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Is the future of Harrods safe?


Harrods is an iconic institution. It is at the same time a local shop to the residents of SW1, a department store for those with the resources to buy quality goods at premium prices and a tourist attraction for visitors to London. It has been on its present site as a Harrod’s shop since about 1853.

Its founder, Charles Henry Harrod had previously opened in 1824 a haberdashery and drapery shop in Southwark, then his first grocery premises in Upper Whitecross Street EC1 from 1831 and soon after a grocery and tea dealing shop in Cable Street, East London from 1834. He stayed at the latter address for 19 years. The Harrods store has been through several metamorphoses since 1853 and in the hands of Qatar Holdings since 2010. It is now probably in its most stable period since the Second World War.

But how long can it go on? We live in a fickle world. No business, even an institution, has an inalienable right to go on for ever.

Other giants of the department store market have fallen by the wayside over the years. Whiteley’s, whose origins were rather similar to Harrods, and was arguably more advanced, and larger at the beginning of the 20th century was originally in Westbourne Grove and later in Queensway. It thrived for many years and then fell foul of succession issues and later take-overs. It now exists solely as a shopping centre on the Queensway site.

Other famous name stores have been involved in take-overs and have been re-branded as a result. Harrods sails serenely on, though it has had its share of events which might have resulted in its demise. Chance events can change history both personal and global. Dinosaurs might have still ruled the world had it not been for a massive comet impact with Earth. The Normans might have been beaten at Hastings if Harold’s army had not had to fight other battles in the north prior to the south coast landings. The Spanish Armada might have succeeded if the wind direction had been different. Germany might have invaded and taken over much of Britain if Hitler had made different decisions. I might not have been born but for the chance meetings and choices of my ancestors. Similarly, Harrods might not exist now if events had been different.

In the business world there is a familiar aphorism—“Shirtsleeves to shirtsleeves in three generations”—this describes the propensity of family-owned enterprises to fail by the time the founder’s grandchildren have taken charge. There are many examples. Whiteley’s and Selfridges fizzled out as family-owned stores in the second generation, but the great depression between the wars also took its toll. There are of course exceptions to the rule, of which the Getty family is probably the best known. The success of the third generation was secured by using the wealth of the previous generations to generate new businesses.

Harrods’ founder, Charles Henry Harrod was a grafter. After initial setbacks he set about consolidating his business over 20 years. Though he and his wife lost three children in childhood, he had three fit sons to continue his work. Probably all three worked within his business for some time. One son did not see his future there and emigrated to New Zealand. Another son did not get on with and could not compete with his eldest brother, and so went into the grocery business elsewhere in London and the Home Counties, running a chain of small shops. The eldest son, Charles Digby Harrod, who was born in 1841, had the charisma, in bucket loads, that was needed to expand and make a success of the business. He worked elsewhere in the trade initially and then aged sixteen started in the family shop. He took over in 1861 aged 20, when his father was aged 62 and able to semi-retire. Charles Henry Harrod died 23 years later aged 85.

Sadly for Charles Digby, though he and his wife had eight children, only one was a boy. By the time Charles Digby was ready to retire at the age of 50, he was tired and in poor health. Only two of his daughters had married, and neither of them to anyone interested in the business. His only son, Henry Herbert Harrod, then aged 21, had graduated from Cambridge University, ducked out of the legal career open to him, and spent his life writing fairy stories and collecting art and books. Charles Digby Harrod, disappointed and stranded, had no alternative but to sell up to a newly formed Limited Company.

What would have happened if Charles Digby had had other male children and if they or Henry had been interested in the business? I suspect that to follow the grafter and the entrepreneur with another successful family owner would have been difficult. It is too easy for accumulated wealth to usurp the working ethic of the third generation. Harrods might have disappeared.

The lack of a successor was probably a godsend. The Managing Director who was eventually appointed to take over was Richard Burbidge, an experienced grocery shop manager who had also worked in Whiteley’s. The fresh approach, the fresh blood was exactly what was needed. What the biologists call ‘hybrid vigour’. The logarithmic rise in sales and profit produced by Charles Digby was continued by Burbidge, who bought more land, creating the present footprint of the store, and introduced numerous innovations. His success was such that the store was able to build even more during the First World War by supplying many of the government’s needs, and then withstand the depression to emerge in reasonable health leading up to World War II.

Richard Burbidge involved himself in good works and numerous governmental committees such that he was award a Baronetcy for his work during the First War. He was followed by a more than capable son, Richard Woodman Burbidge, who acquired other London stores and increased profits in the 1920s. As another exception to the rule, a third generation of Burbidges retained control of the store with success through World War II.

After the War, in the 1950s, there was a period of flux with ended with a takeover in 1959 by the House of Fraser. This time of uncertainty could easily have left the shop with a change of name or even extinction. After a successful period under the control Mohammed Al-Fayed and his brother from 1985 onwards, Harrods was sold to Qatar Holdings, the sovereign wealth fund of the State of Qatar, in May 2010. Harrods was sold for £1.5 billion; half of the sale was used to pay bank debts of £625 million. A statement from Lazard said Fayed was retiring "to spend more time with his children and grandchildren", but would take on the role of honorary chairman following the sale. Harrods is probably safer in Qatari hands than for some time.

The Qatar Investment Authority (QIA) owns large parts of London apart from Harrods. Qatar owns swathes of the Canary Wharf financial district, through its majority holding in Songbird Estates plc. They own a chunk of Barclays, they are a major investor (22%) in Sainsburys, own 20% of the Stock Exchange and also of Camden market. They own the Shard, the Olympic Village and No. 1 Hyde Park. Its influence is largely invisible and still growing.

This year, Harrods has recorded its eighth consecutive year of record sales and profits, reaching £2billion of sale despite market conditions. QIA received a dividend of £100 million this year. The refurbishment of the shop continues, spending £55 million on capital expenditure with 4G installed throughout its one million square feet of shop. It has pledged to restore the famous food halls, consolidate the sport and menswear on one floor, increase the area devoted to jewellery and watches, expand its beauty hall and integrate its homewares division into one department.

I think the future of Harrods is secure; unless you know something different!

By Robin Harrod

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