TOKYO — The 2019 edition of the World Department Store Forum finished its two-day run in the Japanese capital Friday, after presentations and talks by more than 20 retailers, experts and industry leaders. The event’s theme was the role of department stores in mega cities, but one topic came up more than any other over the course of the conference: the importance of experiences in the future of retail.
Other things touched on throughout the two days included the growth of mega cities and midsized cities, creating department stores that are destinations that offer something online shopping cannot, how to get customers into stores (and how to get them to stay), renovating and innovating historic buildings, infusing empathy into the retail experience and using department stores to anchor communities.
Some of the highlights included:
• Naomi Yamakawa and Jean-Baptiste Coumau’s presentation on granular growth through cities. The two McKinsey & Co. partners in the company’s Japan office said a sense of optimism has returned to Japan over the past four years, and that the numbers of inbound tourists to the country continue to grow — projected to reach 30 million this year, 40 million in 2020 and 60 million by 2030. Among the top cities as apparel markets in the world, Tokyo is number one and Osaka is number five, making Japan the only country with two in the top five. And while this will shift by 2025, with New York overtaking Tokyo for the top spot and Chinese cities including Shanghai, Beijing and Hong Kong surpassing Osaka, both cities will remain in the top 10. Yamakawa said in the last four years the number of cities classified as mega cities has grown from 31 to 41, representing a quarter of global wealth. She also noted that the top 600 middle-weight cities — of which half are in developing markets — will drive 65 percent of growth moving forward.
• The lofty goal of Naoya Araki, president of Hankyu Hanshin Department Stores, to create the world’s most entertaining department store. He discussed how the company’s recently renovated Hankyu flagship in Osaka’s Umeda district looks at the role of a department store as theater, with event spaces on every floor and some 160 experiences of various scales every year. He described one large event, a French fair, which generated $3 million in sales and drew 200,000 customers over just seven days.
• Gucci president and chief executive officer Marco Bizzarri’s explanation of how he worked with Alessandro Michele’s clear aesthetic vision and combined it with a strong company culture to drive the brand’s success. “From the very beginning, we didn’t want to create something that was going to last for a season or two seasons, becoming a typical fashion brand that is going up and is going down,” Bizzarri said. “So the idea in trying to offset these kind of curves was for me to try to find a culture in the company where the values of joy, happiness, inclusion, diversity were at the foundation of the company’s strategy.” He elaborated that he doesn’t believe in trying to install the same team at each company he goes to in order to try to re-create one company’s success, but that alchemy is the key to success at Gucci.
• Mario Grauso’s case for the importance of stellar service at department stores. The president of Holt Renfrew described how he is in the process of building the biggest Holt Renfrew department store yet, in the Montreal home of the historic Ogilvy store. When completed, the store will encompass 250,000 square feet. Grauso also emphasized the importance of personal shopping for the company’s business, saying this sector makes up 15 percent of Holt Renfrew’s business. “We all know that the online shopping experience has a lot to offer consumers, but clearly brick-and-mortar is not dead,” he said. “Often digital tends to be a monologue, and the in-store experience, when done well, is a dialogue.” The executive said his company is working to create a similar dialogue between personal shoppers and customers online as well, with projects including a virtual closet for key customers where stylists can see what they already own, as well as a virtual basket or fitting room created by the stylist for the customer.
• The insistence by Doug Stephens, a retail futurist at Retail Prophet, that all retail companies are experience companies, and it is those experiences that drive foot traffic in the digital age. He said department stores need to lead with experiences, and to follow with products; to focus on building stories rather than stores. “I see online players coming off-line and opening physical stores for their brands, because they recognize that you cannot fully actualize as a brand unless you have a physical and maybe even an emotional connection to your consumer,” Stephens said. He elaborated that great customer experiences are about being surprising, unique, personalized, engaging and repeatable.
• The notion that international shoppers can help to drive growth for department stores, as posited by Greg Gelhaus, ceo of Asia Pacific for Global Blue, a tax-free shopping company. He said tax-free spending at department stores worldwide grew 21 percent from 2013 to 2018, with Chinese consumers making up 31 percent of tax-free shoppers in European department stores and 76 percent in Asia Pacific department stores. In 2015 there were 1.2 billion international arrivals around the world, and that figure is projected to increase by 50 percent to 1.8 billion by 2030, making tax-free shopping a huge potential growth market.
• Astrid Klein and Mark Dytham’s explanation of how they designed some of Asia’s most inviting retail spaces by giving customers a place to sit down and relax. The two architects shared their concept for creating what have been called some of the best bookstores in the world, at a time when bookstores are in rapid decline. By catering to customers’ passions and hobbies with magazines, books, products and services that all relate to a single field — travel or automobiles, for example — they got people browsing in a way that would not be possible online, leading to unexpected purchases.
• The presentation by Ian Moir, ceo of Woolworths Holdings, on the David Jones store in Sydney that is undergoing renovations to make it more experiential and innovative, even within its historic building. The company is investing $400 million in the store, even while it tries to reduce the overall physical retail space that its stores occupy. “You can’t decline your way to success, you’ve also got to commit to a future, and to a bright future,” he said. Moir added that the company is aiming to re-create the success it has had with its Woolworths’ food business in South Africa with David Jones in Australia.
• Hermès Japan president Masao Ariga’s notion of “kizuna,” the Japanese word that translates to empathy, and how it is important in the physical retail space. Similar to Grauso, he said while digital and online sales are increasingly important, it is also important to provide customers at brick and mortar stores with outstanding service. “Customers don’t buy in a logical fashion,” he said. “It’s a much more emotional experience.”
• Vittorio Radice’s concept of department stores as the heart, or anchor, of a city. The vice chairman of Rinascente Group lamented the fall of several once-great department stores — including Marshall Field’s in Chicago and Foley’s in Houston — and discussed how stores today can avoid the same fate. “If we are able to convey the image that we are central to the life of people and we are indispensable for them and they feel proud to visit us, we will have a winning formula,” Radice said, adding that a store’s interior must deliver what its exterior promises.