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 (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 and Apple. The Motley Fool owns shares of 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information