​Samsung's 837 in New York: Nice playground, but massive marketing expense

When you visit Samsung's 837 "digital playground" in New York you almost look for the checkout aisle. But Samsung's massive center is all about marketing. Will there be ROI?

Samsung on Tuesday opened its 837 in New York's Meatpacking District to the public and there were plenty of Galaxy S7 plugs, Gear VR demonstrations and hooks into various products ranging from tablets to Internet of things devices to TVs and appliances.

The three-level "cultural destination, digital playground and marketing center of excellence" could appear to be an Apple retail rival at first glance. But you can't buy anything. Instead, Samsung New York City destination is about walking consumers through products, bolstering the brand and briefing executives.

Samsung said it will have "curated and customized experiences for the B2B community."

I'm not going to lie: Samsung's 837 was kind of fun. The Gear VR demonstrations were nice and the Galaxy S7 and S7 edge felt good in the hand and more refined than the previous versions of the device. I even took a selfie that made me throw up in my mouth, but hey it's business (see gallery).

And then my business sense kicked in. What's this 837 cost? Where's the ROI? How the hell can you justify Meatpacking District rents as merely a sales and marketing expense?

You don't. Samsung is leasing a six-story building in a pricey neighborhood that Facebook, Google and Ferrari were all thinking about grabbing, according to The Real Deal, a New York-focused real estate site. After that deal was closed, Thor Equities and Taconic Investment Partners sold the building to TIAA-CREF for $200 million, or $3,158 per square foot. Thor bought a 75 percent stake in the building in 2011 for $55 million.

Samsung is reportedly paying $125 per square foot in rent for the office space and $450 per square foot for the "retail" area. Those rents are above New York averages for prime real estate, according to CompStak. The problem for gauging returns on Samsung's effort is that there's no retail being conducted.

Samsung said is partnering with the community to highlight artists, thought leadership and culture. At some point, you have to wonder if Samsung is going to try and connect the sales dots from 837 to real sales. After all, you can check out 837, walk a block away and buy something from the Apple store.

In the end, 837 is Samsung's marketing return equation to figure out. As for me, Samsung's 837 was a good trip. I'm just glad it doesn't fall under my marketing expenses.

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