Magazine article Marketing

Helen Dickinson on Retail: Flagships Are All about the Glamour

Magazine article Marketing

Helen Dickinson on Retail: Flagships Are All about the Glamour

Article excerpt

Anyone working in the retail industry or living in London cannot fail to have noticed, or at least heard of, the Apple store on Regent Street.

It is large and airy with high ceilings and is kitted out with no-expense-spared fittings, including a glass staircase and impressive stone flooring. It is everything a flagship store should be for a global consumer brand such as Apple.

Apple recognises that a presence on high-profile streets in the world's leading cities is vital, and its glitzy stores allow the brand to showcase its products in the best possible environment.

Nokia is seeking to follow Apple's example. In December it opened its first flagship store, just off Moscow's famous Pushkin Square, and has plans to open a number of similarly flashy shops around the world. New York, Hong Kong and London are high on its shopping list.

Such cities are also favoured by global fashion and luxury brands, whose flagship stores are positioned on only the most upmarket roads in each of these territories. Sloane Street and Bond Street in London are littered with the likes of Gucci, Prada and Louis Vuitton, which choose their locations very carefully.

However, flagship stores do not always make big profits. In my day job, as an auditor, I encounter retailers dealing with the problems this raises when producing their financial statements. Accounting rules require that a store's fixed asset value should be written down if the expected cash profits generated by a store are not sufficient to support its value.

Since the running costs of the store - the rent, staff, lighting and heating - are all likely to be high for a flagship outlet, the potential for lower comparative profits, and therefore a write-down of fixed assets on these stores, is dramatically increased.

The fact that brands often incorporate cutting-edge design to differentiate the flagship stores from their typical retail outlets adds to the financial risk associated with them; as well as having to pay for high-end architects and top-quality materials, there is a risk that some elements of the design will not work as well as expected.

Consider the flagship store of fashion retailer New Look on Oxford Street.

The popularity of the store appears to have led the company to overhaul certain fittings after only 18 months of opening, as they had become worn through high footfall. …

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