Where To Locate An Apple Store?

The most common question I hear is, "When will an Apple store open in Oaktown?" And after that question is answered, the person wants to know how Apple selects its store locations. Of course, the official answer will never be known--Apple doesn't reveal its criteria for selecting store locations. Nevertheless, over the months I've gathered some tidbits of information that give some insights into the process. Here's a diagram version of the process.

In April 2004 V-P Retail Ron Johnson said that Apple had a list of 100 potential store locations. It's reasonable to assume that the company started with a list of the most populous U.S. metro areas for this list, and then sorted them into an order based on which areas of the country where Apple wanted to definitely locate.

For example New York, Chicago and Los Angeles are considered significant retail opportunities, and Apple located flagship stores in all three locations. No doubt they were near the top of the initial list of potential locations.

Next, having identified the proper city or metro area, Apple must then find a suitable mall within the area. This is expedited by contacts with all the major mall developers, including Simon Property Group, General Growth Properties and Westfield Property Group. Apple is also considering street-located locations these days that fall outside the normal property-management companies, and must have contacts with other real estate brokers to identify these locations.

Apple has committed to opening stores in so-called Tier 1 locations, which attract the most visitors and have the highest per-square-foot sales figures.

The suitability of the mall or location seems to be based on various statistical and other factors, including:

  • the number of persons residing within certain distances of the proposed location (1-mile, 5-miles, etc.)
  • the number of registered Apple customers within certain distances, based on the company's registration database. This is a significant consideration when making the decision.
  • the average household income with certain distances (1-mile, 5-miles, etc.)
  • driving times surrounding the mall
  • customer traffic to the mall
  • mall customer demographics, usually by age range
  • the presence of other trendy stores: Victoria's Secret, Abercrombie, Pottery Barn, Gap, J. Jill, etc.

Apple also takes into considering other nearby features of the mall:

  • the proximity of universities or colleges
  • the proximity of Interstate highways, with an intersection of two Interstates most desirable

Once one or more suitable mall sites are located, Apple then focuses on specific, available spaces within the malls, using various criteria:

  • proximity to entrances
  • proximity to other desirable stores
  • width and square-footage of space
  • ability to cost-effectively renovate

In mid-2004, real estate services company Price Edward & Company published a survey (pdf) of Oklahoma City region retailers, that showed the Penn Square (Okla.) mall, site of a future Apple store, had a vacancy rate of just 1.82% out of 1.2 million square-feet. That amounts to about 20,000, according to the report, or about the size of just six 3,500 s.f. spaces for Apple to consider. Naturally, not all of the spaces would be of the proper configuration (such as L-shaped) for Apple, or in an optimum location. So even at a very large mall (Penn Square is the second-largest in Oklahoma), there are limited spaces from which to pick.

At this point, Apple makes a decision on which one of several mall spaces will be developed, and begins negotiations with the mall developer on the lease details. This includes:

  • total lease money commitment, based either on a monthly or annual payment
  • lease term, which Apple prefers to be 10, 12 or 15 years
  • any option to buy out the lease, or end the lease early, and the cost
  • any money the mall developer will contribute towards renovating the space

Once the lease is signed, Apple must then arrange to have the space renovated, and for its standardized prototype store to be installed. This process has been finely-tuned over three years, and has become a pretty routine process. However, each space is different (if only by inches), and there is a fair amount of customization.

The renovation process involves outside project managers for the construction, and all the associated skilled workers (electricians, plumbers, carpenters, etc.) who actually do the work on the space.

Poof! That's it! Instant Apple store.

Well, not exactly. The process can be very time-consuming. The most common slow-down is Step #4, because finding a suitable available space within an identified mall--and one that you want to sign up for 15 years--is not easy. Apple has publicly acknowledged that it identified San Francisco as a flagship location from the very beginning of the retail initiative, but took almost three years to find the perfect location to build it. The company has also acknowledged wanting to located at the Providence Place mall in Rhode Island for since early 2003, but apparently hasn't been able to find a suitable space within the mall.

From the information I've received, it appears that the entire process, from site identification to grand opening, can take over a year--if everything goes smoothly. (Recruiting to grand opening averages 150 days.)

And lastly, I'm often asked, "How can I suggest a store location to Apple?" In polite terms, you can't. Apple already has a very long list of stores that includes the largest metro areas in the country, and they also have a list of the targeted malls. If you live in a city or town larger than 50,000 or so, your community is already on their "potential" list. You may never see an Apple store, but you're "on the list."

Check my ranking of potential future U.S. store locations, based on a scoring system, a list of the Top 150 metro areas in the U.S., a list of potential foreign store sites, and potential airport locations.

Also check where Apple stores are not located, on my black-out map and comparison with U.S. Census Bureau figures.