Speaker 1: Oh hi, is it so free?
Speaker 2: Nice to meet you, high, Nice to meet you.
Speaker 1: Good, thank you not bad.
Speaker 2: So Moses and I have just hinted the luxury accessory
Speaker 2: part of Harold's and I don't know what to think
Speaker 2: other than all the ermes belts, all different colors hanging up.
Speaker 2: I know they've been and must have accessory. All the
Speaker 2: beautiful handbags, different sizes, different makes, different colors.
Speaker 3: Okay, so the high ticket item for men at the
Speaker 3: moment seems to be watchers. So we're now walking through.
Speaker 3: We're walking past Valenciaga on our right and you're on
Speaker 3: our left.
Speaker 2: Everyone shopping in here looks really happy.
Speaker 4: Another thing I've noticed is you just can't get over
Speaker 4: the volume of stock.
Speaker 5: That everything is available.
Speaker 4: Every handbag make from the luxury houses is here. There's watches,
Speaker 4: there's diamonds, there's bracelets, there's air rings, there's food, there's chocolates.
Speaker 4: It's just vast.
Speaker 3: It feels quite surreal just to know that, you know,
Speaker 3: this is a type of luxury, This is a type
Speaker 3: of extravagance that is not really accessible to the normal person.
Speaker 3: But every now and again you can get a little
Speaker 3: glimpse to it.
Speaker 5: On the ground reporting there from our producers Lean Gerns
Speaker 5: and Moses and who traveled to hero It's this week.
Speaker 5: It's a tough job Dave nowadays to see for themselves
Speaker 5: what Heros does to actually maintain its reputation as a
Speaker 5: primer retailer and Knightsbridge, that's.
Speaker 6: Right, one of the toughest gigs in journalism training around
Speaker 6: the fruit tools in harrod you know, I mean, Francine.
Speaker 6: What I find really fascinating about Harrod's is what it
Speaker 6: tells us about the broader market for luxury around the world,
Speaker 6: Britain's economy. I mean, it's such an iconic landmark in
Speaker 6: West London and it's just one shop after all, but
Speaker 6: it symbolizes so much in terms of the history of
Speaker 6: London as financial capitals where people come from all over
Speaker 6: the world to spend their money, and obviously all of
Speaker 6: that has been massively disrupted in recent years. So the
Speaker 6: future of Harold's in a way tells us a little
Speaker 6: bit perhaps about where London is headed.
Speaker 1: I'm David Merritt and I'm Francine Laqua and this is.
Speaker 6: In the City Bloomberg's podcast, connecting you to the conversations
Speaker 6: at the heart of the City of London.
Speaker 5: This week conversation with The Herod's managing director of Michael Ward.
Speaker 5: We talk about the luxury market, the impact of the
Speaker 5: end of tax free shopping and makeup.
Speaker 6: Michael tell us about the general landscape now for shopping
Speaker 6: in London and particularly luxury shopping.
Speaker 1: I mean, the.
Speaker 6: World's shopping has been disrupted and imaginably by the pandemic.
Speaker 6: Are we back to the where we're before or are
Speaker 6: we somewhere else now in terms of how people come
Speaker 6: and shop in your store.
Speaker 7: I think there's two or three things in this, one
Speaker 7: of which is we are now back beyond twenty nineteen sales,
Speaker 7: and that's without the Chinese customer that used to represent
Speaker 7: about twenty five percent of our sales, and of course
Speaker 7: the loss of tax free shopping. So we've had many,
Speaker 7: many things to sort of fight again. So the first
Speaker 7: thing was to get back our local customers, and in
Speaker 7: doing that we invested in very high quality cuisine. So
Speaker 7: we've put in Tom Kerriage, We've put in Jason Atherton,
Speaker 7: We've put in Gordon Ramsey, We're put in Beyond Frans
Speaker 7: and who's the number six chef in the world. We've
Speaker 7: just signed up Massa who's going to top sushi chefs
Speaker 7: in New York, so making it a real destination for food.
Speaker 7: And then we allied that with health and wellness, and
Speaker 7: that's really given us a strong position with our local shopper,
Speaker 7: which is now representing the vast majority.
Speaker 1: Of our sales.
Speaker 5: Overall, house business.
