New Luxury is Keeping Physical Retail Spaces Alive

Disrupting decades of decline and the growth of e-commerce has seen a radical shift in the state of physical retail spaces

Over the past decade, retail has evolved at an incredible pace. Thanks to the rapid growth of e-commerce worldwide - digital holds dominance. Meaning physical retail has taken a considerable blow.

This shift, largely dictated by fast-changing consumer behaviour and inflated business rates, has left many brands and retailers questioning whether or not physical retail is a worthwhile investment.

However, New Luxury approaches retail in a new way. It’s about creating physical spaces to build community and vibe.

In this piece, we examine how and why physical retail has experienced such large-scale change(s), and spotlight which New Luxury stores are helping reshape the narrative and perception around physical retail.

The high street’s decline.

It’s no secret, the high street (around the world) has been experiencing a significant decline, particularly over the last five years. In the UK, more than 17,500 chain store outlets disappeared from high streets, retail parks, and shopping centres. These closures, which would be permanent, came as a direct consequence of the pandemic, with ripple effects such as climbing business rates and rents in the proceeding years leaving many hesitant to risk new openings. 

The decline of physical retail spaces isn’t unique to the UK, with the US experiencing a 12.6% decline in the number of stores per capita– 60,000 retail stores–between 2011 and 2021.

What’s important here, is not only how many stores have been closing, but how this has been affecting physical retail sales in general. Where does this leave the state of physical retail?

An analysis of in-store sales pre-COVID by Retail Economics highlights that stores—in the UK, Germany, France, and Netherlands—accounted for €9.1 billion fewer sales in 2019 compared with five years earlier. Across a five-year forecast period, this data translated to an average loss of €8 billion in sales per year.

The pandemic, through lockdowns compounded with rising business rates and costs post-pandemic, played a significant role in the decline of physical retail; however, e-commerce’s pace of growth had already outmatched the high street.

From 2000 to 2019, e-commerce grew from 0.9% of all US retail sales to 10.6%, jumping again to 14.6% in 2020 as a result of physical store closures and low traffic during the pandemic. Further growth of almost 9% is projected for this year, with the global e-commerce market expected to total $6.3 trillion, growing to over $ 7.9 trillion by 2027—translating to 23% of total retail purchases being made online.

Moreover, the UK alone had nearly 60m e-commerce users in 2023—a figure projected to increase to 62.1m by 2025, which would see the proportion of all UK retail sales made online reach a predicted 38.1%.

Clearly, online sales are showing no signs of slowing down; so where does this leave New Luxury physical retail?

An experience beyond shopping.

One of New Luxury’s key tenets is the value of the experiential, encompassing several elements, such as:

• Immersive retail environments

• Personalisation and customisation

• Cultural and social integration

• Digital and virtual experiences

• Sustainability and ethical practices

• Community and social interaction

While many of these elements have digital applications, the experiential generally speaks to the physical, making these foundational elements to the success of New Luxury retail spaces. 

Earlier this year, Vogue Business’ assessment of the future of shopping highlighted that “stakeholders have been advocating for the need to make the high street less about selling things and more about the experience and fostering a sense of community,” offering a clear indication that the current (and future) state of physical retail is reliant on brands and retailers effectively executing the experiential in the eyes of the consumer. 

The piece in question, through conversations with several leaders and disruptors within New Luxury retail, concludes that “retailers will have smaller footprints that work much harder; human connection will be recentered; and, above all, curation is key.”

So, who’s doing experiential, community-driven retail right? Who can the industry look to as torchbearers for physical retail’s future?

KITH (USA, UK, EU, South Korea, Canada)

KITH—through Founder Ronnie Fieg—has always put great care, consideration, and curation into its physical retail spaces.

Each location across the USA, EU, and UK, has been designed to reflect the premium line-up of brands and collaborations that have seen KITH become one of the hottest retailers in the world.

Inside each of its spaces, Ronnie Fieg’s love of design, art, and culture comes to life, inviting consumers into his mind as well as the brand’s universe. These elements alone have made KITH’s locations a hotbed for social interaction but through its launch events, collaborations, Kith Treats, and more, it’s fully embraced New Luxury to create memorable experiences.

These experiences keep feet in KITH’s doors around the world.

END. (UK, EU)

Since breaking into the market in 2005 from its home in Newcastle, END. has catapulted itself to the forefront of New Luxury retail by working closely with some of the most desired and respected brands in (luxury) streetwear such as Needles, Nike, Stone Island, MASTERMIND, and more.

While boasting an extensive offering via its e-commerce platform, END. has made a consistent effort to build communities within key cities, utilising its physical stores as hubs.

Through its Newcastle, Glasgow, London stores, as well as its newer spaces in Manchester and Milano, END. has put thought leaders within its community, as well as those that have shaped the scene it inhabits, at the forefront of its outward engagement.

For the opening of its Manchester store, for example, it hosted a night led by Represent, offering the city’s inhabitants the opportunity to learn more about the brand from its founders, shop exclusive merchandise, and share an experience with likeminded individuals from both END.’s and the local community.

