The Future of Department Stores with Christophe Cann

Christophe Cann

With over 30 years of retail fashion management experience across Europe and Asia, Christophe has led some of the largest and most recognised department store chains in the region.

Having begun his career with Auchan, Christophe joined luxury French department store group Galeries Lafayette in 1991. In the following years he worked his way up through the group in various management roles across their properties in Europe and Asia, until he was ultimately appointed Deputy CEO for the group with responsibility for over €2.5bn sales turnover and 12,000 employees.

In his role as Group CEO for Al-Futtaim Asia, Christophe managed the group’s department store and fashion brands across the region with responsibility for SGD1.6 billion sales turnover and 6,600 employees.

As customer behaviours and expectations continue to evolve, the retail industry fights to keep up with these new demands. Christophe shares with Barracuda Search his reflections on department stores today and his views of the future of the format.

Despite the significant challenges facing department stores today we continue to see examples of stores, both old and new, that attract high levels of customer footfall and deliver strong sales growth. What do you see as the future of department stores?

To be frank with you, I see this crisis as just an accelerator of what we knew before. Principally that most department stores are still living in the past. Sorry to be a bit brutal. They are living in the past in the sense that they pretend to be customer-centric but actually they are brand-driven.

I remember when it used to be that when we talked about a department store it was about location, location and location. These days, location and convenience are important but it is also about customers that are really looking for experience. They are no longer driven by buying product the way that there were in the past and again I think that this crisis has been an accelerator for that.

Department stores must quickly rethink their customer value proposition if they want to remain in the race. They need to build a long-term vision, but at the same time they have real costs to consider so must be very practical and close to the behaviours of customers to turn this disruption into opportunity.

What do you believe is this long-term vision that they need to build?

They need to think of themselves as a customer service business that that just happens to sell products.

Firstly though you have to understand what is your target customer, what is your strategy and how do you address it? You cannot be all things to all people.

At the end of the day the customer will increasingly buy from whoever provides them with the strongest value proposition combining the range of products, value, convenience and service. I think that department stores need to ask themselves all these questions because otherwise online and other store formats will eat their breakfast, lunch and dinner.

You have to start by getting the basics right. What I mean by this is putting the customer first with a company culture and then systems, people and processes all properly organised around customer satisfaction. Technology definitely is an enabler but for me people and processes are absolutely required to deliver the appropriate customer experience.

 You spoke there about the competition presented by other types of store and online. What advantages do you think that department stores have over other retail formats and channels?

I still believe in the department store format but the format needs to evolve. Personally I still think that shopping in a physical store with ready access to other services is a major part of a rounded customer shopping experience.

At the end of the day we are social animals. We still need to interact with other people and to some extent we want to be seen and we want to see others; otherwise, we can just stay in our pyjamas all day, there is no need to buy nice clothes and we don’t need to interact with anybody!

A successful department store usually has a beautiful building and has beautiful setup inside. It provides a nice place to interact with people in real life and I think that this is still an advantage that they have over online businesses. They have to make full use of this advantage though. As a customer I want the department store to entertain me, I want the department store to educate me and I want the department store to engage with me. At the end of the day we need to think about what is the benefit for the customer to shop in your store.

Another advantage is that department stores can be an immediate solution provider. Even with next or same day delivery this is an advantage. What it does mean though is that you need to train and empower your store staff so that they can provide these solutions. Think about an Apple store, they are one of the best examples of this.

Crucially as I said at the beginning, department stores should consider themselves to be a service business for the customer. With space you can provide services that others can’t, so if customers these days expect to find healthcare services, leisure services and things like this, well maybe it doesn’t fit very well alongside Gucci and Prada but the problem is that if we don’t do that then maybe in a few years this business won’t be relevant anymore.

So it’s not about only customer acquisition anymore. It’s about the customer retention.

During times like these when people are unable or less willing to go into large stores, how do you retain customers and build a relationship with them?

 During COVID many of us have been buying more online. With good retailers the more we buy the better they get to know us so they can push us products that we will like, sometimes even before we know we want them.

In recent months I have had great personalised online experience from retailers ranging from health products and leather goods through to wine and ceramics. I have bought more from all of them because of this. On the other hand, I am also a member of many department store loyalty programmes here in Singapore. So they should know me, right? I’ve been in Singapore for seven years and I’ve been buying a lot. The problem is they don’t know me and they don’t push me proper personalised material. Instead they send me offers for products that aren’t relevant to me, so I don’t buy more.

For me a loyalty programme is a must have, as long as it’s a personalised. If it’s to pretend that I’m a loyal customer and you don’t really take care of my needs then it’s a waste of time. At the end of the day we all know that a multi-channel customer is definitely more valuable than the single channel customer but we need to make that experience seamless, personalised and as enjoyable online as off-line.

