Flagship Stores and the Future of Fashion Retail

Thomas Brownlees

Thomas Brownlees

CEO and Founder,
440 Industries

Introduction

There is no business like the fashion business, especially when it comes to luxury.
A luxury fashion company is an organisation required to
withstand the highest standards of quality across its supply chain. Fashion brands don’t sell clothes, they sell something much more intangible: status, identity, freedom of expression. The associations that brands build are connected with the idea of standing out or making ourselves notices, but also fitting in or feeling part of an exclusive elite. In both cases, brands are selling a dream, which customers buy into, every time they see a commercial, a fashion show or a red carpet event.

In order to deliver this ‘dream factor’ the retail experience that brands provide to their customers cannot be downplayed. Retail may be the last mile of a firm’s supply chain, but it’s the first touchpoint with your target audience and establish a connection that draws the customer into the brand’s narrative, its heritage its story.

In this post, we are going to look at the evolution that fashion retailers have experienced over the past decade, in order to understand how retail has evolved towards new experiential models where physical and digital distribution coexist and become a synergic force centred on the customer. This synergy is called omnichannel distribution and is designed to integrate all of the benefits that customers get from in-store purchases, with all of the efficiencies that can be expected from technological innovation.

Here are the topics we’re going to discuss in this post:

Play Video

1. Creating a seamless omnichannel distribution experience through a company’s digital presence.

At the beginning of the internet era, many companies perceived the web as a digital environment where the values associated with the fashion world were hard to stand by. The internet is in fact easily associated with discounts, lower prices and high product accessibility. All of these values hardly align with a firm’s intent to associate its items with a sense of exclusivity, scarcity and timelessness, which are the foundations of premium pricing strategies.

Fashion firms, however, realised that the way to address this challenge was not to ignore the problem or avoid digital distribution as a whole. The solution lied in combining a customer’s physical and digital experience through an omnichannel distribution strategy.  

Through omnichannel distribution companies are able to integrate the “digital” and the “physical” purchase experience into the
customer’s journey, exploiting the benefits of both channels to create a synergy between a physical store and an online marketplace.

Here in Italy,
Luisa Via Roma was one of the first movers into this uncharted territory. As a multi-brand high-end fashion store, it was able to earn media space through influencer marketing campaigns and create a new shopping experience which allowed its customers to find both social validation and seamless one-click access to a vast collection of designer brands. By building upon these values of efficiency and customer-centricity many fashion brands were able to broaden their audience, and access new segments of the consumer market.

Undeniably, an online store has a series of advantages in comparison to physical retail, for example:

  • A website or a transactional e-commerce store is a 2-dimensional experience, which induces the visitor to focus on the purchase process instead of being potentially distracted by a 3d environment.
  • A product page is a tireless 24/7 brand ambassador, working (almost) for free.
  • Checkout processes and other website interactions are functions that can be controlled and optimised by collecting and mining user data.
  • A multi-language website can be a very inexpensive entry method into a foreign country, generating traffic and collecting orders from global digital customers.
  • Global seasonality. By acquiring user data, e-commerce stores can advertise the best clothing options, according to the weather conditions associated with the visitor’s location.
  • Aside from the hosting space and the domain name rental, a website has a minimal cost, which is not even remotely comparable to the costs of renting and running a physical retail store.

These benefits have shown to fashion firms that the integration between a physical and digital experience can help to create better profit margins, despite the challenges connected to a brand’s dilution. Brand dilution is the idea that is a brand becomes too commonly available, customers will not perceive the value of its exclusivity.

Seamless integration of physical and digital journeys can be achieved through the merger of customers’ expectations. This happens through the development of features that allow the transition from an online store to physical stores with a single click.

Some examples of these
omnichannel functions can be the following:

  • Buy online, pick up in-store. This allows merging the ‘webrooming’ behaviour with a luxury purchase experience.
  • Reserve in store. If your customer does not trust online transactions, allowing customers to book the product online and to purchase it in-store can help increase conversion rates.
  • Localise store. In the era of global tourism, finding a store close to the customer location can make a customer feel close to the brand, wherever he\she may be.
  • Try out in the store, ship home. This can allow customers to try clothing in-store to find the perfect fit. If the right size is not available in the store, then the specific size can be requested and sent to the customer’s home address.
  • Browse the shop’s shelves through a pad in the physical store. Retail locations are so expensive that only a selection of items can be displayed on the shelves. By allowing customers to browse the online catalogue through a pad enables them to see the full extent of your collection while educating them on how to shop from home by using the brand’s digital platform.

These elements of physical and digital integration can in time, impact customer behaviour at its foundations and help re-imagining stores from the ground up. Physical stores, to welcome this innovation need to evolve if they want to better support the omnichannel distribution approach pursued by a fashion brand.

In the next paragraph, we are going to discuss some of the new retail formats that many luxury brands are developing to innovate in-store experiences.

