Apple flagships pull their weight, crown new king on Fifth Ave

[AppleInsider]

Apple's enormous investment in high-profile retail stores continues to pay off, with its five U.S.-based flagship locations combining for 13 percent of the total revenues generated by its U.S. retail sector latest quarter.

According to people familiar with the matter, the spacious multi-floor outlets logged over $105 million of the approximate $810 million in sales generated by Apple retail stores in the United States during the company's third fiscal quarter of 2007.

Topping the list of highest-grossing locations during the quarter was Apple's subterranean outlet on Fifth Avenue in New York City, which sold over 5 Macs every hour and 1 iPod every two minutes on its way to generating a whopping $45 million in revenues. Following in a distant second was Fifth Ave's neighboring store in downtown SoHo with approximately $23 million.

On the West Coast, Apple's high-profile shops in San Francisco and Los Angeles saw more modest sales of approximately $14 million and $12 million, respectively. Both were edged slightly in the rankings by the company's Chicago flagship outfit, which ranked third amongst U.S.-based high-profile stores with sales in excess of $14 million.

Most telling is that the five high-profile stores contributed as much revenue as the next 13 best-performing stores in Apple's chain, including those that have been open from the beginning and some open less than two years.

In total, Apple operates eight high-profile stores in three countries that are intended to provide a sales point for both locals and travelers. Just as important, they are expected to project and publicize the Apple brand with their architecture and interior design. Each year, the company spends an undisclosed sum on marketing costs for the these locations, ranging up to $10 million.

According to the Apple's last annual report, leases on the high-profile stores are longer than other stores, ranging from 10 to 14 years. Lease costs are consequently higher, the company says, ranging from $4 million to $33 million per location, per year as of Sept. 2006. Construction costs for the bigger stores are also higher, ranging up to $12 million for the Fifth Avenue store. Once the stores open, their size results in higher operating costs because of increased staffing, and in the case of Fifth Avenue, its 24-hour operation.

Comparing the high-profile store revenues with the same quarter of 2006, the Fifth Avenue store had the largest percent increase, tied with the North Michigan Avenue (Chicago) store at 15 percent. At the bottom, the SoHo store's revenues declined from 2006 by about 17 percent, no doubt because the May 2006 opening of the Fifth Avenue stores siphoned off some of its business.

Shoppers flood Apple's flagship retail store on Fifth Avenue in Manhattan this past October

The high-profile stores also contribute heavily to sales of Macs and iPods, although not in equal numbers. The five stores last quarter accounted for about 30,000 desktop and notebook computers, along with over 127,000 iPods. But each store seems to have a "personality" for sales of the two categories: Fifth Avenue sells more iPods than computers by 5:1, while The Grove (S. Calif.) sells in the ratio of about 2:1. The other three stores are somewhere in the middle of these figures.

Ranking after the high-profile stores in revenues is the oldest store in Apple's chain, Tysons Corner (Virg.), with over $9 million in sales for the third fiscal quarter of 2007. It's followed by long-open stores at Third Street Promenade (S. Calif.), The Westchester (NY) and South Coast Plaza (S. Calif.).

Despite their high revenues, the flagship stores don't excel in another category: attach rates for AppleCare, .Mac, ProCare and One to One services. The chain of U.S. stores sells AppleCare service to an average 64 percent of those who purchase a computer. But the high-profiles stores successfully push the high-margin service on just 57 percent of computer buyers, people familiar with the matter have said.

Other attach rates are similarly lower for high-profile stores: .Mac averages 27 percent at all U.S. stores, but comes in at about 20 percent at high-profile stores, while ProCare sells at 11 percent (13 percent for all stores) and One to One at 11 percent (16 percent for all stores).

Looking ahead, Apple remains committed to the extra cost of its high-profile stores, with plans for at least four more massive outlets around the world: Sydney (Australia), Glasgow (Scotland), Boston (Mass.), and one more in Manhattan (New York).

Gary Allen is the creator and author of ifo Apple Store, which provides close watch of Apple's retail initiative. When Gary isn't busy publishing news and information on Apple's latest retail stores, he finds himself hanging out at one.

[ View this article at AppleInsider.com ]

[waytogobuddy]

This is well written article.

does anyone remember/know how the lawsuit between Apple and Appleinsider worked out?

[aplnub]

Originally Posted by waytogobuddy

This is well written article.

does anyone remember/know how the lawsuit between Apple and Appleinsider worked out?

Do you mean ThinkSecret.com?

[waytogobuddy]

Originally Posted by aplnub

Do you mean ThinkSecret.com?

oh.

I thought AI was hit too re: firewire breakout box/ 'astroid' or whatever... was that only Think Secret?

[dr_lha]

I don't think its that surprising that the Apple Store in The Grove sells a higher ratio of Macs. After all The Grove is very close to Hollywood, and we all know how those creative types love their Macs.

[MacsRGood4U]

Originally Posted by waytogobuddy

oh.

I thought AI was hit too re: firewire breakout box/ 'astroid' or whatever... was that only Think Secret?

Appleinsider was. But they beat Apple big time in court. The court order Apple to pay AppleInsider's lawyers near a quarter of a million dollars:

http://www.macnn.com/articles/07/01/...ys.legal.fees/

MRG

[waytogobuddy]

Originally Posted by MacsRGood4U

Appleinsider was. But they beat Apple big time in court. The court order Apple to pay AppleInsider's lawyers near a quarter of a million dollars:

http://www.macnn.com/articles/07/01/...ys.legal.fees/

MRG

cool thanks. That seems a decent ruling. I think my conspiracy theories are turning out to be just that.

[theapplegenius]

What about the Chicago store? Does that one not count as a "flagship" anymore?

