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How much does an Apple store cost?

Apple loves to talk about its stores. They do it in every conference call, keynote event and SEC filing. There is a monotony with the repetition of how many they have and how many they are building and how pretty they are. They start to seem like commodities.

But if they were commodities why aren’t there any other networks of successful “vendor stores”?

The answer is partly in the odd integrated business model Apple maintains asymmetric to every other modular technology provider. Apple seems to want to control the relationship with the buyer. It’s also partly in the uniqueness of design, an obsession with the brand. But still, that does not explain why can’t it be copied.

The answer is in the economics.

To understand the cost of developing an Apple store, we turn again to the balance sheet. Fortunately for us, Apple reports details of a particular asset called “Leasehold Improvements.” It’s a substantial asset worth over $2.3 billion in the last statement. It represents “alterations made to rental premises in order to customize it for the specific needs of a tenant.”

The following chart shows the change in that figure quarter-over-quarter.

Can we tie these expenditures directly to stores? I overlaid the number of stores opened in the same quarters as the expenses in the following chart:

There does not seem to be much correlation. But if we consider that spending happens before a store opens and shift the openings forward relative to expense by one quarter we have the following:

This is a very consistent pattern. The rise and fall in expenses is matched by the subsequent rise and fall in store openings. We can even see how stores seem to be getting more expensive with the amplitude of the waves increasing relative to the amplitude of the openings.

So if we are looking at store costs, just how much does one cost?

Over the time period illustrated, Apple opened 220 stores and spent $1.9 billion in fitting them out. That’s about $8.5 million per store. It’s been increasing so it’s probably closer to $10 million lately.

That’s an interesting figure by itself, evidence of how profitable they must be. But I turn the question again to competitiveness and the lack of response in kind.

The data shows that if a company wanted to duplicate this effort they would need to commit to spending at least $2 billion. And that’s just for “fixing up” the sites. This figure does not include the lease itself, the cost to operate (including the tens of thousands of employees) or the inventory within. It also does not include the value of choosing the right locations (though maybe a follower could simply choose to locate in the near proximity to an Apple store.)

So assuming a competitor (e.g. Microsoft) did commit to this spending, how would they recover it? I’ll keep this question rhetorical, but the hint must be in the unique way Apple is integrated as a business.

  • Lou

    I struggle to reconcile the apple store lease where I live with the 10 million. They can’t have spent more then a couple of hundred thousand.

    • http://profiles.google.com/rhenderson Richard Henderson

      Lou, this is on average… I’m sure most new ‘mall’-type stores might run Apple a million, maybe two.

      When it comes to flagship stores, well, I have no doubt that costs could run into tens of millions… I can only imagine what the new cube on Fifth Ave. ran them.

    • Rene

      I imagine the amount spent per store is very, very variable. A flagship store would cost far more than the 10 million dollars, while a mall based store would cost much less than the average. Remember, the numbers he is showing is just the amount it costs to fix-up the lease, not the lease itself. Basically the cost of building the store.

    • Jorge Santos

      That’s on average, think flagship stores.

    • http://www.asymco.com Horace Dediu

      This is not the cost of the lease. This is the cost to renovate the premises.

    • Kizedek

      Some will cost more than others, and this may average out to 10m per store. Some buildings are very large and iconic. Obviously, if your local store is a relatively small store in a relatively new mall, then there is that much less to do — redo the floors, walls, and add some glass, etc.

      But in many cases, just renting scaffolding and putting it up and covering the store front with a huge logo would cost them your 200,000. Think of the contractors

      Then think of the glass cube in times square, or the L’Ouvre store in Paris, or the Covent Garden store in London or the new stores in Shanghai. Lots of work to plan and prepare and refurbish old or new buildings in keeping with both Apple’s style while preserving the building’s character or providing infrastructure and enhancements to the surrounding locale.

    • http://twitter.com/dicklacara dicklacara

      Where do you live — I’ve never seen an Apple store that had that small $ improvements.

      I do have some actual experience in improvements for computer stores,

      In 1982 (and 1982 dollars) we redid our 80×140 Sunnyvale store — in a Shopping Center at Fremont and Mary. The total cost for improvements was $160,000 +. We spent about $45,000, alone, on counters, shelfs, cabinets, display/demo stations (pods).

