With the theme “Transforming to Sustainable Retail Business”, the first summit on retail business in Bangladesh was held on 6th of February, 2016 at Le Meridien hotel, Dhaka. The day long congress hosted multiple key-note sessions with international experts, panel discussions and local insights from the experts in retail sector. The sessions & discussions addressed the current trends in retail business, the challenges and growth prospects, and how a sustainable growth can be ensured through a cooperative eco-system.
Syed Naved Husain, Group Director and CEO of Beximco Ltd. presented his captivating speech on the global trends that are taking place in retailing and shared some local insights. Following are excerpts from his session.
“Trends in technology and innovations are changing the shopping experience. The founder of Starbucks, Howard Schultz said that if you walk into a retail store and if there is a sense of entertainment, excitement and electricity, you want to be there. So, it’s actually an experience of going into a shop, and that is a trend-faster retailing.
Speed has been a key trend in retail for a decade. Customers want faster response and immediate gratification. Now, if you come to fast fashion, it’s about getting runway styles to the stores as soon as possible. One of Beximco’s biggest customer is Zara, or the Indie Text Group. We started off with the Indie Text Group back in 1995. Back then, Mr. Ortega, who is the owner of Zara, he and his sister started Zara. His sister’s son used to come to me, and he was actually sourcing, and I used to tell people that I sell to Zara, and most people would say, “Who the hell is Zara?” No one had heard about them!
Today, Ortega is the third richest man in the world in the Forbe’s list, and Indie Text has become the world’s largest specialty retailer. Zara has about 7000 shops worldwide. So, what was their secret? The secret was that Ortega is the, in my view, the father of seasonless retail, and fast fashion. Previously, retailers would buy spring, summer, autumn and winter, but Zara buys every month. Right now, they give us the colour of the garment two weeks before and they land two planes a week and take everything by air. So, what they were producing in Spain, Portugal and Turkey, they are now taking by air from Bangladesh.
What has that done for Zara? The European average on markdowns, or I would say, the international average would be somewhere between 30%-40%. Zara’s markdowns are below 8%. So, there strategy is that what happens on the catwalk, before it is even revealed, it’s in the Zara store. The next time you go into a Zara store and you say, “Let me think about it, whether I’ll buy it or not”, and you come after a week, the whole shop looks different. In most stores, due to global warming, the summer stretches, and you’ll find winter clothing there, because they are working seasonally. You go to Zara, and it’ll still look summery, and this is why their markdowns are lower. Every month, you read Harvard Business Review, and there is a model on the Zara supply chain.
Shift to Technology Based Retailing
Companies like Amazon and Google are moving towards same day delivery, because customers are impatient. Flash sales and fast check outs using iPads and kiosks are rapidly coming in. In the next 3 years, global e-commerce sales via mobile devices, are expected to top 638 billion USD.
With mobile retailing and the huge dramatic changes that it is making, 65% of the global population used mobile phones in 2015. In 2017 it is predicted that 83% of internet usage will be through hand-held devices, and 90 billion USD in payments will be made via mobile phone. To keep up with this emerging trend, businesses ought to begin considering the utilization of mobile payment processing for their customers’ transactions.
Another dramatic change that will happen is that the plastic credit card will be dead, as we’re moving to a stage where paper money will disappear. No one uses it, and it will be replaced by digital money, and if the hand held goes, why would we need banks? So, these are some things to think about. Do we really need banks? Do we need paper money? Do we need plastic credit cards? I think that these will all become dinosaurs, and not in the very long future.
Very soon retailers will have to introduce free WiFi in-store, mobile payment mechanisms, add mobile friendly websites. However, when you start paying with your phone, one big thing will become critical – that is powerful security and fool-proof privacy, so you don’t get hacked and money is not taken by others. It has to have very clear and strong credibility. Trust, transparency and protecting customer information will be critical for retaining customer loyalty and a lot of work is being done for that.
Beacon’s will be introduced; these are sensors in the shops, so as you move around in the shop, the retailer or other businesses can push timely messages to that customer, promoting products and other useful information. You can track your customers, and see what their tastes are. Companies like Amazon go down to a level that, once they have your history, they tend to know what you order, and they will stock these items around the time when you are going to order.
