Retailers from Gap to Ralph Lauren are giving up on their flagship stores — and experts say others will have to make big changes to keep the store model from dying

Gap Inc.’s CEO said the company would be closing flagship locations in 2019. Business Insider/Jessica Tyler
  • The flagship store as we know it is changing.
  • Retailers from Gap to Ralph Lauren are closing their flagship stores in desirable shopping areas.
  • Experts say that large flagship stores that do not offer exciting and engaging experiences are no longer effective marketing tools for brands.
  • At the same time, digitally native brands and innovative legacy retailers such as Nordstrom and Nike are reinventing the flagship store and proving that it still has a place in retail.

At the end of 2018, Gap Inc. CEO Art Peck said the company would be closing hundreds of Gap stores this year, including flagship locations.

“This is the piece of the business that we are firmly committed to addressing with urgency,” Peck said, adding that the stores that had been selected were were either unprofitable, had low traffic, or didn’t offer a good customer experience.

In December, Gap’s Fifth Avenue location and former flagship store in New York shuttered its doors. Ralph Lauren also closed its Fifth Avenue flagship in 2017, and Calvin Klein plans to shutter its nearby Madison Avenue flagship this spring. Lord & Taylor also closed its flagship store on Fifth Avenue in January after more than 100 years in business.

Peck’s comments were evidence that, in many cases, flagships stores have become indistinguishable from a retailer’s typical store. This means that having a large store in the most expensive part of town, offering the same experience as any other store, might no longer make sense.

A way to tell the story of a brand

Traditionally, the flagship store has been a way to promote a brand’s image and tell its story, more about marketing and branding rather than sales.

But increasingly the flagship has become a less relevant – yet still costly – marketing tool due to changes in consumer shopping habits.

“New generations of consumers do a lot of product discovery online or via social media. This means expensive flagships are less relevant than they once were,” Neil Saunders, managing director of GlobalData Retail, wrote in an email to Business Insider.

“A brand like Gap has no real business having a flagship as it is just a large version of mundanity that doesn’t really pay for itself,” he said.

Flagship stores that are simply larger versions of standard stores are unlikely to have a place in the future of retail.

“It only makes sense if you create an experience,” Corey Pierson, CEO and founder of Custora, a customer analytics platform for the retail industry, told Business Insider.

Pierson said flagship stores need something extra to make it relevant, “a different or unique experience that strikes a chord.”

Casper’s new sleep store. Business Insider/Mary Hanbury

Things are changing

Digitally native retailers such as Bonobos, Glossier, Everlane, and Casper are paving the way with innovative new store concepts. These brands have the luxury of making a fresh entrance into brick-and-mortar retail and are able to trial new concepts. Given that their flagship may be their only store in a city, these retailers can focus on putting their best foot forward here – exactly what a flagship should do.

Innovation hasn’t been reserved to smaller digital brands, however. Longtime industry players such as Nike and Nordstrom are also figuring out how to make their flagship stores relevant and appealing.

Last year, Nordstrom opened its new men’s-only flagship store in New York. This micro-department store offers in-house tailoring and shoe-shining services, and it has a restaurant and bar. This fall, a women’s-only version will open across the road.

At the time of the men’s store’s opening, the late Nordstrom co-president, Blake Nordstrom, told Business Insider that the company had been scouting out a location in Manhattan for the past 20 years; this was by no means a spontaneous decision. And, despite the industry pressures currently facing department stores, the company still saw value in opening a location in a prime area of Manhattan.

Nike flagship 1088
Nike’s new flagship store. Business Insider/Jessica Tyler

Nike also opened a massive new flagship store in New York at the end of 2018. Housed in a sprawling, 68,000-square-foot space that spans six floors, this store has the largest collection of Nike shoes for sale in the world and highly innovative technology that offers in-store experiences like instant purchases for app users.

“This is the future of relevant flagship spaces,” Maya Mikhailov, chief marketing officer and co-founder of GPShopper, a mobile retail app developer that looks at ways to drive customer engagement, told Business Insider.

Read more:
Nike is opening a 68,000-square-foot flagship store of the future in New York City

‘Something that stands out’

For these stores to have a future, experts say they need to take on a different form and offer a unique and differentiated experience.

They need to be “something that stands out, connects with customers and gives them something to talk about,” Jaime Bettencourt, senior vice president of business development at Mood Media, told Business Insider over email.

“I don’t see flagships dying out, but I do think retailers will become smarter with their investments,” she added.

We could also see the flagship shrinking in size.

“Flagship stores as a giant space for product inventory are dying, but the overall concept is evolving,” Mikhailov said.

She continued: “It’s becoming smaller in size, concentrated in major urban demographics and leveraging technology for sales and loyalty.”

And as with any store, retailers just need to find a way to make them relevant and engaging.

“As with everything else in retail right now, things are changing. I am not sure if flagships will die out as a whole, but without a doubt, what we are used to seeing is coming to an end,” Vic Drabicky, founder and CEO of January Digital, a consultancy firm for consumer-facing brands, told Business Insider over email.