2. New retail formats in the fashion industry and flagship stores.

As presented in the video, creating a “phygital” (physical and digital) experience for your customers requires you to learn a new language. Burberry’s flagship store in London set a new best practice when it comes to creating an experiential journey breaking the boundaries of traditional retail.
So why are flagship stores so important, and why did Burberry start this retail evolution through its most important distribution channel?
Let’s start with clarifying what a flagship store is.

  • Flagship stores take their name from naval military history. Flagship vessels are the most important ships of a country’s fleet. Flagship stores, by comparison, are the most important stores in a company’s retail distribution chain.
  • A flagship store goes beyond selling a company’s products. Its goal is to draw customers into the brand. Flagship stores need to be imagined as theatres, where the narrative of the brand is narrated to the visitors. A flagship store is a place of entertainment and education, rather than sales.
  • Due to their prestigious locations, flagship stores can be tourist attractions by their own right. Luxury brands thrive on the country-of-origin effect and leverage prestigious premises to further reinforce a brand’s association with national culture and a reputation for excellence.

Angela Ahrends was one of the visionaries behind Burberry’s 121 Regent’s Street store in London.  Mrs Ahrends was able to imagine a retail format that many deemed impossible. 
Moreover, we can see some
additional benefits that a  flagship store is able to deliver to the market.

  • Firstly, it introduces, reinforces and enhances the retailer’s position and status as a credible luxury brand.
  • Secondly, it provides the retailer with the physical retail space and opportunity to develop new business propositions, such as diffusion ranges,  as well as using cafès and restaurants to ‘experientialise’ purchase.  Moreover, it can use the space available in the retail location to expand its product range. Home furnishings represent an example of frequent range expansion.
  • Thirdly, the function of the flagship store is to stimulate, strengthen and support the relationships existing between the brand and three separate stakeholder groups: distribution partners, fashion media and customers.

The rich experience provided by these stores, and their ability to become brand gateways, shows us why companies are using flagship stores as an entry strategy to foreign markets.

This is an important aspect to consider, and we are addressing it in the next section of this post.

3. Flagship stores as a foreign market entry method.

Fashion retailers may find themselves torn between different possibilities when entering foreign markets. When addressing the opportunity to grow their business by entering new, foreign markets, retail managers can choose from a wide pool of strategic entry choices spanning from direct export to greenfield operations. This is a key decision in international marketing, and if you’re interested in reading more about it we discuss foreign market entry modes in greater detail in this article.

It has to be clarified, however, that the development of a flagship store is not usually the first step into new markets. In many cases, a foreign country is an uncharted territory. Brands need to first establish a connection to foreign customers first through less risky strategies which often entail third-party distributors.
 When a fashion firm decides to build a flagship store, its intent is to signal that the brand has reached a point of maturity where it has gained the confidence to build a long-term foreign presence, designed to celebrate the relationship with a large community of loyal customers

There are two main elements to consider in terms of using a
flagship store to establish and develop a foreign market presence:

  • Flagship stores cannot be simply for profit. Academic literature and business practice address international expansion in the context of balancing risks and rewards. A flagship store is extremely costly, but still provides uncertain rewards, so at first glance, it seems to follow an unreasonable logic.

    Flagship stores call for extremely expensive investments, catalysing a brand’s heritage through its association with luxurious entertainment, historical premises and renowned architects. Creating a flagship store cannot be seen as a viable approach, if not in terms of pursuing something other than short-term profit generation. A flagship store is the opportunity to foster a profound relationship between a brand and its stakeholders. In the perspective of developing a brand’s intangible value, only luxury brands and fashion conglomerates can offset the cost of the flagship store.
  • Fashion companies can use flagship stores as a unique entry mode designed to access foreign markets balancing physical costs with digitally-generated revenues. In this second scenario, we can consider the sales generated from a brand’s e-commerce platform as an index of the flagship store’s profitability. This is because the flagship store is able to attract customers into the brand,  while an e-commerce platform, can assist in converting this relationship into a sale. In this sense, if we account for digital sales, flagship stores do not only provide intangible benefits but actual tangible returns.

In this perspective, we see how the ‘customer journey’ model pushed fashion brands to adopt experiential approaches rather than operational approaches to market entry, as the former reduces the distance between the brand and the consumer, regardless of any actual physical distance.
That’s it, let’s now move on to conclusions.

4. Conclusions.

There is no business like the fashion business. Fashion companies are constantly drawn to innovate and reimagine retail. In this article, we have discussed how in-store and and online customer journeys can be aligned thank to omnichannel distribution. 

‘Phygital’ experiences however are not the only trend in fashion retail, so much more is happening. Take a look below and see if you can find other articles from our blog that explore the new trends impacting the world of fashion.

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Flagship Stores and the Future of Fashion Retail Fashion retail has experiences profound changes over the last decade because of omnichannel distributions strategies. Let's look where we're headed.
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Thomas Brownlees

Thomas Brownlees

I am an Anglo-Italian business lecturer and consultant based in Florence, Italy. In 2017 I started 440 Industries, an education and training company focused on fashion, music, and technology. Our mission is to help students, entrepreneurs and managers in overcoming the challenges of starting, developing and scaling their business in the creative industries. When there's a will, there's a way!

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