Home » London is trailing behind Paris and Milan in luxury retail, says Harrods boss

London is trailing behind Paris and Milan in luxury retail, says Harrods boss

by WorldFinance
0 comment 9 minutes read
Michael Ward

London is falling behind Paris and Milan in luxury trade, the boss of Harrods has said.  Michael Ward, the managing director at the 173-year-old luxury retailer, claims a decision to stop tourists reclaiming VAT has put tourists off shopping in the capital.   He said Harrods is having to work much harder to source designer goods which shoppers can not get in other European capitals in an effort to keep customers interested.  Other countries, including France and Italy, both still allow international shoppers to claim VAT back. The UK scrapped the measure following its formal exit from the EU at the end of 2020.  Former Chancellor Kwasi Kwarteng had unveiled plans to bring it back in his fiscal update in the early autumn this year. However, Chancellor Jeremy Hunt later U-turned on this in his mini-Budget bonfire.   Mr Ward said: “If I’m going to buy a Christian Dior saddlebag for £2,000, why wouldn’t I buy it in Paris? We’ve got to make it up by being smarter in what we’re offering to that customer. We want more exclusive products, so that they can’t buy the same thing in Paris.” Mr Ward called for the Government to ramp up work to attract tourists to London, saying Britain needs a tourism strategy to put it ahead of Europe as more people start returning following the Covid pandemic.  “It’s actually really key to have – because we’re competing against Europe, which has a very comprehensive tourism strategy and that is integrated across the whole of Europe. We need to be ahead of that.” He said Britain had “one of the greatest advantages in Europe, which is soft culture”. “We’ve got the best museums, we’ve got the best plays and ballets and opera. Germany and Paris, they don’t have that and that is why people flock to London.  “The Government needs to think how do you market that? And how do you put forward a package that the whole sequence is a good experience?” In summer 2021, the UK launched a tourism recovery plan, in which it said its ambition was for the country to recover to pre-pandemic numbers of tourists by 2023. Then-Culture secretary Oliver Dowden had said: “This means domestic and – in due course – international visitors spending more, staying longer, visiting throughout the year rather than just during the traditional tourist season, and accessing a more diverse range of destinations across the country.” However, visitor numbers remain significantly lower than pre-pandemic levels, even as Covid rules have lifted across the world. In August this year, 3.5 million people visited the UK from overseas, down by a fifth from August 2019 levels. These visitors spent £3.1bn over the month, down from £3.5bn in 2019. Burberry in November said it was not seeing the “same degree of tourism in the UK as we used to because we’re seeing more tourists going to Paris, Milan”. Burberry finance director Julie Brown said: “It was a real incentive for the luxury shopper, it was a real incentive to come to the UK.” The Government has said it is scrapping VAT-free shopping for tourists as the move would save £2bn annually. The Treasury said it comes as “part of the UK’s commitment to fiscal discipline”. “The Chancellor has made clear that the UK’s public finances must be on a sustainable path.” However, retail chiefs have disputed the Treasury estimates, and have called for an independent review of the policy. Oxford Economics research suggests that the UK could raise a further £350m in tax revenues if they brought back in the measure, saying if VAT-free shopping came back then visitors would flock back into the UK and spend more on hotels and attractions in the country. Mr Ward, who also heads up the luxury retail industry body Walpole, said he believed the Government had “miscalculated” on the policy. It comes as China begins to ease its Covid restrictions, raising hopes among many luxury retailers that 2023 could bring the return of Chinese tourists into Europe. In 2019, Chinese tourists accounted for around a third of all tax-free shopping in the UK, according to figures from tax refund company Global Blue, even though they were not a large group in terms of total traveller numbers. Michael Ward claims he will “shut up” if he’s proven wrong about VAT-free shopping. For weeks, the Harrods managing director has been fighting a losing battle to get ministers to overturn their decision to scrap the tax cut. The 66-year-old warns flip-flopping on the decision to cut it means London will lose retail sales to Paris and Milan as tourists flock back into Europe. “All we want is the Government to do what they did with all other aspects of the Budget,” he says. “Let’s just have an independent review into it.” “My view on it is, could the Government look at things as opportunities, like we would as a business?” Ward sighs. “What I’m asking ministers to do is look at problems and solutions and they’re just not.” A tourism strategy would be a step in the right direction, he says. “It’s actually really key to have – because we’re competing against Europe, which has a very comprehensive tourism strategy and that is integrated across the whole of Europe. We need to be ahead of that.” For now, what it means is that Harrods is having to work harder to sell items that tourists cannot find elsewhere. “We’ve got to be smarter