Spending more on less: Premiumisation emerges as retail winner
Most people will be familiar with retail premiumisation from the pandemic.
Faced with a sudden boost in the number of Brits on furlough with time to spend looking for products, a number of retailers – partially luxury and alcohol retailers – bumped up their supply of more expensive, premium products.
The strategy worked well, for a while, until the cost-of-living crisis meant that consumers could no longer afford to spend the same amount of cash on better goods (and turned toward discounters instead).
Now, the trend is back in the limelight, but for in-store experiences rather than goods.
Stores can offer a ‘premium’ experience for any number of reasons – they could offer a personalised experience, have a particularly well-curated inside space, or exist within an attractive, well-located green or pedestrianised space.
This trend to ‘experiential shopping’ has “encourag[ed] repeat visits and purchases, ultimately driving customer loyalty and long-term brand success,” property giant Savills said, emerging as one of the only retail divisions to largely buck the downturn in consumer spend and confidence post-pandemic.
London’s property giants look to premium spaces
While retail as a whole has been struggling with the shift to online shopping and the trend towards experiences, such as holidays and meals out, over goods, premium stores have not.
“As the impact of online shopping has matured, successful retailers recognise that the physical consumer experience is paramount – we are aware that our role is progressively that of ‘stage manager’, curating an enticing environment that allows business and community to thrive,” property giant Cadogan – and owner of most of Chelsea – said in its 2024 results this morning.
Conversion ratios – the percentage of people who make a purchase – still remain fundamentally higher in-store, with consumers appreciating the opportunity to connect with brands in person.
“Successful retailers… combine their digital and physical channels to provide their customers with a seamless experience,” Cadogan said.
“These retail businesses now require fewer stores, but these must be in the best locations,” the company added.
The company said its redevelopment of Sloane Street into a ‘green boulevard’ has not only booted footfall and consumer dwell time but overall spend, too.
Cadogan is only one example of London’s land owners investing heavily in retail.
Landsec announced a pivot away from offices and towards retail in their annual results earlier this month, while Shaftesbury Capital has expressed confidence in the West End’s “enduring appeal”.
Combining digital and physical
It’s not just the giant property owners who are investing more in the atmosphere of their high streets, but individual retailers, too.
Retailers want to be more than ‘just a shopping location’ with many offering events, personalised goods and cafes.
Prada has its cafe in Harrods, Tiffany has a Blue Box Café, and Lego has launched a ‘mini chef’ concept in Denmark.
Expensive, social media-ready retail pop-ups, too, are almost ubiquitous in the capital, used to launch new ranges or highlight shop openings.
“These experiences are being designed to generate substantial social media exposure, tailored for image-led platforms like Instagram and TikTok.
“By creating visually appealing and shareable moments, brands encourage user-generated content, amplifying their visibility across social media channels and attracting new audiences,” Savills said.
It remains to be seen whether things like Selfridges Coach x It’s Bagels collab (complete with Coach logo-branded wrap) are worth retailers’ investment, or whether – as in the pandemic – the trend ends up stretching Brits’ wallets too far.
But for now, expect to see more well-curated shops and more eyebrow-raising Tiktok ready pop-ups.