One of the reasons that it’s so much fun to write about Apple is that they outright flout the normal rules of merchandising. And yet they succeed spectacularly. Nowhere is that more evident than in the Apple stores. The usual retail rules-of-thumb go completely out the window with the Apple stores, and with most of them there is a lot of window to go out.
The recently announced Apple store in New York’s Grand Central Station will be Apple’s largest at 23 thousand square feet and its most perplexing to explain. To start with, that is over a thousand square feet for every product that they sell, most of which can fit in your pocket and even the largest of which can be carried in your arms. A thousand square feet for each product!
Then there is the rent. Apple will be paying $800,000 per year at the start increasing to $1.1 million dollars per year at the end of the ten year lease. In addition, Apple made a $5 million one-time payout to the current tenant of part of the space to get them to vacate early. So we are talking well over $4 thousand per square foot per year. That is way beyond the market price even for the most premium of premium retail spaces.
While on the subject of the most premium of retail spaces, Apple’s famous glass cube store on 5th Avenue in New York is estimated to have sold at $35 thousand dollars per square foot in 2009. To put that into perspective, the second highest revenue store on 5th Avenue in 2009 barely made more than half that at $18 thousand per square foot. What was the second place store? Tiffany & Co. And in case you haven’t noticed Tiffany & Co. isn’t selling things produced in the millions from a factory in China that are readily available not only online but at thousands of authorized resellers.
And while Tiffany & Co. might need a store for people to experience their unique jewelry in person, we know what an iPad looks like. And if we don’t, there are any number of Authorized Resellers in convenient locations. Apple’s need for a retail presence to sell their wares is fully met by its network of Authorized Resellers.
Which is the first clue to my underlying question: If the Apple store makes no sense as a store, what does it make sense as?
The answer is found in the other company in which Steve Jobs is a major shareholder.
This Apple store is Disneyland.
It is a destination. It is a place of wonder. It is a place where it is impossible to be too in love with the brand. It is the clubhouse of the Apple Fan Club. And isn’t it great to be a member of the Apple Fan Club if the clubhouse is so amazing? It is a place where you can talk for ten minutes about how your phone brings zen perfection into your life and makes you a better person through the sublime harmony of its hardware and software design and absolutely nobody will roll their eyes. It is a place where you can talk to people whose insight into the products you love is so supreme that they are called geniuses without even a hint of sarcasm.
It is a place where competing products simply do not exist, and by that I don’t simply mean the phones, tablets, computers, and players of other companies but any other thing you might possibly want to spend your money on. At the Apple department at Best Buy, the salespeople might be just as skilled and knowledgeable. And the Geek Squad there probably has more genuine geeks than the Genius Bar has genuine geniuses. But at Best Buy those in the Apple Department have to acknowledge a reality in which there are other computers there, and flat screen TVs over there, and game consoles down the aisle, and Blu-Ray players and car stereos and video cameras and home theatre gear and kitchen appliances. Inside the Apple-iest place on earth there is none of that. It is the Magical Kingdom.
**By the way, if Apple wants to try the same tactic on my side of the continent, there are a pair of beautiful historic spaces sitting vacant in Los Angeles Union Station that are undoubtedly available for a lot less money. The first is the massive unused main ticketing lobby and the second is the smaller but even more whimsical former Harvey House Restaurant.