Why retailers are closing their flagship stores

Three decades ago, opening a store on a city’s high street meant that the brand had found success. Nowadays, flagships are quickly disappearing from top locations such as New York’s Fifth Avenue due to the impact of e-commerce and rising rent costs.


Less revenue, higher rents

A standard for 80’s and 90’s retail, flagships now struggle under the predominance of online shopping and annual rent increases. The recently bankrupt Barneys New York saw its flagship rent increase from $16 million to $30 million within the span of a year.  Real estate research firm CoStar Group estimates that the vacancy rate is 4% higher than in the days of the Great Recession.

Retailers who decide to keep their high-profile locations are now shifting to create shopping experiences that go beyond offering a larger range of products than usual. 


Rethinking the shopping experience

Nike’s Fifth Avenue store offers cashless payments and have installed QR codes on their mannequins so customers can request products without having to browse for them. Other brands, like Levi’s, offer tailoring services, larger dressing rooms, and even have in-site restaurants to keep customers at the store.

Since success in retail is no longer demonstrated by having huge locations,  companies are now focusing on creating shopping experiences that makes them relatable to customers. Brands that began as online retailers are now opening small stores that showcase their brand’s spirit. For example, Casper locations have private spaces where potential customers can try their mattresses. Glossier has clean and well-lit beauty counters where clients can sit and request makeup without having to browse through all the possible options.

Smaller locations that are fully integrated with online shops have also found success by bringing store traffic through services such as Click-and-Collect and Return-to-Store. Other brands are now opening seasonal pop-ups in collaborative locations. This option greatly decreases the investment required to keep shelves stocked and the doors open.

Flexibility, it seems, holds the key for former flagship owners to survive the changes in retail.

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