“Apple may be disrupting your local mall,” Ben Rooney reports for CNN Money.
“The iPhone and iPad maker is so popular that malls with an Apple store are doing much better than those without one,” Rooney reports. “Overall sales at malls with an Apple store are 10% higher, according to real estate research firm Green Street Advisors.”
“Apple is obviously a huge draw for malls, giving it the power to negotiate big discounts on the rent,” Rooney reports. “Typically, Apple pays no more than 2% of its sales per square foot of the floor space its stores occupy. By contrast, most mall stores pay between 9% and 16%, according to National Real Estate Investor.”
Read more in the full article here.
MacDailyNews Take: A growing number of malls are actually paying Apple to build a store in theirs.
I give [Apple] two years before they’re turning out the lights on a very painful and expensive mistake. – David Goldstein, Channel Marketing Corp. President, commenting on Apple’s opening of retail stores, May 21, 2001
Related article:
Why authorities waive rents and taxes to land Apple Retail Stores – May 20, 2012
Or, perhaps, Apple places its stores in the more popular malls?
I wonder how you can generate that data independent of openings and closings of other stores and restaurants especially in large malls..
Perhaps Apple just chooses the malls that are successful because that is where its customers shop BUT it also attracts new customers to the mall who just want Apple products but find other shops with great products too.
True, but the only time I’m at a mall buying stuff is when I am making the trip to the Apple store first.
That’s the same with me. When I’m back in the U.S. most of shopping I do is at the mall where the Apple store is. Apart from Apple’s presence, what’s the difference where I go? The rest of it is pretty much standard fare.
Big mall operators watch and analyze their retailer’s location revenues like a hawk watching a mouse.
Once they detect a trend up or down they take immediate measures to enhance the upside and stop the downside.
All malls want “upscale” customers and it has been obvious since the 2007 iPhone release just exactly what Apple does to mall incomes and it has only risen since.
Unfortunately, Apple’s success doesn’t leave much room for Microsoft, as no mall operator wants to lease to retailers with no customers.
MS justs pays rent because they have no sales.
My guess is that Apples desirability is so terrific that it can now negotiate lower gross % deals than the typical retailer because a mall/shopping center knows how much Apple adds to the whole revenue stream.
If Apple can jump a center’s revenue by 10%, then the center could be money ahead by giving Apple free space.
Dear CNN Money, Please start hiring writers who understand what math is for.
Apple doesn’t pay 2% of its gross sales per square foot in rent because it is paying a low price per square foot. It sells more than 10 times as much per square foot than the average retailer. Apple averages $4000 per square foot in sales, while most retailers are lucky to break $300. The calculation barely qualifies as algebra. It’s just comparing ratios. If Apple rents a store for $80 per square foot and sells $4000 in goods per square foot, it is paying 2% of sales to rent the store. If a different retailer rents for the same $80 per square foot, but sells only $400 in goods per square foot, it is paying 20% of sales to rent the store.
This isn’t all that difficult. Apple doesn’t win by being the biggest dog in the fight, it wins by being the best dog in the fight.
It’s my understanding that when you lease retail space in a mall you pay rent PLUS a portion of your sales. Here’s an article that explains it.. http://fitsmallbusiness.com/lease-retail-space/ (see step 5: Negotiate your lease – Percentage lease)
still apple is paying more than it appears because of their sales per square foot. adding in a rent (per sq ft) only adds a constant to the numerator and denominator in the comparison of what apple pays to what someone else pays. unless the rent payment >> sales payment apple isn’t coming out ahead.
I admit to no experience in retail space leases. I read the link you provided and saw the discussion regarding the percentage lease but couldn’t get a feel if that was included in the amounts the consultant listed as typical amount for a budget estimate. I tried to link to the original article to understand what the writer was trying to express, but it came back to MDN.
That said, el Tritoma has it covered.
Overall, Malls- especially enclosed malls, are dying in America. The age of the teenage mall rats has long since passed.
Seems that would Amplify Apple’s position to a greater degree. Locally the Apple Store is always the busiest place in the shopping center.
I suppose some analysts would posit that Apple has been fortunate for finding the busiest location in the mall for its store. 😀
Microsoft Stores are being boarded over in an effort to stop the Mall from resembling a communist supermarket.
Correlation isn’t causation. Apple stores probably don’t go into areas without much disposable income.
The management of Vallco mall at 10123 N. Wolfe Road in Cupertino havebegged Apple to open a store there as have Cupertino city council members. It’s a shame because the mall that’s closest to Apple headquarters has turned into pretty much a ghost town despite having a fairly decent movie theater and being surrounded by nice neighborhoods. I’m not blaming Apple (they have stores close by in better locations), it’s just when you go to the movies there it’s really sad.
Here in Thailand there’s not a single Apple-owned store. 65 million people and a main city that rivals New York. Instead Thai celebrities get paid to use Samsung gear, all the while having a secret iPhone hidden away. What will they do when the watch arrives? Can’t hide that, and if you’re wearing the watch there’s an iPhone nearby. OK I’m rambling now. 🙂
Vallco has been a dying mall since its inception. If it wasn’t for the high school close by nobody would be there. Why would Apple, or any retailer want to go there?
Like I said, I don’t blame them, it’s just sad when you see the place and think of what it could’ve been (especially if Apple had put a store there).