Location starter activity - what difference does the side of a street make?

What difference does the side of a street make in terms of the rent that a business pays? It can be quite significant in New York and I have used the flagship Apple store as an example to put together a starter activity on business location.

Firstly, I ask the students if any of them have been to an Apple store, and if so, what were there general impressions. This could include factors such as design, helpfulness / motivation of staff, how crowded the stores were etc.

Secondly, I get out the mini whiteboards and ask them the following questions. They are not expected to know the exact answers but it is about seeing if they are "in the ballpark"

1) What is the rent per year for a store the size of Apple's flagship store (10,000 square feet) on New York's Fifth Avenue.

2) What do they think Apple's yearly sales are in that Fifth Avenue store.

I then give them the answers to these questions - at a rent of US$3,500 per square foot, the annual rental is US$35 million! While this may seem a lot, it is estimated that sales in this store were $440 million in 2009. Apple do not actually release figures for individual stores but this figure was given by the owners of the GM building (of which the Apple store is in the basement) to prospective tenants.

I then show the students the following graphic of rents on the east vs west side of Fifth Avenue. Rents on the east side are US$3500 per square foot but (only!) US$3000 square foot on the west side. Back to the mini whiteboards for three reasons why this might be.

The article from the New York Times gives three possible reasons (although real estate mogul Donald Trump professes not to be sure of the matter). They are

- the types of stores on the east side (the west side has more hotels and churches)

- transportation (most of the subway stations come up on to the east side)

- the sunshine! The east side gets more sun so presumably it is more pleasant to walk down.

Finally, I remind the students that there is a subtle difference between location and place (as part of the marketing mix). While place certainly contains the location for a retailer, it is also about other ways in which the business can sell their product to the customer. In Apple's case, this includes a major online presence as well as using other retailers to stock their products as well.