“Retail has changed, and it will never go back.” The recurring theme of June’s International Retailing 2012 event (organised by the British Retail Consortium, with sponsorship from PLM suppliers Core Solutions and others) is an open-ended proclamation, sure, but one that any retailer would be hard pressed to disagree with. Whether they sell frocks or frozen yoghurt, retailers the world over find themselves having to adapt to a rapidly-shifting world. Trends like fast fashion, e-commerce, and social media – all of which are further crystallised through the lens of a precipitous economic crisis – are here to stay, and the impact they have had on traditional retailing can hardly be overstated. In a multi-channel world, each channel must strive to differentiate itself from the others, and it is no longer just bricks and mortar retail facing the pressure.
Although internationalisation was the marquee topic of the event, in a broader sense the day’s agenda was intended to address many of the challenges facing contemporary retail – challenges for which internationalisation is just one of many potential solutions. And it’s important to note that despite the headline, none of the day’s speakers advocated expansion or internationalisation as a “quick fix” for the difficulties delegates were doubtless encountering in their day-to-day business.
So it was that when BRC Director General, Stephen Robertson, took to the stage to open the proceedings, he was introducing not just the speakers and the BRC itself, but also the unspoken questions that had precipitated the day’s agenda. Can expanding my retail operations abroad make me more profitable, and within what time frame? When is an appropriate time to internationalise my business, and how should I go about it? What characteristics make a brand worthy of investment? What are the major legal and cultural ramifications of taking my brand overseas?
The BRC provides industry data, conducts lobbying on behalf of its members (who, according to Robertson, represent 80% of the UK’s retail industry, both high street and online), manages recycling programmes, organises industry events, and works to establish global standards for production across different verticals. More than three million UK jobs depend on retail and, perhaps unsurprisingly given his role, Robertson’s view for the future of the industry is an encouraging one. Before introducing the day’s first speaker, Kevin Rusling, Director of International at George at Asda, Robertson painted a positive picture of retail. For Robertson – who seems for all the world to genuinely love and believe in retail, and who appears authentically starstruck by some of the guests he introduces – opportunities exist in place of challenges, and barriers to profitability are to be overcome through persistence, care, due diligence and adaptability.
As the day’s first full presentation emphasised, growth and expansion in a difficult climate means different things to each individual retailer. For George at Asda (whose parent company was the first to introduce clothing into supermarkets some twenty-two years ago) internationalisation encompasses online retail, wholesale, and franchising, and has gone on to become an effective and profitable part of the company, which now boasts more than 10,000 stores worldwide.
Rusling – a measured and efficient speaker – emphasised the sheer quantity of introspection that had taken place within George to ensure that the company was adequately prepared for internationalisation. Using Turkey as a modern example, he suggested that a detailed analysis of any destination territory should be undertaken, and went on to suggest several key areas for investigation. How is that target market faring as a whole? Are there any sizing or cultural concerns that an apparel retailer should take into account? Does the available retail space in the destination territory suit your needs? Have international duties and the sometimes-arcane customs procedures been factored into your expansion plans?
In addition to this rigorous preparation (something he was keen to point out that George paid close attention to) Rusling articulated a firm belief that internationalisation, irrespective of which model is adopted, should not be undertaken until the company is able to maintain a healthy profitability in its home country. Only then should the company begin to examine whether comparable profit margins can be achieved abroad, and subsequently whether the brand can be both unique enough and sufficiently profitable to sustain an expansion.
Rusling explained that George International was, despite his exhaustive preparation, nevertheless founded as an entirely separate division of the company. While this separation may sound like a concession to the risk associated with international expansion – keeping potential disasters away from the core business – he argued that, in fact, it allowed him to assemble the best possible team. Having recruited internally as well as from a select pool of international experts, Rusling placed great emphasis on the importance of employing expert resources in three key areas: people who understand and are passionate about the business, people who understand the destination market(s), and a leader who is accustomed to working internationally.
