The bottom line: Why more in-store staff beats greater discounts every time
Monday, October 8, 2018/
I did an interview with Channel 7 this week, on the newly refurbished shoe department at Sydney’s Elizabeth Street David Jones (DJ) store. I work with international hedge funds looking to invest in Australian retail, so being current on this challenging department sector is key. I’ve also just finished a walking tour of department stores in northern Europe and major grocery retailers in Germany in advance of the Kaufland launch, so the timing was great.
The new seventh floor in DJs Sydney is good. And not just good because its ‘new, true and different’ with the largest selection of luxury branded shoes in Australia. Those two attributes are always a draw to shoppers — and especially female shoppers. Women love shoes! It’s also good because DJs has open-mindedly learnt and applied a lot from top luxury department stores, and luxury brand owners, from outside Australia.
Among other numerous attributes, the new seventh floor has 50 trained shoe specialists. So what? Well, there are three crucial things about luxury high-value or ‘intimate’ retailing that hold up sales and lower the need for discounts.
Number one, there is an adage in retail that ‘if it costs over $100 or goes in or on our body, we ask for advice.’ ‘In or on our body’ intimate retailing includes cosmetic and drugs and all cosmetics floors and pharmacies have high staff-to-shopper ratios for this reason. Luxury items don’t sell themselves, especially not shoes. It’s a high-involvement purchase, not a self-service purchase. Knowledgeable staff make a huge positive difference to the end result for both the shopper and the store. They have a good initial shopper experience, tell their friends and come back themselves.
Number two, in large physical retail spaces, shoppers don’t want to be alone. We are happy to walk in and out of low-involvement smaller stores, hoping there are no other shoppers there or the store has a self-scan checkout because of a two-minute and $9 mission! In. Out. Gone. However, in large retail it’s just downright lonely being in a department on your own. It’s even worse when there are no store staff to talk to. Dwell times are lower, purchase-to-shopper ratios are lower and higher discounts are needed to engage shoppers to shop. I saw clear proof of this in Berlin and London two weeks ago. In London, as I walked from Harrods to Selfridges to House of Fraser, store staff numbers dropped and discounts increased.
Number three, store staff costs have a far lower profit impact than whole-of-store discounts. In Harrods, the energy from the high number of staff was amazing. Lots of happy shoppers mixed in with noisy retail staff enjoying their workplace. There was a 10% discount available if you were willing to sign up for a Harrods’ card. In Selfridges, there were noticeably fewer staff and shoppers with a 20% discount on most items. In House of Fraser, there was so few staff it was lonely. In one department I photographed a 100m by 20m run of store with not one shopper or retail staff member in the shot. This was at 2pm on a sunny Saturday, when Oxford and Regent Streets sidewalks were 10-people deep in shoppers. Discount levels in House of Fraser were 30-50% with a whole department of clearance items up to 60% off, with more shoppers there than anywhere else on that huge floor.
Store retail isn’t dead, it’s just building up immunity to an online virus. Much of global retailing has found its ‘new place in the online world’. Some old big box, category killers such as Toys R Us have just gone. Others like grocery have invested in retail tech instore and online services out of store to stay competitive. In department-store land, the top end is getting it right with investment in higher staff numbers, brands in breadth and stock in depth to create true destination stores. Their online offerings range from great to okay with Nordstrom arguably at the head of the curve.
In terms of flagships stores, Magasin Du Nord in Copenhagen and KaDeWe in Berlin were outstanding. Harrods too, having kept all of the service, choice and ambience that has allowed it to be a magnet for crazy rich Japanese in the 1980s, Russians in the early-2000s and now Chinese shoppers in 2018.
In Australia, new chief executives have finally told their boards, shareholders and suppliers that huge investments are needed to keep the lights on and find a profitable place in the world. Please spend some of that on large numbers of well-trained staff in the stores you intend to keep open. It’ll help every stakeholder involved in your business.