Altered consumer preferences and practices, technological advances, shrinking revenues, increasing costs and slimmer margins, have all contributed towards a number of significant changes in the retail landscape in recent times.

Among these, the effect on the once iconic flagship stores is, perhaps, the most striking. While it would be premature and inaccurate to speak of their demise at this juncture, it is true that there has been a major shift in the position taken by several leading retailers who had enthusiastically embraced the concept less than a decade ago.
A symbol of status and a key element in overall planning at one point, retailers are now rethinking their strategies about these stores, and, in the case of many large players, exiting midway through long term leases as an urgent remedial measure to realign objectives and outcomes.

Ralph Lauren brought the shutters down on its Polo Store on New York’s Fifth Avenue — acquired in 2013 on a $400 million 16 year lease –, and JC Penney closed its 150,000 square-foot Manhattan flagship store less than halfway through a 20-year lease. Toys R Us and Aeropostale also vacated their Times Square premises last year, while FAO Schwarz moved out of their Fifth Avenue flagship as far back as 2015. Even the legendary Macy’s, a significant destination for tourists visiting New York City, while retaining their 34th Street presence, is said to be reviewing its real estate.

This only serves to underscore the essential nature of flagship stores. They are not built to make money and are rarely profitable. Instead, they are designed to celebrate the brand, where presentation is critical. By offering multi-sensory experiences and connecting with customers through interactive aesthetic elements, these stores are meant to strike an emotional chord and spectacularly showcase the brand.

For retailers that seek this kind of presence, flagship stores are still relevant — Apple in New York, HM in Barcelona, Lego in London, Louis Vuitton in Singapore and others — as a grand and emphatic statement to strengthen brand image and customer loyalty.
However, for those with an eye on ROI, the downside – the prohibitive costs of real estate in glamorous locations, the need to overcome the challenge of relevancy by frequently and regularly changing store interiors and design – has made flagships a non-viable option.

At the opposite end of the spectrum, Pop-Up stores and redefining, existing stores address this issue admirably by encouraging customer contact without any of the negative aspects the flagship model includes. Not surprisingly, Pop-Ups are rapidly gaining in popularity, providing, as they do, the advantage of unique locations, minimal store design, and the flexibility and agility that come with freedom from expensive long-term real estate commitments.

Customers, too, have responded well to this trend, contributing to the short-term, high-impact increase in attention for brands. Statistics indicate that Pop-Ups are on the rise and more and more established retailers and even previously, online-only brands are adopting this approach to explore new locations and test product lines.

Similar trends are evident in the banking sector, as well. While exceptions exist, most are moving away from the flagship model, For the same reasons as retailers, The fact that their products are intangible makes banks fundamentally different from retailers. They do not need to maintain inventories of stock nor design elaborate displays of physical products.

Typical bank flagships tend to present tastefully appointed interiors reflecting trends in retail and hospitality design, embellished with expensive electronic equipment that serve as venues to disseminate financial information by way of seminars or
individual interaction. In effect, banking flagships are, often little more than testaments to their standing and serve no larger purpose. In an age where the influence of social media is continually gaining more significant sway, the flagship store experience has become akin to a visit to a museum. For some a one-time event that does not invite repetition.
As a result, forward-thinking banks and Digital banks are exploring other alternatives to facilitate enhanced and more rewarding customer engagement.

Establishing smaller branches in less expensive areas is seen as one solution. By providing a more personal touch, they are expected to engender a sense of community and build customer loyalty.

Pop-Ups, the other alternatives, enhance customer experience by adding novelty and variety in multiple locations – and are more effective in terms of cost and impact.