Another British Invasion

It’s the ultimate—and a literally delicious—irony: “We were born on the Fourth of July, a real irony for a British company,” said Nicky Doggart, U.S. CEO of Hotel Chocolat, a luxury chocolate boutique that launched its U.S. Web site on July 4, 2007, and late last year opened its first brick-and-mortar store, on Newbury Street in Boston.

Forget John, Paul, George and Ringo or The Rolling Stones; now it’s retailers that constitute the new British Invasion.

“It is a window the size of which we haven’t seen before,” said Mark Burlton, partner, Cross Border Retail of global real estate services firm Cushman & Wakefield, London. The firm is working with British apparel retailer AllSaints (see related story) on its U.S. expansion.

Since 2007, retailers as diverse as Tesco’s Fresh & Easy Neighborhood Market grocery stores, cosmetics merchant Space NK, high-end apparel designers Ben Sherman and Ted Baker, and fast-fashion leaders Topshop and Superdry have dropped anchor in California, New York, Boston and other major U.S. cities.

“We are delighted to see that U.K. retailers continue to find success in the U.S. market, but this is no surprise,” said Sir Alan Collins, Consul General, New York and Director General Trade and Investment USA, in an e-mail to Chain Store Age.

British businesses have a strong track record of exporting and investing in global markets, Collins continued, and retailers comprise a significant part of those exports.

“U.K. retailers in the USA are consistently well-received and recognized for excellence,” he added. “With the recent opening of Topshop and Matthew Williamson in New York and Hotel Chocolat in Boston, it seems the invasion of British retailers is not slowing any time soon.”

Indeed, Topshop owner Sir Philip Green has said he plans to open up to 15 U.S. stores following the strong positive reaction to the opening of the chain’s first Big Apple store (in SoHo) last spring. Despite a global recession and new market adaptation, chains in search of expansion have maintained an optimistic view of the United States and globalization.

“There is an increasing trend of globalization of major retail channels,” said Neil Hendry, VP consulting, consumer markets, retail markets and financial services for Chicago-based consultancy Datamonitor. “Historically, retail was considered to be local and country-specific. Now there is an understanding of major players that they can take existing formats and apply them to local [markets] and adapt to the local consumer culture. There’s obviously a natural attraction of British businesses to the U.S.”

Why U.K. chains would seek out America is not really a surprise: The size of the market provides a huge opportunity, while a common language and similar laws ease the path of entry to some extent.

In addition, many specialty chains have hit saturation at home and need to look farther afield to continue growing. Many already are on the European continent, or are loath to submit to leasing requirements such as paying key money to landlords.

“In the United States, you have much more of a free bet,” Burlton said. “A lot of brands are changing their strategy in how they expand. They are looking at picking off the best cities in other countries, rather than opening 300 stores in their home country.”

And chains such as Hotel Chocolat and Fresh & Easy are finding niches that need to be filled, though each has had to adapt to a new country—and a changing economy. Hotel Chocolat launched as a Web site to test the U.S. market and systems, including its frequent importation of merchandise from the United Kingdom.

“We wanted to ensure that we got the entry to the U.S. right,” Doggart said.

The company’s research determined that chocolate tastes are not universal.

“In the United States, the demand for dark chocolate is so much higher than in the United Kingdom,” Doggart said. “The perception is that it’s much better and better for you.”

However, Hotel Chocolat’s house chocolate is milk chocolate, and the company is promoting it in the United States as “milk chocolate for people who don’t like milk chocolate.” In addition, flavor combinations are different in the United States. U.K. consumers are accustomed to floral flavorings such as rose and violet in chocolates, which are almost unheard of in the United States.

“It’s through trial and error that we’ll continue learning,” Doggart said.

Unlike other imports, Tesco entered the United States with a new format, the convenience-oriented Fresh & Easy. It now has 141 stores in California, Nevada and Arizona.

“This is something built for the American consumer. We spent a lot of time talking to customers,” said Brendan Wonnacott, spokesman for Fresh & Easy Neighborhood Market, El Segundo, Calif.

The recession caused Tesco to slow its original plan to have 200 stores by the end of its current fiscal year. But the chain continues to open at least one new store per week, including a recent entry into Northern California in Fresno, and is undertaking significant marketing to reach U.S. consumers.

“We’re focused on our existing markets and are continuing to look for new locations,” Wonnacott said.

The U.S. stores also send back more than just revenues: Hotel Chocolat’s Boston store is a new prototype that will be rolled out to U.K. stores as they open. It features a tasting room that can be booked for private parties that include a cocoa farmer explaining the chocolate-making process.

Thus far, the real estate strategy has been fairly consistent for all expanding chains: major urban markets. While New York City historically has been the first U.S. stop for most European retailers, some of today’s British newcomers, such as Hotel Chocolat, are heading to Boston.

“Boston was just a fantastic fit for us,” Doggart said. “The brand is infused with British wit and humor, and Boston is a very European city. We are looking for a real cosmopolitan population—very foody, very passionate people who want to know where their food comes from. Boston wrapped it up uniquely.”

“Boston is a really attractive place for British business, and it is great to see British shops—like the first Hotel Chocolat in the U.S.—opening here, despite the global economic downturn,” said British Consul General to New England, Dr. Phil Budden. “This New England region is also an ideal springboard to the wider U.S. market, precisely because of the city’s global stature as a hub of academic, cultural and economic activity.”

Hotel Chocolat has opened a second unit in the Mall at Chestnut Hill, Mass., a Boston suburb, and more expansion will take place.

“Our expansion will reflect our strategy of being deliberate,” Doggart said. “Our initial sales have definitely exceeded expectations. Our target areas are food and fun, and we will continue with that strategy.”

So are other British chains. The real trick will be avoiding the temptation to overexpand beyond the major U.S. cities such as New York, Miami, San Francisco, Boston, Chicago and Los Angeles, Cushman & Wakefeld’s Burlton observed.

“Once you get out of those, you’re down into fairly small towns,” he said. “You’re also looking at a half-dozen successful malls.”

The current window will last about 18 months to two years, most say, but global expansion is here to stay, and the British invasion likely will become a global juggernaut.

“There is an increasing globalization of the High or Main streets,” Hendry said. “You are getting the homogenization of retailers. The H&Ms, Sephoras and Aldis already are here. The biggest and best of each of the developed markets will invade.”