WSJ: WANT SOMEWHERE TO HANG?

By: Katie Deighton

Interest in “third places”—public spaces that aren’t home or work where people can gather, hang out or just be—is growing as the line between people’s offices and living rooms grows ever-blurrier in the hybrid-work era. Some brands that don’t usually have anything to do with hospitality say that demand is an opportunity.

Mud\Wtr, which sells mushroom-based coffee alternatives, last month in Santa Monica, Calif., opened “a cafe without the coffee, a mindfulness studio without the noise, and open workspace with fast Wi-Fi so you can get things done and take care of yourself in one spot.” In the Gulch neighborhood of Nashville, Tenn., fashion brand Aviator Nation is gearing up to open its second live music venue and event space, following the 2022 opening of Aviator Nation Dreamland in Malibu, Calif.

Mud\Wtr’s cafe provides space for social events and co-working, while serving the company’s beverages. PHOTO: MADELEINE PHOTOGRAPHY
The ventures aren’t about creating another meaningful revenue stream or sales pipeline, according to the companies. Rather, they are designed to make a statement about brand values in a physical form that is more persistent than the pop-up shops and experiences that have proliferated over the past decade, executives say.

“We are not looking to sell accounts through the cafes,” said Jennifer Windbeck, Capital One’s head of retail bank channels and operations. “We are looking at the cafes as ways of expanding the public’s exposure to Capital One.”

Visitors who are interested in becoming banking customers can sit down on a couch and chat with a Capital One ambassador, but staff are trained not to aggressively approach or circle cafe guests, Windbeck said. Employees don’t have sales goals to hit, she added.

A cafe’s success is judged by its traffic, local measures of brand popularity, customer satisfaction levels and whether an opening coincides with a lift in new accounts in the local neighborhood.

“We have expanded our physical presence through the cafes into markets where we did not have branches traditionally,” Windbeck said, noting that customers could visit the cafe but go on to open an account online. The company declined to disclose details about any impact the cafes have had on its business so far.

Ghosts of third places past
Adding real estate under expenses marked “brand marketing” isn’t a new idea, but its executions haven’t always proven to be as permanent as advertised.

General Motors operated a New York City cafe and art gallery called Cadillac House from 2016 through 2019. It closed as Cadillac’s brand marketing team moved back to the car maker’s central headquarters in Michigan. The company has no immediate plans to open a similar venue again in the U.S., a spokesman said.

“Unfortunately, due to structural damage to the space from significant flooding, our time in the Kenmare Street location ended early,” said a Bumble spokeswoman, who didn’t respond to questions about any plans to open another branded space.

Signing pricey leases for in-demand retail space in a time of rising costs for staffing, food and energy without the aim of a profit is certainly a risky strategy, said Michael Miraflor, chief brand officer at venture firm Hannah Grey VC, which invests in early-stage startups. Marketing executives today are also under more pressure to generate sales through their activities, rather than more nebulous metrics such as brand awareness and approval, than they were when Cadillac and others opened third places before the pandemic, Miraflor said.

But giving people a public place to spend time is a smart decision in a period defined by remote work and a loneliness crisis, he said.

“That adds value to customers or potential customers’ daily lives,” Miraflor said. “It creates a very positive brand halo that will hopefully lead to some sales.”

Mud\Wtr has hedged the risks by also using its third place, called Gather, as the company’s headquarters. That means the costs of running Gather, which offers yoga classes, speaking events and cold-plunge parties in addition to daily cafe operations, are split between marketing and operations, according to Chief Executive Shane Heath, who founded the company in 2018.

Heath still had to make some sacrifices to sell the concept to his chief financial officer and board of directors. The company in its first few years set up tasting booths and other pop-up experiences at festivals and events around the country, a routine that was getting expensive, he said.

“So I positioned this space as like, let’s cut all external experiential marketing and invest in a space that we own and run, nearly every day of the week,” Heath said. The company hopes people will try Mud\Wtr’s coffee alternatives in the cafe and sign up for an at-home delivery subscription.

What the people need
Some are skeptical about whether marketing departments can truly fulfill a community need that has historically been handled by smaller companies, local governments and not-for-profit organizations.

The locations might be expanding public gathering places in trendy, affluent and populous cities like New York and Los Angeles, but they would be even more valuable to the community outside major metro areas, said Danielle Rhubart, an assistant professor of biobehavioral health at Pennsylvania State University.

“In many parts of rural America, there is limited social infrastructure,” Rhubart said. “What would be really exciting is seeing similar efforts invested in smaller towns that lack such spaces but could greatly benefit from them.”

Capital One Cafes are spread across a mix of suburbs, malls and city centers in 18 states, but work best in urban areas with a lot of foot traffic, according to Windbeck, the company executive.

Aviator Nation’s founder said brand awareness wasn’t the motivation for the music venue. PHOTO: AVIATOR NATION
Over in Nashville, Aviator Nation is putting the finishing touches to a music venue it hopes will open in the spring.

President and founder Paige Mycoskie, who owns the company, described the original Dreamland space in Malibu as her personal playhouse. It serves breakfast, lunch, dinner and drinks six days a week, and is filled with plush carpets, squishy sofas and nooks that invite guests to chill.

Customers can buy exclusive Aviator Nation Dreamland apparel (hats: $46; denim jackets: $670) in a section that looks more like a music club merch stand than a standard clothing store.

But Mycoskie, who was named by Forbes as one of America’s richest self-made women, says Dreamland wasn’t “created to make a lot of money.” Concepts such as brand awareness and brand value are beside the point, she said.

“My intention is to create a place that artists can enjoy and that may be inspiring for artists with the hope that great music and great experiences come out of it,” she said.