Let’s start this topic anew.

I was at the Glendale (CA) Apple retail store today. The place was packed. From the time we arrived until the time we left (an hour or more) virtually every Mac on display in the store was in use. Conspicuously, the least attended sections of the store were the iPod and iPhone sections.

I was surprised at how busy the store was on a Sunday afternoon.

Toronto Eaton Centre store.

I took my MacBook in for service, something wrong with the DVD writer.

Of course, the store was packed. Purchases being made at the stations with the remote sales thing, but a long line up for the counter too. Walking in this store, you really have to notice the contrast with all the other stores. Empty & dull vs. packed and exciting.

This was late afternoon, before the work force broke for the day too.

Oh, and at a BBY, (fewer customers than the Apple Store), the mobile guy mentioned that they were sold out of the iPhones for the Rogers service. He mentioned that they still sell out very quickly.

I have made several recent visits to the 59th Street store in NYC.

The store has been crowded, but the line to pay for purchases has been much shorter than usual.  At times, there is no line at all.

This certainly seems to be a sign of slowing sales volume.

I don’t subscribe to Barron’s, so I can’t read the article in question, but Seeking Alpha summarises:

While foot traffic at Apple’s 250-odd retail stores more or less held up (-1.8% from last year), customers aren’t walking away with all that much—as same-store revenue fell 17.4% in the December quarter vs. a year ago.

Ouch.  I seem to recall from the Q1 earnings report that Apple’s quarter was actually saved by international growth?  Given the spread of the downturn, how long can overseas growth be sustained?

I presume online sales weren’t affected as severely.  Nonetheless, the fall in same-store revenue during the holidays suggests the bears were right to some extent: Apple products are not immune to the downturn, and consumer retrenchment will affect Apple sales.

Wonder how sales are holding up for Q2…

Edited: hyperlinking is good for you.

Winterpool - 02 February 2009 03:02 AM

I don’t subscribe to Barron’s, so I can’t read the article in question, but Seeking Alpha summarises:

While foot traffic at Apple’s 250-odd retail stores more or less held up (-1.8% from last year), customers aren’t walking away with all that much—as same-store revenue fell 17.4% in the December quarter vs. a year ago.

Ouch.  I seem to recall from the Q1 earnings report that Apple’s quarter was actually saved by international growth?  Given the spread of the downturn, how long can overseas growth be sustained?

I presume online sales weren’t affected as severely.  Nonetheless, the fall in same-store revenue during the holidays suggests the bears were right to some extent: Apple products are not immune to the downturn, and consumer retrenchment will affect Apple sales.

Wonder how sales are holding up for Q2…

Edited: hyperlinking is good for you.

Of course Apple’s products aren’t immune to a slowdown.  But that susceptibility manifests itself differently with Apple products than with others
‘s, in this very important way, unit sales continued to grow, just at a slower rate, while competitor products unit sales rate actually declined.

Let’s put this into perspective, shall we?

Apple retail stores topped out at an ASTOUNDING $4,700 per square foot.

If they declined by 17% that would lower them to a “mere” $3,900 per foot.

Now we CONTRAST the stores with other prime retailers, and compare:

Abercrombie and Fitch       $489
Aeropastale             $549
American Eagle           $638
Costco                 $920
Rite Aid               $478
Tiffani’s             $2,890
WalMart                 $661
Zale’s                 $843

So, no matter how you want to “slice it” the ‘downturn’ at apple, takes them from simply unbelievable sales per foot, way down to plain old *UNBELIEVABLE* sales per foot, without the simply!

The rest of the retailers would DIE to have those “lower numbers” anytime at all.

But we need to maintain Apple’s growth story to justify a decent multiple (ideally above 20 again in the near future).  Wall St seems to look for any excuse to sell AAPL and proclaim the end of consumer discretionary spending = the doom of Apple.  That’s the ‘logic’ they claim for AAPL being down 55 per cent from the high despite its incredibly strong fundamentals.

Frankly I’m a little surprised.  Anecdotal evidence suggested the physical shops were doing great business.  As Tan points out, down 17 per cent is still lovely, but I’d have thought such a decline would be more noticeable.

Winterpool - 02 February 2009 12:58 PM

Frankly I’m a little surprised.  Anecdotal evidence suggested the physical shops were doing great business.  As Tan points out, down 17 per cent is still lovely, but I’d have thought such a decline would be more noticeable.

