Featured Article: Apple Retail Shows Strong Third Quarter
Apple Retail Stores Outperform Tiffany's, Best Buy
by , 4:55 PM EST, December 26th, 2006
Apple Computer has higher sales per square foot at its retail stores than Best Buy, Neiman Marcus, and even Tiffany & Co, according to a report released by Bernstein Research last Tuesday. Performance per square foot is one of the most important metrics in evaluating a retail chain's success. The report provided the numbers per square foot per year.
- Apple: US$4032
- Tiffany: US$2666
- Best Buy: US$930
- Neiman Marcus: US$611
The report cited Apple's better selection of location and better design aesthetics in the store compared to the competition. In addition, Apple has concentrated on premium products rather than cut-throat competition with PC manufacturers on very slim profit margins. As a result Apple earns an average of $23M in annual sales per store compared historically to Gateway's US$8M per store. Those Gateway stores are now all closed. Part of Apple's success was attributed to the fact that Apple customers can walk out of the store with the product; at Gateway they could not.
The report concluded that Apple's keys to retail success have been location, location, location. Design a great store, appeal to the impulse buyer, and maximize the revenue per square foot.
Apple has about 170 stores worldwide with about 150 of those in the U.S.
Observer Comments
Tue Dec 26, 2006 7:21 pm Subject: Other statistics where Apple is clear retail leader
Apple also has tremendous leads in these retail statistics:
* tatoos per salesperson
* piercings per eyebrow
* band members per store
Surprisingly, Apple also leads Home Depot and Lowes in "tape measures available per employee". But sadly, Apple was recently passed by Ralph's/Kroger for shelf space dedicated to iPod cases.
QuoteBosco wrote:
Apple also has tremendous leads in these retail statistics:
* tatoos per salesperson
* piercings per eyebrow
* band members per store
Surprisingly, Apple also leads Home Depot and Lowes in "tape measures available per employee". But sadly, Apple was recently passed by Ralph's/Kroger for shelf space dedicated to iPod cases.
A good one, Bosco! Here in Oregon, it's Fred Meyer , also owned by Kroger. Fred Meyer is unusual--imagine if Target stores included a supermarket.
Tidbits:
- I was in my local Costco several times in the weeks before the holidays. Not long after the Zune came out, they had a prominent display. (Costco uses the "empty box"--well, huge empty blister pack--system: you take the box to the cashier and get your item there.) The Zune was right next to the iPods. About two weeks before Christmas, the Zune display was gone--not moved, gone, nowhere to be found. There were iPods (all flavors), iTunes cards, and iPod accessories (mostly the speakers/radios/boom box type), but no Zunes to be found.
- Tonight, I was in both a Best Buy and an Office Depot. Both had the Zunes on display, though Office Depot only had a non-working model--the holder for the working version was empty. Best Buy's display was not very helpful, as the Zune was tied down to the stand--you couldn't pick it up at all. There were about 8 people looking at iPods and iPod accessories, including two couples intently listening as a young employee demonstrated the JBL OnStage and other speaker/boombox systems. There was NO ONE at the Zunes. I asked the employee after both couples walked off with their OnStage (OnStages?). He said that almost no one even LOOKS at the Zune.
QuoteAnonymous wrote:
I am all for Apple doing well but what does "sales per square foot" mean, exactly? Apple's stores are rather small compared to the others tracked in the report, and their merchandise tends to be more expensive. I mean, you could walk into a Best Buy that is eleventy million square feet and walk out having purchased a package of double-A batteries. I'm not sure how anyone but undereducated marketing people benefits from this sort of senseless comparison.
It's an entirely meaningful quote in the retail world. Period. Whether you understand it or not.
By averaging sales into a figure based on the relationship to the retailer's investment in physical space, the metric provides an understanding of how well the retail space is returning sales to the operator.
True, in an eleventy million sq ft Best Buy a customer may well only buy a pack of double-A batts but for each of these customers there is one who spends heavily on, say, a 42in plasma TV. It evens out. For every Tiffany customer who buys a 9ct gold bracelet, there is one who buys a diamond the size of a golf ball.
The metric also provides information to retail management on the efficiency of retail space. A retailer with 100 stores of different sizes may observe some difference in sales volume from one store to another. By determining the store with the best sales per square foot, the manager can determine the optimum size in square feet for their next store. This can provide significant operating cost savings by not renting a store that is twice as large and carries twice the rent premium as they need to knowingly operate efficiently.
The metric is useful in other ways... but you get the idea, right?
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