The future of retail features a basketball court.
This fall, the world’s two largest athletic-gear makers—Nike (NKE) and Adidas—opened massive multi-floor stores in Manhattan as a way to champion a more immersive retail experience to promote the sports brands in a way that cannot be delivered by department stores and specialty sports retailers. Those features include customization of jerseys and shoes, athletic consultation services, and same-day delivery service in New York City.
“Consumers just expect more,” Heidi O’Neill, Nike’s president of global direct to consumer, told Fortune at the company’s new 55,000-square foot store in SoHo. “They expect more immersive experiences at retail like you are seeing here.”
The new SoHo store from Nike is the second major retail space the company has opened on the island of Manhattan. The first was the Niketown store in Midtown, just south of Central Park. A third is planned on the trendy Fifth Avenue, where Nike this month signed a lease to take over a seven-floor, 69,214-square-foot space. Adidas, meanwhile, already operates a large store in SoHo but debuted a new, roughly 45,000-square-foot store on Fifth Avenue this month. Smaller rival Under Armour (UA) is also planning a big, splashy New York City push as it plans to open a flagship store in a space that once housed the famed FAO Schwarz toy store.
How Nike Is Doing It
Nike is placing a big bet on mobile integration and shoppers can book one-on-one appointments using a dedicated mobile app. Stores will feature massive digital screens that customers can use to learn more about when products will launch, as well as get info about in-store events. Shoppers can get customized items delivered quickly to their homes or hotels. Even the fitting rooms are swanky: adaptive lighting can show a shopper what gear would look like in a yoga studio or for a night run.
The SoHo store is built to boast three sports trial zones. There’s a treadmill surrounded by two cameras that can capture data about a runner’s stride—and then make a suggestion on what shoes might be best. Video screens depict scenes in Central Park or the downtown neighborhood Battery Park. On other floors, there is a soccer trial zone for testing cleats and a half court for shooting hoops.
O’Neill said Nike will continue to experiment with major retail experiences in big cities, but won’t apply the same approach that the company took in SoHo. “We wanted these sports to feel right for this market,” O’Neill said. “Basketball for New York City says ‘we get you New York.’ The running community here is also strong.” The sneaker wall at the SoHo store is the largest at any retail location in the world—O’Neill said that reflects the important sneaker-driven culture and style that New Yorkers embrace.
For Nike, the SoHo store is part of a broader push to boost direct-to-consumer revenue to $16 billion by the end of fiscal 2020. That business—which includes sales at Nike stores and the online business—has been outpacing the overall sales growth of late. The reason why it is important for Nike and other athletic purveyors to take control of their own retail experience is because traffic at key wholesale partners, notably department stores, has slowed. And a number of specialty sports sellers, most notably Sports Authority, have gone bankrupt—resulting in the loss of major physical retail shelf space.
The Midtown Manhattan Stadium Adidas Built
When you walk into Adidas’ Fifth Avenue store, it feels like you are entering the tunnel of a football stadium. There are also locker rooms instead of dressing rooms and stands that can be used for seating to watch live games. Adidas also built four customization stations so shoppers can create their own apparel and footwear designs.
“If this store was four floors of product, people would come the first time and then not come again,” said Mark King, president of Adidas Group North America. “The challenge is that when you come here three months from now, it needs to be constantly changing.” King said the store is more fluid—especially the bottom floor which can change to promote new products, host celebrity events or other new initiatives that Adidas might tout. By making the retail store a destination, it plays into the “experience” that shoppers are expecting today if they are to be lured to a brick-and-mortar store.
Executives at Adidas have placed a bigger bet on six global cities—including New York and Los Angeles in the United States—where the company will double down on marketing and retail experiences with the hope that by building a strong brand experience in metropolitan areas, the trends would then fan out to other regions. Building a massive new New York store plays into that strategy.
“When you take a city like New York, which sets trends in almost everything, and you create energy here—within literally hours the whole country knows about it,” King said. “You then capitalize on it through retail partnerships in other regions of the country.”
Adidas is also planning to control 60% of the brand’s global retail space by 2020—up sharply by about 30% today. Building new stores, as well as store-within-a-store experiences in department and specialty stores, will help the company achieve that goal. When Adidas controls the retail space, King says it generates higher sales per square foot—better for both the brand and retailers.