Apple to Open 50 More Stores - Let's Be Careful, Steve 40 comments
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Friday in The Tech Generation Daily I picked up a story by Emma Woollacott about Apple Inc. (NasdaqGS: AAPL) planning to open 50 new stores. I immediately was not pleased. This country is over-stored in general and I do not want Apple going the way of other specialty retailers by opening too many stores and diluting their brand.
Note to Steve: keep it special while selling millions of units.
The US already has too many stores in general. The recession is a Darwinian process reducing the total number of stores until all remaining open stores are profitable. This sucks for the moms and pops out there trying to compete with public companies and is not great for consumers seeking unique products.The big companies can weather the storm, issue more bonds or stock to raise staying capital while the mom and pops goes bust. Back to Apple, in NYC this weekend Apple opened its biggest NY store yet. By adding its fourth store, one no longer needs to make a pilgrimage to speak to someone at the Genius Bar, which brings up two issues.
First, there are only so many extraordinarily trained people in this world (let alone geniuses). Each Apple store needs evangelist employees. Second, (repeating myself) is if there are now too many Apple stores; a visit may no longer seem special - that could be a brand bruiser. My kids have been indoctrinated having attended software classes at the Apple stores on photobook making, rock video production and sound manipulation. The fee for these unbelievably solid classes is zero. The brand value, loyalty and purchases made are priceless for Apple and pure genius. Having stores at all as a manufacturer is another crazy success of Apple and kids of all ages speak of the stores with glee. I worry about the magic leaving the experience when the lines are shorter and the stores are nearby.
Ms. Woollacott did not provide too many details but I will sleep better tonight knowing that more than half the new stores will be outside the US including two branches in Shanghai where the cash is flowing freely. Additional new stores will open in London, Paris and in Canada, Australia, Italy, Switzerland and Germany. She also wrote:
Earlier this week, the company opened others at the Louvre, in Paris, and at Brisbane in Australia. The stores planned for next year are also likely to be bigger than the company's existing outlets. Apple opened its first store in 2001. The company now has 280 stores in ten countries, and they're very popular, with nearly 46 million visits during the last quarter.
Bernstein published a report that is all over the Internet (I saw it when I searched here). Apple stores have the most revenue per square foot of any US retailer, Neiman Marcus (NMG) is impressive at $611 revenue per square foot, Best Buy (BBY) is a surprising $930, Tiffany (TIF) is outstanding at $2,666, but Apple takes the prize at $4,032.
With those kind of numbers, taking in that amount of cake, I understand Apple for opening more cash machines. Keeping it special is the key and not over storing a city even as large as my home town need to be part of the strategy. The $4,032 is bound to drop in NYC. I am hoping that the stores in new cities keep the average high. Entering more markets is good, saturating any market will lead to brand dilution. To Steve and his marketing team I share a well known NYC expression; let’s be careful out there.
Disclosure: Mr. Corn is Chief Investment Officer – Equities of Beacon Trust Company. Through various equity strategies under his supervision he is currently long AAPL.
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This article has 40 comments:
They can--and do--train personnel, well in advance of opening a store. Many said that Apple couldn't staff 20 stores, much less 200. Find the article that said that the "selection rate" for the latest NYC store was lower than Harvard's admission rate--under 10%. Sounds like they won't have much trouble staffing.
They may decrease revenue/sq ft, but, if the total revenue and profit goes up, where's the problem?
Oh, and that Disney company.
He promised to run any major decisions by you in the future, umkay? He'll call you.
$35,000 per sq ft = 5th Ave sells $350mm in 10,000 sq ft.
It has a long way to drop in Manhattan.
www.businessinsider.co...
If it is easy to walk into a store to receive high quality assistance, training and do research on new products and make purchases, does that quality of service help a brand? Or does staying aloft and making access challenging and exclusive more beneficial to a brand?
In terms of business concerns, there are more neighborhood Apple stores than "flagship" or "significant" stores. Neighborhood stores are generally smaller and simpler with relatively lower investments in fancy architecture and fancy decor. The cost of such stores is in staffing. This keeps overhead low and focuses the cost on what is important, the highly trained staff. Apple did not receive high return per square foot by decking out every store with meaningless flashy junk. Not all 50 will be significant stores. Apple also did not say 50 is firm. It plans to open between 20 and 50. That is a wide range and Apple can adapt to changing business environment by opening 10 if it so chooses.
The article raises a couple of interesting issues but failed to explore either.
Reminds me of this:
www.businessweek.com/m...
Don't you just love these do-nothings trying to tell Apple how to run their business?
