Shortly after the launch of iPhone 6, Apple announced they had sold a record, 10 million units over the weekend. Of course, that number represents not just Australian sales but global sales.
In the wake of the October 16th launch of the new iPads, we were curious to see the effect of Apple launches on the retail spending landscape here in Australia, both for Apple itself as a retailer, and other retailers during this period.
1. Consumer spending on the iPhone 6 at launch is immense, but didn’t smash the 2013 September launch.
Why does Apple make such a big fuss about new product launches? Because it works better than you can imagine.
We looked at historical spending on Apple stores and what we saw astounded us.
In short, looking at our sample of Australian spending, spending on Apple stores between September 2013 and August 2014, Apple makes 63% of its yearly revenue from device sales in the 4 months following its new phone launch (September to Christmas).
That means 2/3 of its revenue is generated in 1/3 of the year. At its peak in the month of December, total purchases of Apple products are 5x more than any month between January and August.
To give you an idea of its scale, Apple has always ranked as one of the top retailers in Australia, even during its “off peak” months.
1. Duration – This sort of “manufactured seasonality” is quite remarkable. It sits somewhere between Tabcorp making around 10% of its annual betting revenue on the day of Melbourne Cup and 70% of ice-cream sales coming in the warmer 6 months of the year. If we extrapolated the January to August sales for the year, Apples annual total sales would be half what it otherwise is.
2. Magnitude – The onset of the spike is also quite incredible, in September 2014, the month Apple released the iPhone 6/6+. Spending on Apple products nearly tripled (increased 187%) when compared to the month prior – August 2014. From what we can see, the top-line total sales numbers in September 2014 (iPhone 6 launch) performed just about as well as the iPhone 5s/5c a year earlier in September 2013.
2. Spending on Apple’s online store experienced an almost 100% increase.
The entire retail world is shifting online, and Apple is no different. Most of the purchases are still made at physical stores, however online increased its percentage of sales from 22% to 37% of total sales, an incredible increase from just a year ago. The speed of shift is very significant compared to what we see in other sectors.
My own anecdotal evidence as to some of the factors behind this increase – when I tried to buy an iPhone 6 at the Sydney George Store store, the helpful Genius bar staff was quick to tell me I should go online and join the virtual queue instead. This melding of both a physical and online shopping experience is increasingly becoming part of the Apple sales extravaganza.
3. Even Apple can’t defy pricing economics. Selling less units than 2013.
There are two ways to make more money: sell more stuff, or, sell the same amount of stuff for a higher price. With iPhone 6/6+, Apple is firmly going with the latter.
This September’s sales are relatively consistent with September 2013 – we wondered if the higher prices charged for the new iPhone meant that less people were actually buying compared to the 5C/5S a year ago. Indeed that is the case.
Average spend for 2014 went way up when compared to 2013 for both the Online and Offline Stores. There’s a difference of about $130 in average spend between the 2014 and 2013 – an increase per purchase that is about the same as the difference between the 6/6+ and the 5C/5S.
While Apple is a juggernaught when it comes to sales, they cannot defy economics 101 which tells us that when you raise your price, you’ll see a decrease in demand. And it is exactly what we see in our data.
4. Retailers that stock Apple rocketed up in sales. Those that don’t, suffered.
We also wanted to look at the effect Apple iPhone launch had on other retails stores which stocked the iPhone 6.
The evidence is crystal clear, those retailers that stock iPhone also have an immense lift in sales during iPhone launches. It is interesting to compare the performance of Australia’s largest telcos, Telstra and Optus – Telstra clearly annihilating the competition. Additionally, Telechoice and Allphones, two national telcos that don’t stock iPhone suffered heavily.
While the boon of Apple launches are a gift for retailers stocking their products, it is a double edged sword. Retailers relying on Apple sales are at the behest of Apple product cycles and their performance. JB Hifi in particular prior to the iPhone launch was not having a good time in the financial markets due to the rapid decline of iPad sales. Apple makes and also breaks companies.
The Apple product cycles are legendary and the sales numbers show the incredible power Apple wields. While sales revenue is comparable to last years 5C/5S launch, it is still has immense impact by any measure.
Looking at this years launch, Apple is shifting gear slightly with both an increase in prices and size. Some potential factors for this shift –
- iPad sales are stalling and Apple is moving towards filling the device gap it leaves
- At the same time, with Apple making bets on the Apple Watch, it has now made room for a smaller and lower priced device
With Christmas around the corner, new iPads and iMacs to be announced sometime this month, and the impending Apple Watch release, Apple could well extend the spike well into 2015.
So despite the less than record breaking effort early in the 2014 product releases season, it’s still time to buy some Apple shares.
On our sample
Edit: This is added to clarify where we get our data.
- Our data comes from the real-spending of Pocketbook users, with all data de-identified, aggregated and analysed internally to protect security and privacy of our users data.
- The data is not from Apple.
- We have 100,000+ Aussies using our app. Out of that batch of 100,000, we sampled 21,000 of them for this study. We do this by using a method called k-means clustering.