It’s not easy for overseas retailers to make their mark in the UK in the present climate. Charlotte Dennis-Jones takes a look at how some are faring and finds that business is worryingly slow

Next month, Banana Republic will become the latest in a long line of retailers attempting to make their mark on the UK. And the challenge that lies ahead of the US fashion retailer will be considerable. With low brand recognition, a tough market and falling consumer confidence, it’s never been more difficult to capture shoppers’ attention and grab a share of the market.

The plight of German retailer Tchibo provides evidence of the difficult times these retailers face. Last month, the general merchandise retailer, which arrived in the UK eight years ago, put nearly half of its 73 stores on the market.

There are some key considerations that retailers need to bear in mind when expanding into the UK. One is location. BDO Stoy Hayward head of retail Rupert Eastell highlights quirky fashion brand Desigual – which has a huge following in its Spanish homeland – as one brand that may have slipped up in this respect.

Its eccentric style means it isn’t necessarily suited to the more traditional fascias and customers of Regent Street. Furthermore, it’s in a basement. PricewaterhouseCoopers chief retail adviser Michael Poynor agrees. “Desigual certainly has a Catalan fashion spirit that sets it apart, but its location is a huge issue for a company that’s used to trading in fashionable side streets in Barcelona,” he says.

Whole Foods is another example. Upmarket Kensington High Street may match its products’ price points, but a lack of parking makes it difficult for customers to do large weekly shops there. Verdict Research lead analyst Maureen Hinton believes the grocer will find the UK market particularly challenging, because the powerful grocery operators are all going into organic foods. “Food at this high price needs high volume and it doesn’t look like it’s getting that,” she says.

Hinton adds that many foreign retailers quite simply don’t do enough research into UK customers. “They need to look more closely at the competition. A lot of people think: ‘If there’s a market in terms of demographic, we’ll do fine,’ but it’s far more complicated than that.”

Eastell agrees. “It’s like the approach teachers tell you to take before an exam: read the paper three times and only then start writing. I wonder if enough foreign retailers really take that stance, or make the common mistake of thinking they can change the market,” he says.

One retailer that knows only too well the challenges of expanding into the UK is Uniqlo. In 2001 it made its first move and expanded fast. Just two years after its arrival it closed 18 of its 23 stores.

Uniqlo chief operating officer Simon Coble says it has learnt many lessons from its hasty expansion. Now, he says, it has a stronger brand presence in London and a flagship store. “From the amount of interest it’s attracted, it’s been very well received,” he says. He adds that Uniqlo has also adjusted its product design, product mix and sizing to suit individual markets using international design houses.

Although Coble concedes that the UK market is tough, he believes it is a crucial territory. “If you want to be successful globally, you have to have a presence here,” he says. Hinton believes Uniqlo could now work. “The stores look less utilitarian than they used to. They could have cracked it this time,” she says.

Sticking to what they know

Nevertheless, it’s a difficult time for foreign retailers. As Poynor points out, you can get better deals in the property market, but, he asks: “With less money to spend, are shoppers going to want to stick with their old favourites or buy into something new?”

Another problem these retailers face is an often limited marketing budget. Without that, it can be difficult to make an impact. Hinton says that both Brooks Brothers and Tchibo could benefit from widespread campaigns. She explains: “For Tchibo, more and more consumers are buying into discounting, so it has potential, but it needs a campaign to explain what it’s all about.” She adds that Brooks Brothers’ target consumers need to be helped to understand more about the brand and the reasons for the higher price points.

So what are these foreign retailers’ chances of success in a tricky market? Retail Week paid some of them a visit to see how they’re performing, which in some cases hinted strongly at trouble behind the scenes. Stores can’t be expected to be heaving on a Wednesday afternoon in January, but being able to hear a pin drop must surely be a cause for concern.

Whole Foods

Kensington High Street

The store was eerily quiet. It was 1.15pm on Wednesday, yet the Market Take Out area, perfect for office workers’ lunches, was dead. Likewise, there was no one at the delicatessen and only one customer in the cheese room. There were shoppers milling around and the caf頵pstairs was busy, but no one was buying – rows of shopping trolleys remained largely untouched. Whole Foods is beautifully merchandised, but people seem to treat it more like a museum than somewhere to spend money.