LOOOOOOOOL
Since most of what the Apple stores sell are Apple products, virtually all of that $4000 goes to Apple. At the MS stores, this is not true. All they sell to the average consumer, is the OS and a few programs such as Office. Therefore the best they can hope for is a profit along the lines of Best Buy. So it seems that what we see here is a really an expensive advertising campaign,
This isn't Disney World, or some cult where the store is Mecca, and requires a pilgrimage. We have WORK to do, questions that need answers, and accessories to buy. We don't need YOU arguing to keep Apple a boutique brand or stiffling it's growth. There are huge swaths of marketshare out there, begging for quality. Let's not be timid.
I hosted an industry expert call last Friday, discussing RIM in the Enterprise and believe they realize their consumer opportunity is not only in jeopardy, the situation is dire. While the company has been slow to react, it is beginning to do so and has the capital and customer base to be a real threat to Apple. (we can go into this offline if you are interested)
Android is an immature platform but coming on strong. There have been some significant issues with the Motorola launches but both the Droid and Cliq are selling well. Android is the greatest threat to both Apple's consumer franchise and RIM's enterprise franchise.
Apple needs to take the air out of the market and lock in consumers with Verizon's incredibly expensive 2 year contracts. It needs the store presence to take advantage of the VZ iPhone launch that will come in 3Q09. I understand you perspective but think that the greater threat comes from inaction.
if Microsoft didn't has so much loot, do you think it would have survived Vista?
Steve Jobs never again wants to be in a '3 days to bankruptcy' situation and he's built a company that's as financially strong as possible. The stores are just spectacular and if you think all those young people in them taking those courses and playing with the toys are going to go home and order a Dell or a Zune, think again.
We all know the usual shopping experience... staff that's bored, distracted, often impolite and ignorant about the products they are supposed to be selling. Then there's the Apple store experience! Much of the staff is young...they're smart and pretty easy to train if you do it right. And Apple does it right. Anyone shopping at the King of Prussia Mall knows the difference between how it feels in most of the other stores and how it is to be in the Apple store. It's just exciting and a very positive experience.
The stores increase Apple's market share in everything they sell. There is still a huge demand all over the country and certainly all over the world. They need that physical presence...it's the draw to the products which feel and deliver like nothing else.
I know the worry about the economy...but Apple won't move ahead of it's cash reserve... and they need to be ready for the next set of products that will up the ante once again.
wereport.com
On Nov 16 08:07 AM jmmx wrote:
> The revenue per square foot data brings up an interesting point re
> the Microsoft stores.
>
> Since most of what the Apple stores sell are Apple products, virtually
> all of that $4000 goes to Apple. At the MS stores, this is not true.
> All they sell to the average consumer, is the OS and a few programs
> such as Office. Therefore the best they can hope for is a profit
> along the lines of Best Buy. So it seems that what we see here is
> a really an expensive advertising campaign,
This is a great time to expand, with real estate down and many highly skilled people unemployed, what more do you need to see the greenlight?
Can YOU spot a bargain when it's in front of you? Find out!
Take this simple test! Less than a year ago Apple stock was under $80 a share. Today over $200.
How much did YOU buy?
The bigger the number you answer, the more qualified you are, and likely to agree, with Apple's push for expansion.
While I agree internationally there is room for growth, here in the US there is certainly cause for concern by expanding too rapidly.
On Nov 16 10:39 AM Ted Landry wrote:
> The author is correct. The shinny new stores are successful of course,
> but look out 10, 15, 25 years from now and it's possible Steve won't
> be around, thus no new products to keep them buzzing with energy.
>
>
> While I agree internationally there is room for growth, here in the
> US there is certainly cause for concern by expanding too rapidly.
The possible lost revenue at the Fifth Ave and other NY stores (SoHo, 14th) from opening yet another retail spot on the island are likely more than compensated for by recovered lost opportunity business from the other stores being so busy. It is nearly impossible to get a same-day Genius Bar appointment, even if your device (eg iPhone) is dead as a door nail. Next available appointments are usually days out, about a week when I recently checked.
Apple fills all of their stores and all stores add incrementally to both revenue and profit. When that changes or even slows down, then Apple should slow down their expansion.
However, their retail build-out has already been so slow and deliberate, that they are in no danger of over building. If anything, they are losing $$Billions$$ in lost potential sales by not building faster. And I do not recommend that they build faster recklessly. I'm just saying that they are in no danger of even approaching saturation of the market (even in New York) and don't have to consider slowing down their expansion. They are already extremely deliberate and make sure every new opening is properly planned and well executed for long-term success.
