Apple
At Fifth Avenue and Fifty-Ninth Street, the noon-day line on Aug. 11 snaked out the front door. More than a dozen people waited to buy an iPhone, which runs from $99 to $299, plus at least another $70 a month for a service plan. Every computer, seat and station was occupied by a visitor to midtown Manhattan.
Apple, based in Cupertino, California, increased revenue at its stores by 2.5 percent in the first six months of the year to $3 billion as the rest of the retail industry suffered. During the same period, sales at all U.S. retailers fell 9.2 percent compared with the first half of 2008, according to the U.S. Commerce Department.
Retail sales in New York City have fallen 8 percent to 10 percent from comparable 2008 levels, according to the Federal Reserves Beige Book business survey published July 29.
“Even if they are not spending money elsewhere, people are still spending money on technology gadgets,” said Patricia Edwards, a retail analyst and founder of Storehouse Partners LLC in Bellevue, Washington. “Its both a need and a want. It fulfills that retail-therapy component.”
Apples store performance in the last year has been driven by the iPhone, according to Charlie Wolf, an analyst who covers Apple at Needham & Co. in New York. The retail operation saw a 22 percent increase in traffic during the quarter ended June 27, hosting a total of 38.6 million visitors, Chief Financial Officer Peter Oppenheimer said on a conference call in July.
Apples shares have almost doubled this year. The stock climbed $2.89, or 1.7 percent, to $169.22 on Aug. 21 in Nasdaq Stock Market trading.
A Mercedes Per Square Foot
Apples Fifth Avenue emporium probably has annual sales of more than $350 million, topping any of the chains other outlets, said Jeffrey Roseman, executive vice president of real- estate broker Newmark Knight Frank Retail in New York. The location is 10,000 square feet, putting its sales per square foot at a minimum of $35,000, based on Rosemans estimate.
Thats the equivalent of selling one Mercedes-Benz C300 sedan per square foot. Apple may be the highest grossing retailer ever on Fifth Avenue, said Faith Hope Consolo, chairman of the retail leasing and sales division at Manhattan-based Prudential Douglas Elliman Real Estate. Apple doesnt disclose store-specific revenue, said Amy Bessette, a spokeswoman at the company.
Thrilled
By comparison, the sales floor at Tiffany & Co. sells as much as $18,000 per square foot, Consolo said. Another famous Fifth Avenue jeweler, Harry Winston Diamond Corp., sells between $12,000 and $13,000, she said. When asked to comment on Consolos estimate, a spokesman at New York-based Tiffany said the number was too high. Toronto-based Harry Winston doesnt provide individual-store performance figures, said a company spokesman.
Sales at Abercrombie & Fitch Co., the U.S. teen retailer with a store on Fifth Avenue, dropped 23 percent in its first two fiscal quarters of this year. Revenue at Saks Inc., the U.S. luxury department-store chain, declined 22 percent.
New store openings have helped increase Apples sales. Ron Johnson, Apples retail chief, said in a telephone interview that the company was so “thrilled” with the performance of its three Manhattan operations — the others are in SoHo and the Meatpacking district — it will open a fourth on the Upper West Side later this year.
Sample the Gadgetry
Apples store layout puts every item for sale on display, which encourages shoppers to sample the gadgetry, said Edwards of Storehouse Partners.
According to a survey conducted by Interbrand Corp. in December 2008, mobile phones are one of the household budget items consumers are least willing to cut back on. Respondents said theyd sooner skimp on housing, clothing, groceries and tobacco products. The only items theyre more reluctant to cut spending on than mobile service are prescription and over-the- counter medicines.
Wolf credits the stores for being as much about service as shopping. He said Apple overstaffs its outlets so that customers get help quickly. He said the store workers and the classes they run on how to use Apple products help establish “a community- like” atmosphere.
“They create what I call an infectious sort of environment,” Wolf said.