Luxury Report 2014

Luxury REPORT
We examine the issues crucial to the luxury market’s continued success,
including how The Outnet has changed high-end retailing online
WELCOME
In the evolution of luxury goods there
can be no boundaries – or visa issues
While the wider
fashion sector has
been hit by the
unseasonably warm
weather during
September and
October, the luxury
market has
JAMES KNOWLES remained robust,
Features and special
much as it did
reports editor
throughout the
recession that saw so many businesses
falter. And now, as the economic recovery
gathers momentum, luxury businesses
are looking to capitalise on this to grow
even more.
Look no further than brands such as
Burberry, where total sales grew 14% to
£1.1bn in the six months to September 30,
which is testament to the fact that
consumers will continue to buy quality
products from those that put customer
service first, even when times are tough.
As such, we continue to see a flurry of
store openings on London’s famous luxury
retail parades, with Bally and Longchamp
opening on Bond Street, Victoria
Beckham unveiling her debut store on
Dover Street, and Michael Kors set to open
a European flagship on Regent Street in
2015. Bond Street will be given a £20m
revamp within the next four years, which
will change the flow of traffic and increase
the pedestrian space by 50%, upping its
potential as a global luxury destination.
With so much movement in the luxury
sector, we bring you our third annual
Luxury Report, in association with retail
technology provider K3 Retail.
We begin by asking ‘Who is the luxury
consumer?’ on page 2. To answer this we
have exclusive data from consultancy
firm CACI, and home in on three
consumer segments to find out their
attitudes to shopping.
It’s not all about the UK, though. In
luxury retailers, it’s not uncommon to
find Mandarin-speaking staff trained to
serve affluent visitors from the Far East.
However, the UK’s restrictive visa system
means our luxury retailers miss out on a
significant amount of customers that
instead opt for the simpler Schengen visa
offered by our neighbours in continental
Europe. For the latest developments on
this issue, see page 9.
Traditionally the sector has been
reluctant to embrace selling online, but
the past few years have seen that change,
spearheaded in the UK by Net-a-Porter
and its stablemates, designer menswear
site Mr Porter and luxury discount site
The Outnet. On page 6 we speak to The
Outnet managing director Stephanie
Phair to find out how the luxury discount
market is performing and how she has
seen it change.
Finally, on page 4, we bring you the
findings from our Luxury Report round
table, attended by representatives from
businesses such as Burberry,
Aquascutum and Jigsaw.
We hope you enjoy this report, and
we’d be pleased to hear your thoughts.
James.knowles@emap.com
Reaching customers across all channels
K3 Retail is again
delighted to be
associated with
another insightful
Drapers report. It
was great to see a
number of leading
luxury brands
debating the true
TONY BRYANT
Strategic business
values of the sector.
development director,
Traditionally in
K3 Retail
the luxury sector,
product has always been king and
customer engagement is now equally as
important as the product being sold.
Much discussion took place around the
importance of consistency across the
digital and physical offering. The
consensus was that informed store
assistants utilising technology and
product knowledge was a winning
combination, and ultimately joining this
up with the web and great customer
service delivered better retention rates
and increased brand advocacy.
We are seeing the emergence of more
new concept stores. Burberry’s digital
store on Regent Street was discussed as
embracing all within the luxury
omnichannel experience. It was also
recognised that the luxury independents
with less budget to spend on technology
still deliver outstanding service based on
strong product knowledge plus an
in-depth understanding of their
customers.
I genuinely feel that UK fashion
retailing is driving innovation – whether
it is via the technology proposition or
service-led – and British fashion,
spearheaded by luxury brands, is
renowned the world over for its quality
and craftsmanship.
I left the round table enthused by the
quality of the brands and passion of the
people driving those businesses forward.
We look forward to hearing your views on
the report and are
happy to continue the
conversation.
tony.bryant@k3btg.com
CONTENTS
02 Meet the consumer
Luxury consumers are changing.
Thanks to data from CACI, we reveal
who they are and where they shop
04 Round table Luxury goods professionals discuss
brand consistency across platforms
and exceeding customer expectations
06 The Drapers Interview The Outnet managing director
Stephanie Phair on convincing luxury
that sales and ecommerce can work
COVER IMAGE: IRIS & INK
Drapers Luxury Report / NOVEMBER 2014
1
09 Chinese visas
Compared with a Schengen visa,
the UK process is arduous – and UK
retailers can lose out to European rivals
MEET THE CONSUMER
INTRODUCING TODAY’S BIG SPENDERS
L
Words by JAMES KNOWLES
uxury trade body Walpole estimates
the sector will be worth £12.2bn in the
UK in the next three years – a promising
time for our home-grown businesses.
