Retailers Land on Times Square

By Tom Ryan

While the revelers around Times Square screamed as the ball dropped
on New Years Eve, more than a few retailers were hoping they’d notice their
sparkling, new flagship stores in the area. Daffy’s, the women’s apparel discount
chain, recently became the latest retailer to sign a lease in the revitalized
shopping district.

The area in the not-too-recent past had been known for crime,
drugs and peep theaters. But a major revitalization during the eighties and
nineties has transformed it into a tourist mecca and viable retail destination.

Daffy’s,
which operates 19 stores largely in the New York metropolitan region, is planning
on opening a 28,000-square-foot store on West 44th Street between Seventh and
Eighth avenues, the former home of The New York Times, according
to Crain’s New York. It plans on adding a total of 14 New York-area
stores before 2015 with a goal to expand nationally.

An article in The Wall
Street Journal
said the area has become a “discount
fashion center” with Daffy’s opening to come after Forever 21 last June
opened up a massive 90,000 square feet location in a former Virgin Records
location. American Eagle Outfitters, Aeropostale as well as Walt Disney have
also opened flagships around Times Square in the past year. In late 2008, Walgreen’s
opened a location at one Times Square featuring a digital billboard soaring
341 feet above the street on three sides of the building. Other stores in the
area include a Toys ‘R’ Us (including a Ferris wheel), Foot Locker, Modell’s,
Sephora, Swatch and Billabong as well as attractions such as MTV’s studios,
Bubba Gump Shrimp and Hershey’s.

Retail space in the area now commands an average
rent of $1,600 per square foot, up from $550 per square foot a decade ago,
Victor Canalog, director of research at Reis Inc., a real-estate research firm,
told the Journal.

The Journal article notes that the new retailers
cater to tourists “looking
for New York fashion at middle-America prices and suburban teens flocking to
the city for shopping sprees.” Foot traffic from nearby office buildings
and new apartments that have been developed in the area in recent years are
also supporting retail traffic. About 365,000 people stream through the neighborhood
on a daily basis, an 8 percent increase over year-ago levels, according to
the Times Square Alliance.

“It mirrors the development of the neighborhood as well as the willingness
of retailers to have storefront space in the densest central business district
in the country,” Mr. Canalog told the Journal.

Discussion Questions: What value do you put on having flagships in major
tourist-traffic areas such as Times Square? Which type of retailers benefit
most/least from having such as flagship location?

BrainTrust

Discussion Questions

Poll

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John Boccuzzi, Jr.
John Boccuzzi, Jr.
13 years ago

The move by Daffy’s is a good one if they want to use this store as not only a retail outlet, but also as part of their overall marketing and advertising strategy. Location, location, location is what you always hear and Times Square is tough to beat. The foot traffic is intense and even better most of that foot traffic is there to shop.

Another benefit is the foot traffic is always turning over since most of it is tourist based. This means new prospects on a weekly if not daily basis.

Daffy’s like other major Time Square iconic stores including Toys “R” Us, Hershey’s and Mars benefit from the media attention from being in that location as well. They become a destination location for many. Movie’s being filmed, live news and TV broadcasts, etc. This location is far more than just about the foot traffic, it needs to be part of your advertising strategy or you are not taking full advantage of the opportunity.

Mark Johnson
Mark Johnson
13 years ago

Great article in the Economist a couple of weeks back about the resurgence in NYC. It has the most students in the country, it is growing (both in employment and income) while the rest of the country does not. Tourism is up 8-11% depending on measurement. It has the largest percent of immigrants (and growing), it has the second most venture-backed companies (outside Silicon Valley) and on and on. Seems to be a great place to have a flagship store.

Bill Emerson
Bill Emerson
13 years ago

Times Square, like the rest of Manhattan is, on paper at least, a great place to have a retail location. All the points mentioned (tourism, high residential density, etc.) are true. This creates huge volume opportunity. What’s also true is that the costs – $1600/ft occupancy, unions, regulations, etc. tend to greatly diminish the return on this high volume.

Indeed, in one company that I worked for, the Manhattan location was the highest volume store, but a much smaller location in Omaha produced significantly higher 4-wall operating profits. In other words, you don’t do it for the money.

The real justification for a Manhattan location is the enhanced marketing profile. As the song goes, if you can make it in New York, you can make it anywhere. Also, for a publicly traded company, this leads to better coverage by the analyst community and potentially a higher share price.

Nikki Baird
Nikki Baird
13 years ago

I’m with Bill–the costs seem to eat up almost all (if not entirely) of the added extra monetary benefits of the location. But that’s not to say it’s a bad idea. I look at a Times Square location like a Super Bowl ad–a “go big” marketing play. If you’re blowing your marketing budget to fund it, then it’s a bad idea. If it’s part of a multi-pronged marketing strategy aimed at building awareness with the touristy crowds that flock to the Square, then go for it. And if it happens to cover its costs while you’re at it, all the better.

Chuck Palmer
Chuck Palmer
13 years ago

HUGE exposure. In person, impressions via international media and digital reach, if taken advantage of properly.

Think about the segmentation of Times Square: mostly visitors but given the new street plazas, it has a new relevance for locals.

While it is not for every brand–mid-market challengers on the up tick are the winners–the potential for collecting data from interested consumers is significant. Capturing an email or a Facebook “Like” from just a fraction of the millions that come through your store can provide reams of data to be leveraged.

For Daffy’s, this store could tell them where to go next. Where are visitors coming from and what do they know of the brand? Are patterns of geographic interest emerging? How does Times Square visitors’ behavior differ from other locations? How can this new data inform growth and real estate strategies?

While these locations may break even or even lose money, it may be worth the investment during a short lease just to learn what they can from it.

Ed Rosenbaum
Ed Rosenbaum
13 years ago

I am jumping on the Bill bandwagon also. I believe it is the marketing value of having a New York City location that sparks interest and sales in other major metropolitan locations. I recently read Tommy Bahama is also opening in Manhattan.

Let’s take Toys “R” Us as one example. Here we have a company where most of the brand specific competitors have fallen by the wayside, leaving the business to the 800 lb. gorillas such as Walmart and Target. Yet, Toys “R” Us survived (barely) and now is opening a flagship store in the heart of Manhattan. I congratulate them for their foresight and aggressive marketing belief that “If you can make it there, you can make it anywhere.”

The Container Store is another example of taking the leap of faith. TCS now has two of their top producers in “The Big Apple.”

Craig Sundstrom
Craig Sundstrom
13 years ago

Methinks this is an opportunity for marketing departments, brokers, and landlords to conspire–consciously or not–to create “flagships” of dubious value (“it doesn’t make any money but it pays for itself in other ways” is a phrase I expect is heard often). That someone visiting NYC and hoping for a “taste of NY fashion” would want to go to a Foot Locker, Aeropostale, or Disney, chains–key word there–with locations all over the country, says something (not very flattering) about the people who shop there.

Lee Peterson
Lee Peterson
13 years ago

Great, if you can afford it (flagships don’t always make money — not everyone knows that) and even better if you can actually manage it. I have experience opening flags and although every locale is different (Chicago: great, NYC: um, challenging), the first few questions you have to ask yourself as a retailer are pretty basic: how hard is it to get the goods in and out; and who are we going to hire to run this monster??

The exposure is amazing, the buzz about it on your web site is great, seeing your brand on TV for nothing is fantastic . . . but if you don’t have amazing people on the ground, it’s going to be a disaster in short order.