Simply ask a multi-entrepreneur like Ronald van Zetten one question, and get a clear analysis of what is going wrong on the high street today. The man who is giving V&D a second lease of life as a web platform, isn’t letting go of the idea of a physical store: “setting up one somewhere in town? I’m going to give it some serious thought. We’re living exciting times!”
What is experience?
Where did things go wrong for the department store sector?
“At the beginning, department stores bridged time and distance. They brought products within the reach of people who couldn’t otherwise buy them. They could import, and they could buy in large volumes. That was very successful for a long time. But with the advent of specialists, the range of products on offer in department stores became less unique. There has now been a complete turn-around in the market. Where it used to be very supply-driven, it’s now demand-driven. The customer decides where to buy, at what price, and even maximum service. At its most extreme, you can simply get it delivered to your home for free, and can then return it free-of-charge. 25 years ago, we couldn’t have imagined that. Everything was focused on efficiency and the idea of bringing things together and creating the most efficient offer possible. But the customers came anyway. Now, we’re experiencing an era of mass individualisation.”
Don’t department stores have an answer for that?
“Shopping as we knew it, the idea of coming to discover products you didn’t see anywhere else, at prices you didn’t see anywhere else… that’s something that department stores haven’t had for a long time. How can you still enthral and fascinate customers today? Do you have to organise events? Why would they come back? The answer should be for the experience. But what is this experience? A department store showcases quite a bit of experience when it comes to displaying items, but of course you don’t really experience that. Foodservice is the biggest opportunity for an experience, but over such a large area you can’t just have one catering outlet, there has to be more on offer. That said, I find Galeries Lafayette Champs-Elysées an interesting experiment. There, the department store itself is top of mind while the brands are underneath.”
So are there possibilities?
“We’re living exciting times! We’re in the eye of the storm and no one knows which way it’s going to blow next. You can’t say today that the high street is doing well. Cities have to be redeveloped, but that is a process that takes years and it is not being coordinated. It allows the free market to operate, which is a good thing, but there is a surplus of retail space and there is the possibility that there will soon also be a shortage of personnel. On top of that, a competition that is invisible, but which does 10 to 20% of the business. All those small vehicles driving around… That whole complex world is changing so quickly, yet also so slowly because it’s not coordinated… There are no easy solutions.”
“Some people are then of the opinion that when the crisis is over, it will all take off again. But that isn’t the whole story. Customer spending is shifting to other preferences: people spend more on their smartphones, for example. There’s the sharing-economy: people rent instead of owning. Young people today don’t necessarily want a car any more. These are fascinating developments. Look at the growth of the second-hand and vintage markets, like with United Wardrobe and Vinted, for example. We’ve launched a micro-influencer platform ourselves, called Frendz. Price transparency was also never that great. People look for the cheapest way to get the best service. Shoppers have become professional buyers and they play retailers off against each other. What price is it? What guarantee does it come with? Is there free delivery? What are the reviews like, etc.? All of this is unprecedented.”
And against that background, you’re investing in an ‘old’ brand, V&D. What is the potential for that brand?
“Many customers my age are still missing V&D. It was welcoming, friendly… That’s what it was all about. For a large group of people, it was a ‘safe pair of hands’. We bought the trademark rights, because it is still a well-known brand. The company might have had somewhat of a dull and boring image, but it still turns over more than 600 million euros. I think Hudson’s Bay would’ve been happy with half of that turnover by now. It plays a role and it has its own location; if you go around with an ageing target group, you can see they are lacking an anchor point such as this in the city. Besides, it was a part of your life; a void that Hudson’s Bay just couldn’t fill. Those customers were actually very disappointed when they discovered Hudson’s Bay. The retailer was aiming for a younger target market, but they didn’t come… A brand like V&D has great nostalgic value, a positive experience. If you were to create something exciting again, in a different format that was aimed at that older customer, well I do believe in that because that particular customer is still around and that gap hasn’t been filled. Setting up one particular shop like that somewhere in the city, together with suppliers, can be a lot of fun.”
