Here's the Huge Business Apple Inc. Is Building Right Under Your Nose

Apple's retail segment doesn't get much attention, but it's been rapidly built into a huge business, with even more growth left to come.

May 14, 2014 at 2:05PM

When you first think of technology giant Apple (NASDAQ:AAPL), its iPhone and iPad probably come to mind. While those two products are undoubtedly the foundation of the company, what you might not know is that Apple is quickly becoming a retail giant as well. Indeed, Apple's retail segment is now a powerful, multi-billion dollar business that has become a hugely important part of the company.

Going forward, Apple has even bigger things in store for its retail business. The company is on the precipice of some critical new product releases, and it's been simultaneously making strategic moves designed to boost its retail business to better compete with Amazon.com (NASDAQ:AMZN). If successful, Apple may be able to add the distinction of retail juggernaut to its corporate resume.

Apple Store

Source: Wikimedia Commons.

Retail is a hefty slice of the Apple pie
As an indication of how powerful Apple's retail business has become, the company now separately breaks out its retail business as its own operating segment in its SEC filings. How rapidly Apple has built its retail segment, and the sheer size of it, are truly impressive.

Apple's retail business generated $5.2 billion in sales in the second quarter, representing 12% of Apple's total sales by operating segment. This represents a one percentage-point increase from last year.

In 2013, Apple's retail division posted more than $20 billion in sales. That means Apple's retail business racks up more sales than it does in Japan. In fact, retail now rivals Apple's China business, which produces $25 billion in annual sales. To put that in perspective, Apple's retail business generated about half as much revenue as Best Buy did last year.

Its retail growth rate is also significant. Apple's retail business did just $14 billion in 2011, meaning the company's retail segment is growing sales at a near-20% annual clip. Even better, Apple is continuously tweaking its retail strategy, to allow it to better compete.

Apple improves its online performance
Not only is Apple doing extremely well with its physical locations, it's improving its online presence to be on more even footing with Amazon. According to a report from retail industry research firm StellaService, Apple has cut its refund times in half for online customers. Previously, it took 10 days for customers to receive refunds. Now, the wait is down to a week.

The move is meant to better compete with Amazon, which is famous for its rapid customer service. In some instances, Amazon can offer instant refunds. While it's unlikely Apple will be able to match that, its reduced wait time for refunds may put a slight dent in customers opting for one of its rivals.

The effort will cost Apple initially, but it's a wise move as a precursor to its much-awaited product releases. Apple will most likely release the iPhone 6 later this year, and the company may have even more in store. Rumored possibilities include an Apple television or a wearable device like an iWatch.

Why retail is such a promising catalyst
Apple has created a massive and highly profitable retail business right under everyone's nose. While its core products like the iPhone and iPad get most of the attention in the media, Apple's retail business has grown so quickly, it's a huge business.

Future growth is likely, as Apple continues to build out its physical retail presence. And, when it comes to the Internet retailing space, Apple is taking big strides there too. More and more customers are going right to the source for Apple devices, just when we're on the cusp of several new product releases.

Here's the biggest thing to come out of Silicon Valley in years, but Apple isn't the biggest way to play it
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Bob Ciura owns shares of Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers