BoF: 5 Technologies Transforming Retail in 2018

BoF: 5 Technologies Transforming Retail in 2018

BUSINESS OF FASHION | KATI CHITRAKORN

LONDON, United Kingdom — 2017 was the worst year on record for brick-and-mortar retail. By December, more than 6,985 stores closed across the US, according to retail think-tank Fung Global Retail & Technology. That’s up more than 200 percent from a year ago, according to the firm’s findings. It also beats the previous all-time high of 6,163 store closings that took place during the 2008 financial crisis, according to estimates by Credit Suisse.

The reality is that many stores are closing for the same reason they’ve always closed — they simply don’t meet the needs and demands of customers. But at a time when consumers are empowered with choice and market conditions are increasingly volatile, new technologies can help brands and retailers drive valuable business efficiencies, and improve the overall customer experience and value proposition.

“The biggest upside to technology in fashion will be the ability to offer consistency, and being able to personalise the customer’s shopping patterns,” said Robert Burke, chief executive of retail consultancy firm Robert Burke Associates. Indeed, fashion companies that effectively deploy the right technologies will be able to enhance their competitive advantage by personalising products and shopping experiences, and refining logistical processes that nibble away at budgets.

However, fashion has been slow to harness many of these opportunities. “We’re only scratching the surface right now of technologies like virtual reality or artificial intelligence,” said Doug Stephens, a retail industry futurist and author of “Reengineering Retail: The Future of Selling in a Post-Digital World.” “But directionally, we can already envision a point where the margin of error for consumer shopping for clothing — both online and offline — will be almost nil.”

Here, BoF spotlights the five important technology innovations that can help brands and retailers boost their businesses.

Artificial Intelligence

Artificial intelligence has become one of the biggest technological developments in business in recent years, with its ability to help turn large and diverse data sets into enriched information that can help improve speed, cost and flexibility across the value chain.

Rapid advances in machine learning processing have already pushed artificial intelligence (AI) into the mainstream, and by 2020, the market for machine-learning applications is estimated to reach £30 billion ($39.5 billion at current exchange), according to the International Data Corporation. “It is, by far, the most important technology that is already here, growing and will change the fashion industry,” Javier Seara, partner and managing director of the Boston Consulting Group, told BoF.

In fashion, AI has the ability to help brands and retailers with predictive forecasting, capacity planning and merchandising. This means that consumers can enjoy the benefits of better product availability and faster, more accurate deliveries. According to 2017 findings by McKinsey & Company, an AI-based approach could reduce forecasting errors by up to 50 percent, while overall inventory reductions of 20 to 50 percent are feasible.

In addition to supply chain benefits, AI can also help create a smoother browsing experience and improve customer retention through personalisation. Online platforms like Amazon, Alibaba, JD.com and Zalando use AI enhancements to help generate precise product search results and display virtual storefronts tailored to individual shoppers, based on their unique characteristics and preferences.

“Retailers can leverage data to provide a more seamless and personal experience for customers, which increases conversion, repeat purchase and loyalty,” said Karen McCormick, chief investment officer at VC firm Beringea, whose portfolio includes personal styling service Thread, which uses AI and machine-learning to help men buy clothes.

Augmented Reality

Augmented reality’s roots go back to 1992 to a US Air Force-funded project, called Virtual Fixtures. The technology, which offers a real-time view of one's immediate surroundings altered or enhanced by computer generated information, was designed to help surgeons operate remotely, while enhancing their accuracy, by seamlessly blending in real-world information such as the location of major arteries. It improved performance by up to 70 per cent.

Augmented reality (AR) has evolved a lot since then, but often, it is still treated as a novelty rather than to solve real problems in fashion. For example, when Burberry launched an augmented reality feature, the tool was designed to interact with user’s cameras feeds to digitally redecorate their surroundings with Burberry-inspired drawings by artist Danny Sangra. The capabilities of AR are so much more, and could be a significant sales tool for the retail industry.

Unlike virtual reality (VR), AR has lower barriers to adoption. Unlike the latter, it does not require dedicated hardware as it is built to work with smartphones and tablets — devices that are already available to most consumers in the developed world. “AR capabilities are now available on over 300 million phones worldwide and it will be up to 1 billion by the end of 2018, especially as Google’s AR software, ARCore, comes online,” said Ari Bloom, chief executive of San Francisco start-up Avametric.

Unsurprisingly, beauty brands have been early to AR. L'Oréal is among the many cosmetics companies offering AR-focused apps, allowing for convenience and eliminating the mess of testing physical products in stores. It’s a move that is working: More than 20 million users have downloaded L’Oréal’s Makeup Genius app, whose AR function lets people test combinations of beauty products on their phones. Beauty app Meitu helped drive sales for Charlotte Tilbury: 13 percent of users who tried the lipstick through the app in 2017 clicked the "buy" button.

AR allows for convenience and eliminates the mess of testing physical products in stores.

Some fashion brands are starting to explore the opportunities. In January 2017, Gap unveiled a digital dressing room, developed by Avametric in collaboration with Google, which allows consumers to “try on” clothes without having to step into a store. Eyewear brand Warby Parker uses a combination of facial recognition and augmented reality, so customers can see what they look like in different frames. In January 2018, Amazon patented a smart mirror that uses AR to virtually overlay clothes on to users, to help stylise their look.

