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Harrods warned: Go easy on the bling

By Peter Wilkinson, CNN
  • Expansion plans by Harrods must be handled carefully, experts warn
  • Qatari royal family bought London store for reported £1.5 billion ($2.25 billion)
  • Brand consultants say there is danger of expanding too fast and over-doing bling

London, England (CNN) -- Possible expansion plans by Harrods into new international markets must be handled extremely carefully to protect the luxury retailer's reputation, experts have warned.

Following the reported £1.5 billion ($2.25 billion) purchase from Mohamed al Fayed by the Qatari royal family last week, Harrods managing director Michael Ward said the exclusive London store hoped to grow overseas.

Ward, who will stay in his job after the takeover, said: "There are a huge number of opportunities for the group. There are selective areas of the world in which we will develop."

Brand consultants said this was a wise strategy for the 150-year-old retailer but there was a danger of expanding too fast and overdoing the bling. "Clearly the growth markets for Harrods are in the Middle East and the Far East -- it's unlikely to be able to expand much in a mature market like the UK, particularly in this economic climate," said Stephen Cheliotis, chairman of the Centre of Brand Analysis.

"However, in this exclusive market, you don't want to be everywhere too fast. It's all about having the right look, in the right cities. Of course exclusivity doesn't mean they must only have one store, but it has to be in the right area, the equivalent of 5th Avenue (in New York), Bond Street or Savile Row (in London), and not in every shopping mall around the world."

Cheliotis said the new owners would probably have bought Harrods for its brand alone, not the single London store itself. "The vast bulk of the business growth potential is in the brand. Is the Harrods brand worth £1.5 billion? Absolutely -- why not?

"But it takes a long time to build up a brand, but it can be destroyed very quickly. This is the reason why luxury champagne brands saw the danger in being consumed by the nouveau riche."

After completing the purchase on Saturday, Qatari Prime Minister Sheikh Hamad Bin Jassim Bin Jabr Al-Thani told reporters at the store he was "very happy with the transaction," according to the Press Association.

He said the responsibility of owning "a very important monument" was a "heavy burden," and within three months the new owners would create a "road map" to make Harrods "more impressive."

Asked if he had ever shopped at Harrods, he joked: "If the shop will have customers like me I don't think Harrods will make profit, but maybe if it's my wife, yes."

Another brand expert said the Qatari's purchase of the company could be a great opportunity for Harrods to grow. Simon Middleton, author of "Build A Brand In 30 Days," said he believed Fayed had held Harrods back since he acquired the company in 1985.

"Harrods used to be an upper-class brand, but over the last two decades it has become synonymous with ostentatious wealth and vulgarity. The loss in 2000 of the royal warrants (which show that the royal family buys a company's goods) was also significant."

However if the new owners develop it, Middleton said, the company could become a great 21st century brand. "There is huge global potential if it's done in a thoughtful way. Harrods could be taken forward in the same way that Hermes developed over the last two decades.

"The luxury goods market is a crowded one but Harrods is still a powerful one around the world, especially in the Middle East, the Far East and Russia. There is enough serious wealth around the world, but you mustn't be ostentatious or tacky."

The first Harrods store opened in the early 19th century before moving to its current site in Knightsbridge in 1849. Al-Fayed became its fourth owner in 1985 and subsequently spent hundreds of millions of pounds refurbishing the 1 million square-feet (93,000 square-meters) of selling space.

The Egyptian-born owner frequently clashed with the establishment over his unsuccessful application for a British passport and his accusations that the British royal family was involved in the death of his son Dodi and Diana, Princess of Wales, in a 1997 car crash in Paris.