Here’s the million-dollar question: Are three major UK and EU shopping cities outdated and irrelevant for retail tourism? We’re talking London, Paris, and Milan. And what happened to the flocks of Asian shopping tourists that have kept these cities’ economies going?
Questionable retail brand storefronts are the result of UK landlords having to pay empty building leases based on legislation that is intended to incentivize them to find tenants and not leave properties vacant. What happened? Many landlords leased to companies who then subleased through a whole bunch of shell companies. And when it came to tax time, the stores and owners typically disappeared.
So far, Europe’s major tourist-reliant cities have had dollar-wealthy Americans to thank for propping up their post-pandemic retail (and hospitality) economies. But the luxury sector is especially keen to get wealthy, brand-hungry overseas consumers back into their stores. And guess what? An almighty fight is brewing among these three city protagonists.
London Behind the Eight Ball
London, the largest destination by some margin, starts with a disadvantage compared to Paris and Milan on two fronts. First, because of something called the Schengen agreement. Chinese visitors can apply for one visa to cover 27 European markets, so once they arrive, they can travel freely throughout European countries. London is excluded from that agreement. So, a separate visa is required, making it an inconvenience and a massive headache for would-be customers.
Second, the British government decided, once the Brexit paperwork was signed off, that sales tax rebates (VAT in the UK) for overseas travelers would end, arguing that the treasury needed the money back in its coffers. Not surprisingly, those lobbying for the luxury sector and London’s retail economy in general went mad, but their protestations have fallen on deaf ears.
To rub salt into the wounds, while the UK government was going through its revolving door of Prime Ministers and Chancellors last year, one of the Chancellors actually rescinded the VAT decision, but that only lasted a few days before he was bumped and so was his policy.
Luxury brands organization Walpole commissioned independent research that claimed the loss of revenue from stay-away travelers actually costs the UK more than the extra taxes it collected, but so far, they have gotten nowhere in changing the narrative.
The Oxford Street Problem
London’s biggest problem is arguably the dire state of its most famous retail thoroughfare –- Oxford Street. The city’s West End is carved out into a series of niches. Regent Street –- owned by a joint venture between The Crown Estate (the real estate arm of Bonnie King Charlie III) and Norges Bank (the sovereign wealth fund of money oil bags Norway) – crosses Oxford Street more or less at its center, and is a paragon of long term, collaborative planning
Bond Street also spurs off Oxford Street and is where most of the luxury brands drip feed their affluent dreamers, Birken bag by Prada pumps.
Trendy Carnaby Street is still, well, trendy. Covent Garden and its surrounds have retained their charm and appeal, while a few other roads have established a position for retail categories and restaurants — and are all thriving.
Effectively linking them all together is the mile-plus Oxford Street, home to Selfridges, some major sports and fashion brands, and at one point over 30 American candy stores and some dire tourist traps. If you’re being generous, you could call it eclectic. A disjointed mess might be closer to the mark.
The American candy stores have been the subject of much handwringing since they emerged under the radar during the lockdown in 2020 when there was no one to really pick up on the fact that so many had opened, and they typically sold out-of-date candy and cereals at super-inflated prices. Far be it to me to suggest that this is not where their real revenues were coming from. Suffice it to say that money shenanigan rumors still abound.
Real Estate Rules Hit Retail
Questionable retail brand storefronts are the result of UK landlords having to pay empty building leases based on legislation that is intended to incentivize them to find tenants and not leave properties vacant. What happened? Many landlords leased to companies who then subleased through a whole bunch of shell companies. And when it came to tax time, the stores and owners typically disappeared.
The previous political regime attempted to solve this demise by building the Marble Arch Mound at the Hyde Park end of Oxford Street near Selfridges. Voted London’s worst tourist attraction, it would be fair to say it was not public money well spent.
Now a change in local government has spurred retail changes. Westminster Council led a crackdown on the candy stores, and along with the local business improvement district (BID) New West End Company, there is an attempt to purge undesirable operators and encourage a fresh generation of retail talent.
