customer service so don't even go there.
        eldernorm
  • Market Saturation?

    iPods were great, then iPod Touches were so much better, then the iPhone was the dream come true, then the iPad was the ultimate replacement for a laptop for many people. But what now? A smaller iPad, the next release of iOS that is radically different just for the sake of being radically different... that's not enough to justify the expense of a new one. Everyone owns multiple Apple devices that still work well and upgrading is expensive.
    LetsGoDiving
  • The George Foreman Grill problem

    Once you buy something that works pretty well and is built pretty well, the need to replace it isn't all that immediate. That's the same problem that the George Foreman Grill people have. Everyone that wanted one has one. They've offered other sizes, but it's a diminishing market.

    This isn't a problem for a retail chief. What they need is planned obsolescence. IBM had this figured out in the 70s. Apple Chiefs feeding the Apple sheep just feel that they know better, and the cliff dive that is their stock price indicates that their feeling is just plain wrong.
    jimbo.starr
    • ER.. your thinking of Samsung

      Apple wants to build products that you love. Period. They do not want you to have to upgrade every 6 months just to fill their coffers. Unlike Microsoft or samsung.

      If you are happy with your product, Apple is happy.
      Just a thought.
      eldernorm
  • can't be sustained

    Apple's marginal declines are to be expected... nobody can maintain that level of sales performance, after all, the market reaches a saturation point once everybody has a MacBook, iPad, iPhone and iPod....
    Kia Ora IV
    • er...... no.

      Actually no, they have not. Keep in mind that there are millions and millions of pc users that do not want to upgrade to windows 8. They are the future market for iPad users that finally want to upgrade.

      Apple is NOT about the money, its about the experience.
      eldernorm
      • Uh, not about the money?

        What about the $145b in cash they have stashed away?
        sjanofsky@...
  • Possible comparison error?

    This article early on is comparing a 2012 4th quarter visitor count with a 2013 3rd quarter visitor count. I have no experience in retail management, but it seems that holiday shopping would explain the difference in numbers easily. But maybe I'm just missing something.
    7stringdude
    • Sorry, my mistake

      I just now noticed the end months of the quarters - I kind of glossed over it when reading. Obviously September would not quite enter the holiday season.
      7stringdude
      • It's still a fair comment

        You can't compare different quarters and expect to take anything useful from it. It could be for example that for the Quarter ending in June people were spending money on holidays etc. and less so on other things. For true results we would need to see how the third quarter of this year compares.
        Leans_To_Center
        • If, like with consumer spending, there's a cyclical factor

          Year-over-year comparisons are the only truly valid numbers.
          matthew_maurice
      • Ah, What Happens in August and September

        Back to school. The equipping of college freshman.

        Next quarter is Christmas holiday giving. The next quarter is holiday giving in Asia.

        If it was you or me, wouldn't we look at traffic counts on a YOY basis, using comparable quarters? Yes, yes we would.

        Raising the question was the choice poor thinking or manipulation?
        DannyO_0x98
        • And let's not forget the iPhone 5 release.

          Surprising that Apple store traffic would be less 2 quarters after their annual iPhone release than in the quarter they actually unveiled it.
          matthew_maurice
  • Want vs need

    With annual release cycles, wants are satisfied with new product launches and needs fill in the rest of the year. A series of singles and doubles will beat waiting for the home run most of the time. A retail boss wouldn't fix their decline, new products to sell will.
    Middle_Age_Man
  • Aaaaaaaaaaaaaaugh

    Does...

    Stat, anecdote, stat, chart, stat, speculation, gossip, stat, anecdote, bromide.

    "Likely not."

    And, of course, the rug that ties the room together, all the words between the title and anti-denouement were in support for the case yes.

    (For those who, inexplicably, still take the arguments presented above seriously, retail store counts were annual comparisons and traffic counts were over the past few months, when Apple did not, as per loose historic precedents, launch a new iPad or iPhone or have a January or spring announcement. Of course, the numbers are the numbers, but declining traffic counts with new product would be more problematic. Not that a person with the specific title of retail chief could do anything about a less than compelling product line. There are people minding Apple's retail. SVP is an abbreviation, not a sign of wizardly powers.)
    DannyO_0x98
  • Agreed. I've always assumed it was because they don't have a retail chief

    as opposed to not having anything new lately.
    William Farrel