      AIR, we spent over $5,000 for etched glass panels.

      You would be surprised at just the electrical, air conditioning, plumbing costs that you don’t even see.

    • Anonymous

      Notice the tiles are laid in a particular way, and made of a particular stone. They don’t fool around. And everything is washed with unicorn tears before opening.

      But that is an average. There are tiny stores like Stanford mall in Palo Alto that you can miss as you walk by, and others you can see from space.

  • http://profiles.google.com/rhenderson Richard Henderson

    “Over the time period illustrated, Apple opened 220 stores and spent $1,863 billion in fitting them out. That’s about $8.5 million per store. It’s been increasing so it’s probably closer to $10 million lately.”

    You mean $1.863bn, right? Threw me for a loop there for a few seconds. :)

    Great analysis on this site. I continue to learn a lot with every post.

    • Ben Rosengart

      Europeans use ‘,’ where we use ‘.’ and vice versa, e.g. €30.000,00.

  • Charles

    As a unique comparison, the LDS church builds temples in a similar way as Apple builds stores. I’d image the costs are similar. In addition, the temples are becoming a very valuable commodity to the Church. These temples, like the Apple stores, also enhance the “user experience” for members of the church. It also appears that few religions are successfully able to replicate the quantity (130ish), quality, visibility and high utilization of these buildings.

    There are some differences, but it’s an interesting comparision.

    • Alden Stradling

      “Some differences” :)

      Yeah, there are some. Apple provides wide-open retail spaces with enormous profit per unit area.

      LDS temples have been constructed at or above this level of care for nearly 180 years. Only in the last hundred has this construction not been accompanied by enormous personal and community sacrifice. The tradition of meticulous construction lives on, though

      Rather than being created as (excellent) profit engines, they are resource consumers. Big ones. Volunteer staff, etc.

      I’d say that the only similarities are in the attention to detail. There are, of course, jokes to be made about similarities in the devotion of their respective attendees. :)

      For me, the irony is that my closest Apple store is a few minutes from my nearest temple. So I usually take the kids to the Apple store after going, so they can play with iStuff.

      • http://twitter.com/podperson Tonio Loewald

        I should also point out that Apple fans need to wear special underwear.

  • DomArch

    As an architect who has some familiarity with retail costs, I have trouble with the idea that their stores are running 8-10 million to open. That’s quite a big number, and I have to beleive there is something else in that number that you’re missing. It would be interesting to figure what the cost per square foot number works out to. At a construction cost of $1,000/s.f. (not a small number) that would work out to the average store being a 10,000 s.f. space?

  • http://twitter.com/artman1033 mike selby

    The Company has certain retail stores that have been designed and built to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores. The Company allocates certain operating expenses associated with its high-profile stores to corporate expense to reflect the estimated Company-wide benefit. The allocation of these operating costs to corporate expense is based on the amount incurred for a high-profile store in excess of that incurred by a more typical Company retail location. The Company had opened a total of 16 high-profile stores as of June 25, 2011. Amounts allocated to corporate expense resulting from the operations of high-profile stores were $26 million and $75 million during the three- and nine-month periods ended June 25, 2011, respectively, and $18 million and $54 million during the three- and nine-month periods ended June 26, 2010, respectively.

    http://www.sec.gov/Archives/edgar/data/320193/000119312511192493/d10q.htm

    • http://www.asymco.com Horace Dediu

      Impressive. Note that the quote is about operational expense allocations. My post plots the expenses allocated to fixed assets–things the company owns and which depreciate.

      I’m measuring the setup costs not the running costs.

  • Kizedek

    Interesting comparison to religions.

    The one obvious example of the few is, of course, the Roman Catholic Church, which has thousands upon thousands of properties around the world, including great swathes of land and priceless cathedrals.

    Other examples would include formal national denominations of the Christian church, such as the Anglican Church in UK, Dutch Reformed Church in Holland, Lutheran Church in other northern European countries.

    The Anglican church currently (or at one time) owns buildings and property in every village in Britain. While some of these get divested off into local trusts, the LDS is by no means dong something new.

