Does the luxury industry still need department stores?

Aspirational consumers are buying less, multi-brand stores are on the decline, and the luxury sector is losing the venues where new brands are discovered.

The Fondaco dei Tedeschi has closed, Coin is undergoing restructuring, and Modes has entered court-ordered liquidation. Three different situations, but all affect the same aspect of distribution: the gap between the brand’s boutique and the consumer.

According to Bain and Altagamma, the luxury sector has lost approximately 70 million active customers since 2022. Aspirational consumers, who accounted for 74% of the high-end market in 2013, have dropped to 61%; 35% have cut back on spending over the past 18 months. The desire hasn’t disappeared. What has diminished is the willingness to pay prices that have risen faster than perceived value.

The department store depended precisely on this type of customer: curious yet cautious, willing to switch brands, compare products, and explore the luxury market through different categories. When this customer buys less, the multi-brand store loses sales volume and is forced to reduce its product assortment and store network. When the multi-brand store downsized, the consumer lost opportunities for discovery.

This isn’t the end of brick-and-mortar retail, but rather its polarization. By 2025, rents on Italy’s luxury shopping streets had risen by an average of 6%, and Via Montenapoleone reached 20,000 euros per square meter per year. According to the latest publicly available data, Rinascente posted record sales of one billion euros in 2023, with more than half of its revenue concentrated in its Milan flagship store. Major brands and a handful of exceptional destinations are holding their own; it is the businesses in the middle that are struggling.

A single-brand store can sustain itself by managing its image, data, and customer relationships. A multi-brand store must maximize the value of its retail space, product assortment, and inventory. If demand slows, the former defends its own brand ecosystem; the latter cuts the less reliable brands—often precisely the emerging ones that would most need to be showcased to consumers.

Six studies published in the Journal of Retailing highlight this difference. A single-brand boutique offers a more hedonistic and intuitive experience, while a multi-brand store encourages customers to compare brands and alternatives. The boutique celebrates a pre-selected universe, whereas the department store allows customers to change their minds.

A natural experiment published in Manufacturing & Service Operations Management measured what happens when a luxury retailer temporarily closes its physical stores. Local online orders increase by 24%, but only 11% of the store’s normal demand shifts to digital. The share of bestsellers rises from 45% to 50% and, among less experienced online shoppers, reaches 70%. Consumers don’t just switch channels—they reduce risk and buy what they know.

This is the vicious cycle: aspirational shoppers buy less, multi-brand stores limit choice, and fewer options concentrate purchases on the strongest brands. The internet completes the transaction, but struggles to generate a discovery that hasn’t even begun.

The old-fashioned department store may well disappear. Its function will not. The luxury sector still needs spaces capable of curating, comparing, and lending credibility to an unknown brand. They may be smaller, more specialized, and integrated with digital platforms, but they must continue to transform curiosity into trust.

The single-brand store capitalizes on an already established desire. The department store helps create it. If the latter disappears, the luxury sector will continue to sell—but increasingly, the same brands to the same customers.