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The Quantum Leap in Retail

In fiscal 2013 there were 395 million visits to Apple retail stores. In 2012 there were 372 million.

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The difference is approximately the population of Australia. This was in addition to the population of the US and Canada already passing through. Although this is a fun way to think about total traffic, it does not reflect performance of the stores themselves since new stores are always being opened. 21 new stores in 2013, to be precise.

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The better benchmark should be the number of visitors per store.

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This shows that, except for seasonal peaks, the visitors per store per quarter has been a fairly steady 240k since mid-2010. What’s more, this rate was also remarkably steady at around 160k/store/quarter from 2007 to 2010.

So what caused this quantum jump[1] in traffic? Was it due to a re-design of the stores? Was it a change in product mix? Or was it due to a change in staffing rules?

I think we can rule out staffing changes. The data shows that staffing ramps with visitors and there was no specific “quantum” increase in employment (on a per-store basis or otherwise).

Screen Shot 2013-10-31 at 10-31-2.18.56 PM

Re-design as a cause has some more merit. On one hand, we have seen bigger stores opening and many more flagship stores. We have also seen specific renovations of existing stores. We have also seen re-designs where the layout was changed to allow for more traffic. The only problem with this as a cause for the quantum leap is that these changes are constantly under-way and have been for some time. It’s hard to point to a specific “big bang” redesign across the board in early 2010 as possibly a cause.

That leaves product. Here we have a clear suspect. The iPad launched exactly at the point in time when the visitor count leaped. In my opinion this is the best explanation.

Let’s remember also the comment from Ron Johnson at the time of the iPad launch. He said that it was as if the stores were designed for a product like the iPad. In other words, the iPad is something that needs to be discovered with a retail experience. You can sense this when you visit the stores and the placement of the iPads within.

It all points to a something more profound: that the stores are brand ambassadors. Apple products create a purchase decision by speaking directly to  the users. For the type of product Apple makes, that conversation can only happen face-to-face. The place where this meeting happens is the store.

Notes:
  1. “Quantum leap” is often used to mean “giant leap” but in the original usage it meant a specific, discrete jump []
  • Walt French

    I had to see the iPad for myself, and ditto the difference of the Retina version. Went out of my way a bit. (There are 4 Apple stores convenient to my home/work area.)

    But now I’m actually thinking about getting the new mini. Having seen ‘em all around me, I think I can predict quite a bit better what it’d be like to have one. I don’t need to go to the store.

    I’m pretty conservative in my shopping and much more interested in speeds & feeds than your average consumer; I think the two cancel out and the average consumer pretty well has the idea what the device is — won’t need to make tire-kicking visits other than maybe give ‘em a glance as they go to pick up their new phone.

    Ambassadors represent you in a foreign country. Apple is increasingly home for people.

    • berult

      Angela Ahrendts at retail ought to make it ‘home…sweet home’ for those longing to wear their heart on their sleeves. She’s the best news that came out of the ‘Sea of Tranquility’ since Jobs’ heydays. With the smallest of innuendo, her moxie’s all…wearable, classy and…tether-able…as it should ideally be.

      Bullish on the Ahrendts-driven AppL Apparel-venture experience. With or without gobbling-up Burberry’s retail outlets and creative streak whole, as the backbone of ‘fashionably-smart’ branding of Apple’s future ‘body’ of work.

  • Jared Porter

    In retail management, successful performance is usually measured on the basis of “sales per square foot”. By this measurement, US Apple stores in the aggregate are by far the most successful retail-store brand, averaging over $6,000 per square foot, which is almost double the performance of the number two vendor, Tiffany and Company. That’s why any shopping center covets the foot traffic and sales Apple generates. I can’t wait for Angela Erhends to come on board to propel this growth even higher, especially internationally. What a brilliant hire and fit in every way. Thank you, Horace for all of your great analysis and contributions to the Apple story. I think the next 5 quarters are going to be awesome as “the competition” seems to be drifting, disorganized, and disjointed, especially when it comes to transitioning to 64-bit technology to keep up with what’s possible on these hand-held computers. Note to Apple fans and shareholders: please buy your devices at the Apple Store as Apple keeps ALL the profit that way. Also avail yourself to their superior, award-winning service.

    • charly

      What do you mean with drifting, disorganized, and disjointed when it comes to transitioning to 64-bit technology. Qualcomm etc. 64 bits are not yet ready but they will be with the 4GB phones roll out.

      • Jared Porter

        I’m not an engineer, but I have read that the underlying Android kernal is based upon 32-bit technology, and this is not easy for Google to change overnight. Additionally, when Android does change to 64-bit, this will further exacerbate the fragmenting, backwards-incompatibility problem within Android making it harder for software developers to update their software to legacy devices. The CEO of Samsung announced that the next version of Galaxy will be 64-bit right after the iPhone 5s was announced, but it should be interesting to see just how, and how soon, that will be accomplished.

