Skip to main content

Why Apple stores are raking in bags full of cash, and no one can dupe the formula

Apple retail store profitsApple’s retail stores are practically holy sites to company’s legions of dedicated fans,  but as it turns out, they’re also the envy of the retail world. According to the latest figures from RetailSails, Apple’s stores lead the retail industry in terms of the money they generate per square foot. And for the first time, Apple is in the top 10 for highest overall sales per store.

Just how is Apple able to perform so much better than other consumer electronics retailers and world-renowned brands? And more important, why haven’t any of them been able to duplicate Apple’s magic formula yet?

Diamonds are for suckers

RetailSails sales per square foot 2012
Image used with permission by copyright holder

According to RetailSails (PDF), Apple Stores generate more revenue per square foot than stores operated by high-end jewelry retailer Tiffany & Company. That would be impressive in its own right – Tiffany & Co. is the leading retail diamond merchant and came in number two in RetailSails’ metrics. But Apple didn’t just beat Tiffany, it trounced the poor jeweler: RetailSails estimates Apple stores pulled in $6,050 per square foot, compared to $3,017 per square foot for Tiffany & Co. Other retailers didn’t even come close. Number three was lululemon athletica, whose stores generated an estimated $1,936 per square foot. Coach and Michael Kors rounded out the top five with $1,871 and $1,431 per square foot, respectively.

“Apple obviously stands out from the crowd, with sales per square foot double that of the number-two chain and more than six times the figure for Best Buy,” said RetailSails founder Josh Ramer, via email. “By combining premium products and revolutionary retail stores, Apple has not only built the most valuable brand in the world, but also an environment that drives shoppers into its stores – 94 million store visitors in just the latest quarter alone, or 19,000 per store per week.”

Adding insult to injury, Apple’s figures are increasing: In 2011, RetailSails estimated Apple’s store revenue at $5,647 per square foot – up seven percent in the last year. And this in a year that marked considerable tumult for Apple’s retail efforts, with the hiring and firing of John Browett as the head of retail operations.

As a rough gauge of success, sales of about $300 per square foot are considered about average for general retailers in the United States by organizations like the International Council of Shopping Centers – jewelers and specialty apparel retailers generally have higher averages. By that measure, one could argue Apple stores are doing twenty times better than the typical shopping mall retailer.

RetailSails sales per store 2012
Image used with permission by copyright holder

Apple’s retail success doesn’t end there. For the first time, Apple stores have cracked the top ten for highest sales per store, coming in at number nine with an estimated $51,148,000 earned per location in 2012. That’s still far behind the leader, membership warehouse chain Costco, which RetailSails estimates will pull in $137,170,000 per warehouse in 2012. But Apple is the only consumer electronics retailer in the top ten: The rest are warehouse stores (Sam’s Club, Walmart, Pricemart, BJ’s Wholesale), high-end retailers (Neiman Marcus, Nordstrom) or grocery retailers (Fairway Market, Village Super Market).

It should be noted that RetailSails’ numbers are estimates. Retailers aren’t in the habit of publishing their per-store sales figures, so RetailSails often has to comb through details in earnings calls and investor presentations, press releases, regulatory filings, and even rely on sales information published by competitors – then they try to strip out online and direct-to-consumer sales, franchise revenue, licensing, and other revenue streams to come up with per-store numbers. The company’s 2012 metrics cover more than 200 chains in 15 different product segments. Although its charts are disproportionate (the Electronics Stores bar should be more than twice as long as Luxury, Jewelry, & Accessories Stores, for instance), it provides an idea how other segments are faring:

RetailSails sales leaders by segment 2012
Image used with permission by copyright holder

Apple’s strong points

Why are Apple Stores so successful, particularly when compared to other folks trying to sell consumer electronics?

“In 2001, when Steve Jobs and Ron Johnson first decided to open a store to sell Apple products, they didn’t start with a vision to sell stuff,” said Carmine Gallo, keynote speaker and author of The Apple Experience in a telephone interview. “They decided the vision behind the Apple Store would be to enrich lives.”

