Luxury Club SDABAC

Oct 22, 202310 min read

From the Editor’s Desk | Navigating Luxury Retail’s New Dynamics

Updated: Oct 26, 2023

Setting the Context: The Ever Evolving Concept of A Store

Within the framework of our International Master in Business Course at SDA Bocconi Asia Center, students have the privilege of selecting from a range of electives during their semester in Milan. One such captivating course I had the pleasure of attending was "In-store Marketing and Visual Merchandising" led by Professor Karin Zaghi. One of the most intriguing aspects we explored was the transformation of the traditional concept of the store from being a mere selling machine to evolving into a platform for 'retailment.'

“(...) The store must become a medium that has the capacity to excite emotions and engage customers in a gratifying experience. From a simple information collection point and a place to buy goods and services, the store has to turn into a place where people want to pass the time, where they find entertainment. The concept of a store is no longer simply the outcome of architectural choices; instead it represents a system in which design means realizing the distinctive elements of a brand/store based on emerging or consolidated aesthetic and communicative trends.

In other words, the store can and must stand out, reinforcing its identity by activating and nurturing an effective and immediate communication process, one that connects with customers in the final stage of their purchase decision process.” (Zaghi K. (2018), Visual Merchandising. In-store Communication to Enhance Customer Value, Egea: pp.28-20)

This shift signifies that the future of retail is moving beyond the mere exchange of goods and heading towards offering purpose, and immersive experiences. Furthermore, the store has transitioned into a powerful communication tool for enhancing brand identity. Brands are now harnessing stores as pivotal touchpoints in the customer journey, as they strive to create an authentic omnichannel experience.

When this transformation is applied to luxury fashion brands, the concept becomes even more intriguing, offering boundless possibilities for imagination, art, and creativity. Crucially, the luxury retail sector is increasingly focused on the customer, especially the younger generation; A study by Bain & Company reveals that by 2025, the combined spending power of Gen Z and Millennials will represent 45% of the global personal luxury goods market. In a world where fast fashion has democratised luxury, many Millennials prioritize experiences over products.

"Millennials and Gen Z consumers want to step in and out of a seamless shopping experience across every channel. They research, they go in-store, and they shop on the go, and it has to be seamless for both the consumers and retailers." Forbes (2018)

In this article, I explore the role of visually driven marketplaces and their relevance, the delicate balance between heritage and innovation in retail for luxury brands, how the concept of 'Flagship' stores is evolving into 'Brandships' and the rise of experiential retail and pop up stores while incorporating sustainability. I cover various success stories to solidify my case across brands such as Tiffany & Co., Louis Vuitton, Gucci and more.

The Age of Visually Driven Marketplaces

Luxury products inherently possess visual allure; they are, to a certain extent, works of art. While tradition mandates the gallery-like experience within the confines of a Chanel store or a Porsche showroom, advancements in technology and the inherent aesthetic beauty of luxury products make this market particularly well-suited for visually-driven consumer engagement.

The Intersection of Art and Fashion has been a prominent theme over the past decade. A notable example is the 2023 collaboration between Louis Vuitton and Japanese artist Yayoi Kusama. This collaboration featured her iconic polka dot prints on a range of products, including handbags, scarves, and accessories, as well as a limited edition "Infinity Mirror Room" installation at Louis Vuitton's flagship store in New York City. The partnership not only achieved tremendous success but also reintroduced Kusama to a new generation of art and fashion enthusiasts.

Such visually-driven, aesthetic collaborations spanning different industries have the power to astonish and inspire the market. They arouse the curiosity of customers, enticing them to engage with the offerings in the physical store. At the same time, leveraging these aesthetic opportunities and enhancing brand visibility across channels becomes paramount. The yearning to experience the virtual world in person provides brands with an opportunity to convert it into customer advocacy—a compelling facet of in-store marketing.

Heritage and Innovation: A Delicate Balance

While I agree that the imperative of continuous innovation is undeniable, it is equally crucial to remain connected to one's roots and preserve the essence of heritage.

Case in point: Tiffany & Co.

A compelling example that illustrates this balance is the case of Tiffany & Co., the jeweler renowned for its heritage. The brand embarked on a cross-platform advertising campaign, featuring young celebrities, to reaffirm the enduring relevance of the iconic "little blue box." This initiative was accompanied by a comprehensive transformation of its website and in-store experiences, enabling seamless online-offline integration. In this harmonious marriage, the concepts of luxury, quality, and craftsmanship were portrayed as modern, playful, and delightful, breathing new life into the brand's identity.

