The number of American retailers in London will be expanding next year with the opening of major food and fashion stores. In Kensington, the US organic supermarket chain Whole Foods Market will be opening an 80,000 sq ft shop in the building formerly occupied by the Barkers department store. And at 7 Burlington Gardens, opposite the iconically English Savile Row tailor Gieves & Hawkes, the preppy US fashion chain Abercrombie & Fitchis making its maiden venture intothe UK with an 18,000 sq ft(1,672m2) store.
Peter Mace, retail partner at Cushman & Wakefield, which represents both companies, believes they will do well here. Whole Foods may be opening a health store the size of which makes the average Holland & Barrett shop seem tiny, but it comes at a time when the British are becoming more and more concerned with healthy diet. It is also in a borough — Kensington — where the average shopper has a decidedly higher-than-average disposable income.
And while Abercrombie & Fitch may be new to the UK shopping scene, they are not new to UK shoppers. The British mail order market is the firm’s biggest outside the US, so it believes that an already loyal customer-base will head for its London shop.
Mace doesn’t believe the fact that it has positioned itself among bespoke tailors, several of whom are of the old-fashioned sort, will do it any harm. He says: “It’s one of those brands that pitches itself at a higher level abroad than it does in its home market — a bit like Polo Ralph Lauren.”
Abercrombie will join its fellow US clothes retailer Brooks Brothers, which opened in the City of London last year and in the capital’s Regent Street in August this year.
But the model for US retail success in the UK most often mentioned by agents is Gap, which now has a secure position on high streets across the country.
More on the way
Other fashion shops are also looking across the Atlantic at London. James Ebel, director at Harper Dennis Hobbs, is looking for a site for Lucky Brand — a denim specialist owned by the Liz Claiborne group — in Covent Garden, and is also talking to New York store Scoop about the possibility of coming to the city. Another US fashion shop looking at the UK is DDC Lab, he says.
But for many US retailers, the question they ask before coming here is far more basic. Ebel says: “The first question the American retailers ask themselves is usually whether they go to Europe or Asia.”
Simple questions often have complicated answers. If there is a quick answer, it is normally a negative — be it because of high London rents or something even more basic.
When Stuart Melrose, director at Colliers CRE, was talking to the California-based juice bar chain Jamba Juice, he found that the British weather was the main issue. “They sell much more juice when it is sunny, so they couldn’t get past the problem of so much gloomy weather here,” he says.
Melrose says that US retailers tend to use London as a springboard into Europe, partly because of the common language and partly because it gives them a starting point for understanding the European shopper.
Melrose points out that what US companies do really well is out-of-town shopping, but they are sometimes less familiar with the UK high street model. One example was a US clothing accessories store that approached Colliers for advice on opening a unit close to Abercrombie & Fitch on Savile Row.
He says: “They were thinking as if they were in a shopping centre and would have a unit close by Abercrombie, but they would have been totally unsuited to a site in Savile Row. Sometimes, understanding the high street can be a bit of a challenge for US retailers.”
London rents are something else that the US companies find hard to cope with, says Melrose, with business rates also higher in the UK and leases less flexible. “What you get across the Atlantic is more flexibility and therefore more mobility,” he says.
Occupancy costs
Jason Sibthorpe, in-town retail partner at GVA Grimley, agrees that the UK market can also seem very expensive.
He adds: “Occupancy costs scare them, and they do calculations based on what they can make per square foot in their existing operations and decide not to come.
“Those that do understand realise that the density of operations here means they can make more money per square foot. And there are some upsides here, such as people costs, which tend to be lower.”
Underlying the arithmetic of doing business is that foreign retailers are coming into a market which is rather good at its job. Not for nothing has the UK been described as a nation of shopkeepers, so any foreign entrant has to be aware that competition will be stiff.
One example, says Sibthorpe, is the caution with which the US electrical retailer Best Buy has approached entry to the UK.
It has been considering opening in one form or another for several years, but has so far held back — perhaps, speculates Sibthorpe, because shops such as Currys and Dixons present a formidable challenge.
But as the numbers of overseas entrants to the UK market this year and next indicate, competition is not going to discourage everybody: the global marketplace is continuing to become more and more cosmopolitan.
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Uniqlo, one of the highest-profile Asian stores in the UK market, is expanding again after a mixed first five years here. Last month, it opened its refurbished and expanded 8,000 sq ft (743m2) store in London’s Oxford Street. Things have not always looked so bright for the Japanese budget fashion shop in the UK. When it first came here, in 2001, it expanded fast, over-stretched itself and ended up closing 15 shops. Since then, it has stabilised and last year opened new branches in Wandsworth and Bromley. Uniqlo’s UK chief executive, Masayuki Nagatake, says that the company will continue to expand but is looking for larger stores in both London and Paris, where it hopes to open by next autumn. He says: “We are looking for stores of 10,000 sq ft, 20,000 sq ft or even 30,000 sq ft. “The focus will be on Greater London for the next two years, and we are looking at sites like Oxford Street, Knightsbridge and High Street Kensington. “The sort of stores we now want are more like our 30,000 sq ft New York store.” |