However, the high-end consumer, like all
consumers, is changing. Shoppers from emerging
markets now figure highly, digital has come to the
fore and provenance is key. Using data provided
by consultancy CACI, we look at three key groups
(see box, far right, to interpret data) and get views
on the changing landscape from retail experts.
WHO ARE THEY?
HOW DO THEY SHOP?
AGE OF PERSON PRODUCT BOUGHT FOR/BY
MARKETING CHANNEL Channels responded to
0-4 yrs
5-17 yrs
18-24 yrs
25-34 yrs
35-49 yrs
50-64 yrs
65-74 yrs
Leaflets
75+ yrs
250
Mail –
addressed to
‘householder’
or ‘occupier’
Mail –
addressed
by name
Newspaper/
magazine ads
or customer
magazines
TV/radio
Email
We take a look at who the luxury
consumer is and how they shop
KEY
Text
message
Telephone
Cinema
300
200
Lavish lifestyles These are the
most affluent people in the UK –
working as entrepreneurs or in senior
management – with the typical family
living in a home worth more than £1m.
150
200
100
100
50
GUY SALTER DEPUTY
CHAIRMAN, WALPOLE
Looking back on the past 12
months, we have seen a
number of significant
geopolitical issues, and that
uncertainty is impacting on business in London.
But taking a longer-term view, we are seeing
some interesting trends, including the
resurgence of bespoke, a fascination with
provenance and growth in digital luxury.
Customers are more demanding, as expressed
in the resurgence of customisation, but for
luxury it is just a return to our heritage in making
bespoke pieces and providing truly individual
service. If you think of the famous Savile Row
tailors, all were founded on truly bespoke
service. We see this trend across all categories.
Linked to this is a real interest in provenance,
in terms of where products are made and the
intrinsic associations of Made in Britain, as well as
how they are made and the particulars of the
materials, sustainable sourcing, craftsmanship
and heritage.
It is good to see the progress that brands are
making in the digital customer experience and
the convergence with physical and online retail.
Consumers are benefiting from this and driving
greater developments and investments in social
media, digital marketing and omnichannel retail.
TONY BRYANT STRATEGIC
BUSINESS DEVELOPMENT
DIRECTOR, K3 RETAIL
The luxury sector has always
been product-focused, but
the new standard is how you
deliver a great consumer experience. Everyone
is working towards a joined-up omnichannel
experience. Clienteling – a personalised
approach to drive engagement – is key.
Ultimately, the consumer wants a sales person
who is engaging. Point-of-sale goes to a whole
point-of-service mentality.
Promotional management in luxury has to
be subtle and it has to be pertinent to the time
of year. Loyalty across the channels is where
luxury wins.
This data is on the three highest luxury
spending consumer groups (descriptions
below), and shows how they shop against
a national average of 100.
0
City sophisticates A younger
affluent consumer group that
owns flats in major towns and cities,
usually graduates working in white-collar
professions. Ownership of iPads/tablets
is double the national average.
0
GEOGRAPHY
DIGITAL ATTITUDES
England
Northern Ireland
Scotland
I worry that any
I couldn’t live
Computers confuse
personal information without the internet
me – I’ll never get
entered online will
on my mobile
used to them
not remain secure
Wales
120
100
I love to buy
new gadgets
and appliances
I wait until
Shopping online
technology gets
makes my life easier
cheaper before I
consider a purchase
150
80
60
100
40
50
20
0
All data provided by CACI
0
COUNTRY OF BIRTH
UK
800
Career climbers Also a younger
consumer group, they live in flats,
apartments and houses in urban areas
that are rented or being bought. They
are more likely to have loans and
mortgage repayments, but frequently
use the internet.
