Chains Infiltrate European Shopping Meccas; Influx of International Retailers Sparks Concern About Direction of the Continent’s Fashion Hot Spots

Chains Infiltrate European Shopping Meccas

Influx of International Retailers Sparks Concern About Direction of the Continent’s Fashion Hot Spots

ALESSIA PIROLO

Jan. 14, 2014 2:17 p.m. ET

With fashion weeks set to kick off from Milan to Berlin, fashionistas descending on stores across Europe might find an extraordinarily similar array of products, whether they are on London’s Oxford Street, Paris’s Champs-Élysées or Milan’s Via Montenapoleone. That is because more international retail chains, such as Zara, Tommy Hilfiger andStarbucks, SBUX +0.45% are opening outlets in these markets.Europe is the most-targeted region in the world for international retailers, according to CBRE Ltd., and the influx of global brands has sparked concern about the direction of the Continent’s fashion hot spots.

“The danger is that the shopping streets will become homogenized, offering the same products,” says Mark Burlton, global head of the Cross Border Retail team at Cushman & Wakefield Ltd.

A report by Jones Lang LaSalle JLL +0.55%states that London has the largest presence of international retailers across Europe, followed by Paris. More U.S. brands are showing up in the U.K. capital’s main shopping arteries, with retailers viewing London as a gateway to Europe. In 2013, U.S. apparel company J. Crew and U.S. home-furnishings store West Elm opened their first European outlet in London’s West End.

Germany is catching up. In 2013, Germany was Europe’s most-targeted market for international retailers, according to CBRE. Clothing was the strongest-performing retail sector, accounting for 33% of new leasing deals in Berlin, in the first three quarters of this fiscal year.

The change is affecting traditional local businesses. In the vibrant historic center of the German capital, near the famous Hackescher Markt, trendy clothing stores increasingly have been setting up shop where local restaurants and cafes used to be, says Sonja Hanisch, a consultant for Jones Lang LaSalle Retail GmbH. As a consequence, artists and small retailers have been priced out. Among the recent victims are the restaurant Schwarzenraben and the shoe store Laufsteg, which after a decade in the area have been replaced by international fashion brands.

U.S. multinational corporation Nike, NKE -0.01% Inc., Benetton Group’s Sisley and often-pricey boutiques including German retailer 14 Oz., fashion designer Karl Lagerfeld and French prêt-à-porter The Kooples, have been changing the face of the neighborhood. “Regional retailers are not afraid of the new competition—they look at it as an important step to enter in the international league as a shopping destination,” says Nils Busch-Petersen, managing director of the local retail association Handelsverband Berlin-Brandenburg E.V.

The same phenomenon has played out in Paris’s historic neighborhood of Le Marais, where international chains have replaced small independent retailers unable to cope with rising rents. Adidas Original, Lacoste Live and the Diesel Black Gold line are among the newcomers. Also in Paris, traditional French-style restaurants and cafes are seeing their predominance challenged by American and British food chains. McDonald’s Corp., Starbucks Corp., and Burger King Worldwide BKW +0.40% are among the retailers that opened the largest number of new outlets in Paris in 2013, says Chris Igwe, head of retail for CBRE in France.

To be sure, significant differences still exist among European shopping districts. In London, for example, the retailers that opened the most new stores in 2013 were the local grocery chains Tesco TSCO.LN +1.42% PLC. and Sainsbury’s Supermarkets Ltd., with 30 and 40 new outlets, respectively, between October 2012 and October 2013, according to CBRE.

Another high-performing sector was so-called betting shops, establishments where gambling on anything from soccer games to names of the next royal heir is permitted. U.K.-based bookmaker Ladbrokes LAD.LN +0.12% PLC increased the number of its shops in London from 304 in October 2012 to 323 in October 2013. Betting shops often have expanded into former bank units, says Steven Stedman, head of central London retail for CBRE.

Meanwhile, in weaker retail markets that have been struggling the most during the downturn, local businesses dominate the leasing market.

In Milan, Italy’s commercial and financial capital, international brands have been cautious, waiting for the last of the euro-zone crisis to pass before officially entering, according to CBRE. Between January and October 2013, the only retail category with an increase in outlet numbers was restaurants, according to data from Italian trade association Confcommercio.

“For almost all trade activity, the balance is negative. The most dynamic sectors are food and drink services,” says Mauro Bussoni, secretary of Confcommercio. The average life of these activities is often limited, though. Some 50% of new restaurants close within about four years, Mr. Bussoni says.