More than two years ago Dimas Gimeno, former president of El Corte Inglés, left the board of directors of the department store group in exchange for compensation of 10 million euros. Now, it prepares the opening in early 2022 of the first establishment of the Wow chain, on Madrid's Gran Vía. A step with which, he assures, seeks to "revolutionize" distribution.
Before this business move, he published the book 'Retail reset' together with Luis Lara, 'senior advisor' at Kapita, the investment firm headed by Gimeno himself. Both are critical of the strategy followed by distribution companies in Spain. They save, however, Inditex, for his "ambition", and affirm that the departure of Pablo Isla and the arrival to the presidency of Marta Ortega, although it has surprised, "it was foreseen".
I would like to start with the very definition of 'Retail reset'. In the book they explain it and it can basically be understood as a need to transform and rethink the model when circumstances change ... Is that so?
The crisis that started in 2020 should serve to propose what we call 'retail reset', to integrate all channels with a 'phygital' approach [así llaman a la combinación de tienda física y digital]. A clear post-pandemic conclusion is that customers have made their digital transformation, but an important part of physical retail has not. For this reason, it is essential to do this 'retail reset', which implies three things: a strategic reflection based on the knowledge of the environment in which the company is and its circumstances; design a tight action plan and execute it successfully.
Has trade in Spain failed to 'reset' or is it unfair to generalize?
Can not generalize. We have a bit of everything, as in other countries. There are companies that have been able to read the situation very well and adjust their business, operational and economic models to keep pace with foreign change. One of the big mistakes of some 'retailers' [empresas de distribución] When analyzing the current situation, it tends to extrapolate what is best known. For this reason, in many operators their physical backpack weighs a lot in their way of thinking and acting. And that's why we say in the book that omnichannel hasn't worked. The reality of the 'retailers' has weighed a lot whose history is physical.
What have been the big mistakes of Spanish 'retail'? And the great successes?
As for the successes, one of those that characterizes our sector is the commitment to internationalization. Wherever we go around the world we see Spanish brands with stores in shopping malls and main streets. By going abroad, these companies have seen their business model strengthened and should serve as an example for the rest of the sector. On the other hand, there is clearly a factor to improve: apart from a few global giants in the field of fashion, department stores or supermarkets, the rest of the companies are small in size compared to other countries. It is imperative to gain dimension to have more resources at all levels and to be able to face challenges such as digitization or sustainability with guarantees.
They mention Inditex as a company that has known how to 'reset', because it is in their culture. What they have done with the succession in the presidency and the CEO replacement is a correct 'reset'? Could or should it have been done differently?
Precisely at Inditex one of the reasons for its success lies in a clear definition of what in the book we call ambition, which is at the origin of the company and was reinforced with its IPO in 2001. That ambition, which is usually formulated by property, council [de administración], it is breathed in each department, store, in the corridors ... and it translates into what we call corporate culture. This movement at the top may have surprised the market, although the succession was already planned. The new top managers will have to effectively manage the teams that have been the architects of the company's success in these decades and, on the other hand, ensure that this peculiar culture is maintained.
In the last decade there has been a lot of talk about the 'retail apocalypse' and you mention it in the book. What is it and how is it avoided?
It is a metaphor commonly used in the industry to scare us with digitization. A negative and fatalistic vision is transmitted: physical stores will end up closing. We don't think there will be a 'retail apocalypse'. On the contrary, we strongly believe in the role of physical stores. But these will be integrated into a single digital platform, connected with the rest of the channels. Therefore, rather than apocalypse there will be a new rebirth of the retail sector. But for this, each company must make a total rethinking of many principles that, until now, had been taken for granted, and that we call 'retail reset'.
Why has 'retail' been shortsighted?
Myopia is a common disease in many sectors, not only in 'retail'. We have collected in the book a concept created in 1960 by Professor Theodore Levitt, from Harvard Business School, and we have applied it to 'retail'. This myopia makes companies look at their competitors, who market the same product through the same channels, and the vision is not extended to other organizations and sectors that can take away our consumers if they are able to better satisfy their needs. present or future needs. How does the myopia of 'retail' work? For example, making them believe that the internet and mobile applications have destroyed their position in the market, when in fact it was because they did not adapt to new customer demands. This myopia means that they do not struggle to understand how the new waves of connected customers want to interact with their favorite brands.
