Iconic department store Harrods is being transformed by a huge refurbishment programme. Tim Danaher takes a walk around with managing director Michael Ward

It may be small, but the glimmer of the pink diamond engagement ring in the De Beers concession on the ground floor of Harrods would be enough to knock even the most reluctant bride off her feet. And so it should. It carries a price tag of £3.5 million.

2007 has been the year of the luxury retailer. But there are luxury retailers and there are luxury retailers and, with its extraordinary cachet with the world’s richest shoppers, Harrods is one of the few UK stores that can be described as genuinely unique. Its current marketing campaign, Timeless Luxury, which spotlights products that have become icons of opulence, highlights its authority in this exclusive bracket.

But wealthy shoppers are demanding, and the challenge that Harrods owner Mohamed Al Fayed has had to address is ensuring the grande dame of Knightsbridge offers the fashionability and store environment that shoppers – whether billionaires or simply comfortably off – expect, while at the same time accommodating tourists, who flock there in their droves.

The man charged with realising Al Fayed’s vision is managing director Michael Ward, who joined from private equity firm Apax in March last year. Prior to Ward’s arrival, Harrods had an unfortunate reputation for losing senior executives, but there is now a stability about the business that has allowed Ward and his team to press ahead with the mammoth task of ensuring the whole store is at the cutting edge. Today, Ward gives Retail Week a rare look inside the UK – and possibly the world’s – most famous store.

It has been a good year for Harrods. Last month, it reported pre-tax profit for the year to February 3 up 152 per cent to£52.4 million, on the back of sales that grew by 19 per cent to £613 million. It is not alone in celebrating a strong performance – rivals such as Selfridges and Harvey Nichols have also prospered, seemingly immune from the wider consumer squeeze that has hit the retail sector.

It is easy to attribute the success to London’s increasingly major role as a global city and magnet for the world’s super rich. Ward says it is not just being driven by the oil rich billionaires of Russia and the Middle East – many of whom now live in London rather than just visit – but lesser known, though equally oil-rich countries, such as Uzbekistan and Kazakhstan from where the nouveaux riche are flocking to London to spend their vast riches.

But Ward rails at the suggestion that this influx of wealthy individuals means that running a luxury department store becomes easy. He attributes the impressive figures to an unrelenting focus on unique product and modernising the store and a shopper experience that others cannot match.

Ensuring a store with more than 1 million sq ft of trading space is looking good consistently is a challenge, particularly when parts of it had fallen behind its rivals, and the task of modernising the store is a bit like painting the Forth Bridge – once the work has started, it is time to go back to the start.

But Al Fayed is determined to spend serious money to ensure the store looks world-class. Last year, 140 separate refits were carried out, and the same will be done this year. “There is a real commitment by the owners to spend a significant amount of money on making sure we have the very best spaces,” says Ward.

The Egyptian has a reputation for being a challenging boss, but Ward says he is unfazed by Al Fayed’s demands. “Of course he’s demanding, but he’s absolutely right to be. He has put a huge amount of his life into this store and he is passionate about quality and about service,” he says. Al Fayed walks the store most days and has been taking a hands-on role with the refurbishment of the store. “We can’t do it quickly enough for him,” says Ward. “It’s the best decision-making process you can have.”

Those areas that have been refitted, such as the luggage department, which opened at the end of the summer, look striking. The sheer size of Harrods means it has the opportunity to show off expensive items to maximum effect, but Ward is at pains to point out that the store is meant to be accessible.

“It is not just about the top product,” he says, striding through the luggage hall. “We have £11,500 briefcases here, but we also have Samsonite.” Ward’s key message is that the shop is not just for the very wealthy and has its own version of good, better, best – at its entry price point, he claims, its prices are the same as in other department stores.

That said, the upper end of the store’s range is extraordinary, whether in fashion, jewellery, or the £100,000 solid gold, diamond-encrusted Fissler pressure cooker, in the kitchenware department. The key, says Ward, is ensuring that top luxury brands see Harrods as a place where they want their most exclusive products.

“We’ve heard a lot about rooms of wonder,” says Ward, in a clear reference to the recently opened Wonder Room at Selfridges. “But it is not about brands, it is about product. De Beers has a£3.5 million diamond in here – that’s wonder.”

Fashion has been a key area for Harrods in recent years. In the past, it has been criticised for lagging behind its major rivals, but a huge amount of work has gone into improving the fashion floors, with brands such as Gucci, Dior and Prada getting their own distinct areas. Even in childrenswear, there is an international designers room.

Whatever Ward does to increase the fashionability of the store, however, Harrods will remain an essential stop on the London tourist trail. The demands and expectations of tourists are very different from those of Harrods’ core customers, but Ward says that the size of the store enables it to meet both very different markets.

“The tourist market is very important to us, but they will generally spend in the signature area,” he says. “What’s important is that you make sure you cater both for the tourist and for the person who is looking for uniqueness.”

As the store refurbishment is taking place, Harrods is also looking at its own products and at the services it can provide its top-tier customers. In the menswear department, its by-appointment personal shopping lounge attracts footballers and City millionaires wanting to spend their bonuses. In food, all 220 own-brand SKUs have been revisited and repackaged.

It is clear from talking to Ward that his main focus is the Knightsbridge flagship. He says he will “keep changing” the Harrods 102 convenience store on the other side of Brompton Road, which has laboured since opening, but stresses “it’s 5,000 sq ft out of 1 million”.

Heathrow’s Terminal Five will host an improved airport offer, with fashion as well as the tourist-oriented signature ranges, and he does not rule out global expansion. “If overseas opportunities came along, we’d look at them,” he says, “but we’d need to safeguard the brand. This is the palace of Knightsbridge – everything has to be anchored off this.”

And while luxury stores have been slow to embrace the opportunities presented by online, Ward sees an opportunity for Harrods given the brand’s global reach. “We can sell the Harrods experience online and we will do it, but we want to do it properly,” he says.

While there is still a lot to be done, the huge amount of refurbishment going on at Harrods should help Ward achieve the aim of not only being one of the most famous stores in the world, but one of the most fashionable too. And while predecessors may have buckled under the pressure, Ward appears to be made of sterner stuff – asked if he’s enjoying running Harrods, he answers: “I don’t do anything I don’t enjoy.”