Neil Cybart: Apple's competition is floundering

"What company can realistically give Apple a run for its money?"

From a note to Above Avalon members ($) posted last Tuesday:

As product strategy changes were underway within Apple, the competition began to flounder. A growing number of bad product bets were placed, peaking with the ultimate misdirection in tech of the past decade: voice computing and the stationary smart speaker mirage. The subsequent embrace of stationary screens positioned on kitchen countertops has seen limited adoption. Foldable smartphone sales have not been impressive. Apple competitors are now struggling to capture consumers’ attention and money with routine annual smartphone updates.

We are at the point when tough questions have to be asked about Apple’s competition, or lack thereof. What company can realistically give Apple a run for its money? The number of paid subscriptions across Apple’s platform is increasing by 170 million per year. Google wants to compete in some hardware verticals that Apple plays in, but it’s fair to question Google management’s commitment. At times, their heart just doesn’t seem in it. Amazon and Microsoft have stronger motivations to do well in hardware, but their lack of design thinking is hard to miss. Meta would win the award for strongest public commitment to hardware, but the company’s culture and heritage don’t seem to mesh well with what it takes to do well in hardware. Snap, Spotify, Sonos, and the long list of smaller companies dabbling in hardware all lack the ecosystems to truly go up against Apple toe to toe.

When thinking of competition outside the U.S., a growing number of consumers are looking for entry points into comprehensive (and premium) ecosystems. Apple is selling both the all-around best smartphone in the market and tools and services designed to live both below and above the smartphone. Android switching rates are increasing while Apple entices hundreds of millions of iPhone-only users to move deeper into the ecosystem.

My take: Don't know how I missed this last week week, especially because Cybart -- who is good with unit sales estimates -- offers some fresh numberts drawn from Apple's commentary and his own assumptions...

  • iPhone new users: 60 million per year (a five-year high)
  • Apple Watch new users: 30 million per year (an all-time high)
  • iPad new users: 30 million per year (an eight-year high)
  • Mac new users: 15 million per year (an all-time high)

24 Comments

  1. Michael Goldfeder said:
    Despite all the Apple haters ranging from the likes of Regulators and competitors who only dream of being actual competitors, Apple produces a product in many areas that’s second to none and offers a seamless transition across all of their hardware devices.

    Once you’re in the ecosystem and treated like a first class passenger heading to a dream destination, the ride continues as who doesn’t like being pampered and having everything you need right at your fingertips 24/7? These numbers will continue to move in the right direction as Apple has it going on all cylinders.

    8
    April 3, 2022
  2. David Emery said:
    It’s an interesting and worthy intellectual exercise to establish what a company/set of companies would have to do to compete with Apple. Life-cycle cost, quality, functionality, privacy/security, design – seems the competition these days gets to “pick 1” but can’t handle multiple considerations.

    6
    April 3, 2022
  3. Robert Paul Leitao said:
    My concern is Apple is unwittingly spawning its own “competition” through the app economy. There are developers seeking to enrich themselves by exploiting the opportunities the App Store provides yet militantly seeking to displace Apple in the relationship with its customers through side loading and insisting on alternate payment systems. I can reasonably argue there would be scant regulatory interest in Apple over its position in device markets yet building regulatory and legislative efforts to “smack down” the company over its necessary App Store practices and policies. What gives the App Store its value isn’t so much the apps as it is the strength of Apple’s relationships with it customers. There are parties, in my view, that are far less interested in building relationships with Apple and Apple’s customers and far more interested in a quick sale and a perceived higher margin by compromising and diminishing Apple’s ability to protect its own customers. This is why I suggest Apple pivot from the current App Store monetization model and develop more Apple-branded subscription services such as Apple One and its components that are available for standalone subscription. Apple doesn’t need the regulatory and legislative hassles that are being created by opportunistic parties exploiting what Apple provides through its strong customer relationships only to bombard the company with legal, regulatory and legislative ordnance while seeking only self-interested outcomes. There are no issues with side loading and payment systems on Apple-branded subscription services. Of course, this is just my view on the matter.

    6
    April 3, 2022
  4. Bob Goldstein said:
    I just want to comment on being a first rate passenger heading to a dream destination. I decided to sell my iPad Air that I bought in November to buy the latest model. As you can see I am a first rate customer selling an almost new iPad at a big loss just to buy the latest. I went to my local store and was told they were sold out. Fine no problem, I can order online. I had a question about which amount of storage to buy. I have been buying the standard but my nephew suggested I buy the next level up so I can watch movies when I fly. It was a simple question but I was told I would have to wait an hour to talk to someone. The store was not crowded, I was not happy to be told to wait an hour

    1
    April 3, 2022
    • Michael Goldfeder said:
      @ Bob: High demand speaks for itself. Look at it this way: Unlike the limited first class seating on an airplane compared to Coach, Apple has turned the Coach section into its First Class, and with all of those first class seats it takes time to get waited on to have questions answered or orders fulfilled.

