London has been recognised as the number one retail location in Europe by Savills in its latest European Retail Destination Index, which identifies the best opportunities for expanding international brands.
According to the property firm, the capital’s success is owed largely to its underlying operational fundamentals related to retail spend and tourist flows.
These factors have been further enhanced by London’s ‘opportunity’ potential for new retail entrants and total occupational costs, which are 6.7% cheaper than Paris.
Separate research by According to Mastercard found that London has overtaken Paris with a record 19.8 million international tourists spending a total of €17.8bn (£15.3bn) in 2015/2016. This level of spend is 53.5% above that recorded for Paris and is even more pronounced when looking at the proportion dedicated to shopping. Visitors to London tend to allocate 46.7% of their total spend to shopping, says Mastercard, compared to 16.7% in Paris.
More recently, spending by overseas visitors in London received an added boost from the Brexit vote due to its impact on the value of the pound.
Based on a basket of luxury goods, which includes an iPad, Rolex watch and Chanel perfume, the average price for these items in London is now approximately 13% lower than those in Paris. Consequently, London’s West End saw a 3% annual rise in retail sales in July 2016, the month immediately following the EU referendum.
Marie Hickey, director of retail research at Savills, said: “While this measure did not feed into the European Retail Destination Index, it does highlight the importance of visitor appeal in determining the attractiveness of a location to new international brands.”
Savills has devised a relatively simple measure of retailer ‘opportunity’ for European cities. This is based on the total number of standalone stores occupied by the top 10 global fashion brands or groups - based on global turnover - in a city relative to population and visitor numbers.
London offers 13.1 stores per 1 million of population and 3.9 stores per 1 million of international tourists. This compares to Paris with 17.3 and 5.9 stores respectively. For international brands looking to expand, this would suggest that competition may be less pronounced in London, albeit this will be largely dependent on the nature of their product offer and existing competition.
“The appeal of London and Paris to expanding international brands is unrivalled in Europe, however recent terror attacks have impacted Paris’s international visitor numbers, and their spending,” said Lydia Brissy, director of European research at Savills.
“Significantly, the city remains a hugely desirable destination with total retail sales for the wider Paris region by far exceeding that seen for Greater London, ensuring its appeal to prospective retailer entrants,” she added.
The revenue potential of London and its lower occupational costs suggest the profit margin offered by a store there may also be greater than that of a similar store in Paris, according to Marie Hickey.
“This will enhance its appeal to new international entrants, hence its place at the top of our European Retail Destination Index,” she added.