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London beats Paris as Europe's top destination for expanding international retailers

Retail brands, particularly luxury fashion brands, are increasingly expanding their global footprint in a bid to access new consumers and ultimately drive sales. London and Paris are the obvious locations for stores due to their sheer size and visitor numbers, but which has the edge in terms of opportunities for expanding international retailers? Our latest European Retail Destination Index, which examined a wide range of features in 11 cities, concluded that London beats Paris to the top spot.

We calculated the ‘opportunity’ potential of each city by comparing the total number of standalone stores occupied by the top 10 global fashion brands or groups (based on global turnover) relative to its population and visitor numbers. London offers 13.1 stores per one million of population and 3.9 stores per one million of international tourists, compared with 17.3 and 5.9 stores respectively in Paris. 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.

London’s success is also due to its strong underlying operational fundamentals related to retail spend and tourist flows. Mastercard figures show 19.8 million international tourists visited London and spent a staggering €17.8 billion in 2015/2016, which is 53.5 per cent higher than the spend in Paris. 

These figures are even more pronounced when looking at the proportion dedicated to shopping: in London visitors allocate circa 46.7 per cent of total spend to shopping compared with 16.7 per cent in Paris. The icing on the cake is London’s lower total occupational costs, which are 6.7 per cent cheaper in London than in Paris. 

Recently, overseas visitor spend in London received an added boost from the EU Referendum vote due to its impact on the value of the Pound. The average price of a basket of luxury goods, including an iPad, Rolex watch and Chanel perfume, is currently 13 per cent lower in London than Paris. Consequently, the West End saw a 3.0 per cent annual increase in retail sales in July 2016, the month immediately following the EU referendum. 

While some brands are introducing price parity to minimise the impact of currency fluctuations, the weaker Pound still means the overall cost of visiting London (accommodation, eating out, and so on) is potentially lower than a similar trip to Paris. This measure didn’t feed into our European Retail Destination Index, but it does highlight the importance of visitor appeal in determining the attractiveness of a location to new international brands.

Ultimately, the revenue potential of London and its lower occupational costs suggest the profit margin offered by a store there may be greater than that of a similar store in Paris. This will enhance its appeal to new international entrants, hence its place at the top of our European Retail Destination Index.

Further information

Read more: Savills European Retail Destination Index

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