However, if I were to ask you, “where did you buy your iPhone?” (which is the primary driver of Apple sales), chances are you’ll answer, “not at the Apple Store!” If I were to ask you, “where do you think Apple sells most of its products?” I’d bet you would probably answer via its Apple Stores. Indeed they create visibility for the brand and the company’s products. Its indirect sales contribution decreased from 71% in 2018, to 62% in 2022, in favor of direct distribution.Īt the same time, Apple Stores have a high impact on the company’s brand. Apple’s indirect distribution strategy explained In 2022, Apple generated 62% of its revenue from indirect sales, 64% in 2021, and 66% in 2020. Indeed, those retail stores are subject to financial risks, and if sales were to rely exclusively on them when slowing down, it would easily create trouble for Apple’s long-term business success. Yet if Apple were relying solely on its retail operations, this would be too risky. In context, in the next ten years, Apple will spend over ten billion dollars in operating leases, as reported on its financial statements. This means that Apple stores are an essential driver of sales.Īnd it makes sense, given how much the company spends on running them. Indeed, you can see how a good chunk of Apple’s revenues also comprise services and other products. However, the company has also transitioned toward a service company (with Apple Store, iTunes, now called Apple Music, and advertising services) and a wearable product company, which is the fastest-growing segment. Ability to sell on a B2B basis (business and enterprise customers might wantĪpple is a product-based company fuelled by platform business models (like Apple Store), in which sales still primarily come from the iPhone.As consumers can be educated in the stores, pre and post-sales support can be provided. Brand exposure at scale, as the owned Apple stores are placed in the most iconic locations across the world and often showcasing also incredible architecture, in line with the fact that Apple considers itself a design/UX company.Thus, Apple’s store and direct channel play a key role for the following reasons: With this approach, Apple can employ experienced and knowledgeable personnel to offer a wide selection of third-party hardware, software, and other accessories that complement Apple’s products. Yet Apple has full control over the customer experience, and control over a distribution strategy requires massive resources. While this is a critical part of Apple’s distribution strategy, it is also quite expensive. That is also why Apple keeps expanding its stores worldwide. Those are critical to Apple’s success as they enable Apple to deliver a high-quality buying experience for its products in which service and education are emphasized. Apple’s direct sales grew from 29% in 2018 to 38% in 2022. In 2022, Apple generated 38% from its direct channel, vs. Apple’s direct distribution strategy explained This means that when Apple makes a judgment call for its business strategy, it does that through the lenses of its iPhone sales.Īnd there is no better place to showcase Apple’s technology than its owned stores. Apple generated over $394 billion in revenues in 2022, of which $205.5 came from iPhone sales, $40 billion came from Mac sales, over $41 billion came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $29.3 billion came from iPad sales, and $78.13 billion came from services. Apple has a business model that is divided into products and services. Now, when you look at Apple’s business model, its main product is still the iPhone. Apple sells its products directly via its Apple Stores. When it comes to distribution channels, companies usually use a direct or indirect approach.Ī mixture of direct and indirect channels makes more sense in many cases.įor instance, the Apple business model leverages both direct and indirect channels. Yet, why, then the company keeps such expensive stores? And what’s their primary function? Apple’s distribution strategy in a nutshell While Apple Stores are a crucial driver of its revenues, they are not a primary driver. In short, people might assume that those Apple Stores are also the primary driver of Apple’s revenues. Those impressions might also create a cognitive gap. When you walk through the urban streets of cities around the world in crowded and selected locations, you’ll find an Apple Store.įrom Piazza Liberty in Milan, Cotai Central in Macau, and Grand Central Terminal in New York, the Apple brand leaves a strong impression in the mind of its consumers.
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