The device revolution is accelerating
A slight decline in Apple’s quarterly iPhone sales sparked concerns about smartphone saturation, but if that’s the case it means the mobile revolution for retail has only begun.
Last week’s quarterly results from Apple could be interpreted a lot of ways. The company produced record sales and profits, sold an astonishing 77,316,000 iPhones and said its pricey ($999) iPhone X was its best-selling model. Sales during Apple’s first quarter ended Dec. 30, 2017 increased 13% to $88.3 billion and profits increased 12% to $20 billion.
Given the magnitude of the numbers, Apple CEO Tim Cook said, “We’re thrilled to report the biggest quarter in Apple’s history, with broad-based growth that included the highest revenue ever from a new iPhone lineup.”
The iPhone’s sales increased by 13% to $$61.6 billion and represented 70% of quarterly revenues of $88.3 billion. However, the actual number of phones sold, the 77.3 million units, was down slightly from the 78.3 million units sold during the comparable period the prior year. The differential was caused by strong sales of the iPhoneX which Cook said surpassed company expectations and was the top selling phone every week since it shipped in November. Nevertheless, the total unit number was below what some analysts forecast and seen as an early indicator of a saturating market and potential trouble spot for Apple’s future growth.
Concerns about an overall slowdown in smartphone growth were confirmed by International Data Corporation (IDC) which released its Worldwide Quarterly Mobile Phone Tracker the day after Apple’s earnings.
The firm said smartphone sales were slower than expected during the 2017 holiday season with a total of 403.5 million units shipped, a decline of 6.3% from the prior year. For the full year, the worldwide smartphone market saw a total of 1.472 billion units shipped, a decline of less than 1%. IDC interpreted the declines as an indication that consumers in markets such as China and the U.S. were in no rush to upgrade to a new generation of higher priced devices.
"The latest flock of posh flagships may have had consumers hitting the pause button in the holiday quarter," said Anthony Scarsella, research manager, Mobile Phones at IDC. "With ultra-high-end flagships all the rage in 2017, many of these new bezel-less wonders proved to be more of a luxury than a necessity among upgraders. Even though we have seen new full-screen displays, advanced biometrics, and improved artificial intelligence, the new and higher price points could be outweighing the benefits of having the latest and greatest device in hand."
As IDC correctly notes, even older generation smartphones provide users with pretty remarkable capabilities. So it is logical that the iPhone, now it is 11th year, and other smartphones, reach a point where everyone who wants one has one and upgrading is a discretionary matter as improvements are more incremental. That prospect may be concerning to Apple investors, but for retailers it means the mobile revolution of the next 10 years will look different than the past 10, a period characterized by increased penetration and discovery of new use cases. Mobile devices will become even more ingrained - troubling as that may be to some - into everyday life in ways that are hard to imagine but retailers and brands must be prepared to capitalize on as they come into view.