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Details on Industry Insight.
Ever since I saw Hollister’s flagship store on Fifth Avenue in New York City, which is entirely designed around the live feeds of surfers from the Huntington Beach pier, it has nagged at me.
Yes, Hollister has been broadcasting live feeds in its stores for years, but this Fifth Avenue store, which opened less than a year ago, takes it to a new level.
The entire outside of the store consists of 179 flat screen monitors that are showing the feeds from Huntington Beach. That is the key design element of the store in one of the most expensive and prominent shopping districts in the world.Tourists waiting in line in the rain to get into the Hollister store on Fifth Avenue.
The video feeds from Huntington Beach, really, seem to be Hollister’s central marketing focus at all of its stores.
Little did I know, the in-store experience is the company's main marketing method.
According to parent company Abercrombie & Fitch's annual report, "the company considers the in-store experience to be its primary marketing vehicle."
Its flagship stores, which include the Hollister store on Fifth Avenue, "represent the pinnacle of the company’s in-store branding efforts," Abercrombie said in the report.
"Flagship stores and social media both attract a substantial number of international consumers and have significantly contributed to the worldwide status of the company’s iconic brands."
Hollister, headquartered in Ohio, had 545 stores worldwide at the end of July. It plans to open 40 international mall-based stores this fiscal year, including opening Hollister’s first stores in China and Hong Kong.
The chain is on the upswing again after a few bumpy years, with same store sales rising 12% in the second quarter.
The inside of the Hollister store on Fifth Avenue. The store has multiple screens broadcasting images from Huntington Beach.
After seeing how Abercrombie took those HB video feeds to such a huge new level on Fifth Avenue, it made me wonder how much the company is paying the city.
After all, Hollister recorded revenues of $1.5 billion in 2010 and with the Huntington Beach images its key marketing strategy, I would assume they are paying the city a pretty penny.
Nope. I went down to City Hall to get a copy of the contract, and was shocked by how little Abercrombie is paying. Boy, was Abercrombie smart.
When Abercrombie first approached the city in 2004, it offered to pay $60,000 a year plus CPI increases in a five-year contract. Hollister installed two cameras on the pier at the time.
Abercrombie came back in 2008, before the five-year contract was up, because it was building the flagship store on Fifth Avenue and wanted a new agreement in place before the store opened, according to the contract.
The monitors label the images from Huntington Beach and reinforce the city's "Surf City" motto.
The new agreement raised the fee -- to $116,000 per year, plus CPI increases -- and allowed Abercrombie to install seven more cameras on the pier, for a total of nine. This gave them more views of the beach to showcase in their multi-level Fifth Avenue store.
Abercrombie added other sweeteners including a signing bonus of $50,000 at the beginning of the new agreement to go toward lifeguard equipment and $50,000 at each five-year extension.
The parties agreed to four, five-year extensions. However, there is no penalty if the city terminates the agreement early, according to the contract.
I'm guessing Abercrombie also went back and raised the payments because it thought people would react the same way I did when they saw that Fifth Avenue store.
A person in the Huntington Beach Finance Department told me currently with the CPI increases, the city is getting about $122,000 a year from Abercrombie.
To be fair, the city also benefits because the feeds showcase Huntington Beach to the world. The feeds feature a tagline that says “Huntington Beach Surf City, USA.”
But still -- what a steal. A chain that generates $1.5 billion in annual revenue pays a measly $122,000 a year to broadcast those images in its stores around the world, the images it has built not only its whole store concept around, but its entire brand.
Not only are they doing it in the surf industry’s backyard, they are doing it on the cheap. Guess those Ohio guys are pretty smart.