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Retailers always try to keep customers captivated in their stores as the more often they come, the more they spend. A few years ago, carrying a relevant product offer displayed in a nice environment and sold by sales associates was enough to guaranty a healthy business. But through the years, consumers have begun to expect more from retailers than just shopping, including what has been on every retailer’s lips for a while: experience, entertainment and a sense of community.

At the same time, consumers have been travelling more and more and retailers have started to eye the tourism industry. To enjoy their slice of the cake, they started to open hotels, restaurants and all kinds of entertaining features such as a ski slope in the Mall of the Emirates, or closer to the IADS members, a cinema in Selfridges or an ice-skating rink on the Galeries Lafayette flagship’s rooftop: all initiatives designed to increase the number of touchpoints with customers, expand retailer’s influence, and ultimately “sell memories before products”.

The Cidade Matarazzo project in Sao Paulo is a great example of ‘expanded’ retail, illustrating a possible vision of the retail of the future. Scaling at a never-seen-before level in Brazil, it can be considered as the ultimate mixed-use retail project mixing hospitality, culture and entertainment with retail. But how does it compare to other retail experiments? What is interesting considering the future of retail, and what can we expect and learn from the project?

What is Cidade Matarazzo?

Initiated in 2009 and led by French businessman Alexandre Allard, Cidade Matarazzo will be completed in 2023. Versatile and entrepreneur, Allard successively founded several companies in marketing such as Diacom, which developed infomercials in France for the first time in the nineties. From 1994, he also ventured into the tech business with Consodata, once a leader in the consumer data business. Then he entered the real-estate business with successful and failed attempts in historic building refurbishments such as the Qianmen area in Beijing or the Royal Monceau hotel in Paris.

Cidade Matarazzo, located on the famous Paulista Avenue, is a mixed-use project, a city-within-the-city, both in size (the estate initially accounts for 50,000 sq. m/540,000 sq. ft), a EUR 500 million investment from Allard himself, with 27,000 people involved) and in its ambitious programme willing to herald what a ‘smart city’ should be in the future. The project will include:

• Retail: a 28,0000 sq. m/300,000 sq. ft retail village representing more than a half of the project and coming with 1,500 parking lots, gathering 300 brands, 30 restaurants and 60 small shops highlighting local craftsmen. The brand portfolio is unknown yet and, so far, there are no department stores involved in the project.
• Hospitality: a 25-storey tower by French architect Jean Nouvel and designer Philippe Starck will host the first 6-star palace hotel in Brazil which will be run by Rosewood Hotels & Resorts (which operates Crillon hotel in Paris, Carlyle in NYC to name a few). The 150-room hotel, opening late December 2021, offers the usual luxury options with 6 bars and restaurants, a wellness centre, a swimming pool and various event centres. Hong Kongese company Chow Tai Fook, both global biggest jeweller and owner of Rosewood group, owns 49% of Cidade Matarazzo.
• Art: with galleries and an exhibition centre whose inaugural show will be from British-Indian artist Anish Kapoor. There will also be a piece of art by Belgian artist Arne Quinze, “Tupi”, which is advertised as the biggest piece of art in the world. A permanent collection of art with over 450 works by 57 contemporary Brazilian artists will be displayed throughout the hotel property.
• Culture: a cultural centre imagined by French architect Rudy Ricciotti will offer a theatre, a music studio and a cinema.
• Nature: 10,000 trees will be planted in the 45,000 sq.m/48,000 sq. ft park surrounding the project.
• Sustainability: several urban farms are set to become the first national organic market. Also, the project relies on the extensive use of local raw materials.
• Social responsibility: the farms will be run by 4,000 homeless people trained to deal with planting, harvesting and logistics. The project features will also enhance and rely on local craftsmanship and will highlight the work of craftsmen thanks to the 60 small stores from the retail village (see above).
• Local heritage: both part of the estate, an old maternity hospital and an old chapel will be restored to host hotel suites.
• Logistics: an automated platform will guaranty ultra-fast deliveries across the city (although the delivery lead time is not known yet).
• Housing: 122 apartments ranging from 100 to 600 sqm.
• 4,000 sq. m/43,000 sq. ft of office spaces.

In terms of retail, the renderings look luxurious and attractive for sure. And needless to say, customer experience is supposed to be at its peak and will be enhanced by a massive digitalization through artificial intelligence: in order to tailor their journey, an app following customer’s steps will guide them according to their personality, interests, particular taste… and will collect data (as we know Allard is no stranger to data, see above). Also, Farfetch has been appointed by Cidade Matarazzo to implement its Connected Retail solution “to create a technologically advanced luxury experience across the retail village”. Digitalisation seems obvious as “the country has the highest percentage of Facebook and Instagram users in the world. Yet Brazil is only the 35th e-commerce economy in the world.”

The project seems to be able to cater both to locals (to wealthy customers but also to the emerging Brazilian middle-class) and tourists as it is offering all features one can expect from a ‘smart city’. Cidade Matarazzo could also serve the local communities by creating countless jobs. But, even though the digital aspect is quite developed here, this is not the first time such a project is launched. How does it compare with other ‘expanded’ mixed-use retail initiatives?