EU
EU country Rest of
country after March Europe
pre-March
2001
2001
CONTENT ACCESSED Through internet or apps on mobile phone
INTERNET ACCESS Usage in last week
Africa
Middle
East &
Asia
North
America
Central
America
South Caribbean Antarctica
America
& Oceania
Up to 3 hours
3-8 hours
8-20 hours
20 hours+
Local
information
200
Shopping
Social
networks
Auction sites
Search
engines
Lifestyle (eg Entertainment
fitness, cookery)
250
200
700
600
150
100
500
100
400
300
50
200
0
0
100
0
SOCIAL MEDIA ACTIVITY At least weekly
FINANCE Annual household income
£0-£20,000
£20,001£40,000
£40,001£60,000
Access
£60,001£80,000
£80,001£100,000
£100,001+
350
Post links/
content you
have found
(eg photos/
videos)
Post/send
messages
Update your
profile (eg
pictures/
hobbies)
Update your
location (eg
Facebook
Places)
Make
comments
on friends’
status,
photos etc
View
content
friends have
uploaded
(eg photos/
videos)
Use other
programs
through
social media
(eg Spotify)
Visit the fan/
profile page
of a
product/
brand or
celebrity
150
300
250
100
200
150
50
100
50
Drapers Luxury Report / NOVEMBER 2014
2
Drapers Luxury Report / NOVEMBER 2014
3
Become a
fan of a
product or
brand
Interact with
a brand (eg
comment
on a brand
page)
Click the
‘Like’ button
(on a brand/
product/
event etc)
Add an
app (eg
a Facebook
or Twitter
mobile app)
ROUND TABLE
It’s all about
THE DETAIL
Retailers agreed that great customer service is a must
in the luxury sector, whether in store or online
R
Words by CHARLOTTE ROGERS Photography by PHIL WEEDON
ather than faltering as the recession
took hold, the luxury sector has
flourished under pressure, fulfilling
demand for quality product that
justifies the price tag. Brand positioning is everything, and with the continued rise of multichannel
and growing international retail portfolios,
consistency is essential across every platform to
protect that image.
This was the consensus of a panel of leading
upmarket retailers at Drapers’ Luxury Report
round table. Held in association with retail technology provider K3 Retail at 30 Pavilion Road in
London’s Knightsbridge, representatives from
the likes of Burberry, Aquascutum and The Shop
at Bluebird debated the state of play in the luxury
retail market.
Discussions kicked off around current trading,
and in particular the warm autumn that has hit
many retailers’ sales. Whereas fast fashion is at
the mercy of the weather and many high street
retailers were hit hard by the mild September,
those in attendance said the luxury sector has
been more resilient.
“As soon as outerwear hit the sales floor back
in July we were selling £3,000 coats,” said Claire
Miles, head of buying at The Shop at Bluebird.
“We’ve had no problem at all and the pattern
of shopping, particularly for us on the King’s
Road, is based on very loyal customers. It’s not
necessarily about footfall, which you would
expect from the high street, it’s more about the
individuals coming in and the level of service they
are getting. The other day we had a customer with
an average transaction of £3,000 who came from
Spain because she knows Bluebird.”
Miles argues such loyalty is down to the sales
people on the shop floor inspiring customers
through a high level of service and knowledge of
product. This opinion was echoed by Mats Klingberg, founder and owner of menswear independent Trunk in Chiltern Street, Marylebone,
who reported an “incredible start” to autumn 14.
Earlier in the year, the store benefited from the
success of its made-to-measure days, where it
collaborated with Italian menswear labels Caruso
and Boglioli, selling 35 suits in two days at prices
of between £1,500 and £2,000.
“My way of doing made-to-measure is more
laid-back, as people can get intimidated by the
whole experience,” Klingberg explained. “It has
been a phenomenal success, particularly for a
small retailer. Many of our customers are loyal
and they come from all over the world. They save
their seasonal shop until they come to Trunk.”
The Trunk customer is not focused on brand
name, but fabric, fit, quality and service. Klingberg estimates that 50% of his customers live in
London but originate from the US, Europe, South
America and Asia, and 50% are visiting the city
on business. The Trunk staff are encouraged to
know their customers by first name, as a way of
building longstanding relationships.
This obsession with customer service was
echoed by Barbara Horspool, product development director at premium chain Jigsaw. Its sales
staff are trained to understand every detail about
the Italian fabric on a jacket or the William Morris
print on a jumper, even down to the artist’s technique with indigo dye. “They know the shoes with
the stamped sole are made in Northampton and
can explain it to the customer, so it may look like
a simple brogue, but it has this story behind it,”
said Horspool. “It’s about how you build a story
into your brand experience.”
Horspool believes there are two types of luxury
consumer and, therefore, two different markets.
One customer believes luxury is all in the label and
dependent on how much you spend. The other
takes an intelligent approach to spending money
on beautifully considered items and loves to know
the story behind a rare or personalised garment.
With 62 stores across the UK, including
concessions in John Lewis and Fenwick, Jigsaw
has expanded into numerous areas of the country
that have affluent local communities, such as
Dulwich in south London, as well as locations
further north such as Leeds.