      • charly

        Android arm64 is much closer to Android arm32 than the also existing Android Intel which can run something like 95% of Android programs tricks so changing arm32 yo arm64 doesn’t seem to me difficult.

      • Kizedek

        It’s not just the difficulty or lack of difficulty in “updating” the software to run on 64bit hardware that is the issue. Will it actually make that much difference, or will it be “a mere marketing ploy”?

        Upon Apple’s announcement, the immediate reaction was that it would make little difference in practical terms. Seems to me that since this was a concern for Apple, it would be even more of a concern for Android. Apple’s approach to going 64bit on OS X, and now iOS, seems to be different than others, and Apple fully integrates its hardware and software to take full advantage of such changes.

      • charly

        You need 64 bit for 4 gb of memory. Apple ships with 1GB so it has still two doublings left Android is already at 2GB so it needs it soon.

        Most Android software runs in a virtual machine so it doesn’t care about cpu architecture and the change to 64bit is not a surprise so i assume Google, Samsung etc. are already using it internally

      • Walt French

        Methinks the requirement is for 64bits once you exceed 4GB for a single application (which might include its VM and OS support); there are all sorts of segmentation approaches, well-known from the early 8086 days, for going beyond 4GB. I’ve seen something saying most (all recent?) ARM designs could, with a bit of OS juggling, work for up to 8GB.

        Right now, all we know is that the A7 really cranks on today’s applications. I’ve swapped ideas with one developer who has a more accurate function that he might add in once 64bit devices get popular, but that’s about fast math, not huge memory spaces.

        It’s hard for me to see what huge increases in phone apps’ memory requirements would take the need past 4GB; it’s even more fantastical to imagine some huge, shared-with-the-cloud virtual memory that you’d need the extra addressing for. I mostly guess it’s to give Apple engineers an easy option to merge iOS and OSX functions or code, with no explicit purpose yet in mind. It seems not to be much of an overhead, and was going to come some day.

      • charly

        Why do thing difficult when going to arm64 is easy. Also 8gb is only one step more than 4GB so that gives you at the most 2 years. It could be done as stopgap but it is only very temporarily.

        The camera app needs 64 bit for the weird things they now do with the photo sensors. And there is always video and gaming. Don’t forget that the resolution of the screen is higher than that of 99% of the laptops.

      • Walt French

        Let me encourage you to stick closer to your own area of expertise.

        Google and all of its partners must have many thousands,* probably a few tens of thousands of software engineers, and of course the underlying linux runs on every imaginable piece of hardware.

        I’m not saying your points are wrong, but neither you nor I appear to be qualified to know how important it will be, how hard it will be, and how much fragmentation there will be, from the switch.

        My own best estimate is that this will be a non-trivial exercise, but that Google will find a way for 32-bit apps to run efficiently as the hardware and OS transition to 64 bits. The simple fact is that today, a billion Android users are satisfied with 32-bit phones and those phones can be made a lot better before they have to worry about 64-bitness.

        * Updated after reading Horace’s excellent OpEx piece.

      • charly

        Intel claims IIRC that 94% of Android arm apps can run without any change or tricks on Android Intel. I think a change to 64 bits arm is much smaller than from arm32 to intel

  • Bananaj

    2010 was the year that the Apple halo effect reached some level of critical mass as lots of threads came together at the same time. iPad followed quickly by iPhone 4, which was available on multiple carriers for the first time in key markets (eg. UK). The competition was relatively weak compared to the present, the i4 was miles ahead of the HTC Desire, Samsung Galaxy S and the Nexus G1.

    It brought usable video calling, a screen resolution that couldn’t be meaningfully topped and differentiation through glass construction. Even things like Antennagate just added to the hype.

    The 2nd generation Apple TV came in September. Verizon iPhone came the following February, closely followed by the delayed white iPhone model and shockingly thin (for the time) iPad 2.

    The 4S was “late” and “just an incremental update” but sold like crazy as the Verizon customers who had waited for the “new” model got on board and the drama around Steve Jobs death created blanket media coverage.

    The question I would ask is, just how bad a hire was John Browett? The visitors per day seem to have plateaued almost as soon as he was appointed. How much momentum did Apple lose and how much damage was done to the brand by that one bad hire? It looks like there are signs that their market momentum is starting to bounce back and a new product category in 2014, which is almost inevitable, would put a rocket under it, if successful.

  • LLk-LRk

    Big points for the footnote, but I’d much prefer not to have seen the phrase “quantum leap” used at all. I cringe every time I see it used to represent a giant leap, and it distracts me from the content of the story. Sigh…

    • Boudica

      Agreed. in fact, a quantum change is typically the smallest possible change.

      • bloftus

        I disagree. A quantum leap represents a discontinuous change. It does not mean small in my book. You can go from one level to another without stopping in the middle. Visitors of about 160,000 per store to about 240,000 per store I agree represents a quantum leap.

