Apple opened its latest store in New York’s Grand Central Terminal Friday. And it’s magnificent. Perched atop a grand staircase at the centre of the cavernous commuter hub, the spare tables and austere 21st century products on display contrast with the Beaux-Arts style terminal’s stonework beautifully. While the location on New York City’s 42nd Street is one of a kind, in other ways the 23,000 foot store is like every other outlet Apple builds:
it’s a money-spinner for everyone involved. The computer stores have become ‘anchors’ for affluent downtown areas, says Robert Gibbs, an urban economic and planning consultant and author of ‘Principles of Urban Retail Planning and Development’. “Sports stadiums do not generate much cross shopping: they’re nice to have but greatly overrated,” Gibbs says.
“If you have an Apple store on your Main Street, though, that gives you a kind of ‘good housekeeping seal of approval,’ that’s going to attract others.” Gibbs figures Apple stores can boost traffic to nearby stores by 15 to 20%, sending affluent customers to nearby clothing stores, coffee shops, and book stores. Those customers don’t just buy a computer once and then leave, either:
they return for more Apple products, to have their computers serviced, and for advice from Apple’s blue-shirted employees. The stores also generate gobs of sales taxes. Given its size and Apple’s ability to generate more sales per square foot than even upscale jeweler Tiffany’s, the Grand Central store could easily generate $10.2 million a year in sales tax revenues for state and local governments.
The problem: cash-strapped cities can’t choose Apple, Apple chooses them. “They want the block that has the most traffic, which is surrounded by the best tenants,” Gibbs says. And Apple will wait for years to get the real estate they want. “You can’t influence them, they’re very secretive.
And Apple doesn’t take risks on dicey neighborhoods,” experts say. “You’re not going to build an Apple store on a rundown crappy street where you get out of the store and there’s a bunch of beggars,” says Joel Kotkin, a professor of urban development at Chapman University in California.
That should give New Yorkers something to puff up their chests about: the city now has five outlets, more than any city in the world except London, which also has five. Don’t take those urban stores as a sign that Apple and other retailers are targeting only the densest urban areas, however. Instead you’re more likely to find Apple stores in upscale malls — look for a Nordstrom’s nearby, Kotkin says — or on prosperous suburban streets.
Shoppers, particularly women, like to be able to see the door to the store when the park, Gibbs said, even if they have to pay for metered parking. That’s unnecessary in Grand Central Terminal. More than 750,000 commuters with a mean household income of $95,800 a year move through the terminal every day. Twenty-percent of those commuters have household incomes of more than $200,000. The 326,000 office workers in the area earn more than $11.3 billion a year. More than 21 million out-of towners with a mean income of $62,000 visit the terminal every year.
To attract those affluent shoppers, Apple isn’t shy about spending a little money of its own. Apple opened 30 new stores in the three month period ending in September. None of them are cheap: Apple will spend $900 million of its capital budget on stores during its 2012 fiscal year, including forty new outlets. With Apple reporting average revenue per store of $43.3 million, those new stores could generate $1.7 billion in annual sales.
Apple sells more than $5000 worth of goods per square foot, more than any other retailer on earth. Not everyone, however, knows it yet. Gibbs tells the story of one older landlord in Alexandria, Virginia, who refused to lease land to Apple. “She thought Apple was a flakey sounding company because it was named after a fruit,” Gibbs says. “That that case the city probably could have stepped in and helped the landlord realize it’s not a flakey company.”