    • ottydook

      Sorry, that was to be posted under Charles’ comment. (been having some issues with posting comments from my iPad since upgrading to iOS5 — can’t enter any text at some points and have to refresh page, and end up posting without meaning to)

    • Davel

      This is not just the Christian churches, mosques, Eiffel tower, older religions where chariots flew, or sties moved were all unique and expensive.

      I guess it is marketing and entertainment.

      I guess this is why Apple spends on it’s stores.

      Any history majors here who have studied this? Sociologists?

  • http://twitter.com/carolinacharlie Charlie R.

    Seems like the flagship stores are such outliers in terms of cost to refit that they may be skewing this figure beyond usefulness.

    • Alan

      It would be great to use the square footage of the stores’ opened rather than the number of stores to help normalize this.

  • Rifepe

    I don’t thing that the cost for store is increasing as much as there is a cost to renovation of the “old” stores, think the new Glass Cube in New York, and cost of just keeping the already open at peak “presence”. Would be possible to get a graph of the expenses per quarter divided for the number of stores in operation at the following quarter?

    • Anonymous

      I think if an analysis were done breaking down Apple’s standard mall store and flagship stores, one would find that there are more flagship stores being built, particularly since more stores are being built internationally. Lots of US Apple Stores can be standard mall stores with a few flagships thrown in. Internationally, since there are so few per country outside of the UK, most have to be flagship stores. In Greater China, the first 6 are all flagship stores. Thus, more flagship stores results in higher average cost per store.

      • Rj

        Indeed. It seems to me that outside the US the typical Apple Store is a freestanding building. Not a flagship store per se but often of some architectural significance and these are often substantially rebuilt or at least gutted and refurbished, with each store having to be unique in order to capture the style of the original building and also authoritatively stamp Apple on it.

        So I would tend to suggest three tiers of store; the Mall stores, freestanding stores and flagship. Obviously within each each tier there will be a range of costs but it wouldn’t surprise me if there was an order of magnitude difference between the median of each class.

        To maintain a common style and sense of design in the face of an existing strong architectural identity — without subjugating either — must require an enormous amount of effort and on-site management from talented architects and designers. Never mind the materials cost; hiring, training, housing and moving the key people around the world, then forming sufficiently strong teams at each location is going to be very expensive.

      • Anonymous

        Hmm, what do you consider a ‘freestanding store’ and what is a flagship?

        Seems like the distinction between mall-store and flagship is easy to make, but if you try to create a middle category of freestanding then it’s going to be very subjective.

  • MattF

    One thing to note is that Apple Stores follow Apple’s fundamental “continuous improvement” processes. In my immediate neighborhood, Apple opened a boutique ‘mini-store’, then, a few years later, completely renovated it, then a few years after that closed the mini-store down and opened a full-sized store across the street. And opening the full-sized store involved razing the entire structure behind the old storefront and building a new store from the ground up on the spot. All this building, renovating, and rebuilding would appear in the ‘leasehold improvement’ category on one lease in one retail development.

    • James

      I was going to say the same thing. Apple treats their stores the same way they treat their actual products – they continuously refine and improve them over time. You don’t notice the changes over the short term, but the delta over the long term is huge (compare their recent flagship stores to the first batch opened in 2001). Also just like their products.

    • Davel

      Apple reportedly spent millions replacing the glass facade that makes up the entrance to the fifth ave store. They replaced many glade panes with fewer. This is just esthetics, it is not the shape or size of the store.

      I have read they spent huge sums on the Shanghai stores. These iconic stores have huge traffic and so e company can afford to spend the money since they bring in so much cash. I would love to understand the rationale behind the spending.

      • Anonymous

        Apparently, Steve Jobs paid for the 5th Avenue cube and its replacement out of his own pocket, and is the owner of it, not Apple. Perhaps he wanted the freedom to improve it whenever technology allowed, regardless of business rationale.

        > just esthetics

        The new cube has some functional improvements, too, but with art and design, it is never “just” esthetics. And that is one of the most photographed buildings in the world, every shared photo is a lesson in Apple culture. It likely paid for itself many, many times over compared to say, TV ads.

