The Future Role of Luxury Flagship Stores Given the Evolving Market and Technological Conditions - Research Proposal Example

Research Question

The formats and functions of flagship stores in the current luxury market have been addressed in past studies, many of the studies only implicitly addressing the roles that these stores have to play in the future. Therefore, this study will seek to bridge this gap by posing the central question:

What are the future roles of the flagship store in the midst of a changing technological environment that pits flagships against e-commerce and an evolving market with consumers demanding a multichannel platform and a fulfilling shopping experience?

Introduction

The growth of electronic commerce and customer needs for speed and convenience in product delivery presents both a challenge and an opportunity for the market for luxury brands. While the market for luxury brands continues to grow on an unprecedented scale worldwide, especially after the 2008 global economic crisis, modern consumer’s multichannel shopping habits have started shaping the approach taken by brands going into the future, through the integration of the in-store and online experience for customers (Olorenshaw 2011). According to D’Arpizio et al., the personal luxury market worldwide grew to an unprecedented €250 in 2015, compared to the approximate €153 valuation of the market in 2009 (2015, p. 1-6). On the other hand, the rising demand for luxury goods on online platforms to a 7% market share in 2015 in comparison to the 1% share in 2012 has come at a time when luxury personal brands, especially in Europe, continue losing their online market share due to failure to conform to consumer multichannel preferences. However, luxury retailers such as Burberry and Oasis provide evidence to the rest of the luxury brand industry on how adopting integrated consumer channels through flagship stores can redefine the roles of flagship stores in displaying and marketing the brand (Kapferer 2012). The digital-physical platform at Burberry’s Regent Street store portrays the role that flagship stores will play in the future in fulfilling the ever-growing demand for a multichannel experience from clients. The research also explores the role that flagships play in market entry and providing other additional services to enhance the shopping experience of customers. There is the lack of adequate literature on how such functions define the future roles of the luxury flagship store. The current study will evaluate the role that flagship stores will play in the future of luxury brand retail, given the challenges that many existing brick-and-mortar luxury brand channels face due to declining store traffic emanating from technological advancements, and changing consumer needs in the market.

Significance of the Study

The current study will help cover the knowledge gap that is currently present in the academic literature regarding the roles that the flagship store will play in the future of luxury consumption. The study will complement past findings by scholars on the evolving format of the luxury flagship store over time, further defining shortcomings in the current academic knowledge regarding the hidden roles that the flagship plays in market entry. Additionally, the findings of the research will help executives of luxury retailers and brands improve on the current roles played by their stores by undertaking structural changes to conform to the changing technological and market conditions to be able to compete in future.

Aim and Objectives

Aim of the Study

The aim of the current study is to define the future role of luxury flagship stores given the constantly evolving market conditions and technological advances.

Objectives of the Study

Achieving the aim of this research requires the formulation of objectives that guide the study. To that end, the following objectives are adopted to define the current research:

(1) To define the defining features of the flagship store in the luxury retail industry

(2) To evaluate the role of flagships in the current multichannel environment

(3) To examine the way by which luxury flagship stores compete with e-commerce

(4) To assess the structural changes that luxury flagship stores are undertaking in response to the changing technological and market conditions

Literature Review

The concept of the format of the flagship store in luxury retail bears little scholarly evidence, especially in the past millennium. As such, many academics have had to depend on the information provided by commercial articles to discern the origin and the evolution of the format of the flagship store (Conrad and Meriam 1978; Tungate 2008; Moore et al. 2010). However, Nobbs, Moore and Sheridan (2012) offer impressive dimensions of looking at the concept of flagship stores. The two studies derive their dimensions from literature ranging from the first mention of the idea of flagship stores by Carusone (1970) to recent sources describing digital flagships in the present decade (Moore et al. 2010; Wigley et al. 2012). First, based on the perspective of size and location, Nobbs et al. (2012) and Moore et al. (2010) describe the location of flagship stores along premium streets in commercial cities as one principle identifier of flagship stores. According to Nobbs et al.(2012) and Tynan, McKechnie, and Chhuon (2010), retailers choose premium cities that are associated with luxury in a bid to reach the right client profile who may either reside close to such cities or luxury tourists. Furthermore, Moore et al. (2010) backs Nobbs et al.’s (2012), concept of flagship stores sitting at the pinnacle of the distribution hierarchy, describing another principle identifier of luxury flagships as the ability to offer the full range of merchandise stocked by a retailer or a brand, in width and breadth. Moore et al. (2010) also assert that the availability of exclusive ranges of products should be accompanied by an experience that marks it out as a destination, rather than just a mere physical store. Literature on flagship stores also explores the role of architecture in communicating the message of the luxury brand (Nobbs et al. 2012; Riewoldt 2002). The architectural design of flagship stores has been identified as a primary characteristic for achieving exclusivity in the highly competitive brand and retail environment (Bareeneche 2008), with luxury brands like Calvin Klein and Burberry going to great lengths to hire top-notch architects to design their flagship stores.

