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Thu, 25 Jan 2007 Apple retail will focus on switchers — analyst

Mac sales and iPhone contracts will get a retail boost this year

Jonny Evans

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Apple's chain of retail stores will be essential in tempting Windows switchers to the Mac in the coming year, claims Needham & Co analyst Charles Wolf.

In a report released to clients yesterday, Wolf dismissed concerns the stores returned a lacklustre performance in Apple's first financial quarter of 2007. The stores attracted 28 million visitors, but visitors per store declined and revenues slipped 19 per cent on a per-store basis. These figures, however, reflect the opening of new shops in the period.

Wolf writes: "Looks can be deceiving. The decline in same-store sales solely reflected a sharp decline in iPod sales. Last year, the Apple Stores were the only reliable source for iPods. This year, iPods were available in 40,000 locations, mostly in the US. There was an inevitable decline in iPod sales at the Apple Stores, then, because of the rapid expansion of the iPod’s distribution."

Mac sales represented 47 per cent of total store sales in December, up from just 30 per cent a year ago.  
 
Wolf believes that in the coming months Apple's retail outlets will change their strategic focus — they will target Windows users and try to tempt them to the Mac, offering Boot Camp and Mac OS X 10.5 'Leopard' to tempt PC users.

"We expect the stores to play a pivotal role in educating the hoards of Windows users visiting the stores about (Boot Camp)," he explains.

The stores will also play an "important part" in signing up customers to an iPhone contract, he observes.
 
"Unlike the iPod, whose distribution has become ubiquitous, the iPhone will be sold only in the Apple online and retail stores, along with Cingular’s carrier stores," he notes.
 
"2007, then, is shaping up as a terrific year for the stores. On the strength of the seamless integration of Boot Camp into Mac OS X along with third-party virtualisation solutions, sales of Macs in the Apple Stores have the potential to steal some of the glory from the iPod," he writes.

"In view of the fact that Windows users represent the majority of visitors to the Apple Stores, the stores represent the ideal venue for enticing these people to switch," he states.

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