Speaker 7: Business is really good, but you have to run three
Speaker 7: times as quickly to get there. We have to do
Speaker 7: constant promotional activity to make it interesting for the customer.
Speaker 1: They say.
Speaker 7: Over Christmas we totally covered the store in Gingerbread to
Speaker 7: have Dior and a wonderful World of Dior, a cafe
Speaker 7: and a full exhibition. Then we went on to Kusama
Speaker 7: with Wheaton with a sixteen meter statue that was peering
Speaker 7: in and painting the store, and then we went straight
Speaker 7: into that with Laura Piano with a beautiful cashmere collection.
Speaker 7: So you just have to run all of the time
Speaker 7: to stay still.
Speaker 6: When you say local shopper, does that mean transite living
Speaker 6: nearby or does that mean all of London as opposed
Speaker 6: to as opposed to you know, as you said, the
Speaker 6: Chinese tourists or people coming from India, it's.
Speaker 7: A lot of people who've got second houses. So London's
Speaker 7: that sort of central hub that people feel safe. They
Speaker 7: come to London for business and they keep a house there,
Speaker 7: but they also come to us and buying the things
Speaker 7: that they can't find anywhere else in the world.
Speaker 5: So what do they buy actually is it a and
Speaker 5: how do they buy? Do they shop through personal shopping
Speaker 5: assistance or do they actually come in store.
Speaker 7: It's a combination of birth. So personal shopping is growing dramatically,
Speaker 7: but people still like that ability to just wander around
Speaker 7: and because we have such a secure building, it's one
Speaker 7: of the few paces that they can walk around without
Speaker 7: security or anyone else. What's happening at the moment is
Speaker 7: people are going to the superbrands, so that mid market
Speaker 7: brand is gradually getting more and more strain, and people
Speaker 7: are really pushing towards the Chanelle, the Deos, the hair
Speaker 7: Mares and the Wheatons.
Speaker 6: So are you seeing that sort of growth in the
Speaker 6: spending of these individuals on those brands.
Speaker 7: Absolutely, I mean you only have to follow the results
Speaker 7: of Wheaton and Hairmers. We've got spectacular growth. The great
Speaker 7: thing about the luxury industry is price insensitive, So if
Speaker 7: you'd invested in I think it's the two point five
Speaker 7: to five Chanell bag, you'd have outperformed the All Share
Speaker 7: index by fifty percent. So it's a great It really
Speaker 7: is a value for life.
Speaker 5: And this, Michael, really goes to the difference between the
Speaker 5: have and the have nots, especially when there's you know,
Speaker 5: we talk about inflation and kind of the cost of
Speaker 5: living crisis. How many, if you'll get your top biggest vendors,
Speaker 5: how much do they make up in revenue? Are they
Speaker 5: really the ones that splash out?
Speaker 7: We never give the figures, but the're vast majority. And
Speaker 7: to your point, the rich get richer and that's the world.
Speaker 7: And of course the other point that we've been benefited
Speaker 7: from this year is we have got a very strong
Speaker 7: presence with the Middle East in shopper and they've been
Speaker 7: the recipients at the other end of our energy crisis.
Speaker 6: Is that the main region where visitors are coming now
Speaker 6: the Middle East. You mentioned China, The Chinese shoppers are
Speaker 6: not yet back in full, is that right?
Speaker 7: Well, the biggest, biggest by volume at the moment is America.
Speaker 7: So we've had a lot of Americans straight after COVID
Speaker 7: coming into Europe. Paris doing particularly well, but fortunately because
Speaker 7: of rioting Parisians. They're starting to come to London from
Speaker 7: more frequently. Least has come back strongly, but not as
Speaker 7: strongly as it was prior to COVID. But China is
Speaker 7: still quite a large proportion of our sales, So about
Speaker 7: ten to eleven percent of our sales are still China.
Speaker 5: Who spends the most test tourists.
Speaker 7: The Americans very seldom spend money in Europe on high
Speaker 7: value items.
Speaker 1: So and the.
Speaker 7: Reason is the American department stores have got a much
Speaker 7: lower markup than the European department stores. So everything, even
Speaker 7: with that is more is cheaper in America than it
Speaker 7: is in Europe.
