Have flagships become obsolete?

Discussion
Photo: Gap, Inc.
Jun 03, 2021

On June 3, a two-story Harry Potter flagship debuted on Broadway, representing one of the biggest store openings in Manhattan in years.

The investment comes as flagships, which significantly depend on tourist traffic, have been squeezed particularly hard by the pandemic and concerns remain about the recovery of major cities.

Have flagships become obsolete?
Photo: Warner Bros.

The value of flagships has often been questioned, with many promoted more for their branding benefits than four-wall profitability.

In March 2020 just before the pandemic’s onset, Gap Inc. announced it was considering closing its “least profitable” flagships, including its Gap and Old Navy stores in Manhattan’s Times Square.

“As we and many of our peers have noted, the marketing value of the historical flagship model has diminished with the continued confluence of channels in the omni-shopping journey, particularly considering the size, location, premium brands and longer lease terms associated with flags,” Teri List-Stoll, Gap’s former CFO, said on a quarterly call at the time.

In December 2020, Abercrombie & Fitch announced it was closing seven flagships that accounted for 10 percent of global square footage but only one percent of revenue. Abercrombie’s CEO Fran Horowitz, said, “Closing flagships is a critical part of our ongoing work to reposition our store network to more intimate omni-enabled stores to better serve our local customer and represent our updated brand positioning.”

Nonetheless, Gibson just announced plans to open its first flagship described as the “Ultimate Guitar Experience” in Nashville. Supreme and Versace have opened flagships in Milan and Gucci just opened one in Seoul. In New York City, flagships debuted last year from Ugg on Fifth Avenue, Major League Baseball on the Avenue of the Americas and Krispy Kreme in Times Square.

“With so many places running away from New York, especially retailers, we want to be part of the re-emergence of New York City,” Krispy Kreme chief marketing officer David Skena, told Advertising Age last August. “We’re betting on New York.”

DISCUSSION QUESTIONS: Have flagships become less worthwhile given pandemic-related challenges and the shift to omnichannel retailing? Where do you see the value in flagships for brands or chains?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Flagships are not a thing of the past - the purpose of the flagship is what needs to evolve. "
"With the foot-traffic drought now recovering in most U.S. markets, I see an opportunity for more brand palaces, not fewer..."
"Flagships are like Disneyland – an expensive treat for the family once a year, but not a place you’re going to visit every week."

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45 Comments on "Have flagships become obsolete?"


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Mark Ryski
BrainTrust

While flagships have their place, and for certain brands it makes great sense, in general I believe the era of flagships is coming to an end. The fact is, retailers need to deliver great customer experiences in all their stores and not just in flagships.

Neil Saunders
BrainTrust

Flagships in big cities have suffered in the pandemic, mainly because foot traffic has dropped as commuters and tourists have visited less frequently. So, to some extent, they will become more relevant as those trends unwind. However flagship stores are only useful if retailers can generate significantly higher (profitable) volume from them or if they help build brand value in some other way. The Gap approach to a flagship was to have a very large store that was basically the same as its smaller stores. What is the point in that? That kind of vanity play will almost certainly come to an end as retailers assess their costs.

Gene Detroyer
BrainTrust

Your Gap observation defines the flagship store problem. The flagship store must be a blow-away experience that is even more likely to attract non-brand users than it is those already loyal.

Neil Saunders
BrainTrust

Yes! Why create a bigger version of the same store you’d put in a suburban mall? It makes no sense and, as you say, is unlikely to pull in new shoppers which should be one of the main aims!

Bob Amster
BrainTrust

Absolutely correct! That is the function of the flagship store, in my opinion. I am not sure if there can be more than one flagship store per brand…

Scott Norris
Guest

Starbucks’ Reserve locations might be an exception, but even then just one per major region (Tokyo, Chicago, Milan, etc.). A nighttime walkaround video I watched from Tokyo during cherry-blossom season this year showed that location buzzing, even with masked patrons.

