Europe’s Luxury Brands Experiment With ‘Experiential’ Flagships – WWD

A luxury store is not only for shopping anymore, but can also involve dining, drinking, having a cultural experience — or simply showing off on social media.

Consider Louis Vuitton’s seven-story Ginza Namiki tower, complete with an LV Café and chocolate shop; the Gucci Garden in Florence with its rotating exhibitions, restaurant and shop; the avant-garde, art-driven department store SKP-S in Beijing, or Dior’s colossal Avenue Montaigne flagship, which boasts a museum, restaurant, pastry café, multiple gardens and a hotel suite.

According to David Bourguignon, head of insights at Paris-based luxury consultancy MAD, “experiential flagships” can generate traffic, loyalty and more.

WWD: What is driving this trend to immersive brand experiences?

David Bourguignon: Several factors combined explain the rise of these experiential flagships. Social media and pop culture increasingly turned luxury brands into key signals that “you are living your life well.” In other words, the desire to not only own a luxury product but to live the brand in public has never been stronger. This appetite to spend time with the brand coincides with the need to sustain and increase the traffic in the stores. Indeed, for large brands, the increase in productivity of existing stores has become at least as important as opening stores and it starts with generating additional traffic.

WWD: Is the return on investment proven for these colossal stores?

DB: Considering the high productivity that the flagships of the most desirable brands can reach, the ROI [return on investment] linked to the sole commercial activity of the store can be quite quick — a few years for the best performers. On top of that, the value creation of the experiential features is both direct and a halo effect that requires the right KPI [key performance indicators].

First, the generation of additional traffic must be assessed, as well as the quality of this traffic: are you recruiting new clients for the core business? Are your existing customers buying into the experience feature? Next comes the measure of the customer lifetime value. If the emotional imprint is higher, it should make for more loyal customers — hence the key role of CRM [customer relationship management] to follow the customers. Then the measure of the customer experience. Creating a “ballet” that seamlessly combines a store and a café for instance is no easy task, especially when successful initiatives create queues in front of the stores. Last but not least, as these stores represent in real life the brand’s lifestyle, they are meant to be used as international communication platforms and should be assessed as such.

WWD: Is it enough today for a luxury brand to open a huge flagship without adding a museum, an eatery, a gallery or other lifestyle amenities?

DB: Let’s put it this way: if you are a luxury brand that clients want to live, exploring the possibility of experiential flagships is probably relevant. If your brand’s core business is suffering, the risk is greater to create an “experiential flagship” that doesn’t generate traffic. However in both cases, flagships are key places to host the most exclusive clients, who need more than amazing products and a VIP salon: They need an experience that will make the moment memorable.

WWD: What are some of the interesting features you’ve seen introduced in luxury flagships?

DB: The beauty of luxury is the power of alchemy. Of course, to be successful, an experiential feature must be delivered with a level of operational excellence that is difficult to achieve. But the “right” experiential feature is the alchemy of a specific narrative that both fits the brand DNA, and the flair of the specific store location, as it creates the sense of cultural depth that makes for a truly satisfying lifestyle experience. Then sky is the limit — cafes, art galleries, concerts, barbers, clubs — experiences that are meant to be relived several times should be favored.

WWD: Should we expect this trend to affect all future luxury stores, even smaller ones?

DB: Immersive experiences can be considered in any store, as long as the value creation described above is relevant. The recent surge of experiential pop-ups is actually an expression of the same trend. This logic of experiential luxury can also trickle down to another typology of spaces that clients wish to live: the places of craftsmanship, for instance, in wines and spirits or watchmaking.

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