        I think the rationale behind the spending on the stores is the same as the spending on their other products: design sells, functionality sells, being the best sells, demonstrating your commitment to continuous improvement sells.

        You know how people try their first Apple product and have a “wow” moment that stays with them? That is what made it easy to sell iPods to Mac users, and to sell iPhones to iPod users. I think if you don’t already own an Apple product, the stores are meant to be your first Apple product, to give you the “wow” moment that some of us got from the Mac or the iPod before we even saw an Apple Store. Essentially, Apple Stores are Apple’s 5th hardware product line, and they are free for all. When you walk in, it is like you are inside a Mac. It demonstrates the quality of an Apple product, inside and out. The signs on the first stores even pulsed like a sleeping Mac, at the rate of the breathing of a sleeping human. There is a sociological message there. We are not conscious of it, but we receive and process it and act on it. It’s better than you expected. The other products will also likely be better than you expected.

        One thing Apple has been very proud of is that about half their Apple Store sales are to consumers who did not yet own an Apple product. So 2 people go in there to buy an iPhone, one because she already owns an iPod and expects iPhone to be just as great, and one because she already owns an Apple Store, and expects iPhone to be just as great.

      • Anonymous

        Those are very perceptive comments. Thank you for sharing them.

      • Anonymous

        http://www.appleinsider.com/articles/05/12/05/jobs_wants_32_foot_glass_cube_following_apple_store_lease.html

        “Steve Jobs felt that he created the cube so he owned it,” said Apple broker Robert Futterman, noting that Macklowe wanted it to stay put. “At the eleventh hour, that was the biggest issue.”

        People have misinterpreted that statement to mean that Steve payed for the cube personally out of his own pocket but I think that’s mistaken. All it means is that he ensured that if Apple vacates the lease they get to take the cube away and replace it with some other structure that isn’t identified with them.

        I agree with your main point though, the store experience is a product in itself. This is a common feature of high end retail.

      • Anonymous

        I hope that the Cube that Apple is replacing on 5th Ave gets recycled and used as the entrance for the underground auditorium on the new Apple Campus. Probably not big enough or enough fire exits or something, but they really need to use that somewhere.

      • Rudolf Charel

        Or it may just be melted down to make new glass, which is also recycling and more common.

  • Anonymous

    Is there any comparable data from high end fashion retailers? LVMH for example, or Hermes?

    • Anonymous

      Gucci is worth looking at.. and not just for the models!

  • Anonymous

    Horacle,

    You diverted some queries elsewhere, but it seems to me that the reason the cost “per store fit-out” is increasing is because the average size of the stores is increasing. I think the cost per square metre is pretty consistent over time, except with regional variations.

    As noted elsewhere, the “mini-store” concept has been phased out. I believe part of the reason for the Apple Stores’ success is that the size of each store exceeds a certain critical mass, even in Tokyo.

    One example of another retailer with a similarly successful store is Nike. Like Apple, they have online sales, and also compete with other resellers, both online and in real buildings.

    Your final question asked how could a competitor to Apple, using Microsoft as an example, achieve a similar success,? The fact is that Microsoft does not produce and sell products that ordinary consumers can walk out of the store with.

    But, since sporting goods and clothing companies are not really Apple’s competitors, what other companies in the technology field really are?

    Samsung, perhaps? I could imagine Samsung opening similar stores and having similar success.

    The biggest reason why Samsung has not opened a string of retail stores is that it has not needed to. The reason Apple opened its own retail stores was NOT because they wanted to get into retail, it was because other technology retail stores were not helping Apple sell its products.

    The original Apple Store was an act of desperation on Apple’s part: if Circuit City won’t sell our iBooks then we’ll open our own store!

    • Anonymous

      It’s very hard to imagine Samsung having similar success with such a concept, because their product mix simply doesn’t support the same kind of retail experience.

      Apple’s stores are most similar to the high end luxury firms, who similarly build extremely expensive shops with very strong architectural identities which support the brand and interact with the design of the products.

      Samsung lacks the strong brand differentiation and the high margins which would support such a store.

