Harrods Adapts to Retail’s New Normal With Outlet and Job Cuts

(Bloomberg) -- Harrods opened its first outlet store Friday only days after announcing hundreds of job cuts -- moves that the London luxury emporium's managing director said are necessary to adapt to the realities of a post-lockdown retail landscape.

“I don't think people understand how painful the last 90 days has been,” Michael Ward said in an interview while walking through the new site in the U.K. capital's Westfield shopping mall.

During the shutdowns aimed at containing the coronavirus, unsold goods piled up at Harrods's million-square-foot flagship store in London's Knightsbridge district. That site has reopened, but with safety restrictions and reduced hours that limit customer traffic.

Now, shoppers can hunt for bargains in 80,000 square feet of space set over two floors at the mall in West London. Ward said Harrods snapped up the store as soon as its previous tenant, Debenhams Plc, went into administration, a form of insolvency in Britain. Within five weeks it created the outlet, which is manned by 80 employees and selling an edited version of the brands available at the original site.

“Our normal sale in the Knightsbridge store takes us four weeks to clear and that is with 80,000 people going through the store each day,” Ward said. “We are currently limited to 4,500 at any one point in time. It was going to take us months.”

The opening of the outlet comes in the same week Harrods announced that 600 to 700 of its 4,800 employees would lose their jobs.

‘New Norm'

“We have to position ourselves for the 4,200 people who will remain in the business,” he said. “There is a reality that has to come into all of this. We are in a new norm and we have to adapt very quickly.”

Harrods is just one of a host of British companies shedding jobs as fears about the economy's resilience grow. Retailers have been hit particularly hard, faced with enforced store closures and high fixed costs, including rent. A shift to more online shopping during lockdowns could have lasting effects for physical stores.

Harrods generates most of its revenue from the Knightsbridge site, with its airport outlets and online division a growing but still relatively small part of its business. Ward, who has run Harrods for 15 years, said luxury shoppers will “always want a bricks-and-mortar experience,” but business may not be back to normal until 2022.

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