Leisure is for sale28 February 2023
// by Domenico Matarazzo // Consumers are slowly spending again, but they spend less in physical stores and more online which causes some stores to close down. But for every empty space left behind a leisure alternative is ready to take over /
Oxford Street in London is one of the most famous shopping destinations in the world, with tourists from all over the globe as well as local residents walking elbow to elbow, particularly in the late afternoon and on weekends. They go to iconic department stores like Selfridges, John Lewis & Partners, House of Fraser, and Marks & Spencer as well as to stores of global brands like Gap, Uniqlo or new upcoming designers. Crowds walk in and out of the stores or stare at windows on both sides of the street ignoring the cars and the iconic red double-decker buses that for some visitors travel on the wrong side of the road.
In the last few years, many of these stores have closed down. What one would notice is that many of these empty spaces have been taken over by candy stores, a lot of them. Candies were thought to be good temporary fillers for the empty spaces left behind by stores that could not afford the high leasing fees during tough economic times, especially after Brexit, and during the pandemic. These candies stores still offered a nice rest for the tens of thousands of shoppers walking back and forth on Oxford Street. But the leisure experience offered by these outlets went beyond the sugar overload. British authorities soon found out that candies were just the front of a more lucrative and amusing business: cannabis related products. Not the most family friendly category, but still a form of leisure for an increasing number of individuals.
On the other side of the Atlantic, in normal economic times, the foot traffic of shoppers at North Point Mall in Atlanta during the Christmas Holidays and during Thanksgiving would be comparable to the hey days of Oxford Street, but without the cars and the double decker buses, as here people walk in indoor spaces only. Here too the attractions would be the aisles and windows of stores like Victoria’s Secret, Apple, Macy’s, Von Maur. To our surprise when we visited the mall around Christmas time, many of these iconic stores were gone. Taking their places were mini golf centers, gym for kids or small merry-go-rounds where parents would just take the kids for fun, with no sale person in sight.
There is no doubt that the retail industry is in a transition. A variety of sessions at the NRF (National Retail Federation) Convention 2023, held in New York City last month, focused on the current trends and the outlook for the future: the findings are not good for retailers, but positive for the leisure industry as some aspects of this transition also apply to amusement parks. According to Rachel Dalton, head of retailer insights at data company Kantar, online shopping continues to grow faster than sales at physical stores and by 2027 we should expect an even split between bricks-and-mortar and online sales. Part of the evolution in the digital landscape is also the fragmentation taking place due to the proliferation of different social platforms. In this area virtual influencers are on the rise and tend to be more trusted than other commercial communication forms. Their popularity also reflects the need of consumers to “reset” and become more in control of where to shop, how to shop, what to buy and how much to spend, especially in a tighter economic environment. Industry analysts see a cultural context in which there is a sort of social contract between consumers and the enterprise and in which customers support companies and brands that share their values and their way of life. Companies, on their part, go beyond the individual transaction to integrate their products into the consumer’s lifestyle. For example, respect for nature is becoming a priority for consumers and, as a consequence, some speakers expressed the need “to make nature a board member”, to indicate the need to align marketing actions to actions that signal respect for the environment.
At the NY show we also started to hear about “authentic automation”, that is an environment in which humans interact with bots and robots. ChatGPT was just emerging while the NRF Convention was taking place, but attendees were already describing a scenario in which many functions will be automated, but with humans still having a relevant role. The first example that no doubt will find a place in amusement parks is the nail-painting robot currently being tested in six U.S. Target stores. The robot, developed by San Francisco-based startup Clockwork, paints, clean and trim nails in 10 minutes and at a cost starting at 8 dollars, much lower, therefore, than the prices offered in nails salons. The robot is a tabletop machine similar to a microwave but powered by computer vision. The varnish is contained in small plastic cartridges inside the machine. The unit takes a photo of the finger, and the AI engine can distinguish the nail from the skin. All the user has to do is to place the hands on a hand rest inside it and see the varnish dripping on the nails via a nozzle. A human, however, will stand nearby in case of problems.
The technology will not replace the traditional nail experience in a salon, but it does increase accessibility and awareness to a larger segment of the population. “Machines offer more convenience and speed,” said Michelle Evans, global lead of retail and digital consumer insights at Euromonitor International, a leading research firm, “On one hand we shouldn’t underestimate the power of emotional connection with a brand. Ultimately it comes down to authenticity. But, on the other hand, there is a generation gap in favor of the new robotic services: Euromonitor research shows that 80% of consumers under 29 are in favor of bots.”
If Oxford Street and North Point Mall represent retail spaces that use leisure activities or products to fill in the void until better economic times, on the opposite extreme there are deep pocket investors that have a more long-term vision and want to replace a retail destination with a permanent attraction that can be also a catalyst for the development of a whole area. Welcome to Saks Fifth Avenue department store on Fifth Avenue, also known as Millionaire’s Row. Fifth Avenue is New York’s most iconic shopping street with the world’s most expensive retail spaces. We can compare this avenue to the Champs-Elysées in Paris or Ginza in Tokyo. Yet, some of the floors of Saks Fifth Avenue are not very glamorous these days. Some have shelves and racks with discounted women’s dresses, lingerie, children’s books, and holiday decorations. Others have been converted into a rentable workspace. Real estate developer Hudson’s Bay has a clear vision about how to bring back shoppers, and life, to the flagship store: convert the top 3 floors of the iconic building into a Monte Carlo-style casino.
Saks is not the only entity to apply for a license to host Vegas-type games that are currently prohibited in the city. SL Green, a major commercial developer, is partnering with Caesars Entertainment to convert part of an office skyscraper in Times Square into a casino and entertainment complex. The building at 1515 Broadway is near the New Year’s Eve ball drop and near several stores mostly for tourists like Disney and M&Ms.
Further south of Broadway is Hudson Yards, the area that was occupied by the Twin Towers and that is still surrounded by warehouses and small stores. Steve Cohen, the owner of the Mets, and Related Companies, is joining Wynn Resorts in a proposal to convert part of the area into a convention and casino district. The project also includes a school and new housing, probably to balance gambling with a family-oriented project to make more appealing the proposal to New York authorities.
Of these projects, Saks Fifth Avenue will most likely be completed first as it does not require structural modifications and could be ready in less than 12 months. The new space will have its own lobby and its own red carpet. Once they are done with gambling, the visitors of the new sin destination can then conveniently visit and confess at Saint Patrick’s Cathedral, the landmark heart of the Roman Catholic Church in New York City right across from the new sin floors of Saks Fifth Avenue.
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