      It’s like comparing the Gap to Prada or LVMH. The Gap is a store that you visit when you want to buy their products, luxury brands build stores that pull customers in with their design and then spark desire for the products.

      Essentially the retail experience is itself a free product, almost a work of art. In the case of Prada it has inspired actual art

      http://www.brandinfection.com/2005/10/14/branding-as-art-the-fake-prada-store/

      LVMH has used the works of actual artists

      http://luxurysociety.com/articles/2011/03/13-must-know-luxury-boutique-designers

      The only mass market firm I can think of that has dabbled with this sort of store is Fiat, and they of course have luxury sub-brands

      http://www.easier.com/10697-new-fiat-flagship-store-opens-with-celebration-party.html

      • http://twitter.com/qka qka

        Interesting that you compare Apple to other high end luxury firms and their expensively decorated shops.

        My local Apple store is next to a Coach leather goods shop. Both are decorated in stark white. Sometimes, when I’m not paying attention, I see the white and start into the Coach store. Then I look up, see no one in the store, and realize the mistake I am about to make. I correct myself and continue on to the next store, Apple.

      • Anonymous

        Heh, luxury goods stores are often very quiet, but then they’re supposed to be – if hordes of hoi polloi were trooping through then they would lose the appeal to the ludicrously wealthy people who actually buy the clothes. So they intentionally make a space that is both beautiful and forbidding.

        As the immortal Yogi Barra once said, ‘nobody goes there anymore – it’s too crowded.’

        Apple is one of the few firms to have successfully married luxury to mass appeal, within a single brand.

    • Anonymous

      It’s interesting you mention Nike, because they have worked closely with Apple on iPod, and their CEO asked Steve Jobs for advice about improving Nike stores, and he said “you have a lot of great products there, and a lot of crap products there … get rid of the crap.”

      My favorite thing about Apple Store is the lack of bad choices. I can send a friend there and they won’t come back with any crap. Culling the best from the crap is the biggest challenge consumers face when shopping. A good retailer does that work for them, and offers them only the best. So if you want a great branded store, you have to start by making all of your products the best in every category.

      Bang & Olufsen also have their own stores. There are a couple in San Francisco. Not sure how many elsewhere, or how well they do.

    • Anonymous

      “Samsung, perhaps? I could imagine Samsung opening similar stores and having similar success. ”

      Well Sony tried. They have their one store in San Francisco — any others?
      It’s not clear to me why Samsung would be more successful than Sony.

      One problem companies other than Apple have is that putting a whole lot of Sony or Samsung merchandise in one place may well make the collection look WORSE than the sum of the parts. Seeing a completely inconsistent design language and a UI that varies substantially even within the same category of devices mainly makes the user ask “heck, why don’t a buy that Chinese no-name brand rather than this 30% more expensive model” — they’re all just random TVs and stereos and whatever.

      Then there is the way that there are ten models, each with names like the XV-307K — all of which offer only a limited selection of the total set of features available — no “good, better, best” nonsense in the Sony/Samsung product line — you are expected to WORK to figure out which device you want — and, whatever you buy, you’ll leave the store feeling depressed that your model doesn’t have the full set of features and maybe you made a mistake.

      Stores as showcases only works when what you are showcasing is WORTH showcasing.

      • azulum

        one can imagine that they could curate their best devices and their android powered washing machines and have them all displayed in the store. if samsung stuck to the design language of the series 9 and moved that to all of their products then they might have something.

        the problem with samsung is that they make everything under the sun and can be thought of as a conglomerate of consumer electronics and appliances manufacturers rather than one cohesive whole. (and yet, somehow they end up with a similar design language to apple. weird.)

      • Anonymous

        The tragic thing is that watching an android powered washing machine run through a cycle would still be more interesting than anything going on at the Sony Galleria.

        In many ways I admire Sony, they broke a lot of ground in consumer electronics and they have a pride in their own designs that Samsung doesn’t seem to. But their retail experience is completely soulless.

      • Rj

        There are Sony stores all over the world. They don’t stock the SonyErricson phones though.

    • Cem Argun

      Well Circuit City went bankrupt and Apple will prevail. :) Is this really true?

