Why the sneaker wars are being waged on the streets of New York City

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The entrance to Adidas’ new 5th Avenue store.
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Adidas

Sports retail is descending on Manhattan like never before. Nike, Adidas, and Under Armour are showing just how important the Big Apple is to their business, opening stores and inking deals for unprecedented amounts of retail space.

On Thursday Adidas opened its new 45,000-square-foot global flagship store near Times Square in New York City. It is now the company’s biggest store in the world, and it was greeted with fanfare and lines out the door. Adidas already maintains a boutique-style store for the Originals lifestyle collection in Soho, and a larger store focused on performance just north of that.

Similarly, on November 17, Nike pulled the sheet off its new 55,000-square-foot tech-fueled store down in Soho, likely one of the largest stores by square footage in that neighborhood. The company also has outposts like the gigantic 95,000-square-foot Niketown near 5th Avenue and 57th Street, and a few much smaller Nike Running stores – one on the Upper East Side near 67th Street and another in Flatiron closer to 20th Street. Rounding out the portfolio is the Nikelab, which has a boutique-like feel.

Citing unnamed sources, the New York Post reported that the swoosh also inked a lease on 5th Avenue just a few blocks from Niketown, which would add another 70,000 square feet of retail space.

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Nike’s new Soho store.
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Nike

For its part, Under Armour inked a lease earlier this year for the 53,000-square-foot store formerly occupied by FAO Schwartz on 5th Avenue and 58th Street, right near Apple’s famous cube store. It is projected to open in 2018. Under Armour also has two other stores in Manhattan (called Brand Houses): one in Soho, and the other in the new Westfield World Trade Center mall.

An increasing emphasis by retailers on bypassing third-party retail stores and going direct to consumer is likely a big motivation behind the big retail push this year. The company-owned stores give the brands a chance to interact with customers one-on-one, have more direct messaging with the consumer, and increase profit margins.

“We see experiences as super important,” Heidi O’Neil, Nike’s head of direct-to-consumer business, told Business Insider in reference to the new Soho store’s tech-enabled areas, where shoppers can test out performance sneakers. “They embody the brand.”

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A curbside view of Adidas’ new store.
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Adidas

New York specifically makes sense as the go-to battleground, as it is by far the most important regional market in North America. 25% of the Nike basketball sneakers sold in the US are bought in the New York area, according to retail analyst Matt Powell of the NPD Group. Trends often start in New York before they go elsewhere. As the old saying goes, “If you can make it here, you can make it anywhere.”

It’s also a hot spot for destination shopping for both international and domestic tourists.

The third-party sports retailer industry is also shrinking, as City Sports went bankrupt in 2015 and Sports Authority liquidated in 2016. This means it’s more important than ever for sportswear makers to go directly to consumers.