London now the second favourite for US luxury retail expansion
Boosted by European letting activity in luxury retail, Europe has become the leader when it comes to overseas expansion of luxury brands. As US luxury retailers look to be break into the European market, London has emerged as their second favourite destination.
London sits behind only Paris as the desired destination to expand. This is a result of the trends that have seen luxury brands become more acquisitive in the last few years. In 2016, luxury brands accounted for 38% of market share. However, in 2017 the figure had risen to 45%.
Milan and London are tied for second place – with both cities taking 5.6% of all global affordable luxury store launches. Paris leads with 5.9%. These three European powerhouses stand clearly ahead of the likes of New York, Tokyo, Hong Kong and Singapore.
The benefits of occupational demand are clear. Luxury brands are able to support multiple stores in a particular city. Of course, this makes larger European cities, such as Paris and London, appealing to luxury retailers.
Why is London so appealing to luxury brands?
London is attractive to luxury brands, but it’s also important to realise that it is ultra-competitive too. Consumers have to weigh up purchases within not just one sector – such as designer clothes – but with equivalent luxuries too. However, London remains appealing to luxury brands because of the amount of disposable income there is in the city.
Of course, luxury purchases are emotional rather than functional. Consumers will seek out the brands that resonate emotionally.
Luxury US retailers who expand in London will need to focus on the emotional side of the buying experience. It is the brands who can build strong customer relationships that will gain loyalty. This is so important in such a competitive market as London.
How will luxury retailers succeed in the London market?
Fortunately, although London’s luxury market is intensely competitive, there are many different types of consumers for brands to tap into and to build emotional connections with. Those that commute from the suburbs see work-life balance as really important. They want to be healthy but they like to indulge and treat themselves on occasion too. All across London, there are up and coming districts that become ‘the place to be’, a hive of nightlife or social activity, and soon become desirable places to live. Local trendsetters are the lifeblood of these communities and they often have much disposable income.
London is also home to those who could be categorised as cosmopolitan. These are affluent people who love the city, and love labels and luxury items. Another category – seasoned spenders – are perhaps more likely to splash out on experiences rather than materialistic items and products. However, with more disposable income than most, these are the type of consumers that luxury retailers will always try to attract.
There tends to be little good news when it comes to the High Street at the moment. The growth in luxury retail expansion in London is a bit of welcome good news.