DUBAI — In the post-COVID-19 world, customer behavior has changed, and it’s not going back to what it was before.
This was the resounding message at the World Department Store Summit here earlier this month. Retail and brand executives from across the globe agreed consumer expectations are higher than ever, with speed, convenience, flexible payment and delivery options being top priority.
“We are operating in rough seas,” said Holger Blecker, chief executive officer of German department store Breuninger. “The biggest challenge is understanding and adapting to the behavior of customers. What we see is a face of customer behavior that is moving faster than ever. It started during COVID-19 and it’s still going on.”
Most agreed there were opportunities to shift gears in this challenging environment.
“Department stores are more alive than ever. It’s just a matter of understanding the situation has changed and refocusing the entire company,” said Dimas Gimeno, the fourth generation of the family that owns Spanish retailer El Corte Ingles.
After spending many years at the helm of the department store, Gimeno divested and founded Wow Concept, a brand experience platform merging physical with digital.
“I have a love for department stores that I am trying to move to the next chapter.”
Wow’s first flagship, which features a curation of many digitally native brands, opened in Madrid in March 2022 and a second location will open before the end of the year.
Khalid Al Tayer, managing director of UAE-based Al Tayer Insignia, who hosted the event for the first time in the Middle East, shared their success story in navigating the changes. Al Tayer Insignia, one of the dominant retail groups in the region, operates under license the department stores Bloomingdale’s and Harvey Nichols, well as joint ventures across the region for luxury brands including Prada, Gucci, Loro Piana, Jimmy Choo, Alexander McQueen, Bottega Veneta, Saint Laurent and Balenciaga.
“The stores are created to work for the marketplace so the customer can choose whichever is most accessible and efficient,” Gimeno said.
Al Tayer told delegates that the group’s business has evolved to being 46 percent online in just seven years. This shift took a lot of “internal disruption,” as he describes it.
Seven years ago, he spearheaded the creation of the group’s luxury e-commerce platform, Ounass. By focusing on key services that Al Tayer called “luxury convenience” — like two-hour delivery, language and content localization — the company quickly dominated the space, becoming what Al Tayer said is today “the number-one luxury multibrand retailer in the Middle East, online or physical.”
While benefiting from the many brand partnerships the larger group had through its department stores and luxury retail partnerships, Ounass operates as a completely separate entity, with its own “governance and oversight as a pure player in e-commerce,” Al Tayer said.
“The team that works on Ounass is tech native, with hardly any coming from our retail business,” he added. “The digital team are pure players and only focus on digital, and the retail team focuses on omnichannel. This allows us to maximize our output.”
While they have no plans to open any Ounass physical spaces, they have hosted several successful pop-up experiences with first-time brand entries in the region, including Skims and Fear of God.
Harnessing the power of new technology was another focal point for discussion. For retailers, building out analytics capabilities to better understand customers is a cornerstone for successful clienteling.
“We need to deepen and elevate relationships,” said Angelo Zegna, consumer and retail excellence director at Zegna.
“The first generation of my family in the business created the fabric; the second, my grandfather, did ready-to-wear; the third generation went into retail. And I really think the fourth generation is all about how far we can take clienteling by personalizing the experience with the power of technology.”
Zegna is tapping into that opportunity with data aggregation. The company has invested in a team of data scientists that works with predictive modeling as well as AI. “The aim is to create a unique and customized experience for top clients,” he said. “There are over 2 million clients around the world who could potentially spend over 50,000 euros a year.”
Zegna told the audience: “2010-19 was all about the customer coming to us. Then after COVID-19 it became about brands going to customers. Now we are in the third stage, which is the need to be in our customers’ lives. So instead of talking about share of wallet, we are talking about share of life. This is the biggest opportunity we see.”
The goal, he said, is simple: “To allow us to send the right message at the right time with the right product to our customer.” Zegna said the approach has been successful. “Over 50 percent of global sales are generated through clienteling.”
Some of the tools they utilize include an advanced configurator, which allows style advisers to sit with customers and visualize more than 50 billion combinations of looks.
He posed a provocative question to the audience: “Will stores always be needed?” He said the brand already has “secret stores” where clients come in by appointment only.
There is also value to this data since department stores have a lot of information on what customers search for and what they buy. Leveraging this can be both good for brands as well as the stores. Nordstrom began using its website for advertising space in 2021.
“There is a better chance of discovery if we can partner with our brands,” said Pete Nordstrom, the company’s president and chief brand officer. “We aren’t advertising airlines here. These are brands people are coming to our site looking for. We are a house of brands. It’s important we have a good relationship with brands. We look at issues they are solving for as well and see how we can be a better partner. It’s also a revenue stream for us.”
Optimizing physical store spaces is also important as consumer spending shifts from material goods to experiences. Gimeno shared that Wow in Madrid is home to one of the most buzzed about rooftop restaurants in the city. “This drives a lot of clients to our store.”
Blecker said that in Germany they host a big party every year, which is vital to their community building. More than 1,200 clients pay 250 euros to attend a curated experience of music and food. “We need to make contact with the customer and drive interaction with the customer even if we know in most cases they will buy somewhere else.
“Making profits of course is vital, but first we create magic moments for the company,” he added. “Wherever they are shopping with us, online or off, they need to feel the brand and that drives customer loyalty. Even in tough situations there are winners in the market. We have to track and prepare ourselves to gain market shares and gain customers.”