The expert view

“To make it work in Kensington High Street, Whole Foods will have to trade at sales intensities that are unknown. That’s the big challenge and it can’t do it by raising prices”

Michael Poynor, Pricewaterhousecoopers

The Retail Week view

Chance of succeeding: low

Desigual

Regent Street

Desigual’s clothing ranges certainly stand out, but many Regent Street shoppers might be confused when they wander in. The clothes are eccentric – verging on Euro trash – and don’t match the traditional fascia; a summer dress was, on closer inspection, adorned with a cartoon cow design. Such quirky clothes may sell better in a more unusual location – a huge amount of the range was devoted to Sale items. That said, there were more shoppers in here than many of the other stores visited, including three queuing at the till. Three more than most.

The expert view

“In Barcelona it’s a fantastic retail experience, but in Regent Street it’s a disappointment. Stick it downstairs in an old-fashioned building and it doesn’t work”

Rupert Eastell, BDO Stoy Hayward

The Retail Week view

Chance of succeeding: In Regent Street, low

Brooks brothers

Regent Street

The atmosphere in Brooks Brothers was imposing; less than friendly staff stood staring ahead into space. Unless shoppers are dressed in the retailer’s own preppy style, they could be forgiven for feeling like they shouldn’t be there. At 4.15pm the store was very quiet. One staff member was twirling a coat hanger around her finger in the name of entertainment. There were a few men ambling around the menswear section, but the only women in the store were a couple of US tourists who walked out empty-handed.

The expert view

“It needs to do more to explain to its UK customers why they should be paying the premium for its products”

Maureen Hinton, Verdict

The Retail Week view

Chance of succeeding: low

Tchibo

Richmond

On first impressions, Tchibo seemed like a glorified pound shop and you don’t know whether you’re in Starbucks or Woolworths. Half the store was devoted to coffee and the rest was full of products that look like they had come off the back of a lorry. Its weekly changing range is eccentric – the weekly “experience” was nightwear. Elsewhere there were inflatable mattresses, women’s jumpers and even hacksaws. The product range list would read like the memory test in Bruce Forsyth’s Generation Game.

The expert view

“The concept just comes across as quite bizarre to shoppers in the UK”

Rupert Eastell, BDO Stoy Hayward

The Retail Week view

Chance of succeeding: low

Intimissimi

Oxford Street

The store was fairly busy, with plenty of friendly staff on hand to advise customers, but the shoppers were probably attracted by the bargains. Most of the store seemed to be devoted to Sale or low-cost items – bras from as little as£6.00. In spite of the basic store interior, the products looked as though they should be of reasonable quality – the fabrics were attractive and the range was extensive – but appearances were deceptive. The bras don’t fit properly and they’re flimsy. And, let’s face it, most women don’t just buy bras because they look pretty.

The expert view

“Anyone selling underwear will have to sell very high volumes because they’re relying on one sector”

Maureen Hinton, Verdict

The Retail Week view

Chance of succeeding: low

Hoss Intropia

Regent Street

Hoss’s clothes are pricey, but well designed. However, there were no other customers in the store at 3.30pm, despite its prime Regent Street location. It almost seemed like it was embarrassed about its Sale. It was barely mentioned – apart from discreet pale pink signs with an ambiguous 50 written on them. But a Sale there was – most of the upstairs floor was devoted to it. When commenting on the quietness of the store, a member of staff mused: “We’re not getting the customers we could be because people aren’t familiar with us yet.”

The expert view

“It wants to keep a small presence. For a premium specialist it could do well in this market”

Maureen Hinton, Verdict

The Retail Week view

Chance of succeeding: possible

Uniqlo

Oxford Street

A rack of what looked like luminous workmen’s jackets was possibly not the wisest product choice to place slap-bang in front of the door. By coincidence, unfortunately for Uniqlo, there was a workman in the store surrounded by plastic yellow construction barriers attempting to fix the broken escalators. This was perhaps dissuading shoppers from going upstairs – the entire top floor was empty and bored staff wandered around aimlessly. However, the wide selection of product is well-designed, with good-quality basics.

The expert view

“The big question is, what makes it so different from Gap? If it’s not sufficiently different, what will help it avoid the same trading difficulties?”

Michael Poynor, Pricewaterhousecoopers

The Retail Week view

Chance of succeeding: possible

Abercrombie & Fitch

Savile Row

Walking into Abercrombie & Fitch was like walking into a VIP club: two men hold the door open as you enter its dark yet cleverly lit maze of rooms. Heady scents of the retailer’s aftershave and perfume brands fill the air as you meander around to loud music. This store is theatrical and provides a totally different shopping experience. Despite being huge, it was busy. Many shoppers beyond their teenage years may think a topless male model at the doorway is a little over the top, but this store is certainly drawing the crowds.

The expert view

“If it sticks to that store format, it could do it, but translating that experience into smaller locations might be difficult”

Maureen Hinton, Verdict

The Retail Week view

Chance of succeeding: high