Apple’s global revenue was down in the past quarter and Apple’s CEO has blamed China’s economic slowdown as the cause.
However, that’s only a portion of the story. Chinese rivals are outselling Apple on comparable smartphones by undercutting prices. And, if the company actually wanted to tap into a vibrant market (see yesterday’s post about Amazon and India), then they would be going all-out to sell iPhones there, where 800 billion in the rural reaches of India await the ability to get onto the internet in order to transact retail purchases – it’s considered the largest untapped smartphone market in the world. Instead, Apple has logged only 1 percent of its phone sales in India. Apple has long depended on its name and cachet to sell phones at (somewhat) outrageous prices. And, are now finding that the U.S. market seems tired of the practice and customers are hanging on to their phones much longer than usual, rather than rushing to buy each year’s release of “the latest.” I had wondered when customers were going to get wiser about these frivolous purchases – the phones that they buy this year are very little different from the ones they purchased last year. And, in some instances, the new releases have been less desirable than the earlier versions. So, Apple is experiencing what all “seasoned companies” come to find out – that they have to stay current with their marketing; they can’t just rely on their brand name and its particular cachet to see them through. Another area in which consumers are getting a bit smarter is to cover their phones with hard plastic, high impact covers to prevent the frequent dropping and damaging of the phone that necessitated replacement. Somewhere along the way, purchasers of iPhones came to believe that not only should they purchase the latest year’s version (I suspect most of this was done with their parents’ money) but they should also be “hip” and not cover the phone to protect it, just slide it in the back pocket of their jeans – both of those features made iPhone purchasers truly among the “blessed generation.” And it also made Apple very profitable, for a while.
Fortunately for the company, many Apple employees have large portions of their compensation tied to restricted stock units. Thus, when Tim Cook called an “all hands” meeting last week to seriously discuss the urgent issues facing the company – among them Apple’s long-term strategy of selling limited numbers of their latest devices at “premium prices” – I would guess that there were some pretty alert people in his audience, willing to grapple with the issues. People on the outside viewing Apple’s current dilemma are declaring that “they need something really big” to overcome the current difficulties. Apple seems to have lost sight of market competition – the sales prices of iPhones are nearly five times the average price of non-Apple smartphones sold globally. Apparently the short-term solution to the problem, according to Cook, is to “make it simpler to trade in a phone in stores and finance the purchase of a new one over time.” Now, that’s a novel and innovative approach. As analysts are saying, “it’s going to take something big” – this strategy doesn’t sound like it’s nearly big enough. Cook has been able to continue to manage a company that Steve Jobs set up well – but that doesnt mean that a company can just “rock on” in the same way that it could ten years ago. If that’s the best ideas that Cook has to offer, then it sounds like Apple’s board should be listening carefully to these conversations, and perhaps be thinking about getting a “go-getter” CEO in to take over – someone who can revamp the company and take it into its next iteration. Or, at least, into India.