Gene Detroyer
BrainTrust

Flagship stores have one purpose. They are for promoting the brand. Any costs of operating these stores should come out of the advertising and promotion budget and not the operating budget. The measure A&F uses of 10 percent of the square footage and only 1 percent of the sales is entirely the wrong measure. While 10 percent of square footage seems excessive overall, the measure should be the impact on the brand (awareness, preference, positive association), not the sales.

If anything, the flagship stores will be more valuable in the omnichannel world. It will promote the brand for shoppers to go home and buy.

Craig Sundstrom
Guest

I agree, but then we’re back to the ol’ “measuring results” problem … namely how to do it? Presumably if it — or “they” if you have more than one flagship (though too many hints at another problem) — is under the umbrella of marketing, it would be the same metrics as an ad campaign.

David Weinand
BrainTrust

I’ve rarely seen a flagship store post higher profitability than other stores across a brand’s chain and typically retailers have been OK with that due to the brand value it brings. Going forward I see the value of flagships for up and coming brands that are trying to break through a crowded marketplace. The established (and often suffering) brands like Gap and A&F will be focusing more on profitability.

Steve Dennis
BrainTrust

It’s possible that’s because they are thinking about profitability the wrong way.

Richard Hernandez
BrainTrust

I always have considered flagships as research and development labs where if you could have everything you want in a store you would put it in a flagship, test it, and roll out components of it to the other stores. I believe they still have a value in that respect.

David Naumann
BrainTrust

During the pandemic, flagship stores had minimal value and they are still below pre-pandemic levels because tourism retail is still being impacted. While store traffic may never reach pre-pandemic levels, flagship stores will continue to be a great draw for destination retail and consumers who appreciate the entertainment of shopping. However the cost of flagship stores in premium locations like NYC may not be worth it for non-premium brands.

Rick Watson
BrainTrust

I think there is a slippery slope between the idea that flagships are dead and the idea that retail is dead. Without question, digital is the new flagship of any brand.

However for new product introduction and creating brand experience, there is nothing in digital to replace an immersive physical experience. Particularly for a brand that wants to create international buzz (high value tourists!).

Suresh Chaganti
BrainTrust

It is true that flagships should be seen as brand identity, and not measured based on profitability within four walls, or even holistic omnichannel measures. By the same token, the effectiveness of flagships should be compared with similar alternatives – a national brand awareness campaign, a sponsorship, or similar brand marketing initiatives.

No one has precise numbers or even estimates of what flagships do on the positive side for the overall brand. The risk is these types of physical structures become vanity projects that consume precious mindshare and resources.

At one level, it is understandable for physical retailers to have a flagship store. But the trend of online brands opening a flagship is questionable unless the intent is there to make substantial investments in physical retail. Even then, testing in real markets is the practical way, as opposed to opening a store in SoHo.

Georganne Bender
BrainTrust

Flagship stores are worthwhile when they offer something that’s uniquely different from the rest of the stores. Sadly, many don’t. They’re just bigger versions of what you find at your local mall.

It doesn’t get any better than Macy’s Herald Square; the former Marshall Field’s on State Street in Chicago, now a Macy’s, is another good example. Both of these buildings are almost as important as what’s inside – shoppers know they are in a special place. The pandemic hurt these big stores but I am not ready to write them off.

Craig Sundstrom
Guest

I think it’s significant — and I’m sure Windy Citizens breathed a sigh of relief! — that of the two “downtown” Chicago stores, Macy’s chose to close Water Tower Place. I’m guessing that if you’d been told a decade-and-a-half ago one would go, smart money would have picked State Street.

Georganne Bender
BrainTrust

State Street and Water Tower Place are two completely different stores. Water Tower Place is just a store, a nice one, but still just a store. State Street is an experience. And a legacy that is deeply ingrained in the people of Chicago. We go there to shop, sure, but it’s also where we go to celebrate, eat before and after the theater, and Christmas at State Street is amazing. Macy’s was smart to keep all of the Marshall Field traditions. It’s a true flagship store and a community anchor.

Craig Sundstrom
Guest

“…two completely different stores.” Indeed: one that’s open and one that isn’t!