Apple has the infrastructure in place to plan, develop, train, and open 50 or so stores a year with phenomenal success rates. I would expect them to open up a number of stores on the higher end of that 20-50 stores range in 2010.
Apple has very far to go before beginning to saturate the market, especially internationally. Apple's process is already deliberate, which is evident by the success. They already take the writer's concerns into account. Further his worries couldn't be farther off the mark. On the contrary Apple is leaving a lot of revenue on the table by being so deliberate. Making sure that every store is well planned, developed, trained and successful for the long-haul; limits the rate of openings and the absolute total number of stores. With Apple's process they will never be in a position to have to worry about the writer's concerns.
Carl Howe is an exception I must say, but then he doesn't write unless he has something to say that is worth hearing.
On Nov 16 01:23 PM Techtrader10 wrote:
> are the Apple stores going to go the way of the Sharper
> Image?
On Nov 16 01:53 PM JWUSC wrote:
> I'm sure Apple-haters like you are HOPING that they will, but I wouldn't
> bet on it.
>
> On Nov 16 01:23 PM Techtrader10 wrote:
" Manhattan is probably the only location with more than one store in the US ..."
No. Check the list. There are two in Tigard, OR, a southern suburb of Portland, plus one in downtown Portland. According to Google Maps, they are 4.9 miles/7 minutes apart by car. That is not as close as the Manhattan stores in space (the time may be similar, considering traffic, etc), but it's still very close, and Portland is a lot smaller than Manhattan. Both are in very large, upscale shopping centers.
Several large urban areas have more than one Apple Store--Los Angeles, San Diego, San Francisco, Las Vegas. Palo Alto has two. Arlington, VA, has two 3.5 mi apart.
An interesting tidbit: there is no Apple Store in Cupertino. The closest are probably in San Jose and Palo Alto.
On Nov 16 02:12 PM Techtrader10 wrote:
> I'm not an Apple hater. I'm just trying to keep people like you in
> reality mode! People get into these "euphoric stupors" and have no
> fear of the market and find themselves in trouble because of it.
On Nov 16 02:12 PM Techtrader10 wrote:
> I'm not an Apple hater. I'm just trying to keep people like you in
> reality mode! People get into these "euphoric stupors" and have no
> fear of the market and find themselves in trouble because of it.
>
1) They have been very careful to locate retail stores exclusively in areas with high income demographics. They locate in high volume malls where store traffic will be high and customers have disposable income.
2) They focus on the buying experience with laser precision. For example, you can now make a reservation online to purchase and pick up items at your local retail store.
3) They constantly improve on the buying experience. For example, the mobile-PC based POS terminals used by sales to do credit card transactions were too slow, too kludgy, and too unreliable. They have all been replaced by iPod Touch based terminals and the sales staff report they work much better.
4) They don't sacrifice brand image at the expense of sales. If you want, you can be in and out of the store in minutes with your purchase, or you can spend as much time as you want getting assistance from the sales reps in learning about products you are interested in.
Apple is expanding their retail presence because they have a winning strategy which has barely scratched the surface of the market, particularly the global market.
I remember few years back the store was soooooo 'cool', crowded, with cool products.
On Nov 16 01:23 PM Techtrader10 wrote:
> I remember walking into the new (at the time) Sharper Image store
> that had just opened around the corner from my office in Chicago
> many years ago. I was in awe of the upscale toys they had. The
> gadgets were great, and there were several that I just had to have.
> As time went on, the intervals between visits grew longer, the products
> less awe inspiring and the number of stores became more numerous.
> With a store now in most large cities, product introductions less
> exciting, are the Apple stores going to go the way of the Sharper
> Image?
If all were in US, that would be one per state. Way too many stores, obviously...ROTFL
It's 2.5 hour drive to my nearest Apple store.
Because I don't have the time, energy, or interest to keep up with all the technology and regularly need tech assistance, I'll go back to PCs next time I purchase a computer. In today's world, the city folks get the benefits of modern life. Those who prefer the quiet of the country (and don't have the resources to shell out for overpriced communications) continue to get verizon landline connection speed and MS. As it ever has been, so it will continue: 'progress' divides us. Not a good sign for the nation's future.
Because they're _way_ better at selling Apple products than, say, Best Buy.
I was skeptical of the Apple Store idea when they rolled it out. Let's just say that they've proven that they were right.
And it makes sense to do deals on commercial real estate today, when Apple can drive a terrific bargain. Not many other companies with $20+ billion in the bank and sterling reputations are looking for retail space at the moment, are they?