Apple’s Success May Lead to Cheaper Leases
A piece in The Wall Street Journal suggests Apple should be paying less for space it occupies in malls around the country.
Here’s the argument in three easy bullets:
- Mall anchors, usually department stores, often pay very little for space, and sometimes pay nothing at all as facility operators want them as a draw.
- Apple produces equal or better numbers in terms of traffic and sales dollars as current anchors.
- Apple is paying thousands of dollars more for its small space than department stores are for locations up to 20 times the size.
Malls have been losing share of consumer traffic dating back to the 1980s. A minor 0.1 percent increase in market share for malls last year was seen as an encouraging sign. While department stores were often given credit for the uptick, it’s clear from any trip to a mall with an Apple Store that it deserves credit, as well.
In February of this year, Anne Howe, founder of Anne Howe Associates and a RetailWire BrainTrust member, observed, "If I were a mall operator, I’d look to get an Apple store. I’ve never been in an Apple store that wasn’t teeming with people exploring. There’s a secret sauce that more operators need to try to replicate across the various corners of the mall."
The Journal piece says it’s doubtful that mall operators are suddenly going to be reworking contracts for either Apple or department stores. It’s also not likely that Apple would want to tinker with a proven store model and suddenly start to look for much larger spaces in malls. But how long before Apple begins to threaten to pick up its iPads and go elsewhere if it doesn’t get a better deal?
- Apple Upsets the Department-Store Cart – The Wall Street Journal
- Americans Go Back to the Mall – RetailWire
Discussion Questions: Will Apple’s success change the way mall operators negotiate space rates? What would you be doing now if you were Apple or a mall owner?