Hudson Yards: beyond the wow factor

Some have tried ‘expanded retail’ projects before, with questionable success. In NYC, Hudson Yards was also aiming to create a city-within-the-city, only bigger and appealing to the 0.1% richer people thanks to its luxury apartments offer. Accounting for a total of 1.7 million sq. m/18 million sq. ft of urban land, commercial, office and residential space, the project was supposed to be able to change (or at least heavily impact) the retail, entertainment, working and housing NYC landscape.

Representing more than half of the commercial surface, the so-called ‘mall-as-public space’ is gathering 100 stores and 25 food offerings on its 67,000 sq. m/720,000 sq. ft surface, and was originally meant to attract both locals and tourists with a dozen public art installations, a performance space and concert venue ‘The Shed’, the beehive-shaped ‘Vessel’, ‘The Edge’ observation deck, a luxury hotel, 4,000 rental units (including 10% of social housing) and offices to host nearly 56,000 workers. The property management was expecting that 40% of the traffic would come from tourists, 30% from office workers and the rest from city dwellers and the 10,000 people expected to live there.

Almost 3 years after its opening, Hudson Yards tremendously suffered from Covid with almost 2 years without tourists and the closure of its crown jewel, the Neiman Marcus department store. But even before Covid, the project purpose was questioned as it was failing to build a sense of community, with a mall feeling like any other mall in the world. Besides, the place is hard to reach as it’s only served by one unreliable subway line.

Hudson Yards greatly suffers from its gigantism and, compared to Cidade Matarazzo, it lacks human scale. Also, there is pretty much nothing happening at the street level, which remains an important key factor in retail performance, and urban and daily life appeal. Cidade Matarazzo seems to avoid such death traps.

Smaller projects with a purpose, bigger effects?

CSR is now a topic in itself, big enough to become the purpose of a project. The new Ikea store in Copenhagen city centre will be completed in 2023 and will serve two ambitions: helping the company become a circular business by 2030, and coming closer to customers living inside of the city centres. The project will offer an Ikea store with a café and a restaurant, but also a public rooftop park with 250 trees, 1,450 sq. m of solar panels, and 760 bike parking lots (knowing that half of the Copenhageners bike to work and only one third has access to a car). Here, Ikea is aiming to become a place to meet and not only a place to shop, by offering a “completely new experience for the Copenhageners”. While most of them will have to shop at Ikea at some point, the project is credible to both answer this need and be an anchor to the local community.

Cidade Matarazzo is set to highlight and serve local communities as they represent a significant part of the project. When it comes to its shopping attraction, the retail village offers a new place in Sao Paulo for more luxury and Western brands: this could be a key factor to appeal to the old rich elite but also to the emerging Brazilian upper/middle-class.

Another initiative, the recently opened Green Pea retail project in Torino in Italy is the first self-proclaimed 100% sustainable department store in the world. It tries to bring an answer to the following question: how to build a profitable business that takes for granted the sustainable approach? The building is 100% made in recycled materials, it uses the energy generated by the footfall itself to produce electricity, and heat pumps provide 88% of the heating needs. All brands sold in Green Pea are sustainable and a museum is here to educate customers about the need to care for the planet. While the project is solid, will its purpose be enough to create a fruitful business and recuring customers besides a single visit?

Cidade Matarazzo claim is not about sustainability but the project includes features relating to the topic, with tree planting and urban organic farms. While the project’s carbon footprint and environmental impact are unknown, the diversity and value of the activities offered should be enough to attract recurring customers looking for a concentration of shopping, culture and entertainment.

The retail industry is at a turning point, especially as consumer habits change due to Covid. More than before, physical stores and retail projects have to come with a strong and clear purpose, as well as a very precise customer target. The size of the project also greatly matters as it has to be kept at a human scale, not to forget what’s happening at the street level. Whatever the dimensions, any retail project now has to include shopping and entertaining activities, rich and varied enough to attract customers more than once. Considering the retailer’s large existing audience, Ikea in Copenhagen will probably succeed in becoming an anchor for the local community and attracting customers and city dwellers on a regular basis. Green Pea, on the other hand, bets on customer eagerness to know more about their impact on the planet, and possibly to lower it: but will the location, size, nature of the product offer and purpose of the department store be enough to guarantee a recurring customer base?
When it comes to Cidade Matarazzo, the ambition is to mostly attract wealthy customers while enhancing local communities. From culture to events, hospitality, housing and retail, all necessary features seem to be poised for the success of the project. It will also represent a great opportunity for Western brands to gain traction in Brazil. Unlike Hudson Yards in NYC, the project is also kept at a human scale. While the Rosewood hotel opened its doors at the end of 2021, the rest of the project should be completed next year but, due to Covid, it will probably be too soon to determine the success of this mixed-use project. Stay tuned.

Credits: IADS (Christine Montard)