The international wrap


Angela AhrendtsApple’s star recruit steps up

After leading such a dramatic impact on luxury brand Burberry’s retail mojo, it’s no wonder Angela Ahrendts’ arrival at Apple this week is attracting widespread attention.

Together with design director, Christopher Bailey, who has now assumed the CEO role at Burberry, she led a revolution of the brand – from a plaid, even dour, label into an exciting, vibrant, aspirational fashion brand, with stores embracing digitalisation, customer engagement, and innovation never previously seen in luxury.

In seven years at the helm she trebled sales to US$3.9 billion.

Salesforce CEO, Marc Benioff, was moved to Tweet upon her appointment last October as Apple’s new retail head, “the biggest hire @tim_cook has made since Steve left us.”

Access exclusive news, features, interviews and reports.

Subscribe now or login to access premium content.

Subscribe Log in

“She shares our values and our focus on innovation,” Apple CEO, Tim Cook, said when announcing her recruitment.

“She believes in enriching the lives of others, and she is wicked smart.”

Apple’s gloss has dimmed in recent quarters, its growth slowing as rivals like Samsung squeeze sales of iPads and iPhone, which has failed to keep pace with customer demands for bigger screens and lower prices. It’s still profitable and successful by any measure, but the dizzying sales growth of the last decade or so has slowed and impatient analysts and institutional investors are looking for Ahrendts to lead a resurgence.

Former Apple retail head, Ron Johnson, created a store format for Apple centred on customer engagement and ‘a place to be’, which made the Cupertino tech giant one of the world’s most successful retailers in sales per square foot – so much so that shopping mall operators have to produce two sets of monthly figures to benchmark tenant and centre performance – one with Apple included, one without.

But no matter how successful a brand, product or store, it must evolve to maintain leadership. No pressure, Angela.

Johnson was replaced at Apple by the ex chief of UK High St electronics retailer Dixon’s, John Browett, in April 2012, who lasted just six months before being fired by Cook, with Browett later admiting he did not fit with Apple’s culture. Cook has held fort since.

Ahrendts will assume leadership of both the 424 bricks and mortar stores internationally and Apple’s huge online retail business – a decision which shows the company is recognises the importance of linking online and offline.

Her challenge at Apple is in many ways tougher than the last. Burberry was ripe for reform in 2006; many would say of Apple’s retail format: ‘if it isn’t broken, don’t fix it’.

If she can take Apple’s store offer to another level, the prize may well be succeeding Cook as CEO.

Meanwhile, Apple embraced Earth Day on April 22 by announcing the worldwide adoption of a recycling program encouraging customers to return their old devices to its stores.

Lisa Jackson, Apple’s VP of environmental initiatives, said every store will now take back Apple products for free and recycle them.

“We believe we must be accountable for every Apple product at every stage of its use,” she said.

The company will ship products to third party recyclers.

Apple used Earth Day to highlight a range of environmental initiatives, launching a new website and video titled, Better, narrated by Cook, with the campaign’s theme, “We want to leave the world better than we found it”.


Primark jumps the Atlantic

Primark, the UK’s king of discount apparel, is to launch in the US.

The first store of 70,000sqft, will open in late 2015 in Boston, with up to eight others planned for the US northeast, all supplied from a localised warehouse and distribution network.

It’s a bold, almost puzzling move, into a market where the bottom end is dominated by discount department stores like Walmart and Target.

Primark, whose flagship stores selling ultra-cheap, essentially disposable lines, often resemble a DDS, wants to become a global chain. To achieve this it must find a way to make its rock bottom pricing strategy appeal to mainstream Americans, overcoming often invisible cultural differences, which have led other British retailers to fail in North America.

That list is distinguished and growing: Tesco’s Fresh & Easy cost it £1.5 billion, despite years of research in which UK executives even boarded with American families to see how they lived. M&S sold grocer, Kings, losing two thirds of its investment in 2006; HMV exited in 2004; Sainsbury sold its Shaw’s supermarket chain, unable to expand or compete with the locals; and WH Smith sold its airport and hotel store network in the wake of 9/11.

Other, more upmarket brands, like Topshop and Ted Baker have succeeded, but with far higher margin products than Primark offers.

Primark’s parent, Associated British Foods, already one of the fastest growing retailers in western Europe with more than 270 stores in nine countries, has assured investors it has undertaken “extensive research” in the US market in preparation for its launch.

