By Marco Passoni
When it comes to buying property the rule, they say, is ‘location, location, location’. The same is certainly true for luxury, but there is another important rule too: image is everything. Big luxury players do not want to be outdone by their rivals, and that is why today we are seeing luxury brands spending millions on prime spots in major cities – because appearance matters.
This is a big business for luxury maisons – and it is one which is shaping the future of the industry.
According to figures from Bernstein and Altagamma, in the last four years, leading luxury brands have invested almost €9 billion in securing the best sites across Paris, Milan, New York and London. LVMH alone has spent €3.4 billion, including €1billion for a site on Paris’ famous Champs-Elysées. Kering has surpassed that, spending €4 billion, including for a palazzo in via Montenapoleone in Milan. Those two stand out as the biggest spenders, with Prada’s €800 million or Chanel’s €500 million sat well behind.
But this spending has an impact on the wider industry. First, even for the biggest brands, this money is not a drop in the ocean. This is capital which they cannot invest elsewhere. It is a vote of confidence in the importance of having the best physical store locations, but it comes at the expense of innovation in other areas.
These ‘Store Wars’ are a vote of confidence in the importance of having the best physical store locations, but they come at the expense of innovation in other areas.
And if luxury’s biggest players are saying that big locations are the important thing to have, and are spending money which some brands can only dream of, then how does this impact the wider market? It creates a more closed space, stifling opportunities for smaller, more niche players to compete.
Such a trend is not exclusively seen in the domestic market either. I have talked in the past about the luxury cathedrals which we are seeing grow in the travel retail market. Changi and Hong Kong are excellent examples of this, with double-façade stores, in some places spread across two floors.
But travel retail does not have space for all brands to play and compete in this way. The same is true in the domestic market – there are not unlimited spaces on the Champs-Elysées, via Montenapoleone or Fifth Avenue.
In both markets, smaller brands – and those which wish to step out of the race – must be willing to think in a new and different way. Find locations and stores which tell their brand story in a way which takes size out of the equation. Moncler did this excellently when it opened on the Champs-Elysées a few years ago, before the rush.
Brands must be willing to think in a new and different way
At a recent Bernstein and Altagamma event attended by 2.0 & Partners Senior Partner Vittoria Passoni, the two companies highlighted the importance of VICs. This demographic of consumers is few but key for luxury brands and they expect authenticity, exclusivity and exceptional service. Nowhere there does it say historic locations.
Brands will always do best by being true to themselves and their story-telling. In travel retail, this means thinking in a new way about how to use space. It would be ideal if all airports would follow the example of Paris Charles de Gaulle, which has a measured and moderate luxury zone, where all brands can flourish. But until then, brands must find the space which suits them – from pop-ups to innovative locations – and bring their experience to life.
The Store Wars cannot go on like this, or everyone will lose in the end.