Online remains an inefficient model
What’s stopping Ronald van Zetten, then? You have the brand…
“Well, I need a few more suppliers… We’ll just sit this storm out first and see what happens to those buildings at Hudson’s Bay. There will always be potential for physical stores, but then you have to make sure you have something that appeals to new generations. Just having more of the same is not good enough. I’m going to give it some serious thought in the next few years, because suppliers also need to sell their goods. And I can also see the major drawbacks of online shopping: the returns, the inefficiency of the flow of vans that drive around one after the other… That can’t be very environmentally friendly. There are still enormous changes to come in the next ten years: we will bundle items and we will drive electric vehicles, but it remains an inefficient model. That can’t survive. In a shop you can choose, you can browse, you can hang an items back up or you can buy it, and then it’s over. You don’t end up with 40% of customers coming back the next day to get their money back. That is a big advantage. You can see, understand, try on, feel, combine – you have a conversation and you can receive a service…”
How is vd.nl doing in the meantime?
“It’s turning out pretty well. Not good enough yet, but a little better every day. We are not yet 100% satisfied with the offer, but the platform conversion is good. On the non-food department store side, I want to see more and better things. This is where we are looking for new partners. We don’t let just anyone in: we are a controlled market place and we want to be able to offer a certain degree of exclusivity to our partners.”
“Look, traditional retailers are bad at online things. You are dealing with a fixed cost structure that is very challenging; it means you need a lot of turnover, or you’ll go bankrupt. It’s natural that they then get frustrated; pure players have a totally different cost structure, which allows them to compete very hard on the basis of price and service. Traditional retailers have no answer to this. I love to see how bol.com and Coolblue are developing. We have actually bought a shoe platform ourselves, and we are learning from that. Incidentally, social commerce is not the golden ticket either: it does provide reach, but little turnover. Only a few influencers manage to really convert.”
Bijenkorf is doing well, both off- and online.
“Yes, they switched in time. They went from having twelve to seven stores. They have always had the best locations in the city and they sell brands that are not widely available. You won’t find Gucci or Prada anywhere else in Utrecht. People trust Bijenkorf and appreciate the service. They have a good name, a good reputation and a clientèle who have sufficient purchasing power. The average receipt amount is high, more than 120 euros. This is also an advantage for their online activities: if you ship a 240 euro sweater, you can still get something out of it. Trust is an important factor, and it will increase in importance. Many people feel unsafe using the Internet. There are lots of stories circulating about fraud and scams. You don’t buy from an obscure website, but you don’t have that problem with Bijenkorf or V&D. I strongly believe in the power of strong brands with good reputations.”
Keep innovating
Is there still a future for ‘variety stores’? For an actor like Hema?
“Remain relevant, that’s the golden rule. The game isn’t going to get any easier. You have to keep innovating. The competition is huge. For me, Action and Kik are department stores too. That’s the ‘wheel of retail’ that you can see at work. I love what they’re doing. Hats off to them. But my big favourite has to be IKEA. This has been one of the best companies in the world for years: focussing on its core business, keeping prices low, innovating… They make special products accessible to the general public. That’s the function of a shop like that, isn’t it? Their collaboration with Sonos, for example, is well received – I could wax lyrical about that. They remain super-relevant. So it can be done.”
How does Ronald van Zetten see the future for the department store sector?
“With fewer department stores in the really big cities, there is still a role for them. A little bit of the De Bijenkorf strategy. Everything in-between is just going to disappear. The merger group of Galeria Karstadt Kaufhof will also have to concentrate on large cities in Germany. That’s what buying behaviour is all about nowadays: people do their run shopping close by, meaning convenience comes first. But shopping as a leisure activity is only possible for really big cities. That’s where it happens, and not elsewhere.”
But does van Zetten still believe in shops? Does your heart still beat that little bit faster for them?
“I love them! It’s fascinating. We’re in the middle of a huge change. You can see the negative side, but also the positive side. Scarcity stimulates creativity. The big question of ‘what will our future look like?’ is being tabled in every boardroom of every major department store in the world. That future will be reserved for those who manage to reinvent themselves.”