Experience. Experience. Experience
Retailing is no longer about the product, it’s about the experience. The other trend going around in a while is experience retailing. That’s one of the reasons why the Yellow shops have decided to move from a 2000 square feet format to a 25,000 square feet format. So, the experience of going into a shop would mean entertainment, education, emotion, engagement, enlightenment. All these factors, when you actually go in will make you come out feeling good.
There can be many ways in which you can enhance the buying experience. You can have fashion shows happening inside the stores, you can have music festivals, you can have snacks, meals and cooking classes, interactive displays, customized and personalized merchandise etc.
A lot of young ladies used to come to me and say that they love Yellow’s clothes, but that they don’t fit them. So, we decided to move into the customized clothing business. Our aim was to create clothing that was “beautifully crafted and custom fitted”. Then we stretched that to dress shirts, to formal wear and so on. So, you can go to a Yellow shop and pick a ready-made shirt, and if you want, they will take your size, and in 48 hours, they will deliver the finished shirt to your house. All sizing data will be saved in the server, so the next time you want to order you can do it on the net. You can choose to have embroidery on it. You can choose the collar, the pocket, whether you want it to be slim fit or normal fit and it will be delivered to you in 48 hours. Throughout the development of our business, we noticed that custom clothing printing websites like Imprint were hugely popular with our customers and so we decided to see how we could incorporate customizable clothing in a new way. Ultimately, I think this is a trend that you will see more of.
Delighting with Food
The Moroccan ambassador was a friend of mine and they are allowed to have two staff members and one cook, but instead he took two cooks and one staff member. When, I asked him why, he said, “I do diplomacy by catching the peoples’ hearts through their stomach”. And that is what most retail stores are trying to do now.
Retailers are wooing shoppers with food, including Yellow. So, if you go to Dhanmondi, and if you feel hungry, you can go to Yellow cafe and get all type of food. So retailers are recognizing that the way to the shopper’s heart is through his stomach. Now examples of this is that Uniglow has added Starbucks to its 5th Avenue flagship. Macy’s flagship in New York city is adding a full service Italian restaurant Stella 34.
Shift to Health & Wellbeing
Retailers will exploit mainstreaming of the health and wellness trend. Everyone’s worried about good food, healthy food, and that’s catching on. Costco has become a top seller of organic food with more than 4 billion USD in sales. Walmart, once seen as unstoppable, is struggling against competitors who offer fresh and local produce. Beximco is also exploring selling organic, formalin-free fish, fruits and vegetables in its stores throughout Bangladesh.
Here, the philosophy is simple, when you look at companies like Monsanto, who create genetically modified seeds, some of these are as bad as smoking. They would put pesticide inside the seed and claim that the crops won’t get damaged. So, in the long run, there is a big move to go back to your grandmother’s cooking, where the goats, cows and chickens were not given anti-biotics and drugs for fast growth. There was no artificial fertilizer and pesticides used, nor were genetically modified seeds were used. Companies like Costco is benefitting from this and it is one area that Beximco has moved into: organic farming in our industrial parks. So, if you visit Beximco park and have lunch there, you’re going to get your grandmother’s cooking.
Online Compliments Offline
When we talk about Amazon, everyone thinks of a battle between the brick-and-mortar and online. I don’t think there will be a battle. I think both will complement each other, because there are products that you want to feel, touch, smell and you can’t do that online. The brick-and-mortar is also becoming an experience, so you just don’t go there to buy a product, you go there for the experience.
But then what is happening is that, companies like Walmart and Target are coming up, in competition with Amazon. Because if you have a combination of brick-and-motor and online, then you can order online and immediately you get a message that you can pick the product from the outlet nearest to you, and then if you don’t like the product, you can return it. Similarly, a lot of the social marketing, etc is also used to sell out of your traditional brick-and-motar. So, what will happen is that these two areas will grow together, but in my view, brick-and-motor will not go away.”