Currently, a new scheme is running with pop-up agency specialist Someday Studios to offer free pop-up spaces along Oxford Street (300 applications and counting), while sidewalks have been widened and more planting and public seating make the street more shoppable and attractive. And a new tube line serves two stations on Oxford Street.
What About Paris?
For retailers, taking on London might look like shooting fish in a barrel. But Paris, the French capital has had plenty of problems of its own over recent months. Disputes have blown up on a variety of President Macron’s policies, especially over pensions plus the fatal shooting of a teenager of North African descent by police. The City of Light has seen protests and violence on its central streets, disrupting life and commerce. While protests are not unknown in Paris, the recent movements have been widespread, long-running and highly intrusive.
Amid this political turmoil, the retail community in Paris certainly didn’t need armed robbers to raid Swiss luxury watch brand Piaget’s store on Rue de la Paix in the high-end Place Vendôme in early August. The thieves escaped with over $15 million worth of jewelry. Last year Bulgari, Chanel, Chaumet, and Dinh Van were all targeted in a series of armed raids with millions of dollars’ worth of merchandise stolen.
Master Planning a Revitalized Paris
However, with more optimistic news, Paris authorities have won approval to transform the famous Champs-Elysées into what Mayor Anne Hidalgo describes as an “extraordinary garden.” The ambitious renovation plans will likely cost over $250 million and by 2030 will transform a 1.2-mile stretch from Place de la Concorde to the Arc de Triomphe into a green corridor, designed by French architectural firm PCA-Stream.
The plans include widening sidewalks, adding greenery-lined restaurant terraces, halving traffic volumes by redirecting some vehicles through a new tunnel, plus greening the huge roundabout at the Arc de Triomphe, the Rond-Point des Champs-Elysées, with more space for pedestrians.
The first phase will be completed in time for the 2024 Olympics and will take in the area around the Place de la Concorde, with the rest completed within six years. Those plans will undoubtedly create short-term disruption but the long-heralded plans (first floated in 2018) are huge in their scope and reflect the major shift in urban planning in Europe from cars to people. The Parisians certainly put London’s modest adjustments in perspective.
Milan’s Urban Rebuild
Arguably, Milan’s redevelopment is even more ambitious. Australian developer Lendlease is pushing ahead with Milano Santa Giulia, a 110-hectare mixed-use development with the potential for 3,400 homes alongside a new commercial office, retail, and entertainment district and lauding its environmental credentials as a new community hub. Completion is slated for 2034 at a cost of $4.2 billion and the retail plans will add 800,000+ square feet of new stores.
Milan is also building projects to be ready for hosting the 2026 Winter Olympics; the city’s famous San Siro soccer stadium will be redeveloped, which currently houses both AC and Inter Milan.
Travel Takeaways
Many Asian countries (notably, but not limited to China) came out of strict lockdown rules later than in the West. Now free to travel, the Chinese documentation process to renew millions of expired passports and issue visas appears to be being carried out by three bored bureaucrats in a dusty office somewhere in unfashionable downtown Beijing.
Speedy it is not. This means the border openings have had little or no impression on Asian residents heading for Europe or the U.S. But that’s expected to change next year when pent-up demand to travel, explore and shop is forecasted to explode. Paris, London, and Milan are in waiting mode.
Will Milan’s huge regeneration put the Northern Italian city in a pole position? Well, maybe. High-net-worth travelers don’t visit just for the shopping, but retail does tend to influence their decisions.
In fact, the loss of tax-free shopping in London has seen some wealthy travelers stay in London but visit Paris and Milan for their shopping sprees.
Politics spilling onto the streets has undoubtedly impacted Paris, but its plans to green the city center are farsighted and will transform the city’s retail heart.
Given those hugely ambitious plans for Paris and Milan, you have to wonder why London is so far behind.