Comment: Will Hema's Dutch courage pay off as it opens its first UK store?

The arrival of Dutch variety store Hema in the UK will not only brighten up the high street, its eclectic offer will also prove popular with shoppers. While the choice of location for its first store is not ideal, it will help boost brand recognition, giving it a platform for further expansion that will allow it to pressurise the likes of Wilkinson, Tiger and Clas Ohlson.

Yesterday’s opening at the Victoria Place Shopping Centre in Victoria Station, London is the first of three confirmed sites around the capital. Two other stores will open over the Next month in Kingston and Bromley, giving the retailer the chance to test three different formats and then use the results to dictate its expansion plan in the UK.

The store sells an eclectic range of products including food, homewares, clothes, beauty products, toys and stationery, which are all excellently merchandised and encourage you to step inside the store. The shops are unlikely to become shopping destinations with consumers going out of their way to visit; however, shoppers are likely to be attracted by the brightly coloured displays and will come out of stores after buying things that they did not even know they needed, like sewing kits or cake decorations.

Victoria Station is an odd choice of location for the retailer as it attempts to build up its reputation; its mix of products is not that relevant for commuters or travellers. However, the site does benefit from high footfall and this will boost brand recognition rapidly, which will support further expansion.

Hema is likely to have the most success with high street locations where the stores will be larger, enabling them to showcase a wider range. Shoppers will also have more time to browse, making it more likely they will make a purchase.

The variety retailer must target more affluent areas for its stores, where disposable income is higher. Hema’s price points are low but they are higher than those at the pound stores, so therefore price will not drive sales alone.

It will therefore be able to make higher margins than these players however, it must work hard to ensure that customers are convinced about the quality of the products as otherwise they will not trade up from the pound shops.

Hema can adapt, as it will initially only be showcasing around one third of its offer due to the smaller store size in the UK compared to Europe. Having a wider range available will allow it to adjust its offer to meet the needs of the local area and enable it to open larger stores once it has established itself. The retailer designs all of its own products and its own brand ranges will prove popular as UK shoppers are increasingly acceptant of unknown foreign brands at lower price points being exposed to them at retailers such as IKEA and Aldi.

The retailer is famous for its smoked sausages in Europe and these, as well as fresh food, will not be part of its initial offer in the UK. This is not a major loss as the brand is not well known here and therefore people will not be expecting it. However, it would work well at transport hubs and as it expands into larger stores then it should consider offering it to increase its appeal.

The variety retailer is approaching its expansion plans sensibly by using a store format trial, and its store environment and product range are strong enough to support rapid expansion once brand recognition increases. The key for Hema is to be responsive to the demands of the local area, making use of its extensive product range to adjust its offer and drive sales.

• Michael Macdonald is retail analyst at Verdict