Spot quiz: What is Apple’s fastest-growing product by total dollar sales?
If you thought iPhones or iPads, you’d be wrong. Growth of both those is in decline.
It’s actually e-commerce — via iTunes, iBooks and the app stores. Sales of extra, non-Apple “stuff” via Apple’s products were up 19% to $US4.4 billion in Q1 2014.
This business is one of Apple’s smaller lines, of course. But it’s still impressive: If there was a standalone tech startup that was doing greater than $US16 billion a year in digital e-commerce sales, and growing at nearly 20% a year, everyone would be talking about it.
It would be the hottest company on the planet. It certainly dwarfs Zappos, an e-commerce company who last reported annual revenues were just over $US2 billion.
‘A big opportunity on the platform.’
While the tech press is obsessed with Apple’s plans for an iWatch and a new Apple TV device, it’s instructive to pay closer attention to the business CEO Tim Cook is actually already building. Because it looks an awful lot like Apple’s future growth might come from online and mobile retail, not from creating new product categories with new, yet-to-be-invented products.
On his last earnings call, Cook talked about this specifically:
In general, we’re seeing that people love being able to buy content, whether it’s music or movies or books, from their iPhone, using Touch ID. It’s incredibly simple and easy and elegant, and it’s clear that there’s a lot of opportunity there.
The mobile payments area in general is one that we’ve been intrigued with, and that was one of the thoughts behind Touch ID. But we’re not limiting ourselves just to that. So I don’t have anything specific to announce today, but you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it’s a big opportunity on the platform.
If Cook had made exactly the same statements about watches or TVs, everyone would have freaked out. Apple fanboys would be jumping for joy.
But because he’s talking about the dull-but-lucrative business of retail, everyone is ignoring it.
Touch ID is not what you think it’s for.
In fact, one of Apple’s most important recent technological advances has been retail-oriented.
Most people think that Touch ID is about security — no one can use or steal your iPhone 5S because you cannot unlock it without the owner’s fingerprint. But as Business Insider has noted before, Touch ID has a much more important application as a business. Because it makes your phone almost completely secure, the iPhone suddenly become an almost perfect mobile payments device.
That’s why Eddy Cue, Apple’s e-commerce chief, is focused on building a mobile payments business for Apple right now, according to the Wall Street Journal. He and vp/online stores Jennifer Bailey have met with PayPal, Google, Square, Stripe, Braintree and Venmo in their efforts to put this together.
By amazing coincidence — or perhaps not — Apple is simultaneously building a mobile retail marketing infrastructure across the U.S. It’s called iBeacon.
Apple is building a national shopping infrastructure.
Stores are already installing these low-powered Bluetooth transmitters so that when you walk past a shelf they can ping your iPhone with an ad or an offer. Soon — if you keep your iBeacon functionality switched on — Apple and its iBeacon partners will know where you’re shopping, all the time, down to a location of just a few feet.
And if it becomes possible to pay with your phone instead of your wallet, then Apple will have successfully “closed the loop” on mobile retailing.
For years, the El Dorado of mobile marketing has been to figure out a way to encourage a phone user to go to a store and buy something at the checkout, and then to be able to immediately attribute that specific sale to a specific phone or owner. This is what marketers mean by “closing the loop.” Some companies have tried, but it is trickier than it sounds — you can check in on Foursquare or Facebook at The Gap all you want, but if the store clerk can’t link your checkin to the sale, then the action is nearly useless.
Having an iPhone user accept an offer inside a store via iBeacon and then pay using their phone, in theory, solves that problem.
And if Cook really has got this figured out, it’s likely to become a lot bigger business than wristwatches ever will be.
Business Insider Emails & Alerts
Site highlights each day to your inbox.