Retail Marketing

Do flagship stores have a future in retail?

October 2021 7 min read Written by Papirfly

In this article, you’ll learn…

  • Why flagship stores have a vital role to play in today’s landscape
  • What makes flagships so valuable for retailers
  • Trends that will drive the future of these stores

We’ve heard talk about the “death of the high street” for years. The rising popularity and frequency of online shopping and an ever-growing list of shops that have disappeared – trends accelerated by the COVID-19 pandemic – have led many to question whether physical stores still have a place today.

  • Total online retail sales grew 36% year-on-year in 2020 – the highest annual growth since 2007 (IMRG Capgemini)
  • Almost 40% of all retail sales in the UK in May 2021 were conducted online (BRC)
  • Online shopping is expected to reach nearly a third of all retail sales by 2024 (Osome)

The relevance of the “flagship store” has come under particular scrutiny. Once considered the most important and impressive store in an organisation’s fleet, the impact of the pandemic and the overall shift towards digital experiences has changed some people’s attitudes towards these environments.

In recent times we’ve seen numerous brands, including Debenhams, Abercrombie & Fitch, Zara and Topshop, close down flagship stores worldwide.

But, not all retailers are singing the same tune – Burberry opened a new flagship store in London as recently as July 2021. Stone Island, L’Estrange, VASHI, UGG and Hermès are among the many retailers to establish flagship stores in major markets since the COVID-19 outbreak.

With this in mind, in this article we will look at the continued importance of the flagship store in the current landscape, and what the future looks like for these locations.

Flagship stores: a brief history

The legacy of the flagship store stretches back to the late 19th century, with the grand Steinway Hall in New York one of the earliest examples. These concepts set the tone for what flagship store would be – the most luxurious and spectacular example of a retail brand’s identity.

By the 1980s and 90s, many premium and midmarket brands had established their own flagships in the world’s biggest cities, with Niketown in Oxford Street one of the most notable examples.

Selfridges in London. Galeries Lafayette in Paris. Nike’s House of Innovation on Fifth Avenue. These and other iconic flagship stores have held a magnetic appeal with consumers for decades, acting as so much more than just supersized stores. They were tourist destinations. They were attractions. They were the epitome of what a brand stood for.

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What is the appeal of the flagship store?

Many aspects make flagship stores unique from other shops within an organisation:

Their size and scale

Flagship stores are traditionally the largest and most aesthetically impressive location in a brand’s armada of shops. They use this size to showcase not only the latest products and developments from the brand, but its history, innovation and personality.

Their size and scale helps to demonstrate the power of the brand, with the aim of leaving visitors wowed. It is more than just a means of containing more products and collateral – it is an indication to potential customers that yours is a brand that matters.

Their location

The majority of flagship stores are based in standout global cities – London, New York City, Beijing, Tokyo, Paris – cities that receive significant footfall and are prominent tourist destinations.

Because shopping is a popular tourist pastime, these flagship stores act as a great introduction to shoppers worldwide, compelling them to frequent their local sites in future. Some of the best flagship stores even become go-to destinations in their own right.

Their customer service

While retailers strive to maintain a strong standard of customer service in all locations, it is usually taken to another level in their flagship stores. Experiences are often more personal and unique in these environments.

This is often because flagship stores are where people “experience” a brand. They engage the senses and encourage interaction between customers and employees to a greater level than most local stores.

Their purpose

While there is a significant commercial component to a flagship store – like any other brick-and-mortar shop it needs to generate sales – the purpose of a flagship store extends much further.

Flagship stores are the “homes” of retail brands. They promote a brand, making it accessible and tactile for consumers. Almost everything inside is designed to emphasise a brand’s products, legacy and identity. This brand presence, beyond the revenue these locations generate, is why these stores hold such a revered place in retail.

Why are flagship stores still relevant today?

This all sounds incredible, but there is a key question to address: “If flagship stores are so crucial to showcasing a retail brand, why are many shutting down?”

Undoubtedly the pandemic has had a major role in this – numerous retailers were hit hard, forcing them to shut down locations either as a means to survive, or because they went out of business altogether.

However, some were questioning the relevance of the flagship store before we ever heard of COVID-19. In an industry that is rapidly transitioning to online and local commerce, is there still a place for costly, gigantic megastores?