“It is a question of how much interest you put
in London and the Southeast versus the rest of
the UK,” Horspool said. “When we had difficult
weather we found it affected our London stores
way more than our out-of-town stores.
“There’s a local customer who is very loyal to
our brand. Forget thinking that a £600 sheepskin
coat can only go into London, the demand for
beautiful product is nationwide.”
Manchester-based leather jacket and accessories label Barney & Taylor is bridging the North/
South divide by first launching its autumn 14
collection on its website, reported global sales
manager Damon Hill. “Because we’re a new brand
and this is our first season, it seems more difficult
to win over retailers based down in the South. The
website is one place where we can show ourselves
off at a low cost, so we are choosing to launch online
Drapers Luxury Report / NOVEMBER 2014
4
in different countries to build the brand’s kudos
and take it from there,” said Hill. “It is best for us
to build our reputation with award-winning independents to get ourselves noticed, rather than talk
to the big store groups.”
For Alice Stone, creative director of scarf label
Lily & Lionel, the aim was always to keep the brand
relatively precious. “We have a few, beautiful, wellcurated stockists and are in a few amazing department stores like Liberty,” she explained. “We don’t
want to be everywhere. If we love a stockist, we wait
for it to be the right time. It needs to happen naturally.” Approximately 80% of Lily & Lionel’s wholesale business in the UK is based in London, with a
growing international presence in France, the
Middle East, the US, Canada and Australia.
THERE IS A DEFINITE APPETITE to go further afield
than London for British heritage brand Burberry.
Over the past three years it has worked on relocations and expanding undersized stores to ensure
it is visible on the right street, in the right city.
Tony Bryant, head of business development at
K3 Retail, asked how luxury retailers like Burberry
ensure their franchises, concessions and airport
retail space provide a consistent brand experience.
Maintaining one concept across every platform
works for Burberry, choosing the materials, finishings and branding for the shopfit, while remaining
sympathetic to cultural differences, reported the
brand’s director of real estate Europe, Adele Reast
Duggan, who since the round table has joined
Value Retail, which operates luxury outlet centre
Bicester Village.
For Burberry it is not about the number of
stores, but the quality, size and ultimately the
brand experience. The Regent Street flagship, for
example, is intended to generate the same feel as
the Burberry website, with the interactivity and
built-in flexibility to create an exciting and
evolving brand experience.
At another luxury address in the capital, Aquascutum is using its Jermyn Street store to target the
brand at an even more premium market, according
to branch manager Kathryn Miller. “Our customers
are really buying into luxury and Aquascutum is
going more into made-to-measure. We are also
trying to secure another location in London, maybe
in the Knightsbridge area.”
The discussion moved on to how retailers are
translating the in-store brand experience online.
For Trunk, online is an extension of its Chiltern
Street store. “The market online is so competitive
and all the big players are pumping in money, but
when you are a small shop you need to make a
profit to stay alive.
“We don’t have a big team to do a lot of editorial
and try to be a magazine, so we need to focus on
what we can do, like nice photography and good
descriptions to give a service as close as possible
to the shop.”
Klingberg sees online as a great marketing tool,
meaning customers are more informed about
products when they come in store, although an
online presence does not always translate into
online sales.
“Almost all the merchandise goes online,
although there are certain brands I am not
allowed to put on the site,” Klingberg explained.
“I sell British brands on the website that are very
popular in Asia, but over there the prices are much
higher, so there are restrictions to what I can do.”
As a website is always open, you must cater for
international customers or UK customers shopping through the night, stressed Horspool. She
argued that an easy-to-use online platform is
essential to give the luxury and premium
consumer a good experience.
“I don’t have a lot of time to go online, but when
I do I want to do it quickly and I don’t read a lot; I
look at images,” she said. “The new currency is
time and, if the value you add to your product is
time-saving for the customer, you’ve added something that is a real luxury. The two worlds of
in-store and online have to be seamless. It is all
one shopping experience.”
Domenico Antonucci, sector manager of
fashion solutions at K3 Retail, added the
consumer does not see a brand as multichannel,
and therefore expects the same level of luxury
service throughout.
Service will continue to be the focus for Stone,
who wants every customer to leave with a Lily &
Lionel purchase feeling like they have walked
away with a story. Miles, in the meantime, plans
to make The Shop at Bluebird website transactional next year, introducing exclusive brands
and collaborations edited by the team to give the
customer a point of difference.
