World Retail Congress review – recognising change is ongoing
After many years of tumultuous change in the retail sector there is growing evidence that many large organisations have now got a handle on things and are able to deal with the constant disruptions and technological advances that make up modern day retail.
This was a key theme that emerged from the speakers during the three days of World Retail Congress in Paris where 850 delegates came together representing 400 retailers from 60 different countries. Among the many senior leaders present was Thierry Garnier, CEO of Kingfisher, who highlighted how his time spent working in China and the experience gained during Covid-19 has enabled him to hone his skills in running an agile business that can navigate ongoing change.
Adopting agile mindset
In China he spent over seven years running Carrefour’s business: “My time in China was a critical personal journey. I’m a perfectionist engineer but you can’t survive in China as a perfectionist engineer – you need to run faster and make mistakes. It has helped me be a better leader back in Europe.”
Covid-19 also helped as he cited how at Kingfisher he had quickly mobilised the store teams to launch a click & collect service for 6,000 SKUs overnight. It showed how the large business could be rum nimbly and move fast.
Such experiences have led to Garnier having the confidence to initiate things like the launch of its marketplace that has proven to be a key initiative for the company, having grown into an operation with sales of £200 million in only two years.
He is also deploying Artificial Intelligence across the group and recommends retailers identify specific “use cases” where they are confident AI can drive efficiencies. Four areas have been identified for Kingfisher including the management of markdown and clearance. The approach is to then “go deep”, applying the technology across every brand and market within the group.
Carrefour Group has also found its feet, according to Alexandre Bompard, chair & CEO of Carrefour Group, who says the digital transformation over the past 20 years has been a game-changer for the retail industry and it is the role of leaders to navigate successfully through this.
Managing through revolution
With the business six years ago “coming to a standstill” as he describes it, Bompard says he took some difficult decisions as a part of a turnaround. His strategy involved: becoming customer-centric; changing the organization to boost productivity; partnering with entrepreneurs for dealing with the most problematic stores; blending digital and physical with seamless integration; and initiating an ambitious CSR policy.
“It’s been a tough battle transforming the 60-year-old company, navigating new trends including digital and climate change,” he says, but adds that by 2022 he believed the company was “back in the race”. Bompard is now implementing a Carrefour 2026 strategy that leverages the business’s strengths of own-brand, new store formats and maximising synergies across the organisation that includes a common purchasing platform.
There has also been a turnaround initiated at France-based Printemps that operates four brands including its well-known department stores. Jean-Marc Bellaiche, CEO of Printemps, says the company suffered from the downward trend for department stores over recent years and also its lack of digital capabilities.
“We went into deep introspection and needed to innovate again. We looked to bring back the wow to the business. We brought back restaurants and intimacy with greeters [deployed] at the doors. We also doubled down on personal shoppers,” he explains.
Although Printemps was late to omni-channel it has implemented click & collect and ship-from-store and also put the personal shoppers online. These efforts have helped push up online sales from 6.5% to 9% of total revenues, which Bellaiche says is progress but also suggests there is still a “long way to go”.
Valuing the personal touch
He says Primtemps very much values one-on-one interactions with its customers and has a specific focus on those shoppers who spend over Euros 30,000 annually with the business. For Michael Ward, managing director at Harrods, successful department store businesses must prioritise long-term relationships over quick transactions and leverage data in order to truly know their customers.
The crucial role that data plays in enabling retailers to best serve their customers, with Ward revealing that Harrods has invested millions in data scientists and its Insights team to truly understand their customers and gain valuable information that he says is “as good as Amazon”.
Harrods also leverages in-person events in different markets, which centre on brand education and awareness to help create what Ward describes as “communities of passion” with potential future customers.
Like Ward, Nicolas Houzé, CEO of Galeries Lafayette, says the differentiator between his business and data-centric global players like Amazon is the ability to deliver world-leading experiential luxury with the development of services further enabling them to build long-lasting, authentic relationships with local audiences.
Houzé describes data as the “gold mine of the 21st Century” and highlights how Galeries Lafayette recently joined Publicis and Carrefour to create a retail media-focused joint-venture that he hopes will enable it to establish itself as the luxury leader of this data alliance.
Stores at the heart of retail
Such activities merely provide an overlay onto the physical assets of these leading department store businesses because it is bricks and mortar that remain at their heart. Stores also remain vitally important to Crate & Barrel even though it has undergone a digital transformation under the ownership of Otto Group and 60% of sales are now generated through digital channels.
