Even in a recession, Apple’s cool still sizzles
Over the last week or so, quite a few companies have announced earnings for the 2008 holiday shopping season, including our favorite fruit company—record profits on record revenues.
If you visited one of the Cupertino, CA-based company’s Apple Store retail locations in the run up to Christmas, you saw eager shoppers snapping up iPods (+3 percent, y-o-y), Macintosh computers (+9 percent) and iPhones (+88 percent) at full price. A few notable exceptions aside—Nike, Avon, Nintendo and, of course, Apple—pretty much the rest of America was on sale at 50 percent or more off list.
“If you infuse enough values into the product, people will pay full price. There are certain categories … where there are no substitutes accepted. It’s infusing your brand with those things that people then say ’I have to have the real thing,’” said Candace Corlett, president of WSL Strategic Retail, according to the The Associated Press
A fine example of a technology company sacrificing revenue to maintain volume comes via Microsoft and its Zune media player. Compared to last Christmas season, Redmond’s wannabe iPod competitor experienced a 54 percent slide in revenue, though the software giant claims unit volume remained roughly the same.
Thereupon, Microsoft has announced it will axe thousands of workers this year with the first 1,000 to be cut almost immediately and it is even rumored that the Zune will soon face the chopping block, as well.
“People are making choices, there’s no doubt about it. They’re making choices about how they want to spend their discretionary dollars, and in some cases they’re still willing to pay full price for brands they’re loyal to,” said Morningstar Research analyst Kim Picciola.
That special ‘Je nous c’est qua’
However, even in instances where consumers choose not to buy Apple’s coolest (and most expensive products), the closest substitute is also a product designed in Cupertino. For example, sales of the iPhone came in under analyst expectations, while it is believed that the company may have shipped 300 percent more iPod touch handhelds, an ingenious blend of media player and Wi-Fi enabled ultra portable computer that’s largely indistinguishable from the company’s zeitgeist defining 3G smartphone, than they did last year.
So, the one example of where the recession (and perhaps AT&T’s poor customer service) can be seen biting Apple, the biggest beneficiary is still Apple.
For companies that only see the hefty profit margins, trying to follow Apple’s lead must be frustrating in the extreme. That is, there is a lot “more” to the iPod, iPhone and Macintosh than just gee-whiz features, seamless integration and ineffable style…
What’s your take?
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January 24th, 2009
As a Mac enthusiast for 25 years, I have always encouraged people to buy Macintosh for the reasons mentioned above. It’s the type of product you just love because of how intuitively easy it is to use, and to get work done. Now it’s the same with the iPhone and iPod touch. I tell my friends and family to just go down to the Apple store and ask for a demo. It still amazes me how many walk away with a new Apple product. Sometimes, folks don’t know what they’ve been missing. I just wish I could get a referral comission!
January 26th, 2009
I don’t doubt that many or even most Zune owners are satisfied with what they have. Here’s my thing: Apple dove into the MP3 market when that market was already well on its way to maturity. The iPod quickly made a big splash, and iTunes has played no small part in helping the iPod acquire a 70% market share. Apple did not engage in illegal, monopolistic business practices in order to achieve that level of prominence; nor did Steve Jobs hypnotize buyers, steering them towards the iPod.
When the iPod was released in October of 2001, it succeeded during a recession caused by the terrorist attacks of 9/11. If the current economic climate adversely affected the Zune and other consumer products, then it stands to reason that it also adversely affected iPod sales. Yet, Apple reported a growth in iPod sales for the most recent quarter, versus a 54% drop in Zune revenues. How much better would the iPod have faired this quarter without the deepening recession?
I believe that Microsoft and its investors need to re-evaluate the Zune with regard to how it affects other products, and how it affects shareholder interests. If I’m a Microsoft competitor — and I don’t believe that Apple and Microsoft compete in the sense that they appeal to very different groups of customers — then I truly hope that Microsoft continues to throw money and other resources at the Zune. Let them and their investors learn the hard way. Again.
February 13th, 2009
I know what Microsoft should do to improve their Zune sales: get someone besides the big, hairy guy with a Zune tattoo to be their marketing front man/woman