Can the cost of creating flagships in high-profile locations really be justified or are they large nails in retail coffins?

Can the cost of creating flagships in high-profile locations really be justified or are they large nails in retail coffins?

Sometimes, it’s hard to escape the sense that if you want to know when a struggling retailer is about to head for the administrator’s office, wait until it unveils a fancy flagship. The failure last week of 55-store strong lingerie retailer La Senza, for the second time in two years, was preceded by the arrival of a very ostentatious-looking store treating shoppers at the western end of Oxford Street to large digital screens, music and all-round underwear bling.

Lingerie shops have come a long way in the last decade from the point when if women wanted ‘foundationwear’ they headed solely for Marks & Spencer. While that retailer still has the lion’s share of the market, young pretenders, such as Victoria’s Secret, Agent Provocateur (for the very affluent and somewhat racy) and the big value chains, have all weighed in for a slice of the action.

The result has been an arms race in terms of fancy shopfits, with the Victoria’s Secret flagship, on Bond Street, being among the most opulent and, like La Senza, boasting an enormous digital screen that backs the staircase at the rear of the ground floor. All of this costs money and perhaps the voices of FDs have been shouted down at board level as other retail directors endeavour to create eye-catching flagships to spearhead their store portfolios.

On this reckoning, return on investment might seem a phrase not to be uttered. It’s always going to be an uphill struggle to pay for an upscale fitout with digital bells and whistles when the cost of renting space on Oxford Street or Bond Street is factored in. Indeed, unless footfall is relentless and freewheeling as far as spend is concerned, it’s actually quite hard, from time to time, to grasp the economics of a London flagship selling mid-market or cut-price smalls.

If you are in the business of knowing where prime sites are likely to become vacant or of ‘shorting’ stock, then clocking a combination of big space, low stock price, high rent and intermittent footfall is probably as good an indicator as any when it comes to taking a punt. Unless of course the shop in question is Primark (or Victoria’s Secret for that matter), where customer shortage is never an issue. Flagships may look good, but there should be a high degree of soul-searching before contracts are signed and bold in-store designs are commissioned.

There’s a fair amount to be to said for focussing on the workaday when margins are tight.