The oldest secret in tech is that Apple products are pretty similar, regardless of the generation. Some have different features, yet they aren’t completely transformed. For instance, facial recognition software is the latest release for the iPhone 12. Other than that, though, it’s the same phone as the 10 or 11. Of course, it doesn’t matter to the biggest brand on earth because it keeps on squeezing money out of this business strategy.
In January 2020, Apple reported record profits for the first quarter. A year later, a £70 billion quarter shot the previous result out of the water. If one thing is certain, it’s that Steve Jobs’ empire is a money-spinner and will continue to be so for the foreseeable future. The question is, how does the business keep on boosting its bottom line?
The term “services” relates to almost everything the company sells that isn’t hardware-related. Currently, that could be anything from music and film or TV to stickers, or from reading material to app and in-app purchases.
For a while, the market has been expanding at such a rate that Apple is investing more of its resources into the services sector to open up new revenue streams. Mobile applications are the most lucrative, as seen by the business’s desire to get Valve to cough up for fees Apple believes the gaming platform owes. It’s easy to see why when the App Store made roughly £50 billion of revenue in 2020. The services are expanding into other areas, too. Investment’s a growing market for Apple, which is why it already has a stocks app that lets users track market activity and view the stocks’ performance.
Apps and services are everything to all sorts of modern-day users. Let’s stick to the world of trading and investment as our example. There’s an app for everything now and the introduction of Forex trading robots that do everything for traders, apart from providing the necessary resources, is a sign of the times. Casual traders can rely on back-tested software that eliminates the time-consuming nature of investments. That many of these automated Forex trading platforms have a specific mobile app shows the broad range of consumers to whom devices like iPhones are fundamental – in other words, we’re not just talking about everyday use. That further bolsters the point that, by focusing on apps and its app store, Apple is doing the right thing for its balance sheets.
Wearables, Home & Accessories
These are different from Apple’s services as they are devices that often include AirPods, Apple Watch, and HomePods. Judging by their current trajectory, however, they will match the services sector quite soon.
In the fiscal year of 2019, for instance, Apple’s market share was projected to be around £17.5 billion in sales. And the industry has only been expanding from that moment, with the wearables, home, and accessories side of Apple’s business strategy making more revenue than Macs. This is based on the last quarter in December of last year where the category made £7 billion of revenue. The Mac-only made £5 billion despite being around for much longer and having greater brand awareness.
Much like the services aspect of the industry, Apple is moving into the wearables, home and accessories markets with much more intensity and purpose because they see room for growth. After all, if AirPods and HomePods are outdoing the likes of Macintosh, they are bound to be profitable.
The iPhone Base
Although it seems impossible, the iPhone range won’t be the stalwart of the brand forever as the services industry is expected to overtake iPhones in terms of revenue by 2024. In many ways, it’s easy to see why when there isn’t much more Apple can offer its customers unless there is a considerable advance in technology.
Still, that doesn’t mean that iPhone sales will fall off a cliff. If anything, they should continue to perform competitively if the iPhone 12 is anything to go by since it is projected to shift 55 million units globally by the end of Q1 in 2021. The 12 has already crushed the iPhone 11 – sales are 21% higher. Apple’s services and wearables will be the future foundation of the company, but the iPhone has a lot to offer if you use the latest release as a yardstick. Anything the iPhones 13, 14, and 15 bring in will be bonuses that enhance the company’s profit margin.
The leaders at Apple are smart, which is why the brand has transitioned from a business that sells phones, tablets and music players to one that deals in services and accessories while trading off the strong historic performance of an item customers love – the iPhone.