Scandinavian retailers: Scandi thrillers

The wave of Scandinavian brand names appearing on UK high streets shows no signs of abating. Property Week finds out what is attracting them to these shores.

Think of as many Scandinavian retailers as you can that have a presence in the UK market. If you got stuck at Ikea and H&M, you haven’t been paying attention. The past decade has seen a wave of Scandinavian retail brands arriving in the UK and, in many cases, expand rapidly thereafter.

H&M’s parent company, H&M Group, has been responsible for many of them. Ever since it founded the more upmarket COS fashion chain in 2007, the business has been rolling out new fascias at a rate of almost one a year. In 2010, it acquired fashion group Fabric Scandinavien, adding brands such as Cheap Monday, Monki and Weekday to its portfolio.

The first Weekday store, which sells fashion and denim for men and women, opened on Regent Street in August.

Later this year, it will be joined there by its newest brand, Arket, which will offer men’s, women’s and children’s ready-to-wear collections and homeware. The group’s & Other Stories and H&M brands are already established on Regent Street, while the UK’s only Cheap Monday store is a stone’s throw away on Carnaby Street.

So what’s driving the trend for Scandinavian retailers to enter the UK market and what are their strategies for doing so?

Growing trend

It is not just Scandinavian brands powered by large umbrella groups that are taking prime UK retail sites. Tiger, the Danish variety retailer that was rebranded Flying Tiger Copenhagen last year, has around 90 stores throughout the UK.

Meanwhile, upmarket Danish home furnishings and accessories chain Søstrene Grene announced late in 2016 that it is planning a UK-wide expansion following openings at Intu Victoria Square in Nottingham and in Belfast.

And HEMA, which although Dutch has a similar offering to the Scandinavian variety retailers, currently has seven UK stores and plans to open more in the years ahead.

The example of Swedish homeware retailer Clas Ohlson, which closed six UK stores during the past year, shows that it’s not all been plain sailing, but the successes currently outweigh the failures.

The UK is one of the top three largest consumer markets in Europe - Emile Ruempol, HEMA

The economic rationale for UK expansion is clear. “The UK is one of the top three largest consumer markets in Europe and is a logical choice given the fact that we are also active in Germany, France and Spain,” says Emile Ruempol, director of expansion and development at HEMA.

Another driver is the fact that the Scandinavian retail market is relatively limited in scale, with most of the population living within a small number of large cities. “If you’ve started in Copenhagen, where do you go?” says David Harper, chief executive of Harper Dennis Hobbs, whose clients include Danish retailers Joe & the Juice and the CrossEyes chain of opticians, both of which have a growing UK presence. “You’ve got Aarhus in the north [of Denmark] but it’s a small market. The same applies to Oslo in Norway.”

With the German market seen as challenging for overseas retailers, Harper says the UK - and London in particular - is an obvious first port of call due to its population, climate and cultural similarities.

Burning bright

Philip Bier opened the UK’s first Tiger store in Basingstoke in 2005. The chief executive of Bier Retail and former managing director of Tiger in the South East believes urban dwellers in cities such as London, Milan, Copenhagen and Frankfurt have similar wants and needs, making the brands’ countries of origin less important.

“The difference between London and Sunderland or Middlesbrough, for example, is in some ways greater than between dwellers in those big European cities,” he says.

Bier also suggests that Scandinavian brands share certain qualities that make them attractive to UK shoppers. “What H&M, Ikea and Tiger have in common is very affordable, great designs. They get that price, quality and design equation right. If you want better quality or higher design than Ikea, you’ll pay at least five times the price. And I think Tiger is very similar in terms of that price/quality relationship.”

Sweden’s Ikea is now firmly established as part of the UK retail landscape. It currently trades out of 19 stores and has been granted permission for a further three sites in Greenwich, Exeter and Sheffield. It also hopes to open a store in Lancing in West Sussex as part of a major new development spearheaded by Brighton & Hove Albion Football Club.

Like Ikea, H&M is a big draw for UK developers. And Louisa Dalgleish, director at Nash Bond, says H&M Group’s smaller brands hold a similar appeal. “They know how the UK market runs; they know how the western shopper behaves and so it’s an easier deal than with a firm that is completely foreign to the UK.”

London attraction

Naturally, property strategies vary from retailer to retailer, but it is clear that London remains the favoured point of UK entry for northern European brands. HEMA, for instance, has seven UK stores, six of which are located in London and the South East, with just a solitary store outside the M25 in Birmingham New Street station.

Flying Tiger Copenhagen, on the other hand, has built a presence across the UK by operating a model whereby UK partners license the brand for a particular region.

In the South East, Bier did not take Tiger straight into London, as much by necessity as design. “We started in 2005 when the landscape was very different,” he says. “The high street was booming; Woolworths was still occupying 800 sites. We started small with a start-up investment of £200,000 so our strategy was determined by where we could find the shops on the right terms.”

Tiger is a low-price-point, high-volume business, so the position in the town has to be absolutely spot on - Richard Brown, RAB Retail

Early Tiger stores were opened in towns with lower social demographics, reflecting Bier’s small budget and the brand’s low price points. The tipping point, according to Richard Brown, founder of RAB Retail, which does acquisition work for Flying Tiger Copenhagen, came with the opening of a store on Clarence Street in Kingston upon Thames.

“What we realised then was that rather than being a value-led offer, people would go in and not be concerned about spending £30 to £40. That was the point at which the strategy changed and we started to do the more affluent towns such as Cambridge and St Albans where the demographic was much better.”

Flying Tiger Copenhagen is still on the acquisition trail if the site is right. “Tiger is a low-price-point, high-volume business, so the position in the town has to be absolutely spot on,” says Brown. “What we’ve done is to ensure when Tiger goes into a town we find the best location for the business.”

More to follow

With prime sites increasingly hard to come by, retailers are experimenting with different concepts in order to fulfil their expansion plans. HEMA has rolled out a transport hub concept in London Victoria, Euston and Birmingham New Street stations, where sales areas are around three times smaller than in its high-street stores.

Ruempol suggests the brand has only scratched the surface of its UK ambitions, with transport hubs and cities outside London likely to be a major focus going forward.

“In France we just opened our 60th store and plan to have 70 by the end of this year,” he says. “There are big differences between the retail markets of France and the UK, but the UK, with more than 100 cities with 100,000-plus inhabitants, has a lot of potential.”

Flying Tiger Copenhagen also has “lots still to go at”, according to Brown, having not yet looked at key sectors such as the out-of-town market, airports and train stations. There’s interest, too, among developers to bring new Scandinavian brands to the UK.

“There’s a current drive among landlords to be seen to have the newest brands within their estates, so they’re always trying to improve the tenant mix,” says Dalgleish, who cites outerwear brand Norwegian Rain and fashion brand Filippa K as examples of retailers that developers are keen to attract.

Where H&M first trod in 1976 many Scandinavian retailers have since followed. And all the signs suggest that the list of brands with a UK presence will only continue to grow. Just like the gritty Nordic crime dramas we’ve come to love, it seems Blighty can’t get enough of their retailers either.

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