Analysts: Apple retail influences, drives sales

Needham report vindicates Apple's retail strategy

What a difference (nearly) ten years makes -- a report released today by Needham & Company reviews the remarkable growth and "halo effect" of the Apple Retail Store strategy and how it continues to push awareness and acceptance of the Mac platform into the mainstream, even as other products have taken more of the spotlight. The store strategy, almost universally criticized when it began, has also been shown to have a huge impact in the rising importance of non-US sales and acceptance of the Mac.

In the most recent quarter, Apple Store revenues exploded -- led by the combination of the iPhone 4, iPad and the recent revision of the MacBook Air -- posting over 95 percent year-over-year growth. Needham's report, written by longtime Apple analyst Charlie Wolf, indicates that positive experiences with such products is accelerating the number of "switchers" from Windows. In the most recent quarter, Needham estimates that over 425,000 Macs were sold to Windows switchers, but Wolf believes this may represent only 20 percent of the number of people who have switched recently, added to Needham's estimate of over 24 million switchers since 2004.

The report also spotlighted the "vital role" the stores play in building the Apple brand, particularly outside the US. International stores represented 27 percent of the total number of stores at the end of 2010, and Apple has already announced plans for "showcase" stores in many of the world's capitols, including Berlin, Milan, and Madrid, to say nothing of further retail expansion in China. In the December quarter, Needham notes, non-US sales accounted for 62 percent of sales.

Although the primary driver of the increased traffic in stores tends to be new or refreshed products, what Needham believes is increasing the acceptance of Apple among Windows users is high satisfaction with Apple's audio and mobile products and in particular the in-store experience, which is largely the creation and responsibility of Apple Retail Vice President Ron Johnson. "The stores are a convenient, identifiable destination for the millions of Windows users whose interest in Apple products was first awakened by the iPod," Wolf writes. "What Windows visitors quickly appreciated is that Mac owners received professional post-sale support thrown in for free—a non-existent resource in the Windows world."