Information provided by sources reveals there are few common factors among Apple’s highest-grossing stores that might explain why their revenues or sales of service-related products are at the top of the charts. Instead, each store has its own operations and revenue personality, dependent upon the staff, customers, regional demographics, size of the store, and to some extent the region where the store is located. Categorizing a specific store, or trying to copy a store’s success to others is very elusive, say those in the know. For example, the chain’s top performers in the United States include the Tysons Corner (Virg.) store, the first store to open back in 2001. But other successful stores have been open less time, are both large and small, and are scattered across all regions of the country.
The newest store with the best overall performance is La Cantera, reporting over $6 million in revenue for the latest quarter. Conversely, the Wellington Green store is the oldest store with the least revenues, tallying just $1.9 million.
But top revenues don’t necessarily ensure increased revenues compared to the same quarter of 2006. Among the top revenue producing stores, the increase from 2006 ranged from just 7 percent to 27 percent. Many other younger stores had more significant gains, those with knowledge say.
Similarly, the sales of CPUs doesn’t seem to be linked to high sales of AppleCare, the sources note. The stores that sold the most Macs during the quarter were among the bottom 25 percent of AppleCare sellers.
Attach Rates
There doesn’t seem to be a pattern of which stores excel in selling .Mac, although the highest rates of ProCare sales seem to be slanted towards older stores. Apple execs have said there are over 100,000 ProCare members and 270,000 subscribers to the One to One service, and over 1.7 million .Mac subscribers.
The newest stores in the chain are naturally lagging in revenues, as the continue to attract new customers, and former ones return for add-on purchases. However, the newest stores lead the others in sales of AppleCare, .Mac, ProCare and One to One service.
On a regional basis, the population-heavy northeast United States leads the U.S. stores in revenues, followed by the southwest region, which includes California with the most stores.
Regionally, AppleCare is sold most commonly in in the midwest and mid-Atlantic states. The south-central states lead in in sales of .Mac, ProCare and One to One service. There is no obvious explanation for either figure, the sources say.
Is Small Better?
Apple’s nine mini-stores lag behind the performance of other stores in the chain. In fact, six of the mini-stores are among the bottom 13 stores ranked for overall performance. Understandably, their revenues don’t match those of full-size stores. However, their attach rates are also well below average for the chain, again, with no obvious explanation.
Even further, the bottom three stores in overall performance are mini-stores, dragged down by their low revenues, but even more by their relatively low attach rate scores.
From Day One
Then how are individual stores performing? Sources have provided information that allows some limited insights into selected stores.
A typical mall store is the Twelve Oaks store in Detroit (Mich.), which opened in August, 2002. It features a 30-foot storefront and about 6,500 square-feet of retail space. The surrounding region is upscale, with an average household income of $87,481, according to the developer Taubman Centers Inc.
Apple signed a 10-year lease on the space, paying about $85 per square foot, or an expense of about $140,000 per quarter. The store cost about $1.3 million to build and outfit.
Sources said the store generated about $5 million in revenues for the third quarter of fiscal 2007, an increase of over 50 percent from the same period of 2006. The store ranked in the top 25 percent in computer sales, but in the lower 50 percent for iPods. It’s sales of AppleCare, .Mac, ProCare and One to One were in the middle third of all stores.
Understandably, the newly-opened Fifth Avenue (NYC) store has more impressive numbers. The store is located along an upscale section of Fifth Avenue adjacent to Central Park. Construction documents indicate it cost over $5 million to demolish the old plaza and build a new two-story structure. That cost does not including the glass cube, which reportedly cost $9 million to design, construct and install. Overall, the store might have cost Apple $20 million to build and outfit.
The store includes an underground retail floor of nearly 10,000 square-feet, and an identically-sized floor below it for offices, storage and other spaces. In total, Apple leased 22,500 square-feet beneath the plaza.
Apple reportedly signed a 20-year lease for the space with building owner Harry Macklowe, who personally approached Steve Jobs to solicit an Apple store on the site. Based on real estate sources and Apple’s financial reports, Apple is paying a bargain basement price of about $100 per square-foot on the Fifth Avenue store lease, or about $2.3 million a year. Some retail space in the area goes for upwards of $1,000 per square-foot.
In return for almost three years of work and millions of dollars, Apple received a bonfide New York City attraction for both tourists and locals. They also created a money machine that is on-track to deliver over $200 million in revenues over the next year. Expenses for the 24/7 store are higher, but not enough to offset its profitability.
As for sales of ProCare and other products, retail sources say the Fifth Avenue store isn’t a stand-out. The store, open since May 2006, is among the bottom 10 stores in overall attach rate performance.
