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
today on http://www.swivel.com/graphs/show/2805737). Apple stores have
the most revenue per square foot of any US retailer, Neiman Marcus is impressive
at $611 revenue per square foot, Best buy is a surprising $930, Tiffany 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 know 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.