The attendees agreed that the luxury sector
looks set to continue its strong performance, with
service and attention to detail the keys to success.
Drapers Luxury Report / NOVEMBER 2014
5
Focused on customers: (left from top) Alice
Stone, Lily & Lionel; Tony Bryant, K3 Retail; Claire
Miles, The Shop at Bluebird; Mats Klingberg,
Trunk (above from top) Domenico Antonucci, K3
Retail; Barbara Horspool, Jigsaw; Adrian Wright,
Peel Outlets; Damon Hill, Barney & Taylor
ATTENDEES
Damon Hill, global sales manager, Barney &
Taylor; Kate Morris, project manager, Kay
Boardman, senior architectural planning
manager, and Adele Reast Duggan, director
of real estate, Europe, Burberry (Duggan
has since left Burberry to join Value Retail);
Kathryn Miller, assistant manager, Jaeger;
Barbara Horspool, product development
director, Jigsaw; Alice Stone, creative
director, and Angela Stone, director, Lily &
Lionel; Adrian Wright, leasing director, Peel
Outlets; Claire Miles, head of buying, The
Shop at Bluebird; Mats Klingberg,
managing director, Trunk
From K3 Retail Tony Bryant, head of
business development, and Domenico
Antonucci, sector manager of fashion
solutions
From Drapers Eric Musgrave, editorial
director; James Knowles, features and
special reports editor; Charlotte Rogers,
features and special reports writer
INTERVIEW STEPHANIE PHAIR
OUT FOR A
BARGAIN
Discounting and etail may not come easy to the luxury sector,
but The Outnet’s Stephanie Phair has convinced the doubters
A
Words by JAMES KNOWLES Photography by DAVID VINTINER
scending the escalators into the Net-aPorter Group headquarters in Westfield
London, there is a decidedly The Devil
Wears Prada feel with shiny black walls,
cream sofas and immaculate offices abuzz with its
equally presentable employees.
Net-a-Porter was founded in 2000 by Natalie
Massenet, who is credited with proving that luxury
retail can and does work online. She is now executive chairman of the etailer, as well as chair of the
British Fashion Council. The group turned over
£533.7m in the year to March 29, recording a 23%
rise in sales. Over the past year investments have
been made in its portfolio of three websites – the
original luxury womenswear site Net-a-Porter,
its discount sister site The Outnet and menswear
Drapers Luxury Report / NOVEMBER 2014
6
site Mr Porter, which were launched in 2009 and
2011 respectively.
Drapers is here to interview The Outnet
managing director Stephanie Phair, who has
steered the offshoot since its inception and has this
year been celebrating the site’s fifth birthday. The
business has marked the occasion by collaborating
on archive designs with 17 designers from Roland
Mouret to Alexander McQueen and Balmain, as
well as teaming up with Victoria Beckham to
auction off 600 pieces from her personal wardrobe.
Most recently, Alice Temperley designed a
21-piece limited edition collection. It even took a
quirky approach to London Fashion Week street
style, with Sergio the roving dachshund “shoe
hunter” covering the event.
Drapers Luxury Report / NOVEMBER 2014
7
INTERVIEW STEPHANIE PHAIR
Having worked alongside Anna Wintour at US
Vogue, of whom she says “I learnt a lot from her –
she has always seen fashion as a business”,
you might expect Phair to be just like one
of the characters from the Hollywood
blockbuster, but you’d be wrong. Half
Argentine and half Canadian, she was
schooled in French and grew up in
Mexico, Panama, Paris, New York,
Washington DC and London. She
studied politics, philosophy and
economics at Oxford University and
began her career working in New York,
first for Siren PR agency in 2000,
before joining Japanese designer
Issey Miyake to work on marketing
and promotions in 2001, and then
Vogue in 2003.
Her first taste of ecommerce
came in 2005 when she jumped
ship to work for start-up preowned bags and accessories
website Portero Luxury,
before moving back to
London in 2009 when
she took on the role at Net-a-Porter after a
number of “very formal” interviews.
Elegantly dressed in an Erdem skirt
and sweater by in-house brand Iris & Ink,
Phair is down to earth and charming,
keen to talk business while brushing her
hair ahead of this interview’s accompanying photo shoot.
THE TEMPERLEY FOR The Outnet
daywear collection, launched on the site
on October 7, represents a departure from Alice
Temperley’s previous focus on eveningwear.
