Prognosticators love to say retail is dead. But a very different message was delivered during a panel sponsored by TSX Broadway at last month’s Fast Company Innovation Festival. TSX Broadway’s investment partnership is wagering that retail is very much alive, placing a $2.5 billion bet on a 75,000-square-foot retail space at the corner of 47th Street and Seventh Avenue in the heart of Times Square.
“We’re demolishing a 97% occupancy hotel,” David Orowitz, project manager from L&L Holding Company, told a packed audience at the panel, entitled “The Experience Is Everything: Exploring the Future of Retail, Entertainment, and Consumer Engagement.”
“We’re lifting the third largest Broadway theater 30 feet in the air, refurbishing it, then rebuilding the tower to stand on a new retail ‘podium’ to create a platform for brands.” An LED screen running up the side of the building will be viewed on the “most trafficked corner in the Western Hemisphere.” A stage hovering above the street will host performances by major artists with the ability to reach global broadcast and digital audiences. The building will be equipped with cameras, sensors, and Wi-Fi to collect data and track customer preferences.
The platform describes in steel and glass what may very well be retail’s future: a commerce-advertising hybrid delivered as an engaging group “experience.” Amid the recent Sears bankruptcy and the closing of major department stores, including Lord & Taylor’s flagship Manhattan outlet, retailers are rapidly rethinking their role while remaining bullish about where shopping is heading.
According to Orowitz, the key is to capitalize on all sources of commerce within the brick-and-mortar footprint. Times Square has seen its share of retail duds, but as Orowitz pointed out, it is not enough to simply build a bigger store or create a low-excitement ticketed event and hope to profit only off the ticketing. He compared the new retail model to L&L’s investment in the New York Yankees. “A stadium allows you to sell tickets,” he said. “But there are so many ancillary ways the stadium makes money—naming rights, advertising, concessions, merchandising. When you start to overlay all those different things, it becomes a lot more powerful and a lot more commercial.”
RETAIL AS COMMUNITY
The first task is to understand brick and mortar’s unique offering. “Retail used to be about immediacy, the fact that I can get a product in my hand in two hours,” said Eleanor Morgan, chief experience officer of the digitally launched bedding company Casper, who joined Orowitz on the panel. “Now I can go on Amazon and get it for $9.99, and even cheaper in the future. So, why go to a store?” Casper’s answer is the Dreamery, a shop that offers customers a chance to take a nap at one of their physical locations, test the mattresses and the linens, while promoting sleep education as a wellness offering.
Morgan foresees the retail store of the future as a source of community building, where potential customers go to take part in product trials, learn about the brand and its offerings, and consult face-to-face with flesh-and-blood humans. “We are optimizing for those things,” she said. Casper plans to expand to 200 stores in the U.S. by 2021, in stark contrast to other mattress companies that are filing for bankruptcy in order to release themselves from costly leases.
Another panelist, Andrew Essex, is a consultant on the TSX Broadway project and the former founding CEO of the creative agency Droga5. He believes that the social aspect of retail ensures its future. He served as CEO of Tribeca Enterprises, which runs the Tribeca Film Festival, and knows what it takes to create an audience. “You have everything on demand at home, every movie ever created—why leave the house? It’s a fundamental existential question,” he said. The answer: Humans crave real connection. “The irony of all these devices is, we have all this computing power, but it puts us in a cocoon. We have all this content, but we don’t have real-world experiences. Brands are going to be the entities that bring people together because they have the capital, and they need to reinvent themselves as well.”
In past decades, coffee shops were the go-to add-on for retail, whether for bookstores, boutiques, or furniture emporiums. Samantha Dorfman, the global head of construction, design, and retail for Citi, told the panel audience that such one-size-fits-all no longer works. “If you are putting coffee in a place where people are just going to sit and buy coffee, that’s not fundamentally driving new clientele or helping your brand,” she said. “It has to be really mindful. It has to be something that resonates with your customers or that brings in a different set of clients.”
Before joining Citi, Dorfman helped launch Starbucks in Japan as a reservation-only establishment. Customers would save their status-symbol cups, reuse them, and walk the streets, providing free branding across the city. Citi Bike has created a similar presence in New York City and Jersey City. “You don’t even think about it,” Dorfman said about the ubiquitous blue bicycles. “That’s advertising.”
Essex cited the paradigm-shifting success of Netflix and HBO as a big reason why brands must seek out new platforms. “Television’s been erased as a canvas,” he said, pointing out how the commercial-free subscription networks have caused a “very large shift of dollars.”
Even the mighty Super Bowl has its limitations as a reliable brand messenger. “People get up and go to the bathroom,” Essex pointed out. He contrasts that with the branding opportunity in Times Square that can’t ever be turned off. Approximately 127 million people annually choose that location to see the sights, prompting them to transmit 8 billion social-media impressions. “We’re trying to think about why people would be interested in this [space] beyond this location,” Essex continued. “How do you create something that is interesting enough that people actually want to talk about it?” Presumably live performances on a stage 30 feet above Times Square will be part of the social media conversation.
Smaller brands can also learn from this model, although Morgan cautioned, “There are ways to do experiential retail badly, too. Increasingly, a lot of brands are selling experiences that are so clearly made to be vehicles for social sharing that it’s upsetting. You go into essentially a giant photo booth where everyone is helping you pose and reminding you of the hashtag. I think those types of ‘experiences’ are going to die off because there’s no payoff for the customer.”
The panel’s major takeaway: Retail must constantly keep reinventing itself. “The reality is, you’ll see this new model for three years, and then it’s going to be noise again,” Dorfman said. “So it will have to change. That’s really the world we’re living in now. Because when everyone does it, it’s noise.”
This article was created for and commissioned by TSX Broadway.