According to a report from real estate specialist Savills, big luxury brands still view physical retail as a crucial driver of sales. The report identifies London, Paris, and New York City as the most attractive cities for luxury retailers. These cities are praised for their ability to retain the essential elements required for successful retail destinations. They have affluent domestic markets that have shown resilience during the past 18 months. New York stands out due to its strong domestic tourism market, while Paris has lower e-commerce penetration, directing customers to its physical luxury stores.

Despite the challenges faced by the UK as a whole, London remains a standout city for luxury shopping. Forecasts predict a return to pre-pandemic traveler numbers by 2023, indicating a swift recovery for the city’s retail sector. London continues to attract tourists and experiences robust demand from locals and UK tourists, distinguishing it from the overall trend in the UK.

Other cities in the ranking, especially those highly dependent on inbound tourism, face significant challenges. Hong Kong, ranked fourth, has experienced a sharper decline and is expected to take longer to recover. However, the report identifies emerging markets in the Middle East and Asia as major opportunities for luxury retailers. Dubai, for example, has implemented policies encouraging international brands to take full control of their stores, leading to increased interest from luxury retailers. Cairo, Saudi Arabia, and Bahrain are also noted as interesting regions with affluent populations that present opportunities for luxury brands.

The report highlights the impact of the Covid-19 pandemic on the luxury retail industry, which has caused a shift in consumer behavior and preferences. Cities like New York, Paris, and London have shifted their focus to serving domestic shoppers. Stores are becoming aspirational destinations that provide leisure and entertainment experiences. The pandemic has accelerated the transformation of physical stores, as brands recognize the importance of reconnecting with customers and fulfilling their desire for human interaction after periods of lockdown.

In conclusion, the report emphasizes the continued significance of physical retail for luxury brands. While major cities like New York, Paris, and London remain top destinations for luxury retailers, emerging markets in the Middle East and Asia offer new opportunities. The pandemic has reshaped the luxury shopping landscape, highlighting the need for immersive store experiences and human interaction. As the retail industry adjusts to the post-pandemic world, physical retail will continue to play a critical role in driving sales and engaging customers.

Useful links:
1. Savills
2. Luxury Daily