The range includes printed dresses, honeycombwave knits, lace pieces and jumpsuits, all at a
slightly lower price point of £175 for a printed
jersey top to £795 for the long Jayla embellished
tulle dress (the mainline retails from around £325
for the sheer organza Angeles shirt to £3,495 for
the long-sleeved Crivelli dress).
This follows collaborations with Oscar de la
Renta and Issa, launched as capsule collections
in April and November 2013 respectively. “What
appealed about the Temperley collection is that
Alice was moving her brand in a certain direction,
focusing on daywear and outfits that work for
women from work to night,” says Phair. “So we
felt that was a nice fit for our customer and that it
filled a gap of a collaboration we haven’t done
before. We liked that she was choosing us to
launch her new direction in her design.”
Temperley adds: “I wanted to create a collection
that is playful and fun, perfect for the modern
woman who demands a wardrobe of pieces that
can be mixed and matched.”
It was, however, the Victoria Beckham collaboration that brought The Outnet the most column
inches. It joined forces with the former Spice Girl
to auction off her many famous outfits to raise
money for charity Mothers2Mothers at the end
of August, with each piece first valued by auction
house Christie’s. “It was a phenomenal awareness piece,” says Phair. “Victoria approached us
sure. “Now, five years in, the most satisfying
part of the journey for me has been to see brands
not only agree to work with us from a commercial standpoint, but enjoy working with us and
see us as one of the elements of their retail mix,
as we speak to a customer that they may not have
access to.”
She adds that The Outnet customer is just as
likely to shop full-price, something she saw firsthand when the Temperley collection was
launched to high-spending The Outnet
customers at the brand’s Mayfair store.
Out and about: Iris & Ink has developed
into a fully fledged own brand
through her team, because she is
an Outnet customer and has known
about us.”
The sale was a huge success and Phair
says Beckham’s reputation for being hands
on is accurate. “She was in the office and
she filmed the interviews and gave up her
time, and she selected the pieces and tweeted
about the auction. So that takes a certain level of
involvement and organisation.”
THE LUXURY SECTOR was well known for its
initial resistance to online, and as a segment
where brand image is everything, it has also been
reluctant to discount. So how has The Outnet,
which is by definition a luxury discount etailer,
managed to surmount those hurdles?
“We’ve built up really strong partnerships with
brands, but it wasn’t immediate. The conversation
with brands was tricky at the beginning,” she
admits. “Understandably the brands were
nervous. They understood the sample Sale
concept, because it was product that sold quickly
and then you never saw it again. Customers had
to go and find a far-flung location, and that was
OK because it didn’t live side by side. But
suddenly we were saying to the brands ‘no, it’s
OK, you’re going to be highly visible’.”
She says that over time brands have come to
realise that online is here to stay, and that having
a full-price business in the form of Net-a-Porter
or Mr Porter, along with the backing of the group
and a platform that mirrors Net-a-Porter’s
successful editorial presentation, helped to reas-
Drapers Luxury Report / NOVEMBER 2014
8
BRANDS STOCKED ON the site are quick to praise
it. “It is the most premium reseller out there,”
says Kat Maconie, owner of the eponymous
women’s footwear brand. “It’s extremely well
curated and presented in a luxurious and
on-trend way. The buyers there really know how
to select pieces. Their customer may be hunting
for a bargain but still has a distinguished taste
and a keen eye for design and quality.”
Rosanna Falconer, communication director
at womenswear brand Matthew Williamson,
agrees: “The unique thing about The Outnet is
that it offers year-round Sale shopping but maintains a luxury, fashion-forward perspective at its
heart. Its tone of voice and branding encapsulates this – the voice of a savvy, sophisticated,
on-trend woman runs through everything from
its tweets to product pages.”
The Outnet sells more than 250 brands, offering
up to a 75% discount on a designer A to Z ranging
from Alexander McQueen to Miu Miu, Nina Ricci
and Zac Posen, with no set number taken on or
dropped seasonally. Its buying team of around 30
buy in about 80% of the goods, with the remaining
20% being “transfer” stock from Net-a-Porter,
following the full-price site’s Sale. It also sells own
brand Iris & Ink, which was launched in September
2012 and is priced from £25 for a jersey T-shirt to
£995 for a shearling coat. Originally positioned as
an “essentials” range to complement its branded
offer and “fill the gaps”, it has since developed into
a brand in its own right.
Phair declines to talk financials – including The
Outnet’s sales or the near £10m loss the group
made in its last reported accounts – but she is
clear about her priorities. Mobile will be key,
already accounting for 40% of sales, as well as
personalisation.
