Apple: Good, Bad And Well Worth Watching

After a few weeks of relative quiet after its latest earnings report, Apple found itself back in headlines this week — for happy, not so happy and surprising reasons.

Worries about Apple’s future started the week, particularly about its signature (and centrally important) iPhone line that saw stock prices taking a hit. However, those prices perked up some at the announcement of Apple Pay’s next upgrade into the wild and already pretty competitive realm of P2P payments.

And in “hey, look who’s out of the bunker” news, after a few fleeting glimpses in the last several months, Apple’s Angela Ahrendts was out and talking about Apple Retail 2.0, the stores’ evolving place in the Apple ecosystem and why making happy employees proves altruism is smart business.

Full week. Worried you missed something? That’s OK; we didn’t.

The End Of The Affair — Is Everyone Just A Little Less Into Their iPhone These Days?

The not-so-good news led the week as investor concerns about weakening demand for the heretofore unstoppable iPhone sent Apple’s stock price tumbling 2.3 percent Tuesday (Nov. 10).

Worrying the public markets was a report from Credit Suisse that predicted some uncertainty for the flagship product for an indeterminate time period.

“Apple has lowered its component orders by as much as 10 percent, according to our teams in Asia,” wrote Credit Suisse Analyst Kulbinder Garcha. Garcha further noted those cuts were likely driven by weaker than expected demand for the iPhone 6s launched in September. “The continued weak supply chain news could weigh on Apple shares for the next few weeks/quarters.”

As of yet, Apple has offered no direct reply to the Credit Suisse report. Many Wall Street watchers have seemingly warmed to Jim Cramer’s position that as dire a situation as Credit Suisse’s observations might indicate, he and a few others express concern that the report was so vague that it probably shouldn’t be putting investors off the world’s most valuable company going into holiday 2015.

“ [Apple’s stock] just can’t get out of its own way right now,” he added yesterday on Mad Money. “If Apple stock goes up today, it’s gonna be a day that people will regret that they didn’t buy.”

Cramer also noted Apple’s other suppliers are all reporting earnings in line with estimates, which doesn’t indicate the slowdown or dip in interest that Credit Suisse is seeing.

Other than a more optimistic read of the channel checks than Credit Suisse, Cramer and co. were also lauding the firm’s announced move into P2P payments this week.

The Power And Potential Of P2P

“Obviously, everyone wants to be in this space,” Cramer noted, before explaining it is the space where the market is moving toward.

The millennial generation is becoming America’s largest spending group, and as a cohort, they are incredibly fond of sending funds via Venmo, Square Cash, Facebook Messenger and SnapCash, as well as a shockingly long list of less well-known others.

Others that Apple may soon be competing with if reports this week that the tech firm is currently in the conversation stage with several potential banking partners about the possibility of adding P2P payments to Apple Pay are accurate. Banks that are supposed to be involved in the talks, according to unnamed sources, include JPMorgan Chase, Capital One, Wells Fargo and U.S. Bancorp.

And if that list appears to be a little familiar, it is probably because all of those banks are currently partnered with clearXchange’s P2P service. ClearXchange was acquired by Early Warning a few weeks ago.

The markets seemed to like this development, with many noting that P2P might give the plateauing Apple Pay the shot in the usership arm it needs. However, that enthusiasm was tempered by big unresolved questions about what exactly the Apple P2P platform would look like or how it can and will compete against established players in the field, particularly PayPal-backed Venmo with a large, active and quickly growing user base.

But then, Apple has proven good at entering some fields and doing them that much better than everyone else — phones, app stores, tablets. Some — like payments, wearables, streaming music and TV — are a big TBD. On the retail side, however, it seems to have struck oil. Retail stores have been around for over 4,000 years; Apple Stores have been around for less than 15 yet have made a huge mark. And it’s not easy to make a big mark on something 3,985 years or so in the making, but it did it once.

And if Angela Ahrendts is to be believed, it wants to do it again.

Looks Who’s Talking

After taking the helm of Apple’s retail operations in a very public manner after a successful run at Burberry as CEO, Ahrendts kind of disappeared. Though periodically visible throughout her early tenure, particularly around public retail events like the launch of the Apple Watch, Angela Ahrendts has been largely invisible.

This week, that all changed as she made a very public appearance for a wide-ranging conversation at a Fast Company conference in New York. So, where has she been? Mostly head down learning the lay of the land, she said.

“Once [I] made the decision to finally join, [I] walk in, and [I] understand half the acronyms,” Ahrendts joked with the crowd.

Local lingo now down pat, Ahrendts is all serious business when it comes to what’s next for Apple, as she gave the audience some interesting insight into the 2.0 version of Apple Retail.

Why Reinvent What Already Works?

The problem with taking charge at the head of a majorly successful retail operation is that any attempt at change will be met with suspicion. Apple’s retail space is already the most lucrative in the world by square foot, and its 450 locations worldwide are the envy of many.

But Ahrendts says her vision involves treating the store “as a giant product” in and of itself, with a great focus on the passion points for consumers represented in store that first got off the ground during the Ron Johnson era. Also getting ready for a rollout are modifications to the store itself to create a store visit that is more experiential.

“The Avenue,” as Arendt described it, will see Apple’s accessories reorganized into a store experience that feels more like being on the street of a “small town and looking into each window.”

But the vision of Apple’s retail future is bigger than the store; it must be realized that the store is a part of a total retail experience designed around consumers who, in some cases, “want minimal human interaction.” This has meant efforts to defrag the Apple shopping experience — breaking down the walls between Apple’s website, the Apple Store’s separate website and the actual store experience, which until recently was only minimally connected to the other two.

“I asked Tim a very simple question: Why do we do it this way?” she recalled. “He said, ‘I don’t know — we’ve always done it this way.’”

But the company is not doing it that way anymore, she says, as the future is not about segregating those experiences but turning them into a single seamless experience.

The Big(ger) Picture

Thinking beyond the store is perhaps shaping into something of a specialty for Ahrendts at Apple, because as her Fast Company talk made clear, she views her role both in relation to the department she runs and in connection to the ecosystem in which it is a major hub.

“How should we handle Apple Pay? How should we help customers download Apple Music? They’re not products we’re selling — we get no credit for doing that at all. Yet, that’s good for Apple and the customer,” Ahrendts noted.

Ahrendts also noted her collaborations with her executive counterparts, particularly “Jimmy” and “Eddy” — Jimmy Iovine and Eddy Cue, the senior Apple executives overseeing Apple Music. They are working collaboratively to make Apple Music part of the store experience.

She also called out Craig Federighi, Apple’s senior vice president of software engineering, for help coming up with a “curriculum to teach code in stores.”

Employee Relations

With strikes breaking out, protracted battles over the minimum wage and a lot of unanswered questions about using software to schedule for maximum efficiency, it is something of an understatement to note that retail and its labor force have pretty big issues to work out.

But Ahrendts’ attitude toward labor was somewhat sunnier than has become common for retail headlines of late.

“Being good to your employees will always be good for business,” she noted of the firm’s refusal to open on Thanksgiving or turn Black Friday into a general shopping circus.

She also called out Apple’s program of giving stock to even part-time workers because “it is both easier and more cost-effective to retain and make employees happy than it is to hire new ones. It is also better for our customers.”

And, it seems, something is working. Apple has an 81 percent retention rate when it comes to retail employees.

So, what did we learn this week? The iPhone might be experiencing a blip in demand that could last for as little as a few weeks or a much as a year. Apple Pay might be getting a P2P boost. And Angela Ahrendts is definitely making big changes at Apple behind the scenes and is well worth watching whenever one gets the chance.