Apple Surpasses Microsoft`s Earnings...Finally! - Retail Profits
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Whereas mobile phone manufacturers depend on mobile providers to sell their phones, Apple is free from this restriction. As previously stated, the company bypasses these mobile phone providers and markets and sells the iPhone itself. As a result, Apple keeps not only its manufacturing profits, but its retail profits as well.
One of the strategies that Apple uses is generating excitement when it’s getting ready to release a new product. Anxious to purchase the product from the retail store, customers will stand in line for long hours. Apple uses the media to generate this excitement. For example, it’s not uncommon for news reporters to interview customers. Apple does all of this without ever having to rely on mobile phone providers.
Mobile phone manufacturers can’t replicate this business model because they lack the retail presence. Mobile phone providers that do work with Apple benefit because the company can generate more subscribers for them. Apple can also offer additional features for its iPhone.
Mobile Service Provider Revenue Sharing
In this area, Apple came up with a different business model in that it gets back a share of the revenue from the mobile phone providers. Apple lures customers from other mobile phone operators by promoting its phone platform. To attract phone providers to its business model, Apple recommends they lower their fees and provide a rebate to Apple if customers stay on their service contract.
Accessories Sales
Apple dominates in the accessories sales area because it presents a strong retail presence. As a result, it can generate momentous profits from selling accessories. As it did with its iPod licensing, Apple licenses “made for iPhone” accessories. At its stores, Apple makes significant retail profits from reselling third party accessories.
Apple profits from this area in part because it marks up its accessories’ prices, which range from $29 to $39. The company earns more in this arena than it does selling its Macs, iPhones, or iPods. This is one of the reasons why Apple’s retail stores make more in sales than other stores, such as Tiffany’s.
Apple also succeeds in this area because it sells a large volume of third party accessories. As a result, Apple can subsidize its continuing growth of its hardware and construct a network of developers around its products.
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