The past few years have been challenging for the retailing industry, and there are signs that 2012 will be no different. One key metric used to judge the health of a store is annual sales per square foot. Research company RetailSails recently ranked U.S. stores based on this metric.
Apple is at the top of the list with the highest sales per square foot. Perhaps most interesting is the large gap between Apple stores and the rest of the market. Apple stores now average $5,600 per square foot of retail space, nearly double the nearest retailer. However, Apple is a unique case as a leader in technology and innovation, and a company with what may be the strongest brand name in the world.
24/7 Wall St. wanted to see if common features could be found among the retailers that managed to get top dollars per square foot. Branding is perhaps the biggest common factor because it helps drive traffic to the stores. Retail establishments with low foot traffic find it nearly impossible to have strong sales per square foot.
In addition, each retailer on the list could be considered luxury goods sellers, with the exception of GameStop. To GameStop’s advantage, however, gaming DVDs tend to take up less room on a shelf than, say, flat-screen TVs.
It is worth noting that four of the top companies are also featured on RetailSails’ 25 fastest-growing retailer list, on which retailers are ranked based on trailing four quarters sales growth. It could very well be that companies with highly profitable locations have easier access to capital to invest in new locations, which in turn further helps underwrite future growth. If so, high margins beget greater sales, at least for some period. The data from retailers on this list would help support that theory.
For comparison to these six highly successful retailers, Wal-Mart Stores has a gross margin of 25 percent and an average of $414 in sales per square foot. All data on revenue, net income and gross margins are based on trailing 12 months earnings reports.
The world’s largest video game retailer does not have the high growth rates the other retailers on this list have. It does, however, have over 6,600 locations. GameStop has a stronghold on the used game market, which produces much better profit margins than new hardware or software. The company will have to stay focused as increasing competition tries to move in on that segment. Its most powerful competition may not be other video game retailers. More and more games are now directly downloaded to and played on smartphones and tablet PCs.
5. True Religion Apparel
True Religion Apparel has grown from its 2002 founding into a $420 million global company with distribution in 50 countries. The company has grown in a niche market, as its average selling price of jeans in the full price stores reached $260 in the fourth quarter of 2011. True Religion also sells its products through other major retailers, which include department store Neiman Marcus and Nordstrom.
4. Lululemon Athletica
Another relative newcomer to retailing, Lululemon Athletica is a yoga-inspired athletic apparel company, which shared its first retail space with a yoga studio. The firm was founded in 1998 in the Canadian city of Vancouver. Revenue has soared recently, and doubled between the firm’s fiscal 2009 and fiscal 2011 years. Lululemon recently raised guidance for fourth-quarter sales and earnings. The retailer only has over 150 stores and has opened several a month for the past year, so it is likely to be able to continue to grow.
Best known for its high-end leather handbags, Coach also sells wallets, shoes and novelty accessories. Its primary markets are the U.S. and Japan, which account for almost 90 percent of sales. One of the examples of the international growth of Coach is that it has individual e-commerce sites for 21 different countries.
Diamonds are small and pricey, so it should come as no surprise to that a luxury jeweler is on a list featuring sales per square feet. Tiffany opened its first store in 1837. The luxury jeweler is well known for its Tiffany Blue color, association with Hollywood films and its flagship Fifth Ave store, which is one of the most expensive locations in the world for a retail store. In contrast to Apple, which is a relatively new retail brand, Tiffany has been in business since 1837.
Apple is a relative newcomer to the retail scene, with its first store opening in 2001. The stores, which feature genius bars for providing advice and repairs, have become a mecca for its fans. It is not uncommon to see die-hard fans lining up outside the stores, sometimes for days, before a new product launch. In the latest quarter alone, Apple sold 37 million iPhones through all its sales channels. Broader signs of Apple’s success are that its global revenue rose 73 percent to $46.3 billion, and its $477 billion market capitalization, which is the highest of any public company in the world.
NORM BOND is a global marketer, digital strategist, speaker and consultant who splits his time between Bangkok,Thailand and the U.S. He conducts workshops and social media training for entrepreneurs, small business, nonprofits and multinational corporations. He has a MS in Information Science and is an ex-IBM marketing rep.
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