Global conference examines department stores around the world

Global conference examines department stores around the world
By RoxAnna Sway, Editor in Chief
July 01, 2008

www.mattcrew.com

The first-ever Global Department Store Summit was held in London, May 29-30, organized by local retailer Selfridges & Co. and the Zurich, Switzerland-based Intercontinental Group of Department Stores (IGDS). The two-day event treated an audience made up of international delegates to presentations by 12 retail department store CEOs and top-level executives, each outlining their views on accomplishments, challenges and strategies facing their organizations and the department store as a retail category.

The consensus was that the department store, far from being dead, is thriving—especially in certain parts of the globe. However, it was obvious that the speakers—from retail organizations in the United Kingdom, United States, Australia, South Africa, Asia, Russia and other locations—were at varied stages of evolutionary business development and were having markedly different experiences. While some CEOs reported dramatic growth—Bernie Brooks, CEO of Myer Ltd., Melbourne, Australia, said his organization reported a net profit of 52 percent in the last six months—more mature formats in Western Europe and the United States are facing increasing economic challenges, slowing growth and increasing competition, with a good bit of that competition coming from monobrand stores.

Many CEOs indicated common themes focused on customer centricity, the store experience, customer service, differentiation, community involvement, social/cultural responsibility and sustainable/green values. Paul Kelly, CEO of London-based Selfridges, talked about "creating a special aura around everything the customer buys," and said, "It is about capturing the customer's affection and loyalty." He emphasized Selfridges' HALO effect, which is made up of four components: "Happy," "Appeal," "Look" and "Oh!" These encompass entertainment and the arts; using the store windows as a magazine cover opening into the store; uniqueness and differentiation; and the wow factor. Selfridges recently opened Ultralounge, a permanent exhibit space for ongoing art and cultural events. The organization has also been importing more designer and upscale fashion brands, and its new Wonder Hall puts the world's most acclaimed jewelry and luxury brands on display in its Oxford Street flagship store.

Terry Lundgren, chairman, president and CEO of Cincinnati-based Macy's Inc., was on hand, not only to speak, but also to accept the IGDS Department Store of the Year award, which was presented to Bloomingdale's, a division of Macy's, at a special dinner Thursday evening. Macy's accelerated its growth by acquiring competitor May Co. three years ago, and then implemented a total organizational overhaul. Lundgren described this as "the largest rebranding project in the world," resulting in an 810-store nationwide company—a dramatic increase from Macy's prior 200 or so units—and a $26 billion business. According to Lundgren, Macy's "answer for the future" is a localization strategy that reorganizes the business into 20 geographic zones, each tasked with making merchandise and other activities a better fit for local audiences. The advertising slogan—"My Macy's"—sums up the new focus on local customers. Reflecting the current U.S. economic conditions, Lundgren said, "It's not the time to focus on the status quo."

The emphasis on the customer was also evident in Australia, as customers there warm up to the slogan: "Myer is my store." Myer CEO Bernie Brooks said that his organization is in the throes of refurbishing 58 stores, moving to smaller boxes with more products. He described the business as customer led, internally transparent, communicative and cost-effective, with a focus on "measuring everything" and "solving problems by sundown."

Another recurring theme was described by Andrew Jennings, group managing director of Cape Town, South Africa-based Woolworths, as the "War for Talent." Investing in human capital was one of four points described by Jennings, along with challenging assumptions, understanding the power shift to customers (the customer is now in charge) and differentiation, which he described as "stand for and stand out." Jennings said that consumers in South Africa are going through transformative change involving instant gratification—with some consumers "going straight to the sports car," rather than gradually trading up.

Green is a theme that Jennings elaborated on as well, as did Nayna McIntosh, director of marketing and design for U.K.-based Marks & Spencer (M&S). The British retailer has reinvented its brand throughout its 600 stores, and opened spin-off businesses, including Simply Food and the M&S Kitchen Café—putting the emphasis on better products and better environments. Food is a big part of the business, and the food halls in M&S stores emphasize green. For example, only organic milk is offered for sale. The customer focus is expressed through the M&S slogan: "Your M&S."

Indeed, food is an important category for department stores around the globe (with the possible exception of the United States). Mumbai, India-based Shopper's Stop Ltd. Managing Director B.S. Nagesh said his company dedicates about 50 percent of its business to food (as do M&S and Woolworths). Nagesh, who is considered a pioneer of retail in India, has been with Shopper's Stop since it was founded in 1991. He took the audience on a colorful and entertaining tour of his perspective of retail development in the country, where 328 new shopping malls are expected to open by 2010 (though only 22 opened in 2007). The density of customers in India is leading to a concept of malls as "destinations." But according to Nagesh, "the worst architecture and store planning is in India." Nagesh also cited challenges to retail development, including wages that are increasing by 17 percent a year, and rents that have increased three times in the past three years.

