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The Drapers Interview: Simon Nankervis, American Eagle Outfitters

Simon Nankervis has overseen American Eagle Outfitters’ UK arrival, and is confident it can sink its talons firmly into the young fashion market.

With nearly 800 stores in the US, it’s safe to say that American Eagle Outfitters is a fashion retail giant on the other side of the Atlantic, but is little known among UK shoppers. But this could all be about to change if Simon Nankervis, executive vice president of global commercial business, has anything to do with it.

Founded by brothers Jerry and Mark Silverman in 1977 - the pair sold their remaining 50% stake in 1991 - the retailer focuses on the denim market, offering a “classic American style with an urban twist” aimed at 15- to 25-year-old men and women, according to Nankervis. This November it landed on UK shores, beginning its swoop into Europe. And what a landing it was, opening more than 25,000 sq ft of retail space across three shopping centres in just five days at Westfield London (9,744 sq ft), Westfield Stratford City (10,605 sq ft) and Bluewater in Kent (5,400 sq ft), which will be followed by the launch of a transactional UK website in April.

After months of speculation about the UK launch, the three openings mark the next step in the company’s global expansion, which Nankervis has spearheaded around the world in the three years since joining, from his previous role as managing director of Australian brand management company Busbrand. Helping to expand a business with 2013 revenues topping $3.3bn (£2.1bn) and 1,092 global stores, which ships to 81 countries and is also available at 94 licensed international franchise stores in 14 countries, the Australian-born, New York-based former lawyer Nankervis took these three UK openings in his stride. After all, his record for international launches is seven franchise stores in 10 days in Israel in February 2012.

This bold approach to entering new markets is an interesting move, but is there space for another international young fashion retailer in the UK? Comparisons have been drawn between its casual preppy offering and the likes of Abercrombie & Fitch and Hollister, or between its young fashion demographic and affordable price points (from £10 for a women’s tank top to £120 for a down jacket) that are akin to the likes of Forever 21, all of which are US retailers that have come to the UK with varying levels of success.

“The UK has a number of globally strong fashion retailers,” agrees Nankervis. “But I think for us the difference is that we’re already in competition with these guys right across the world. But there is no one else doing what we do. From that perspective alone, there is definitely space for us [in the UK].”

Representatives from both the Westfield and Bluewater shopping centres agree. Russell Loveland, portfolio director at Land Securities, which part-owns and manages Bluewater, says: “International brands represent in excess of 30% of Bluewater’s rental income and are a key element of our offer. For our guests, brands like American Eagle add variety to our offer and experience.”

Westfield’s director of leasing Keith Mabbett adds: “UK shoppers are always looking for new stores and experiences. We’ve seen there is a tremendous appetite in the UK for international brands like American Eagle, which will join several other US retailers in our London centres, such as Victoria’s Secret, Hollister and Tommy Hilfiger.”

But what sets American Eagle apart from its competitors? “We don’t believe, in this market, that we have a direct competitor,” says Nankervis bluntly. “Our denim and bottoms is the core of what we do and we’ve built our business around it. That for us is a differentiator.” And certainly, the vast wall of jeans that dominates its UK stores backs up his claims, signposting the store as a denim destination, complete with in-store denim experts and even an American Eagle denim app to help customers shop the many options. There are 12 fits available in an incredible 80 washes (22 fits are sold in stores across the world, but the retailer is only starting with 12 in the UK), with price points from £30 to £42. Denim generally accounts for 25% of the business’s sales.

A survey last month by US investment bank Piper Jaffray investigated the spending habits of more than 7,000 of the country’s teens, who rated American Eagle as their second favourite clothing brand, beaten only by Nike (Abercrombie & Fitch didn’t even make the top 10). But while the retailer might be popular in its homeland, will the UK shopper care for its all-American look?

“A lot of people have said to us ‘The UK customer is different to the US customer’, but I got told the same thing in Japan; I got told the same thing in the Philippines,” says Nankervis. “Typically, what we find is that 60% to 70% of customer choices globally are the same.” However, he admits the retailer has “distorted the assortment” slightly for the UK. Denim takes on a slimmer, cleaner and rawer look, including a new super-skinny fit for men, while a reduced amount of colour will appear in store compared with other markets, thanks to the UK’s fondness for black, grey and white.

Other questions have been raised about the choice of locations, with London’s Westfield malls and Kent’s out-of-town Bluewater favoured over spots on the UK’s main high streets, such as London’s Oxford Street or Regent Street, where the likes of Forever 21 and Abercrombie & Fitch have stores.

“It wasn’t a deliberate decision not to do [the high street],” says Nankervis. “If we could find something that would work from a return on investment perspective we would do it. We don’t open stores for marketing; we open stores to give a return on investment to our investors. We don’t let real estate drive our brand decisions either,” he adds. “We’re very focused on giving valuable return to our investors and giving an experience to our shopper. And we’re definitely servicing our customers in these malls.”

Commenting on their first three locations, retail analyst Nick Bubb says: “It’s a high-risk move, but they’ve picked the best three shopping malls in the London area [and] the country. The alternative for a high-profile launch would have been Regent Street, but the rents there may have put them off.”

But can we expect to see American Eagle landing on the high street, or popping up in more shopping centres soon? “I’d say the chance is good,” says Nankervis guardedly. “Ultimately, the way we work, we’re opportunistic; we’re definitely looking at additional real estate locations. I think we definitely have opportunities outside of London too, there are a lot of good cities here, which warrants us opening stores in other major cities.”

“We didn’t want to avoid the high street,” he adds. “But flagship today is no longer about real estate. I think the days of needing that flagship real estate are dwindling, because ultimately most brand’s flagship stores are their digital channels; that’s where you can do the most. Our focus at the moment is to get the digital channel open in April.”

Although not wanting to divulge much detail, Nankervis says: “Globally our strategy is that it’s about an omnichannel customer,” or omni-customer as he calls them. “The customer now wants to shop with us how, when and where they want.” This will see the retailer roll out its “omni-customer experience”, which will include flexible fulfilment capabilities, such as buying online, shipping from store when product isn’t available at a customer’s location, and a system called ‘store to door’, where customers order in store and product is delivered at home.

“If you looked at our strategy at the start [around 2005], it said we should have somewhere north of 50 stores in the UK. But I think the growth and penetration of the digital channel is so high that we’ve seen the need for a large bricks-and-mortar footprint dramatically reduce,” admits Nankervis.

“Now we believe that somewhere in the low twenties is the right strategy.” Even at this reduced target, Nankervis still has big plans for the retailer: “It’s weird taking [public transport] here, because in the US when you go to the subway and there’s a girl wearing jeans, chances are they’re [American Eagle] jeans, a really good chance. We don’t see that here, today,” he says with a smile. “But let’s see what it looks like in a year.”

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