Finally, Rusling explained the importance of internationalising on a business’s own terms, rather than anybody else’s. As with the internal resources, he believes that nobody understands a business quite like the people who work within it, and only those people truly know the brand and are capable of anticipating what aspects of it will and will not resonate at home and overseas.
Following a brief question and answer session, Robertson introduced Alex Cara, Vice President of Global Partnerships for Esprit, and Francis McAuley, International Director for Debenhams. Both men mounted the steps to the stage with Robertson’s lists of accolades still ringing in their ears, and it was Cara who took the microphone first.
Cara has worked in internationalisation and franchising for New Look, Nike, Benetton, Group Cortefiel, and the Sears Group – making his role at Esprit just the latest in a storied history of opening the curtains for renowned brands on the international stage. Suitably, then, Esprit is a truly international company: founded in San Francisco, listed on the Hong Kong stock exchange, and headquartered in Dusseldorf. Since its foundation in 1968, Esprit has grown to become a €3bn operation in Asia and Europe, and Cara explained that the company is in the second year of a detailed transformation plan that will see it embracing its heritage and revitalising many flagship stores around the word.
It’s clear that Cara speaks from experience. His advice for companies looking to internationalise is pragmatic, informed and progressive; he believes the any company wishing to expand internationally should first examine what success should look like to them in five years’ time. For Cara, the opportunity to grow and adapt internationally also represents a chance for companies to revisit the way they operate in their home territory. As consequence, it is vital that the company analyse the reasons for not just their expansion, but their long-standing ways of working. They should, he argued, revisit their core values, analyse what drives their brand, understand the alignment of their business model, and, crucially, develop a picture of what they hope to change by expanding internationally.
This introspection was similar in aim to that advocated by Kevin Rusling earlier in the morning, but placed a great emphasis on not just the practicalities of change, but also the motivations that drive it.
Cara explained that, irrespective of entry model (i.e. concession, joint venture, franchising, licensing), it is critical that any business adopt an international strategy as a long-term prospect, and that they tailor their approach accordingly. This means fostering enduring partnerships, ensuring buy-in for internationalisation plans at every level of the business – from CEO to designer – and understanding your destination market not just as it exists today, but as it’s expected to grow in the near future.
Despite a real understanding of the difficulties facing retail today, Cara’s willingness to speak in years and decades revealed a cautious optimism that, underpinned as it was by his history and experience, proved extremely persuasive. His confidence in retail’s future was not blind, though, and Cara closed his presentation by reminding delegates that the real work – remaining competitive, profitable and relevant – begins once the doors are open.
Francis McAuley, the session’s second speaker, shared a great deal of his Esprit counterpart’s experience and optimism, if not his presentation style. Where Cara is studied and serious, McAuley is a breezy and fun presenter who glosses over well-established practicalities to focus on the moral, cultural and logistical imperatives that accompany internationalisation.
McAuley has worked in international retailing since 1989 (including a stint of his own at Sears Clothing), and that weight of experience no doubt played a role in his brief summation of Debenhams’ global operations. The UK-headquartered department store has traded internationally for more than fifteen years, and in that time, McAuley said, he has discovered no magic silver bullet that makes it all any easier than it was when they embarked on the journey. The bulk of Debenhams’ international presence operates under a franchise arrangement, which he describes as a simple model with a complex execution, even today.
A large component of that execution, he explained, lies in convincing the company itself that internationalisation is the right strategy for growth. Executive-level buy-in is something we discuss regularly here at WhichPLM, and it’s as applicable to expansion strategies as it is to the implementation of enterprise systems. McAuley (who supported Kevin Rusling’s earlier suggestion that international operations should be leveraged away from the core business) reinforced the importance of securing that senior commitment by establishing a clear and effective communications plan – one that establishes not just how the company will approach globalisation, but why.
For McAuley, the changes in retail have, if anything, created a less cut-throat market than you might expect, and the communications strategy he outlined was designed also to address the needs of franchise partners overseas, ensuring that they have a clear understanding of not just how Debenhams does business, but how they can expect to prosper as a result of the enduring partnerships the company hopes to create.