so that when they come in they see things they can’t buy in Paris,” Ward says. It should not come as a surprise that he is preoccupied over what the future holds for London as a tourist hub. The 173-year-old luxury retailer has long been a key destination for visitors to the capital from all over the world, with Chinese consumers making up Harrods’ single largest customer group before the pandemic. In late 2019, one pound in every £5 spent by Chinese visitors in London had been at Harrods. This is a group which Ward says have yet to come back in full. “The Chinese consumer isn’t travelling, so what we did during the pandemic was we invested in the local customer,” Ward says. Adding a new hairdressing salon and spa in the London store, alongside restaurants from Tom Kerridge and Gordon Ramsay, has all been geared at luring Britons into the flagship store. “We have seen the resurgence of the Middle East, they’re doing very well. But, it’s very much swung towards the British customer,” Ward says. “When we start to see Chinese customers coming back, we’ll obviously react.” Harrods already accepts payments from Chinese payment platforms WeChat and Alipay, making it one of the first stores to do so in London in an unusually innovative step by the long-established retailer. Although it has embraced this step, there will always be limits on what types of payments it accepts. “We wouldn’t accept Bitcoin,” Ward says. “It’s wrong to spend so much electricity to mine a currency which is equal to $1 (83p). It seems to me that if you want to be a green company, it’s fundamentally wrong to accept cryptocurrency.” He insists, though, that Harrods is more nimble than some may expect. “If Chinese customers come back, we’ll change our sizing policy, we’ll change some of our brand buying policy. For that to happen, we really have to start to see the direct routes coming back into London.” Right now, this has not happened. It is not immediately apparent, though, that Harrods is missing one of its key clientele. Over the festive season, the glitzy store has been buzzing with customers as soon as the doors open at 10am each day. The way Christmas fell this year on Sunday gave a whole week of sales in the run-up – something which is set to help spur sales back to pre-pandemic levels this year. In its latest results, out in October, Harrods said sales were back on the bounce, up 36pc in the year to January. It revealed that it had returned to profits, posting £41.7m for the year to the end of January compared to a £57.3m loss the prior year. Cost of living woes might be ripping across its high street rivals, but so far, there are little signs that Harrods is affected. “You’ve got to remember that we have a very unusual customer base,” Ward says. “We represent the top pinnacle of customer spending, and all of the economic hardship that people are seeing, that doesn’t really apply to our customer.” It is something Ward knows well, having led the business since 2005. For now, he does not seem headed for the door, although says there are ”always conversations”. “But I really do have too much of a passion for this place.” He blasts rivals as having “no clear strategy” and selling “broadly the same product at broadly the same prices”, and says those visiting Harrods are looking for investment pieces. “If you invested in a 2.55 Chanel handbag 20 years ago, you would have outperformed the All Share Index by 100pc.” Still, when it comes to cost of living pressures, Ward says there is one area where Harrods is making changes. Like other retailers, pay is a topic of much discussion. It is poised to increase wages by 10pc following the Christmas season. Ward says this is to show workers that it “recognises that our success is based upon you”. But, perhaps more importantly, it comes amid an increasingly competitive job market, where all retailers, restaurants and hotels are battling to hire enough workers to keep their businesses ticking over. “It goes back to the recognition of government and problems,” says Ward. “Nobody is in disagreement with the prognosis of the Government that we should have a high value added economy. This is the right thing to do. But what they forget is there are a number of people who do jobs that nobody else wants to do and we have to make sure those people are available.” Ward says he found it “horrific” to read that the biggest area of recruitment for those leaving the nursing profession was retail. “The Government has to provide alternatives for us. Why can’t we just have access to labour?” While Ward is keen for moves to help access talent, he is hoping the coming year will bring fewer sweeping policy changes which rankle the markets. “Whatever happens, we just need a steady shift for the course of the next 12 months.” In the next budget in March, “something where there were no surprises would probably be the best thing”. Still, that will not stop him from banging the drum for a switch in stance on VAT-free shopping. “That’s different,” Ward says. “That shouldn’t really come as part of the Budget. That should be part of a bigger question on how we build UK PLC.” And Harrods, it seems, will be leading the way on getting the answer. Need help? Visit our adblocking instructions

You may also like

Our Company

Critical insights and analysis on Finance in the world


Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

Laest News

@2023 – All Right Reserved. Designed and Developed by WorldFin.news

World Finance News