We believe so. In fact, we feel their relevance has only grown as a result of these trends. While digital shopping is becoming more sophisticated every year, many still actively prefer the in-person experience of going into a store rather than shopping online.

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This could be for a number of reasons:

  • Preferring to see and feel products before they decide to purchase them
  • Wanting to interact with other humans face-to-face rather than through a screen
  • Enjoying the activity of shopping generally
  • Wanting to feel more connected to a brand by personally visiting shops

The pandemic may have actually strengthened these feelings. After many months unable to visit brick-and-mortar stores, many will feel more motivated than ever to return.

Furthermore, there is the risk that by forgoing the importance of your flagship stores, as Gap has done recently, you illustrate to customers that you don’t value these experiential, personalised brand experiences – something that many think very highly of.

As Matt Sargent, principal of Sargent Up North, in an interview with Retail Dive eloquently put it:

"It shows your customers that you’re not connected to that intimacy. You will see brands like Nike advocate for their brand in flagship stores and company stores, while for brands on the decline like Gap it's a short-term profitability measure. It may be necessary, but it’s very problematic."

"The beauty of a flagship store is it's aspirational. It's designed to pull interest, create that halo effect. People still want to engage with brands and want to make that trip meaningful versus transactional."

Remember that while online shopping exploded during the pandemic, stores that delivered a multi-channel experience benefited the most – these retailers enjoyed a growth rate of 57% in 2020, with online-only retailers only growing 9%.

With that said, flagship stores are crucial to an effective omnichannel strategy. A place that gives visitors a tangible, experiential sense of a brand and its products, which can then encourage future online and local purchases.

The future of the flagship store

So what does the future of the flagship store look like? While nothing is ever set in stone in the world of retail, here are three key trends to follow:

#1 Elevating experiential marketing further

An important trend for the future of the flagship store will be introducing ways to help consumers experience a brand and its offerings even more closely than in years prior.

Consider Nike’s flagship in Times Square. It includes a basketball court with cameras for customers to record their shots, and treadmills with screens that mimic famous running routes across the globe. These don’t directly drive sales, but they emphasise the identity of the brand, and deliver this in a sense-driven, engaging way to customers.

In order to encourage sales either online or in local stores, the flagships must continue to provide the most complete and enthralling experiences to visitors.

#2 A greater mix of physical and digital

In a similar vein, we anticipate that flagship stores will need to deliver a more seamless transition between a brand’s physical and online presence.

Innovations like the Starbucks rewards app that allows you to order ahead before walking into a store, or the Sephora Beauty Bag account which immediately saves purchases made in-store so they can be quickly repurchased when products run out, have massively improved the way that these companies’ customers interact with their brand across all platforms.

As the standout stores for the brand, flagships have to take this to another level. With many adopting new technologies like virtual and augmented reality to support this vision, a retailer’s flagship should be at the heart of a commitment to multi-channel marketing.

#3 Reassessing flagship performance

Finally, we believe it is essential that the performance of flagships moving forward should not simply be measured by revenue generated – something that likely contributed to the closure of many of these as a result of the pandemic.

While no one is suggesting that sales shouldn’t factor into how well they are operating, it is just one part of the equation. Retailers should also incorporate KPIs that judge the flagship’s influence on the strength of their brand, such as media reach, tourists attracted, net promoter score, etc.

In fact, companies like Microsoft and Foot Locker actually attribute some of the costs of running their London flagships to their marketing budgets – a sign that they rightly consider these locations more important for increasing brand awareness than a strict sales focus.

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Unlocking the potential of retail marketing

Without question, the flagship store still has a powerful part to play in strengthening the connection between brands and their customers. Until e-commerce becomes the sole avenue for consumers to purchase products – something we don’t see happening for a long, long time – these locations will remain the ultimate showcase of brand identity.

But, while flagships are the prized possession for many retail brands, it is crucial that customers enjoy a seamless experience at every marketing touchpoint. Without this consistency, it is incredibly challenging to bridge that gap between casual consumer and loyal advocate.

BAM by Papirfly™ empowers your retail teams worldwide – from your standout flagships to your most remote local stores – to lock down consistency across all marketing assets, and produce campaigns faster and more cost-effectively than ever before.

Book your personal demo today to discover the power of BAM first-hand, or get in touch to talk to a member of our team.

by Papirfly

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