Why Nike, Under Armour, and Adidas Are Competing Over Expensive New York Real Estate

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 (NASDAQOTH: 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.

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Vincent Shen:There's beena lot of activity in one city specifically that I think is really interesting. This is inNew York. Not only Under Armour, but its two biggestcompetitors, those companies beingNikeandAdidas, arepursuing some very big investments in large -- I guess, just taking a big stake in these huge stores in the city. Can youexplain to me a little bit of what they're thinking? Because, generally, people see a lot of other chains, think aboutMacy's, they're reducing their footprint, whereas here, thesecompanies 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 justa couple weeks ago, with Nike opening theirmassive new store in the Soho District of New York City. We're talking about a 55,000-square-foot five-story buildingright in the middle of one of the most expensive parts of New York. The storelooks incredible. Each levelis a different theme or a different sport. There's abasketball court inside the store where users can come in andtest 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 aresimilar things for soccer and running. It's a massive store,and there's so much going on there. They're also hosting celebrities and professionalathletes coming in, hosting seminarsinside 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 wasjust 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. Itkind of looks the same. They have fitness consultants in there, they have trainers, a fullconcierge desk, a cafe, some other interesting features like same-day hotel delivery forpeople who are traveling in New York,some kind of running analysis sopeople 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, withUnder Armour, what has their response been? Fromwhat 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 thevery famousFAO Schwarztoy store -- that's thetoy 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 beenable 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 justsomewhere 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 goodexample of this is withUrban Outfitters. They have opened these test pilot locations inNew York and Austin recently, and a few others, where they'retrying to combine an event space for music or some type of local craft market with the obvious apparel part of the store, of the retailexperience, but also with a restaurant as well. Obviously, I think a lot of people werescratching their heads when they made theVetri acquisition, this pizza chain.

Another example beyond Urban Outfitters, if you look at what aBass Pro or aCabela'sdoes, these stores aredestinations unto themselves. So it'skind 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 thesephysical brick-and-mortar locations, having come full circle, seeing that regardless of how important e-commerce will become, and thebenefits 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. Andyou're right, we don't really knowwhat 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 showwhat they have to offer withouttrying to sell as much gear through that one specific location. It's really more of a chance to showcase, have an event center, havepeople come in and test out products. Then, byhaving a really connected e-commerce strategy to those brick-and-mortar stores, they'reable to make all of that work together.

Seth McNew owns shares of Nike and Under Armour (C Shares). Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, Nike, Under Armour (A Shares), and Under Armour (C Shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.