Discovering What the Future of Physical Luxury Retail Holds: From Sustainability to Hyper-Connectivity

BoF Insights will examine how such improvements can set the norm for physical retail of the future in a new relationship with Royalmount, a proposed mixed-use shopping district in Montreal that is focused on sustainability, inclusivity, and connection.

Lockdowns and other restrictions due to the Covid-19 pandemic fuelled the boom in e-commerce and called into question previous assumptions about what shoppers want from in-store experiences. But brick-and-mortar has made a remarkable comeback, while e-commerce growth is returning to pre-pandemic levels. Brands and retailers have an opportunity to recapture the allure of physical retail while providing customers with new immersive, digital and physical experiences.

Against this backdrop, Royalmount — a mixed-use, transit and pedestrian-oriented luxury development in Montreal from Quebec-based property developer Carbonleo — aims to redefine physical retail. With the first phase set to open in 2024, Royalmount will ultimately encompass more than 825,000 square feet of leasable area in Montreal’s midtown, providing shoppers with more than 170 stores and 60 restaurants, alongside office space, a hotel, a spa and public green spaces, including a three-kilometre linear park called Le Champ Libre.

In advance of Royalmount’s first phase, BoF Insights and Royalmount will release a report in March to explore opportunities in next-generation luxury retail in an increasingly digitised world, including how customer journeys will evolve and how luxury retail can be both experiential and sustainable to meet the evolving needs and expectations of customers, brands and retailers. The study will leverage BoF Insights’ industry access and expertise as well as Royalmount’s own experiences and learnings in developing a state-of-the-art luxury retail space.

In an interview with BoF Insights, Andrew Lutfy, chief executive of Carbonleo as well as visionary and co-owner of Royalmount, discusses the ambitions of Quebec’s largest private development to date and his perspective on the benefits of creating a sustainable, inclusive luxury space.

Carbonleo is no stranger to major property development since its founding in 2012, including the development of the Four Seasons Montreal and Canada’s second-largest shopping centre, DIX30, located in the South Shore of the city. Can you walk us through Carbonleo’s strategic thinking behind Royalmount?

At Royalmount, we’re focused on three strategic pillars — green living, inclusive luxury through open, public spaces among other features, and supercharged connectivity — that strive to give consumers a mixture of experiences in an environmentally responsible way.

It will be the only 100 percent carbon-neutral, mixed-use development in Canada, holding globally recognised environmental certifications such as Leed Gold [Leadership in Energy and Environmental Design].

It will also be the only luxury mixed-use flagship development in Quebec, enabling more than 50 iconic brands from around the world, including Louis Vuitton, Gucci and Tiffany, to create their first freestanding stores in Quebec. Royalmount provides real-life evidence of the ongoing transformation of physical retail, integrating shopping, dining and entertainment, all in an emotionally nourishing environment.

What is the rationale for basing this development in Quebec? What does Montreal have as a shopping destination that differentiates it from others?

Let me first provide some context. Not so long ago — 10 or 15 years ago — US brands generally dominated the luxury market, but Quebec was an outlier in part because local laws require businesses to operate in French, preventing these brands from getting a strong foothold in the province. Since then, we’ve seen European brands gain dominance in the luxury market, and while Quebec’s language laws remain, they do not represent a barrier for these brands. As a result, Quebec’s luxury market has the opportunity to thrive.

Meanwhile, Quebec’s economy has been strengthening. It’s really pivoted over the course of a generation or two from a manufacturing-based economy towards a service-based economy. It has the lowest unemployment rate in Canada as well as relatively high GDP growth, which alongside enviable affordability make Montreal, in particular, an attractive and vibrant city.

Montreal is, in fact, one of North America’s fastest-growing metropolitan areas, and is Canada’s second-largest city, after Toronto, with a population of around 4.3 million that is culturally diverse and sophisticated. It’s also a key pocket of wealth and a major tourist destination. But to date, Montreal has been underserved by luxury retail.

Our goal is to be the number one destination in Quebec for shopping, dining and entertainment as well as tourism. And as we double click on shopping, the epicentre is really luxury. Montreal has 5 percent of the luxury shopping it should have. There’s a real imbalance in terms of the actual supply relative to demand. We’re solving for that.

How does this development reflect Carbonleo’s sustainability philosophy? Why is carbon neutrality and accreditation so important for Royalmount?

