World Retail Congress 2018 Recap: Innovate To Win
On April 17-19, Madrid played host to World Retail Congress (WRC) 2018. Retail is a vital part of the Spanish economy as explained in the opening congress by Prime Minister Mariano Rajoy with major employers Inditex, El Corte Inglés and Tendam (formerly Grupo Cortefiel) also participating in the event. Below are three key themes discussed at the conference that summarise the mind-set of retailers.
The store is dead, long live the store
Despite 2018’s retail headlines being dominated by a slowdown in footfall and store closures on high streets around the world, there was a certain optimism at World Retail Congress for the role of brick-and-mortars in today’s society. But, the key message was ‘adapt to survive’. Véronique Laury, Group CEO at Kingfisher spoke about how retailers have underestimated the cost of digital and how to integrate it into the business: “the biggest mistake retailers made is to do exactly the same thing as before but just adding digital on top”.
The most successful retailers are those that have embraced digital opportunities and use stores as an enabler of online sales. Online used to be an extension of the store but the store has now become the extension of online. Its role in the customer journey has evolved, yet is of increasing importance. Therefore, it is no surprise to see many online pure players moving into physical brick-and-mortars as they adapted the store experience to complement their online strategy. Indochino (US online menswear retailer) operates the ‘showroom’ model and holds a virtual inventory so they can engage more with their consumer. The company stated at WRC how they had grown twice as fast online in cities where they had showrooms with their average transaction value increasing from $450 to $550 and the margin increasing 12% over the four years after opening stores. Similarly, M.Video (Russian electronics retailer) shared how online sales now account for 20% of their business but 96% of transactions are still fulfilled in store thanks to the popularity of click & collect.
The recurring theme is the integration of online and offline which gives retailers the best chance of success. Facebook gave an enlightening talk on how mobile and social media is able to drive offline sales. Martin Bathel, Facebook’s Head of Global Retail & eCommerce Strategy, spoke of how the era of retail has changed: “it’s no longer an online versus offline story, mobile is the dominant force as consumers’ mind-set has changed and everything revolves around mobile devices”. Retailers now need to stop people in their tracks – especially on their mobiles – as augmented reality is likely to lead to a world where commerce will be visible everywhere.
‘Edutainment’: The key to brand authenticity
The trend of consumer buying experiences over products was widely discussed during World Retail Congress. In order to improve engagement, retailers must educate consumers to bring the brand heritage and values to life. LEGO utilises in-store experiences to enhance their brand image; LEGO sees the store as just another media channel alongside social media and traditional advertising that, utilised well, will ensure consumers “have as much fun shopping for LEGO toys as building them”.
Floral Street, a fragrances start-up founded by former Estee Lauder executive Michelle Feeney, recognised the benefits of how experiences can lead to stronger customer loyalty. The brand opened a flagship store in Covent Garden that hosts scent workshops with a qualified ‘florista’ that allows the staff to tell the brand’s story. Feeney explained how it is important to personalise the experience for each and every consumer: “the future of branding/retailing is about being the bunch of flowers not just a bouquet – don’t alienate customers”.
Innovation in the East, Heritage in the West
In the last decade, attention has shifted to China in terms of how the retail landscape is likely to evolve. When Richard Liu started his eCommerce business, JD.com, in 2004 he hadn’t even heard of Amazon but the US behemoth is certainly aware of the Chinese retailer now with Liu announcing ambitious plans to expand its global footprint. What was striking about Liu’s fireside chat was the differences between consumer expectations across the globe: “China is changing very fast. (There is) less change in Europe since there is more of a community and they like going back to the same retailer they trust. In China, the attitude of loyalty is very different as they always want something new”.
Liu thinks that machines will take human jobs in 10 years, a view not shared by European retailers with Véronique Laury, CEO of Kingfisher believing that robots will only be implemented if they can help humans do their job. Retail staff are the ones who create the experience and can have an emotional connection with consumers. Laury spoke of how change will be slower in Europe versus their Asian counterparts: “In China, they went from retail to digital in one go. In Europe, offline retail is more established so hard to dramatically transform. We are the industry of the 19th century and employ a huge number of low-skilled people so we have to consider the social implications of robots taking human jobs”.
Although Asia, led by China, is at the forefront of innovation, there is huge demand for Western brands due to their long established heritage and luxury image. Jet Jing, President of Tmall (Alibaba) explained how the trend has moved from “made in China” to “consumed in China” and there is currently 18,000 international brands that sell to China on Tmall’s platform. Chinese consumers are interested in premium brands which saw Spanish ham sales on JD.com increase by 800% during 2017 such was the demand.