Apple: Another opening, another show
Apple's (AAPL) 258 retail stores may be drawing fewer visitors and bringing in less revenue than they did before the economic downturn (see stats below the fold), but they can still make a splash.
Witness the grand opening video — shot by No. 2 in line — of the company's 21st U.K. Apple Store in Brighton on Saturday, complete with the usual long snaking queue, 1,000 free T-shirts and over-the-top high-fiving Apple employees.
Below: the curious economics of Apple's retail stores.
The purpose and function of the Apple Store has been underscored in recent weeks by leaks of Microsoft's (MSFT) plans to deploy its own chain of retail outlets — some of which will be located near Apple's and will reportedly have the same look and feel, with bright open layouts, wall-sized digital screens, spaces for free public events and Guru Bars to deal with customers' software complaints. (See here.)
As Microsoft seems to now understand, the real purpose of the Apple's retail outlets is not to move product — although they generated a total of $1.5 billion in revenue last quarter.
Rather, the Apple Store is the company's steel-and-glass public face — a high-tech oasis as close as the local mall where one can experience first-hand the attention to design, the hand-holding support and the unrelenting focus on the user's experience that make Apple different from every other computer maker (and are used by company and customers alike to justify Apple's extraordinary profit margins).
So it's not as important as it might seem at first glance that store visits were down for the second quarter in a row or that average revenue per store has sunk back down to 2007 levels. (See the spreadsheet below provided by ifoAppleStore, which covers Apple's retail division like Variety covers Hollywood.)
The fact is, no one leaves an Apple Store feeling quite the same about computers. "It really is like entering another world," wrote Silicon Alley Insider's Henry Blodget earlier this month after what was — believe it or not — his very first visit.
And it doesn't hurt that every store opening still draws a crowd, and that Apple employees still care enough who whoop and holler and act the fool for the entertainment — and often apparent embarrassment — of the people waiting for the doors to finally open.
Thanks to Ian Thomas (twitter: ianthomasuk) for the video, Gizmodo for the Microsoft slide and reader Donna in Mountain View for the tip.
Below: ifoAppleStore's quarterly stats. For more of their charts and graphs, click here.
Your lead sentence is misleading — it is typical for retail to have strong numbers in Q4 and Q1 (holiday shopping) and lower numbers in Q2 and Q3. The valid comparison is Q3 this year versus years past, which show the stores up in revenue, profit and number of visitors.
ex ped: We've been through all this before. If you're going talk about this year versus last, revenue growth for the quarter was 4% year over year while the number of stores grew 20%, which is no kind of growth at all. By the same measure store visits were essentially flat y-to-y, up 20% in 20% more stores. That said, Apple did pretty well for itself given the state of the economy, especially in comparison to its competitors.
I still say the intro to the story shouldn't mention "fewer visitors" as that is the historical pattern. The opening sentence should focus on the new, unusual, or unexpected. Fewer visitors were expected, it happened last year too.
The biggest number is the additional 2500 FTEs, FullTimeEquivalents, aka jobs or job equivalents, that were added.
You said the story was about … and “average revenue per store has sunk back down to 2007 levels.”
You are interpolating data or has inside information if you get that from what ifoApplestore.com posted. Please check the facts as listed on their page regarding Accounting Change.
Since you mentioned profits are not a point, then I am assuming 
you know a bit about Apple's attach rate on AppleCare and .mac/mobileMe. Since you do, then you must know that unrealized revenue in those two areas is growing while prices on many things has gone down and margin has edged up a bit.
Not surprised about the foot traffic either, as foot traffic in a lot of the stores is already approaching max capacity much of the time. The correlation between foot traffic and new stores is a great indicator that they are doing well in store and market placement.
ex ped: No need for inside information. The average revenue per store is available on ifoAppleStore's quarterly stats page, which gets its data from Apple's quarterly reports and goes back to 2001. There's a link to the page in the story, but here it is again: click here.
The line for the Guru Bar in a M$ store will probably be just as long as the one for an Apple store grand opening, just a lot less cheering.
@PED: OK, I see your meaning now. And your point regarding 20% more stores is well taken. So in the worst recession since FDR, Apple stores have flat per store traffic despite 20% of the stores being open less than a year.
Changing the subject: In the MSFT conference call, CFO Chris Liddell stated that in the non-networked market segment PC unit sales were down 16% vs. a year ago. The Mac is sold almost exclusively in this segment and registered unit sales up 4%. This is quite a achievement. It demonstrates that despite the poor economy, the trend toward OSX from Windows has not slowed.
Ahh, I'm sure the first Microsoft Retail Store will get that many people to stand on line even if they have to hire people. What really matters if any of these people standing in line actually buy anything worthwhile. 95% of these people are probably just achin' for a free Apple T-shirt. I'm just happy that if they wear the T-shirt, it will be free advertisement for Apple. Still and all, a very nice turnout and it's always nice to see employees having a good time.
