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TIME TO GROW

Fossil embarks on a major European expansion

By Sean C. Kelly

Fossil, a Richardson, Texas-based watch, leather goods and accessories retailer, is embarking on a 100-store European expansion. The move will involve some premier locations and increase the chain’s presence in the U.K. and Europe by almost double.

The expansion began with a flagship on London’s Oxford Street that opened in March. Fossil will be phasing its rollout over the next five years. The company just launched a unit at the recently redeveloped Arndale Shopping Centre, in Manchester, and at press time was in negotiations to open a store at the Met Quarter, the new 147,000-square-foot designer shopping complex developed by Milligan that opened in March.

The company is priming for other stores in Berlin’s 581,000 square-foot Alexa, Sonae Sierra’s new shopping and leisure center due to open in September 2007, as well as in Cologne and Düsseldorf, says Wolfgang Thoeren, Fossil’s vice president, who has responsibility for Europe, the Middle East and Africa. Little wonder that he spends 80 percent of his time traveling.

“We have negotiations for locations under way in a number of countries,” said Thoeren. “Our initial focus is on Germany and the U.K., Switzerland, Benelux and Austria. In 2007 we will look more closely into France and Italy. The USP (unique selling point) we have is appropriate to go into all European countries and big cities.”

Fossil is looking in particular for urban locations with a strong presence of mid-price fashion brands, he says. “Those are the places where younger shoppers are ready to spend their money.” Thoeren estimates that about two-thirds of the stores will be in malls, though this will vary from country to country.

“In Germany the majority of stores are in the High Street, whereas in the U.K. the majority will probably be in malls,” he said. “In cities like Liverpool and Manchester we are in the heart of the city, but we are in the mall there. The point is that the U.K. often has much larger centers than are found in cities in continental Europe. I would calculate that out of the 30 outlets we plan for the U.K., some 20 will be in malls. However, that includes railway stations and airports.”

Fossil already had two stores in prime U.K. areas. One is in London’s Covent Garden open-air center, and the other at the regional Bluewater center, next to London’s M25 freeway. The store at 330 Oxford St. stands near the intersection with the equally famous and upmarket Bond Street. Fossil asked U.K. property agency Harper Dennis Hobbs to acquire “strategic and statement locations,” and the agency certainly delivered in this case. The 1,130-square-foot store (with a 600-square-foot sales area) is sandwiched between two of Oxford Street’s major department stores, Debenhams and House of Fraser. Fossil is reportedly paying £240,000 (about $450,000) a year for a lease that expires in March 2008.

“The first 15 stores in the U.K. should be in the most important places in terms of visibility, traffic and brand building,” said Thoeren. “We consider our stores as the ‘business card’ face of the brand. That means we need to have the right locations and the right shop fronts. The Oxford Street store is an example of that.”

But the competition in the U.K. and on the Continent is likely to be fierce. Some of it is within view of the Oxford Street store: Next and Zara are nearby, offering lots of trendy fashion accessories. Then, too, there is the long-established Swatch store just a little farther down Oxford Street.

Even so, Fossil’s attitude seems to be at once sanguine and realistic. “Overall, I don’t see any big rival in terms of our offer,” said Thoeren. “Across Europe, in terms of our watch business, we will be in competition to Swatch mainly in Germany and Italy. We are already strong in watch sales in Germany as well as with small leather goods. If you look to France, Benelux and perhaps to Spain, we would probably be seen to be competing against the likes of Festina, Guess and Esprit.”

Thoeren says Fossil will be relying on an imaginative product mix. In the Oxford Street store, sales of the Anadigi watch (analog and digital faces on the same timepiece) and of leather goods such as bags and toiletry kits, led the list of summer favorites. “What we believe and what we have had backed up by market research,” he said, “is that we have good value for the money, and we are a good, fashionable, fair-priced company.”

Generally, the merchandise will be split equally between the watches and the other goods, but this can vary, Thoeren says. “We have the ability to be flexible in this, which greatly works to our advantage.”

Meanwhile, Fossil is narrowing down a preferred size format and instructing its agents to target facilities that fit the criteria, he says. “Our optimal store size would be around 1,000 square feet,” he said.

“We are at the beginning of our own journey and experiences on this. The first few stores which we have opened this year are all about 600 square feet [of sales space] and working very well. But we know that the bigger stores will also work well in the right locations. In Vienna, for instance, we are opening a 1,500-square-foot store.” This will be at Shopping City South, a center located about 10 miles southwest of the city. “The aim always is to have a store which gives us the ability to show our entire assortment of goods.”