Is this a thing?
May 24, 2018 7:19 PM   Subscribe

My boyfriend told me that he read somewhere that the huge TMobile store in Times Square is so expensive to rent that they lose money by keeping the store open. But that supposedly, TMobile does this on purpose because the store itself is so visible in such a famous location that it is amazing advertising and is somehow worth taking the loss on. I am super skeptical but he can't remember where he read it so he could be conflating different things. Does this sound familiar to anyone?
posted by Neely O'Hara to Grab Bag (8 answers total) 3 users marked this as a favorite
It's hard to get exact numbers on this (companies don't generally run around releasing store-by-store breakdowns of costs vs. revenues), but it's commonly said about various "flagship" stores in NYC, e.g., on Fifth Avenue or Bleecker St. It's certainly not implausible.
posted by praemunire at 7:21 PM on May 24, 2018 [11 favorites]

I've heard this about many of the stores on Rodeo Drive in Beverly Hills--that they are basically loss leaders/billboards for their branches in Seattle, Houston, Atlanta, online, etc....

From Forbes

>Luxury Retailers Sometimes Lose Money to gain Cachet

>Creating that sense of exclusivity sometimes means strategically losing money.

From Apparel News:

>Flagships are not about making money but showcasing the brand. The money allocated to it often comes from the marketing budget, not the retail budget. Having a high-profile flagship at a prestigious location is one of the few ways brands can continue to showcase the essence of the brand and reinforce the full range of products not able to be displayed at retail partners

>Retail location profitability is becoming increasingly more difficult to measure because purchases made online are often a result of a store visit. We call this the difference between ‘value creation’ [the visit] and ‘value capture’ [the sale transaction]. In a broad definition of profitability, the flagship’s contribution can be measured and they can be profitable

So these aren't specifically about Times Square and TMobile, but high end retail stores do seemingly operate flagstaff stores at a loss. With millions of tourists walking through Times Square every year, Times Square showing up in the media frequently, TMobile could possibly see benefits in its bottom line with this added visibility.
posted by GregorWill at 7:37 PM on May 24, 2018 [7 favorites]

Does this sound familiar to anyone?

I've heard this exact thing except about the Times Square M&M's store instead. I can't recall a specific source where I heard this so, in my mind, I've chalked it up as something between "extremely plausible story but unconfirmed" and "total urban legend". According to this FT article, the parent company, Mars, refused to comment on whether or not a similar flagship M&M's store in the UK was profitable.
posted by mhum at 8:27 PM on May 24, 2018

My wife manages one of the buildings on Times Square, and has said the same thing. Given what they charge for the billboards above, it’s easy to imagine the retail tenants counting the branding value of the storefronts in the high 100s of $000s per month.
posted by nicwolff at 9:50 PM on May 24, 2018 [1 favorite]

Also discussed here: In a Thriving City, SoHo’s Soaring Rents Keep Storefronts Empty:
"The area also became a hub of flagship stores, for which chains pay top dollar to expand their brand identity and don’t mind breaking even, or even losing money. Typical is the five-story, 55,000-square-foot Nike behemoth at Broadway and Spring Street that opened last winter."
posted by Mr.Know-it-some at 6:48 AM on May 25, 2018

See also the Oculus. Tons of tourists and foot traffic, high-end stores all empty except for the Apple Store.
posted by whuppy at 7:26 AM on May 25, 2018

Some flagships lose money on a four wall basis more or less intentionally -- and the TMobile and M&M stores are goods examples of "working billboards" if you will. However, a lot of the flagships in Manhattan are very profitable, especially the ones that sell luxury or distinctive goods. LOTS of rich people live in Manhattan, and lots of well-heeled tourists visit, and what they have in common is a deep bid for stuff and little bid to go to the suburbs to buy it. (Although there are thriving outlet mall field trip operations.) The sales per square foot of of some of those high-end Manhattan locations are mind-boggling high.
posted by MattD at 9:09 AM on May 25, 2018

The opposite of this is One Times Square, the 25 story cornerstone of Times Square. Home to the ball drop, the building is empty, and makes money from the billboards.
posted by Marky at 2:17 PM on May 25, 2018

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