Inside Harrods
Meet the man in charge of the ‘toybox’
Despite starting his career as an accountant, Michael Ward, the 62-year-old managing director of Harrods, knows luxury retail inside and out, and is able to spiel off dozens of names of high-end perfume brands and fashion designers stocked in store.
He has been at the helm of the business since 2005, when he was asked by former billionaire owner Mohamed Al Fayed over the phone to “come and work for me”. The Yorkshireman accepted the top job at the world’s most famous store, which he likens to “being in charge of a huge toy box”.
Over the past couple of weeks, Harrods has been dragged into the drama surrounding House of Fraser, when discount tycoon Mike Ashley pledged to transform the stricken department chain into the “Harrods of the High Street” after agreeing a £90m deal to buy the chain out of administration.
“I think what Mike meant is that he wants to take House of Fraser more upmarket and become more experiential,” Ward says. “Having a Harrods in every British town wouldn’t work, it would fail miserably. Harrods works because we are in one location – London, the capital city.
“Mike knows he won’t be successful putting Prada into every House of Fraser shop. But he will be successful in making the chain more fun.”
Ward, a Hull native, added that while it’s a British custom to criticise a person or company trying to better itself, “we should all give him support and enthusiasm for trying to shake things up a bit”.
Was he surprised to see House of Fraser fall into administration? “Not at all,” he says. “The high street is in decline because it is dull and boring and not inspiring to the customer.”
While the high street’s woes continue – according to The Daily Telegraph’s store closure tracker, an estimated 1,171 shops have been closed or earmarked for closure this year, putting 20,609 jobs at risk – Harrods looks set to continue its run of soaring profits, after reporting its eighth consecutive year of record sales in October, breaking through the £2bn mark for the first time.
Ward believes that the demise of the high street is, in part, because retail has become too “bland”. “Customers have to be excited when they walk into a store,” he says.
Harrods’ £200m three-year refurbishment, the biggest and “most ambitious” redevelopment in the luxury department store’s 170-year history, represents somewhat of an antidote to the lacklustre high street, with a new food hall, Art Deco style coffee bar and bakery, beauty hall – which will encompass space across two floors – and menswear section.
The store even has a new cigar room which boasts state-of-the-art air filtering technology that means the tobacco smell isn’t absorbed into clothes. “The tech cost an eyewatering amount of money, but we can afford the investment when other retailers can’t.”
The move towards experiences rather than products has been one of the biggest changes on the high street over the past few years, as retailers have come under pressure to keep up with shifting consumer behaviours.
Businesses are increasingly looking at ways to lure in shoppers and keep them in store for longer, with nail bars, photo booths, tattoo studios, and even tarot card reading common in many flagship retail stores.
“It’s difficult for the high street to go beyond the product,” Ward says. “We have invested a lot of money to make our store exciting and a place where people want to come again and again.”
Around 60pc of the one million sq ft, Grade Ii-listed Knightsbridge building is being refurbished, equivalent to the size of around 40 high street shops. It is hoped that the updates will boost sales once they’re completed, although Ward concedes that the scale of work being carried out has had some impact on trading. Despite Harrods being one of biggest payers of business rates in Britain, Ward is empathetic towards rival bricks and mortar chains that face crippling rates, while online retailers pay marginal amounts.
Earlier this month, Company House reports showed that Amazon’s UK logistics arm, Amazon UK Services, paid just £4.6m in tax in the year ending December 2017, down from £7.4m the previous year, despite a rise in profits and revenues of just under £2bn.
Ward said: “We spend a ridiculous amount of money on rates compared to online firms and the Government thinks that’s a level playing field. They are responsible for the current situation [on the high street]. Hammond needs to take full responsibility for these tax increases. He can’t wash his hands of it. This is on his watch”.
While Ward isn’t concerned about the impact Brexit will have on Harrods (“we’ll be fine”), as chairman of luxury industry body Walpole, he is worried about how the uncertainty around Britain leaving the EU will impact how and where high-end brands invest.
He said: “The luxury industry is a huge contributor to the UK economy. London is known as the capital of the world for luxury shopping, and the Government is in danger of jeopardising this title. All the infighting going on at the moment is pretty pathetic.” Under Ward’s tenure, Harrods has come under some scrutiny for “bending over backwards” to Chinese shoppers, who are the second-highest spenders in store after Britons.
In an interview last year with the
South China Morning Post, Mr Ward said the store’s refurbishment was in part being done to appeal to wealthy Chinese shoppers, and that various ideas were being considered to attract more Asian customers.
But Ward, who says he recognised the potential of the Chinese market almost a decade ago, argues that accommodating wealthy Chinese consumers isn’t alienating its core British customer, but being more “inclusive” to other nationalities. “Why wouldn’t we want to be considerate to shoppers from the Middle East or China?” he asks.
Brand-hungry millennials in China make up a whopping 32pc of luxury shoppers globally, compared to Europe’s 18pc, and retailers are increasingly looking at ways to appeal to the wealthy Chinese market.
While the high street is playing catch-up, Harrods has been catering to Asian shoppers for years and became the first British retailer in 2013 to launch an account with Wechat, a Chinese messaging and payments app which has more than one billion users globally.
“Retailers today are waking up and saying: ‘We have too many stores. We don’t have enough Chinese shoppers.’ We have been catering to this market for years, and Harrods has more social media followers in China than any of our European or American competitors,” Ward says.
The retail veteran has previously said one of his greatest achievements has been living past 40, with every male in his lineage dying before reaching this age, but he has enjoyed great success at Harrods, with profits ballooning since he took the reins 13 years ago.
He says he gets on “very, very well” with Qatar Holdings, the sovereign wealth fund of the State of Qatar which has owned the department store since 2010, when it was bought from Fayed for a reported £1.5bn.
“They’re a great shareholder. As long as they get the returns they’re comfortable. They understand our vision and are very supportive. They can see that we haven’t put a huge amount of debt in the business, all investment in the store comes from its profits, and we still pay a good dividend to shareholders,” Ward says.
His focus over the next few years? “To continue doing what we have done so well at over the past 10 years. We are committed to bringing in the right products and the right people. That’s never going to change.”
‘ The high street is in decline because it is dull and boring and not inspiring to the customer’
‘Harrods has more social media followers in China than any of our European or American competitors’