Without Apple’s own spreadsheet full of live store data, and some statistical expertise, it’s impossible to tell what creates a successful store–or a loser. Instead, we’re left with tidbits of information and the company’s quarterly reports, which are showing nothing but success for the retail stores.
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{ 8 comments… read them below or add one }
$200 million a year money machine? Wow.
It makes sense that there’s a wide range in the stores’ detailed results since they are a fairly diverse set. Would have liked to hear about the overseas ones of course (still waiting for Edinburgh, Scotland’s addition) to get a handle on international differences too. For instance, how are those Japanese stores going while Japan’s computer market stagnates as a whole and Apple routinely express concern at their own showing there?
I used to work for an Apple Retail Store several years back. Personally, I think the metrics of a particular store have a great deal to do with the quality of a staff and its management team.
Overly zealous sales people can be a turn-off and the push to always attach can be a downer for a prospective buyer. Conversely, stores that run too lean on staff can actually bost the sales of “pro care” like program, as the customer feels that is their only avenue to guarrantee help when they need it.
Sales of Applecare is best done by the Genius staff, as they are the ones who repair machines and can give a legitmacy to the program.
The problem is that many managers don’t care about the quality of their sales staff as long as they hit their respective numbers. The result can be a sales floor filled with quick talkers who lack real mac knowledge. When retail first started, many of the staff were true mac heads who brought their own legitimate passion and knowledge of the platform which in turn created a special atmosphere that was good for both sales and the customer.
As retail has grown and become successful, Apple risks losing that quality and simply becoming another Best Buy or Circuit City where everyone on the floor pushes the TAP but can’t really provide the knowledge of a mac enthusiast.
Don’t hear too many of the naysayer analysts anymore that pooh-poohed Apple’s decision to open their own stores.
It seems a shame that Apple won’t release more info on the stores but the figures quoted in the article raise speculation that the “profits” aren’t really true.
If they were, Apple’s marketshare would be larger than it is.
I’ve been an Apple only user for almost 20 years but recently I’ve been reading stories about how the dealer channel is been adversely affected by not being able to offer the same products, services and products as Apple’s own stores. This is a definite disadvantage not to just the dealers but also their customers. (I won’t shop in another Apple store again for a number of reasons).
How do you the Ford or GM dealers would react if Ford or GM decided to open and compete with their deal channels?
I’ve also been pointed in an area that really concerns me, out-of-warranty repairs. The Apple stores won’t do them or upgrades, and the dealer channel can’t stay in business, where do we customers then go?
I wouldn’t argue with Bruno since he is definitely speaking from personal experience. However I would submit that it may be a narrow vision of one particular store. If this is true it only goes to prove the article’s point that each store is in fact different. I know of many stores who still have knowledgeable mac specialists who can also sell ice to an eskimo.
As for Peter Gordon, you couldn’t be more wrong. Profit and marketshare aren’t related at all. Here’s the link to prove that the numbers are in fact true: http://library.corporate-ir.net/library/10/107/107357/items/245168/10Q_Q2FY07.pdf (It’s a public link.) Incidentally, didn’t Apple’s market share increase percentage for 1Q07 just far exceed both Dell and HP?
As for in or out of warranty computers at Apple or not Apple, I guess I would just personally prefer someone who repairs my machine to be part of the same company that built my machine. And to imply that Apple is putting ALL the dealer channels out of business is just absurd. Go to any Apple retail location. Ask them to refer you to their local dealer/repair house of choice and you’ll see.
Apple sfores do out of warranty repairs all the time on computers, at least the ones in my town do. Even on iPods, a friend of mine had an out
of warranty video iPod replaced (the whole thing) for $149, much less than the cost of a new one.
Jay and David make some great points, however, in my neck of the woods, the stores do not do repairs on out of warranty units and try to sell new ones.
My major problem and why I wont go there any more, “service tech’s” that aren’t certified like the ones at the channel partner service provider that have to be certified by Apple (Hmmmmmmmmmm, advantage+).
David, Apple service center partners are not allowed to service iPods and therefore cannot exchange them for any price and that’s my point exactly, unfair and unleveled playing field for those independents who supported the company ((Apple) for many many years through the bad times.
Don’t start me on the iPhone that I couldn’t buyer from my local dealer and the bad attitude I got from the AT&T store that forced me to an Apple store……. interesting I think.
Jay,
Certified or not? That’s the question. As to being referred from an Apple store to an independent, not on the West Coast. I had to call Apple and demand names and numbers of service providers that could help, the closest, 63.4 miles one way for drop off, had to leave it as they part was on backorder at Apple. 63.4 miles to go home, 63.4 miles 4 days later to pick it up and 63.4 miles to take it home.
Interestingly enough, the dealer principle, when asked, how about opening in our area advised that he had applied to Apple and was rejected. Again, customer service??????????????