While there is little scholarly information available on the format of the flagship store, its strategic role in the luxury retail industry has been widely studied in marketing, academic and general business literature (Moore et al. 2000; Moore et al. 2010; Nobbs et al. 2012). The importance of flagship stores in presenting the best assortment of products that a brand has to offer to consumers in the most stylish and interactive manner is of great interest to business executives who wish to design successful customer interfaces. Such managers hope to create platforms that provide a whole new and inspiring interactive experience with the customers, different from the experience of a typical luxury brand retail store Fernie et al.(1998); Herring and Wigley (2014); Moore, Doherty, and Doyle (2008). Fernie et al. (1998), Kirby and Kent (2010), and Moore et al. (2000) explore the importance of the location of flagship stores in high-end streets such as the Bond Street in London, as well as the exquisite architectural designs associated with luxury brands in attracting customers to the brand, and standing out among competitors. More specifically, Moore and Doherty (2010) propose four roles served by the flagship stores in brand promotion and retail: enhancing market relationships, entry into the market, acting as a model for ultimate brand stores, and acting as the epicentre of the brand’s communication with consumers. Papers by Varley (2007) and Dion & Arnould (2006) expound on Doherty’s explanations (2010), further defining flagship stores as the focal point of the brand’s PR strategy. The papers also describe flagships as blueprints for digital and visual concepts aimed at inspiring and awing clients into accepting the uniqueness and the authenticity of the brand. Furthermore, the evolution of the flagship store from the mere showcasing concept of the 1970’s (Kozinets et al. 2002), to today’s emotional branding (Manlow and Nobbs 2013,p.52) that targets the customer’s senses points to the advancing role of flagship stores in luxury brand retailing now and in the future.

Moore et al. (2010) specifically offer significant insight into the future of flagship stores as an international market entry strategy, a deflection away from the traditionally defined roles of the luxury flagship. According to D’Arpizio et al. (2015), the growth of personal luxury markets in 2015 in Asia, particularly mainland China presented the highest percentage of domestic market consumption worldwide. As such, Moore et al. (2010) advise that entering growing markets, far away from the traditional European and American markets require a strategy that differentiates European and American brands from the already established brands in the new markets. Previous literature by Doherty and Alexander (2004) describes traditional market entry strategies used by luxury retailers of fashion merchandise as low-cost and less risky. Petersen and Welch (2000) also reinforce the same argument by giving examples of entry methods favoured by such wholesaling, merchandising, and franchising. Moore et al.(2010) assert that while such strategies have worked for fashion retailers in the past, the changing increased buying options provided by e-commerce at the customer’ s convenience calls for smarter market entry strategy, and no platform provides a better opportunity for new entry strategy than flagship stores. Research undertaken by Moore et al. (2010) arrives at various conclusions regarding the utilisation of flagship stores as a method for entering into emergent markets such as the Asian markets. First, the differentiation of flagship stores from other stores owned by luxury brands regarding their size, design and location helps in attracting customers (Barreneche, 2008). As such, the awe-inspiring nature of these stores, exquisite internal and external designs, as well as their location in streets associated with prestige and heritage in the fashion sector provide just the rare shopping experience that may form the correct recipe for enticing customers to the brand in the highly competitive emerging markets. However, the high costs associated with running these stores present a challenge for retailers who may want to roll out flagship stores in many locations simultaneously (Fernie et al. 1998).Moore et al. (2010) advice that the method should only be used under restrictions, and in high-end cities that promise high revenue returns such as Mumbai and Shanghai.

