In an age of  e-commerce and online shopping, why spend huge amounts of money on a storefront in a high rent city?  The following is an excerpt of a great article from the Business of Fashion about flagship stores in London:

A first store is a turning point for a fashion business — direct retail allows a brand to bring in customers, capture sales and earn more of the margin that was previously shared with wholesale partners. But it also comes at a price — astronomical rent costs, not to mention the financial and logistical investment of employing staff and carrying inventory. And, in a digital age, doesn’t the consumer value convenience over in-store extravagance? A clutch of British brands would disagree.

“We are above 100 percent like-for-like sales, up on our first month,” Carmela Acampora, chief executive officer of Roksanda, told BoF in July, one year after the first store opened on Mount Street in Mayfair. “Our conversion rate is around 50 percent in our store. I haven’t seen those numbers before!”

But setting up shop in areas like London’s Mayfair — where all of these brands have recently opened their first stores — is no guarantee of turning a profit, and market sources suggest some are not performing well in terms of sales. “Often, these mono-brand stores are not profitable — but they could be, as the receptacle of all ‘maison’ private and celebrity clients,” adds Luca Solca, head of luxury goods at Exane BNP Paribas. “If you only have one store, you may ask all ‘maison’ clients to go to it.”

By choosing an elite store location, designers are not only courting sales, but status, too. “In terms of marketing, we want the shop to be a brand in itself,” says Hussein Chalayan, whose flagship is located in an emerging arts district, steps away from the Phillips contemporary art auction house and the soon-to-open Gagosian Gallery. “It’s in a cultural hub. Because of where we are, it’s a lot easier for press to come.”

“There’s so much that they can do with a standalone store, which they can’t do if they are in a department store and doing wholesale,” concurs Fflur Roberts, head of luxury at Euromonitor. “They can have their own events, whether that’s with professionals, sales, or customer evenings.”

“Small designer brands see their first store as their first flag on the map. A sign they exist and ‘have made it’ in the real world,” says Luca Solca.  A first store also opens a dialogue between a brand and its customer — a designer can test out products, get feedback first-hand, clarify their product assortment, and have full control over how it is presented, sold and discounted.

“[With wholesale] you really have to respond to the buyer and take into consideration their needs. The showroom is massive and there’s such a big collection that it’s only a select amount of items that the wholesaler will buy, but when you have your own retail space you can tell the story much more,” says Kane.

“It’s been an incredible experience to speak with my customers directly,” agrees Roksanda Ilincic. “When you’re doing that through shops that are not your own, the information that you get is limited. Now, we are building all this data ourselves.” According to chief executive Acampora, deciding which products should adorn the store’s golden slabs of shelving has been a learning curve: “Previously, we were never buying anything in-depth. What are the pieces that we are really going to believe in — we’re betting on all of that now.”

While the fierce competition for locations may have made some of these investments a case of “now or never,” the timing of a store opening is significant. This year, Simone Rocha’s label turns five; Roksanda, Erdem and Christopher Kane all opened their flagships around their 10th anniversaries; and Hussein Chalayan’s first store represents another coming of age: the label’s 21st anniversary.

Indeed, it can take years to build up the ideas, the brand identity and the product range needed to fill out a store. “It takes a while to build your own DNA, even if you’re a really, really focused designer that is doing very similar things from season to season,” says Ilincic. “It’s too early to start a shop at a time when people don’t quite know what you’re about yet.”

And then, there’s the digital question. While it may seem surprising that Roksanda, Hussein Chalayan and Christopher Kane have all prioritised a physical location over launching e-commerce, according to a 2014 report by McKinsey & Company titled ‘Luxury Shopping in the Digital Age,’ e-commerce represents only four percent of luxury sales at an estimated €9 billion (almost $10.2 billion), though that figure is expected to reach approximately €20 billion (around $20.6 billion) in the next five years.

“I don’t think digital sales will ever make physical stores completely obsolete,” says Ilincic. “The architectural space and materials used to create it, lights, fragrance, the flowers, and, of course, direct interaction and feedback from the shop team — all these play vital roles in allowing customers to experience the full potential of the brand.”

Rather than being divorced from digital, these physical flagships present an opportunity for omni-channel retail, combining the in-store experience with the convenience of e-commerce. “We’re hoping that our customer can come in, try something on and eventually order it online, because they want it to be delivered to their house. [The store] can actually be the space in-between the two,” says Hussein Chalayan.

For Roksanda, Christopher Kane and Erdem, plans for more physical stores are in the pipeline, though the designers remain tight-lipped on the timings and locations. “To have a store in every city in the world, it’s a dream of every designer,” says Kane. “I’m not going to lie, I’d love it to happen tomorrow.”