Luxury brands from Gucci to Chanel are placing billion-dollar bets on in-store shopping

• Luxury brands seek new retail storefronts in a bet that shoppers prefer in-store experiences.
• The Journal reported Kering, which owns Gucci and Saint Laurent, spent $1.4 billion on a building in Milan.

While vacancies in retail real estate have surged since the pandemic, luxury brands from Gucci to Chanel are betting big bucks that their in-store experience will draw in shoppers for the long haul.

Kering, which owns Gucci and Saint Laurent, recently spent $1.4 billion on a building in Milan's Via Montenapoleone, The Wall Street Journal reported. The purchase comes in addition to a $1 billion property acquisition on New York's Fifth Avenue made by the company in January, the outlet reported.

Representatives for Kering did not immediately respond to a request for comment from Business Insider.

Business Insider previously reported that Kering's investments are part of a selective real estate strategy meant to lock down highly desirable locations for its suite of leather goods, jewelry, and fashion houses, including Balenciaga and Alexander McQueen.

The Milan property, acquired from Blackstone Property Partners Europe, is one of the largest in Via Montenapoleone — an iconic upscale shopping street — and includes more than 5,000 square meters of retail space.

The Journal reported that other luxury companies, such as Chanel and LVMH, are eyeing similar investments on New York's Fifth Avenue and the Champs-Élysées in Paris.

While e-commerce has surged since the pandemic, increasing by $244.2 billion or 43% in 2020 over the previous year according to Census data, and with more and more retail establishments — including Rite Aid and 99 Cent Stores — permanently closing their doors in recent months, luxury brands haven't shied away from opening new locations to serve shoppers in person.

Forbes reported in October that luxury storefronts accounted for 38% of new store openings and 40% of retail leasing over the last year, with Dior opening stores in Orlando, Detroit, and Austin, while Alexander McQueen opened new locations in Atlanta, Boston, and Charlotte, North Carolina.

European luxury brands have snapped up $9 billion of boutique real estate locations since the start of 2023, the Journal reported. The outlet noted their spending on store costs and investments represented roughly 9% of their sales last year, up from 6% before the pandemic.

And it doesn't appear they'll be slowing down any time soon. When luxury spending ticked upward at the end of 2022, analysts quickly highlighted that the ultrawealthy keep their sights set on long-standing luxury designers like Dior and Louis Vuitton, even during times of economic hardship.

"It's just intensification of the bigger getting better," Business Insider previously reported Oliver Chen, managing director in the retail and luxury section for investment bank Cowen, said.

Representatives for LVMH and Chanel did not immediately respond to requests for comment from Business Insider.