Speciality Fashion Group, the company behind Katies and La Senza, didn't just deliver results last week. The retailer also announced it was targeting for 15% of its sales to come from online, and flagged the closure of more than 100 stores due to higher rents and bad trading conditions.
It was a fascinating announcement. But as chief executive Gary Perlstein explains, the company thinks it has the experience to back it up.
Why the decision to make online sales 15% of the business?
We started our online business four years ago, we launched it in the United States, and today it represents a significant portion of sales in the online area. That’s for our City Chic business.
From our point of view, 15% is achievable given what we’ve had, and it’s taken on rapidly since last year. Based on what we’ve learned from that, I think we can get to 15%.
We think Chic will get beyond 15%, and we feel it’s a realistic figure.
Can you expand on what sort of lessons you’ll be applying here?
It’s extrapolating from what we’ve already learned there. We have a few years of experience there and that’s telling us we’re able to reach that goal.
Is that transition to online anything to do with the announcement about closing stores?
It’s interesting, because as I’m sure other retailers have found, where you tend to have more customers online is where you actually have a physical store there as well. The biggest online businesses are doing better all the time.
It’s more a case of our multi-channel experience that’s driving this move than anything else. Where the online and bricks and mortar stores are working well together is a fascinating topic for us.
Whenever we see areas that are doing well online, we think it’s a good position for us to open a store there. And we do have some anomalies where we have a store in the top 20 but it’s not reflected online, but most of the time we see good results from the multi-channel approach.
Perhaps the demographics aren’t working in that area or some other reason, but we’re constantly organising this.
We use a demographic study that shows us where there online sales are coming from. It’s so detailed that it even gets down into specific streets, where those people have a higher propensity to shop online. We use statistical analysis to determine which areas are the best for bricks and mortar, and which are best for online.
You spoke a lot in your results about high rents and the condition of property. Is that shift to online a result of higher rents?
I just think the relationship between landlords and retailers is no different than what it’s been for decades. It’s a relationship based on supply and demand. The war is on, people say, but it’s been on for a long time.
The reality is that investment hurdles for bricks and mortar are much more given the expectations people have of being able to run a bricks and mortar store cheaply.
I think shopping centres are slow to realise the shift, but from our point of view we’re not waiting. We’re dealing with these stores, and we think they ought to be recalibrated. We’ll speak with them, and that’s just part of the transition in the retail sector.
Is this change to online and the resulting closure of stores from a number of businesses a result of a structural transition or just a cyclical downturn?
A combination of both. Certainly one is accelerating the other, consumer sentiment is down, because everyone is watching their wallet.
In that environment, people are more likely to go online and find another channel that’s cheaper. Given that motivation, people to global sites. That’s helped us accelerate online, but it’s still hard to work through that consumer sentiment.
All in all, is moving to online a bittersweet move, or just a natural progression?
Consumers are looking for a better experience. Consumers are more excited than they ever have been because there are multiple channels and ironically, I think this is a fantastic time for retail. Retailers have never been more excited and enticed to shop in different ways.
We’re embracing online and see this as the best thing that’s ever happened to the industry. It’s the first time we’ve had the opportunity to sell to a mass audience online, and this is a once in a generation opportunity.
The transition will be challenging and complex, but it’ll be exciting and good for us.
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