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Vittorio Radice hopes to work the same magic he used in the reinvention of Selfridges to once again make La Rinascente Italy’s premier department store chain.
This story first appeared in the November 11, 2008 issue of WWD. Subscribe Today.
Radice, the company’s chief executive officer since 2005, helms one of the country’s oldest and most revered retail institutions, with 14 stores and sales of about 420 million euros, or $532 million. However, in recent years, the business that was founded in the 1860s had grown a bit musty.
Radice recalled that during his tenure at the London-based Selfridges between 1996 and 2003, he broke all the rules of traditional retailing. “We worked to move the perception of the company from a retail company to a place of aggregation where almost everything was allowed,” he said.
“It was about creating moments of different nature,” Radice said. “From architecture to music, from product to movement, even anti-foie gras demonstrations helped make Selfridges a public venue full of real and contrasting life.”
Radice has described his vision of department stores as “places where the noise is louder, the colors are brighter and where there is always the new and unexpected — places that innovate and excite.” And it is this vision that he hopes to bring to La Rinascente.
As he works to update the business, Radice is motivated not only by his success at Selfridges, but by other trendsetting retail companies as well. He pointed to Tsum in Moscow as one example.
“In 2003, Mercury [Distribution SA] bought this historic department store located next to the Bolshoi theater in the center of Moscow,” he said. The next year, Radice joined the advisory board and worked with management to increase sales.
Recalling a discussion about the 2005 budget, Radice said that based on the plan that had been set in place, he expected same-store sales to increase about 25 percent.
“For a store established 97 years earlier, I thought it was going to be an excellent performance,” he said. But Leonid Friedland, one of the owners of Mercury, said he had not bought the store just to achieve a 25 percent increase. “If we were not aiming at doubling the sales that year, he was going to dismiss everyone.”
As a result, “Targets were lifted, marketing spend was increased, new brands were introduced and sales that year went from 56 million euros, or $72.7 million, to 106 million euros, or $137.7 million.
“Moscow is a fantastic market, much more receptive than any other I have experienced, however, the budget story forced me to reconsider some established beliefs and to apply this lesson to the Rinascente turnaround program,” Radice said.
In Italy, he said few department stores exist because of the “over-regulated retail sector and the lack of large surfaces in city centers.” Instead, “elegant independent boutiques” have developed in their place.
“For years, the boutiques have been the only channel for the distribution of luxury brands,” Radice said. “Names like San Carlo in Turin, Antonia in Milan, Luisa in Florence are powerhouses there. Most of the time these boutiques represent the ultimate selection and service in the town, venerated by the locals and the tourists. These stores are designed by famous architects, have long-term successful relationships with the best brands, attract very loyal customers, achieve excellent sales and make their owners very rich.”
Radice said these boutiques achieve sales of more than $5,000 a square foot.
He wants a piece of that pie for La Rinascente, noting that “with 150 years of history, [it] should have been the natural channel for the distribution of luxury brands in Italy.”
After World War II, Radice said La Rinascente was viewed as “one of the engines for reconstruction of the country. We had more shops than anyone else. We were seen as elegant, innovative, modern and accessible. We were the original sponsors of design in Italy employing the architects and the product and graphic designers that put Milan on the world map for years to come.”
Giorgio Armani, Giò Ponti and Ettore Sottsass are among the names that were on the Rinascente payroll in the Sixties, he added. “The newly discovered successful combination of artisans’ ability and designers’ creativity was at the center of every initiative the company did.”
In 1972, “as the timid initial steps of Italian fashion were beginning to be noticed internationally,” La Rinascente changed hands and was sold to the Agnelli family, Radice said. “Their empire was built on Fiat, the popular make of cheap cars available to everyone,” he said. “They applied the mass-market philosophy to everything they owned.”
As a result, La Rinascente abandoned its original mission and got into the food, do-it-yourself and electronics businesses and embarked on an aggressive expansion plan. “Self-service became the name of the game even in our historic city center location,” he said. “These stores, once temples of fashion and design became temples of adjustable shelves; and with that the opportunity to distribute the newly born Italian fashion brands was gone in favor of the boutiques that I mentioned before.”
