What: Even though the situation is not as dire as a few months ago, as luxury still helps, department stores in London face a diverse reality: the increase of visitors in the UK is not not translating to retail sales.

Why it is important: Just like in Paris, many questions are rising when it comes to what would be a sustainable number of department stores on a reconfigured market marked by touristic flows changes and Brexit.

British luxury department stores are navigating a challenging retail landscape even though their revenue is on the rise.

Harrods has reported a substantial rise in pre-tax profit due to increased tourism and successful collaborations with brands like Dior and Louis Vuitton. Meanwhile, Harvey Nichols has seen revenue growth, although its flagship store's performance is still recovering to pre-pandemic levels. Selfridges faces financial pressures with significant debt after being acquired by Thailand's Central Group and Signa in 2021.

The New West End Company highlights the absence of tax-free shopping as the primary cause, which is leading international visitors to spend less in the UK. Although flight bookings from the US to London rose 17%, spending by American visitors in the West End dropped 1%. Meanwhile, travel from GCC countries to London increased by 7%, but their spending fell by 17%.

In contrast, US and GCC spending in European countries like France, Spain, and Italy surged significantly. Dee Corsi, CEO of New West End Company, emphasized the importance of international visitors to West End businesses and warned about the adverse effects of Britain no longer offering tax-free shopping.

Additionally, 77% of international visitors expressed they would spend more if they could reclaim VAT. Corsi urged the Government to reconsider its stance on the tourist tax, suggesting its removal could benefit the UK economy by around £350 million.

Despite challenges, luxury brands are reimagining distribution, focusing on immersive experiences, and asserting more control over product representation, which brings good and bad for department stores. On the positive side, pop-ups and creative collaborations are driving growth and offering unique customer experiences.

WWD

The Retail Bulletin