Speaker 6: And even with the strong dollar, I mean, I guess
Speaker 6: how much has the pound played into this a bit
Speaker 6: as well? I mean it's rallied in recent months, but
Speaker 6: it's you know, after towards the end of last year,
Speaker 6: it was really on the floor.
Speaker 1: Did that actually help you?
Speaker 7: It does, and it doesn't because the brands tend to
Speaker 7: price across the whole of the world these days, so
Speaker 7: they'll adjust the prices in the UK to make sure
Speaker 7: that people are not sort of going backwards and forwards to.
Speaker 1: Buy on price.
Speaker 5: So Dave was looking around on your online store and
Speaker 5: he found a cool ring for a million Does that
Speaker 5: sell or does it just attract eyeballs to the.
Speaker 1: Merrit's birthday is coming out. I was a bit tempted.
Speaker 7: We would tend to sell us more through our personal
Speaker 7: shoppers and direct contact with the sales assistance in the
Speaker 7: store themselves, but no, we do sell at a distance
Speaker 7: million pound rings.
Speaker 6: I mean, that's that is a new that's a new thing,
Speaker 6: isn't it if somebody's spending that much money without actually
Speaker 6: going into a store trying and on looking at it,
Speaker 6: that they're happy. We talked on this podcast about people
Speaker 6: buying houses or WhatsApp as well. I mean, this is
Speaker 6: the world we're in, isn't it that people will do
Speaker 6: these huge purchases and they're comfortable doing it entirely online.
Speaker 7: But I think it's it's also security of the brand.
Speaker 7: When personally is on the phone, they've probably not the
Speaker 7: only thing that they've bought from us, so that this
Speaker 7: is a long term relationship that we've built over years.
Speaker 7: So buying a million pound or a two million pound
Speaker 7: item is not a big issue because they know we
Speaker 7: will honor whatever we need to do to make it right.
Speaker 1: For them and if they don't like it, they can
Speaker 1: they can sell, they.
Speaker 5: Can they can put it on e Bay. Is that allowed, Michael?
Speaker 5: You can't put stuff on a eBay that you bought
Speaker 5: from you.
Speaker 1: I'm not sure that anybody would buy it over there.
Speaker 5: When you look at the luxury brands that are doing
Speaker 5: really well, it's about collaborations but exclusive. It's that I know,
Speaker 5: ten fifteen pounds or Moss bag where you're on a
Speaker 5: waiting list for like two three years. It's that Chanel
Speaker 5: bag that everybody wants but you can't get hold of.
Speaker 5: How much of that exclusivity actually drives the connection with
Speaker 5: your customers. So the fact that they call their personal
Speaker 5: shopper and they say, I want this bag, no one
Speaker 5: can get it. Can you get it to me?
Speaker 7: It's an element of that. But I think the whole
Speaker 7: industry that's sort of rarity in exclusivity is what makes
Speaker 7: this special. So, yes, how personal shoppers have got access
Speaker 7: to stock that other people won't get. But the luxury
Speaker 7: industry has been brilliant at two things, one of which
Speaker 7: it remains cool. So the collaborations are also with streetwear brands,
Speaker 7: so they're there for the younger Generation Z, but they
Speaker 7: also do the collaborations with the older people as well,
Speaker 7: so at both ends the spectrum, they're actually playing to
Speaker 7: that audience and it works so well in terms of desirability.
Speaker 7: And then we keep launching the Kusama collections and each
Speaker 7: one is targeted at a different age group and it's
Speaker 7: just spectacular how they continually engage in the population.
Speaker 6: Are you pulling in the younger demographic into the store
Speaker 6: as well or is it slightly the older, wealthier clients
Speaker 6: who are still no.
Speaker 3: No.
Speaker 7: The gen Z, particularly the International gen Z, are the
Speaker 7: ones with money and they're the ones that will do
Speaker 7: particularly when when China starts to come back online. That's
Speaker 7: the reason we invested so much in beauty, because beauty
Speaker 7: is the first touch of a customer, so we usually
Speaker 7: get the exclusivity of products. So we were the first
Speaker 7: to launch Hermes, we were the first long Gucci were
Speaker 7: launching Prada. All of these builds the relationship with the customer,
Speaker 7: and because we have a CRM system that has eighty
Speaker 7: six percent of our customer's data, we can then move
Speaker 7: them from into small accessories, into bigger leather goods and
Speaker 7: then into apparel.