That approach is borne through in the steps of service Apple outlines for its store employees:

  • Approach customers with a personalized, warm welcome
  • Probe politely to understand all the customer’s needs
  • Present a solution for the customer to take home today
  • Listen for and resolve any issues or concerns
  • End with a fond farewell and an invitation to return

It’s easy to notice the clever little acronym, but it’s more important to see what word isn’t mentioned: sell. Apple emphasizes the experience of visiting an Apple store, using Apple products, and letting users see how those products fit into their lives rather than focusing on making as many sales as possible. To that end, Apple store employees are hired more for their personalities than their sales or technical backgrounds, and – unlike many other retailers – they’re not paid on commission. If a staff member at a typical retailer spends an hour with a customer but doesn’t make a sale, that employee will probably get reprimanded. At an Apple store, all that matters is that the customer had a good experience.

It also means Apple store employees focus on products that meet a customers’ needs, rather than pushing items that will ring up the largest sale. Customers ogling a $2,000 iMac might find themselves steered towards a less-expensive model if it’s a better fit; similarly, customers looking at an iPhone or iPad are likely to find Apple employees showing them how the devices can meet their needs rather than scripted selling points. And beyond an initial hello, Apple employees are also willing to let customers try stuff out on their own and make the first move.

Copying Apple isn’t easy

Apple Store Grand Central Station Store 2
Image used with permission by copyright holder

All these things help explain why customers like Apple stores – others include the Genius Bar, Apple’s One-on-One training sessions, and scan-and-go purchasing with the Apple Store App. But do they explain why Apple stores are so profitable per square foot? Given that Apple stores have been around since 2001, why haven’t other retailers been able to copy the experience and try to beat Apple at its own game?

There are a few other factors to consider:

Few products

A typical Apple store carries hundreds of individual products, from iPhones, iPads, and Macs to headphones, software, and accessories. But the selection is very small compared to consumer electronics retailers, let alone mass-market retailers, whose stores often feature thousands or tens of thousands of individual items. Apple’s tightly-focused product line also enables it to focus its retail experience in ways more generalized retailers can’t match.

No wasted space

If you have a one square-foot store and a million-dollar product, you only need sell one item a year to utterly dominate the RetailSails survey. Apple’s retail stores aren’t exactly diminutive: Two of Apple’s London stores are in the 25,000 square-foot range, and Apple’s recently-opened store in Grand Central Station is about 23,000 square feet – all large by modern retail standards. However, many of Apple’s retail stores are comparatively modest in size, occupying more-or-less ordinary (if high-rent) spots in shopping centers. As of August 2012, Apple had 394 retail locations worldwide; according to Apple, 240 of those are in the United States. Compare that to struggling big-box consumer electronics retailer Best Buy, which has more than 1,100 stores in the United States (omitting several hundred Best Buy Mobile outlets). Comparing the scale of Apple’s retail efforts to Best Buy really is a case of apples and oranges, but some of Apple’s astonishing revenue-per-square-foot is due to Apple operating comparatively few square feet.

Less baggage

When Apple opened its first retail stores in 2001, its main product was the Macintosh — even the iPod just barely existed. The Mac had never dominated the PC industry, and Apple’s presence in big-box retailers like CompUSA and Circuit City were generally failed to show Macs in a good light, or even show them working at all. Part of Apple’s intention with opening its own retail stores was to control the presentation of its products and give a positive experience to customers. It had the advantage of starting from scratch; even if customers were familiar with the Macintosh or other Apple products, none of them had previous experience with an Apple retail store. That’s not true of any retailer hoping to copy elements of Apple’s retail formula: Even if they successfully change their existing retail experiences to be something more akin to Apple, it will take some time before customers forgive or forget the echoes of their previous efforts.

The X factor

If there’s one company that has directly tried to challenge Apple’s retail strategy, it’s Microsoft, which has opened its own stores in Apple’s image. And in some cases, in the literal shadow of Apple stores.

Since I happen to live in the vicinity of one of these rare Microsoft stores, I recently wandered in to get some first-hand experience and see how they stack up beside Apple’s own.

