Flagship flops: Calvin Klein, Gap and more. But…

Flagship store
28 Feb 2019

The New York flagship store, “will be closing in spring 2019. The company is evaluating options for future retail locations, and will also be unveiling new consumer experiences both online and offline.” This terse announcement from Calvin Klein marks the end of the famous “yellow store” at 654 Madison Avenue revamped by designer Raf Simons.

The list is getting longer

The Calvin Klein store is just the latest in a stream of legendary flagship closures. At the end of 2018 it was the turn of Gap’s flagship store on Fifth Avenue. But with revenues of about $15 billion from 3,600 stores, the Californian company is still the largest clothing retailer in the United States.

Lord & Taylor, America’s oldest luxury department store, also had its flagship store on Fifth Avenue but closed it in January after more than a hundred years in business. Ralph Lauren had already done the same in 2017, and JC Penney had also had to make the same decision. Toys R Us, Aéropostale, Forever 21 and FAO Schwarz have also had to close their flagships over the past few years. Of course, these are only some of the more high-profile brands.

If we look closer to home, we only need to mention the recent closures by H&M, American Apparel and Promod in Milan to see the situation is reflected here. It is a global trend happening to fashion and other brands because the format is in crisis. An irreversible crisis? Perhaps not. There are two different, but closely interlinked, ways of looking at the phenomenon.

Flagship stores: is the location no longer worth the expense?

In terms of real estate, retailers can no longer justify the expense incurred for these temples of commerce. Real estate brokers have noticed that increasingly more brands prefer smaller, less financially taxing locations.

“Retailers are being more stringent and taking only what they need. In the past. If somebody wanted a Fifth Avenue store and it was substantially larger, they’d still take the space because they wanted the presence.” This is the opinion of Andrew Goldberg, the vice chairman at the CBRE Group, which is probably the largest commercial real estate services firm in the world.

The business card has gone

The flagship store was a brand’s business card for the longest time in the history of retail. Storytelling was worth a great deal more than sales. Some stores were even well worth the trip, Macy’s on 34th Street is an irrefutable example of a must-visit store. But over time consumers have changed their shopping habits and this has drastically scaled back the model’s value.

According to Anthony Dukes, professor of marketing at the University of Southern California, “The physical store was the place to learn about products, inspect them - now we can learn about them on social media.” If flagship stores simply satisfy a need for material things, consumers can get that online with a lot less time, money and effort. Is size the only difference between a flagship and a normal shop? They have lost any of the effect they once had. What if they don’t engage visitors in new and different experiences? Their raison d’être is gone.

There may be many variables driving decisions which can suddenly arise from out of the blue. This is how Art Peck, the CEO of Gap, chose to explain the problem, “There are hundreds of other stores that likely don’t fit our vision for the future of Gap brand specialty store, whether in terms of profitability, customer experience, traffic trends. The range from the very best to the very worst stores is extremely broad.”

Unique is a must

According to the lyrics of a classic Italian song from many moons ago, “you die a little to keep living.” This seems the perfect way to sum up what is happening with brands’ flagship stores: they need to close to reinvent themselves and relaunch.

Some big-name brands are making a conscious move to put the customer experience before sales. Sometimes with truly original ideas aimed at pushing the concept of a showroom-like location, service and entertainment. In fact, this is why the Samsung 837 store made the headlines.

 

Nordstrom’s new men’s-only store that opened last year also made the news: it offers in-house tailoring services and even a restaurant and bar. Nordstrom’s store for only women opens across the street in autumn 2019. At the end of 2018, Nike once again decided that bigger is better and opened a flagship store in New York that spans six floors and 6,000 square metres. It has the largest collection of shoes for sale in the world, but more importantly it offers customers amazingly innovative experiences. The Nike Speed Shop uses Nike’s e-commerce data to stock the store with a localised assortment that sells well in that area. The Nike Expert Studio offers exclusive services ranging from one-on-one appointments with Nike experts to the chance to buy exclusive seasonal products. The Nike Instant Checkout enables customers to pay by scanning the barcode of their chosen items using an app on their phone and avoid queueing at the cash register.

The two Lego flagship stores in China have been a roaring success. They offer the public creative, fun experiences that are highly geared towards the local market. The Forbidden City (made out of 2.2 million Lego bricks) and the Great Wall are very popular attractions with visitors.

Last December the audio specialist Sennheiser chose to open its flagship store in the heart of Sydney at Martin Place, a listed World Heritage building. The level of personalisation offered to customers is off the charts, even including carefully curated private listening sessions.

Let’s relaunch!

Often a smaller store integrated into a large urban area to add character to its location, a store that constantly changes to suit the need for personalisation and fidelity, and features cutting-edge technologies to make the sales space even more exclusive and liveable. This is how the flagship store should be, or it will be no more.