But all snark aside, what I meant was that with Macy’s seemingly Hell-bent on commoditizing the shopping experience, logic would have dictated that the survivor would indeed be the “just a store.” Not to mention the costs of running 400K gsf vs. 2M and the relative retail/tourist landscapes of Magic Mile vs. the Loop (though offset by the 500K office workers in the latter).

So my take is that the generic answer didn’t win: I’m delighted … but still surprised.

Liza Amlani
BrainTrust

Flagships are not a thing of the past – the purpose of the flagship is what needs to evolve.

No one needs a flagship store in every high-traffic shopping area or to serve as an anchor to a shopping mall. Flagships don’t have to be giant monstrosities but what they do need to be is a representation of the brand with engaging experiences, innovative product ranges, and localized assortments.

The flagship needs to engage the customer and get them involved in what the brand actually represents – Nike + sport, Adidas + sustainability, Levi’s + product innovation and so on.

This is what we want to see. Involve your customers in creating a validating product in your flagship stores. Create an exciting and invigorating experience that wows at every visit.

Customers want to be delighted. A flagship can do that.

Ken Morris
BrainTrust

I believe in the theater of shopping so flagships to me are a stage and there will always be theater on Broadway. I believe it is more about the brand and innovation. If you build excitement into your stores they will come. We have to reinvent our brands to stay fresh and relevant in a milieu where people are satisfied with the 2-D or 3-D online experience instead of real life.

Bob Amster
BrainTrust

The flagship store serves to represent, and draw consumer interest to, the brand. I will never forget when Ralph Lauren opened his flagship store in the former Rhinelander Mansion on the corner of some of the most expensive real estate in New York City, with Bloomingdale’s – theretofore Ralph’s biggest outlet – merely blocks down Madison Avenue, and Marvin Traub understood the benefit of having the flagship there. In big cities, with a lot of tourist traffic, a well-done flagship can be a destination. “If you build [right], they will come.”

Bob Phibbs
BrainTrust

Gibson has it right. If you aren’t going to set a high water mark for delivering an exceptional experience but just have more of your stuff in a bigger store like Gap, you might as well close the flagships – and most of your stores. Get it right like Lululemon and Starbucks and you truly make your flagship the heart and soul all of what all your other stores should aspire to be.

Kathleen Fischer
BrainTrust

To be relevant, flagships need to create and demonstrate the overall brand experience. While a Harry Potter or Gibson Guitar flagship store may be a powerful draw for customers/fans, some flagships may not be as relevant and don’t make sense to the business.

Zel Bianco
BrainTrust

Yes some flagship stores have become irrelevant but here in NYC, it is not the case as NYC is coming back fast. Nordstrom is in a location that will always have traffic given that it is steps away from Columbus Circle and Central Park. Tourists are starting to return, so they will be all over town including all the large retailers in Hudson Yards. Attendees at next years NRF will be amazed!

Jeff Sward
BrainTrust

Just like the number of malls and the overall store count got out of control, so did the whole concept of flagship stores. Flagships as pure ego projects are history. But flagship as an acknowledgement to the Explore + Experiment = Experience equation still make sense. Brands need to explore and experiment every bit as much as customers do.

Dick Seesel
BrainTrust

As travel and tourism return, the interest in experiential retail will come back. While giant flagships in central cities may never carry the same cachet — especially if nearby offices remain half-empty — they still serve a purpose in defining a brand. The model isn’t sustainable for every retailer, but the “buzz factor” still makes sense for many brands.

Lee Peterson
BrainTrust

I think the opposite is true — I think that the flagship idea will actually become more important going forward, BUT in a different fashion from the behemoths of the ’80s and ’90s. Albeit in a reduced manner, consumers still want to see, touch and “feel” a brand, and there is no better way to achieve that than through physical depiction. They may be showroom stores or partial fulfillment centers but with e-commerce soon being the dominant form of shopping, the idea of a heightened retail experience will increase in importance as a “frosting on the cake” method of making your brand better than (or at least much different than) your competitors.

Cathy Hotka
BrainTrust

Flagships aren’t just stores. They’re billboards, giant advertisements, brand palaces, and invitations to experience what that brand has to offer. It doesn’t matter whether they are profitable or not; they exist to create mystique and aspirational desire. Long live the flagship.

