Why Doesn’t Apple Open More Stores?

Two charts from Horace Dediu show that last quarter Apple reached new nonholiday highs in terms of visitors per retail store and revenues per retail store. And he writes: “[O]n a sales per square foot basis, Apple retail continues to perform twice as well as Tiffany & Co., the second best retailer, and three times as well as lululemon athletica, the third best retailer.”

This is an enormous success, but it naturally raises the question of why Apple isn’t opening more stores. If you have a level of revenue per square foot that’s way out of line with common industry practices, that’s probably a sign that you’re leaving money on the table by not opening more stores. Tiffany is presumably making the calculation that purchases of expensive jewelry are not that sensitive to store locations. But Apple’s retail situation is very different. The stores are key ambassadors for the brand. What’s more, the stores are locations were Apple’s products are serviced. If you doubled the number of U.S. Apple store locations, it’s extremely unlikely that sales would double. But it’s also extremely unlikely that sales would stay flat and simply be spread across a larger number of stores. In other words, by aggressively expanding the number of stores and letting the revenue per square foot metric drop to something less stratospheric, you might be able to push overall sales up.

Instead, Apple has dramatically slowed down the pace at which it opens new retail stores in the United States in favor of a focus on international expansion. Going global makes sense, but why not keep growing in the United States? There are plenty of American downtowns that still lack one. The job of senior vice president for retail at Apple has been vacant since October, and Ron Johnson, who did fantastically in the job in the past, is now unemployed again.