From a carbon standpoint, the world is in a fragile state. Things have really gotten out of control in the last 30 years. As the population continues to grow, we will continue to evolve as humans, we will demand different things, and that’s okay. But I think that there’s a way of doing it responsibly, so that there is a modest impact on our environment.

We need to be responsible and it’s not really about the money. I think five to 10 years from now, it might become basic table stakes for business leaders to address.

This project represents only 10 percent of the buildable density at present. We’re putting in all the infrastructure to support continued sustainable development, including a direct connection to the metro and an energy loop that runs around the perimeter of the property, which is powered by hydroelectricity and a geothermal system. All of this infrastructure is being put in today.

How is this playing out in practice at Royalmount?

Royalmount is a 100 percent carbon-neutral, a 100 percent pedestrian, mixed-use development with direct access to Montreal’s metro. Virtually all of our energy comes from renewable sources.

I truly believe the future is fewer cars, and more shared mobility, public transport and cycling. As much as we’ve got lots of parking, it’s 100 percent pedestrian onsite. There’s no conflict between man and machine. There’s an indoor portion to Royalmount and an outdoor portion. Nowhere will there ever be a conflict in experiencing Royalmount as a result of a car.

With regard to the development’s outdoor component, we’re creating a vertical garden city; we’re planting 450,000 plants and trees; and we’re creating the three-kilometre linear park, Le Champ Libre that links the entire development. Essentially, we’re converting one of Montreal’s biggest “heat islands” into an urban oasis.

While some of the leading brands in global luxury will have a presence at Royalmount, what other types of retail can visitors expect?

One of the innovative concepts launching in Royalmount is Rennaï, a fresh approach to beauty retail, the ultimate destination for modern self care, reflecting how the worlds of beauty and wellness are merging. Rennaï sits in between these worlds and brings together art, science and nature. In addition to offering the latest beauty products and a vast array of wellness services, Rennaï is a space where you can go to escape the rush of your life, to take time out to reconnect with yourself and with your friends in a beautiful surrounding. The feeling will mirror that of going to a Tuscan garden for aperitivo.

You mention “supercharged connectivity.” What is your view on how this physical development can marry up with the increasing allure of digital shopping experiences? Where is the value proposition?

At the end of the day, what all brands want are deeper and more meaningful relationships with their customers. The most profound relationships are the omni-relationships — not purely physical and not purely digital but a fusion of the two. That is ultimately where you have the highest customer lifetime value and the least amount of churn.

We think of Royalmount as a brand. Consequently, we want to establish a relationship with a customer from the beginning. Our hope and aspiration are that we recognise as many of our “five-star” customers as possible as they physically enter Royalmount. We recognise them, we celebrate them, we reward them — not with points, but with experiences. I think if you are a five-star customer, we owe you a different experience, and those experiences should become memorable.

One of the best ways to do that is to have flagship store presences, rather than minimum viable outposts — a luxury and aspirational flagship store experience, intertwined and supported by digital, is what Royalmount ultimately is.

How will the luxury component of the development be differentiating?

Our definition of luxury is really all experience-based. If you can remember an experience 10 years from now, that was a luxury experience.

Royalmount will fuel a dynamic cultural scene, providing a wealth of vibrant entertainment offerings designed to mesmerise young and old visitors alike. My idea is that it will be a welcoming space, for friends and families to get together on, say, a Saturday afternoon in one of the public spaces. In summer, they can take a stroll along Le Champ Libre, perhaps take in one of the shows at the piazza or explore the many free art installations; in the winter, maybe they head to the ice rink to skate and then warm up with a late lunch in one of the 60-plus restaurants. We want them to have the best visit, providing long-lasting memories.

In 10 years you may not remember the belt you purchased, but you will remember the experience. That to me is luxury.

Let’s take a look behind the scenes. How are these plans being brought to reality, and what are your key performance metrics?

We speak about “hypercharged connectivity.” We ask, “What can drive footfall? What can drive interaction? What can drive ‘dwell time’?” I think of us as a broadcast network; we’re just the plumbing network. To us, another aspiration involves user generated content. We want 10 times more user generated content, such as social postings, coming out of Royalmount than our competition.

This means that for every myopic component of the project, there is a design room or atelier dedicated to the experience. We agonise over every detail and what the guests are going to experience to ensure it’s as magical as possible.