It's no secret that retailers are spending less on advertising -- the statistics point to plunges in print, TV and online. But what you won't find on the charts is a form of retail advertising that's not just declining but dying: the iconic flagship store.
Impressive, sprawling flagships in high-profile locations have long served as status symbols for retailers, more important for their brand-wide promotional value than the profits they may or may not have generated on the premises. A tourist's visit to the Macy's on 34th Street in Manhattan was something to go home and tell friends about.
But contraction in retail is leading big chains to reconsider their biggest brand temples. The latest casualty is JC Penney's New York City flagship and sole Manhattan outpost, put up for rent last month less than a decade into a 20-year lease. JC Penney's decision to close the 150,000-square-foot store, centrally located in one of the top tourist destinations in the world, signifies a dire situation at the Plano, Texas-based retailer.
But it's not alone. Earlier this spring, Ralph Lauren closed its lavish Fifth Avenue Polo store, for which it brokered a $400 million, 16-year lease in 2013. Toys R Us and Aéropostale shuttered their Times Square stores last year, and FAO Schwarz in 2015 turned in the keys to its Fifth Avenue flagship, whose giant piano won't be enticing Tom Hanks wannabes anymore. And while its miraculous location on 34th Street remains open, even Macy's is rethinking its real estate.
Struggling retailers can no longer justify the expense, even as a marketing cost, as e-commerce and social media grow in importance with shoppers. In the digital age, ads made from bricks and mortar no longer work as well, or even send the right message.
Now some brands are transforming flagship locations into more experiential, showroom-type locations where consumers can look but not necessarily buy. Nearly all marketers are forgoing the big glitz and glamour of the old flagship for smaller locations in less expensive areas.
"When a brand starts hurting ... then management starts to turn more financially oriented than brand-oriented," said Lee Peterson, exec VP-brand strategy and design at retail consultancy WD Partners. "It's hard to justify having a giant flagship store."