To serve this end, the strategic utilization of aesthetic social media channels like Instagram and Pinterest too emerges as a pivotal tool in repositioning the brand while remaining steadfast in upholding its core values, and culture, and honouring its heritage and I feel, contrary to popular belief, giving precedence to one channel over another is not the ideal approach. Instead, the focus should be on cultivating coherence among various channels while they work together to fortify the desired image and positioning of the brand ensuring that the legacy thrives in the contemporary landscape.

From Flagship to Brandship Stores: A Significant Shift

The launch of a flagship store, such as the 45,000-square-foot Hermès flagship that opened last September on Madison Avenue, is symptomatic of a trend among fashion houses to establish a more permanent presence in influential cities around the world. Now a model that seems half-brand marketing and half-conceptual art, the idea of a “flagship” or large-scale atélier has evolved significantly since the foundation of the first luxury fashion houses over 150 years ago.

Luxury brands’ experiential flagship locations are redefining the role and meaning of traditional counters and boutiques. The art pieces on show in these spaces and the presence of coffee shops, art galleries, and beauty salons are creating an atmosphere based on more than the sales process.

Through these emblematic buildings, brands are seeking to enhance their positioning. Bernard Arnault, chairman and CEO of LVMH, said during the group’s 2021 year-end earnings call, “Louis Vuitton is not just a fashion brand. It’s a cultural brand with a global audience.”

Independent flagship stores are like a blank canvas that brands can modify according to their needs. The shift towards lifestyle-oriented experiences may also encourage brands to diversify their offerings beyond traditional fashion and accessories and to experiment with new product categories and services. For example, they may start incorporating wellness or cultural elements into their retail spaces to cater to evolving consumer preferences, as we have seen recently.

Perhaps an interesting question in the 21st century is what does the concept of a flagship store represent, particularly in the multi-country model that many companies adopt as well as in the face of an increasingly digital-oriented retail market for fashion? And what does this renewed attention to flagship brick-and-mortar stores signify for the brands and the luxury market in general?

Let's take the case of Louis Vuitton.

Case in Point: Louis Vuitton

The Vuitton building at 101 Champs-Elysées, which LMVH now owns outright, did not open until 1913, by when the company had become the largest travel goods manufacturer in the world. Louis Vuitton, then, has come full circle, with plans to launch a new hotel at 103 Champs-Elysées just steps away from its iconic flagship. These moves from LVMH established an updated presence for Louis Vuitton, confirming the brand’s permanent position on what is arguably the most famous shopping street in the world.

Of course, luxury flagship stores serve many different purposes, depending on the brand, country, and city.

Some brands are using flagship stores as a way to showcase their commitment to innovation. Valentino, which earlier this year announced a partnership with metaverse company Unxd, did an immersive unveiling of its new Plaza 66 Shanghai flagship on Instagram Reels, showing the new store being unveiled underneath a virtual sheet and paint can. Ralph Lauren’s store in the Miami Design District, which is the first brand location to accept crypto, plans to host digital and immersive experiences in the store as part of its collaboration with Web3 group Poolsuite.

For many luxury brands, however, flagship stores are a way to illustrate or bring to life the brand’s unique vision, heritage, and creative flair. They stir interest simply because they are beautiful spaces with beautiful products for high-end brands. The flagship, it seems, is a physical manifestation of luxury itself. It represents the culmination of money, power, beauty, and fame. In short, luxury is a tantalizing, unreachable, yet desirable aesthetic. ( Quillin & Quillin 2023 )

The concept of a flagship store is a living cultural artifact: a way for luxury brands to make their mark, setting up a type of cultural permanence. This seems comforting in the face of so much impermanence in the virtual world established by online media. Even the multiplicity of flagships, i.e. a company having “flagship” stores in select cities across the world, is arguably a quiet form of cultural diplomacy, even if from a profit-driven standpoint. Therefore, I yet again reemphasise my point of the impractical but necessary need for flagship stores.

Another very interesting aspect that demands our attention is the new concept of ‘Brandship’ Stores that focus on reemphasizing brand identity rather than sales. Luxury shoppers expect stores to go above and beyond for their customers, and creating a brand experience with no pressure to actually buy anything can be a way to fulfil this expectation. After all, luxury is not just what you buy, or even how much it costs; it’s all part of a carefully cultivated lifestyle. ( Wang, 2022 )

Ultimately, the goal of these 'brandship' stores is to encourage potential consumers to learn about the brand and secure existing clients’ loyalty by fully immersing them in the brand’s universe and educating them about the house’s unique identity.