The changing technological environment and consumer preferences have created a need for luxury flagship stores to blur the gap between the physical and the digital experience of the customer through cutting-edge technology that takes the flagship store experience online, as well as, bringing the online experience into the physical store. According to Herring et al. (2014) and Chong (1996), though the traditional pure brick-and-mortar luxury store faces little signs of death now due to the growth of e-commerce, consumer needs for convenience and their preference for a shopping experience rather than mere physical product offerings by brands throws the future of such stores into uncertainty. Millennial luxury consumers are now, more than ever, willing to spend on brands that cater for their multichannel spending habits through platforms that merge the physical space of the flagship stores with their need for an interactive online shopping experience, all offered by e-commerce. McKenzie-Mohr (2013) and Jones et al. (2010) assert that the technological boom and the growth of Hashtags have significantly influenced the approach of luxury brands towards digital platforms such as social media to catch up with evolving consumer needs for convenient and interactive shopping experiences and the competition provided by e-commerce. McKenzie-Mohr notes that while many luxury brands are responding to the changing technological environment by taking their business online, only a few have responded significantly through their flagship stores. However, luxury brands such as Apple, Nike, and most notably, Burberry, have responded by availing interactive interfaces in flagship stores that blur the physical-digital gap that hinders seamless customer experience in today’s changing technologically changing the world (Moore et al. 2010; Nobbs et al. 2012). Available scholarly literature implicitly describes the role taken by flagship stores in defining the luxury shopping experience for the future. However, existing research does not give clear explanation on the issue. For instance, one research study by Fringes (2009) describes the initiative taken by luxury brand Dolce& Gabbana in their flagship store in Milan in providing an in-store demi-couture experience. Bingham (2005) also describes the in-store champagne experience that customers can enjoy at a Louis Vuitton flagship store in Tokyo as they view the merchandise on offer. Such experiences also described shallowly the role that they play in making the flagship a crucial tool in luxury brand and retail marketing, point to a trend where the extra “wow” service in flagship stores will play a role as the language of the brand in future. Most importantly, the success of digital integration in the shopping experience of customers by luxury brands such as Burberry and Apple provide a precedent for the future role of luxury flagship stores in retail (Moore and Birtwistle 2004; Moore et al. 2010; Nobbs et al. 2012;Theng , Grant and Yap 2013). According to Nobbs et al. ( 2012), the creation of a seamless shopping experience that brings the online experience to the flagship store is crucial in redefining the role that flagship stores will play in the future of luxury consumption and retaining customers who are increasingly being swayed by the convenience provided by e-commerce.

Methodology

The current study will adopt a qualitative study design, as well as an interpretative approach, due to the lack of defined theoretical frameworks for the research. The qualitative methods of choice adopted for the study are semi-structured interviews and observation, guided by preceding exploratory studies related to the topic. To comprehensively address the evolving role of the luxury flagship store in retail and brand promotion, and capture the experiential aspect of the evolution, this study will utilise interviews from both managers who are at the core of decision-making in the flagship stores, as well as clients who shop at the stores. In that respect, the methodology will be defined by case selection for study, and a two-pronged approach to data collection that encompasses the two methods already mentioned.

Case Selection

The selection of the luxury flagship stores for this study will be based on the definition offered by Nobbs et al. (2012) that relies on concepts described in the review of the literature on defining characteristics of luxury stores. Moreover, three other criteria that will be used in choosing the flagship stores to be used for the study include:

(i) The flagship store should demonstrate a high level of technological integration in the architectural and the interior design, as well as the in-store processes.

(ii) The flagship store should show a high degree of adoption of a “third space’ in that appeal to customers’ psychological experience mechanisms

(iii) The chosen retailer or brand should have at least one operational flagship store encompassing one or both of the characteristics described in (i) and (ii) above in a foreign market.

The study will adopt various sources in devising the list of flagship stores due to the lack of a definitive list of retailers and brands in the luxury sector. In that respect, the Bain Report on the Global Luxury Goods Worldwide Study for 2015 will be very crucial in obtaining the list of retailers whose flagship stores suit the current study. Using the mentioned source and other sources, the researchers will formulate a list of 30 luxury retail firms. Most of the firms will be drawn from the United Kingdom, Italy, and France because of the reliability of data on the retailers and brands in those countries, as obtained from respective registered bodies that represent the luxury retailers in the mentioned countries. However, the list must also include retailers with at least one flagship store in a foreign market outside Europe and North America, preferably in an Asian country because of the emergent nature of Asian markets in luxury consumption (D’Arpizio et al., 2015). The researcher shall then communicate with the individuals in charge of the luxury stores and set up the meetings for semi-structured interviews. The phone, email, or Skype can also set up such interviews because of the convenience provided by these means of communication.