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  • http://twitter.com/sampenrose Sam Penrose

    This post and “The down payment on iCloud” are outstanding even in light of your usual high standards. Thank you!

    • Veritas

      Really? …

  • chandra2

    “How much does an Apple store cost?” and “The down payment on iCloud” just remind me why I come to asymco.com . Brilliant how you teased out the store data from the site improvement costs.

    I look at bald heads in a crowd to see how the consumer economy is doing Ha..ha.. ( theory is when economy is bad, men shave their heads instead of spending on haircuts ) and how the garbage business is doing to get a leading indicator on the economy. I was reminded of these two when I read this article.

    • Gathurm

      What you are doing in counting bald heads is referred to as Baysian Statistical Analysis.

      It started when the military asked a statistician to determine the number of Cuban soldiers in Africa. The statistician (Bays) counted the number of baseball fields (satellite photos) in the areas of interest, and knowing how many baseball teams a battalion.regiment can support, and how many teams are required to support each baseball field, he determined the number of Cuban soldiers in Africa. His estimate turned out to be extremely accurate.

      • http://pulse.yahoo.com/_RKS56BXI5SF2II2YTQD6MBE54A Hosni

        Thomas Bayes was born in 1701. I have no idea where “Gathurm” came up with this story, but it has nothing to do with the development of Bayesian statistical analysis.

      • Vhs431

        Must have been wooden satellites back then ;)

      • Marshall

        I’ve heard that story too, though without a statistician being named. Can’t quite remember where though.

  • davel

    Horace

    Over the past year I notice your graphs show up more frequently on other blogs that reference Apple.

    Just today Apple Insider has your graph on iphone model breakdown of units sold.

    This is a testament to the quality of your work.

    Thanks for this site.

    • http://twitter.com/andyidsinga andyidsinga

      A truly awesome blog.

    • MOD

      Yes, Horace, ask for voluntary donations from your readers. This is great info, for which readers would pay several dollars at least. Set up a Paypal donate account.

    • Anonymous

      Because it leans more and more towards promoting Apple? I fail to see how that’s a benefit to anyone except those who own Apple stock.

      There are so many stories that would promote companies other than Apple. Yet they are conspicuously omitted. The importance of long-term market share gains are downplayed, while short-term profits are emphasized. Any angle to make things look better for Apple is the focus.

      Oh, and the quality of an analyst’s work begins with verifiable citations and verifiable data…

      • Anonymous

        You are mistaking unbiased for unfocused. Horace isn’t biased towards Apple, he’s focused on Apple. You could always try to create a similar site with a focus on Google, or Samsung, I’d personally follow such a site, but I think it would be difficult to do – because the other big firms don’t provide nearly as much data as Apple does.

        Not that Apple offers every piece of data that we’d like, they don’t – but on the whole they offer more than average.

  • james Katt

    Apple recovers the costs of its store investments EASILY since Apple stores make more money per square foot than Tiffany’s. The more stores Apple opens, the more profit it makes.

    The problem for competitors is that they CANNOT recover the cost of their store investments. They are NOT Apple. Their stores have to be LOSS LEADERS.

    • Anonymous

      As far as I remember the figure is something like $3,600 per sq. Feet against the nearest competitor $ 910 that in US. Surely in China or Japan could be higher.

      • Anonymous
      • http://www.jeffkibuule.com Jeff Kibuule

        Wouldn’t the cost of their products factor into such an analysis. I’m even more surprised that Gamestop is so high up, as most games are only $60, compared to Apple’s $200 and up items with most in the $1000+ range.

      • james Katt

        As the link from EduardoPellegrino says:

        Sales per square foot for the Top 20 US Chains:

        Apple = $5626
        Tiffany = $2974
        Coach = $1820
        GameStop = $1009
        Costco = $998
        Whole Foods = $867
        Best Buy = $831

        Apple has nearly twice the profitability per square foot as Tiffany as of 8-24-2011.

        I wonder what this would be like with the Chinese Apple Stores figured in.

      • Vhs431

        Is that per year, quarter, month, week, day, hour or what? This sounds crucial to me but the information seems nowhere to be found.