“It’s the ideal mix of digital technology living in the physical world,” said Bloom. By letting customers try clothes on virtually, the experience places no restrictions on the number of items that can be tried on, which means that customers may easily be persuaded to explore more items of clothing than they normally would in-store. It can also suggest clothing based on known user preferences or whatever is popular at the time, allowing for customers to broaden their horizons. As for online retailers, it could reduce the number of returned items, an industry-wide frustration.

Blockchain

The underlying technology driving cryptocurrencies such as Bitcoin, blockchain is a decentralised and distributed digital record that offers new opportunities for managing product safety, authenticity and ethical standards. Records cannot be altered after they have been added to the blockchain. The global blockchain technology market is predicted by Statista to reach $339.5 million in size, and is forecast to grow to $2.3 billion by 2021.

The most obvious use of this technology in fashion is to verify the originality of a garment. Microchips utilising blockchain can tell a customer with complete certainty whether a piece of clothing is genuine or an imitation; whether it was stolen, where it was made and the product’s general history. All this information could be accessible via a smartphone, and could help prevent counterfeiting and theft.

According to the OECD and EU’s Intellectual Property Office, imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5 percent of global imports. The organisation put the value of imported fake goods at $461 billion in 2013, compared with total imports in world trade at $17.9 trillion.

Blockchain can help retailers garner greater trust and brand loyalty throughout the product lifecycle, as it can tell consumers not just where an item was made, but also who it was made by, the conditions they worked in and how much they were paid. Shoppers could also learn about the composition of a garment, where the fabric was grown and what chemicals have been used.

De Beers, the world's biggest diamond producer by the value of its gems, aims to launch the first industry-wide blockchainthis year, to track gems each time they change hands from the moment they are dug up from the ground. The technology could be used to verify the authenticity of diamonds and ensure they are not from conflict zones, where gems could be used to finance violence. However, the technology has yet to be more widely explored by the fashion industry. “This is in the early stages and brands are not yet thinking about it,” said BCG's Seara, adding that the biggest challenge for fashion would be finding “the people who are able to work with the technology and implement it.”

Contactless Shopping

High-tech automated convenience stores are infiltrating Beijing and Shanghai. Powered by WeChat, a Chinese mobile messaging service, these unmanned stores require no checkout, no cash and no salespeople. Customers scan QR codes to enter the store and select products, and then pay using their mobile WeChat wallets. Sensors on the shelves detect the removal of items. Once an item has been removed, it is linked to the shopper’s unique ID in the smartphone app to prevent theft.

Outside of China, Zara has introduced self-checkout stations at a new 65,000-square-foot store in Madrid, its largest store in the world, which opened in April last year. Meanwhile, Rebecca Minkoff’s flagship store in New York lets customers buy anything from $200 handbags to $1,500 jackets on their own, without dealing with a sales associate. Amazon is also trialling an Amazon Go store where there are no checkouts, and Walmart plans to launch a contactless shopping store in Long Island by the end of 2018.

Contactless shopping helps to make the checkout process more seamless, efficient and convenient by eliminating hassles like long checkout lines or inconvenient hours. Still, half of all retailers still do not accept contactless payments, even though “touch-and-go” spending is expected to increase by more than 300 percent over the next four years, according to British bank Barclays. Analysts at Technavio, a market research firm, however, predict that the global retail self-checkout market will grow steadily over the next four years, posting a CAGR of almost 18 percent by 2021.

“In the retail industry, the act of paying is often treated as something that is detached from the experience. You have a great shopping experience and when it’s over, it’s ‘time to pay.’ But the act of checking out of a store is part of the experience,” said Stephens. Many retailers already have the capability to eliminate checkouts, but whether they choose to do so or not is “a branding decision,” he said. “How you choose to approach that depends on the brand story you’re telling, the positioning of your brand, and ultimately, the experience that you’re trying to craft and curate.”

“In 2018, there will be two types of stores: one for convenience where shoppers will go there, to get something. The second one has a lot to do with experience. For a retailer like Primark, convenience is always more important. A luxury brand like Burberry might focus on the experience,” agreed Seara. “In the end, brands might even have two models. If you’re a big retailer with multiple locations, you might have a flagship on London’s Bond Street with all the experiences, as well as a click-and-collect place elsewhere that is convenient.”

Facial Recognition

Diners at KFC in China can now pay for their meals by using a facial recognition system. Walmart previously applied for a patent that would use facial recognition to identify varying levels of customer satisfaction. Union Pay has introduced facial recognition-based payment system. And JD.com has recently announced that it is opening hundreds of unmanned stores, which will use facial recognition technology to register payment for products.

Previously, facial recognition was used mostly to help with criminal investigations or unlocking smartphones. But, “the recent release of the iPhone and its FaceID technology has brought us closer in bringing facial recognition to the masses,” said Beringea’s McCormick. “In 2017, there were huge developments from retailers around the world that would suggest that facial recognition technology is on the brink of mainstream adoption.”

According to Fung Global Retail & Technology, the global market for facial recognition applications brought in revenue of $178 million in 2016, making the second most adopted biometric technology after fingerprint scanning. Technavio predicts that the global facial recognition market will grow at a CAGR of close to 23 percent by 2021.