The two veterans fielded questions from an engaged audience (including an insightful question about how incumbent retailers react to international brands impinging upon their home territories) before the stage was given over to the Core Solutions-sponsored panel discussion.
Chaired by Chris Collins, the panel included Geoff van Sonsbeeck (CEO of Isabella Oliver and, terrifyingly, former NATO prisoner of war interrogator), Gordon Farquhar (MD of Boots International, and later a speaker in his own right), Ashish Sensarma (CEO of Vilebrequin International) and Daniel Gestetner (CEO and co-founder of the Yoo Moo frozen yoghurt brand). Collins himself is the Managing Director of consultancy I-Realise, has worked with a diverse retail and brand client list on a range of change management projects, and employs an interview style and a cadence of voice that wouldn’t feel out of place in a lost 1960s BBC broadcast.
Unlike the morning’s other speakers, who had been mostly upbeat about retail’s potential to flourish in a difficult climate, Collins’ introduction was a dour reminder that change (be it internationalisation, expansion to multi-channel, or otherwise) can come from desperation or necessity as much as from a planned desire to expand and improve. He cited retailers like Barratts, Borders and Habitat as recent casualties in the battle for high street profitability, before reminding the audience of the sometimes-catastrophic job losses that can result from the collapse of businesses of that scale. This introduction sat a little ill at ease with the discussion that followed, but I assume Collins’ intention was to impart a little gravity to the proceedings, and to remind the audience that despite ongoing optimism, the threat of failure on the local and international stage remains very real.
The sponsors had assembled a compelling group, and the panel as a collective had real insight to offer into the process of internationalisation – particularly into the ways it differs depending on what factors prompted each business to embark on that route. In some cases it was a matter of spotting opportunities after a period of single-territory-success, in others the company had been founded with international operations firmly in mind, so that establishing operations overseas had been the intention from the beginning. Sonsbeeck, whose company is an online-only retailer, explained that even without physical retail outlets to consider, it is vital that employees think globally from the start.
Indeed, the importance of adopting a “global mindset” was underscored more than once, with Gestetner in particular airing a cautionary tale about his getting too caught up in the minutiae of running a UK business, losing sight of the ethos that’s required to operate the same brand to the same standards in multiple territories. Sensarma (whose brand moved from 5 countries to 52 in an extremely short space of time) ran counter to the morning’s emerging trend by suggesting that this global mindset should supersede any local / international divisions that exist within the company.
Another area in which all four panel members were aligned in their views was that of supply chain complexity, and the ways in which internationalisation compound this. In Boots’ case, Farquhar explained, the international company operates an entirely separate supply chain to that of its UK counterparts, taking account of differences in products and international regulations. Sonsbeeck’s example of the importance of supply chain agility was topical and, I’m sure, resonated with many audience members; when international freight was restricted by the volcanic ash cloud in 2010, the company was suddenly forced to adapt, and the redundancies and agility programmes they have in place today are a direct result of that unexpected business catastrophe.
Collins’ introduction was revisited, though, in the panel’s collective response to an audience question. A well-known retailer towards the back of the The Cumberland’s pristine conference room asked how each retailer goes about measuring the success of a worldwide portfolio. An insightful question, and one that prompted one of the most realistic and sobering messages of the day: more than quantifying success, internationalisation is about avoiding failure. So many organisations (including those with representatives on the speakers roster at the event) have had abortive attempts at globalisation, and it is important to realise that the ability to simply make international operations work, day in and day out, is not something that should be assumed. It takes time, perseverance and intelligence to succeed on the world stage, and an alarming number of those who try, fail.
The day’s busiest participant was unquestionably Jayne Rafter, who serves as Publishing Director for Retail & Leisure International magazine. Her publication was operating the RLI awards that very evening, and she was poised (and dressed) to interview two extremely high-profile speakers on stage during the day. The first of these was Joseph Wan, CEO of Harvey Nichols.
