Despite huge chunks of planet earth that are still developing, technology gadget makers face what always happens. Market saturation. Peak smartphone. Peak personal computer. Peak tablet. Peak automobile. Peak kitchen appliances.
For Apple, the company is facing a worldwide glut in smartphones that have humbled hundreds of manufacturers. Except Apple. Apple has figured out a way to beat smartphone fatigue. Smartphone shipments have stalled or dropped in the U.S., Europe, and Asia.
How does Apple manage to prosper?
Let me call this aspirational branding. Apple, Mac, iPhone, iPad are aspirational brands. That is, a brand that people want to own when they’ve outgrown their cheap Windows PCs, cheap Android phones, and so on.
This situation is not unique to Apple, but the company’s perch at the premium end of the product spectrum gives it options that competitors do not have. Higher prices, higher gross margins on those prices, and that yields higher profits.
Some research indicates Apple’s iPhone models own 85-percent of the entire smartphone industry’s profits– iPhone X has roughly 35-percent of that profit. Premium products may not sell in the same numbers as marketshare counters, but that’s where the money is.
Mostly flat sales in the past financial quarter yielded a notable increase in iPhone revenue and profits. Every company on planet earth would prefer to be in that situation. In other words, Apple is getting more revenue and more profits from few customers than any competitor in the technology gadget space.
Half the PC industry’s profits? The Mac. Half the tablet industry’s profits? iPad. Most of the smartphone industry’s profits? iPhone.
What is interesting here is that Apple has yet to experience customer fatigue. With the number of customers not growing as fast as in recent years, Apple’s own Services segment is the fastest growing revenue and profit stream.
How is that possible?
Apple sells more services to the customer base. Or, put another way, Apple’s customers are buying more from Apple than just iPhones, iPads, and Macs. Think Apple Music, iTunes, Mac and iOS App Stores, Apple Pay, AppleCare, iCloud, et al. That does not include accessories, which also are on the increase– think Apple Watch, Beats headphones, AirPods, et al.
There may be gadget fatigue elsewhere in the developed world, but the affliction has yet to impact Apple, Inc.