Catering to Today’s Consumer
WWD By KATYA FOREMAN and JOELLE DIDERICH
The customer is king.
That retail mantra has never been more true than in the age of the Internet as shoppers — many of them wielding smartphones — are forcing retailers to play by their rules, delegates at the Global Department Store Summit earlier this month in Paris heard.
A total of 380 delegates from 201 companies gathered at the Pompidou Center for the conference, organized by the Intercontinental Group of Department Stores (IGDS) and French department store chain Printemps.
“The change we are experiencing with consumers today is of the magnitude of printing with Gutenberg in the 15th century,” said Philip Shearer, chief executive officer of the Paris-based Clarins Group.
Michael Dart, senior partner at management consulting firm Kurt Salmon and co-author of “The New Rules of Retail,” described it as one of the most dramatic shifts in the industry’s history.
“We think that 50 percent of all brands and retailers will disappear,” he said. “The competitive congestion in trying to reach the consumer is immense now.”
Though operating in vastly different markets — from recession-hit Europe to high-growth emerging economies — the retailers in attendance agreed that an omni-channel strategy was key in dealing with this new market reality.
“We’re probably the baby in terms of developing omni-channel,” said Datuk Alfred Cheng, group managing director of Malaysia’s Parkson Retail Group, which celebrates its 25th anniversary this year.
The department store chain, which also operates in China, Indonesia and Vietnam, is due to launch an “omni-channel platform” at the end of May, and though Cheng expects it to generate just 3 percent of total sales by the end of the first year, he sees it as key to brand communication.
“We believe it’s an area that will contribute significantly to our growth,” he said, adding that Parkson has set its sights on expanding to four more countries in the next five years — with India, Pakistan, Bangladesh, the Philippines and Myanmar high on its wish list.
At the opposite end of the spectrum, British retailer John Lewis was cited as a model for its omni-channel approach, which earned it the 2010 award for Best Online Retailer from Which?, a British product-testing and consumer campaigning charity.
Andy Street, managing director of John Lewis, said its Web site now featured 210,000 stockkeeping units and would account for 23 percent of total sales in 2012, putting the retailer in a better position than its competitors to face Britain’s second recession since 2009. Sales at John Lewis are up 13 percent since Feb. 1, the start of the financial year.
“It’s been a cracking start, and I’d be disappointed if we didn’t finish the year in 6 to 7 percent territory, which — given the economy is going to be flat — obviously means we’ll be winning substantial market share,” Street told WWD on the sidelines of the summit.
Customers can have their purchases delivered at home, or collect them from one of 35 John Lewis stores and 194 Waitrose supermarkets nationwide, with Street noting that the “click and collect” option accounts for a quarter of all online orders.
Indeed, retailers noted high levels of service were key across all channels.
Printemps chairman and ceo Paolo De Cesare said the store, which in recent years has undergone a major facelift, derives 55 percent of sales from the top 15 percent of its customers.
“We have changed completely our approach to personnel and selling. We have hired over 100 people, and now about 15 percent of our store personnel are service-oriented,” he said, adding this ranged from basic orientation to private personal shopper spaces for VIP clients.
Tsutomu Okuda, chairman and ceo of J. Front Retailing Co. Ltd., which operates the Daimaru and Matsuzakaya department store chains in Japan, noted that its “Gaisho” service — whereby sales associates bring a selection of products to a customer’s home — generated 21 percent of total sales.
Even customers at off-price retailers are demanding high levels of service. Robert Wallstrom, president of Saks Off 5th, was surprised to discover that for 46 percent of his customers, it was the number-one driver of loyalty.
In response, Saks Off 5th last year introduced a service program for sales associates, in addition to a merchandise locator for its 61 stores, and in-store price scanners. The company hopes to transform those scanners into multifunction kiosks through which customers can access their membership card details, as well as the Saks FashionFix flash-sale site, among other features, Wallstrom told WWD.
Westfield Group, meanwhile, is pioneering a mall model that blends fashion, food and entertainment. Its co-ceo Steven Lowy predicted the Westfield Stratford City mall near London, which opened last September, would draw 30 million to 40 million visitors and record sales of 1 billion pounds, or $1.6 billion at current exchange, in its first year.
“It has been a great success, and one we plan to roll out with other major malls in the world,” said Lowy. Westfield plans to unveil the retail portion of the World Trade Center in New York in 2015, and open another mall near Milan’s Linate Airport in 2016.
Stores are also pulling out the stops to create memorable experiences.
Paul Delaoutre, ceo of Galeries Lafayette, said it hosts contemporary art exhibitions at the gallery inside its Boulevard Haussmann flagship four times a year, and plans to open a foundation for contemporary art in central Paris in two years’ time.
“The gallery inside the store came from the idea that we cannot just be merchants, that our brand should also have a dimension of generosity and that we should share our vision of art with our customers,” he said.
In October, Galeries Lafayette will celebrate the 100th anniversary of the flagship’s cupola. The whole store will be covered in what Delaoutre described as “probably the largest piece of art made of light in the world,” designed by Yann Kersalé, who has a six-year contract “and complete freedom to do what he wants on our walls.”
Selfridges’ Weston said the notion of being a culture center was not new for department stores, but was becoming more important in the Internet age.
“I believe there is always a trend and a countertrend. So, for everything that I buy with my mouse, I’m going to want a richer experience in a store,” she said.
In her presentation, “The Future of Retail,” Weston noted that the new customer is one who loves to share. “Convenience is more important to them than privacy. Today’s customer will happily tell us where they live, their measurements and what they had for breakfast if they get something in return. In many ways it’s a return to the intimacy we had with the small shops in the 19th century,” she explained.
Weston concluded that bespoke offers — whether it be the chance for shoppers to customize their sneakers, have a suit made from scratch or Mother’s Day makeup applied in the cosmetics hall — are the best way to befriend customers. “Bespoke products, services, communication and experiences are the future of shopping,” she said.
At a dinner on the first day of the summit, Selfridges was named Department Store of the Year 2012, marking its second consecutive win.