The Outnet is also an international business with
150 staff dedicated to the fascia globally (excluding
shared services among the group) selling to 170
countries, with offices in London, New York and
Shanghai. The UK, US and Australia are its three
key markets. Its Chinese platform is a locallanguage site, and Phair is about to jet off to China
a few days after this interview: “Asia-Pacific is a
key focus for us, hence my whirlwind trip around
China. [The trip will be] a bit of everything from
fact-finding, relationship-building with brands,
press and working with the team there. When you
are running an international business, you have to
make sure the teams globally see you.”
The Outnet’s success is testament to the
changed attitudes within the luxury sector to
online, a change that shows no sign of slowing.
CHINESE VISAS
Tearing down THE WALL
The UK’s complex visa process means retailers are losing
out to Europe for Chinese spend, but change is in the air
Words by CHARLOTTE ROGERS
REUTERS
L
ook around any of London’s luxury
retail destinations and you’ll more than
likely see Chinese shoppers snapping
up products on their travels, in many
instances served by Mandarin-speaking staff.
China is the UK’s largest visa market. Visas
issued to Chinese nationals surged by 39% in
2013 to 291,919, the Office for National Statistics reports, well ahead of travellers from Russia,
Kuwait, India and Saudi Arabia.
With the average price of luxury goods in
China up to 70% higher than in Europe, due to a
combination of import duties, VAT and consumption tax, it is little surprise they are keen to make
their high-end purchases here. Upon arrival in
the UK, Chinese consumers are seeking out
brands like Givenchy, Valentino, Alexander
McQueen and Balmain.
“When they visit the UK, the number one
activity is shopping for luxury goods. Even Bond
Street prices are a third of normal pricing in
China, says Nick Rines, director of international
communications at Anglo-Chinese digital
marketing agency Qumin.
Underlining the opportunity for UK-based
retailers is the fact that during 2013 Chinese
consumers spent a total of £492m during their
visits to the UK. On Bond Street their average
spend was £1,815 per person versus an average
international spend of £1,302, tax-free shopping
services firm Global Blue found.
However, the true scale of the opportunity is
hindered by the UK’s restrictive visa process. The
291,919 Chinese visas issued by the UK last year
compares with the 1,434,418 issued by the 26
EU countries that make up the Schengen Area.
Rines says Chinese consumers see UK visa
regulations as arrogant and imperialist. Chinese
nationals must make an appointment at one of
12 visa application centres in Beijing, Shanghai,
Wuhan, Chengdu, Chongqing, Shenyang, Jinan,
Hangzhou, Nanjing, Guangzhou, Shenzhen or
Drapers Luxury Report / NOVEMBER 2014
9
Fuzhou. They are required to bring their current
passport or valid travel identification, detailed
travel plans, bank statements and a certified
translation of any non-English documents.
The Schengen visa, by contrast, encompasses
26 EU states, except the UK, Ireland, Croatia,
Cyprus, Bulgaria and Romania, although the
latter two are in the process of joining. Chinese
citizens can apply through an external service
provider or directly at the consulate of their destination country.
The UK China Visa Alliance (UKCVA) reports
that only 6% of Chinese visitors bother to obtain
both visas, preferring the freedom of a multi-trip
Schengen visa. The UK, therefore, misses out on
an estimated £1.2bn of tourist spend compared
with other European capitals.
Strategies are now in place to streamline the
UK visa application process. Following a
successful pilot programme in October 2013,
held in association with China’s top 20 tour
operators, home secretary Theresa May
confirmed in June the launch of a passport passback service that allows customers to simultaneously apply for a UK and Schengen visa.
Since August, Chinese visitors can apply for a
24-hour visa service, while the Home Office
has also extended its three- to five-day priority
service. It also introduced premium service
lounges in its Beijing, Shanghai and Guangzhou
visa application centres to reduce waiting times.
“The UK remains a popular destination for
international travellers and we have received
almost 2.8 million visa applications over the past
year,” a Home Office spokesperson tells Drapers.
“We are taking steps to make it easier for Chinese
visitors to apply for a UK and Schengen visa at
the same time and we will be launching the
British-Irish visa scheme later in the year,
allowing Chinese and Indian nationals to visit
the UK and Ireland on a single visa.”
While pleased with the progress, Paul Barnes,
UKCVA campaign director, now wants VSF
Global, the private organisation which operates
the UK’s visa application centres, to act as an
agent for applicants requiring both a UK and a
Schengen visa. The applicant would leave a duplicate copy of the application, together with the
Schengen visa fee, and VFS Global would submit
the application to the visa application centre of
the Schengen country.