Microsoft store
Image used with permission by copyright holder

Microsoft’s store location is only a few yards from an Apple store, and conspicuously larger, but otherwise the resemblance is startling, down to blue-shirted employees. But it felt vacant, with idle employees and a handful of kids playing with an Xbox Kinect setup. An employee greeted me after I entered, and I said I was curious about the typing experience on the Microsoft Surface. Big smile; the employee enthusiastically led me to one and then proceeded to use it for me, pointing out key elements of Windows RT without letting me touch the device, ask questions, or politely get a word in edgewise. It was a few minutes before we got through the apparently scripted introduction, and I was able to ask if I could test out both the Touch Cover and the Type Cover. The answer was yes, but it was still more than a minute before I actually got to touch a Surface unit. I was able to give the Surface a decent test drive, and I did encounter the slow typing problem in Microsoft Office so many others have written about (but Brent Ozar has a fun video). The Microsoft store employee was witty and answered my questions accurately, but only seemed prepared to ask me if I was already using a tablet.

After I’d finished, I walked down the the Apple Store braced for the worst, because I’ve always found this particular location be overcrowded and noisy. It was. Nonetheless, I was “greeted” immediately, although it was more of a “Hi!,” a nod, and an overwhelmed laugh as the store employee helped a child pick up a dropped toy. Once that was accomplished, I said I was curious about the typing experience on the new iPad mini. “Here, try it!” the greeter said … and just like that handed me an iPad mini. I was less than three feet inside the store, and I’d been there less than 10 seconds. A couple minutes later (child and parent successfully reunited), the employee swung back around, asked what sort of writing I did, if I’d found Pages (Apple’s word processor app for iOS), or if there were particular apps I wanted to try out. I was still barely inside the store.

It turned out my big calloused fingertips didn’t like the iPad mini typing experience any more than being able to out-type the Microsoft Surface. But I know which store made me jump through hoops, and which immediately put the product I’d come to see in my hands.

“What’s easy is mirroring the look of an Apple Store,” said Gallo. “What’s harder is to hire, train, and motivate employees for a transformational customer experience. I hope other retailers improve based on what they’re learning from Apple, but it’s really hard to get the people part right.”

Editors' Recommendations

Geoff Duncan
Former Digital Trends Contributor
Geoff Duncan writes, programs, edits, plays music, and delights in making software misbehave. He's probably the only member…
All the ways Intel Macs are still better than Apple Silicon Macs
cheap macbook deals

MacBooks are pretty amazing these days. Thanks to the efficiency of Apple Silicon, you get all-day battery life, as well as the ability to edit videos when unplugged from power. The new MacBook Air with the M3 chip is even good enough for gaming.

All of that is in contrast to the Intel Macs of the past.

Read more
This bundle deal saves you $1,000 on an Alienware PC and monitor
An Alienware Aurora R15 gaming desktop alongside a gaming monitor on a desk.

You don't have to go through gaming PC deals and monitor deals yourself because there are bundles like this one from Dell -- the Alienware Aurora R15 gaming desktop and the Alienware 34-inch curved QD-OLED gaming monitor for a package price of $2,900, which is $1,000 less the original price of $3,900. It's still not cheap, but you'll be getting a top-of-the-line gaming rig with just one purchase. You'll have to hurry with the transaction though, as we're not sure if the bundle will still cost cheaper than usual by tomorrow.

Why you should buy the Alienware Aurora R15 gaming PC and 34-inch curved QD-OLED gaming monitor
It's the Alienware Aurora R16 that sits on top of our list of the best gaming PCs, but its predecessor, the Alienware Aurora R15, remains a worthwhile purchase because of the power that it packs. It's equipped with the AMD Ryzen 9 7900X processor, AMD Radeon RX 7900 graphics card, and 32GB of RAM that's the sweet spot for high-end gamers, according to our guide on how much RAM do you need. These specifications make it more than enough to run the best PC games without any issues. The gaming desktop also features a 1TB SSD for ample storage space, and it comes with Windows 11 Home pre-installed.

Read more
Here’s proof that Snapdragon X Elite laptops can play hit games without issue
A laptop and a camera on a table with a Qualcomm logo on the screen.

Windows laptops with Qualcomm's ARM-based Snapdragon X Elite chip are set to come this summer, but we're already getting a preview of how good the devices will be for gaming. A recent video surfaced online showing how one of the most popular PC games, Baldur's Gate 3, can run on a Qualcomm reference laptop with the chip -- and it does look to be pretty impressive.

As shared by Devin Arthur on X, Qualcomm ran this game on a sample laptop at 1080p resolution. The demo was done in a public setting, and it's not clear what else was changed beyond that, but it does appear stable, with little to no lag.

Read more