Speaker 5: Does that happen organically or does a positioning of the
Speaker 5: store help with you know, how you browse and how
Speaker 5: you end up in certain parts of the department store.
Speaker 7: Well, ours was never built as a department store. It
Speaker 7: was actually built as a block of flats. So it's
Speaker 7: not like any other department store that's got a journey.
Speaker 7: It's creation of rooms and that's something that gives us
Speaker 7: the ability to make each one of those rooms special.
Speaker 6: I didn't realize it was a block of flats. So
Speaker 6: when was it converted into a department store?
Speaker 7: After the nineteen twenties all of the leases were taken back,
Speaker 7: but I've got some wonderful photographs of estate agent's boards
Speaker 7: on the Brompton Roads selling mansion flats inherits.
Speaker 5: And then there are the vaults, Dave, have you ever been?
Speaker 5: I've never been, Actually I have been invited in. It's
Speaker 5: my fault that I've never been. But there are vaults downstairs?
Speaker 5: Were you still do you still store gold for customers?
Speaker 7: We have safety deposit boxes which we store whatever our
Speaker 7: customers well.
Speaker 5: Such as how can we not follow up on that
Speaker 5: you need?
Speaker 7: But if you're on my phone, but if you're in London,
Speaker 7: you've got a second house, you'll be wanting to keep
Speaker 7: all of your large quantitative jewelry there. People wanted just
Speaker 7: to keep their watches and things suit like that are there.
Speaker 6: How's London doing, do you think, Michael, compared to other
Speaker 6: big financial and cultural capitals around the world. I mean,
Speaker 6: we've written a lot about Dubai's rise as a you know,
Speaker 6: particularly after COVID and with the war in Ukraine. I mean,
Speaker 6: are you seeing more competition for these these super elite
Speaker 6: shoppers to go elsewhere or that does London still have
Speaker 6: a special place.
Speaker 7: I think London still has a special place, but unfortunately
Speaker 7: we're getting little on nurse support from government on it.
Speaker 7: The government is sort of almost art of moving away
Speaker 7: from the arts and taking funding away, so that creativity
Speaker 7: section we've got to be protect really very strongly. I
Speaker 7: think the secondary is well is. The loss of tax
Speaker 7: free shopping has been a major blur because if I'm
Speaker 7: an affluent person who wants to spend five million pounds
Speaker 7: on jewelry, then I can save million million pounds by
Speaker 7: going to Paris, so I'm going to go to Paris.
Speaker 7: It's a loss of tax free shopping and that diversion
Speaker 7: of money outside of the capital for art is a
Speaker 7: major issue that could hurt us in the future.
Speaker 5: That will change.
Speaker 7: Well, it was supposed to be in trust's budget, but
Speaker 7: that was swiftly reversed.
Speaker 5: So does that how much have you lost in revenue
Speaker 5: because of that?
Speaker 7: Well, it's difficult to really say how much we've lost
Speaker 7: in revenue because we've we had to pivot onto local
Speaker 7: customer But if I look in terms of the tax
Speaker 7: free shopping of the Americans and the Middle East in Paris,
Speaker 7: it's double that of what we're doing in the UK.
Speaker 6: And any signs that the government might listen to to
Speaker 6: your I mean maybe are you logging them at all
Speaker 6: or your industry? Are they actually listening to what the
Speaker 6: retailers are saying.
Speaker 7: We're constantly constantly lobbying, but it's getting it on their
Speaker 7: agenda and what we're actually saying to government is dirt
Speaker 7: change policy. But ask for an independent review because we
Speaker 7: think all of the calculations that they've made have been
Speaker 7: fundamentally flawed. So we want to put it to the
Speaker 7: Office of Budgetary Responsibility.
Speaker 1: To give a view.
Speaker 5: Why do you think they're not listening?
Speaker 7: I think there are so many points that we try
Speaker 7: and engage government with at the moment, and they don't
Speaker 7: seem to listen to many. I mean, there isn't really
Speaker 7: a tourism strategy for London, whereas if you go to
Speaker 7: across the whole of Europe, it's now much better integrated
Speaker 7: across Europe and the whole of shingun So there's a
Speaker 7: number of areas where the government is just misdirected and
Speaker 7: not focusing.