Janet Hayes, CEO of Crate & Barrel, says the performance of the stores has being boosted through the introduction of The Design Desk, which allows customers to design the interiors of their homes with the help of design specialists. Such has been their success that in only three years as much as 40% of revenues in stores is generated via this service and the average order value is $3,000 versus $1,000 for other orders. Another upside of the service is that at the New York City store for instance, 25% more sales are being generated from 30% less space.
Guillaume Motte, CEO of Sephora, feels the same positive way towards physical stores and suggests they are the “heart-beat” of the global beauty retailer: “Sephora is stores and we have always invested in them. The growth engine of the business is stores and we open 200 per year. But they have to be lively and interesting. We invest in technology in order to bring it to colleagues’ in-store so it enriches the relationship we have with customers and does not replace it,” he suggests.
The company has certainly been on a tear, with sales now 50% above pre-pandemic levels, and major growth being experienced across the globe where it operates 3,500 stores selling products from 500 brands of which many are purely Sephora products. As well as unique products Motte highlights another key pillar of the company being the community it has built with its customers.
As many as 160 million have given the company their details and as many as 60 million are described as hyper loyal and active. “We aim to pamper these customers and have created Sephoria beauty shows for them that have 140 brands participating. We’ve rolled it out to major cities,” says Motte.
Building communities
Community is paramount for one of the hottest areas of retail – marketplaces. Albert Larter, CEO & Co-founder of Wakuda – a marketplace for African and Caribbean brands, says: “Building a community sets us apart. We’re helping build a community of brands that are making these products. They have a place, a home. We target the customers they’ve struggled to reach and we look to keep the human connection between buyers and sellers.”
Amir Awan, CEO & co-founder of Dupeshop Beauty, agrees that the human touch is also vital to his marketplace, which does not rely on things like AI. He says this feeds into customers trusting the platform. Trust is also very important to Moses Rashid, CEO of The Edit LDN, who says: “Trust is where we drive value. We’re 10-20% more expensive than other marketplaces but we can leverage the trust.”
This has helped The Edit LDN to work with a variety of brands and sports teams in the UK and US to bring rare, collectible products to the market and also generate lots of valuable content for pushing across social media channels, which fuels the appetite for the products.
For Christina Fontana, senior director of brand operations at Shein, the enabling of brands to engage with consumers through the likes of video is a vital component of marketplaces but the
brands must put in the necessary effort in order to drive sales: “It won’t look after itself. It requires a lot of attention from a brand to give customers a great brand experience. We have partners who can manage the marketplace for brands.”
Developing circular models
One of the fast-growing areas of marketplaces is for the resale of goods, which has become increasingly important as circularity is now a strategic imperative for retailers, especially for the clothing industry. James Reinhart, CEO & co-founder of ThredUp, says: “Brands and retailers had never thought about circularity but they now realise you can do something else with the [used] clothing. There are also changes in consumer behaviour around recycling and circularity. There was a stigma around second-hand clothing but it’s now cool and it will only grow in terms of market penetration.”
Justine Porterie, director of sustainability and DEI at Depop, says the growth in appetite for second-hand clothing can come from the industry making circular options more appealing but it requires a mind-set shift by retailers and brands when calculating the lifetime value of a customer. This involves disassociating LTV from being just about new goods sold but to also include recycling, repairing and reselling.
One of the challenges is driving greater numbers of sellers onto marketplaces like Depop. “There is a layer of story/emotion to garments. When emotion comes into play then people keep hold of products because of memories. We need to highlight there’s an economic and social benefit for person-to-person circularity models. We all sit on underused capital,” explains Porterie.
Disrupting established models
Another challenge for the clothing industry is changing the established models, of which Lynne Walker, director of Primark Cares at Primark, is all too aware: “Getting people internally to understand what circularity means has been a struggle. It’s about re-educating from within about how do you design a garment so it could be recycled? It’s that sort of thinking and then how to scale it up. Then we can go out to our supply chain [manufacturers].”
With such seismic changes continuing to impact the retail industry it is maybe no surprise that Matt Clark, managing director at Alix Partners, revealed research from business leaders that found 50% of retail executives expect significant change to their business model in the next year. This is the highest by some margin across all industries.
Much of the change will undoubtedly involve technology as the solution, which is likely why almost half (49%) of the leaders surveyed admit they cannot keep up with technology changes and that the prioritization of investment is presenting them with a huge challenge. This is contributing to the worrying scenario whereby 38% are concerned about losing their jobs as they are aware that possibly their mindsets might be outdated.
Despite this backdrop there is much to be positive about and there are serious levels of innovation and investment taking place in the retail sector, which is driving great success at many companies. According to research from Boston Consulting Group the key areas receiving investment are inter-operational improvements (by 71% of retailers surveyed), e-commerce (60%), big data, AI and analytics (58%), and sustainability (58%).
