For Vittorio Radice, the department store is a religious experience, one that is all about a special place filled with special brands. The chief executive of London-based Selfridges mesmerized the crowd at the CEO Summit with his take on the viability...
For Vittorio Radice, the department store is a religious experience, one that is all about a special place filled with special brands. The chief executive of London-based Selfridges mesmerized the crowd at the CEO Summit with his take on the viability of these "cathedrals of consumption."
Ever since retail commerce sprung up in the 11th century, stores have "played a very important role in society and modern culture," he said, whether it be Isfahan in Persia or Red Square in Moscow. The modern department store had its beginnings in the mid-1800s in Paris when Le Bon Marche opened its doors.
"That started the era of mass consumption and mass production," he said, encompassing well-organized factories to make the products and construction of large buildings — "several floors connected by escalators" — to distribute that product.
"Department stores are found in every important city in the world," Radice noted in his Italian-accented English. "These cathedrals of shopping have created new dimensions of consumption. The crowds, noise, music, the constant flow of new product, the constant transformation of the store into a dream world of fashion has excited people to consume like never before."
The department store appeals to shoppers with its "commanding and physical presence," distinguished by its architecture and design. "Department stores are urban monuments — massive and elaborate store buildings designed to stimulate interest and consumer desire. They project progress, luxury, indulgence and pleasure in a unique environment."
He cited three examples of superior department store design: Paris’ Le Bon Marche, which was designed by Gustave Eiffel of the Eiffel Tower fame; Carson Pirie Scott in Chicago, designed by Louis Sullivan ("It remains as contemporary today as 100 years ago, at least on the outside," he sniffed), and Samaritaine in Paris.
The key to the department store is that it draws consumers of all types. And even though they are time-pressed, they still view shopping as the ultimate leisure activity, Radice said.
"Today, shopping is not necessarily connected to buying. Going shopping is a way of spending time and this is the key to reinventing our industry. In the Western world, 80 percent of the people walking the shopping streets are on a day out. They’re not looking for anything in particular. Their wardrobes are full. What we need to offer is fun."He continued: "Retail is theater and we are the actors. Unfortunately because the name of our industry is ‘department store,’ we think and act only on product. But today, people are not after that. They come to the store to escape, to have their half-hour dream in the shape of a lipstick or a handbag. To see and experience the new."
Although our everyday lives are very "controlled," with commitments of work, family and friends, it is shopping that can provide a diversion. "Shopping is one of the last moments of creativity left in each of us. Our schedules are very demanding and intense, and shopping is the only freedom. It’s the moment for adrenaline to flow freely in our bodies."
To appeal to this consumer, Selfridges has created "places, not stores," Radice said, "filled with brands and experiences that inspire and excite our customers. Places where the noise is louder, the colors are brighter and where there is always the new and the unexpected. Places that involve and inspire people. Places that innovate and excite."
It is this innovation and excitement that the industry needs today, he said. "It’s what people are looking for. Today, in our business, the place is more important than the product."
The typical customer works, has some disposable income to spend, wants to look young and healthy, seeks the latest gadgets and aspires to vacation at the new hot spot. "We want to be the ‘in’ crowd," Radice said. "I haven’t met anyone yet who wants to be out."
Between now and 2006, retailers will be faced with appealing to three expanding demographic groups: the millennium generation, the middle youth and the cool oldies, he said.
The middle youth "wants to look 10 years younger and 20 years richer." However, they’re stretched to the limit with children, a mortgage and two car payments. "They think big and they act small," he said.
The "cool oldies have plenty of money and plenty of time so they go on holiday. However, the rest of the fortune goes into the bank account for rainy days. They’re not good for us or for the food retailers" since they live on the early-bird special. They do, however, spend freely on their grandchildren."The millennium generation is the group we like the most. They’re young, they create trends, they change and they consume." They’re the ones who "watch 100 channels on television, read 110 monthly fashion magazines and spend three hours a day on the Internet. They’re very aware of what’s in and what’s out. They are in touch with a changing world."