  • http://twitter.com/mdavidse Morten Davidsen

    Damned, Horace! You’re good!!! :-)

    I keep getting more and more impressed by your work. You’re graphs and analysis is impeccable. Kudos!

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  • Steve Setzer

    O/T: Florian Mueller has a new research project: looking into FRAND issues worldwide

    Florian Mueller will be conducting a new study on FRAND (Fair, Reasonable and Non-Discriminatory) patent licensing pools. Most of the companies we discuss here are members of or are affected by such groups; for example, IIRC Apple is defending against some of Samsung’s patent claims by saying that Samsung’s behavior conflicts with its FRAND responsibilities.

    Mr. Mueller will be looking at the various kinds of contracts, legal remedies and other issues that go along with FRAND setups. Sounds like it will be quite a large undertaking and take a while to conduct; hopefully he will discern some patterns that will help us all understand these situations better.

    More details at:
    http://fosspatents.blogspot.com/2011/10/study-on-worldwide-use-of-frand.html

  • Anonymous

    I’m not a CPA, CFA or an MBA, but lease hold improvements costs are noted as such in the accounting, and for reasons of probably yield a greater amortization/depreciation value, but its possible that the landlords have given them a tenant improvement allowance – which might have be offset in return in rent or other subsidies, or guaranteed over a period of time, etc. So the $8.5M to $10M may not be totally accurate. There is also an economy of scale to be had, a majority of their mall stores use the same fixtures, etc. So it would be on par with say a chain of similar square footage. Their flagship stores of course require different attention, and I can see that architecture costs would be paramount here, as well as underground stores, would cost significantly more to build than in-building/street level/mall locations (even in attaining the permits alone). So its not necessarily true that the mean is $8.5 to 10M. Mall stores might run $2 to $4M while the 5th Ave NYC location might run $20-30M, as with their Shanghai or new Hong Kong locations. I cant fathom to see how the typical mall store, with wooden tables, and genius bar, plus some wall fixtures and lighting could even add up to that much, for subsequent locations – even if the store needed to be gutted from the get go.

    • Anonymous

      You mean Apple lied in their filings with the authority.

  • Cem Argun

    Great analysis Horace. Yet I agree with Andriba’s comments regarding the square footage and Nike. I think it’s best to see cost per square footage figures as well. Regarding Nike though, I think they are spending more than their retail investment on celebrity sports figures and I don’t think it’s that sustainable on their side.

    I think Apple, Apple Stores, iProducts and Steve Jobs pretty much fit into a religious analogy. So the Apple Stores can be seen quite like the landmark extravagent cathedrals or mosques of early times, iPads or iPhones as the “book” and Steve Jobs as the prophet. There’s no better way to build unconditional mass loyalty like religion.

    Cem argun.-

  • http://www.tempworks.com greggdourgarian

    ok with all the giddiness about Apple here can someone please get them to show a different commercial during football games once in a while?

  • Scott Sterling

    Respectfully Horace, I thinks it’s utterly impossible that the stores have cost an average of $9 million for Leasehold Improvements. Sure, the flagship stores cost much more than that, but most of the stores are in standard mall-type property; the cost of turning the empty space into an Apple Store cannot possibly exceed even $1 million in most of those stores.

    Your thoughts on what else might be going into this expense category? Surely ongoing rent expense and inventory are not included here?

    • Anon

      Yes I too feel $10M per store for fixtures is too high. There must be something that I missed.

    • http://www.asymco.com Horace Dediu

      The leasehold improvements sounds like and behaves like retail store openings. There might be renovation of older stores coincidental with the opening of stores and hence may be inflating the cost per store, but I don’t think this pattern can reflect anything other than stores.

      Apple probably does not lease and renovate facilities for its employees on a significant scale. Nor does it have rental properties on which it spends for improvements.

      The definition of this line item points squarely to store spending. It may seem like a lot of money but it also seems to be worth it.

    • Rj

      You say “most of the stores are in standard mall-type property” but are you sure of that?

    • Rj

      You say “most of the stores are in standard mall-type property” but are you sure of that?

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  • Ajay S

    Some very good analysis there. Hats off to you Horace

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