Bodies IN the door does not necessarily = $$ stopping in the store.

Many are kicking the tires, considering if it is “really worth it” to spend DOUBLE for an Apple. Most Windows switchers have trepidations, and despite the praises of friends, need time to justify that purchase.

TanToday - 02 February 2009 02:02 PM

Bodies IN the door does not necessarily = $$ stopping in the store.

Many are kicking the tires, considering if it is “really worth it” to spend DOUBLE for an Apple. Most Windows switchers have trepidations, and despite the praises of friends, need time to justify that purchase.

Whoa.  That comment, “spend DOUBLE”, sounds suspiciously like an agenda.

I will grant you that Apple does not have a $500 computer, unless you include the Mac mini, but Wintel’s do not have anything comparable to iLife without spending more to get beyond the included “free” trials.  Even then they are junk, and the consumer knows it.

Still equally configured, the Mac is actually less expensive than Wintel’s.  Either way, Macs are not DOUBLE the price of Wintels.

TanToday - 02 February 2009 02:02 PM

Winterpool - 02 February 2009 12:58 PM

Frankly I’m a little surprised.  Anecdotal evidence suggested the physical shops were doing great business.  As Tan points out, down 17 per cent is still lovely, but I’d have thought such a decline would be more noticeable.

Bodies IN the door does not necessarily = $$ stopping in the store.

Many are kicking the tires, considering if it is “really worth it” to spend DOUBLE for an Apple. Most Windows switchers have trepidations, and despite the praises of friends, need time to justify that purchase.

As management explained during the conference call with analysts, catalog resellers bundled aggressively during the quarter and there are increasing points of purchase. As I’ve stated in other topics, I spent more on Apple products during the Christmas quarter than the year before, visited the stores more frequently during the quarter than the year before but spent more through the online store than at the retail stores. The items purchased through the online store were delivered to an address a five-minute walk from a mall with an Apple retail store. Visiting the stores to view the products was an integral part of the purchase process.

Here’s an example of how well the stores work: A member of our extended family needed a new laptop. In January I took her to an Apple retail store and showed her the white MacBook thinking that was best for her limited budget. She saw the MacBook in the aluminum casing and with the LED backlit screen. The rest is history. She walked out with the new MacBook, AppleCare and a printer.

Without the store and its product displays to see and handle the MacBook, she might not have bought a Mac. Other family members might have sold her on buying a cheap netbook. It took five years of subtle nudging for her to buy a Mac. The store was instrumental in sealing the deal.

DawnTreader - 02 February 2009 09:57 PM

Without the store and its product displays to see and handle the MacBook, she might not have bought a Mac. Other family members might have sold her on buying a cheap netbook. It took five years of subtle nudging for her to buy a Mac. The store was instrumental in sealing the deal.

Don’t want to appear like I’m flying on your coattails, but you are absolutely correct.  The value of The Apple Stores goes way beyond actual revenue generated.  Apple used to have over 2,000 authorized resellers, and they sold squat.  The Stores have raised the bar for product display and sales staff knowledge.

Unlike when the Stores were first introduced, Apple has a much stronger presence in Best Buy, online and in catalog venues, not to mention authorized resellers or international partners.

Revenue was up QoQ 28.8%, while competing firm’s revenues were down.  With a record like that, does it matter that the leading retail store chain (revenue per sq foot) dipped a bit?

nt

Gregg Thurman - 02 February 2009 05:20 PM

TanToday - 02 February 2009 02:02 PM

Bodies IN the door does not necessarily = $$ stopping in the store.

Many are kicking the tires, considering if it is “really worth it” to spend DOUBLE for an Apple. Most Windows switchers have trepidations, and despite the praises of friends, need time to justify that purchase.

Whoa.  That comment, “spend DOUBLE”, sounds suspiciously like an agenda.

I will grant you that Apple does not have a $500 computer, unless you include the Mac mini, but Wintel’s do not have anything comparable to iLife without spending more to get beyond the included “free” trials.  Even then they are junk, and the consumer knows it.

Still equally configured, the Mac is actually less expensive than Wintel’s.  Either way, Macs are not DOUBLE the price of Wintels.

You are inserting a LOT OF things the buyer only learns about AFTER buying a computer.

For most of those “tire kickers” it is the STICKER PRICE that they are looking at and yes, it really is almost double for an APPLE than for a WinDoze machine nowadays.

