Rethinking flagship stores

on Jul7

Inside the Mercedes-Benz flagship store in Manhattan. Photo credit: MERCEDES-BENZ

Luxury automakers love to open glitzy flagship stores in trendy neighborhoods of cities such as London, Tokyo and New York.

These architectural exercises are designed to boost a brand’s image with the right crowd.

But as a retail trend, those flagships are so 2005.

The latest issue of Advertising Age, a sibling publication of Automotive News, includes a telling article titled “Flagships run aground.” Subhead: “Once the ultimate status symbol for retailers, the flamboyant flagship is now too extravagant and ineffective.”

Consider the evidence cited by reporter Adrianne Pasquarelli:

• J.C. Penney’s New York City flagship — and sole Manhattan outpost — was put up for rent last month less than a decade into a 20-year lease.

• Ralph Lauren has closed its lavish Fifth Avenue Polo store, after arranging a $400 million, 16-year lease in 2013.

• Toys R Us and Aeropostale closed their Times Square outlets last year.

• Perhaps most famously, FAO Schwarz in 2015 shut down its Fifth Avenue flagship. Yes, the one where Tom Hanks danced on the giant keyboard in the film “Big.”

Does all of this mean automotive showcases are also doomed? Maybe not. After all, automakers, not retailers, pay the hefty rents those Taj Mahals require. Indeed, at many of those temples, consumers can’t even buy a vehicle; they are designed solely to promote the brand’s image — and serve the aims (some might say delusions) of the marketers behind them.

Some high-profile flagships are being rethought, not abandoned. They are becoming places to experience the brand — something that can’t be done online — rather than as a spot to learn about the brand’s products.

In other cases, the rethinking is leading to multiple showcases, rather than one must-go location. As the article says, “Nearly all marketers are forgoing the big glitz and glamor of the old flagship for smaller locations in less expensive areas.”

As incentives and other marketing costs rise, don’t be surprised if some automakers put their flagship showcases through a cost-benefit analysis.

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