Talking to Customers: What Regional Department Stores Can Teach Flagships

An interview with Selvane Mohandas du Ménil, Managing Director at IADS, the International Association of Department Stores


La Samaritaine recently opened its doors following a 750 million-euro makeover. With tourists largely absent, the LVMH-backed brand wants to become the world’s largest concept store and for "Parisians to reclaim" the iconic department store.


It could look to department stores outside of Paris for inspiration on how to connect with local customers: beyond capital cities, business is brisk around Europe with regional department stores outperforming flagship stores. Less reliant on tourist revenues, local customers are spending more and in some cases exceeding 2019 levels, according to Selvane Mohandas du Ménil, managing director of IADS, the International Association of Department Stores. He says the pandemic has been a blessing in disguise for jumpstarting innovation and creating new revenue streams. BSPK caught up with Selvane to discuss how stores are connecting with local customers and the enduring role of the flagship. Below is an edited transcript.


Overview

There are 10 percent fewer people coming in store since department stores reopened but customers are spending more. Almost all our members are currently trading up versus May 2019 on a comparable basis. Regional stores are outperforming flagship stores as they are less dependent on tourism than flagship stores in capital cities. What we see is the regional stores are overperforming which is good however given the weight of the tourist business (for flagships) that is not completely compensating for the lack of tourists.


Does Local mean Loyal?

I would say that in regional stores the role of the store has been connected in the lives of the customers since the beginning. That connection was lost in recent years in capital cities. If you live in Paris you may not think to check out what is going on in Galeries Lafayette, Printemps or Bon Marche because in recent years you thought it was for tourists and where you will find only luxury brands.

Overall what we learned is that we have fewer people coming in store but that (outside of capitals) people are staying loyal to their department stores and they are buying more...it's a combination of revenge shopping and a need to re-equip after 18 months of staying at home.


The Role of Flagships

When you are Galeries Lafayette or El Corte Inglés and you start thinking about integrating new brands and making sure you are delivering the right services you cannot only think about flagships anymore -- you have to think on a national level to activate economies of scale. That is the reason why (the pandemic) is a blessing in disguise, it's helping department stores to stay connected with local customers.


We all know flagships are not here to be closed..... no-one in the world is super happy to keep on living on screens. However, the actual question is to what extent should your flagship store be different from the original stores? How do you connect your flagship stores with regional stores?


In March 2020 when Galeries Lafayette had to close, they had no liveshopping experience. Six months and two additional lockdowns later, livestreaming represented 20 percent of Galeries Lafayette Haussmann’s turnover. The goal is to generalize this service for all customers so if you are in Marseille you have the option to go to the Marseille store but you can also see what is presented in Paris and have access to the products. Your flagship has to be outstanding. Europe is similar to what we see in the US in terms of new working and living habits: Parisians are starting to relocate to Marseille or Lyon and they expect the same level of service but they also want the right to enjoy the same offer and product curation from Paris, even virtually. No more distinction between Tier 1 and Tier 2/3 stores. That is valid for the whole of Europe.


Department Store Ecosystems

Innovation has grown. We see that department stores are moving from networks of stores to ecoystems so it's about articulating the stores as part of the customer journey along with the app and website just to make sure that overall you are capturing the customer in your brand.


Will this innovation drive last or will it become integrated into company strategies? You have upfront innovations, for example, BSPK is key in clienteling, department stores are innovating in all the followup moments. For example, department stores in the Philippines, Denmark and Mexico are investing strongly into "buy now pay later "options which are helping sales to grow.


There are initiatives in logistics and last mile. How do I deliver in a proper manner? Magasin du Nord in Denmark gives the option to pick up a product in store that you ordered online from somewhere else. This allows them to see what is selling because people tend to open the boxes in the store and that helps convert 15 percent of those who come to collect a parcel into customers.

In the Philippines, you can get a unique number which gives access to live shopping through whatever method you want: Viber, FaceTime, SMS or an email and it gives you access to the whole proposal of the store with someone to guide you through the process.


Record retail staff shortages in the US and the evolving role of employees.....

At a global level there is a strong difference between the countries where there was strong support from the government versus the ones with nothing -- in the Philippines and Mexico, for example, they don't have issues attracting employees. In Europe, governments were supportive and making sure employees were taken care of: Germany covered at 65 percent of pay for those on furlough schemes, in France it was 95 percent - there was not an incentive to come back.


The real question is how can we make sure that working is attractive again? This comes at a time when the retail job is changing and we don't know from what and to where. We are right in the middle of the evolution .......but as global retail veteran Andrew Jennings said recently "retail has never been as exciting."