Harrods managing director Michael Ward says its Shoe Heaven concept puts it ahead of the field in the battle for well-heeled shoppers.
Harrods has long been heralded as a pinnacle of British luxury retailing. Yet despite its 165-year pedigree and ability to attract 15 million customers a year to its Knightsbridge store - both from overseas and the UK - the business is far from resting on its laurels.
The man charged with driving and implementing the strategy to stay ahead is managing director Michael Ward, who joined in 2005 under then owner Mohamed Al Fayed, after a career that included stints as a partner at private equity firm Apax, and heading up Lloyds Pharmacies. And you don’t have to look far to see that Ward and his team have been busy.
Since acquiring the company in 2010 for £1.5bn, its owner Qatar Holdings has lavished the cash to ensure it retains its lustre. This has included spending £521m between January 2012 and February 2013, a proportion of which was focused on renovating its concessions and shop-in-shops at the Knightsbridge flagship, and opening airport concessions - it now has four at Heathrow and two at Gatwick.
At the Knightsbridge store, following the launch of the Shoe Heaven department this month and the final phase of its contemporary womenswear Fashion Lab in July, Harrods is set to expand its women’s ready-to-wear on the first floor, one of the fastest-growing categories over the past few years. Next spring the women’s ‘superbrands’ area will also be redesigned, with all the brands relocating to new shop-in-shops.
Next up, and due to open in April 2015, the overhauled menswear department will grow from 60,000 sq ft to 75,000 sq ft. The Men’s International Gallery will be expanded into a second room, with refurbishments planned for Balenciaga, Valentino and Balmain. While Harrods was unable to reveal the sales breakdown of its product mix by category, it maintains fashion is a core focus.
However, the competition is fierce. In July, rival Selfridges on Oxford Street lifted the curtain on a multimillion-pound redevelopment of its menswear floor. In the same month, Fenwick of Bond Street opened its £1m, 4,143 sq ft Shoe Corner.
Less than a month later, Harrods unveiled the 42,000 sq ft Shoe Heaven, surpassing Selfridges’ 35,000 sq ft Shoe Galleries department opened in 2010. Speaking to Drapers in an elegant fifth floor office squirrelled away beyond the store’s Egyptian escalators, Ward declines to reveal the exact amount spent, but confides the project cost “an awful lot of money”.
The size of three Olympic swimming pools, Shoe Heaven contains 17 shop-in-shops from the likes of Manolo Blahnik, Christian Louboutin and Chanel.
A further 50 brands contribute to the 100,000 pairs of shoes on offer.
British designer Nicholas Kirkwood, whose shoes are stocked in the department, says: “Harrods is already such an iconic department store with an incredible offering, which Shoe Heaven reinforces.”
Conceptualised two years ago, Shoe Heaven took six months to construct and involved moving staff restaurants and offices to the sixth floor, which was previously vacant roof space and old offices. It is managed in partnership with Harrods’ shoe partner Kurt Geiger, chosen due to its “ability to buy across a range that we probably couldn’t”, Ward explains.
“Every time we’ve undertaken a refurbishment we’ve pushed the boundaries. You need to when you are the leader in luxury. That’s the challenge for us.”
And the steady stream of upgrades to the 1 million sq ft store - Europe’s largest department store - have paid off. It has weathered the recession and according to its latest accounts turnover rose 10% to £716.m in the year to February 2, 2013.
Harrods now has an 8.7% share of the UK department store market, according to Verdict Research, a share that has been growing every year for more than five years. This puts Harrods fourth in terms of sales behind Marks & Spencer, John Lewis and Debenhams, but it remains the biggest seller in the premium department store sector, just ahead of Selfridges.
“Harrods is certainly the destination department store in the UK,” says Verdict retail analyst Honor Westnedge. “The store has grown its share rapidly over the past five years [from 6.2% in 2009 to a forecast 8.7% this year], benefitting from tourists visiting the UK from areas like China and the Middle East.”
Ward agrees Harrods has been on a journey. When questioned as to whether it has become higher end since the Qatari acquisition, he says the business has not repositioned its offer.