Data Collection

The first phase of the data collection will involve observations undertaken through direct visits to the flagship stores of various retailers across premium streets in London, Paris, Milan, Shanghai, Tokyo, and Mumbai. The observation shall then be based on several drawn criteria to be recorded, including the exterior and interior design of the stores, additional services, third space, and the digital integration of the shopping experience. The recordings of the observations will be made through comprehensive descriptive notes, and photographs taken in stores that permit photo taking. Afterwards, the recordings shall be analysed to identify similarities in futures, trends, and features that distinguish the flagships. In the second phase, the researcher shall undertake structured face-to-face interviews with the managers of the flagship stores, or opt for phone, email, or Skype communication.

The data collection process shall use non-probability sampling, with the researcher recording all the interviews. The interviews shall be guided by fundamental questions about the study. The interviewer shall probe the interviewees regarding the role that their stores play in the multichannel environment, the steps were undertaken to conform to the changing digital and market needs, and the steps that they are taking to be at par with the competition provided by e-commerce. Additionally, the researcher shall also seek the opinion of customers, mostly undertaken in premium streets with large concentrations of flagship stores. The interviewer shall pose short questions to the interviewees regarding their experiences in the various flagship stores and the needs that they would want fulfilled by the flagship stores regarding shopping experiences. The opinion of the digital integration strategies undertaken by different retailers shall also be sought, and whether such changes match the experiences, that e-commerce provides to the customers on online platforms. The information will be recorded for subsequent qualitative and quantitative thematic analysis regarding the needs of clients.

Conclusion

In conclusion, the current study is expected to come up with results suggesting the evolving roles of flagships as technological and market conditions continue changing, now and in the future. The results are supposed to point to three important aspects of flagship stores in luxury consumption:

(i) Consumers and business executives do not expect the traditional roles of the luxury flagship store to be wiped out by technological advances and changing market conditions. In that respect, luxury flagships are still projected to continue providing an avenue for retailers and brands to avail the biggest assortment of their products to customers in the most stylish manner possible (Nobbs et al 2012), communicating the brand’s heritage positioning, and creating a third space for consumers, among other current roles played by flagships.

(ii) The flagship store is expected to provide more competition to e-commerce through providing the multichannel shopping experience that today’s consumer crave. Through the shifting of the store to an online platform that avails a similar emotional experience for the consumer through developments such as mobile applications, the flagship store will only continue growing in stature as the premium store through which luxury retailers and brands connect with their clients (Godey, Lagier, and Pederzoli 2009).

(iii) The growth of the role of the flagship as a market entry strategy is expected to outpace current market entry strategies in future due to the differentiated position held by flagships as a marketing tool (Bingham, 2005). Therefore, the ability of flagships to appeal to the consumer’s emotional and visual senses will give luxury retailers a competitive advantage (Bruce, and Kratz 2007) in entering new markets on the international platform.

(iv) Finally, the study is expected to point to the vital role that the flagship is expected to play in the future luxury consumption market by blurring the gap between the digital and physical space in the stores, hence providing customers with a memorable shopping experience, rather than a mere product. The example provided by leading market players such as Apple and Burberry in their flagships is expected to be the hallmark of future luxury flagship-stores.

Ethical Issues

The present study might experience ethical hurdles in data collection, especially considering the consent of the interviewees and their privacy. As such, the researcher will have to obtain the prior consent of the flagship store managers and the customers before conducting any interviews. Any part that might be unwilling to participate in the interview will be left out of the study, and no part of the survey shall include any information obtained from the individual. Furthermore, the reporting of the findings shall not mention any individual personal names, instead using the term “interviewee, “customer” or “manager” in the reporting. Additionally, the researcher shall also obtain permission from the relevant authorities before making any photo or video recordings of the physical design of the flagship stores, while also desisting from mentioning the names of the specific stores in the report as part of preserving business privacy. Finally, the final report of the study shall be availed to the participating stores as reciprocity to help them improve their processes deriving from the comprehensive findings of the research.