Wan’s interview was, for me, the centrepiece of the day. He is a compelling interviewee: at once affable, funny, and preternaturally calm and collected. As the interview proceeded, it became clearer and clearer than Wan is not just the management face of Harvey Nichols; he embodies everything that has made the company one of the world’s best known luxury retailers. Needless to say, Wan offered a perspective that was not found elsewhere in the day’s agenda (that of the luxury retail landscape), and his insight into Harvey Nichols international operations served as one of the better case studies in a programme that, as the day wore on, edged towards repetition.
Wan was nothing if not realistic about the state of both luxury retail and the industry in general. In response to Rafter’s first question, he was adamant that the landscape of both has changed significantly, and he did not expect what he referred to as “the good times” to return any time soon. What set his assessment apart from other, similar analyses was that he had ensured that each and every member of his team understood the ways in which the retail landscape had shifted, rather than assuming that they could continue to work in the ways they were used to.
Wan believes that the retail casualties of the economic crisis (including those mentioned in the earlier panel discussion) failed because they were slow to adapt to this changing environment. As a counterpoint, he offers Mulberry as an example of a luxury brand that has risen to these challenges and thrived. As with most other speakers, Wan also stressed the importance of “having your house in order” and being able to demonstrate long-term profitability at home before going international. Harvey Nichols, Wan explained, operates a licensing model, with a focus on emerging markets like Vietnam – those markets that are densely-populated and play host to a growing middle class. “We have the best of the best in luxury fashions – that is our USP. Whether we go to Hong Jong or London or Kuwait, I believe that that USP can travel intact”, Wan said.
Despite the company’s almost unrivalled success in the UK, he also believes that international expansion will become a necessity in the future, citing predictions that European and Western markets will have begun to stagnate by 2030.
How is that target market faring as a whole? Are there any sizing or cultural concerns that an apparel retailer should take into account? Wan’s answers were clear and carefully curated, belying his history as an arbitrator. Indeed, he placed considerable weight on the legal and jurisdictional parts of what he considers to be proper due diligence: ensuring that licensing partners are signatories to the New York Convention, ascertaining whether or not the growth potential exists to support your expansion into a new market for years to come, and understanding the customs regulations that apply to your target market. He cited by way of example for the latter a shipment of Harvey Nichols food hampers that were held up in customs for more than a year.
A point of commonality that Wan shared with the speaker who followed him was his willingness to discuss Harvey Nichols’ failures. In the mid 1990s, the company signed a deal to open a store in Jakarta, Indonesia. Following various setbacks, the store did not open until 2008, at the peak of the economic crisis. It very soon transpired that sufficient local currency did not even exist to pay Harvey Nichols their royalties, and the store was forced to close. Wan accepts that the company’s due diligence was insufficient in this case; Harvey Nichols trusted their partners’ assurances that the Indonesian market could support the proposed expansion, when in fact, with the benefit of hindsight, the affluent class that would have supported a Harvey Nichols store simply did not exist.
Although he also offered some excellent insight into how Harvey Nichols protects its brand overseas, this cautionary tale was Wan’s lasting contribution to the day. If one of the largest and highest-profile luxury retailers can get it wrong, the same could happen to anybody else.
Gordon Farquhar, who had been part of the earlier sponsored panel, took Wan’s place on the stage, and delivered a presentation that was in many ways as refreshing as the one that preceded it. Farquhar clearly has considerable experience of internationalisation, and the lynchpin of his presentation was a frank look at Alliance Boots’ failed global expansion, followed by an examination of how they did things differently the second time around.
In the late 1990s, the company expanded to Thailand, the Netherlands and Japan. To hear Farquhar tell it, the core UK business at that time was not particularly healthy, and to make matters worse they chose a poor partners, priced their product lines incorrectly, and failed to take account of consumer needs in their new markets. Farquhar was garrulous and self-effacing in revealing that all of these stores had either closed or been consolidated by 2001. As with Wan’s earlier example, Farquhar highlighted the lack of due diligence and even arrogance on Alliance Boots’ part when it came to internationalising their business. At the time, the company tried to replicate its UK practices and rely on its existing brand cachet in order to succeed overseas; neither was effective, and as a consequence Farquhar and his team documented each of their failings and used these to inform a new, considered franchising strategy.
