Out of all the High Streets in the world, there are only a select few that are synonymous with high-end shopping. London has its Bond Street. L.A. has its Rodeo Drive. Paris has its Avenue Montaigne. Tokyo has its Ginza district. And in New York, Fifth Avenue has always been the heart and home of high-end fashion.
Yet, despite its “Millionaire’s Row” reputation, waves of retailers have been fleeing the infamous Fifth Avenue, but not for the reasons you might think.
Some are blaming rising rents; others think the handful of high-profile bankruptcies might be adding fuel to the fire. But the main reason behind the Fifth Avenue exodus is that the role of the flagship store is evolving and retailers are eager to keep up.
Which brands have left Fifth Avenue and why
This year the iconic luxury department store, Barneys New York, declared bankruptcy and has since closed down 15 of its 22 stores – and at the beginning of 2019 department store Lord & Taylor, which previously occupied an entire building on Fifth Avenue, closed down its flagship store.
A number of big league retail brands have also closed their flagship stores, including Calvin Klein, Ralph Lauren and Henri Bendel, while Gap and Versace are reportedly on their way out.
According to data from corporate real estate firm Cushman & Wakefield, the availability rate of leases from 49th to 60th street on Fifth Avenue hit 27.5% at the end of 2018, an increase of 5% from a decade ago. (Neighbouring Madison Avenue hit 28.2% from 57th to 72nd street.)
Rising rental costs are clearly a factor, with many smaller retailers eager but unable to secure leases on the coveted shopping streets due to costly contracts – but that doesn’t explain why the big retailers are leaving. There’s also speculation that New York isn’t attracting the tourist numbers it once did – yet the city drew a record high 65.2 million visitors in 2018, the ninth straight annual increase in a row.
Figures from Coresight Research hint at a wider issue, estimating that the US will lose 12,000 stores this year – a drastic increase from 2018’s record 5,800 sites – and figures by Credit Suisse report one in every four malls in the US is projected to close over the next five years.
The role of the flagship store is changing
Having a flagship store on Fifth Avenue used to be about so much more than making a profit for that particular store. It was about showcasing your brand on a national and global scale.
But we are in the midst of a retail revolution – and the role of the store or shop is evolving. Instead of pushing their way through crowded stores or shopping streets to purchase products or receive a service, consumers now have a number of different options at their disposal. They still enjoy shopping, but on their terms.
In response to its departing Fifth Avenue flagship stores, the parent company of Calvin Klein and Tommy Hilfiger, PVH Corp, said the restructure was to “evolve the traditional luxury fashion model” for the digital age.
And one of the fundamental changes to retail in the digital age is the demand for experiences. Three out of four Millennials (78%) choose to spend their money on a desirable experience or event instead of buying something desirable – and this desire has impacted the way they shop.
To attract and engage consumers, leading retailers such as Nike, Samsung and American Eagle are creating in-store experiences that reach well outside the confines of the traditional transaction-based business model.
What’s next for the future of retail in New York?
Fortunately, Fifth Avenue’s days as a retail destination are by no means numbered – with many high profile brands staying put.
Retail giant Nike opened a six floor, 68,000-square-foot “House of Innovation 000” on Fifth Avenue after closing its Niketown store. At the new destination, shoppers check out using the Nike mobile app (there are no cash registers), can scan QR codes on clothes and send them to fitting rooms to try on, and book appointments with store associates for expert advice.
In an interview with CNN Business, Nike Direct’s President, Heidi O’Neill, labelled the new store a “flagship of the future” and says they hope it will define how shoppers interact with the brand.
O’Neill said: “We think about flagships as big monoliths. This store can be responsive to a New York City sport or culture moment. We can change this space up overnight, which you don’t think of with flagship retail.”
While it might not be what it once was, Fifth Avenue’s place as a world renowned shopping destination is still safe – but what has changed is the belief that retailers HAVE to HAVE a flagship store there in order to be successful.
Consumers have made it clear that they no longer intend to play by the old rules of retail, meaning brands have the opportunity to reinvent themselves in exciting new ways.
For instance, a number of online-born retailers are setting up flaship shops in SoHo, including Nordstrom, Warby Parker, Allbirds and Everlane.
Luxury marketing and branding strategist, Thomai Serdari, who teaches at New York University’s Stern School of Business, says:
“A new idea like Allbirds that is trying to develop the local American market would have no business spending all their money on Fifth Avenue.”