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Amid budget crisis, Spaniards still buy Apple

An advertisement for an Apple store in Spain. Spain is suffering the highest unemployment rate in Europe right now and is trying to shrink a major budget deficit. Still, Spaniards are buying up pricey Apple products -- and the company is taking notice.

Sarah Gardner: More bad news out of Spain today: An auction of Spanish bonds was sort of a bust, and as a result, borrowing costs jumped higher -- and that took a toll on stock markets around the world.

Spain's economy is really taking a beating as it tries to shrink a monster of a budget deficit. It's suffering the highest unemployment rate in Europe right now; it could hit 25 percent this year.

But amid all the belt-tightening in Spain, a strange thing is happening. Spaniards are buying pricey iPhones and iPads like mad. And Apple has taken note. Lauren Frayer reports from Madrid.


Lauren Frayer: This is Madrid's Puerta del Sol: A sprawling downtown square that often swells with protesters angry about education cuts, labor reforms, and most of all, unemployment -- which affects one in four people here, and nearly half of 20-somethings.

In this same square, construction is underway on Apple's flagship store in Spain. You see, even unemployed Spaniards seem to scrounge up cash for iPhones.

Juan Aberling is a pilot who just lost his job.

Juan Aberling: That's the crisis. I mean, you study a lot, and then you can't fly.

Frayer: But you still have your iPhone?

Aberling: I still have my iPhone, yes! It's worth paying it. I know! And honestly, if this breaks right now, in one week, I will buy another one. Really!

Despite the debt crisis, Spaniards bought 800,000 iPhones in the first three quarters of last year -- 60 percent more than the previous year -- even though retail sales countrywide have fallen for 18 straight months.

Those against-the-odds sales are what Apple looks at when it decides to expand into a stalled, debt-ridden economy like Spain's. That, and Spaniards' tendency toward conspicuous consumption, says economist Gayle Allard.

Gayle Allard: When you walk around in Spain, you see how well-dressed people are, and how good their cars look and what nice cars they drive. They don't have a dented fender and they don't have a bad paint job. Spaniards are very much about the outward appearance of things. And Apple fits right into that. These are beautiful products. They're not just functional, they're beautiful.

It's the classic 'nouveau riche' syndrome. Thirty years ago, Spain was still a poor country. Now Spaniards are basically on par with the rest of Europe, and they relish brand names. Sales of luxury goods were actually up 40 percent here last year.

That doesn't surprise Juan, with his iPhone.

Aberling: I think that if people just see the Apple brand on it, it's like, 'Wow, yeah it's an Apple.' It's worth it.

All five Apple stores in Spain have opened in the past year and a half, during the economic crisis. That's compared to 33 Apple outlets total in Britain, seen as a more secure investment than Spain.

But even on a Tuesday morning, this Apple store on the outskirts of Madrid is packed. Victor Sallent, an engineer who helped design the store's layout, takes me on tour.

"Very good marketing!" he says. "Look at this Apple store. It's something different, in technology. The very space where you shop, all the details, including even the tables where you can test the Macs -- so welcoming!"

Spain has its big department store, El Corte Inglés, and mom & pop local places. Chains have only been here for a few decades, and none are like Apple, Sallent says. So Spaniards are quick converts.

"Of the people with really low salaries, or who are even out of work," he says, "they all have smartphones."

Back in Madrid's central plaza, Oliver Romero, 26 and jobless, smokes a cigarette on the stoop of the 19th century building that'll be an Apple store this spring. He says he's thinking of applying for a job there.

Oliver Romero: The crisis is bad, of course. But it's not a matter of, 'We're in crisis, we don't have money, we can't spend any money.' It's a matter of how we deal with the money we have.

With that, he pulls out his iPhone and starts surfing.

In Madrid, I'm Lauren Frayer for Marketplace.

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My friend that moved in Spain a couple of years ago told me that he saw a lot of people owning Apple devices and he was curious why they buy such expensive gadgets if their country is facing a tough economic condition. The answer is simple: Apple`s marketing strategies are great and they created a strong brand and everyone wants to own a gadget with the apple logo on it. He will come in USA the next month and asked me to buy him a couple of tools from http://www.arbortechsupply.com/ because they are affordable, his salary diminished a little and he must revise his budget spending.

In the US the real cost of a smartphone is the monthly data plan. This story did not address what Spaniards pay for mobile service. If it is anything like the U.S. market, this seems like an important part of the story. What telecom companies are profiting from the mobile device boom?

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