A radical redesign of the Walt Disney Company’s Disney Stores in 2010 is paying off according to new research. It reveals that in the four years since the overhaul the Disney Stores in the United Kingdom alone have made $761.6 million in revenue which peaked at $200.4 million in 2012.
The first Disney Store opened in California in 1987 and three years later it entered the UK market with a flagship on London’s Regent Street. Its network has since grown to more than 40 outlets in the UK and over the past few years they have taken on a new look.
California was home to the first store with the new design which was led by the late Apple executive and Disney board member Steve Jobs. He was the brainchild behind the successful Apple Store concept but the design for Disney didn’t follow its minimalism. Instead, Disneyland itself was the model for the new format.
The result includes features which would look more at home in a theme park than a retail outlet. Touch screens allow customers to select their own Disney music and film clips to watch on a huge screen in an activity area whilst a magic mirror uses clever trickery to make it seem like Disney’s princesses are speaking to the kids who stand in front of it.
Scenes from Disney movies are projected on to transparent trees scattered around the store and at the end of the day they show a digital display of fireworks just as you would get in one of Disney’s theme parks. There is even a store opening ceremony every day where the first child waiting outside is given an over-sized key to insert into a fake lock on the door of the shop.
The final touch is that the new outlets drop the word ‘Store’ from their name and are simply known as ‘Disney’. This appears to be a neat psychological ploy to try and make visitors forget they are entering a shop and that suspension of disbelief continues inside with the new format in which the sale of products sometimes almost seems like an afterthought. This too is Disney’s desired effect as its aim is to get visitors into the same relaxed state as they are in its theme parks so they will think nothing of making a purchase, especially when their kids are having such fun.
Completing the picture, the flagship store in London even incorporates into its format a huge façade of the fairytale castle which is found at the center of Disney theme parks. It all comes at a cost.
Disney has invested a reported $480 million in the redesign globally and began introducing it to the UK in 2010/11. It is on a roll at the moment but Disney’s British invasion hasn’t always been the stuff of fairytales.
Although the Disney Store’s revenue in the UK has been steadily climbing, surprisingly, it has only finished in the black three times over the past decade and once since 2010. This came in the year to 28 September 2013 when it made an after-tax profit of $1.5 million on revenue of $197.6 million. In 2012 its bottom line was a net loss of $35,651 and the previous year it was even higher at $3.7 million. In the past four years alone it has made combined net losses of $3.3 million and the total comes to a whopping $64.7 million over the past decade. The cost of running lavish stores squeezes margins but Disney has begun to wave its magic wand and do something about that.
Graham Burridge, managing director of Disney Store Europe, says that his team members “constantly evaluate our Disney Store portfolio to ensure we are in the right locations and are able to provide magical experiences for our guests. This has led to some recent Store closures in 2013 in locations that did not meet this criteria.”
Disney reportedly closed 10 permanent and four temporary standalone stores in the year but opened a concession in the famous London department store Harrods in November 2013. Mr Burridge adds that “sales decreased slightly year over year from 2012 due to a reduction in store portfolio offset to some degree by continued growth in online business.”
To cope with the increase in online trading Disney took on 16 additional distribution staff whilst the number of full-time retail employees fell by 19. Overall, last year staff numbers were down slightly to 1506 with their total pay stable at $44.9 million.
Although there were store closures in 2013 Disney still invested in its existing outlets and spent $2.4 million on equipment, furniture, fittings and construction including development of the concession in Harrods. During the year it burned through $8.4 million of its cash in the bank leaving it with a total of $5.1 million.
The UK division is run on a day-to-day basis by Mike Stagg, vice president and general manager of retail for the UK and Ireland at The Walt Disney Company. He previously worked at Coca-Cola and consumer goods company Unilever before joining Disney in 2008.
The income from his division comprises around 15% of Disney’s total retail revenue of $1.3 billion which comes from 348 stores worldwide. It may sound like a lot but in fact it is a tiny portion of the company’s $45 billion in annual revenue. The upward trend in the UK is reflected in other regions as Disney’s retail revenue increased by 9% last year with the Disney Stores delivering their best performance to date. It was driven partly by higher store sales growth in North America, Japan and Europe and this is is on track to continue.
In 2014 Disney has begun to market merchandise themed to Star Wars characters following its $4 billion acquisition of the brand’s parent company Lucasfilm in 2012. In addition, trading in the UK has reportedly been boosted in part because of the “phenomenal” popularity of Disney’s blockbuster movie Frozen which was released in November last year. For the Disney Store, it is a tale which really does have a happy ending.