      0
      April 3, 2022
      • Bob Goldstein said:
        Sorry Michael, I don’t agree. I have been going to the Apple Stores from when they first opened. Service has really gone down from the old days. It’s just bad business for a customer to come in with a question and to be told to come back in an hour for an answer. The store was not crowded but possibly they do not have the same amount of sales people as before. I don’t see them losing any customers to an Android device but still they should not say to come back in an hour to answer a question

        3
        April 3, 2022
        • Robert Paul Leitao said:
          Bob: How often do you travel and need stored videos? Also, do you use the iPad often for making videos? If you are interested in the iPad Air, there’s two storage capacity options. If you have concerns about sufficient storage, I’d go with the 256 GB capacity option. I’m surprised you were asked to wait an hour to have that question answered. I was at the Glendale Apple Store the day it opened on May 19, 2001. It followed the Tysons Corner store opening by three hours. Yes. The store experience has changed over the 21 years I’ve been frequenting the retail stores. I choose to order online whenever possible. I visit the stores if I want immediate pick-up or to see a device before purchase. Rarely does a store staffer have more information about an item than me unless they are a creative specialist. That might have been the reason for the wait.

          2
          April 3, 2022
        • Neal Guttenberg said:
          Bob,

          We had a similar experience, although we only had to wait a half an hour. Fortunately, there were other things we wanted to look at in the store which we were able to do at the same time. But it does seem like there are lots of salespeople just hanging out shooting the breeze amongst themselves who could have helped at an earlier point in time. This is a stretch but maybe it is a way of limiting the number of people in the store or limiting the number of people salespeople interact with or maybe there is something that we are not thinking about. If this is an issue in the future, there are authorized Apple retailers in the area that I can try but they also have had issues with an adequate number of sales staff.

          0
          April 4, 2022
        • David Emery said:
          And the employees need to check their “OK boomer” attitude at the (back) door!

          The stores feel like “customer factories” where each customer is funneled into a specific channel for interaction, optimizing Apple’s benefit/ROI. And God Forbid you try to break out of your lane!

          (I remember how welcoming Apple Store #2 in Tyson’s Corner was when it first opened.)

          1
          April 4, 2022
          • Bob Goldstein said:
            @David Emery, Exactly, that’s my point. The stores were a real designation under Ron Johnson, they went downhill in my opinion when he left and then they got better under Angela. Now I prefer to shop from Apple.com. I also don’t feel very safe in the Apple Stores. Thieves have robbed both stores in my location a few times while I have been shopping. Not a pleasant experience

            0
            April 4, 2022
    • Robert Douglass said:
      @Bob G.,
      You can always post a question here. I’ll bet there are literally thousands of man-hours of experienced Apple product users represented here, who are more than willing to share their knowledge.
      My personal advice concerning Apple hardware:
      Always buy a little more than you think you need. After all, you’re an owner (I presume) of AAPL shares. Just consider your purchase as giving Apple a little boost… besides, with AAPL’s growth, you deserve to treat yourself. 🙂

      3
      April 3, 2022
      • Bob Goldstein said:
        Thanks Robert but my point was that they are not treating their customers as first class passengers on their ecosystem as stated in the first comment on this thread. As it happens I have been an Apple customer since 1997. A first time customer and an long time customer like me who takes the time to go to the Apple Store should not be told to come back in an hour to get a simple question answered
        They could have convinced me spend $150 more on the next level iPad Air but because they didn’t take the time to answer a simple question I decided to make do with the model with 64 gigs

        3
        April 3, 2022
        • Robert Paul Leitao said:
          Bob: I get your point and I agree on the Apple retail experiences today. I’ve had to “register” at the front of a store and have been told many times to wait at a table for someone to assist me. It’s frustrating at times to wait for even simple assistance. There have been times I’ve walked into the store to experience a device and then have to find someone to assist me with a purchase. If, for example, I was interested in a Mac Studio today, I’d probably visit my local retail store to see it and work with a display model and then go home to order one online and possibly arrange for pick up at the same store I visited. That’s actually my usual routine when I buy Macs for my work site because I create custom configurations. That’s fairly easy for me with an Apple retail store fifteen minutes away and I don’t mind visiting the store. I can only imagine my frustration level if I took time to travel to a store an hour away. I understand everything you are saying.

