Flagship stores have long been lossleaders for the luxury industry. Brands’ retail investment has soared in recent years, with projects becoming increasingly elaborate and expensive in the quest for patrons and profits – but entailing costs that are rarely recouped by sales.
Yet, from a state of un-animity, debate has ignited as to how necessary flagships will be to brands in the future. Now that more than 50 per cent of luxury purchases are made by tourists visiting the west, brands could scale down their rollout of supersized stores once consumer visits level off in emerging markets.
“Who needs aggressive store expansion when customers are happy to jump on a flight to London, Paris or New York?” says Aaron Fischer, head of consumer research at Asian brokerage CLSA, noting that the luxury sector’s capital expenditure to sales ratio has slipped from 7 to 5 per cent since 2009.