Speaker 6: I guess you know, we've had people on this podcast
Speaker 6: talk about this immedcient weeks that you know, maybe cutting
Speaker 6: the governments some slack. They've had a pretty tall order
Speaker 6: to kind of rescue the economy after the chaos of
Speaker 6: last Jane. You mentioned the trust budget, so they've been
Speaker 6: trying to kind of steady the shape, restore Britain's reputation
Speaker 6: to the bandwidth perhaps hasn't been there whilst the economy
Speaker 6: was looking so shaky. But things are looking a little
Speaker 6: better now, so perhaps might the outlook be a little
Speaker 6: bit rosier for the rest of this year than perhaps
Speaker 6: we thought?
Speaker 7: I would hope, sir, But I think you know, Fred
Speaker 7: I work at them any slack. It's self inflicted wounds
Speaker 7: and the fact that everybody has to run three terms
Speaker 7: as fast now than they used to do.
Speaker 1: So.
Speaker 7: No, you've got to just get yourself in a structure
Speaker 7: that can make proper decisions. And you know, the UK
Speaker 7: can't lag behind the rest of Europe when it comes
Speaker 7: to having a really really strong tourism policy.
Speaker 6: I mean, when I was growing up, it was a
Speaker 6: huge treat for me to come into the Harrod's toy department.
Speaker 6: That's what I used to love doing. You know, all
Speaker 6: the people demonstrating this unbelievable kid now used to buy anything.
Speaker 6: Mind you, it was all quite too expensive, but we
Speaker 6: used to actually goggle it at all. And then around
Speaker 6: the footl that those two areas you haven't mentioned so much.
Speaker 6: The margins are a lot smaller on selling lego or
Speaker 6: selling smoked salmon. Are you going to continue to have
Speaker 6: those departments which sort of pull in the crowds.
Speaker 7: No, We've just refurbished the four food holes back to
Speaker 7: the standards that they were there in the eighteen seventies
Speaker 7: when they were originally built with the original tiles. We're
Speaker 7: investing more and more and more in food. In fact,
Speaker 7: it's one of our fastest growing categories. Everything in the store.
Speaker 7: We have an army of chefs in the basement who
Speaker 7: cook everything fresh every day and it's that sort of freshness,
Speaker 7: newness that are bringing more and more people in. So no,
Speaker 7: it's a very big area for us.
Speaker 5: But how do you try I don't know if you
Speaker 5: track data, like people come in to buy a handbag
Speaker 5: and then get diverted to the food hall or do
Speaker 5: people come in to get a fish cake and then
Speaker 5: get diverted to your store?
Speaker 1: Well, people, what do you do?
Speaker 5: Can I never get diverted obviously, but I.
Speaker 7: Think that But it's the building the relationship, and the
Speaker 7: food holds the relationship. So somebody will be coming in
Speaker 7: two or three times a week to buy their food,
Speaker 7: and on every occasion they'll divert into whether or not
Speaker 7: it's beauty because they need a pick up, or they'll
Speaker 7: go and browse fashion accessories. If you're spending two three
Speaker 7: thousand pounds, it tends to be more of a considered
Speaker 7: purchase that you've you've really thought about and glad to
Speaker 7: hear that, you know.
Speaker 6: One of the things, obviously with Harrod's has been in
Speaker 6: the uniqueness of the venue, and they're in the location.
Speaker 6: You do have some concessions in some airports in various
Speaker 6: places around the world. I saw the one in dohaf
Speaker 6: any recently. Could you ever envisage opening another store somewhere,
Speaker 6: a full, full fledged store.
Speaker 7: No, there's only one Harotz. And really being at the
Speaker 7: international capital of the world is London, you all of
Speaker 7: the crossroads allow you to have that putting it elsewhere,
Speaker 7: you know, bless me, you're in America at the moment.
Speaker 7: Just go next door into Bloomingdale's and have a look.
Speaker 1: It's a disaster. I couldn't possibly que But what.
Speaker 7: We've done is we've spent every year, we spend fifty
Speaker 7: to sixty million pounds, making it the most stunning emporium.