Not only could facial recognition technology offer convenience, but it can also provide insights on a consumer’s purchasing decision process by identifying individuals and developing personalised experiences for them. “Imagine a major customer at a store. He would walk in and sales associates — if they were well trained — would recognise him and know what he likes,” said Burke. “But if he goes to London or Paris, or maybe he went for a jog and went into a different store, they won’t recognise him at all. He wouldn’t get the right service and therefore won’t buy anything.”

A facial recognition tool linked to cameras in high-end stores could allow the staff to improve their service by gaining insight into customer's online and offline profile. “Facial recognition can give all the background on a customer’s past purchases, his shipping addresses, where he travels; it logs everything,” said Burke, who found in his personal experience as former senior vice president of fashion and public relations for US multi-brand retailer Bergdorf Goodman, the technology also makes companies less reliant on its staff, particularly in retail, which has one of the highest turnover rates in any industry.

“I’ve had relationships with personal shoppers, but when that person leaves, nine times out of 10 I get lost in the shuffle. That’s one of the biggest complaints customers have. Some people may find it potentially intrusive, but it’s absolutely not going to go away,” he added. Looking ahead, “the technology also allows for incredible advances in body scanning and other applications that will be meaningful for fashion,” said Avametric’s Bloom.

NEW YORK TIMES: The Death Knell for the Bricks-and-Mortar Store? Not Yet

NEW YORK TIMES: The Death Knell for the Bricks-and-Mortar Store? Not Yet

NEW YORK TIMES | MATTHEW SCHNEIER

On a quiet strip of Rue de Marignan, just down the block from the Paris power-lunch spot L’Avenue, Alex Bolen, the chief executive of Oscar de la Renta, was standing outside No. 4, where the brand is to open a store next May.

“We think long and hard before we enter into a lease,” Mr. Bolen said. “With all that’s going on in retail, we need to think even harder. For a luxury brand, what’s the point of a store, at least a bricks-and-mortar store?”

It’s a question many in the industry are asking, and trying to answer anew. In a difficult climate for retail, the stakes are very real, as 4, rue de Marignan makes clear. Above the doorway, a sign hung reading “Reed Krakoff.” Mr. Krakoff, now the chief artistic officer of Tiffany & Company, shuttered his namesake brand in 2015 and never opened a shop in the space.

Recent years have seen store closings from small brands and seismic contractions from major retailers, including Hudson’s Bay Company’s saleof the landmark Lord & Taylor building on Fifth Avenue last month to WeWork, the office-sharing start-up. (Lord & Taylor will rent about a quarter of its former space to continue operating.)

But the solution, say several retail innovators, is not the end of bricks and mortar, as some in the industry once anticipated.

“There was a time six or seven years ago when there was only talk of pure play e-commerce,” said Stephanie Phair, the chief strategy officer of Farfetch, the marketplace and retail platform that helps brands do business online. “What we’ve seen from a millennial consumer behavior point of view is customers really want that joined-up online and offline experience.”

What that means is a renovation of the old bricks-and-mortar ideal. Instead of the arms race for the biggest location on the most desirable street, a new model focused on multifunctional, integrated stores is gaining currency: less storehouses of product than event spaces, classrooms, community centers, showrooms or studios.

In the case of Oscar de la Renta, the two-story Marignan space will serve as not only the brand’s retail home in Paris, but also the showroom for its four annual wholesale presentations. Jeang Kim, an interior designer and sister of Laura Kim, the brand’s co-creative director, is designing it as a modular space: Displays can be cleared for customer-entertaining events and dinners, like the brand has begun to hold in New York following its runway shows, and a tailoring studio will allow customers to have fittings and alterations done on site.

But while the physical stores continue to drive business, Oscar de la Renta has been finding new customers outside of its usual channels. Since joining Farfetch earlier this year to expand its e-commerce, often by way of the site’s personal shoppers, the company has seen sales in the range of $200,000 a month, mostly from new customers. “Two hundred thousand dollars, seemingly out of thin air,” Mr. Bolen said.

The brand’s stores now are inviting those personal shoppers to visit, to learn more about the collections. And they, in turn, may take their clients to the physical shops.

The model for success, as Mr. Bolen sees it, is a combination of on- and off-line. “We think bricks and mortar is going to be a critical part of it, but a very different part than it’s been in the past,” Mr. Bolen said. “Bricks-and-mortar stores — those aren’t necessarily advantages any more.” Especially in second-tier markets, he added, “stores might be a real millstone.”

Where brands affiliated with major luxury groups, like LVMH Moët Hennessy Louis Vuitton and Kering, once had a clear competitive advantage in negotiating for real estate, given their ability to leverage entire portfolios of brands, smaller companies like Oscar de la Renta and the upstart London-based evening wear label Galvan are finding the playing field leveled by the rise of the smaller shop.

“I was with these very big brands that sell tens of thousands of units a week and have flagship stores,” said Paul O’Regan, the chief executive of Galvan, who previously was an executive at the Gucci Group (now Kering) and Burberry. “Everyone’s closing stores around us and the fashion model’s changing.”

Galvan just opened its first store, combining its work space and showroom with shopping for walk-in customers and by appointment. And its location in the Notting Hill area of London ensures lower overhead than on a luxury retail strip like Mount Street, a few miles east.

Not only will the store have the current season’s options but customers also may order from the next season’s collection and browse past collections to have pieces revived in custom colors, working with personal shoppers or, in some cases, the founders themselves. Appointments also may be made at a client’s home or office.