And have all the operators put on glasses to correct this myopia or are there some who are groping?
Myopia makes it difficult to see clearly what is behind the 100 cm2 screen of a 'smartphone', which is where today we play with the client, and that they prefer to look only at what they can see because they have it in front of their noses . The myopic of 'retail' They blame technology for changing the behavior of customers when they need to buy new glasses, see well up close and far and wake up from their 'groundhog day'. This myopia of 'retail' conditions the responses that companies give to changes in customer behavior.
Strolling through any commercial area of a big city gives the feeling of 'copy and paste': the same stores, the same distributions and commercial proposals. Does losing differentiation make trade poorer? Doesn't it also impoverish societies?
This impoverishment of 'copy and paste' did not matter when physical stores were the only destination when it came to stocking up on product or having shopping experiences. Digitization is the solution to this access problem: we are in the era of 'tele-everything'. We hope to have information and buy any product at the best price no matter where it comes from. It is no longer necessary to travel to access what we need ... Another thing is that we are going to give up shopping, to enjoy the experiences and services that only physical points of sale can offer us. For this reason the subtitle of our book ensures that physical stores are key to the 'retail' of the future.
Can the disappearance of the traditional small business be prevented or is it already too late?
It's not late. Absolutely. The small traditional business fulfills some very important functions. In fact, the pandemic has made many of us rediscover local commerce and value the service it provides. This 'retail' opportunity It cannot be wasted on a small scale and it must be understood that customers are also in the digital world and therefore that digital connection has to be worked on. In addition, the emotional connection must be worked on, in which small businesses can have much more advantage than large chains.
They mention large digital platforms as catalysts for change. For many small operators they have been a growth pillar, for other companies they are the enemy ... Are they angels or are they demons?
A positive factor is their role as catalysts for change in the sector. Many 'retailers' realize that they have to change and that there is scope to focus where these platforms cannot compete. Those giants of commerce may have more resources to beat their competitors in price, breadth of supply, speed and convenience. And the little ones can play their cards clearly betting on a differentiated offer by working exquisitely on the brand, the product, the service and the experiences.
They talk about the future of commerce with one foot in the physical and the other in the online. How do you balance?
Living with our backs to the digital world means doing it for the vast majority of consumers. If something defines us as clients, it is that we are connected. It is estimated that 80% of us look online before going to a physical store. Can we think that we can survive or be successful in the future when our brand is not in the digital world? We assume that these data will make those 'retailers' think that they see digital as a threat and prefer not to face this challenge.
In recent months, the supply crisis has made evident the problems of having all production relocated. Are we going back to productions in proximity or has it been just a scare and Southeast Asia will continue to be the great textile and retail factory in the world?
COVID-19 can be considered a gray swan rather than a black one [acontecimiento inesperado]. Although it was considered highly unlikely that there would be a pandemic, it was possible that it occurred because there had already been in history. In such a globalized world, it has introduced tensions in the supply chain and has awakened many companies that already knew that it made sense to work with a short cycle or proximity model, for all or a significant part of the offer. On the other hand, those of us who know Asia well know that many countries are in a process of reorienting their production model, moving away from low-cost manufacturing. Therefore, we have a great opportunity to relocate productions that make perfect sense not only from the point of view of flexibility but also cost.
Are customers willing to pay more for products manufactured in proximity?
In the medium and long term, we will probably have no other option. In some 'retail' subsectors, such as fashion, if we look at the graph of the average price over the last fifteen years, the curve is downward. This deflation of prices in the sector, caused by emerging phenomena such as the 'low cost' and the proliferation of promotions, cannot continue for long ... The post-pandemic consumer value equation has changed and it is necessary to move from the 'value', the good value for money, without more, to the 'value plus', excellent relation, originated by the emotional connection with the client.
They are about to open the first Wow store in Madrid. What do you come up with with this step? Do you have new openings scheduled and where?
We are scheduled to open in the first quarter of 2022. It will be a multi-brand and multi-product complex to revolutionize the world of ''retail 'with a shopping and leisure proposal that goes far beyond what has been seen so far in the city. We want to make this new online project that has arisen in Madrid known globally and, once filmed, see the options of taking it to other countries. We receive proposals almost every week and we have some in the drawer, ready to be studied. Meanwhile, our goal is to prepare to blow the minds of all who visit us.