Gene Detroyer
BrainTrust

I love “Brand Palaces”! I wonder if we called them that if we would think differently about flagships.

Jlauderbach
Guest

Cathy I completely agree. Flagship stores need to excite the imagination. Practicality be damned!

James Tenser
BrainTrust

Yes Cathy, “flagship” stores put a shining face on the retail brand and their primary value is as a marketing engine. But a powerhouse marketing tool that also earns enough in retail sales to cover or exceed its costs is a thing of special beauty.

With the foot-traffic drought now recovering in most U.S. markets, I see an opportunity for more brand palaces, not fewer, despite the closures which were forced by certain investors. In particular, look for ambitious direct-to-consumer brands to open on Main Street. I’d submit the tactic is less costly and more effective than pounding out gigabytes of social media.

Cathy Hotka
BrainTrust

Amen!

Karen S. Herman
BrainTrust

Clearly, the flagship stores that are launching in the era of COVID-19 are highly experiential and brand driven. This is important because the perceived value of having a flagship presence for a company is still important. Integrating immersive short-term offline retail experiences into the brick-and-mortar shopping journey for the consumer is key now and going forward, regardless of location. The consumer has changed and retailers need to adapt.

Mohamed Amer, PhD
BrainTrust

Flagship stores are the ultimate expression of the brand. They are a marketing investment designed to wow customers with the best the brand offers from the in-store experience. That includes assortment uniqueness, special collections, visuals, signage, and services. You look at flagships first as brand enhancers and force multipliers and not as profit centers.

The pandemic was a once-in-a-lifetime event rather than the new (ab)normal. Flag store location selection is critical and needs to align with and enrich the brand proposition. Gibson and Nashville form a natural pairing, so do fashion and Manhattan. Regional flagship stores make sense with robust research and execution. In the land of omnichannel, there is an even greater need for well-designed, highly experiential flagship stores.

DeAnn Campbell
BrainTrust

Flagships are like Disneyland – an expensive treat for the family once a year, but not a place you’re going to visit every week. I get why flagships seem like a good idea – they generate press and appear to be a great marketing tool. But in truth brands will see more success if they first map out the key pillars of their brand, then figure out how to inject these pillars into their everyday stores before building flagships. It’s easy to build a highly experiential flagship with boatloads of square footage and money, but very, very hard to scale that down to where the money is really made – in the mainstay local level stores. Value comes from connecting to your community of regular shoppers, not in unique and more often far away flagships.

Steve Dennis
BrainTrust
No, though perhaps the terminology needs to change. Physical presence is only less important for brands that sell what amounts to convenience and commodity-oriented products. For everyone else physical presences are an essential component of a well-harmonized (can we please stop using “omnichannel”?) customer-first strategy. But the role of brick-and-mortar continues to evolve. Shopping is not about physical or digital, it is how they work together in concert. Stores themselves are increasingly hybrid in nature, serving in their historical manner (places for customers to go inspect product, maybe get some sales help and get immediate gratification), but more and more as the hub of a brand’s ecosystem. This means they are places to pick-up and return e-commerce orders, sources of product inspiration, the most elevated brand marketing, service centers and more. So the stores themselves will evolve in their layout, design and operations to serve their hybrid roles. A given retailer’s format deployment needs to evolve to become more hybrid. Flagship stores will still have a role in being the most immersive and expansive expression… Read more »
Ryan Mathews
BrainTrust

It isn’t a question of flagships being more or less worthwhile, it’s an issue of whether brands can develop fewer, and more highly differentiated, flagship locations. In other words, what else could a flagship store be if it wasn’t trying to function as a traditional flagship? The default answer is “an experience center” – whatever that means, but I think that too often “experience” is a buzzword for “haven’t got a clue.” Why not have a few flagships that function as consumer testing and information learning labs? What happens instead of flaunting style consumers were invited to co-design existing products or new lines? Flagships have historically been built as places where people meet the brand. What would happen if we turn that around and view flagships as the place where the brand meets the consumer?

