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Wall Street Journal: The Future of Retail in the Age of the Flagship Store

The Future of Retail in the Age of the Flagship Store

The invention of the car didn’t lead to the extinction of horse-drawn carriages — it just made them a rarer and more distinguished way of getting around, and primarily a tourist attraction. Now apply that same kind of idea to online shopping and the old-fashioned brick-and-mortar store: far from dying off, it could make them a less common but more impressive sight.

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When Americans moved to the suburbs in the second half of the last century, retailers followed, with strip malls springing up and often displacing the need for big stores based in high-profile downtown locations. Flagship storefronts in city centers closed up, and the suburban mall thrived.

That trend now looks to be in reverse, and it suggests a new era of flagship city stores, according to Credit Suisse analyst Michael Exstein. In a note today, he said the rise of online shopping is slowly but surely helping reshape the world of brick-and-mortar retail, driving a revival of the idea of the big flagship downtown store — the same thing once made less appealing by the malls of suburbia.

In a future where the Internet takes an increasing share of basic shopping but also helps brands boost their reach and appeal, the big-city store will become more of an attraction in itself, Mr. Exstein wrote.

“In an age where e-commerce is emerging from its infancy to a more established and integrated part of the retailing system, it seems that flagships serve two purposes. These include retailers’ affirming brand stakeholders in addition to a hedge against how the retailing structure could evolve in the next decade,” he said. “The result could be fewer locations, less inventory, but more powerful locations in their own right.”

The new focus on grand flagship locations naturally benefits a smaller number of urban areas that could support such stores, highlighting a broader trend of consolidation of economic power in the world’s most prosperous cities. But Mr. Exstein says it also “reaffirms that the physical retail store is alive and well, but going through a transformation, similar to when the industry went from an urban based strategy to a suburban one.”

Article by Tom Gara, Wall Street Journal blog, April 29, 2013

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