      • charly

        We could talk about quantum mechanics but in popular use it means a very big discontinuous step. As this is not a physics blog i would go with the popular definition.

      • bloftus

        I agree. I was disagreeing with Boudica and LLk-LRk. I think in popular use it is a large discontinuous change in position.

      • Boudica

        In your example each visitor would be a quantum. Of course, common usage has corrupted the term to mean almost any change, often of very large magnitude. But like LLk-LRk I cringe when used that way.

    • LRLee

      I thought Horace was referring to the TV show and that Apple was modeling the plot where Scott Bakula jumped around in time and space fixing things.

    • http://www.asymco.com Horace Dediu

      You cringe when you see it used incorrectly in other stories so you prefer not to see it used at all even if correctly as in this one?

  • Andrew fields

    Also note that the iPhone 4 came out in 2010, which scaled the iPhone business much further than any previous entry. It was also the first iPhone, with its glass and stainless steel precision design, that looked like a luxury item, and not just a nice computer.

  • albertodepaola

    The question is what will the next product with the same effect? I don’t think a watch has the same drag as a tablet, nor does a TV. Maybe an iGlass, but they are not doing one to sale yet. Maybe for a couple of years the will just go down the services road, Siri on it’s head, and only then lauch another revolutionary category. They definitively have the time and money to do so.

  • RichLo

    As Apple grows a redesign should be in order again to study how to effectively provide a positive retail experience. Over the years the stores have started to fill up to the point that it feels like a busy train station. The thought of navigating to the back of the store has become a negative experience at this point. Apple has been proactive in designing the retail experience it will be interesting to see what their collective imagining comes up with.

  • obarthelemy

    a 6% rise is a “quantum leap” (sic) ?

    • Artiste212

      The rise in per store traffic from 2007 to 2010 was from 160K to just under 240K, a quantum leap indeed.

      • obarthelemy

        50% is a quantum leap ? We need to come up with new words for 100% and 200% then, To me even that doesn’t merit the term “quantum”

      • Hosni

        If I could run 50% faster, I could win an Olympic gold medal. It’s not the % number, but the phenomenon you’re measuring, that determines whether a given improvement is impressive.

        When a mature retail store chain gains 50% more visitors day after day, that is big. If Apple’s earnings growth rate increases by 50%, it’s huge.

      • obarthelemy

        Huge. Not quantum. Quantum is when something is so far off what you’d expect that’s it’s out of bounds.

      • Tatil_S

        Ask Walmart whether it thinks 50% rise within a year is within bounds.

      • obarthelemy

        That makes the iPad’s market share evolution a quantum bomb ?

      • pk_de_cville

        No.

        You’re a quantum bomb.

      • Joe_Winfield_IL

        According to whom? Your arbitrary interpretation of this term isn’t the only allowable one – in fact, it’s not even the commonly accepted one. Do a quick google search of the phrase “quantum leap,” and you’ll see that Horace’s usage is spot on.

      • Jeff G

        Your focus on this term is quantum nonsense.

    • lllull

      from 160k a quarter to 240k is a 50% rise not 6%

      • obarthelemy

        Over 5 yrs…. 6% since last yr…

    • equanimous

      Why on earth does anyone reply to you in earnest? Have to say you do remarkably well in getting attention, of any sort, while not really achieving anything else at all. What prolific output.

      • marcoselmalo

        Once in a while he says something interesting or informative.

  • charly

    If a store doesn’t sell something very perishable, used now or “bulky&cheap” than the purpose of a store is as brand ambassador in this internet age.

  • Martin

    My understanding is that there was an uptick in square footage starting in 2010 that didn’t correspond to new store openings (and offset some new store growth). Many existing standard stores were being upgraded to larger spaces. Rather than look at visitors/store, see if you can track down visitors/sqft. There exists sales/sqft data from all across this period, so this can probably be calculated if it’s not out there.

  • Jessica Darko

    Your chart shows what appears to be a big jump in the first half of 2007 as well, the period of maximum iPhone hype before release. Seems the iPhone brought people into the stores as well.

    Since Tim Cook has said there will be a new category product next year, it will be interesting to see if this also results in a big jump in average visits per store per quarter.

  • Frieda

    browse iPad in Apple store = free internet cafe. clueless article.

    • cafe

      You would expect the revenue per visitor to dive, if that was the case.

      • charly

        It is the example of what you should have in a brand ambassador shop. iPad is a good product so you should expect people buying it after use.

    • http://www.asymco.com Horace Dediu

      It’s not free. Every visit to an Apple store results in about $50 in sales, regardless of overall traffic rate. As such it’s the most expensive internet cafe ever devised.

    • http://www.florence-journal.com/ af

      Horace = clueless? Frieda, please point me to some of your writing so I can get a grip on your expertise – or is it trolling?