“We wanted to throw away all of those preconceptions and say: ‘What would be the dream scenario for a woman buying a dress?’ ” Mr. O’Regan said.

Robert Burke, whose New York-based company has consulted on retail strategies for industry players including Ralph Lauren, Chloé and Bulgari, has seen such thinking emerge in recent years. Even the larger retailers, he said, “are looking at just how many flagships or large stores they really need. That format worked for decades and decades. With the growth of online, it doesn’t seem to be working. Bigger isn’t better, necessarily. More focused is better, I think. And more intimate and more personal.”

The distinction, he added, was between the old idea of department stores and the emerging model of the “apartment store.”

Technically speaking, the store-as-home — or hub — is nothing new. Harry Gordon Selfridge, the founder of Selfridges in London, once decreed that “a store should be a social center,” and put an ice rink and a shooting range in his. But after several years of chilly, gallery-like shop design, a homey feeling is again becoming dominant.

MatchesFashion.com, the London-based retailer, began as a single bricks-and-mortar store in Wimbledon Village (called simply Matches). But while business from its (now three) stores has been dwarfed by its global e-commerce, as its rechristening as MatchesFashion.com suggests, the company is continuing to invest in new stores. After a year of testing smaller, homier stores as part of a pop-up program called “In Residence,” it is scheduled to open a new permanent space (the company prefers not to call it a “store”) at No. 5 Carlos Place in Mayfair in the spring.

The space will have two floors of retail as well as floors for private shopping, but equally important will be the floor that is to house the company’s broadcasting and content hub. Classes, panel discussions and events will be held there, all of which will be streamed on Facebook Live and YouTube, its social channels and its website. And all of it will be digitally shoppable.

“That’s the beauty of what we’re doing,” said Ulric Jerome, the company’s chief executive. “You don’t have to create an enormous department store to have a reach that is 10 or 100 times bigger than that department store. The reach is way bigger than the physical space. But the physical space enables you to produce amazing content.”

The Carlos Place store will have fewer choices than the full MatchesFashion.com range; it will be “the curation of the curation, and we’ll change the product quite often,” Mr. Jerome said. But iPads will allow browsing in-store, and all products will be available within 90 minutes for delivery within metropolitan London.

But at the company’s existing stores, 40 percent of the sales already are done via iPad. It reflects the reality that, for Matches, the online dwarfs the physical in every way: 95 percent of Matches’ business is online, Mr. Jerome said, and 85 percent is done outside of Britain.

Mr. Jerome has confidence in the hybrid online/offline model, with smaller physical and larger digital space.

“We tested it,” Mr. Jerome said. “Now we are investing in it. We think it’s part of the future of the way we see retail.” And he added that Apax Partners, which in September announced an agreement to take a majority stake in the company — one that values it at about $1 billion — is fully supportive.

Even those brands born online are stepping into the physical world. The RealReal, the online luxury consignment giant — it receives 8,000 to 10,000 consignment items per day, according to Julie Wainwright, its founder and chief executive — has spent a year testing pop-ups. And this month it is setting up a permanent retail space on Wooster Street in New York City.

Ms. Wainwright is envisioning the space as community center as much as shop: RealReal’s staff of experts, from watch gurus to fashion historians, will offer clinics and classes and offer appraisals, and the store will include a coffee bar and flower shop.

It will also, lest one forget, have a curated selection of the website’s clothes, shoes, accessories, jewelry and more: a fraction of the online offering, but a selection tailored to New York consumers.

The RealReal’s pop-up experiment last December in New York revealed a particular synergy between on- and off-line shopping, and a customer base ready and willing to combine the two, Ms. Wainwright said. And, she added, the average purchase at the pop-up was larger than the average one online.

“If you walk into the store, everything you see will also be online, and anything you see online you can see in-store,” she said. “What we saw when we ran the pop-up, some people went in, saw the item, thought about it, ordered it online that night and picked it up in the store that next morning.”

Such synergy is what drives Ms. Wainwright, and others like her, toward their new approach. While the death knell for the bricks-and-mortar store has been premature, the online experience is never far away.

“There are going to be iPads everywhere,” Ms. Wainwright said.

BoF: For Multi-Brand Retailers, Private Label Is a Growth Driver Once Again

BoF: For Multi-Brand Retailers, Private Label Is a Growth Driver Once Again

BUSINESS OF FASHION | CHANTAL FERNANDEZ

LONDON, United Kingdom — When Yoox Net-a-Porter Group reported its latest results last week, executives were excited to discuss the launch of Mr P., Mr Porter’s new private-label brand. Managing director Toby Bateman described the ready-to-wear collection — designed by an in-house team including buyers and merchandisers and manufactured in Italy, Portugal and Japan — as the physical embodiment of the men's retailer. Mr P. includes a collection of essential pieces available year-round as well as five seasonal capsule deliveries per year. Shoes and accessories are expected in Autumn 2018. While offered at a competitive price point (starting at $75 for a T-shirt), Mr P. is positioned alongside the e-retailer’s other contemporary brands.

“It is one of the most significant projects in Mr Porter’s history, and one that sees us delivering on a key strategy from the five-year plan,” said Bateman. In July 2017, Yoox Net-a-Porter Group outlined a plan that included growing private label brands to account for about 10 percent of off-season net revenues by 2020. (At the company’s two off-price channels, The Outnet launched its private label Iris & Ink in 2012 and Yoox’s own private label is forthcoming.)