Harrods has cautiously welcomed the streamlining of the process. A spokesperson says: “The
visa process placed on tourists travelling to the
UK, especially from China, is still complicated,
despite assurances from the UK government it is
being simplified.”
“We are not part of the Schengen visa system
and we know that Chinese spend in Paris is eight
times that of London – representing a big missed
opportunity not only for retailers but also the
wider UK economy. We therefore continue to be
vocal in our support of any initiative that simplifies visa applications.”
Harrods operates a tax-free shopping bureau
to cater for its high demographic of Chinese
and Middle Eastern consumers. Nationwide,
all non-EU resident shoppers can claim back
VAT (20%) on a minimum purchase price of
£30, bought within three months of leaving
the UK. From January to September 2014,
Chinese consumers applied for the most tax
refunds (25%) from Global Blue, followed by
Kuwaiti (8%), Saudi Arabian (6%) and Qatari
(6%) nationals.
The shopper must present their completed taxfree form to a customs officer at the airport, with
their passport and purchases. The form can then
VISAS UK VS
UK
Price £83
Valid for Six months
Access UK, to extend
to the Republic of
Ireland later this year
Biometric testing
10 digits of the
applicant’s hand are
scanned and a digital
photograph taken
Other Chinese tour
groups (minimum five
£1.2bn
The estimated tourist spend the UK misses out
on compared with the rest of Europe
be taken to a refund office or sent to a processing
centre. Since March, Global Blue can also pay
the refunds directly to Alipay, online trading
platform Alibaba’s version of PayPal, which has
550 million registered users in China.
OVER 500,000 TRAVELLERS have also signed up
to the Global Blue card, which automatically fills
in the tax-free form with the customer’s registered details once swiped at a cash terminal. This
prevents shoppers incorrectly filling in the form
– the most common reason a refund is rejected,
according to Global Blue UK and Ireland country
manager Gordon Clark.
Another Global Blue service allows customers
to pay in their own country’s currency at retailers
like Nike, Burberry and Liberty.
As well as offering
tax-back options,
SCHENGEN
Harvey Nichols
SCHENGEN
employs staff who
people) travelling to
Price €60 (£47)
speak Cantonese and
the UK for less than
Mandarin. The
Valid for Six months
30 days can apply
Access Ability
luxury retailer’s
for an approved
airport VIP fast-track
to travel through
destination status
service is eligible to
or stay in all 26
(ADS) agreement visa.
shoppers spending
Schengen states
Chinese nationals
more than £7,000.
for a maximum
must stay with the
“The Harvey
of 90 days per
group for the entire
Nichols flagship
180-day period
visit. The trip has
store in KnightsBiometric testing
to be organised by
bridge remains a
No testing or border
an ADS-licensed
highly attractive
checks
tour operator
destination for inter-
Drapers Luxury Report / NOVEMBER 2014
10
national consumers and we are often the first port
of call for high-net-worth tourists,” says a Harvey
Nichols spokesperson. “We are pleased that the
UK Home Office is taking measures to simplify
the visa application process for Chinese tourists.”
Selfridges has recently seen a slight increase
in the number of Chinese customers, with
non-UK sales accounting for on average 30% of
overall sales. “There is no doubt that simplifying
the UK visa application process would result in
more Chinese visitors to the UK, and in turn have
a positive impact on retail,” said a spokesperson
for the department store.
“We are constantly looking at solutions to
make claiming VAT easier for overseas
customers. Within the next three months
Selfridges will open a bigger customer service
space, which will make the process much more
efficient for our international customers.”
Chinese consumers make an average of
37,392 journeys through Heathrow each month,
and naturally Britain’s largest airport argues that
the simplest way to buy tax-free is in the departure lounge. Heathrow has seen a significant
increase in international passengers choosing to
defer their purchases to the airport, rather than
use the VAT refund process.
“Our personal shopping service in particular
is very popular with customers from Nigeria,
China, Brazil, America and Mexico, who pre-brief
a personal shopper on their size, preferences and
concerns before they arrive at the airport,”
reports Jonathan Coen, Heathrow retail director.
“They typically spend more than £1,200 with
each visit.”
The impact of allowing China’s wealthy individuals easier access to the UK goes beyond
luxury spend to investments in property and business. These savvy shoppers are some of the
world’s biggest spenders, yet they have not established their favourite retailers, so once they get
to the UK it’s all still to play for.
ALAMY
CHINESE VISAS