London beats Paris to claim Europe's top retail destination

International real estate advisor Savills has identified London as Europe’s top retail location in its latest European Retail Destination Index, which identifies the best opportunities for expanding international brands. According to Savills, London’s success is due 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.

According to Mastercard, London has overtaken Paris  with a record 19.8 million international tourists spending a total of €17.8 billion 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.  As a result, London’s West End saw a 3.0% annual increase in retail sales in July 2016, the month immediately following the EU referendum.  Marie Hickey, director of retail research at Savills, comments:  “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,” says 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.”

Marie Hickey adds: “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.”