Doug Garnett
BrainTrust
11 months 25 days ago

The value of a flagship seems to depend on the usefulness of a dramatic showcase to feature products. So it’s no wonder that Gap’s showcases struggle — customers don’t have enough reason to go to their mall stores let alone a showcase.

As with any other effort, there’s no truth to the idea that “all showcases should succeed” nor that “all brands will thrive with showcases.” Some should and will. Many shouldn’t and won’t.

But that’s also nothing new. Any business effort needs to be considered for the unique, individual reality of that business at the specific point in time.

Brent Biddulph
BrainTrust

Think of flagship stores as ambassadors from a brand and marketing perspective – they have their place, especially in fashion, especially in big cities like NYC. However even more exciting (at least for me) are incubator/concept stores – often in demographically representative areas where retailers across all sectors are testing new technologies leveraging data analytics focused on the customer experience.

Mark Price
BrainTrust
Mark Price
Chief Data Officer, CaringBridge
11 months 25 days ago

The objective of a flagship store is to generate awareness and exposure to a brand in an area of high traffic. Those stores rarely pay out per se — their impact is spread across markets and channels as consumers make their purchases later on.

Many of those stores are located where tourist traffic is strong, which spreads brand exposure to other markets without going to them (e.g. NYC). As tourist traffic grows again post COVID, flagship stores will regain some of their importance.

Craig Sundstrom
Guest

This is a classic case of “defining the question.” In the true sense (that the word was used) a flagship was a single store, usually the original — or at most a few large stores at key locations — that offered something the other stores did not.

As store-based selling shrinks, I would think something like this would become all the more important for defining the brand, and helping to differentiate it. However, that having been said, as the term has come to be degraded — Barneys was an example, with practically all of its stores being called “flagships” — I don’t think they have much value (if they ever did). A “flagship” whose main feature is having 30% more g.s.f. than average is just that much more excess space.

Dan Surtees
Guest

For the retailer, what are your objectives for the flagship store and how are you going to measure success?

Sometimes we do the same thing over and over because “we’ve doing it that way for years.” In an omnichannel world, the cost of operating flagship stores might be better used elsewhere and deliver on the same objectives.

Brand awareness. Customer experience. Promotions. All of these can be accomplished much easier in other ways, with a significantly less risk and financial commitment.

storewanderer
Guest
11 months 25 days ago
Flagships in high rent locations are challenged for so many reasons: Less tourism- especially International tourists who often visited these stores Work from home- less traffic in these downtown areas where the flagships are located in general Among others. Another issue I’ve seen is these flagships disappoint customers when the customer goes into the flagship store and the store does not have what they are looking for (but I saw it on the website — you are the flagship store — you don’t have it?). This is part of a larger issue for the physical stores in general. A key element of flagships is they need to remain fresh. Let’s just say as of March 2020 most flagship stores became, should we say, stale. I expect in the future as travel picks back up, office traffic picks back up, brands evolve and have new things they want to show off, we will see fresh new flagship stores developed. Some brands may get out of doing flagship stores but other brands will decide they may be… Read more »
Kevin Graff
BrainTrust

A “flagship” was the ship that carried the commander of the fleet and flied the commander’s flag. It was better than every other ship in the fleet in every respect. So too must a flagship store be. It’s not enough to rent a big, high profile location and then just do the usual (boring) store. It needs to be a true experience that brings the brand to life and wows customers.

And while it’s great if you can make money at the flagship, the measurement of that store needs to extend beyond just the cash register. That store, done right, is the “commercial” that runs 24 hours a day, 365 days a year. Done right, it drives awareness, traffic to the online site, and even traffic to your other stores.

Karen Wong
BrainTrust

Flagships work for brands that know how to leverage them, hence why they are increasingly scarce.

wpDiscuz
Braintrust
"Flagships are not a thing of the past - the purpose of the flagship is what needs to evolve. "
"With the foot-traffic drought now recovering in most U.S. markets, I see an opportunity for more brand palaces, not fewer..."
"Flagships are like Disneyland – an expensive treat for the family once a year, but not a place you’re going to visit every week."

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