The coronavirus crisis caught retailers unawares – and there’s no going back to business as usual. So what does the future hold for retail? Florian Haller asked s.Oliver Group CEO Claus-Dietrich Lahrs how people’s purchasing behaviour changed during the pandemic, which strategy will allow s.Oliver to bring its customers back to its stationary stores and why department stores haven’t fallen behind the times.
FLORIAN HALLER: The COVID-19 crisis hit s.Oliver hard and led to a decline in sales. What has your experience been like?
CLAUS-DIETRICH LAHRS: It was an unnecessary crisis for the entire industry. During the lockdowns we constantly tried to make it clear to the authorities that it was a bad idea to shut down something that is so important to people – places where they can continue to interact with people, treat themselves and browse great clothes, and where the risk of infection is extremely low anyway. For us as a company, the coronavirus was a development that took us by surprise. 70% of our business was suddenly gone (the remaining 30% are online). We tried to stay in contact with our customers and share creative ideas with them, assuring them we were there for them and that our collections were still available. For example, we presented the latest collections in various stores using WhatsApp and video calls. But of course this can only make up for a fraction of the business we lost.
Were you able to find any positives from this phase?
CDL: We said that, despite the crisis, we still wanted to carry on developing our big projects, improving our speed, innovation, shop concepts and shop experience, both in our e-commerce as well as in physical retail. And above all, for our collections to be more closely aligned with the market and reflect the trends that we are observing. We want to accompany this process with digital development technology so we can reduce the time taken for everything that was previously only possible by physical means and often very time-consuming. I think we used this time wisely. One drawback, of course, was that we didn’t know when we would be able to open again. That’s why we were cautious about making predictions for the second half of 2021. Overall, we gave the company an enormous innovation boost that made it clear that, once the restrictions officially end, we will have a faster, more agile organisation that is more open to change than before the COVID crisis.
Has the coronavirus crisis changed how you see customers? Are they more at the fore now?
CDL: During the crisis, we gave a lot more thought to the kind of messages we wanted to send out to our customers without them having to actually come to our stores. On the one hand, we spent a lot of time working out how to use the e-shop to communicate with them. And on the other, we had to figure out how to produce digital content for products that were previously only presented at the POS – which is still our most important channel – and ways to make it so effective that it brings our customers back to our stores.
To be honest, as a customer in a store, I don’t often have the feeling that the focus is on me. Customer centricity doesn’t seem to have really established itself in stationary stores yet. How do you see it?
CDL: We have observed that customers these days don’t just drop by anymore. They are much better informed and arrive at our stores with more specific things in mind so we need to be better prepared for that.
What does that mean specifically?
CDL: We need to give a different kind of welcome to our customers and serve them better while they are in the store. That doesn’t just mean serving them in the sense of: here’s the product, there’s the changing room, off you go. It means keeping the dialogue going and the customer engaged. That never used to be necessary in our business. Our attitude used to be: we have a certain flow of customers from which we need to generate enough sales and make sure we are prepared by having enough goods in stock. Today it’s all about giving the people who do come to our stores the feeling that it was worth their while. And that’s why the store, unlike the online shop, needs to be a place where customers experience something special. It’s no longer just about displaying the goods in the right colours and sizes – something has to actually happen from the moment the customer enters the store to when they leave it.
So the store is to some extent losing its logistics function and gaining more of a brand function.
CDL: Yes, definitely.
How will I be able to experience that as a customer in the s.Oliver stores?
CDL: To name just one example, we will be opening a fantastic new store in Munich with a large mezzanine area in December. We decided to fill this space with art that represents who we are and where we come from. The whole craftsmanship aspect – the feel of the textile and the fabrics – is still very important to us. And as we want to convey that in an artistic way, we have commissioned Berlin artist Peter Lindenberg – and also given him plenty of freedom. In the past, stores were just places for transactions, but that can’t remain the case in the future. That’s why art is going to play a more important role for us – by organising exhibitions with this artist at regular intervals, we can make the Munich store much more than a place where transactions happen.
There has been a marked shift from physical to online sales. How will these two sales channels develop at s.Oliver in the future?
CDL: We are observing that a lot of customers who never used to shop online suddenly developed a taste for it during lockdown – and are now really into doing things online. But we can also see that there is something missing in online retail: the physical experience and being able to hold the products in your hands. Only then can you get a feel for what kind of a fabric it is, how it feels when you’re wearing it, what it feels like to the touch. Our online shop now has a very important function for us, because it’s where we present our largest range of products and more and more information on everything including fits. That ensures that the customers who come to our stores will be a lot better informed. But it’s a very sad state of affairs when people are not only working from home all day long but also ordering everything online on top of that. We are noticing that the return to stores, especially on Saturdays, has become incredibly important. In the past, we also had quite evenly distributed footfall during the week because people were working in the city centres and would often pop into our stores during their lunch break or after work. But everyone working from home soon put paid to that. That means we need to be a lot better prepared on Saturdays – and hopefully on Sundays one day too.
One term that keeps cropping up is OMO – online merges with offline. Is s.Oliver planning to integrate digital technologies into its sales strategy in the future?
CDL: We already have, with our app. If we can get our customers on the app first, then that will be the biggest revenue driver. But the app shouldn’t just be all about transactions either. For example, we are thinking about presenting smaller virtual fashion shows on it at the beginning of each month, when we have a new collection in stock, to show people that it’s worth coming back to our stores and taking a look around. These days, everyone is trying to gain a better understanding of which platforms their customers are spending time on, where they can reach them and where they can credibly appeal to them. We are still in the early stages of figuring out where and how we can play a part with the required authenticity. But I think that the traditional separation of physical and digital – both from a channel and an experience perspective – won’t be around for much longer.
Department stores are regarded as outdated models and currently having something of a hard time in Germany. How do you see their future developing?
CDL: Good department stores will still be very important in the future. If we look at what’s happening at department stores like KaDeWe in Berlin or Breuninger, there is a legitimate expectation that these stores will stick around. But they need to offer a good mix of brands, an in-store café and special moments during the year that are turned into a visible theme in the store. And of course tourism is a very important point here: department stores tend to do better in cities with plenty of tourism. In the future it is likely that there won’t be department stores in all of Germany’s cities – and run-of-the mill department stores in medium-sized cities will certainly struggle.
s.Oliver has been pursuing an international expansion strategy since 1998. Which markets are important for you and what potential do you see here for the future?
CDL: I think we would be wise to concentrate on the markets where our brands are already known. That is a basic requirement for continued commercial success. We certainly won’t become a global brand and won’t be setting out to conquer America and China either. But we are already well established in the Benelux countries, Croatia, Austria, Russia, Switzerland, Slovakia, Slovenia and the Czech Republic. Our main focus will be on developing these markets – with our own online shop and our own stores with an even more impressive range of products.
Thank you for taking the time to talk to us.
This interview first appeared in TWELVE, the Serviceplan Group’s magazine for brands, media and communication. You can read more exciting articles, essays and interviews by and with prominent guest authors and renowned experts in the eighth issue under the central theme “A Human-driven Future: How People Shape the Digital Tomorrow. Click here to access the e-paper.