Editor’s Note
This analysis highlights the evolving strategy of luxury retail, where flagship store scale signals brand strength but aggressive expansion gives way to targeted presence in key global hubs.
To a large extent, the scale of top luxury brand flagship stores is clearly positively correlated with the brand’s value potential. The demand from first-tier luxury brands for new commercial spaces continues to grow. Major luxury consumption destinations such as Milan, London, and New York will remain the most attractive to luxury brands, exceeding everyone’s expectations. Faced with an increasingly saturated market, aggressive store openings are no longer the optimal strategy. The next goal for major brands is to integrate stores with unique urban charm, immerse themselves in the city’s rhythm, and create flagship stores that combine “concept and experience.”
From January to August this year, 18 luxury brands upgraded 21 stores in Beijing, including 9 newly opened and 12 renovated stores. Bernstein analysts point out that China is on the cusp of a new retail upgrade, with a large number of new projects entering the market and first-tier brands also expanding their scale to attract different consumer groups.
· Dior expanded its store at Shanghai’s Plaza 66 to four floors, including a luxury home department and a VIC-exclusive space.
· Fendi opened a flagship store at Shanghai’s 1788 Plaza.
· LV, Dior, and Hermès established independent flagship stores in the North Zone of Taikoo Li Sanlitun, Beijing.
Today’s luxury brand boutiques need to become more attractive to generate more foot traffic and increase productivity per square meter. This means engaging all of the consumer’s senses within the space to create a memorable experience. To achieve this, it’s not just about adding more artwork, but about expanding the brand’s influence by acting as a cultural venue beyond its sales function.
Bernstein luxury analyst Luca Solca noted in a recent report that flagship stores have been upgraded in both scale and quality. For example, Dior’s massive Avenue Montaigne complex, which opened in March 2022, includes several restaurants, a museum, and hotel suites in addition to home, beauty, and high jewelry departments.
Bernstein states that such super flagship stores create “shock and awe” in consumers, thereby enhancing their perception of the brand’s intrinsic value. In an era where phones can do anything, stores must become distinctive to be worth a consumer’s visit. More importantly, super flagship stores do not represent a sacrifice on the profit and loss statement; on the contrary, they are highly profitable in terms of turnover and margins.
Bernstein points out that between 2019 and 2023, the store networks of major luxury brands grew by only 0.5%, with 40% of stores concentrated in 25 major cities. Among them, Tokyo leads with 234 luxury stores, followed by Seoul with 221, Paris with 165, Hong Kong with 148, and New York with 128. London, Shanghai, Beijing, Osaka, and Taipei round out the top ten.
Weiying Guo, Senior Associate Director at Cushman & Wakefield in China, stated that expanding at existing locations is safer than entering new shopping malls. Taking the upgrade of the Taikoo Li Sanlitun complex in Beijing as an example, a brand typically needs two to three years to expand in an ideal, superior area.
By next year, almost all first-tier luxury brands will have large flagship stores in the North Zone of Taikoo Li, while second-tier brands are being relocated to the South Zone, once occupied by fast-fashion brands. In the near future, there will be no new luxury shopping centers in Beijing, so the upgrade of Taikoo Li will be the last chance for brands to anchor their expansion.
Meanwhile, Gucci is building a super flagship store on Rue Saint Honoré in Paris—just a stone’s throw from the picturesque Place Vendôme. The company has taken a similar approach in London, planning to open a 16,000-square-foot store on the former site of Versace’s New Bond flagship.
While most observers predict a proliferation of super flagship stores in the future, they are just one part of the physical touchpoint ecosystem for first-tier luxury brands.
According to Delphine Vitry, founding partner of luxury consultancy MAD, brands can also open pop-up stores, seasonal shops, and private stores accessible only by appointment or invitation in top resort destinations.
— Gucci’s first super luxury salon concept store opened in Los Angeles this April. This approximately 400-square-meter store operates by appointment only and is open exclusively to top clients, primarily selling products ranging from €40,000 to €3 million. It is expected to be followed by nine more branches in New York, Paris, Milan, London, Dubai, Hong Kong, Shanghai, Taipei, and Tokyo, each with its own product line.
Louis Vuitton’s Objets Nomades is located in Shanghai’s historic Zhuangyuan Shikumen compound, adjacent to Hong Kong’s Swire Taikoo Hui. This three-story “long-term” pop-up space offers an experience similar to the nearby Prada Rong Zhai, combining storytelling with local architectural style to attract major clients willing to pay high deposits for custom luggage or furniture.
This month, Boucheron unveiled its second-largest boutique globally in Ginza, following its historic Maison Boucheron at 26 Place Vendôme in Paris. From Paris to Tokyo, Boucheron brings a journey of creative pioneering—this flagship store, spanning over 1,000 square meters across four floors, is a microcosm of Paris in Tokyo. The Ginza flagship, from its boutique scale (1,000 sqm) and strategic location (Ginza—Tokyo’s iconic luxury district) to its unique experience, will serve as a showcase window for Maison Boucheron in Asia.
Luxury brands such as Chanel, Dior, Louis Vuitton, and Christian Louboutin have all opened independent private stores or VIP salons in recent years.
The expansion of top luxury store scale is timely. In the current challenging economic environment, the middle class is no longer the growth source for these large enterprises.
Delphine Vitry, founding partner of luxury consultancy MAD, points out that the volume of appointment-based business for luxury brands is a key performance indicator, as the engagement and conversion rates for appointment business are far higher than for walk-in business. Top jewelers can derive up to 40% of their revenue from appointments.
Vitry notes that VIP stores can even be more profitable than super flagship stores, as they are often located on higher floors of buildings with lower rent, and their product assortment is rich enough that affluent individuals not only buy special items but also purchase displayed collections in large quantities.
The entrance to the recently opened Chanel VIP salon in Guangzhou’s Taikoo Hui is separate from the main store, segregating the brand’s high-spending clientele from other consumers.
In the same mall, Dior and Louis Vuitton have also carved out dedicated spaces in the adjacent Mandarin Oriental hotel and the mall’s former members’ area, respectively, to highlight their high jewelry products and better serve VIPs.
The brand’s underlying strategy is its emotion and proposition, deeply influencing through brand storytelling, offline experiences, and user communication paradigms to form brand preference. Javier Sanchez, former Global CMO of Coca-Cola, once said: “For products, people buy to purchase, but for brands, people buy because they believe, and they will consciously or unconsciously pay for the entire experience.”
Effective marketing always chooses to speak to the emotional brain. For luxury brands where brand value is difficult to measure, an ultimate shopping experience will undoubtedly become a key fulcrum for stabilizing consumption trends.