Private-apparel labels, or exclusive brands typically manufactured by retailers and sold under their own name, have long been a staple of department stores such as Saks Fifth Avenue and Neiman Marcus. The clearest advantages of the business model remain the same: the product has higher margins than the designer brands retailers buy, is predictable and creates cash flow. The collections also often fill in gaps in a store's designer offerings.

Today, when retailers have more data than ever before about what types of pieces their customers want to buy and at exactly what price, the advantages of producing a private-label brand have increased. If done right, these lines can raise retail brand awareness and, by virtue of having a controlled production that can be replenished in-season, respond more quickly to consumer demand. (Retailers are not always able to reorder more inventory from clients in-season.)

In-house collections also offer another reason for a customer to shop at a specific retailer. “These days, with the internet and everyone seeing everything, exclusivity really becomes such a big factor,” says Gabriel Ricioppo, the co-owner and creative director of Virginia-based retailer Need Supply Co., whose private label, Need, launched in Spring 2016 and has since grown to be one of its largest brands. Well-received products include denim for women and T-shirts, shirting and chinos for men.

It's not a coincidence that those are all so-called basics. While a new generation is embracing logos in fashion in a way that the market hasn’t seen since the height of “logomania” in the 1990s, today’s consumers are more willing to turn to private labels for essential pieces. (For an example in the mass market, see Amazon’s growing private-label apparel business.) Globally, the private-label apparel and footwear market grew 10 percent between 2011 and 2016 to $62 billion, according to Euromonitor.

At Barneys New York, for instance, the in-house label is its top performing brand for men, led by staple pieces such as a black cashmere crew-neck sweater and a black suede Chelsea boot. At British multi-brand retailer Joseph, the Joseph brand accounted for 87 percent of total sales as of 2015 and has served as a vehicle for international expansion: its mono-brand stores make up the vast majority of Joseph’s retail network.

What makes a private label successful? For one, the retailer needs to have a positive brand image. “If you don’t have a strong retail brand, then it’s going to be a real struggle to convince the customer to buy private label,” says Robert Burke, chairman and chief executive of consulting firm Robert Burke Associates.

Retailers also need to have a clear strategy of what the private label is going to offer, at what price point and for what specific audience. “These retailers are extremely close to their customer and understand them," says Burke. "That is what is making this work.”

At MatchesFashion, the customer was ready for more than just basics that complement the designer assortment. When Rachael Proud, a designer who had worked for Topshop and Christopher Kane, joined the company in 2014 to relaunch the in-house label, she quickly realised that catering to the MatchesFashion customer was not the right strategy because there is not one single type of customer.

“The original remit was to drive business to Matches,” says Proud. “As soon as we started seeing sales reactions, it became clear that it’s a brand on its own with its own identity."

Womenswear has been a significant success for Raey, particularly in knitwear and denim, and the brand has doubled its sales since its first full year on the market in 2015. “What’s more challenging is menswear,” says Proud, adding that men often seek the approval of a brand name they recognise to reinforce their purchasing decisions. “The Raey man probably knows what he likes and I think we have to get that right."

Proud and the Raey team have data on their side: they have a deep level of information evaluated on a weekly basis, from cost-per-click to real-time sell-through. However, because they consider the brand a complete offering distinct from the rest of MatchesFashion's offerings, they only look at Raey's metrics.

“If we’ve got a jumper and it’s a best seller and we’ve only ever done it in blue, we are immediately thinking: let’s do it in black,” she says, adding that if fabrics and trimmings are in stock, Raey can deliver product in as little as four weeks. In 2016, MatchesFashion — which reported overall revenues of £204 million ($268 million) that year — shifted Raey's deliveries from seasonal to monthly collections that arrive on the site each week. These more frequent deliveries also help drive traffic to the site, says Proud.

Need Supply also benefits from being able to control the cadence of its private-label deliveries. “Different brands deliver at different times,"says Ricioppo. "This just gives us an opportunity to align messages and campaigns.”

The data also informs the price point, which varies from retailer to retailer. Most in-house labels are priced a tier or two lower than the designers the retailer carries. “We are not wholesaling; we just add on the markup to make the profit to keep trading," says Proud. "Category-wise, we always want to have our basics that are a lead-in [in regards to price] to the brand.”

After zeroing in on the right point of view and price point, however, producing a collection and delivering it can be a challenge for retailers not accustomed to the process. The design and strategy can be right, but then retailers need to “back it up with the infrastructure to execute these things,” says Burke. Some retailers outsource design or manufacturing. Like Raey, Need is designed in-house, and Ricioppo says the process was a learning curve: “You have to learn to crawl before you can walk, before you can run — we have a long view of what we are doing.”

Another challenge in private label is that retailers might anger the brands they carry if they are seen to be copying their designs at a lower price point. “You’re the retailer that buys them; that’s a risk that you could run,” says Burke.

At MatchesFashion, the design and buying process is kept separate. “I don’t know what [buying director] Natalie [Kingham] is buying on core," Proud says. "I don’t know how things are performing. I basically went forward with what I thought a working woman would want to wear.” While she isn’t guided by trends, Proud does sometimes align with the major themes of a season. “[Designers] are all seeing the same mills, shopping the same fabrics."

