I need a little help with my Q1 estimates (my crystal ball has caught the October haziness bug). The question is quite simple: whether people this year will more likely buy online in Q1 than in Q4, as it’s happened historically, or instead the iPhone availability will force them to go to retail stores even more than in Q4.

So I thought, who better to ask than the incredibly smart and resourceful guys here at the AFB and AAPL Sanity investor communities, always so generous with your insights.

So here’s the deal, I will use the results of this poll in my November, December, and January estimates. I’ll reserve the right of coming up with the intensity of any change, but you guys will definitely choose the direction. Fair enough? Thus, I’ll just ask that you really aim for a realistic answer as opposed to what you wish would happen.

Now, here’s some context to keep in mind as you think about the question:

Factors contributing to a relative increase in online orders:
1.- Historically, Q1’s relative share of online shopping increases vs. Q4. Of the last 6 years, 3 have seen relatively no change, and 3 have seen an important increase. Here’s the data:

2.- Evidently, the Online Store is quite convenient for Christmas gift shoppers (unless one of those gifts is an iPhone 3G).

3.- Even though the iPhone appears to be the hot gift to give this Holiday season, forcing shoppers into the retail stores, the iPod is still expected to sell between two to three times as many units, a much higher ratio than in Q4:

Factors contributing to a relative decrease in online orders:
1.- So far this year the iPhone is not available online.

2.- New-to-Apple shoppers (even more so for Macs than for iPods) seem more comfortable buying at the retail stores than repeat customers (this one is just an educated guess on my part).

3.- Recent data points to a break from the historical seasonality pattern. As you can see from the last data point in the first table above, online orders in relation to total revenue is at a historical low. I will add that online orders YoY growth has been in decline during the last few months. Here’s the data:

So, there you have it. Please help me out of this pickle. Thanks!

I thought the iPhone was available on-line now, or at least ordering it is. It has to be picked up and activated at an Apple or ATT store.

IF people are shopping at all, they will tend to do it wherever it is most convenient, or possible. Towns that lack an Apple store will find more shoppers on line or at Best Buy, Wal Mart, Target, etc. I for one hate malls during the holiday shopping season. My hatred of malls actually starts about now, as the pumpkins are replaced with Santa and holly. Even web sites start having xmas trim along the top of their pages. But the lines are shorter on line.

Run the numbers.

I live in Pennsylvania, ..... IF I buy from Amazon, I get FREE TWO DAY SHIPPING and NO SALES TAX, on a $2,000 MacBook Air gussied up, I save $140 with Amazon.

So, do I go to the store and buy my Air, or order it online and wait two days?

Multiply that thinking X a few million decisions.

Why do you think Amazon’s sales are rising, despite the economic downturn?

And if gas is $3 a gallon, and round trip to the store is 40 miles, my SUV that costs me 40 cents a mile with wear and tear + consumables, stays in the garage.

Add ‘em up, save $156 and never leave my den, or fight the crowds, pay the taxes and hope they have what I want?

I believe therein lies a large part of your answer.

I’ve checked the US Online Store and I can’t order the iPhone 3G from there.
[quote author=“willrob”]Towns that lack an Apple store will find more shoppers on line or at Best Buy, Wal Mart, Target, etc.

This situation has not changed much since Q4. So, would you say in Q1 they’ll prefer online [edit: Apple’s Online Store] instead of BBY, WMT, etc. in more or less proportion than in Q4?

[quote author=“willrob”]I for one hate malls during the holiday shopping season.

I get that you’d prefer to shop online, even more so now than during the summer. But do you have an opinion on whether that can be generalized to Apple’s xmas vs. back to school customers?

Thanks!

[quote author=“TanToday”]
I live in Pennsylvania, ..... IF I buy from Amazon, I get FREE TWO DAY SHIPPING and NO SALES TAX…

I believe therein lies a large part of your answer.

Sales through Amazon would not be considered as part of Apple’s Online Store sales. With regards to my online vs. non-online metrics, they’d be non-online. Unless you mean that the same thinking applies to the Apple Online Store.

I should have been more clear. The question is if people will go to the Apple Online Store in more or less proportion in Q1 than in Q4. More people going to Amazon (or to BBY or WMT instead of the local Apple Retail Store) would still count as less, not more. Sorry for the confusion.

I will be buying a mac air and using the online store, but I think with the switch market the in store purchase is the way to go.  As far as a Christmas effect, I think many people hate going to the mall and if they know what they want and can get free shipping they go online.  So I would think online percentage would be a little higher.

Re: Q1 sequential change in share of online sales?

[quote author=“deagol”] The question is quite simple: whether people this year will more likely buy online in Q1 than in Q4

The Christmas Shopping this year could be different.  I think we will see more last minute shoppers this year and people buying less of the stuff nobody wanted anyway.

Of course it all depends on any real surprise bad news happening in December in the economy or not.

People were scared with the market crashing and the Great Depression talk all over the news.  But most people are seeing more money in their pockets as Gas prices have dropped, less people have purchased new cars meaning more money to spend on other things and the data showing people paid off more dept means they have more room on the old credit cards. 

