Qatar-owned Harrods lures rich with $50m makeover

Drivers along Dubai’s Sheikh Zayed Road, used to adverts plugging international luxury retail names, now see a locally-owned brand decorating billboards as they drive down the strip.

The advert featuring Harrods, the luxury London department store snapped up by the Qatari royal family in 2010, plays into a campaign to ramp up the store’s appeal to wealthy tourists – including some of its highest spenders: GCC shoppers.

 “There are a lot of areas in Harrods that are more geared around domestic tourists and that may change as the UK domestic tourist drops off and international tourism grows - I think capitalising on that is key,” said Jonathan De Mello, retail analyst at London-based CBRE.

“It’s not just a case of [attracting] Middle East or Gulf customers; it’s also a wider expansion to…high-net-worth individuals in growing markets; the Chinese, the Nigerians and the Thais are apparently the next big thing in relation to growth customers.”

Harrods’s new owners have spent £32.7m ($50m) upgrading the store, installing 150 video screens designed to display the very latest in luxury advertising, adding six new restaurant spaces, a new luxury watch room late and payment systems that accept Chinese credit cards.

 “We’ve had the support of our new owners in continuing to spend at a rate that is really not seen anywhere else in the retail industry,” managing director, Michael Ward told the FT.

Wealthy tourists are offering a lifeline to the struggling British retail market, which has seen dozens of chains collapse into administration amid dwindling domestic sales.

Around 36 percent of British consumers are spending less on clothing and footwear while 28 percent are spending less on furniture as concerns of unemployment rise, the British Retail Consortium said this month.   

By contrast, Arab visitors spend an average of £2,000 ($3,269) in the city’s priciest stores, according to the New West End Company, a body representing 600 retailers on Bond Street, Oxford Street and Regent Street.

Luxury retailers in the UK capital have also benefited from France’s decision to ban the burqa, a move that saw a number of Arab tourists snub the European nation in favour of the UK.

“We saw quite a big increase after the burqa ban in France and also with the situation in the Gulf and the Middle East there has been a flight to London,”  Jace Tyrrell from the New West End Company.  

“Around Ramadan there was a huge amount of Middle East shoppers, more than ever before and that is partly down to the French banning the burqa, which has backfired on them hugely from a retail perspective,” added De Mello.

Sales in the Knightsbridge store increased 39 percent to £108.3m in the year to January 29 while sales broke through the £1bn sales barrier. Chinese customers were the top-spending customers, spending an average of £3,500 during a store visit.

Harrods has installed 75 UnionPay points – terminals that can process Chinese credit cards - in its Knightsbridge store and a further eight at its airport terminal branches. The retailer also employs 75 Mandarin speaking staff.

The move led to a 40 percent increase in sales to Chinese customers in the first quarter of 2011, Ward said in May.