Niche chocolatier Hotel Chocolat first appeared in bricks and mortar in 2004. However, for British entrepreneurs Angus Thirlwell and Peter Harris, the journey began around 20 years ago. They started the business in 1987 and it became an e-tailer in 1993.
“We’ve been in the online world right since the beginning,” says Thirlwell. “It meant when we did go into bricks and mortar, we were able to have a very multi-channel view from the start.”
Thirlwell has built up a 61-strong chain of stores in the UK. Hotel Chocolat has a large concentration of shops in London – 15 – with the rest in towns and cities across the country. It is also opening up in transport hubs after a successful launch in London Bridge station.
It opened a café-cum-shop-cum-restaurant, Roast & Conch, on Monmouth Street, W1, and a store at Network Rail’s 27,000 sq ft retail-led concourse at King’s Cross, N1, earlier this year.
Hotel Chocolat’s growing success online and in stores contributed to a 25% jump in pre-tax profits last year. However, the company’s growth from e-tailer to multi-channel retailer is not for the faint-hearted, as Thirlwell testifies.
“Initially, we find a drop-off in online trade [when we open a store] but then when you add bricks and mortar trade to online, it’s a strong business. After one or two years, we find the online trade goes up quite strongly. People who have found the brand through bricks and mortar start to use online to send gifts. So there is a time lag and you have to go in on the white-knuckle ride through the dip and back up again.”
Thirlwell is acutely aware of the power of social media, letting it act as a natural marketing tool for his new stores.
“I’m monitoring Twitter all the time,” he says. “I can see there are an awful lot of reviews, commentaries and recommendations coming from particularly the Rabot Estate [south London’s Borough Market]. It’s like accelerated word of mouth.
“I believe that this new model is so important because it’s intriguing for customers. They like to take photos and spread it around via social media, which we love, of course.”
Mature brand
David Carlsson of Briant Champion Long, which advises Hotel Chocolat, says: “Hotel Chocolat confounds the theory that retailers are deserting shops for online retailing en masse. It is a mature brand which has successfully made the transition from being an internet retailer to also having a chain of stores – both sides of the business now complement each other.”
Thirlwell continues: “I think a lot of the older bricks-and-mortar retailers were in denial [about online retailing]. They knew what they had to do but they didn’t want to do it because they felt it hadn’t quite hit yet and they didn’t know when it was going to hit.
“In retrospect, I think a lot probably wished they had taken the tough call earlier. A lot of chief executives from the bigger retailers have a three-year horizon and that breeds that type of short-term decision-making.”
Thirlwell’s emphasis now is on deepening and strengthening Hotel Chocolat’s offer and he plans to increase the number of shops in its portfolio by about 15 to a total of 75.
The entrepreneur believes the largest format that Hotel Chocolat can support is 4,000 sq ft, up from the 1,600 sq ft that the retailer currently occupies. He is also experimenting with smaller collections, such as kiosks.
“We see our property model comprising stores that become larger or smaller,” says Thirlwell. “It’s really the medium-sized stores that we’ll seek to remodel.”
“We’re very keen not to overegg the pudding on the number of sites we have in the UK because we want to retain the sense of specialness when you do find a Hotel Chocolat store. To maintain a luxury aspect for a brand, paradoxically you have to restrict access to it. This is a cause of substantial angst, of course, because you want to grow your business.”
Thirlwell plans to leverage off upcoming lease expiries across the portfolio to secure the future pipeline.
“A lot of leases we’ve been able to negotiate in recent years have been on a much more flexible basis and we’ve been able to achieve break clauses that allow us to stay agile,” he says.
“If you look at the wider economy, it can’t be a good thing for landlords to entrap retailers in a format that may not suit them. It’s far better to have a more fluid environment, better for everybody and certainly for retailers.”
Fortunately for Thirlwell, he says there is “a conveyor belt of good deals” coming through, with no shortage in sight. However, he dismisses the idea of picking up stores from fellow chocolate retailers.
“We’re not really interested in picking old-model chocolate retailing sites because the world has changed since then,” he says. “We have our own property strategy which I think is very different. I think it’s highly unlikely the stores will be attractive to us.”
European growth
Hotel Chocolat is making its debut in Europe this year with the opening of Roast & Conch stores in Copenhagen and Amsterdam.
The chocolatier, advised by Cushman & Wakefield in Europe, is also expected to eye up further opportunities for expansion into northern Europe later this year, possibly Sweden.
At a glance
? Hotel Chocolat was started in 1987 and became an e-tailer in 1993
? It has built up a 61-store portfolio, with 15 shops in London alone
? The company plans to open about15 shops
? Pretax profits jumped by 25% in 2011
From click to brick
ENHANCING BRAND APPEAL
Hotel Chocolat is not the only e-tailer to invest in bricks and mortar. Other pure online retailers are also aware of the benefit of a ‘high street’ presence and the convenience it offers shoppers.
As Lawrence Hutchings, Hammerson’s managing director for UK Retail explains: “[Having a high street presence] enhances brand appeal and the customer experience.
“Amazon has installed collection lockers in centres such as Brent Cross to maximise convenience, and clothing company Boden, which ships 12,500 parcels a day, launched its first pop-up store at the Oracle in Reading last year for Christmas trading.”
PHYSICALLY AMAZON
According to a flurry of reports in February, Amazon was said to be looking at opening a store in Seattle, US where it has its headquarters. But this has yet to materialise, although reports say it would make sense as give customers a way to buy physical books published by the online retailer.
EBAY AND FUNKYPIGEON.COM
Others who are now branching out from the cyber world to the real world include eBay – the online auction house opened a Christmas store in London’s Dean Street for only a few weeks, and Funkypigeon.com.
WH Smith’s online greeting card store Funkypigeon.com last year launched a new store format offering personalised greetings cards and an upmarket stationery offer in railway stations, including Leeds.