When it is all said and done, the same instinct that guides Need Supply’s edit of brands infuses its approach to private label. “Even when we go to buy, we are not always reacting to what’s out there,” he says. “Often times we are looking for things we know we are excited about, and we go and look for those in the market. That energy and that vision, it’s the same thing that translates to creating product.”

BoF: What American Department Stores Can Learn From the Success of Selfridges

BoF: What American Department Stores Can Learn From the Success of Selfridges

BUSINESS OF FASHION | KATI CHITRAKORN

LONDON, United Kingdom — As retailers geared up for Black Friday and Christmas amid a slowdown in UK consumer spendingSelfridges reported record profits for the year ending January 2017.

The department store chain, a pillar of the Selfridges Group, which also includes Canada’s Holt Renfrew and de Bijenkorf in The Netherlands, said operating profits for the period were £180 million ($236 million), up 18 percent from £152 million ($200 million) the previous year, while sales reached £1.6 billion ($2.1 billion), a 16 percent increase from £1.4 billion ($1.8 billion).

“Selfridges has delivered excellent results… achieved by the success of our long-term planning and implementation of an ambitious programme of capital expenditures across all channels and stores,” Paul Kelly, managing director of the Selfridges Group, said in a statement.

He was referring to a £300 million ($393.8 million) investment announced in 2014, which has served as a catalyst for the transformation of its flagship London store. The retailer unveiled a new 20,000 square foot Designer Studio, devised to showcase established and emerging fashion designers, in July, three months after it launched a new 37,000 square foot Body Studio, housing lingerie, swimwear, pajamas and high-performance sports gear.

The focus now is on revamping the store's accessories department — the second phase is set to be unveiled next month, just in time for peak Christmas trading. When the changes are completed in 2018, the British retailer says it will be the largest destination for luxury accessories in the world.

Selfridges’ enviable productivity flies in the face of the financial headwinds facing the department store segment, particularly across the Atlantic, where American retailers have struggled to capture consumers as spending habits shift. Shoppers are increasingly ordering on phones, computers and tablets, with e-commerce giants like Amazon siphoning sales from physical stores. Many have also redirected their spending from physical products to experiences.

According to Springboard, a retail intelligence firm, the capture rate of footfall for UK department stores declined 5.8 percent between 2016 and 2017, over the period from January to August, more than any other type of store. “This indicates that the market share of department stores is declining,” says the company’s marketing and insights director, Diane Wehrle.

“[Selfridges'] level of investment, innovation, style authority and brand curation across its stores and online exemplifies how to stand out in a crowded market,” says Honor Strachan, principal retail analyst at GlobalData. “Retailers must identify which in-store services and experience-led departments will draw in customers and increase dwell time to benefit their future financial performance.”

So, what are the specific secrets to Selfridges’ strong performance — and what can other retailers learn from its strategy?

Reconfigure the Physical Footprint

Unlike US department stores, many with multiple outposts — Macy’s has 855 locations, Neiman Marcus has 42 and Bloomingdale’s has 38 — Selfridges is able to focus its energy on four physical stores across three cities: London, Birmingham and Manchester. While the US is a much larger country — with more than 323 million people in 2016, compared to 66 million in the UK — spread over a much larger swath of land, retailers must continue to shrink their square footage, focusing on densely populated urban centres.

Consider the approach of retail-real estate developer Westfield, which has abandoned its underperforming suburban locations. “Ten years ago, Westfield had 69 shopping centres in the United States; today we have 33 and two in the UK. We probably will have quite a bit less over the coming years,” Westfield co-chief executive Steven Lowy told BoF in an October 2017 interview. “We’re not far away from that right now, and the way we do that is by selling non-core assets and reinvesting that capital in assets like London, Milan, New York, Silicon Valley, etcetera.”

Redefine the Landlord-Tenant Relationship

Within its stores, Selfridges has embraced a concession model, which allows brands to run their own shop-in-shops, taking responsibility for customer experience and sales performance. “Often, concessions highly outperform the traditional wholesale model, because the brands help to manage and control stock and personnel, so they have a singular eye on the business,” says Robert Burke, chief executive of retail consultancy firm Robert Burke Associates.

“In Selfridges, particularly the high-end brands, the people working within those concessions are very well trained and knowledgeable about the product they offer,” says Springboard’s Wehrle. “You’re going there for a true quality retail experience — you’re not just going there to buy products.”

While the shop-in-shop approach is commonplace in Europe and Asia — Paris’ Le Bon Marché is another widely admired example — it’s less popular in the US. However, retailers including Saks Fifth Avenue have begun to employ it more regularly.

The key to making it work is in the execution. "The experience should be seamless,” Burke advises. “When a customer walks into the store, it should have everything they want and there should be great customer service. How the business is structured should be unknown to them.”

Recalibrate the Retail Mix

“The customer is always right” and “give the lady what she wants” are terms originally coined in 1909 by Harry Gordon Selfridge, the founder of the department store. So it’s no surprise, then, that Selfridges has long prided itself on offering a diverse curation of products and experiences where there is something for everyone.

For instance, on the third floor of the London flagship, known as the Designer Studios, streetwear-inspired brands — including Yeezy, Vetements, Off-White and Heron Preston — sit alongside emerging labels Grace Wales Bonner, Art School and Marine Serre and high-street favourites Topshop and Whistles. Established luxury brands including Céline, Saint Laurent, Valentino and Oscar de la Rentacan be found in the Designer Galleries, just one floor down.

