Apple’s stock price soared to new heights today, and the company eclipsed Microsoft as the most valuable public company in history. It will likely become even more valuable in the comings weeks at Apple satisfies the pent up demand for a new, larger screen iPhone and a possibly a mini-iPad.
Apple’s continuing success is manifest at its more than 370 stores across the world. Apple told The Loop’s Jim Dalrymple that its retail stores have hosted nearly 300 million visitors worldwide since October 2011. In addition, 50,000 people per day belly up to the Genius bar for service and advice.
In announcing the first two Apple retail stores on May 19, 2001, Steve Jobs said that growth was the primary reason to invest in brick-and-mortar for itself. At that time Apple was competing mostly with Windows PCs, and had less than 5 percent market share.
But Jobs was looking beyond the battle for the desktop or laptop, and during his presentation he talked about personal computers evolving into the hub of digital lifestyles, connecting with an array of portable digital devices and apps.
The first iPod was just around the corner. It made its debut in October 2001, and catalyzed the transition of Apple and its stores from curiosities and into destinations and tourist attractions, reaching millions of customers outside of its typical early adopter demographic.
In 2001, Apple store revenue was $19 million. In 2011, Apple stores took in more revenue per square foot than any other retailer — $18 billion in total. Compared to the struggling Best Buy, for example, Apple had more than five times the revenue per square foot in 2011.
Apple’s retail guru, Ron Johnson (who is now CEO of JC Penney) explained the success of Apple’s stores beyond having popular products, offering enrichment for people’s lives:
[toggle_box title=”Title of toggle box” width=”Width of toggle box”]A store has got to be much more than a place to acquire merchandise. It’s got to help people enrich their lives. If the store just fulfills a specific product need, it’s not creating new types of value for the consumer. It’s transacting. Any website can do that. But if a store can help shoppers find outfits that make them feel better about themselves, for instance, or introduce them to a new device that can change the way they communicate, the store is adding value beyond simply providing merchandise. The stores that can do that will take the lead.[/toggle_box]
Some customers may find a form of enrichment or enlightenment perusing the aisles of Apple’s elegant retail locations and interacting with the helpful staff, but ultimately Apple needs to keep churning out products that fly off the shelves.
FBR Capital Markets analyst Craig Berger predicts that the rumored iPhone 5 will be a glorious tsunami for Apple and its shareholders:
We calculate that the device represents an opportunity to generate earnings of $50 per share throughout its life cycle. We estimate that Apple should sell 250 million iPhone 5 units at an average ASP of $575, generating nearly $144 billion in revenue, $77 billion in gross profit, and $47 billion in net income.
If Berger is anywhere near accurate, Apple and its stores could see their biggest quarters in history.
In the meantime, Apple’s chief competitors — Microsoft and Google — have to be thinking about more of a retail presence beyond third-party outfits like Best Buy to show how Windows Phone 8 and Android devices can be just as “life enriching” as Apple’s products. Microsoft is expected to have 44 stores opened by mid-2013, when Apple will likely have over 400. Google isn’t saying much on the topic.
On the other hand, according to IDC, Google’s Android has a 68 percent share of the global smartphone market last quarter, compared to 17 percent for Apple. But then, Apple has reaped enormous profits from its solo efforts, while Google gives Android away for free to manufacturers like Samsung (which, by the way, is now facing off against Apple in court over patents and copycat allegations).
(Credit: IDC)
