BusinessWeek Says Jury Is Out On Apple Stores (W/Analysis)

by , 1:15 PM EDT, April 7th, 2004

BusinessWeek's Alex Salkever says the jury is out on Apple's retail store effort. This is partially in response to many in the Mac community gloating over Gateway's decision to shut down its remaining 188 retail stores. Mr. Salkever says that not only should we not be so quick to judgement, but that Apple's market share numbers show that the Apple Stores have not been the success they need to be. From the article:

All this is somewhat unexpected. Although always intended to be profitable eventually, Apple stores were envisioned mainly as showcases for Apple wares, aimed at drawing in new customers.

But here's perhaps the biggest surprise: On the crucial basis of attracting newbies, Apple's stores have yet to show any notable progress. Despite Jobs & Co.'s claims that 50% of the people buying at its stores are Windows users, Apple's market share has made no significant advances. So while comparisons to Gateway might seem easy and feel good, they only go so far.

[...]

Still, the proof is in the number of new Apple users, and that remains discouraging. In tech tracker International Data Corp.'s latest tally of computer market share, Apple's piece of the U.S computer pie slid from 3.5% in 2002 to 3.2% in 2003. The decline also speaks volumes about Apple's campaign to woo switchers -- if they were coming over in any significant numbers, then Apple would be growing faster than the broad PC market.

[...]

For Apple's retail experiment to be judged a true success, it would need to see some positive momentum in actual Mac market share from reputable sources, such as IDC. Absent these third-party judgments, Apple's own claims about switchers lack credibility.

There's much more in the full article, which we recommend as a very interesting read.

The Mac Observer Spin:

We agree with Mr. Salkever more often than not, but this time that's not the case. While Apple indeed has a market share problem (and yes, we realize that many of our readers prefer to dismiss market share as unimportant), it is the Switcher campaign and Apple's retail stores that have kept that problem from being far worse than it is. Apple's sales would have fallen far more during the last two years had it not been for both the Apple Stores and the Switcher campaign.

Indeed, the Switcher campaign and the Apple Stores were crucial at a time when Mac users stayed away from new Apple hardware in droves while they waited for CPU speed increases. Apple's biggest professional demographic, graphic design and publishing, were also staying away as they held on to their Mac OS 9 Macs, eschewing Mac OS X. Had Apple not brought Switchers to the platform, with help from the Apple Stores, the company's sales would have taken a huge hit.

So what's the problem? Our opinion has increasingly swung to the idea that Apple's Mac prices are too high. The Power Mac G5 is too expensive, the iMac is too expensive, and Apple's 17" and 20" Studio Displays are far too expensive. iBooks, eMacs, PowerBooks, and the 23" Cinema Display HD are priced more competitively. It's the G5 in particular that is just whacked.

Of course, the problem with the G5 is that Apple can't sell it in its current form factor and design for less than it is. We believe that it is important for Apple to maintain its industry-high margins, and the G5 is expensive to build. The solution, therefore, is to design a Power Mac G5 model that is less expensive to build. The same goes with the iMac. If Apple can't sell the darned thing for less money, then come up with a solution that is cheaper.

The fact is that Apple is packing so much into its Mac product line, that they are "worth" what Apple is charging. There's no arguing with the value in a Mac. The problem is that the rest of the computer-buying world doesn't care. We can argue all day long that the world should care, but it won't change reality. Apple has to find a way to address some aspects of this problem.

As Mr. Salkever says, the proof is in the numbers (or the pudding, as we are wont to say): Apple's market share is slipping. The Apple Stores (and the Switcher campaign before it) aren't the problem, however, while pricing is.

BusinessWeek Article