[bryand]

When you add up the rent, construction costs and staffing costs and accounting for the profit margins built into each unit, it sounds Like Apple is actually losing money on these stores.

[city]

Originally Posted by dr_lha

I don't think its that surprising that the Apple Store in The Grove sells a higher ratio of Macs. After all The Grove is very close to Hollywood, and we all know how those creative types love their Macs.

"Hollywood" isn't necessarily in Hollywood. There are stores all over the area i.e Century City, Beverly Center, Santa Monica, Glendale, Sherman Oaks, Manhatten Beach, Northridge, Topanga

[audiopollution]

Originally Posted by waytogobuddy

cool thanks. That seems a decent ruling.

We thought so, too.

[cutemartin]

Originally Posted by bryand

When you add up the rent, construction costs and staffing costs and accounting for the profit margins built into each unit, it sounds Like Apple is actually losing money on these stores.

Don't forget about all the sales Apple takes on-line after visits to the Stores. They serve a bigger purpose than simply selling, especially the flag-ships.

For example, the Regent Street store in London is as good as inaccessible by car, so many buyers go to check out the Macs at the store, then order on-line when they get home.

[solipsism]

Originally Posted by bryand

When you add up the rent, construction costs and staffing costs and accounting for the profit margins built into each unit, it sounds Like Apple is actually losing money on these stores.

Over the past years Apple Stores have earned more per square foot than any other retail store, and by a large margin.

As Apple opens up new stores in smaller towns there earnings per square foot will probably drop. But this is inconsequential when you consider the effect these stores have had on the Apple's increasing unit sales.

I know many more Mac switchers whose decision was based on trying out a Mac at an Apple Store than from using one at a reseller where the Macs are often shoved in a corner and neglected or from their love for their iPod.

[Kendoka]

>Apple's subterranean outlet on Fifth Avenue ... generating a whopping $45 million in revenues

>Lease costs ... $33 million... Construction costs ... $12 million for the Fifth Avenue store.

Considering the lease, construction and operational cost, that place needs "whopping" revenues.

[solipsism]

Originally Posted by Kendoka

>Apple's subterranean outlet on Fifth Avenue ... generating a whopping $45 million in revenues

>Lease costs ... $33 million... Construction costs ... $12 million for the Fifth Avenue store.

Considering the lease, construction and operational cost, that place needs "whopping" revenues.

I assume that lease cost is for the entire lease duration while the revenues are for only the quarter. It would be nice to get some clarity in these AI articles.

[TenoBell]

Some of you guys wonder why Apple wants to build another store in New York.

Considering the lease, construction and operational cost, that place needs "whopping" revenues.

You gotta' spend money to make money. The 5th Ave Apple store is packed to the point of being uncomfortable most of the time. You practically had to fight to use a demo iPhone when it was first released.

"Hollywood" isn't necessarily in Hollywood. There are stores all over the area

True to a point. There are several physical production studios in Hollywood itself. Paramount is the only major studio company in Hollywood. The majority are in the North Hollywood/ Burbank area. While Sony Pictures Studio and several other companies are also in the Santa Monica/ Culver City area.

The Grove has far more foot traffic than any of the other shopping areas where Apple Stores are located. 4th Street shopping district may be the closest to The Grove while The Beverly Center is dead much of the time.

[jbelkin]

Yes, Hollywood is more of a state of mind but the GROVE offers easy parking and is next door to CBS TV, Paramount is maybe 15 blocks away. There are ad agencies all up & down Wilshire along with VARIETY plus people who are shopping on Melrose can swing by. Agents who are having lunch in BH can swing on by - while the Bev Center might be in theory closer, it is a mall and not as nice as the open air Grove which is also next to the Farmer's Market for casual lunches.

[Slewis]

Null.

[MacsRGood4U]

Originally Posted by Slewis

RAWR!!!

This is why I disappeared off the face of the AI or whatever... the most exciting thing these days is Apple's Cash and Stock and whatever.

No hardware... no software... nothing about .Mac or iLife or iMacs or Macbooks or iPods or iPhones (speculation wars from analysts while they sound interesting in theory are really very boring).

T_T

Sebastian

You're a lunatic if you believe that. There is not one other publication -- either online or in print -- that provides me with more frequent and accurate information on future Apple hardware and software than AppleInsider has for several years now. Just in the last week they reported on new details of future iMacs and iPhones. If it's something you're smoking that's causing your blindsightedness, you may want to keep that stuff clear of the forums. It's pretty foggy round here as it is.

MRG

[solipsism]

Originally Posted by MacsRGood4U

You're a lunatic if you believe that. There is not one other publication -- either online or in print -- that provides me with more frequent and accurate information on future Apple hardware and software than AppleInsider has for several years now. Just in the last week they reported on new details of future iMacs and iPhones. If it's something you're smoking that's causing your blindsightedness, you may want to keep that stuff clear of the forums. It's pretty foggy round here as it is.

MRG

He isn't cracking on AI, he's making an accurate statement about the current state of Apple news.

[Slewis]

Null.

[city]

Originally Posted by TenoBell

Some of you guys wonder why Apple wants to build another store in New York.



You gotta' spend money to make money. The 5th Ave Apple store is packed to the point of being uncomfortable most of the time. You practically had to fight to use a demo iPhone when it was first released.



True to a point. There are several physical production studios in Hollywood itself. Paramount is the only major studio company in Hollywood. The majority are in the North Hollywood/ Burbank area. While Sony Pictures Studio and several other companies are also in the Santa Monica/ Culver City area.

The Grove has far more foot traffic than any of the other shopping areas where Apple Stores are located. 4th Street shopping district may be the closest to The Grove while The Beverly Center is dead much of the time.

I didn't realize that there is life east of the 405.