Connecting with brands and creatives from each of its home city’s has transformed the retailer’s physical stores into community hubs that are as much about learning, experiencing, and sharing, as they are shopping.

Voo Store (EU)

A store often in reciept of the highest praise—included in our Field Notes from Berlin—Voo Store’s success in creating a lively, dynamic physical space is grown from a highly curarted, less-is-more approach.

The space, which is relatively barebones in comparison to some of the larger department stores on this list, takes great pride in its product selection across all categories. From a luxurious line-up of beloved and niche fragrances to high-end designer boots and loafers alongside sneaker favourites from Kiko Kostadinov and ASICS, curation is undoubtedly the store’s greatest strength.

In addition, patrons are invited to extend their stay within the store thanks to a modest deli (with indoor and outdoor seating) which also stocks a selection of natural wine, organic food, and hand-picked goods.

The combination of these elements, alongside community-based events such as exhibitions, pop-ups, launch events, readings, and concerts, as well as the stores tucked-away-courtyard location results in an inviting community hub that’s held in extremely high regard.

Highsnobiety (EU)

Having established the concept of New Luxury in its book The New Luxury: Defining the Aspirational in the Age of Hype, Highsnobiety understands what it takes to build engaging, community and socially-driven retail experiences and spaces.

With the tenets of New Luxury established and its e-commerce platform successfully demonstrating its eye for product curation, building a space reflective of its values, consumer needs and desires was a natural next step.

Its hyper-textual space in Berlin transforms the digital Highsnobeity experience that its fans have enjoyed for almost two decades into a physical one for the first time., outside of its fashion week activations like Not in Paris or its retail space at Copenhagen Airport.

Highsnobiety prides itself on its community engagement, with its pop-ups, events, and collaborations being proof of concept. As such, mirroring this within a physical storefront of its own demonstrates an awareness of its consumers’ desire to connect with both the brand and its wider community.

FLANNELS (UK)

With the opening of its Liverpool store, FLANNELS made a bold statement of intent—to challenge the status quo of the UK’s physical retail scene.

Doing so required the retailer to go big. Utilising every corner of its enormous new dwelling, FLANNELS promised more than just shopping, providing a diverse retail experience encompassing fashion, beauty, sneakers, fitness, food, and more.

120,000 square feet of space spread across seven floors. From the bottom up, the store includes dining, cocktails, and coffee from Bacino, extensive skincare and beauty (including the world's first "Beauty Changing Rooms”), floors dedicated to menswear, womenswear, an on-site Barry’s Bootcamp, beauty treatments, a rooftop brasserie, all-day dining space, and a pan-Asian restaurant.

By pulling out all the stops in diversifying its retail experience, FLANNELS transformed its traditional offering into something that invites shoppers to plan a full day out within the space, bringing people together through fitness, food, and fashion.

Aime Leon Dore (USA, UK)

One of the most desirable and respected brands operating within the New Luxury sphere, ALD’s spaces in New York and London are hotbeds for consumer engagement almost by default. People want to be seen there, whether shopping or not.

As highlighted by Highsnobiety, ALD’s cafe, aptly named Café Leon Dore, is just as popular as the brand itself.

The Starbucks for fashion enthusiasts, this space is as much of a hub for the ALD community as it is meme stock for the wider fashion community, making it somewhat of a must-visit.

Coupled with the incredible design and curation of ALD’s stores, Café Leon Dore provides the perfect retail experience for those who desire to connect with likeminded individuals and indulge in the peak of New Luxury fashion.

Positive Retail (UK)

Thanks to her experiences working in retail, Positive Retail’s founder Anna Woods has been able to build a successful business that looks at fashion retail differently.

Positive Retail (a resale concept established in 2020) mixes surplus stock with private seller consignment. Through its commitment to creating an environment that is highly curated, carefully considered, and values human connection above all else, proves that physical retail doesn’t need to be built on a foundation of overconsumption and overproduction.

As previously mentioned, the space (of which there are now 3) focuses on curation, community, and change; pillars that have been integral to its continued success.

The keys to success.

With the continued growth of e-commerce, there’s certainly a case to be made against investment in physical retail spaces. However, New Luxury consumers are seeking out community-driven spaces that put value in creating experiences.

Building strong communities requires brands and retailers to think beyond the digital experience, such as those demonstrated above.

To summarise, the keys to success in New Luxury physical retail:

• Put value in curation. For example, offering city-exclusive stock, such as local brands or collaborations.

• Provide valuable experiences. Utilise physical spaces for events such as workshops, talks, panels, parties, and so on.

• Put community first. Value the opinions and voices of the local community as well as your direct consumers to build loyalty and connection.

• Priotise human connection. Create an atmosphere that is welcoming, comfortable, and engaging beyond the desire to drive sales.

• Consider non-retail. Could the space include a cafe or services such as a barbers or shoe cleaners? What can you offer to keep consumers engaged beyond product?