“Proto-ships” Set to Sail

Posted by Carol Spieckerman on July 20, 2011

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Flagship stores tend to be characterized by cutting-edge creativity, soup-to-nuts assortments, and wow-factor fripperies that reinforce the brand like nothing else can. That’s why they will remain an irresistible option for retailers, even as they shift toward small formats in order to build scale.

Manhattan remains a flagship mecca for retailers such as Aeropostale, with its two-level Broadway location featuring a massive digital billboard; Disney’s largest-ever, 25,000 sq. ft. Times Square showstopper; or tastefully low-tech odes to the luxury lifestyle such as Ralph Lauren’s Rhinelander Mansion re-do, which features meticulously-curated vignettes of customized furnishings and accents that almost render the products secondary to the store itself.

Flagships are understood to be high vanity, even when they aren’t high volume. It’s all about showcasing the brand in its ideal state and setting, the epitome of the brand done right, even if it will never be done that way again.

Contrast that model with Best Buy’s prototype connected store concept—a format that we made a point of adding this year to our Licensing Expo retail safari—which showcases services and solutions in a non-cluttered, Apple-Store-esque environment. Best Buy is cautiously rolling out these prototype stores, not as an immediate replacement for its product-centric big boxes, but as a short-term alternative template that may or may not gain traction.

Last week, Duane Reade unveiled its 22,000 sq. ft., 24-hour Manhattan mega-store, which features a chef-staffed sushi station, local favorite food brands, a Coca-Cola Freestyle machine that dispenses 130 varieties of fountain drinks, a nail salon, a “virtual” greeter powered by the latest in holographic imaging and a host of other atypical amenities and precedent-setting product offerings.

So what is it, another great flagship that tells the world what Duane Reade is all about or a prototype that will serve as a template for future store development? It’s both and it’s neither. The store has all of the gee-whiz characteristics of a flagship; however, it isn’t intended as a one-off banner brag. Joe Magnacca, Duane Reade’s president, stated that the store will serve as an “incubator for new ideas” and that “where it makes sense, [they] will apply whatever works” to other locations, which may include Duane Reade or its parent company, Walgreens, locations. It goes beyond a traditional prototype because the dizzying array of innovations and mold-breaking experiments housed under that one roof are all operating as separate trials. “Whatever works” may be an isolated element well suited to all stores, or a cluster of synergistic solutions that nonetheless only make sense in certain markets or individual locations.

I’m calling Duane Reade’s mega-lab a “proto-ship” because it is a hybrid of a flagship and a prototype, and I think we’re going to be seeing a lot more of them, as retailers get bolder about the number of ideas that they are willing to test at once and then deconstruct—and more comfortable doing so in live settings rather than behind closed doors prior to putting them out en masse. Proto-shipping is more than a location; it is a complex process of incubating multiple tests in live environments, distilling insights from each one, and strategically deploying the exponential outcomes to other brand environments (perhaps that’s why it hasn’t been attempted on this scale before).Duane Reade has set a standard that others will soon follow.

Licensees and licensors have always had a vested interest in supporting flagship stores due to their visibility, even when they sometimes seemed like high-maintenance situations that required a lot of care and feeding. Most have awakened to the reality that, when it comes to supporting prototypes, growing pains often give way to real volume potential when it comes time to expand. Proto-ships promise to offer the best and the worst of both. Is the licensing industry ready for the challenge?

Bottom line:

  • As big box retailers shift to smaller-format stores, proto-ships are the perfect vehicles for “feeding” fresh ideas to them. Licensees and licensors should push for placement within these concepts and dedicate resources to ensure flawless execution and collaborative problem solving. Flagship brand awareness and prototype rollout volume potential will be the rewards.
  • Proto-shipping raises the bar for licensees and licensors. “One thing at a time” and “sell and wait” are relics of the past, and live incubation is replacing private refinement. The readiness to “go public” with multiple brand and product scenarios and course correct throughout each program will be critical.
  • Brand and product tests used to be siloed; now they are synergistic. Retailers will increasingly expect licensees and licensors to look at how their brands and products are performing in relation to others, and in the context of services and solutions, as well.

Want to continue the conversation? We welcome your comments!
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