The lack of iPhone sales should more than off set any gains on line sales might have.  The people that purchased iPhones last year on-line probably came back and purchased other things like car chargers, cases, other Apple products, where the people who purchased in the store are less likely to shop on line for those items.  So chances are each on-line loss of an iPhone sale will result in a loss of two or more on line purchases on average.

Those additional on-line visits by iPhone users could be why the on-line visits was only 1 percent in July and -8 percent in August as the repeat iPhone visitors were still hitting the online store where by September with no on line iPhone sales for a couple of months those repeat visits were mostly gone from the system.

I hope these thoughts help you get a handle on this.

[quote author=“TanToday”]Run the numbers.

I live in Pennsylvania, ..... IF I buy from Amazon, I get FREE TWO DAY SHIPPING and NO SALES TAX, on a $2,000 MacBook Air gussied up, I save $140 with Amazon.

So, do I go to the store and buy my Air, or order it online and wait two days?

Multiply that thinking X a few million decisions.

Why do you think Amazon’s sales are rising, despite the economic downturn?

And if gas is $3 a gallon, and round trip to the store is 40 miles, my SUV that costs me 40 cents a mile with wear and tear + consumables, stays in the garage.

Add ‘em up, save $156 and never leave my den, or fight the crowds, pay the taxes and hope they have what I want?

I believe therein lies a large part of your answer.

I just picked up a new HDTV via Amazon BBY would not match the price and Amazon had free shipping.  Saved $ 200 off the best buy price and they delivered in 4 days.

imo, more sales will be retail. Part of it is what you mentioned, iphone must be retail. But, also more of Apple product is available via retail. Best Buy, Wall Mart, Toys are Us, etc.
Another factor that must be taken into consideration is the economy. It’s possible that what you are seeing is total sales decreasing, not just on-line sales. For example, you are seeing a decrease in on-line sales recently. I don’t know what you use for data on the retail side, but is it possible they are down as well?
I hope this is not the case, but is possible.
Cheers,
Tim

[quote author=“Neatguy”]imo, more sales will be retail. Part of it is what you mentioned, iphone must be retail. But, also more of Apple product is available via retail. Best Buy, Wall Mart, Toys are Us, etc.
Another factor that must be taken into consideration is the economy. It’s possible that what you are seeing is total sales decreasing, not just on-line sales. For example, you are seeing a decrease in on-line sales recently. I don’t know what you use for data on the retail side, but is it possible they are down as well?
I hope this is not the case, but is possible.
Cheers,
Tim

Thanks Tim, your point is exactly why I decided to ask everyone about it. I only have data derived from web orders from Apple’s Online Store, and nothing on the retail/3rd party channel side. That’s why I’m picking everyone’s brains.  Hopefully total sales are not decreasing from last year (about $10.5b in adj rev).

[quote author=“deagol”]
Sales through Amazon would not be considered as part of Apple’s Online Store sales. With regards to my online vs. non-online metrics, they’d be non-online. Unless you mean that the same thinking applies to the Apple Online Store.

Deagol, you didn’t say *ONLY* APPLE’s ONLINE SALES. You said online. If you meant AppleOnlineStore only, you need to SAY that….     

Re: Q1 sequential change in share of online sales?

[quote author=“deagol”]

I failed to mention these declines are for the US Online Store. The declines in Sep and Oct are slightly smaller when I include European online orders. Here’s the data:

[quote author=“TanToday”]
Deagol, you didn’t say *ONLY* APPLE’s ONLINE SALES. You said online. If you meant AppleOnlineStore only, you need to SAY that….     

I know, I know! please don’t sue me.    :o

[quote author=“deagol”][quote author=“TanToday”]
Deagol, you didn’t say *ONLY* APPLE’s ONLINE SALES. You said online. If you meant AppleOnlineStore only, you need to SAY that….     

I don’t sue, others sue ME.

Poll results: Will people in Q1 tend to go online more or less than in Q4?
More 31%  5
Less 25%  4
Same 43%  7
Total Votes: 16

So it seems I’ll be projecting about the same ratio of Apple Online Store sales vs. total revenue as last quarter.

The European web orders have finally given up considerable ground vs. last year, going from a 10% decline in Oct to a 33% decline in the last two weeks. The US orders managed to maintain the 30% decline from Oct, thanks in part to the last few days regaining some of the lost ground (the response to Apple’s launch of their Holidays pitch on the online store I believe this past weekend looks promising). Remember there’s a very tough comparison given last year’s events:

Oct 26: Leopard launch
Nov 09: iPhone UK and Germany
Nov 29: iPhone France

So here’s how I’m looking at the Y/Y web order growth rates:

This results in about 3.7M orders (US and EU combined) for the quarter. Using the same ratio as Q4 (as you have voted for), it suggests revenue of around $11.1B.

I will keep updating here about the web order growth rates as they come along vs the estimates. However, I’ve decided to wait until after black Friday to publish November’s full update of the spreadsheet, given the low visibility (despite this week’s promising response to the promotion).

Thanks to all who voted. I’ll probably open another poll by mid December since it’s perfectly reasonable to change your minds as the data comes along.