In a way, Microsoft's (MSFT) plans to shutter its 83 physical retail stores highlight the uniqueness of what Apple (AAPL) has pulled off with its retail operations.
After all, it's not as if Microsoft's core hardware businesses are in dire straits right now. The Surface PC/tablet line is now on a $5 billion-plus annual revenue run rate, and has gotten a recent lift from purchases made to support newly-remote workers and students. And though Xbox sales are down right now due to the Xbox One cycle nearing its end, the franchise remains on solid footing and will get a major sales boost later this year when the Xbox Series X rolls out.
Nonetheless, Microsoft apparently concluded that it wasn't getting enough for a return -- whether in terms of retail sales or stoking greater interest in its own hardware and that of OEM partners -- to keep running its own physical retail stores, as opposed to relying on its online stores and third-party retailers.
Apple, it's safe to assume, has no plans to do anything similar for its 500-plus Apple Stores -- not even at a time when overall retail foot traffic is down sharply (and some Apple Stores are closed) in many large markets due to COVID-19.
In fiscal 2019 (ended in Sep. 2019), Apple generated about $81 billion in revenue (31% of total revenue of $260.2 billion) from its physical and online stores. Though Apple doesn't break out how much of this revenue comes from physical stores as opposed to e-commerce, both channels are believed to account for substantial portions of it, and multiple third-party studies indicate Apple is the world's top physical retailer in terms of revenue per square foot.
Moreover, though this is hard to quantify, Apple Stores appear to have done quite a lot over the years to convince millions of consumers to buy a second, third or fourth Apple device -- whether immediately at a store, or later on through some other retail channel -- and in doing so get them more hooked on Apple's broader ecosystem. Likewise, with the help of Apple's investments in store features such as its Genius Bars and free Today at Apple teaching programs, the stores also seem to have done a lot to keep users of a particular Apple device loyal when it's time to upgrade.
There are a few things at play here. First, Apple is by far the world's biggest consumer electronics/tech hardware vendor in terms of revenue. The global demand that collectively exists for its products means that a lot of its retail stores (often situated in major metro areas) would produce significant revenue even with so-so execution, in a way that the stores of smaller consumer electronics vendors wouldn't.
Second, Apple has done a lot of things right in terms of making its stores welcoming places to try out, learn about, purchase and get customer support for its hardware. And in the process, it has been willing to bear the cost of doing things like staffing individual Apple Stores with an outsized number of employees and paying up to lease prime real estate.
Third, as many readers can probably vouch, there's a degree of customer attachment to Apple products and the Apple brand that's unique among major consumer/tech hardware vendors. This attachment inevitably drives a lot of casual foot traffic -- which is to say, traffic from Apple customers who aren't looking to make an immediate purchase, or at least weren't when they entered a store -- in a way that brands which don't engender the same kind of attachment are unlikely to drive for their stores.
Put these factors together, and you have a recipe for a one-of-a-kind success story for a consumer/tech hardware company looking to sell its wares through its own bricks-and-mortar stores. It's hard to blame Microsoft too much for not being able to replicate this success. No one else really has on a large scale, either.
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June 27, 2020 at 07:00PM
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Microsoft's Store Closings Drive Home the Uniqueness of Apple's Retail Success - TheStreet
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