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Holt Renfrew & Co., Canada’s 174-year-old luxury chain, has a formula for profits — be the same and be different.

This story first appeared in the November 16, 2011 issue of WWD.  Subscribe Today.

“Our business is still the same — we haven’t opened new stores over these past two years, or expanded significantly into any new markets, but we’re thinking and acting very differently,” Mark Derbyshire, president of Holt Renfrew, said. “We have learned that we can’t be successful unless our employees truly get it.”

Derbyshire said that in the past two years, the Canadian apparel market rose more than 10 percent, while Holt increased more than 20 percent, and record profits were achieved last year. Core designer divisions, in particular women’s apparel and accessories, rose more than 40 percent, he added. “We’ve also improved our performance on full-price sell-through by over 11 points.…But numbers can only tell part of the story.”

The story begins in January 2010, when Derbyshire became president after serving as chief talent officer for Wittington Fashion Retail Group, the holding company for Holt, Selfridges in the U.K. and Brown Thomas in Ireland. “In my first few months, I really wanted to understand what was going on in the company and how everyone felt.” He knew Holt always focused on products and how stores appeared, but he decided to talk to hundreds of employees, vendors and customers. “I needed to know what we were doing well and where our opportunities were.” He learned employees were not fully engaged, though they wanted to be, and customers liked the store but liked it best when there was a sale, or for special occasion purchases. He also learned that vendors thought Holt could be a stronger partner.

“It was clear we had to change things, and we’re still changing things,” Derbyshire said. “I firmly believe that we need to transform the way people think of us in order to transform our business. At Holt, we needed people to distinguish us.…It’s one individual at a time…each employee, each customer and each vendor, but when it takes hold, let me tell you it works, because it’s organic — it’s not forced. I didn’t want to tell them what to do. I wanted them to think about what they had to do.”

In September 2010, Derbyshire launched the President’s Bet whereby sales associates received $100 if they hit their plan by the end of the year, and $500 if they hit it a month early. All nonsales employees were also eligible, if their teams or stores hit their targets, marking the first time many of them had a chance for a bonus. “There were no losers. If a person doesn’t hit their goals, they are asked to donate some time to charity.”

The result of the experiment: 50 percent of employees won. “That’s impressive when you consider that only 14 percent hit plan in 2009,” Derbyshire noted.

“The bet turned out to be a huge success, financially, but more powerful was its role in producing a change in our culture. It truly supports teamwork.…Commissioned sales associates were giving some of their sales to their colleagues so that they could make it. But it wasn’t the money — it was the challenge. Everyone wanted to show their team — and to show me what they could do. Holt and the employees weren’t the only winners here. Our customers and our vendors felt the spirit.”

The President’s Bet is on again this year, Derbyshire added, and to get staff further motivated, the top winners will get a trip to Las Vegas instead of $500.

To better partner with vendors, Derbyshire said, “We [began] partnering on initiatives that would help raise funds for causes near and dear to their hearts. We weren’t asking them to help us raise money. We wanted to help them raise money. Our idea was based on a simple, powerful formula: sell 10,000 of one worldwide exclusive item in 10 days, with all proceeds to go to the vendor’s charity of choice.” Holt’s Web site and stores were merchandised top to bottom with the items, and supported by events.

“To date, we’ve raised almost $300,000 for three different causes selected by three different vendors — most recently for the Canadian Breast Cancer Foundation.…In addition to helping out with some very worthy causes, what is really of value to us is that these vendors are seeing us differently.”

To break from a focus on discounting, and to get customers to shop earlier and at full price, Derbyshire said the assortment was customized to each market, the frequency of deliveries was increased so the selection was fresher, and sales promotions were reduced from 16 in 2009 to six last year, and four this year.

“From listening to our customers, we know they wanted price integrity after the inventory excess that peaked in 2008,” Derbyshire said. “They wanted to buy their favorite runway dress, and not see it sitting there at the end of the season for someone else to buy at 40 to 60 percent off. But I will admit we had some resistance at first. Some people wanted us to continue to discount when New York [stores] did, and we had some interesting standoffs.”

However, we stood our ground, ensuring we were giving them the very best experience and the products they wanted.

“When we do run a promotional event, it’s designed to drive traffic back in for full-price shopping. So, when we do offer gift cards as part of a promotional event, they expire before our seasonal break. And on average, customers have been spending three dollars for every dollar they earn on those promotional cards.…In the short term, we’ve experienced more traffic, higher sales and a very healthy 11-point increase in full-price sell-through.

“For the long term, we’ve transformed the way our customers think of us.”