Nike (NYSE:NKE) just opened a massive new tech-infused store in the Soho district of New York City including five stories and a basketball court. Adidas (OTC:ADDYY) and Under Armour (NYSE:UAA)(NYSE:UA) are right on its heels with their own major investments in the city. However, this is more than just opening another retail location -- it's planting a physical flag for the brand.
A full transcript follows the video.
This podcast was recorded on Dec. 6, 2016.
Vincent Shen: There's been a lot of activity in one city specifically that I think is really interesting. This is in New York. Not only Under Armour, but its two biggest competitors, those companies being Nike and Adidas, are pursuing some very big investments in large -- I guess, just taking a big stake in these huge stores in the city. Can you explain to me a little bit of what they're thinking? Because, generally, people see a lot of other chains, think about Macy's, they're reducing their footprint, whereas here, these companies are building out these huge facilities. How do you view this, in terms of how it bucks the trend, in terms of people moving to spending online and away from a brick-and-mortar store locations?
Seth McNew: It all started here just a couple weeks ago, with Nike opening their massive new store in the Soho District of New York City. We're talking about a 55,000-square-foot five-story building right in the middle of one of the most expensive parts of New York. The store looks incredible. Each level is a different theme or a different sport. There's a basketball court inside the store where users can come in and test out new products, they can play on the court, and there's some really neat digital tech features that will give players real-time coaching and feedback that connect to their Nike Mobile app and record their stats and save all their favorite gear. There are similar things for soccer and running. It's a massive store, and there's so much going on there. They're also hosting celebrities and professional athletes coming in, hosting seminars inside the store; it looks great.
Shen: Yep. Of course, not to be outdone, Adidas opened a similar flagship location not that long ago as well, right?
McNew: Yeah. This was just last week. This is right on 5th Avenue. It looks the same -- not quite as big, but still massive, four stories, over 40,000 square feet. It kind of looks the same. They have fitness consultants in there, they have trainers, a full concierge desk, a cafe, some other interesting features like same-day hotel delivery for people who are traveling in New York, some kind of running analysis so people can pick the perfect shoes that work right with their stride. All of it is a very tech-infused kind of feel.
Shen: Yeah. For [CEO Kevin] Plank, with Under Armour, what has their response been? From what I hear, they're actually taking over a very famous space within the city, right?
McNew: Right, yeah. So, obviously, Nike has had the lease, and Adidas has had the lease, for a while. Under Armour, earlier this year, announced that they'd taken over the very famous FAO Schwarz toy store -- that's the toy store right in the middle of New York, the massive space that has been in so many movies. Under Armour will be taking over that lease starting in 2019; they hope to open a store there.
Shen: I'm not sure how much detail they have been able to provide in terms of what to expect from this location. But I get a sense, based on what the competitors have done, a more interactive experience they want to offer, where it's not just somewhere you go to shop for your shoes or your clothes; it's more of a destination. I have seen this take hold, in terms of apparel and retail, not with just these sports-apparel brands, but another really good example of this is with Urban Outfitters. They have opened these test pilot locations in New York and Austin recently, and a few others, where they're trying to combine an event space for music or some type of local craft market with the obvious apparel part of the store, of the retail experience, but also with a restaurant as well. Obviously, I think a lot of people were scratching their heads when they made the Vetri acquisition, this pizza chain.
Another example beyond Urban Outfitters, if you look at what a Bass Pro or a Cabela's does, these stores are destinations unto themselves. So it's kind of interesting to see this take hold. While some retailers are pulling back, others may be taking -- if you even look at [Amazon.com], how they're starting to test and expand these physical brick-and-mortar locations, having come full circle, seeing that regardless of how important e-commerce will become, and the benefits that it offers, and we'll talk about that a little bit more -- is you'll come full circle and see some very interesting, it seems more so marketing benefits, to having locations like these. Right?
McNew: Right. And you're right, we don't really know what that Under Armour store is going to look like, but from what they said in their releases, it'll be the "greatest single retail store in the world." It's almost more of a marketing attempt by these companies -- they can plant their flag, and really show what they have to offer without trying to sell as much gear through that one specific location. It's really more of a chance to showcase, have an event center, have people come in and test out products. Then, by having a really connected e-commerce strategy to those brick-and-mortar stores, they're able to make all of that work together.