This group seeks merchandise that "represents the style they want to be part of. Even if they can afford only a T-shirt or a pair of sunglasses, they want to bask in the image projected by the brands." Radice showed a slide of the departments that made up Selfridges when he arrived, which included everything from juniors to better missy. "What is better missy? If there is a better missy, than there must be a worse missy, too."
He then switched to a slide showing the same floor today, which focused entirely on the brands available there. "We have said, ‘Out with departments, and in with brands.’" As a result, Selfridges has aligned itself exclusively with brands — from Gucci to Bobbi Brown, Ted Baker to Tse — which is why its buyers must think outside the box and are willing to experiment. Radice told the story of a Selfridges buyer who traveled to Rome to visit Fendi. She purchased the best-sellers from the season before, added a few new pieces and negotiated the price down to the last lira. However, when the manufacturer showed her a new product line, which included the red-hot baguette bag, the buyer declined, saying her customers would not buy this item. It turned out that the baguette became "the first handbag to create a waiting list. Obviously the buyer is no longer with us."
"Most department stores will have the fashion must-have a year later and 50 percent cheaper, redesigned by buyers and inspired by the brand. What’s the matter with buying the original?" Radice asked.
"We have the environment — the cathedral of shopping — and there are brands available at every [price] level, not only luxury." Because no retailer can be experts in every area, Selfridges decided to give the brands the freedom to make their own personal statements. "To achieve this, we fundamentally changed our operation — out with the departments and in with the brands. Let the experts help us. We give the brands the theater and they create the environment."In the past, Radice said, Selfridges had 56 buyers buying 1.5 million products and spending their time trying to be in-stock and worrying about markdowns. "Now we have 18 managers managing 3,000 brands, delighted to be sold out, and constantly worried about margins. We know that brands already have merchandising functions, design, production, quality control, distribution, training, etc. Why should department stores duplicate that? We should dedicate our time and effort to creating the place. The brands are the experts in product."
The only reason to do private label, he said, is to gain increased margin. However, "brands sell five to six times as quickly as private labels," he said, making the choice an easy one.
And when a brand is hot, a customer will buy whatever that brand makes, regardless of color, shape, material, price or packaging. "The customer will buy something that doesn’t suit them just for the pleasure of owning it," he said. For example, he said, Selfridges introduced a brand called Jungle about three months ago. The combat trousers sold out in a matter of days and then customers started to buy the shirts. "I even bought one myself." When they were gone, they bought the sweater. "It didn’t matter what we sold, people just wanted to buy Jungle. That was the cool brand to have."
Since embracing this brand strategy, the physical and visual change in Selfridges in London has been enormous, he said, and it has paid off. Customers flock to the store today to buy everything from televisions and suits to sushi and shoes. The store recently opened a bicycle shop, is the number-one outlet for Apple computers and also sells newspapers. Selfridges also operates two stores in Manchester.
Those brands will find a spectacular new home in Birmingham when the retailer opens its newest store there. The sprawling project, which has been designed by architects Future Systems to resemble a space station with a wavy bubble-wrap exterior, may well redefine retailing in Europe.
"We think it’s going to be a wonderful, exciting building that will create a sense of place. It’s novel, provocative and controversial, but undoubtedly it’s a ‘place’," he said.Like its other locations, that "place" will offer a full assortment of products to appeal to a wide range of customers. "We sell T-shirts for teenagers next to suits for adults," Radice said. This assortment represents the variety of the city with its "multicultural, multiethnic and multilingual" mix. "Our customers are using subways or Rolls Royce. They read The Times and The Sun. They go to the opera house or a nightclub. They can stay at the Dorchester or a bed-and-breakfast for $19.95. It’s the contradiction of city life. The spirit of a city allows this diversity to exist."
As a result, Selfridges would "like to see Nike next to Dolce & Gabbana, a book store next to a dentist. And one day we’ll get there."