Monday, September 11, 2017

Flat iPhone revenue does not mean that Apple is dying

Via a Google Plus share, I ran across a ZDNet article that is guaranteed to anger the Apple fanbois. Author Adrian Kingsley-Hughes notes the following:

There's a problem facing Apple that the fanboys want to ignore and that the executives in Cupertino won't acknowledge: Stalled revenue growth.

Not stalled revenue, but stalled revenue growth. Kingsley-Hughes refers to a report from Guggenheim Securities that looks at five sectors of Apple - iPhone, iPad, Mac, services, and other products. Of those five sectors, only services revenue is growing consistently.

Fair enough. But then Kingsley-Hughes spends the rest of the article talking about the anticipated iPhone 8.

But does the iPhone 8 have enough to restore revenue growth? Is AR, face unlocking, wireless charging, and an OLED display really going to get people to part with more than $1,000 for an iPhone?

In my view, Kingsley-Hughes made a mistake here by concentrating on an older product. And yes, the iPhone is an old, mainstream product - one step above the iPod.

Now the article does state that Apple has "nothing new on the horizon that is going to pick up the slack." And perhaps this is correct.

But perhaps it isn't.

In a longish post on Google Plus (that I'll reproduce below in case Google Plus bites the dust before Blogger does), I noted that it's not necessarily correct to analyze the future of a company based upon its current offerings. After all, what would be the result of an analysis of Apple Computer circa 1983, before the Macintosh was released and changed computing forever? (Admittedly with a few bumps along the way.)

One thing that I didn't state in my Google Plus post is that all companies that exist for a long time go through changes. Nokia no longer depends upon wood pulp. IBM no longer makes meat slicers. Microsoft no longer depends upon BASIC - or MS-DOS - for its revenue. And "Apple Computer" hasn't manufactured an Apple II in over twenty years.

And someday, Apple will no longer offer an iPhone. Yet there's still a chance that the company will survive. It's certainly survived many downturns in the past.

OK, here's the text from my Google Plus post:

Yes, the fanbois are being overly optimistic - and yes, the naysayers MAY be overly pessimistic.

The Cliffs Notes version of the +ZDNet article reads as follows:

1. The only growing sector in Apple is services.
2. The iPhone isn't growing.
3. The iPhone 8 isn't earth shaking.
4. This is bad.

This is accompanied by a chart that shows revenue growth (and lack thereof) since 2010.

However, I counter that a seven-year time horizon may or may not predict future growth of a company.

Let me give you an example of another seven-year timeframe - the time between Apple's founding (April 1, 1976) and 1983. And how did Apple look in 1983?

1. The Apple II was doing great, but it had been around for a while.
2. Its new product, the Apple III, was running into problems.
3. Apple was facing competition from the increasingly popular IBM PC.
4. Its new-new product, the Lisa, was incredibly high priced.

So at that juncture in 1983, an argument could clearly be made that Apple's time has passed. Sure, the two Steves had a bit of success, but now that experienced companies like IBM were moving in, there was absolutely no way that Apple could turn the Apple II into a long-term success.

"You stupid idiot," you're saying to me. "Good companies always innovate, and Apple was at that time readying the Macintosh for delivery. The Mac had its ups and downs, but it eventually became a viable product. And a couple of decades later, Apple revolutionized the world again, morphing from its "Apple Computer" past to offer the iPod and iPhone. Anyone who would judge Apple's success based upon its 1983 product line is completely clueless."


So why are people judging Apple's post-2017 success on the anticipated feature set of the iPhone 8?

Yes, it's quite possible that the iPhone will go the way of the iPod. And if Apple makes the mistake of putting all its eggs in the iPhone basket, Apple will go away also.

But if Apple has its smarts, it's doing all sorts of development activities inside its spaceship - development that has nothing to do with iPhones.

Now some of those development efforts will probably fail. But perhaps some of them will be insanely great successes.

So much so that ten years from now, when everyone is busily using Apple's latest gizmo, one teenager will turn to another and say:

"Did you know that Apple used to make phones? You know, those things for voice calls? My mom used to have one."

And the teenager's friend will reply:

"You think that's wild? My grandpa said they used to make something called a computer."

Saturday, September 2, 2017

Revisiting the Retail Equation - why customers should love them

I've previously written about The Retail Equation four times. April 2012. October 2013. January 2014. February 2014.

I've always covered them from the store side of the, um, equation - basically, the algorithmic efforts to reduce fraudulent returns. I've also covered the customers who are caught up in the algorithm and haven't been allowed to return things that they think they should be able to return.

With the negative press that The Retail Equation has received, I began wondering - has the company tried to make the case that its service is actually GOOD for customers?

It has:

The Retail Equation’s Verify Return Authorization solution offers you a tremendous alternative to strict, across-the-board return policies used by some retailers.

It also covers "Retail Rewards," which appears to be a new name for the Return Rewards I previously discussed.