He does, however, say: “By working more closely with the major brands we’ve been able to move the price point forward. This has coincided with the surge of overseas wealth, which has allowed us to reposition our fashion accessories to give greater presence to the likes of Prada, Chanel and Dior. Generally if I have a criticism of UK retailing, it’s that it’s not really raising the bar and we’ve got to continue to do that.”
The Harrods ethos is based on offering bespoke product and service rather than trying to define itself solely by the increasingly ubiquitous term ‘luxury’. Ward says: “Our customers don’t want the most expensive. The key is that stunningly beautiful item.”
He puts equal emphasis on online sales, which are crucial. While Kantar Worldpanel data shows UK offline expenditure on premium fashion dropped 11.4% in the 24 weeks to July 6, online luxury spending rose 29.7% to £156.3m.
“We invest a lot of money in social media,” Ward explains. “We invited eight top-tier digital influencers from the US, Italy, Australia, Sweden and China for our Digital Style Summit [a new event held on March 12-13 at the Knightsbridge store] to drive awareness of our womenswear collection. These bloggers included Wendy Nguyen (Wendy’s Lookbook), Marie Hindkaer Andersen (Blame It On Fashion) and Feifei Song (Miss Fay).
“We also have more followers (405,000) on Twitter than any other UK department store and as well as having 465,215 followers on Instagram we are the seventh most Instagrammed institution in the world, ahead of a lot of iconic buildings.”
Walking around the department store, Drapers saw a lot of young consumers in their late teens and early 20s, who are seemingly not put off by the high price tags. The Harrods Rewards card, which records 76% of all transactions, gives a clearer picture of the customer demographic, which informs buying decisions and communicationstrategies. Chinese consumers are Harrods’ biggest market, although Middle Eastern shoppers are also prominent.
“It’s all about emerging countries, emerging wealth and emerging confidence,” Ward states. “People want to buy the original in Europe. There’s a difference between saying you’ve just bought a Burberry bag in Beijing and at Harrods in London.”
But Ward is critical of the British visa process. Unlike 26 other European countries, the UK is outside the Schengen area, which allows non-EU nationals to cross borders without being subjected to checks. The UK system is also reliant on biometric testing, which requires visitors to submit a photograph and full set of digital fingerprint scans. Fewer than 25% of the Chinese population can attend a biometric testing centre within a five-hour commute.
He believes there are simple solutions. “If their child is graduating from university, give each parent a week’s visa. They’ve probably spent £250,000 on their education, so they’re not going to come and be a drag on the UK economy.
“The second is simplification of the tax-free process. Sometimes consumers are queuing at Heathrow for three hours just to get the tax back, all of which is paid in sterling at airport rates, so your last feel of being in the UK is not a pleasant one.”
Harrods has managed luxury brands at Heathrow for more than 26 years. These concessions provide a slimmed-down edit, at a different price point, managed by a separate buying team. Harrods also operates tax-free shops at Gatwick, Kuala Lumpur, Lisbon and Singapore Changi airports.
With such an international customer base, it may be a surprise to learn that Harrods has not opened a flagship overseas in, say, Shanghai, Riyadh or New York. And there are no plans to do so. “If you look at New York, do you really think you can take £300m off Barneys, Saks Fifth Avenue or Bergdorf Goodman and trade successfully when they are struggling to make money in those locations?” points out Ward.
Department stores accounted for more than a quarter of UK premium fashion sales, with expenditure rising by 17% to £177.7m in the 24 weeks to July 6, according to Kantar statistics. For Ward, department stores will always be relevant if they get the right mix of concessions. He argues that people do not go to them to buy a series of own-label products, they go for the overall shopping experience.
In his eyes, Harrods’ recipe for success is as follows: make your store a destination, carry enough stock to satisfy customers and train staff to understand the product - all topped off with a theatrical experience.
- Michael Ward will be kicking off the Drapers Fashion Forum on November 27 at King’s Place, London. To attend, go to fashionforum.drapersonline.com