Well…I don't really care about computers as long as they are easy to use, do what i want them to do, and don't freeze/crash. Windows simply doesn't measure up to Apple in terms of my criteria. The price difference is significant, but clearly worth it for a superior product. I have used Apple tech support (setting up airport plus with a Verizon cell modem) and they were great. I called Microsoft once, and I think I am still on hold. IMO, the only thing keeping Windows alive is inertia. Everybody I know who has tried Apple wouldn't even think of going back to windows. Don't believe me? Ask around.
PED, you surprise me. A generalization such as "store visits are down" with no reference points. Down compared to what?
The comparison that matters most in a business with any seasonality is year over year. And store visits yoy are up 20%. This is shown by your table and is what was reported by Peter Oppenheimer in the recent conference call (to which you surely listened).
ex ped: But I did give a reference point: down for the second quarter in a row. As for year over year, one could argue that they were essentially flat: up 20% year to year as the number of stores also grew 20%.
One would have to be insane to accept a job working at one of Microsoft's "Guru Bars". People at Apple Stores generally arrive with an enthusiastic attitude and excited about learning something. People will walk into a Microsoft Store angry as all hell. Talk about going home every night after work hating your job and wanting to kill yourself…
09Q3 Retail Rev: $1.5b > 08Q3 Retail Rev: $1.44b
09Q3 Retail Prft: $321m > 08Q3 Retail Prft: $297m
09Q3 Store Vistrs: 38.6m > 08Q3 Store Vistrs: 32m
Funny definition of "drawing fewer visitors and bringing in less revenue".
Yes, they have more locations now (so the ave./store went down), but Apple Retail is MORE profitable year over year, not less!
ex ped: Your points are valid but you've changed the subject in several ways. The story said "store visits were down for the second quarter in a row" and "average revenue per store has sunk back down to 2007 levels." It didn't mention profits or make year-to-year comparisons. And if it did, it would have pointed out that 4% rev. growth from 20% more stores is no kind of growth at all. That said, Apple did well for itself in the midst of a recession, especially in comparison to its competitors.
In the highly biased Microsoft funded commercial, Lauren was paid to shop for a computer using the limited amount of money with which Microsoft bribed her. She evaluated Macintoshes and PCs. She decided to purchase a Windows PC.
On the first day of any Apple opening, each store has enthusiastic greeters who even cheer many willing customers as they enter to shop with their own money.
If the MS store were to be true to the Lauren commercial, as it should be, then a MS store employee should be prepared to meet a handful of window shoppers waiting outside, hoping that they too can be handed a decent amt. of cash as a bribe to enter the MS store and then be allowed the choice to buy a Mac or Windows PC right inside the store.
Should the store not offer Mac products, it can offer vouchers to go to the Apple Store next door to buy a Mac.
Another item or two to add to the list from yesterday's "Sticking to One's Knitting" article, no?? It will be fun to see the Apple ad that results from this one….
Dim-Wit comments that Apple "focus on the user’s experience that make Apple different from every other computer maker (and are used by company and customers alike to justify Apple’s extraordinary profit margins)."
I take it he is implying that the profit margins are a result of the higher prices for Apple computers (remember the Palm Treo originally sold for $500).
But most users overlook these facts: Apple has the highest rating in customer satisfaction, so we should buy something we're not going to be satisfied with? Mac's come with an OS that can only be compared to Vista Primo Office Deluxe (99% PCs come with Vista barely useable Home).
Then in 3-5 years what are you going to do with your computer? If this is such an important investment then spend a little time comparing the price of a 4 year old PC with an equivalent Mac to see what the re-sale value is like. (a recent 4-year old Mac mini sold on ebay http://tinyurl.com/mhaz2w for $330, original price $599)
I love it! ". . . Guru Bars to deal with customers' software complaints".
E.g. Why do my applications lock up excessively while running Vista? Oh that's just our unstable operating system, let me show you ctrl alt delete
Uhm, it's important to notice that while store visits are down for the 2nd quarter in a row, that that is the TREND, since it is the same as the year before. You do mean 2nd, right, not third?
We expect the number of store visits to be down from Xmas, which is Q1 for Apple. And, we know that this Spring to Summer quarter is the historically slowest for Apple in the year, so why point this out? It's not unusual at all.
Rather, it would be more interesting to point out that big kerfluffle after the previous conference call, about Apple cutting 1600 job-equivalents, has been reversed with 2500 additional job-equivalents. Do you think there will be a flurry of articles pointing out that the serial jump in job-equivalents is the highest in 2 years? Isn't that a bigger story, given the current interest on whether this is an economic bottom?
ex ped: Re store visits, right you are. Fixed. Thanks.
When the Guru Bar is closed, the employee will pull down a blue screen in front of the counter, to show it's closed.