By reminding the gathered retailers and brands that there are no overnight successes in internationalisation, Farquhar underlined a message that ran throughout the day’s proceedings: the importance of persistence.
Farquhar was followed by a panel discussion between Neil Roberts (Head of International Franchise Development at Clarks) and Helen Barnish (Head of International Franchise at Hamleys of London), chaired by Stephen Robertson. The ostensible theme of the discussion was “Building an Effective Partnership Strategy”, but unfortunately much of the material that Roberts and Barnish provided had already been covered by speakers earlier in the day. Due diligence, as always, was the cornerstone of both companies’ strategies, and Roberts in particular stressed the importance of sharing best practice between franchise partners – in Clarks case this is handled through a bespoke extranet. Barnish and Roberts both agreed that setting realistic milestones for franchise partners is an effective way to both build partnerships and maintain quality standards – but beyond these insights, the final pre-lunch session had precious little new to offer.
This is not a slight on the nous or oratorical skills of either speaker, but simply a result of an extremely dense agenda given over to what is, in essence, a fairly narrow topic. The lessons gleaned from this and other, later panel discussions (which unfortunately suffered the same fate by dint of being confined to a topic on which almost everything has been said) were no less valid than those contained in the earlier sessions, but they did lose a good portion of their impact because, by definition, they repeated a lot of what had gone before.
A large component of that execution, he explained, lies in convincing the company itself that internationalisation is the right strategy for growth.Luckily, then, the first after lunch session was, as the saying goes, something completely different. Howard Saunders (CEO of Echo Chamber, a retail consultancy) is about the most unique speaker I’ve seen. Looking like a cross between Dorian Gray and a young Sigmund Freud, Saunders bounded up to the stage to deliver a kinetic and impassioned presentation that I can only describe as a love letter to the retail industry. If the day’s other speakers believe in retail, Saunders lives for retail. That said, though, he opened by painting a dismal picture of the industry. “Retail has changed”, he lamented, “and it’s never going to go back”. Bookended by photos of shuttered stores and sales and stock clearances, one of Saunders’ opening slides read like an obituary for high street retail, listing each of the retailers and brands who had collapsed over the past few years.
“People don’t care about retail any more”, he mock-cried, before correcting himself with a photograph of the opening of the Westfield Stratford Mall, which saw a 280,000-strong crowd on its opening day, saying that “…they do care about retail, when it’s done well”. Citing the day’s unofficial theme, Saunders agreed that, yes, retail has changed and is unlikely to go back to how it was – but for him it has changed for the better. Over slides of pristinely-designed stores from Primark, Uniqlo and H&M (the latter on 5th Avenue in New York City), he argued that innovation is paradoxically alive at what should be the worst possible time for retail. This, he believes, is that what will characterise the new generation of retail outlets; customers want enthusiastic experts working in stores, specialists with a real belief in and understanding of the products they are selling; they want story-tellers, not selling things, but telling things; they want tailors, people who make them feel as though every product was made for them; and they want imagination, from pop-up stores to unique concepts like Loblaws’ beautiful grocery store in Toronto.
It goes without saying that Apple also merited inclusion in Saunders’ presentation (“because they’re so bloody good at it”), but they are by no means the only brand maintaining an imaginative and effective presence on the high street. He also draws particular attention to Prada’s “twenty-four-hour museum” and the extravagant Singapore Bay Gardens.
In a more direct version of Joseph Wan’s earlier statement about retailers’ failures to adopt, Saunders demonstrates that so much of high street retail has lost its sense of purpose, leaving it with nothing to offer the shopper. It’s an extreme case, but by contrasting a flagship Louis Vuitton store with a row of bored men waiting outside a shopping mall BHS, Saunders hoped to drive home the fact that if there is nothing for a shopper in a given store, he argued, then obviously they’ll go elsewhere. It’s a brutal distillation of the day’s major unspoken fact, but no less true for it: if the high street is dying, it’s the high street retailers’ fault. Despite closing with a slightly uncomfortable list of those retailers he predicts will collapse in the coming year, Saunders is not actively seeking the death of physical retail – far from it. He, and the shoppers he represents, is seeking the death of mediocrity in retail. Only by transcending the factors that have precipitated the downfall of so many retailers can we revitalise retail both at home and overseas.
