BRAND HEALTH CHECK: Harrods - Can Harrods ever stop trading on past glory?

Harrods boasts that it can supply everything any customer could possibly wish for, but turnover is sliding at London's best-known retailer. Daniel Rogers reports on its fortunes.

Although Marks & Spencer's recent advertising has set out to 'own Christmas', it is perhaps Harrods which best embodies the festive retail experience for Londoners (and generations of tourists).

There are few people left unmoved when encountering the beautifully lit, immaculately window-dressed building on a December evening.

But there are still causes for concern at the 153-year-old establishment.

Fear of terrorism has decimated the number of tourists visiting London, particularly high-spending Americans who used to love nothing better than spending the afternoon at Britain's best-known department store.

At the same time other luxury brands have moved into the retail space with panache. Sitting opposite Harrods now is an impressive new Burberry store sporting the modern iconography which has given this traditional clothing brand a global renaissance.

Accounts filed at Companies House three weeks ago reveals that turnover at Harrods Ltd, the UK retail arm of Mohammed Al Fayed's empire, has dropped from £533.9m to £526.3m. Pre-tax profits (excluding exceptional items) fell from £30.5m to less than £22m in the past year.

Worryingly this is at a time when consumers are supposed to be spending as if there's no tomorrow, particularly Londoners splashing out the equity released from their spiralling house prices.

The flagship store still adheres to its motto "Omnia Omnibus Ubique" (all things, for all people, everywhere). And it claims to have sold gifts of all sorts, shapes and sizes including an elephant and an alligator - the latter reportedly given to Noel Coward as a Christmas present.

But is Harrods now relying too much on such tradition? Should it reinvent itself with greater focus on, and salience to, modern consumers?

We asked Stephen Cheliotis, brand liaison director at The Brand Council and Lee Daley, chief executive of the Red Cell Network, whose clients include Bon Marche and Coty, to comment.

VITAL SIGNS

UK department stores 2000 2001 2002

annual turnover pounds pounds pounds

Harrods Holdings 539.4m 489.3m 476.9m

House of Fraser plc 838.3m 785.5m 857.7m

John Lewis Partnership plc* 1894.6m 1997.0m 2138.0m

Selfridges plc 368.6m 363.5m 360.6m

Source: Hoover's Online Department stores division.

*Source: John Lewis Partnership Annual Reports

DIAGNOSIS

Stephen Cheliotis

Harrods is the quintessential English brand yet it is based on an image of England that no longer exists other than in the mindset of foreign visitors. With the continuing tourism drought, this niche yet profitable market has all but disappeared leaving Harrods like a bride at the altar.

Traditional and high quality, but attractive to British consumers outside SW1 and aside from the New Year sales? Not really.

Harrods is squeezed between two attractive propositions, unique and trendy boutiques and more accessible departments store such as the revitalised Selfridges. With brands such as Alexander McQueen available at these alternative outlets, the reason to visit Harrods specifically has disappeared, except on the odd occasion one is trying to impress an individual with a Harrods embossed gift. This last statement of course means there is value left in the brand, but it is a question of wider accessibility and relevance without compromising the core brand values.

The Harrods slogan may be 'you want it, we got it', but unfortunately not so many people want it anymore. This will not change unless its complacency is replaced by energy and drive.

Lee Daley

Returning to the UK after six years in New York, I discovered that everything in London had become 'premiumised' during the 1990s. Everything had become gilt-edged for the affluent consumer.

Harrods can no longer afford to rely on its very strong brand awareness and historical values to lure customers in this aggressive market.

The brand is about luxury, refinement and elegance and its motto of all things to all people is a fantastic promise. In the world of one-to-one marketing, few are claiming this. Yet it falls between two stools, neither celebrating its own brand nor the brands it offers.

It should focus on promoting consistent proprietary and unique experiences.

Lessons can be learned from the renaissance of Burberry, Gucci and Yves Saint Laurent.

More attention to design and event marketing would increase the frequency of customer visits and yield. Local, younger and cooler London customers should be a focus of the business strategy.

Communicating its bedrock values in a more contemporary, playful way will secure Harrods a place in the lives of consumers, as well as in their hearts.

TREATMENT

Cheliotis' choices

- Modernise and enhance the product offering without damaging exclusivity.

- Drop the expensive souvenir shop feel and reclaim significance to UK consumers.

- Overhaul the mail order and internet offerings.

- Create consumer pull at times other than the major sales without resorting to mainstream gimmicks.

Daley's directions

- Develop a single idea of what it promises to the consumer beyond being a department store. It should be a magical kingdom.

- Be more aggressive in the segmentation of products and year-round marketing.

- Treat the London market as a discreet audience.

- Develop a powerful creative department.

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