Speaker 7: And that's that's what makes it special. It is really
Speaker 7: the Palace of Knightsbridge.
Speaker 5: And this is because you're also backed by Qatar, so
Speaker 5: at the moment money is limitless.
Speaker 7: Well, we never have drawn a penny from Qatar. We
Speaker 7: generate everything ourselves.
Speaker 5: Michael, who's your biggest competitors.
Speaker 7: Our arrivals at the individuals stores themselves. But nobody has
Speaker 7: continued this investment to create this. As I say, it's
Speaker 7: just something that's special and unique, whether or not it
Speaker 7: be the food holes or whether or not you can
Speaker 7: walk in there and buy the most amazing diamonds from
Speaker 7: every one of the major jewelers in the world. It
Speaker 7: doesn't happen anywhere else.
Speaker 6: And do you think all of those other competitive centers,
Speaker 6: And we've talked about Paris multiple times, do you think
Speaker 6: that the UK government and perhaps with the economic situation improving,
Speaker 6: do you think London's going to reassert itself. I think
Speaker 6: you just called it just now the capital of the
Speaker 6: world in some respects. Do you think that's going to
Speaker 6: continue for the full sillable future.
Speaker 7: If we can start to get more investment back into
Speaker 7: the areas that we touched on earlier, such as making
Speaker 7: sure that our creative industries continue to rule the world
Speaker 7: and that we have this growth in the soft power,
Speaker 7: we have a stable environment which people come to. As
Speaker 7: I touched on earlier, the fact that Paris is constantly
Speaker 7: on problems is the biggest thing that drives particularly the
Speaker 7: Middle East and customer away from Paris and into London.
Speaker 7: So stability of law, great culture is really the key
Speaker 7: to making sure that London remains here.
Speaker 5: Why do you worry about the creative industry? Is that
Speaker 5: Brexit related or is that just government funding.
Speaker 7: It's government funding.
Speaker 5: Do you think that the labor government would be better
Speaker 5: at taking care of the creative industries? Would that change?
Speaker 7: I have to say I don't worry about a labor
Speaker 7: government because historically, whether it's labor or conservative, they tend
Speaker 7: to do broadly the same things, so that making big
Speaker 7: changes isn't something that government likes. So I think that
Speaker 7: it'll probably be a continuation.
Speaker 6: Although they have, I mean, the labor opposition have talked
Speaker 6: about some of the arts funding.
Speaker 1: Questions that you've raised.
Speaker 6: I mean, maybe perhaps they might have a bit more
Speaker 6: of an open ear.
Speaker 1: To some of these concerns.
Speaker 7: We really hope that they have an open ear. But
Speaker 7: I think it's one that when you have some of
Speaker 7: the best creative industries in the world, that you would
Speaker 7: want to nurture and preserve rather than isolate.
Speaker 5: Michael, how long is this scaffolding? Therefore, I think that
Speaker 5: it was Big Ben and our herods.
Speaker 7: We finished the step up scaffolding at the beginning of November.
Speaker 7: We're replacing all of the facade lights with digital lights
Speaker 7: so that we'll be able to reduce our carbon footprint
Speaker 7: by twenty seven tons.
Speaker 1: And are you going to have it. Are you having
Speaker 1: a big unveiling.
Speaker 7: No, we'll think about doing something quite interesting because we
Speaker 7: can change all of the colors. Oh wow, multi colored herods,
Speaker 7: multi coolored herods.
Speaker 5: It's a lots of revenue, but worth it for the planet.
Speaker 1: Absolutely.
Speaker 5: Michael Ward, thank you so much.
Speaker 6: Thank you, thank you, thanks for listening to this week's
Speaker 6: in the City. We will be back next week.
Speaker 5: But in the meantime, if you like our show, please
Speaker 5: head on over to Apple Podcasts or wherever you listen
Speaker 5: to podcasts and rate, review and subscribe.
Speaker 1: This episode was hosted by Me.
Speaker 5: David Merritt and me Frantin Lapua.
Speaker 6: It was produced by Somersadi Moses Andam and Leane Gerens.
Speaker 5: Additional editing by Blake Maples
Speaker 1: And special thanks to Michael Ward and Sophie Green.