I browsed around Best Buy a few weeks ago, and the average price on a laptop was give or take, 800 bucks for the better ones.

The ENTRY machine for Apple was a grand, and the midrange went to $1,700 plus.

As an ALL MAC guy myself, I can justify that differential, but how many of these switchers really understands things like operability, OS advantages, and the quality of the free bundled software?

I would guess less than 25%, and increasingly those folks already HAVE Macs, leaving a diminishing pool of buyers with computer savvy to ascertain value VS price, ESPECIALLY in a market where daily, your friends are getting pink slips, and your retirement savings are going up in smoke.

TanToday - 03 February 2009 08:15 AM

Gregg Thurman - 02 February 2009 05:20 PM

TanToday - 02 February 2009 02:02 PM

Bodies IN the door does not necessarily = $$ stopping in the store.

Many are kicking the tires, considering if it is “really worth it” to spend DOUBLE for an Apple. Most Windows switchers have trepidations, and despite the praises of friends, need time to justify that purchase.

Whoa.  That comment, “spend DOUBLE”, sounds suspiciously like an agenda.

I will grant you that Apple does not have a $500 computer, unless you include the Mac mini, but Wintel’s do not have anything comparable to iLife without spending more to get beyond the included “free” trials.  Even then they are junk, and the consumer knows it.

Still equally configured, the Mac is actually less expensive than Wintel’s.  Either way, Macs are not DOUBLE the price of Wintels.

You are inserting a LOT OF things the buyer only learns about AFTER buying a computer.

For most of those “tire kickers” it is the STICKER PRICE that they are looking at and yes, it really is almost double for an APPLE than for a WinDoze machine nowadays.

I browsed around Best Buy a few weeks ago, and the average price on a laptop was give or take, 800 bucks for the better ones.

The ENTRY machine for Apple was a grand, and the midrange went to $1,700 plus.

As an ALL MAC guy myself, I can justify that differential, but how many of these switchers really understands things like operability, OS advantages, and the quality of the free bundled software?

I would guess less than 25%, and increasingly those folks already HAVE Macs, leaving a diminishing pool of buyers with computer savvy to ascertain value VS price, ESPECIALLY in a market where daily, your friends are getting pink slips, and your retirement savings are going up in smoke.

So if the average price of a Windows laptop is $800, how is $999 for the entry level MacBook “almost double”?  Since it comes with the nVidia chipset, 2GB of RAM, and an easily replaceable 120GB hard drive… remember that a 250GB drive costs around $75 and a 320GB drive around $99…

The $999 MacBook, for the average person who’s not going to be using it as a video editing system; or a system for working with tens of thousands of RAW image files from a digital SLR; needs no hardware upgrades at all.

There’s enough RAM and hard drive space to run OSX perfectly well, quickly and fluidly, and enough resources to install and run XP under either Parallels/Fusion or Bootcamp.

The $999 MacBook also has a FW400 port. It has a Core2 Duo that’s the same 2.0Ghz clock speed as the low-end 13” unibody. In fact, for $300 more, here are the differences: the new MacBook aluminum has the unibody; same processor, clock speed, and RAM; and 40GB more of drive space, and it’s missing the FW port…! Anyone looking for a “bargain” with the extra “feature” of the FW400 port could just buy the polycarbonate model and it would “only” be 25% more (not 100% more, not even close) than the average PC laptop at $800.

The $999 MacBook also has the latest version of Leopard and iLife ‘09 preinstalled. It doesn’t need antivirus/antimalware software installed and the associated yearly antivirus “tax” is eliminated.

I’m not saying something we all don’t already know, but if you look at the value proposition of what Apple is offering for this kind of buyer; -today-; at different price points; this is by far the strongest set of laptops they’ve ever offered.

TanToday - 03 February 2009 08:15 AM

. . .but how many of these switchers really understands things like operability, OS advantages, and the quality of the free bundled software?

In many respects, showing those difference is the entire point of the Apple Store.  Prior to their existence, the Apple Resellers often sold other products and were not trying to sell Apple as much as sell something. Thus, Apple’s partnerships with Sears, Circuit City* etc in the ‘90s were doomed to failure if only due to the mentioned sticker shock.  The Apple Store has given potential switchers the opportunity to actually talk to somebody about the differences and for those differences to be delineated.

This strategy has obviously worked. 

*when I got married, we bought a Performa at the local Circuit City.

But would you pay $10 for a laptop. This brings a whole new meaning to entry-level.