Apple sells a lot of iPhones through its retail stores — but not nearly as many as it would like. Indeed, at a recent gathering of Apple Store leaders, CEO Tim Cook said he was dismayed that only 20 percent of all iPhones are sold through Apple Stores, and that he’d like to see that number rise in the months ahead.
Like the iPod before it, the iPhone is a gateway product that introduces new customers to the rest of the company’s offerings. As Cook said last year at the Goldman Sachs Technology and Internet Conference, “What is clearly happening now is that the iPhone is creating a halo for the Macintosh. The iPhone has also created a halo for iPad.”
So it’s understandable that Cook would like to see more of Apple’s iPhone sales made through the company’s own stores, something along the lines of 50 percent — the percentage of iPhones serviced at the company’s Genius Bars. Question is, can it?
According to new analysis shared with AllThingsD by Consumer Intelligence Research Partners (CIRP), raising Apple Store iPhone sales to the level Cook is asking is a potentially difficult proposition.
The biggest and most obvious constraint on such an effort is the size of Apple’s retail operations. In the U.S., for example, Apple has about 250 retail locations — most, if not all, very well trafficked. But its carrier partners together have about 9,000, according to CIRP. Add to that 1,000 or so Best Buy stores, and a bunch of other retail outlets like RadioShack, and Apple’s plan to claim iPhone sales share from its resellers seems a tough one to execute without a drastic increase in the size of the company’s retail footprint.
“We don’t know, exactly, how Apple can realistically meet Cook’s goals,” CIRP co-founder Michael Levin told AllThingsD. “However one defines those goals, we can’t see how their mostly jammed stores can handle more customers, sales associates and inventory.”
In other words, to increase the percentage of iPhone sales through its own retail stores, not only does Apple need to drive sales, it needs to increase sales capacity. That rumored iPhone trade-in program and other such incentives could presumably take care of the former. But the latter? That might take a bit of doing. As CIRP observes, when Apple debuts a new iPhone, its stores typically run at capacity — canceling vacations, hiring part-time staff, etc. Pushing the percentage of all iPhones sold through Apple Stores from 20 percent to 50 percent would likely require similar efforts.
And that’s assuming more consumers want or are able to buy iPhones from Apple Stores. There’s a reason that 80 percent of iPhones are not purchased there and that an astonishing 90 percent of first-time iPhone buyers purchase their device at a carrier store or reseller.
Which isn’t to say that doubling the percentage of iPhones sold through Apple Stores can’t be done, just that there may be few hurdles to overcome. But for Apple, the rewards could be great. As the CIRP chart below shows, iPhone buyers who purchased their handset at the Apple Store own and buy many more other Apple products, relative to iPhone buyers at other outlets. With Microsoft and Samsung both creating stores-within-a-store alongside Apple’s at retail partners like Best Buy, that’s a trend worth exploiting more so, now than ever before.