Sunday, August 8, 2010

Apple Retail Stores And Mac Sales

Apple Retail Stores And Mac Sales
There's no doubt a correlation exists between the increase in the number of Apple retail store locations and the impressive pace of Macintosh unit sales gains. In the June quarter Apple sold a record 3.472 million Macs. Of that total, 677,000 Macs were sold through Apple's international chain of retail stores.

However, in addition to being points of purchase, the retail stores play an important role as customer service and product education centers. Apple retail store data suggests the bricks and mortar stores are boosting Macintosh sales through other sales channels. 
Increase In The Number of Apple Retail Store Locations
During last month's June quarter conference call with analysts, Apple's management stated the company ended the June quarter with 293 retail stores and anticipated openings 24 new stores during the September quarter. This 8% expansion in retail store locations in one three-month period is not only ambitious, it supports continued strong Mac sales in the current and future quarters.
In the June quarter Apple retail stores hosted an estimated 60.5 million visitors, experienced revenue growth of 73% over the prior-year period and revenue ramped to an average of $9 million per store. Sequentially, retail store sales rose 53% from the March quarter results. The release of the Apple iPad in the June quarter positively impacted both store foot traffic and store revenue results. As primary points of purchase for the Apple iPad, which currently remains in constrained supply, the retail stores benefitted in both customer traffic and sales activity from the release of this popular new device.
The Pace of Mac Unit Sales Growth
During the first three quarters of FY 2010 the year-over-year growth rate in total Mac unit sales has remained amazingly consistent at 33% each quarter. This impressive rate of Mac unit sales growth for the first nine months of this fiscal year portends strong Mac unit sales in the September quarter as well.
Should Apple report a fourth consecutive quarter of 33% year-over-year increases in Mac unit sales, the company will ship over 4 million Macs in the three-month period ending in September and realize roughly a 17% sequential gain in unit sales, just shy of the June quarter's 18% sequential unit sales gain performance.
For now I am estimating Apple's year-over-year unit sales gains in the September quarter will remain consistent with the trend for the first nine months of this fiscal year, establishing yet another quarterly unit sales record and setting a record for Mac sales in a fiscal year of 13.8 million units or more.

Apple Retail Store Mac Sales As A Percentage Of All Macs Sold
For the first nine months of FY 2010, Apple retail stores accounted for 1.972 million or about 20.2% of the 9.778 million Mac units sold. For the first nine months of FY 2009, Apple retail stores accounted 1.445 million or about 19.7% of the 7.343 million Macs sold. 

In the September quarter of fiscal year 2009, Apple's retail stores accounted for about 22% of the 3.053 million Macs sold in the quarter. This strong retail store performance in the fourth fiscal quarter raised the Apple retail store percentage to about 20.3% of the 10.396 million Macs sold in the fiscal year and inline with the percentage of Macs sold through the retail stores in the first nine months of this fiscal year.
Year-Over-Year Comparisons 
In year-over-year comparisons, total Mac unit sales increased about 33.2% in the first nine months of this fiscal year while retail store unit sales of Macs grew at about a 36.5% pace. Although Apple has accelerated the pace of new retail openings in this quarter, the pace of growth in retail store unit sales in the first nine months of this year far outstripped the pace of growth in new retail store openings. Consequently each retail store is selling more Macs while the percentage of Macs sold through the Apple retail store chain has edged up only slightly in the nine-month comparison. 

This suggests Apple retail stores are selling more Macs than ever before without cannibalizing Mac sales from other distribution channels. The retail stores, as product education centers, are most likely contributing to Mac sales through all of Apple's product sales channels.

The percentage of Macs sold through Apple retail stores has remained fairly consistent over the past seven fiscal quarters while store foot traffic and store revenue have grown in a dramatic way. This suggests visitors to Apple retail stores are choosing to purchase Macs through a variety of distribution channels, including Apple retail stores and the Apple online store, after making their Macintosh purchase decision. 
Apple's management has stated roughly 50% of Mac buyers at the company's retail stores have never owned a Mac before. However, looking at these sales numbers, it appears the retail stores are serving as much as advertising and marketing vehicles for Mac sales through other distribution channels such as the Apple online store as they are serving as the points of purchase once a Mac purchase decision has been made by a consumer. 

Unique to the Mac are the number of product configuration options. Not all of the custom configuration options are readily available at Apple retail stores. Additionally, management has reported it takes multiple trips to an Apple retail store for a customer switching from Windows to make a Macintosh purchase decision. While the Apple retail stores play a vital role as product education centers, the stores are not the only convenient way to purchase a Mac. For students and educators in particular, Apple's online education store provides an easy way to purchase Apple products at a slight discount to retail prices. 

The available data suggests the importance of Apple's retail stores to Mac sales regardless of places or points of purchase can not be overstated.
Robert Paul Leitao

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