But while many retailers offer a high-low mix, Selfridges prides itself on getting that mix just right. “Selfridges’ point of view is extremely clear,” Burke says. “The consumer can go to individual stores, but they’re coming to department stores to see a point of view and to find an edit of products in a specific way.”

Harness the Experience Economy

In a market where consumers have more and more tools to purchase goods at the cheapest possible price and the greatest possible convenience, the pressure is on for physical retailers to create a space that’s about more than transaction. “You can do your functional shopping online. It’s not like you need to leave the house for that,” Wehrle says. “If you can buy it on the internet, you need a real reason to go to the store.”

Founder Harry Selfridge was one of the first to approach retail as theatre. When French aviator Louis Blériot became the first person to cross the English Channel in an airplane in 1909, Selfridge decided to put the plane on display in store, with appearances from the pilot himself, drawing crowds of over 150,000.

Selfridges has since been focused on hosting immersive retail experiences, from its Roof Garden — a space that has been transformed into everything from a sweeping ice skating rink to thematic pop-up restaurants — to two permanent exhibition areas that host frequently changing concepts, themes and performances, curated by names like Mario TestinoMarc Jacobs and Yayoi Kusama.

Earlier this year, the store hosted a potato peeling workshop as part of a new programme that aimed to help stressed-out consumers calm down and "reconnect" with themselves. “Department stores need to ask — why would a customer come to their store?” Wehrle says. “That’s where Selfridges scores, because even if you don’t buy anything, you can experience things like the Roof Garden or their extensive food hall.”

Spend Money to Make Money

Another hurdle faced by US department stores is that “the amount of experienced merchants, buyers and back-of-house personnel are not as experienced as before,” Burke notes, referring to the approach several American stores have taken to maintain profit margins, including layoffs. In August, Macy's announced it would cut 100 jobs as part of a restructuring of its merchandising unit. In June, Hudson's Bay Company eliminated 2,000 positions, including letting go senior-level staff at Saks Fifth Avenue.

But cutbacks often feed a vicious cycle. “The US retail scene has been very challenged and as a result, they’ve had to pull back financially. With so many cuts, today’s merchants and buyers have become so numbers-driven that it’s very hard for them to take a lot of risk,” Burke says. “There’s less exciting merchandise because they’re so concerned about sell-through.”

By investing up front, Selfridges has managed to successfully execute an offensive strategy. “The sense I get from Selfridges is that they’re trying to do many new things,” Burke says. “They’re taking risks and really showing off their fashion products.”

To be sure, it’s not just sound business practises, sprinkled with a bit of magic dust, powering Selfridges’ success. The retailer has also benefitted from an increase in tourism following the fall in value of the pound since the Brexit vote in June 2016.

“Luxury retailers in the UK have discreetly increased their price points to help offset weaker traffic in other European stores, taking advantage of spiked demand and helping to build in the impact of rising inflation in 2017,” Strachan says “However, overseas visitors were still able to take advantage of lower prices versus their home market — leading to higher volumes and margins.”

But while tourism has benefitted Selfridges, there is little doubt that its initiatives are also driving domestic footfall and spend.

Huffington Post: Robert Burke: Fashion's Secret Power Link

Huffington Post: Robert Burke: Fashion's Secret Power Link

HUFFINGTON POST | RENATA M. BLACK 

Paradigm Shifters is a series of interviews with a select group of women and men from eclectic walks of life. It will highlight unspoken, real-life insights on how they have been able to turn weakness into strength. A naked soul point of view of how their breakdowns were really a preparation for breakthroughs. They are your quintessential paradigm shifters; internal shifts converted into genuine change.

Everything I have ever done has been focused on this underlying theme of shifting the paradigm because, "What we think determines what we feel and what we feel determines what we do." Hence, why Empowered by You takes lingerie, which has traditionally been seen merely as a tool of seduction and redirected that energy as a tool of empowerment.

I hope from these stories you will look at your own situations, struggles and accomplishments through a different lens. At the very least you will be more equipped with real life tools to change your own paradigm. At the end of the day, we are our own Alchemist turning the silver we were born with into the gold we are destined to become.

How did you get into the fashion industry?

After college I went to LA and was deciding whether to go to graduate school, but I needed to get a job until I figured out what I wanted to do. Some of my friends worked at the Ralph Lauren Polo store in Beverly Hills, so I thought it would be a fun job to do for a little while. I ended up working for the company for 11 years. Eventually I moved to New York and I worked in various positions. The company went public and franchise retail was brought in-house and I worked in the newly created retail division. I spent a short time in design (which Ralph encouraged me to do) before returning to retail. In my time there I had the opportunity to work very closely with Ralph, who has really been a fantastic mentor and supporter. 


In 1999 I was hired to be the V.P. Fashion Director at Bergdorf Goodman. At that particular time there were a lot of changes at BG. There's no store like Bergdorf in the world, but it had gotten very dusty. This was an amazing experience in my career. It was a fantastic team of people. I hired Michael Bastian (who has his own label now) as the Men's Fashion Director and Roopal Patel (now the Fashion Director at Saks Fifth Avenue) as the Women's Fashion Director. We had an incredible time and felt and realized that anything could happen. The CEO Ron Frasch and President Peter Rizzo at the time pushed us all to create the best store possible.

