Magazine article Marketing

News Analysis: Trading Down?

Magazine article Marketing

News Analysis: Trading Down?

Article excerpt

With two retailers closing their West End flagships, James Quilter asks whether premier trading areas remain a draw.

Few things raise Britons' hackles more than the end of a tradition.

And in the retail world, the exit of Dickins & Jones and Laura Ashley from London's Regent Street is something of a momentous occasion - and not in a good way.

The two stores have abandoned the premium shopping location for different reasons. For Laura Ashley it was due to high rents imposed by its freeholder, while Dickins & Jones owner House of Fraser blamed poor sales.

Though the area is still sought-after - Apple and Boots recently opened high-profile stores there - and while Oxford Street retains its iconic status as the nation's high street, premier trading areas in central London are not ideal places for many to trade. The footfall is tremendous, but so is the rent compared with mega-shopping centres such as Bluewater in Kent.

When retail consultancy the Javelin Group compared the leading shopping environments in terms of sales per sqft versus the cost of the premises, it found Oxford Street to be one of the poorest venues in terms of sales versus rent.

But there are reasons for trading in Oxford Street other than footfall and sales, according to Javelin Group director Robin Bevan. For many retailers, having a store on a high-profile site acts as a physical flagship to advertise the brand.

Bevan says the only stores that will be able to survive in these areas will be either 'retail beasts' with huge turnover or multinationals that can afford the costs associated with these stores.

Power brands

There is evidence that higher rents are changing the retail landscape in these areas, with Regent Street and Knightsbridge no longer the preserve of high-end brands.

'In Regent Street we are seeing the big-hitter brands that need the space,' says Bevan. 'That is also happening in Knightsbridge; there is an H&M store there and you would not have seen that 10 years ago. It is able to do that because of the strength of the brand and it can pay for the site. Site owners want powerful brands.'

Rising rent is a prickly issue for retailers. Leases and negotiations are held together by the Upwards Rent Agreement, an institution peculiar to the UK. Its terms stipulate that any renegotiation of retail leases use the current fee as a starting point, regardless of the situation. …

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