TRE's Retail Rewards targeted incentives ... help accommodate you for the inconvenience of the returned item and persuade you to keep shopping in their store.

Finally, The Retail Equation states that its service lowers retailer costs "and helps lower prices." While the "consumer benefits" statement doesn't provide justification, this release does make one interesting claim:

The Retail Equation/Sysrepublic has conducted studies to substantiate the fact that return rate and return fraud are closely tied to shrink. These studies indicate that if a retailer takes actions to prevent return fraud and abuse, shrink can be reduced by a significant amount. This suggests that paying close attention to returns is a powerful weapon to combat shrink. As companies look to improve their loss prevention metrics in the coming months, they should consider implementing strategies to reduce return rate and fraud and, ultimately, shrink.

And it's obvious that reducing shrink lowers retailer costs, although in the quarterly public company pressure to profit profit profit, it's uncertain whether that reduction in costs actually lowers prices that customers pay.

Friday, September 1, 2017

When cultural references are lost on potential customers

Businesses desperately want ways to connect with customers, and - provided that it's done tastefully - they can connect with customers by insightful references to current trends.

So someone tried to do this recently, with the following statement:

Federal CIOs are going down like Lannister banner men.

Many of you will read this sentence and either appreciate the reference, or comment that the reference is totally inappropriate.

The rest of us will sit here and go "Huh?"

For the benefit of those who, like me, are in the last category, this is from an article entitled "CIO Game of Thrones?" So once I Bing or Google the reference, I'll presumably figure out who Lannister banner men are.

"But John, you are an obvious outlier," many of you are saying. "You don't watch any TV other than sporting events, Whose Line, and Jeopardy. EVERYONE watches Game of Thrones."

And that technology machine Mashable agrees with this assessment about Game of Thrones' popularity.

As everyone learned this season on Game of Thrones, you don't need three fire-breathing dragons to dominate the competition, but it certainly helps.

That's right - EVERYONE learned this. Didn't they?

According to the network, Game of Thrones Season 7 has averaged 31 million viewers per episode – up 34% over Season 6 last year – once live, DVR, on-demand, and streaming views are all factored in.

Mind you, that's not even counting the numbers for the Season 7 finale. An all-time high of 16.5 million viewers caught the episode Sunday night.

So, follow the numbers. That season finale that everyone watched was seen by 16.5 million people. Generously assume that another 14 million or so pirated the show to get around HBO's fees. That means that around 290 million people in the United States did NOT see the Game of Thrones finale that everyone is supposedly talking about. That's 90 percent.

Well perhaps the numbers are different in specific demographics. What about IT people who love fire-breathing dragons, some chair in Croatia or wherever, and Bannister - I mean Lannister banner men? (Still haven't Binged that yet.) Maybe the percentage there will increase from 10 percent to, say, 25 percent.

Now I love obscure references more than everyone else, but I don't expect everyone to understand them when I use or misuse them. So if you want your Lannister banner men to fight fire-breathing dragons in multiples (the dragons), make sure you're not leaving your target audience behind.

Because the points DO matter.

Could business needs restore pre-9/11 airport gate access?

It was less than twenty years ago, but it seems like forever.

In the late 1990s, my then-young daughter and I - well, my daughter's still young, but not as young as she was then - anyway, my then-young daughter and I visited the grand opening of Terminals 2 and 4 at Ontario International Airport in Ontario, California. While I primarily remember walking around the runway area, the terminals themselves were very impressive. There were ticket counters on the first floor, and escalators leading to the second floor gates and shops, where passengers and their families could eat something near the gate -

Hold it. Did I just say "passengers and their families"?

Yes, I did. People who are younger than my young daughter cannot even remember a time when a family could accompany a passenger all the way to his or her gate. Because after 9/11, extensive security controls were introduced, and at my local airport in Ontario, non-ticketed people were restricted to the first floor. Only ticketed passengers could go up to the second floor, and because there were fewer people in the shops, there were fewer sales. And as passenger traffic declined at Ontario International Airport because of 9/11 (and other reasons), there were even fewer sales, and these days the shops are only open at limited hours.

Thus, the 9/11 security restrictions resulted in a reduction of revenue for airport shops, and therefore for the airports themselves.

(Oh, and by the way, if you have this nagging question about why Ontario opened Terminals 2 and 4, it's because they were planning to build a Terminal 3 in the future as air traffic increased. Because of 9/11, those traffic increases never materialized.)

But now things are changing in Pittsburgh:

For the first time in almost 16 years, a U.S. airport will let non-passengers head past security and mingle in gate areas. Starting next week at Pittsburgh International Airport, you'll be able to greet your long-distance girlfriend at the gate and grab one last (hopefully decent) meal with the in-laws, even if you don't have a ticket, through the TSA-approved "myPITpass."

It's still somewhat restricted - non-passengers can only enter during daytime hours on weekdays, and not at all on the weekends. But this is an eye-catching development. Hopefully the additional airport revenue will offset the increased security costs.