So how did Robert Burke Associates come about?

I was at Bergdorf's for 7 and a half years. I dealt with many established brands and new designers when they were just starting out: Tom Browne, Tory Burch, Proenza Schouler, and Derek Lam, plus the executives. I had this incredible vantage point into the business on what worked, what didn't work. I found that many of the brands had questions when they were looking for strategic growth and how they were going to position themselves. The only consultants out there were generally retired executives from department stores and I was about 42, and thinking about what else I wanted to do in my life. I wanted to open my own consultancy company. I went and I spoke to a handful of people: Anna Wintour, Rose Marie Bravo, who was still at Burberry, and Ralph. And Rose Marie and Anna said yes, do it, but Ralph said 'this is a terrible idea, you should come back and work for me', of course we talked it out. In the end, I started Robert Burke Associates, almost ten years ago. 
When I started out, Tory and Chris Burch were still married at the time, and Chris had just started an investment firm officed on 57th and Madison, so they offered me some office space. Our first client was Marchesa, Anna Wintour called me and said Harvey Weinstein's girlfriend (at the time), Georgina Chapman, wanted to start a new dress line, and asked if I would meet with them. So of course I said yes.


It was a fantastic start and I found that the industry did need someone who could advise brands. Brands often times need to have the perspective of the retailers, so we're unique in the way we approach things. We're not a Bain or McKinsey in that market research driven way, we are more competition and positioning driven. We work with international brands, who might be looking to come to the US and maybe don't understand nuances of the US market, like Alexandre Birman, a shoe designer from Brazil, as well his Schutz brand, which is looking at expansion in the US. So we do that type of work, and we do quite a bit of international and domestic retail, which is generally working with developers and local partners in a region.

What project would you say you are most excited about right now?

I would say the re-design and re-conceptualizing of the Beverly Center because it is such an iconic mall. It's exciting to make it into a strong retail destination for luxury and contemporary retail. Working with the Tommy Hilfiger brand globally has been a very interesting and exciting experience as well. It's a brand that is really poised for great growth.

What do you envision the future of fashion will be like? Do you have any advice for young designers or brands?

I think there is generally a lack of original ideas. This athletic apparel movement is a good example of everyone jumping on the same bandwagon. So I think new designers need to be very clear and focused and not try to be everything to everyone. We went through a period in the early 2000's where a young designer wanted to have a sunglass line, a jewelry line, a shoe line, a handbag line, a ready-to-wear line, and a secondary line, and what we've come out learning is that the customer appreciates when someone is the very best in their field at doing one thing. The advice I would give younger brands is to be very clear on who their customer is and what their product is. 


The company has evolved to work with bigger clients, because it's more advantageous, but I think it's very important to work with young designers and to see their design and help them in navigating. We've had many people who have worked with Robert Burke Associates and gone on to become quite successful. There is a young woman named Alison Chemla who interned here, who now has a jewelry line, Alison Lou, which is sold at Net-a-Porter and Matches, and she just opened a store in SoHo. George Sotelo launched a men's swimwear brand called Thorsun. That is really rewarding to see the people who worked here launch their brands at a relatively young age and find success.

What has been your biggest breakdown to breakthrough moment?

There were a few. Those experiences take you out of your depth. I had always been more interested in the business side. But I think I witnessed the bridging of design, retail and commerce while at Ralph Lauren, which set me up for my work at Bergdorf's. If I hadn't had that experience in intimate design meetings and Ralph asking me which color red I like and then in a store design meeting for a new Ralph Lauren store in London I wouldn't have become confident in what I went on to do advising brands. Unlike some very traditional houses, Ralph will put you in many different positions: you can be in a design meeting, then be in the retail store. That experience doesn't exist as much anymore, but it's important to gain as much experience as possible and hopefully have really good mentors along the way. And Ralph was really incredible in that way, he still is. 


That's the thing about fashion, it's never all business and it's never all creative. Like Andrew Rosen is highly unique because he's a product person and he's a business person. And at the end of the day, Ralph is a designer and a business and product person. You look at someone like Jason Wu, he's very left-brain and right-brain, he's very focused. He called me when he was first starting and asked to have lunch, and I could just tell he was very focused. Then six months later, Michelle Obama wore his dress.

What kind of legacy do you wish to leave behind?

Seeing the people I have worked with and mentored go out on their own. It's not about being successful, it's about having the courage to go out and follow your passion, and many times that inevitably leads toward success. Seeing those young people achieve and strive and become confident, that's probably what I am most proud of. And having some positive influence on them. I think that the creative and business processes in fashion sometimes have a rap of being difficult or pretentious, but I actually find it to be the opposite. I find there is a lot of nurturing and support. You definitely get what you put out, but my experience has been extremely positive. 


I was definitely influenced by the big names that I've been behind, and starting my own business was a very different experience from working for them. I wondered if I'd get the phone call back, or get the meeting, but I found that when you form those kind of deep relationships, you do. It's a very positive and loyal industry.

Listening to Robert's story and how all the circumstances of events in his life have led up to the point of creating a unique position in the market is quite extraordinary. By having a credible name in the industry, he has been able to create his own space where he uses his reputation and spotlight to launch others. He is not only a source of admiration but one of inspiration.