Alfred Cheng, managing director of Parkson Retail Group Ltd., prominent in China and Malaysia, and expanding into Indonesia and Vietnam, talked about the "New Asian Renaissance." He described an emerging new class of consumers, "with limited resources, but unlimited demand." According to Cheng, "Asian consumers' three financial priorities are: 1) savings, 2) holidays and 3) clothes." He pointed out that China now has more than 5,500 department stores, and by 2020, "there will be 4.3 department stores to 1 million consumers in China, while in the United States the ratio is 31.2 to 1 million consumers." Cheng emphasized the shift of global power to Asia, and pointed out that of the top 10 global businesses, five are in China—with Petro China second to No. 1 ExxonMobil. He also said that the world's largest source of capital is the Asian Central Bank. "Retail in China grew at a rate of 22 percent in 2007, totaling $44 billion USD," Cheng said. Cheng also reported that Parkson's after-tax profits are 35 percent to 40 percent a year.

Yuwadee Chirathivat, CEO of Central Department Stores in Bangkok, Thailand, talked repeatedly about the "pleasures" of shopping and making customers "happy." Flower and art shows—including an exhibit of Rembrandt paintings—and an annual balloon event emphasize education, entertainment and culture to an increasingly receptive audience. "Department stores have lots of opportunity to grow," Chirathivat said. In fact, Central, which currently has 14 stores, has opened a number of niche-targeted concept stores, including Zen, Food Loft and Supersports, and the company is expanding into China.

In a similar mood, Caryn Lerner, president and CEO of Toronto-based Holt Renfrew & Co. Ltd., attributed a sales increase of 45 percent since 2004 to providing an experiental store environment and "gorgeous fashions" that project the "story and vision of the fashion designers." Lerner said that the keys to success are: experiental, luxury, aliveness and personal—with a big dose of entertainment and extravagance thrown in. This was reflected by the musical bash the retailer staged to open its new store in Vancouver, Canada, this year—complete with top entertainers and musicians—making the opening a top media and social event. Her aim is to make Holt Renfrew "irreplaceable" to its customers.

Patrice Wagner, managing director of Berlin's KaDeWe, a division of Germany's iconic Karstadt retail organization, also talked about romancing the customer. He entertained the audience with photos of an elaborate event hosted by the store to introduce Victor & Rolf's new fragrance, Flower Bomb—as elaborate an event as seen anywhere and lavish with flowers, models and fashions. Wagner stressed the "internationality" of retail today and the importance of the marriage of art, culture and merchandise.

Khaled Jamil, member of the board and CEO of JamilCo, Russia, discussed his experiences in bringing luxury brands to the country. Jamil said that Russia accounts for one-sixth of the planet's land mass and has nine time zones, but has only 11 cities with a population of more than 1 million people. "Sixty percent to 70 percent of the retail in Russia is in Moscow," Jamil said, noting that there were "only 30 luxury brands in Russia in '98, but there are 615 luxury brands in Russia today." This is resulting in a much more competitive climate. Jamil emphasized the "amuse" or pleasant aspects of retail, describing flower shows and chocolate festivals that JamilCo produces to entertain its customers.

Continuing the theme of luxury at retail, Stephen Sadove, chairman and CEO of New York-based Saks Inc., shared a detailed view of his strategies to revive the Saks Fifth Avenue business after a couple of difficult years. He stressed, "articulating a clear and compelling vision that is embraced by the entire organization," and said that innovation and consumer-centric strategies are key. Saks reorganized its merchandise, segmenting it by type and customer profile, which has resulted in success and growth for the company. Sadove enjoyed talking about the new "10022-SHOE" renovation—the area has its own U.S. postal zip code—of the entire eighth floor in the Manhattan flagship store, which resulted in the largest shoe business in the world, producing $100 million in sales.

Probably the most luxurious and imaginative presentation of the conference was made by Sheikh Majed Al Sabah, the nephew of the Emir of Kuwait and CEO of luxury fashion emporium Villa Moda, Kuwait. Personally involved, and with a background and interest in design and architecture, the Sheikh talked about several Villa Moda projects, each unique in its location, architecture, interior design and merchandise—and each a work of art in its own right. The stores are opulent and imaginative and bring the best of luxury merchandise to an increasingly sophisticated Middle Eastern clientele. A total of 10 stores are planned, with locations including Damascus, Syria; Dubai, U.A.E.; Bahrain; and Qatar.

This conference afforded an unparalleled opportunity for a 360-degree overview of the department store as a retail phenomenon—ranging from well-established, 100-year-old, grand merchandise emporiums to recently established start-ups in rapidly developing markets. The passion, knowledge, dedication and will to succeed on the part of these CEOs was informative and inspiring—and a positive indicator for the future of the department store.