          0
          April 4, 2022
    • Charles A. said:
      https://www.cnbc.com/2022/03/16/apple-ipad-air-2022-review-m1-chip-undercut-by-64gb-storage-in-599-model.html

      “My biggest ding against the new iPad Air is that the entry-level model gives you only 64GB of storage. That’s probably fine for folks who don’t install a ton of apps and games or prefer to stream movies instead of downloading them. But you may fill that up fast. So, you should consider the 256GB model for $749. But at that point you’re $50 shy of the entry-level iPad Pro, which has a nicer screen, twice the storage and more camera options. Apple should have just put 128GB in the entry-level iPad Air.”

      1
      April 4, 2022
      • Bob Goldstein said:
        @Charles A, I decided to stay with the 64 gig model as I have had iPads from when they were first released and never had an issue with running out of storage. I thought about more storage as I thought I may want to download some movies and shows when I fly. The question I wanted to ask at the Apple Store was how much space does a 2 hour 4K movie use. I decided that I probably have enough storage with 64 gigs as I don’t download games and music to it.
        I did not need a new iPad, as I said I had the iPad Air 4 that I bought in November. I just wanted to have the latest technology

        0
        April 4, 2022
  5. Bob Goldstein said:
    The reason I posted about my experience at The Apple Store is that it seems almost everyone loves to talk about how great Apple is to their customers. It’s laughable to suggest I make an appointment to walk into a retail store to ask a question about a product. For a number of years I have been buying online but this time I wanted to go to the store to ask a simple question before ordering. As I said they wanted me to wait an hour. I went home and ordered the latest iPad Air to replace the one I bought in November with the same amount of storage. As I stated before they lost an opportunity to sell a willing customer a $150 more expensive iPad. As a shareholder of 22 years I just find this a poor business practice, something that wouldn’t have happened in the past when they had good customer service

    1
    April 4, 2022
    • John Konopka said:
      No offense and I’m not denying your experience. I just wonder how universal it is. We’d have to get a crew of “secret shoppers” to visit stores across the country, or the world to gauge what is going on with Apple retail.

      At my two local stores I have been able to quickly demo the new Mac Studio and Studio Display and other products and ask questions. However, just because it was an OK experience here doesn’t mean it is great elsewhere. Maybe I’m just going in at slow times.

      Looking at the numbers above I am just stunned that Apple is able to perform as it does. I can’t even imagine the business practices they have to have in place to manage those kinds of numbers. How do you plan for 60 million new iPhone users on top of the hundreds of millions of existing customers the sell to each year? How do they staff up, train staff, rent space, obtain product, ship it where it needs to go?

      For a while I ran a small office in Japan with only about a dozen employees and it was really stressful. Yet every time I see TIm Cook interviewed or on stage at the shareholder meeting he seems so relaxed, like he has all the time in the world to talk. That is awesome.

      3
      April 4, 2022
    • Daniel Epstein said:
      Hi Bob,
      While your experience with the Apple Store was not what you expected I want to assure you you are not alone in failing to understand Apple’s system for helping customers. Some of it is actually Apple’s fault from what I have seen. Some of it is customers expecting Apple’s structure to work the way they want. How disconcerting, mad or frustrating this is depends on what actually happens. A friend of mine wanted to buy two Iphone’s recently and made a “genius” appointment online. He asked me to come along as it is difficult for him to navigate some situations easily due to physical issues. This was apparently the wrong way to approach it as those appointments are not for new sales. I chalk up a lot of this to Covid procedures which mean dropping by the store and getting guided to the correct place doesn’t happen as much and online communications don’t always go well. However anecdotal stories don’t always reflect the overall story. My friend did end buying two new phones, was very satisfied with the service once he was in the correct part of the stores etc. From my point of view it could have been easier but I couldn’t determine if my friend had short circuited Apple procedures or Apple had misled him at some point in the process. It certainly went better than the phone call I was asked to make by my accountant to the IRS but that is to be expected.

      1
      April 4, 2022
  6. Aaron Belich said:
    Bellevue, WA has been the same story as Bob’s. But, it’s a destination location, quite large, and almost always packed. In the rare times I’ve had to go in for AppleCare or just getting someone to ring me up, the wait time was getting longer and longer. That said, I haven’t been there since the pandemic kicked off and our family was fortunate to be able to turtled up. I’m looking forward to checking out the Studio hardware.

    1
    April 4, 2022

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