Retailers Invest in Showy Flagships as Market Offers Opportunity

Elaine Misonzhnik / Retail Traffic

Recent announcements by retailers as disparate as Uniqlo, Century 21 and Macy’s about launching new mega-stores or significantly expanding existing stores in New York City seem to go against the current trend of cutting back on store footprints.

When everyone in the retailing universe is trying to keep down real estate costs and consumers are holding on to their discretionary income, why would firms invest millions of dollars in huge units on some of the most expensive streets in the world?

The answer is brand-building.

For most retailers that open over-sized stores on major urban thoroughfares, the stores likely won’t reflect a portfolio-wide strategy, says Jeff Green, president of Jeff Green Partners, a Phoenix-based real estate consulting firm. Instead, such stores are meant to serve as flagship locations—showcase stores in areas that benefit from high shopper traffic and tourist counts that can both give customers a taste of what the brand is about and provide a testing ground for new products.

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