I would like to share with you the interview that ANGED did with Felix de Iturriaga. Through it, we will be able to delve into the present and future of retail with the help of a professional with a vast experience in the sector and utterly updated on the latest trends. Felix’s analysis and personal opinions regarding the store of the future and the arrival and impact of technology are not to be missed. I hope you enjoy it and find value in it!
Félix de Iturriaga, Professor of IE’s Retail Management Program: “Talent is what brings the greatest competitive advantage to companies in the sector”.
Deep changes in purchasing habits or digital transformation are revolutionizing the retail sector. An environment that increasingly requires new profiles and skills within companies. IE Business School’s Retail Management Program has been created to meet this new demand. Directed by Eduardo Ruiz, this executive program addresses the fundamental issues that companies’ management teams require today. In ANGED’s Blog, we interviewed Félix de Iturriaga, professor of Strategic Management in the Retail Management Program at IE Business School and strategic Retail consultant, with extensive experience in the sector. His roles include, among other positions, CEO of GOCCO, Global Retail Director of Telefonica, general manager of retail for EMEA at Quicksilver, in addition to his 5 years’ experience in the international department of Inditex.
Sometimes, when we talk about the digitization of commerce, we tend to generalize and talk about it as a phenomenon that exclusively affects online sales. However, there is a process of deeper change in the consumer. What has mainly changed in the way our customers buy in recent years?
FI: I would rather say, what hasn’t changed?! Today’s customers can shop wherever they want, at any time of the day or night, in a much more practical way, without having to travel, without having to endure queues, without having to carry their purchase, or get stuck at the exit of the mall. They have much greater knowledge, not only of products and prices, but of the experiences of other consumers who anticipate more real expectations, and therefore lead to greater customer satisfaction. Not to mention retail technology at the point of sale, or the evolution of customer satisfaction monitoring that motivates better customer service at all points of contact with the brand … in short, digitization has made the purchase processes much more practical, satisfactory and bearable for the customer.
In mature markets such as the United States, people are beginning to speak of “retail apocalypse”. However, we see that the shutdown of physical stores is accompanied by the opening of new concepts, the innovation of spaces, etc. Where is the store of the future heading?
FI: You would think that retailing has its days counted. It is true that only in the United States in 2017 more than 9000 points of sale were closed, and this is only the beginning. But it is the beginning of the transformation of the model, where brands tend to have fewer points of sale, but they are larger and better located. In other words, there will be more flagships and fewer neighborhood stores. In the case of mass consumption and category killers, the revolution works backwards, migrating from macro-surfaces in the suburbs to smaller ones in the center of cities, which also act as promoters of their online offer.
In all cases, the stores will be more experiential, and their role is, on the one hand, to generate a link between the brand and its customers, to be able to listen to them, understand them, and above all, transmit the values of the brand; and on the other hand, to be a pivot of its omnicanal offer. Therefore, what seems to make no sense anymore are those multi-brand points of sale that are merely transactional, with mass merchandising, where the shopping experience is not at all gratifying. For this type of purchase we will go to the marketplaces, and our visits to the brand stores will be part of our leisure, such as going to a restaurant, or to the cinema. We will no longer be forced to go to the store to buy, we will go to the store because it will be a show, where the purchase may or may not be part of the show.
The stores will be more experiential, both to generate a link between the brand and its customers and to be a pivot of the omnicanal offer.
Technology is a vector of change, but not the only one. Where should a company start to consider the process of digital transformation?
FI: In my opinion, approaching change from technology, or from the concept of store, or from the implementation of a digital marketing strategy is a mistake. The first step should be to undertake a deep strategic reflection on the global vision of the business, positioning, and then think if the digital impact forces us to rethink our value proposition. Do we want to be Primark or Louis Vuitton? Depending on the conclusions we draw, we will have to adapt our expansion policy, product, define the different omnicanal customer journeys, and what the logistical needs of our model are. Only then will we be able to identify the systems architecture and technological solutions that will enable us to successfully undertake our recently revised strategy.
That said, there are a number of technological solutions that are likely to be adopted in isolation, and that can add value to both the customer experience and the retailer’s management capacity, provided that it is clear which is the commercial objective being pursued. For example, dynamic marketing can be a solution that adds value for many retailers, but if we stop to evaluate the content in many cases it seems that what has prevailed has been the means, the technology, over the end, and this can never happen.
Some studies foresee the robotization of up to 50% of the workforce in sectors such as retail. Despite this, talent within companies is more appreciated than ever. From the management team to the staff at the point of sale, how are companies going to respond?
FI: In my opinion, talent is undoubtedly one of the most differentiating points and one that can provide a greater competitive advantage. Once the diagnosis and strategic approach has been undertaken together with the top line and the Board, the CEO’s top priority should be the restructuring of the management team. If those in charge of the transformation of society do not believe in it, the process will be a continuous struggle of the establishment against change, where they always have a problem for any solution. This by no means implies that all managers should be dismissed; it will simply be necessary to relocate each one where their natural skills make them more valuable for the project, train them intensely, and finally, unfortunately, replace those profiles that do not fit. As for the staff in the store, it will be necessary to follow exactly the same philosophy, but only once we have undertaken the whole process of change and have given them the new tools. It’s rather a matter of attitude on the part of the staff, and of training and explaining why change is necessary, and how it can help employees and customers on the part of the company.
Approaching change from technology, or from the concept of store, or from the implementation of a digital marketing strategy is a mistake.
As far as the value chain is concerned, this whole process is also a challenge for suppliers, logistics, information systems.
FI: Without a doubt. Gabriel Farías, a sourcing expert, recently wrote that sourcing technology implies speed. Software such as Centric, which allows the vertical integration of the value chain of both suppliers and the internal work flow of the entire production process, from design, pattern-making, purchasing to logistics and even to administration, are differential tools to gain speed in the time-to-market. Companies such as Nextail, which are developing algorithms for the optimization of purchase, distribution, restocking and movements between stores, seek to optimize stock to maximize sales opportunities and improve gross margin, which is crucial in these turbulent times of discounts and endless promotions. And what can we say about solutions like Salesforce.com, which allow us to complete an omnicanal strategy, with optimum management of the client portfolio that multiplies the effectiveness of our digital marketing campaigns. We could go on for hours, but I think this shows to what extent technology is impacting retail.
In an environment so liquid that it transforms so quickly, strategic planning in the mid and long term is more complex. However, in what timeframe should/could a strategic and operational change such as this be undertaken?
FI: The problem is not so much in the change of the retail model as in the industry. Today it is easier than ever to lift brands out of nowhere, as Hawkers has done, which is already approaching 100 million euros in turnover. It is true that many of these pure online players are launched into the physical world without a clear model, or without sufficient experience, generating a legacy that if not managed in time can destroy the company itself. It is precisely the management of this legacy that, in my experience, generates the greatest problems for retailers.
To a greater or lesser extent all the so-called brick and mortar have a burden on their backs, whether in human resources as we have seen, or in location, systems, processes, etc. that are no longer valid under the new retail paradigm. Therefore, I would recommend patience, and not skimping on resources. It’s a race for the long term. This is easy to say and difficult to put into practice when you have some objectives and/or expectations for the investment by the company’s shareholders. The bad news is that the new model will require heavy investments in systems, disinvestments and investments for the relocation of commercial spaces in the new model that the digitalization sets for us, a deep process of transformation of the company’s culture, and a maturation period of 2 to 4 years, depending on where each retailer is in particular. The good news is that not everyone will see it coming, or will be able to convince their shareholders of the necessary investments, and that those who do not will fall off the path, generating a new natural selection. Those who survive will experience very sweet moments.