In 2005, the company was sold to a consortium of investors, including the Borletti family, former owners who had sold La Rinascente to the Agnellis. The new management had a “clear intention of bringing back that old philosophy of design and innovation that characterized Rinascente after the war,” he said.
By the end of the repositioning program in 2012, Radice said he expects sales to hit 850 euros a square foot, or more than $1,000, with earnings before interest, taxes, depreciation and amortization, or EBITDA, of 20 percent.
To achieve these results, Radice said he set out to transform the company from “top to bottom” — a strategy that is “not without” challenges.
New brands are being introduced, stores are being refurbished, and the company is “bringing back integrity and presence to our locations and adding some spice to our communication,” he said.
The company closed five poorly performing units and is focusing on new doors in top locations around the country, such as Bologna, Venice and Verona, and relocating the unit in Palermo.
“We are totally modernizing our business processes,” he added, including updating its systems and opening a new distribution center. Employees are also being retrained to “move from a self-service model to a full-service” one.
“This is a work in progress,” Radice acknowledged. “But so far, the results have confirmed our beliefs. The fl agship in Milan has doubled its sales in three years,” to about 200 million euros, or more than $251 million, almost half the company total.
Plans also include opening a new “flagship in Rome, the only capital city in the world that has never had a proper department store,” he said. “It will be located in the historic city center; on the trail from the Spanish steps to the Fontana di Trevi.”
Radice said the company is “adjusting and finding our way as we go along. We are continuing to invest as per our original business plan. We will continue to do so even in difficult times.
“As an old Chinese proverb says: ‘One cannot refuse to eat just because there is a chance of being choked.’”
Like many U.S. retailers, Radice said La Rinascente has experienced “much chaos” because of the worldwide pullback in consumer spending. Many of the rules have changed. He pointed to Shoppers Stop in India as an example. “It is the first department store in India, a wonderful company, great people. It’s got fantastic systems and procedures for the country they operate in. It has a huge expansion program and there’s a potential customer [base] numbering one billion. It’s a company operating in a market where everything still needs to be done.”
Shoppers Stop has grown about 40 percent every year in the last 10 years, but its share price has gone in the other direction. “The company was listed in 2005 at 300 rupees per share [about $6.20]. It is now 170 [$3.51],” he said. “It is crazy. It is probably an extreme example, but there is no justification anymore between the performance of a company, the everyday management commitment and the value created.
“These days,” he said, “it’s impossible to determine the right price for anything, let alone Shoppers Stop shares.”
During a recent lunch with a friend, Radice said he mentioned that he was buying a house for one of his children and had made an offer. His friend cautioned him to wait because prices were expected to continue to drop and in a few months could be 30 percent lower.
“‘Wow, maybe he’s right,’ I thought,” Radice said. “I then called the seller to ask for a discount, and before I was able to say anything he announced to me that the house was off the market because he thought he would be able to sell it for a higher price in a few months when the market recovered.
“We have to ask ourselves: ‘Are we fools to buy now or fools to sell?
“One thing is clear: Where there is a will, there is a price. Who would have thought that, in times like this, this Damien Hirst’s Golden Calf would reach 10.3 million pounds [or $16.4 million] at Sotheby’s auction last month? Who would have thought that, in times like this, the Birkin bag would still have a waiting list at a price tag of over $10,000?”
Acquiring something “is more and more a subjective decision that depends on the moment,” Radice said. “It could be a very short moment dictated by an impulse or a much longer one dictated by considerations. Moments are what we need to…sustain our businesses today.”
He pointed to McArthur Glen, a designer outlet developer in Europe. Radice, who has been on the company’s board since 2004, said one of its assets is its ability to “adjust its format depending on the place they operate. They have been incredibly successful in Italy, where shopping has remained in the Middle Ages, dominated by mamas and papas stores, in an underinvested extremely regulated and protected environment.”
McArthur Glen operates four designer outlets in Italy with two more under construction. In Serravalle, outside Milan, its development has transformed the city center with open-air cafes, the fi nest brands and easy access for customers. “Going to the village is a moment of celebration, the return to a quality of life long gone,” Radice said. “The new village has become the old village as the real village did not keep up with the times.”
And so with La Rinascente, as with McArthur Glen, keeping pace with the times is the key to success.