Saunders would be a difficult act for anyone to follow, and unfortunately the day’s remaining sessions (bar one notable exception) were confined to discussing anew the practicalities and probabilities associated with international expansion. It’s not to say that Stewart Binnie (Former President of Aurora Fashions), Simon Marshall (CEO of Fawaz Al Hokair & Co.), Mark Eve (Head of Global Partnerships at New Look), Carmine Rotondaro (Worldwide Real Estate Director for the Gucci-PPR Group) and Ben Gordon (Former Chief Exec. of Mothercare) had nothing to contribute to the agenda. In fact, Binnie offered some interesting insight into the history of trying to internationalise brands like Oasis and Karen Millen, Marshall examined the role of e-commerce and price transparency in internationalisation, and Rotondaro underscored the importance of due diligence and prudent financial planning before any internationalisation takes place. The trouble was, they had all been beaten to the punch by speakers who had gone before them.
That this went further than just the typical after-lunch ennui was exemplified by the reaction that well known entrepreneur and infamous Dragon Theo Paphitis received. Interviewed by Jayne Rafter, Theo spoke willingly about his television and investment work (both things the audience were keen to known about), but it’s important to remember that Paphitis is no stranger to retail, serving as CEO of Rymans Stationers and Owner of the lingerie and intimate apparel company Boux Avenue.
Undoubtedly his ample resources play a part in this, but Paphitis was the first speaker from an actual retail background to move away from the now oft-repeated mantra of research, prepare, separate, and communicate. Paphitis explained that he launched Boux Avenue at what many people would consider to be the worst possible time – at the height of a recession. The company was launched in Iceland, Gibraltar, the Middle East, South Africa and Australia because Paphitis felt as though the Eurozone was simply too volatile a market. Indeed, he expects that Boux Avenue will always have more international stores than UK ones. Nevertheless, he believes that the brand experience (something Boux Avenue has given considerable attention to, and something that will be unified across stores worldwide) is what will come to differentiate physical retail in the near future. When asked about the demise of La Senza, he places the blame squarely on the fact that private equity operators chose to run the company on the basis of spreadsheets, rather than as a brand with a consistent identity and a desirable shopping experience.
Like Saunders, Paphitis believes that customers need a reason to buy from you. And for him, intimate apparel is in many ways the embodiment of that desire: no customer wants to shop for something as personal as lingerie and have a bad shopping experience, because that experience will colour her impression of the product from then on.
Paphitis explained that, as a result, he considers service to be the most important component of retail. While he doesn’t subscribe to the arbitrary notion of staffing ratios, he believes that “retail is not rocket science – it’s about detail” and that “if you understand your customers, you can survive in some of the most difficult circumstances”. And survival for him means more than just profitability; like Bill Clinton at this year’s NRF show, Paphitis is acutely aware that retail means jobs, and he appeared to understand that only by restoring the safety and security of the retail jobs market could companies like Boux Avenue continue to deliver the service and brand experience that he believes will define them.
Paphitis’ advice for businesses looking to internationalise? “Do it. There’s never been a better time.”
And so it was that the International Retailing 2012 event ran full circle, from announcing the death knoll of retail to acknowledging the fact that, yes, it can be a profitable industry, worth getting passionate about and certainly worth the quantity and calibre of speakers that the British Retail Consortium had arranged. The programme definitely suffered from repetition, but from discussing the day’s agenda with some notable retailers after the show, most of them were simply glad that this kind of information and optimism exists, and that fellow industry figures are giving genuine consideration to its future – ensuring that the industry will be able to surmount the bumps in the road and become more profitable and personal as the world changes alongside it.