How luxury department store Harrods created a thriving restaurant business

Food is not the first thing that comes to mind when consumers think of Harrods—despite the fact that its retail Food Halls are internationally renowned. As one of the world’s leading luxury destinations, with over 3,000 brands, the department store in London’s Knightsbridge maintains a high fashion image based on exclusivity and personalized service.

Even the retailer’s website is shy of offering 26-person restaurants and bars — you have to scroll to the bottom to find the details. However, in-store food and drink has flourished to the extent that towards the end of last year it was trading 44% higher than pre-Covid, and transaction values ​​were also up 47% on 2019. More broadly , Harrods turned a profit again in the latest financial year for which figures are available.

The latest addition to the dining roster—which includes names like Jason Atherton, Vineet Bhatia, Tom Kerridge, Angelo Musa, Gordon Ramsay and Em Sherif—arrived in late 2022. Studio Frantzén brought another Michelin-starred chef to store, this time from Sweden.

Björn Frantzén’s à la carte restaurant, with a distinctive Asian influence on Scandinavian cuisine, is literally the pinnacle of Harrod’s dining experiences, because it is located at the top of the department store building on two floors, as well as an outdoor terrace. The latter is said to be the only rooftop terrace in Knightsbridge and Mayfair, two of London’s most desirable boroughs. As well as being an option for foodies, the 150-seat Studio Frantzén is open until late and has a lively atmosphere with two bars, one of which offers stunning views.

Earnings based on data

So what’s the appeal of having so many food and drink outlets in store? I had the opportunity to catch up with Harrods’ Director of Restaurants and Kitchens, Ashley Saxton, to find out how for and beverage (F&B) is fast becoming a revenue driver and cornerstone of the business.

“Our research found that when customers engage with our restaurants, they also engage with the store more often. They spend twice as much time in the building and spend twice as much money,” he said.

This insight alone gave Saxton enough freedom to bend his empire. Certain elements, such as The Harrods Tea Rooms, have always been essential to the store as they are part of the Harrods brand DNA, such as the traditional Fortnum & Mason afternoon tea in Piccadilly. Others were the result of new research and hard graft.

Each spot must convert Harrods shoppers into diners. Then it becomes a virtuous cycle of more shopping and more spending – and back to eating. At first, the most prolific consumers in the store were less engaged with the food, in part because the store had not addressed the needs of specific cohorts. Now 80% of customers on the Harrods Rewards card database use restaurants, up from 29% pre-Covid.

“We’re much more knowledgeable about what our customer segments are looking for – different age groups and different nationalities, for example – and we’ve built our proposition around that. It’s very behavior driven,” Saxton said. From an 8% pre-Covid conversion rate (i.e. the percentage of shoppers who decided to dine), this has risen to 20%.

The destination strategy

Another way is to make restaurants a destination in themselves and Studio Frantzén is a good example of this. It acts as an entry point for local, affluent consumers from where they can then discover the store and what the Harrods brand stands for. About 74% of all in-store F&B transactions take place before 4pm. giving customers plenty of time to explore the various departments afterwards.

Thanks to its research, Harrods sees the restaurant business in a very different light. From just being a place to recharge and rest before starting shopping again, it’s now about destination food. “It’s important to look at the restaurants as a vehicle for the store’s future success,” Saxton said.

In addition to the 26 restaurants located in the Harrods building, there are others, for example abroad, adding up to 45 in total. Some of these locations, mainly tea rooms, can be found in Shanghai, Qatar and Bangkok, both in the city center and in airports.

It’s only been three and a half years since Harrods began to really drive its F&B business under Saxton’s leadership. “When Covid arrived, we could have battened down the hatches or used that to go out into the market and talk about our plans for growth and development and changing our proposition,” he said.

The latter course was the right one, with the new builds taking place during the pandemic downtime, leaving the retailer in a strong position to capitalize on any post-Covid changes. “Right now, the experience is more important than the product in driving people into retail environments and away from a dot.com. We do that through F&B,” Saxton said.

Food captures hearts and minds in the wider luxury space. Inside Harrods, he opened a Dior café that acts as an entry point into the Dior fashion universe, just as the brands did with their accessories and fragrances. Another example is the Fendi cafe in the new luxury storefront of Hamad Airport in Qatar.

Saxton commented: “There is a huge demand out there for these F&B-led experiences. We had almost 10,000 bookings for the Dior cafe in the first four days of opening. If we take the Gen Z customer, they tell us they want to spend their money on luxury, fashion and food. This combination is golden.”