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 the board. In order to sustain its “dream factor”, a luxury brand needs to be perceived consistently over a variety of mediums.

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 omni channel distribution and brand growth have become the driving forces of distribution decisions in this industry.

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

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

This is no easy task. At the beginning of the internet era, many companies perceived the web as “a place” where the values associated with the fashion world were hard to defend. 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 and timelessness, to justify premium pricing.

Fashion firms, however, realised that the way to address this challenge was to merge 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 one-click access to a vast collection of designer brands.

By looking at current trends in the fashion business, we need to acknowledge that an online store has a series of advantages.  Here are some examples:

  • A website or a transactional e-commerce store is a 2-dimensional experience, which induces the visitor to focus on the purchase process.
  • 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 minimal cost, and these are not even remotely comparable to the costs of 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.

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:

  • 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, purchasing an item in the store can help conversion rates.
  • Localise store. In the era of global tourism, finding a store nearby can make a customer feel close to the brand, wherever they 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 on a digital platform.

These elements of physical and digital integration change customer behaviour at its foundations and support the process of re-imagining stores to foster a better “phygital” synergy.

So much can be done online, but physical stores need to change as well 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.

The reason why Burberry chose to start the retail revolution from its flagship stores has to do with what makes this kind of store different from anything else.

Here are some key elements defining flagship stores:

  • 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, they 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. It comes with no surprise that she was then hired by Apple to lead the change into their retail store and to continue the tradition of radical innovation Apple is famous for.

In short, we can summarise the benefits of a flagship store in the following three points:

  • Firstly, it introduces, reinforces and enhances the retailer’s position and status as a credible luxury brand.
  • Secondly, it provides the retailer with the 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 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 distribution retailers and three 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. To some extent, they are able to draw from a wide pool of choices spanning from export to greenfield operations. We discuss foreign market entry modes in greater detail in this article.

It has to be clarified, however, that a flagship store is not the beginning but the culmination of an entry strategy. Fashion brands still rely on
wholesale distribution. When fashion firms create a flagship store, their intent is to signal that the brand has reached a point of maturity where it has gained the confidence to support its value proposition across international markets.

A flagship store shows that a company is capable of bearing in-depth scrutiny regarding the quality of their products.

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

  • Flagship stores cannot be simply for profit. If academic literature and business practice address international expansion in the context of balancing risks and rewards, flagship stores seem to follow an unreasonable logic.

    Flagship stores call for extremely expensive operations, 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 profit generation. A flagship store is the opportunity to foster successful relationships between a brand and its stakeholders. Only in the perspective of developing the value of a brand’s intangible assets we can see that only the overall profitability of a fashion conglomerate can offset the cost of the flagship store.
  • Fashion companies use a unique entry mode to access foreign markets balancing physical costs with digitally-generated revenuesAs a further conclusion, we can consider the sales generated onto the brand’s e-commerce platform as an index of the flagship store’s profitability. The Born Global internationalisation theory – usually adopted by digital companies  – can also explain fashion firms’ behaviour. Born globals are companies that internationalise fast, in order to gain an early mover-advantage when entering new markets in order to grow early customer loyalty.  The e-commerce division of a fashion brand, in this analogy, can be easily compared to a completely digitised business.

In this perspective, we see how the customer journey paradigm 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.

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 conducted a short survey of the latest trends in fashion retail looking at how international and digital markets are reacting to new customer trajectories.

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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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