What's in a flagship?

2020/09/09 Innoverview Read

Gap closing stores isn’t really news. The apparel retailer has been closing hundreds as it works to build back its brand, grow its e-commerce and get away from the mall. The company just announced yet more will shut down this year and next.

But closing its flagship in hometown San Francisco, near the touristy Union Square shopping district downtown, got some extra attention. The sprawling store is in the historic Flood building, one of the few to survive the city's 1906 earthquake thanks to its hardy steel frame and blue-gray Colusa sandstone-covered brick, which may or may not be haunted. Gap opened there early in 1994, the same year the company opened its first-ever, lower-priced Old Navy store.

Now it's set to close. "[O]ur store closures focus on addressing stores that are underperforming and reviewing lease agreements that don’t fit our vision for the future of Gap Inc.," a spokesperson said in a statement last week when asked about that plan. "We are confident these closures will strengthen the health of our company moving forward." 

Gap Inc.'s pruning of its namesake brand's footprint, including key stores like the Flood building flagship, is aggressive, but Wells Fargo saw an upside weeks ago. According to a March 13 note from Senior Analyst Ike Boruchow, executives are "admitting that while once a critical marketing vehicle, flagships are no longer a worthwhile drag on profitability."

Are they worth it?

A "flagship," on the sea, is the vessel that flies a flag indicating that it's the commander of the fleet. In retail, it's a store that showcases the brand. But could the concept be losing its value?

Certainly, many are disappearing. Department stores' original downtown locations once served as flagships for the less flashy mall-based stores down their chains, but those have steadily vanished for years. Most recently, parent Hudson's Bay Co. sold off Lord & Taylor's Fifth Avenue flagship last year, (later selling the entire business) and now it's in Amazon's hands; Barney's stores in Beverly Hills and New York sit empty after morphing into a licensable brand last year.

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Ownership of Lord & Taylor's Fifth Avenue flagship in Manhattan changed hands twice in less than two years and as of last month is owned by Amazon, which will use it as a tech hub.
"Lord and Taylor" by JJ is licensed under CC BY-ND 2.0

"It's always been kind of a blunt instrument," Corey Dehus, principal-founder of retail design agency Path Retail, said in an interview. "Flagships are more about vacationers and travelers than anything else. A 'flagship' has got to be something relative to building a culture, building a community around your brand ethos. An experience that is dedicated to one or two or three stores in the country is not really serving all your customers across the country." 

Not all retailers are letting go of the idea. Nordstrom, for example, last year established a gleaming new flagship in New York City, though that remains untested now that the pandemic has interfered by shutting it down temporarily and chasing away the tourists and office workers expected to flock there. And, in contrast to its treatment of the Lord & Taylor fleet, HBC saw enough value in Saks Fifth Avenue's Manhattan flagship to pour $250 million into it.

(Source: Retail Dive https://www.retaildive.com/news/whats-in-a-flagship/584366/)