The folks over at RetailSails.com recently published a report which ranked U.S. retail chains by retail sales per square foot. While the report seems to have sparked some level of controversy regarding overall methodology (have fun perusing the reader comments associated with that post), our ears were perked by the finding that Apple had far and away the highest sales per square foot at $5,626. Right or wrong, give or take a few dollars, percentage points or square feet here and there… our ears were perked and we got curious.
Apple has a good product. Apple does a good job of marketing. If you buy into RetailSails.com report, Apple must have some good real estate. Let’s take a look. (But before that let’s clear the air and make sure you understand that Buxton is not affiliated in any way with the aforementioned RetailSails.com nor are we working in any way for Apple.)
Admittedly we are working with limited inputs so we will keep this “analysis” back-of-the-napkin simple and stick to what Buxton knows best - the consumer. In the real world we would prescribe a more in depth analysis which would include additional factors such as sales, store-by-store trade areas and core customer gravity, competition, co-tenancy, regionality, seasonality, traffic, etc. etc. But again, we are keeping this exercise simple and focusing in on one dimension – the consumer.
We took a slice of our extensive consumer data and built a core customer profile based on people that are Apple customers. This profile allows us to identify key segments of the consumer base which, based on traceable consumer behaviors, are most important to Apple.
In our world a core customer is the low hanging fruit (pun only slightly intended here). A brand like Apple should be able to efficiently and effectively market existing products and services to this customer base. In terms of location strategy a retailer like Apple wants to sit in a trade area that is rich in its core customer types.
With Apple’s core customer profile in hand we set off to determine the core customer penetrations for every U.S. Apple location. To add an interesting wrinkle, we looked at core customer penetration two ways. First we evaluated the penetration rates of residential core customers. Second we evaluated the penetration rates of workforce core customers. Here’s how it shakes out:
When Apple drops a location they appear to do so in fertile ground. Their average residential trade area captures over 150,000 households. Nearly half of those households match the consumer behaviors of Apple’s best customers.
With regard to workforce trade area Apple stores capture on average close to 42,000 workers. Of those workers over half match the consumer characteristics of Apple’s best customers. Digging slightly deeper we see that a majority of Apple store trade areas enjoy a core customer penetration level in the range of 40% to 70%. This is relatively impressive. For Apple, even if they are the number one retailer in sales per square foot (again according to the report from RetailSails.com) the goal in retail store growth going forward would be to find more locations with trade areas rich in core customers – an obvious statement.
Apple continues to see increasing levels of competition and because of that fact location decisions will become more important and much tougher to make. By understanding who their core customer is a brand like Apple could site new retail locations and market them in an extremely targeted way.