When you talk about a seamless O2O (online to offline) customer experience, what does this mean for customers today and how can department stores satisfy these expectations moving forward?

I see this time is a great opportunity for department stores to boost their online strategy, but as I said they need to do this with a very practical approach that fits with their customer.

These days customers are more empowered, connected and informed than at any other time in the retail industry. Department stores need to understand and anticipate their customers’ needs but also ensure that their own shopping proposition is very clear. There can’t be any ambiguity on how customers can get their products.

O2O provides opportunities to make the shopping experience easier when people don’t have time or want to walk around the store. Department stores can do click and collect, they can use the store as a fulfilment center to deliver to homes or even setup a drive-through system. If you want to keep people safe and avoid human contact then a drive-through means the customer can order product online and staff can pass goods through a window or put them in the customer’s car as they drive past. We need to really rethink how to make the whole experience more customer-centric.

As you transition from a mainly instore experience to a more balanced O2O setup, one of the questions that needs to be answered is what kind of organisational design do you need to put the customer first? Off-line, you need to identify the gaps in the existing structure and what are the implications for customer-centricity. Online, you need to identify the new capabilities which are required to meet the new customer expectations. You need to have a very lean and very easy structure for your team to understand and embrace then your customers will really feel that everything has been organised for their pleasure and satisfaction

 Often it is not the strategy itself but the implementation of the strategy that is the key challenge in a transformation. What approach do you take to achieve change in an organisation?

Yes, that’s a very good question. Let me tell you about my last experience.

When I the joined the company as CEO, I came in and spent the first month asking the existing team what the company stood for. Guess what? I asked 30 people and I got 30 different answers. The company didn’t have any proper formalised vision and mission. So we built one together, keeping the customer in mind at all times.

One of my learnings is that you have to make sure that this mission and vision is simple and meaningful because otherwise it’s just a generic, meaningless cliché sitting on the wall of the office and it will never translate into any kind of customer satisfaction improvement or do anything to make your company different from your competitors.

When we had set the vision we started by communicating it within the company at all levels, including to the frontline and sales staff. I would always refer to it when we had to make any business decision and this was the framework for all of us to decide what the company will do or not do. You have to have a vision and a framework to support it. Of course inside the framework you also have to be able to play and be creative because people are not engaged long if they are treated as robots, but at least you give them a framework so that everyone knows what we want to achieve and how we aim to do that.

Then of course I needed to change parts of the company myself. That is the elegant way of saying I changed some people. At the end day I told them:

“OK, I’m driving the bus and you are all inside the bus with me. If you don’t want to stay in and go on the journey we have decided to pursue then it’s time to get out”.

I don’t want to waste time so it is important that people are quickly aligned on the journey. This is even more true today because the situation is what it is. It will not go back to normal and we know that we need to change very fast.

Ultimately we work with people so you need to recruit for attitude and you need to train for skills, not the reverse. Of course I want the best people in each function and area but I want them first to understand what is the starting and end point of our journey. They may be very good in their own specialty but if we don’t all share a common vision and mission then the business doesn’t need these people.

When you have recruited the right people you have to make sure that they are really empowered to deliver what it takes to delight the customer according to your company’s mission and vision. As part of this of course you need to set the right KPIs to make sure that what everyone is doing serves the customer and business targets and so that that you can track progress and be aware when you are heading in the wrong direction. This is why it is crucial to be properly using tools like AI and customer data analytics to measure the effects of your decisions on your sales and customer satisfaction. What I have noticed previously is that we were implementing actions and thought that they were good but there were occasions where we didn’t really measure the results and so didn’t refine decisions like we could have.

Once you are on the transformation mission I personally think that good is never good enough. You need to make sure that as CEO or business leader you constantly work through your customer journey to check and see what can be improved. I have tried to lead with purpose by taking care of my people and my customers. This has to come from the top, you cannot delegate that.

Christophe thank you for sharing your valuable insights with us. Are there any final comments that you would like to leave us with today?

Well to answer your original question, I ‘am still quite positive about the future of the department store.

Tough times should be seen as an opportunity to make a business future proof but it has to be done now. The change has to happen right now; otherwise, I can tell you we are going to see a lot more bad news for these businesses in the coming months and years.

I think it important to focus and I do believe that less is more. Most department store businesses probably don’t need to have a huge offline platform.  It is better to focus on a smaller number of stores and make sure that you have proper CAPEX invested to improve experience and accelerate the O2O journey.

Businesses must embrace change, they must embrace flexibility, they must embrace innovation and they must have a purpose.

Interview conducted by Barracuda’s Head of Hong Kong, Max Holdsworth.

August 2020