The Rise of Experiential Retail

In my humble opinion, experiential retail represents the best post-pandemic solution to enhance in-store sales. After a long period of lockdowns and restrictions, customers are now more willing to purchase physically in-store. However, their expectations get higher as a result of the prolonged use of digitalized platforms, during their staying at home. Nowadays, being immersed in sensational rooms, while interacting with other people and feeling part of a great community seems to be the most logical step luxury brands could take to impress their audience.

Let’s look at some examples.

In November last year, Louis Vuitton opened its first independent flagship store in China at Sino-Ocean Taikoo Li Chengdu. The 1,500㎡ space offers Louis Vuitton’s full line of products. The French house also opened its first branded restaurant in China in the neighbourhood. Dior has opened a three-story retail space with a terrace garden serving exclusive afternoon tea near the Louis Vuitton store.

Elsewhere, at the beginning of this year, beauty label Sisley opened its first Asia-Pacific Maison Sisley, which includes in-store coffee shops and beauty salons, in Shanghai Zhang Yuan, a complex of houses built in the late 19th century to an East-meets-West architectural style.

Perhaps my most favorite statement on experiential retail was by Gucci with Gucci Circolo, aimed at discovering the diverse facets of the brand throughout an immersive in store journey. Located in the majestic building of the Duke Gallarati Scotti, the Gucci Circolo is a succession of experiential rooms revealing interesting codes of the Maison, plus highlighting its tight bond with music, cinema and art. Indeed, the Gucci Circolo offers to its visitors the exclusive opportunity to view and eventually purchase the newest Aria collection, including “The Hacker Project” in collaboration with Balenciaga.

The Gucci Circolo is a succession of experiential rooms revealing interesting codes of the Maison, plus highlighting its tight bond with music, cinema and art (Gucci)

Every room is perfectly curated and exudes the creative vision of Alessandro Michele (Gucci Creative Director). Moreover, this experiential journey is not only aimed at educating its visitors driven around by the guide’s storytelling, but also surprising them with fun and entertaining laboratories to join. Thanks to the Gucci Circolo, the Maison showcased how experiential retail can make people feel part of a community, while at the same time, driving traffic to the store.

'Gucci retail sales grew by 7% in Western Europe and by 24% in North America thanks to the strong investment in such immersive experiences.'- Kering Financial Publication

Incorporating Sustainability

According to Westfield’s How We Shop: The Next Decade report, when experiences are built into a retailer’s sustainability practices and used to highlight that strategy, it can lift the retailer's reputation and keep people coming back. As consumers become more aware and conscious about their purchase decisions, incorporating sustainability is no longer an option but the only way to move ahead.

Case in point: Nike

The brand’s recycling initiative, called Nike Grind, transforms manufacturing scraps like rubber and end-of-life shoes and apparel into new products. External partners and Nike shops both make use of these recycled materials for flooring and other furnishings. Grind is coupled with other green initiatives, such as Forward, which seeks to reduce carbon output through material innovation

Implications: Nike’s sustainable store design upcycles products into new building materials.

“Sustainability is a key component in how we run our business. Consumers can see sustainability woven into the fabric of Nike stores through store design, products and services. As we open new stores, we aim to incorporate elements of sustainable design to provide benefits at scale.” - Shannon Glass, Vice President, General Manager of Nike Direct North America

The Pop-Up Store Fever

Although the multi-functionality of shopping malls helps brands secure footfall, the format also restricts what brands can do with their retail space.

“Shopping malls often have strict rules around opening and closing times, what can be displayed at the entrance, and the types of services that can be offered. Moreover, everything in the shopping mall tends to look the same and lacks a unique character due to the limited retail space that’s similar to every other store in the mall,” Aurelien Rigart, the co-founder of digital consultancy ITC, which operates offices in China, Singapore, and Vietnam, via Jing Daily.

From Jacquemus to Dior, via Balenciaga and Prada, fashion houses are testing pop-ups for their latest handbags or unique capsules to attract new young customers with a hyperphysical immersion in their world. In an attempt to reboot the luxury market and revive sales, these cool luxury brands are offering them a multi-sensory, fun experience.

Another interesting fact that is worth pointing out is that these pop-ups actually represent a parallel universe when compared to the digital and metaverse, and offer an opportunity for customers to socialize, shop and enjoy in a physical environment.

We explore the pop-up trend in detail here.

In conclusion, even with the advent of digital channels, the store remains pivotal in customer journeys. However, it is essential to point out how the retail store is no longer just a point of sale; it has evolved into a multi-dimensional platform for meaningful interactions, artistic expression, and immersive experiences that captivate and engage today's discerning consumers. The store holds enormous potential for community building, incorporating sustainability, brand building and customer service.

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