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Karstadt’s Andrew Jennings Says Change Is Essential to Survival

The ceo was a participant in the college’s CEO Speaker Series and addressed a room full of M.B.A. students and scholars at LIM College.

NEW YORK — Embrace change and never give up.

Those were just a few of the words of advice imparted by Andrew Jennings, chief executive officer of Karstadt Warenhaus Gmbh, to LIM College students on Sept. 9. Jennings was a participant in the college’s CEO Speaker Series and addressed a room full of M.B.A. students and scholars.

“Change is the only constant,” he said. “The old rules no longer apply, and a business that fails to be relevant to the customer today will not have customers tomorrow.”

Jennings said that while retailing has always been about change, the key principles have remained the same over the years: providing great value, having an efficient and reliable supply chain and providing exceptional customer service.

“But success in the past is no guarantee of success in the future,” he said, pointing to the disappearance of once-prosperous retailers such as Blockbuster and Borders. “All businesses are under constant pressure to innovate, sharpen and differentiate, and our job as leaders is to understand and make appropriate ongoing refinements to the way we do business.”

He said the first step is to know the customer. “One of the key initiatives I’ve introduced at Karstadt in Germany is a lifestyle segmentation program,” he explained, which resulted in identifying six distinct customer segments, including a classic cross-shopper, one whose shopping is driven by kids and another who seeks sports and technical gear. Once identified, retailers can buy the right brands and products to appeal to each segment, modernize and improve the selling floors to accommodate the product and target marketing programs to connect with each.

“This is a very important message we use to gain market share,” he said.

Jennings said understanding the interaction between brick-and-mortar and online retailing is also essential in today’s world. “There are no firewalls [between these two types of retailing],” he said. “They’re profoundly entwined and mutually supporting.” He said that 76 percent of consumers today recommend companies they like to a friend or colleague, while 63 percent of all online shoppers read product-related comments from friends on Facebook. “Word of mouth remains a crucial influencing factor. It’s just that that word of mouth is as likely to be digital as it is verbal.”

Retailers can participate in this “digital blizzard” by constantly telling their customers about new products and where to get the best deal. “[Customers] want to communicate, and we have to be ready to respond,” he said.

Jennings also said retailers need to work hard to hire the best people to work for their stores. “Retail is still a people business,” he said. “We have to recruit the best people, we have to develop them and we need to listen to them.” Google, eBay, Amazon and Zappos are among the best examples, he said, noting that he looks mainly for “life experience, energy and passion” when seeking employees. He recounted the story of a waitress he encountered at a New York City restaurant who was so superior at her job that he recruited her to join Saks Fifth Avenue. He placed her at the Fifth Avenue Club, the store’s personal shopping department, and within a year she had booked more than $1 million in sales.

Jennings then turned to the changing retail landscape. Technology has given businesses the ability to adjust prices with just the click of a mouse, and retailers need to be prepared for that. But instead of focusing only on price, stores need to “excel in other aspects of customer service — including the quality of the customer experience in-store, delivery time, a willingness to refund and excellent warranty periods. How do you win the war on price? By winning on all other fronts,” he said.

At Karstadt, which emerged from bankruptcy three years ago, management has been restructuring the business, slashing jobs and modernizing the assortment to keep pace with competitors. Jennings said the newly unveiled and refurbished 220,000-square-foot Düsseldorf flagship sports more than 100 new brands, including Topshop, whose introduction into Karstadt stores last week has been “unbelievable.” Jennings has also been the catalyst behind the Feel London promotion at the company’s 84 stores this fall. “That’s what the customer wants,” he said, “an experience.”

While retailing remains a challenging industry, “with the right ideas and the right strategies, I believe the traditional retail industry has a very bright future. Make a plan, make sure it’s the right one, then execute it ruthlessly.”

Jennings, who is planning to leave Karstadt when his contract expires at the end of the year, would not divulge what he plans to do next. But he hinted the plan is in motion: His next step will be in London.