The art of making big profits as a small player!

by on 11/11/2011

Let’s start with the worlds biggest retailer.

Walmart. They have 8970 branches turning over $422 billion last year. What do they sell? Everything an household could ever want. Electronics, clothing, food, toys, leisure and so on…

Apple stores worldwide make 13 times more money per square foot than Walmart!

Yes 13 times more! You have more fingers in one hand than the entire product range of apple! This from a company that was predicted to fail.

This was the quote from David Bernstein (a retail expert) to Business Week

“I give them two years before they’re turning out the lights on a very painful and expensive mistake.”

In fact apple’s 357 retail stores (as opposed to Walmart’s 8970) had turned over a higher operating profit ($25.92 billion) than Walmart($15.35 Billion).

What does apple do differently?

To answer that lets look at how Walmart and Apple operate:Apple Stores are in the most expensive locations worldwide. Compare this to Walmart, an out of town retailer, where cost per sq.ft is very low. Walmart treats retail space as a scarce resource. Hence every available space is crammed with display and stock stacked high. Apple does the opposite. They allow more space for customers to experience the in-store demo’s.

Apple customers don’t buy at their first visit. They com back to experience the products few more times before they buy. (This excludes the fanatical supporters who buy stuff on the launch day….). Where as Wallmart customers know what they want and want to spend the least time possible in store.

What has apple mastered?
Most of us talk about the genius of Steve Jobs and his ability to unleash products that people go crazy for.But the real genius behind apple…..

Apple has mastered the art of making big profits and keeping most of it.
They go after a niche that they can serve at a higher price point. Then they serve that market like no one can. They did not have lofty world dominating visions.Here is more proof. In 2007 when Dell was the biggest PC manufacturer in the world with about 30% of the market. That year Apple’s market share was 6.3%. Later that year while Dell earned profit of $2.8 million , Apple reported a record $818 million in profits.

Lessons from Apple:

  • Pick a niche you can serve at a higher price point
  • Offer them something no one else does
  • Serve that niche like no one can

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