Its strategy of focusing on a small geographic area with compact distribution logistics is smarter than debuting with high profile flagships in big cities like New York or Los Angeles with crippling rents, usually subsidised from marketing budgets.

“We think we have as differentiated and attractive a proposition in the US as we have in continental Europe and the British Isles. We think we have something special to offer,” said ABF CEO, George Weston.

Success in different markets in Europe had encouraged the brand to cross the Atlantic, he said, adding it looked more attractive than the Far East or eastern Europe.

“It seemed a better option than anywhere else.”

Analysts support the move, despite the failure of other British forays into the US.

“Young fashion is global now. The US tended to be quite conservative in fashion. I think that has changed because of the global access in fashion and entertainment,” said Maureen Hinton, a retail analyst with Conlumino.

“The main point about Primark is its price positioning. It is not going in as just another young fashion brand. It is going in as a young fashion brand with a very defined price edge on competitors that sets it apart. But it has all the trappings of the big stores and the feel of a more expensive fashion brand. I am sure that the likes of [US rival] Forever 21 are a bit worried.”


Hybrid formats offer offline edge

Hybrid stores are emerging as a new trend in the US and further afield as bricks and mortar retailers look for ways to fight the trend to shop online and local businesses seek a way to offer a point of difference from rivals around the corner.

The concept of matching different concepts of retailing, relaxation, or services has largely been restricted to bookstores offering cafes to encourage dwell time until now. The new ‘hybrids’ still seem very much to be offering a foodservice bolt-on concept, but more are coming.

As the Daily News in New York reports, the hybrid store is set to become a “new normal in retail”.

A laundromat on Manhattan’s Lower East Side, Wash House, has added a cafe selling beer, coffee, cookies, and grilled cheese sandwiches.

“The Wash House is the latest place to bring seemingly diverse shopping, service or entertainment experiences under one roof,” the newspaper says.

Customers love the format, openly wondering why no one has thought to do it before – you have a captive audience in the store, why not find something else to sell them?

A bicycle retailer in Stockholm, Bianchi Cafe & Cycles, opened a cafe and merged the concept so well it is difficult to tell if it’s a cafe that sells bicycles, or a bicycle store with a cafe. Whichever feature draws the customer in, they’re highly exposed to the other.

The real driver of hybrid stores is the internet. As more and more consumers shop online, bricks and mortar stores must find new ways to offer an offline customer experience which lures shoppers instore.

The Dressing Room in Manhattan is a vintage boutique with a bar (cue licensing issues in a market like Australia). Even an adult concept in the city is getting in on the act – Splash Sexy Boutique sells sex toys and offers a restaurant.

“All bricks and mortar retailers are going to have to create some kind of entertainment experience so consumers stop shopping on the Internet and go to the store,” said Robin Lewis, CEO of the Robin Report.

The downside of hybrids is that the retailer can end up having to run two very different retail concepts at once if they don’t sub-contract one component, such as bookshops in the US that might host a Starbucks, or in Thailand a McDonald’s McCafe.

In Vietnam, there is a further twist to the idea: an increasing number of bars and nightclubs in downtown Ho Chi Minh City are finding ‘daytime tenants’ to share the rent.

A popular multi-storey club, Blanchy’s Tash, takes the concept furthest – by day the building features signage for an upmarket custom coffee brand, and bagged coffee and related merchandise sit on easily disassembled shelving to create a true cafe feel while baristas brew fresh lattes.

By night it returns to a bar, the coffee packed away and without a hint of its daytime guise.

Bianchi Stockholm

Bianchi, Stockholm


Starbucks Fizzio

Starbucks Fizzio

From beans to bubbles

Starbucks, relentlessly expanding its cafe network across the globe, is moving into sodas.

A “handcrafted carbonated beverage” dubbed Fizzio will launch in 3000 US stores, as well as Singapore, South Korea, and several Chinese cities.

CEO, Howard Schultz, said the move follows “the overwhelming success” of a recent trial of carbonated beverages.

Like its coffees and teas, Fizzio will be positioned as an upmarket, healthy alternative to the Coke and Pepsi brands dominating carbonated beverages markets globally.

Schultz says the new brand will be all natural and preservative-free, “with the theatre of a custom handcrafted beverage”.

The first flavours will be Golden Ginger Ale, Spiced Root Beer, and Lemon Ale. Other flavours will be added – some specific to individual markets to satisfy local tastes.

Meanwhile, Starbucks’ latest results show continuing growth ahead of expectation. Its second quarter to March, profit was US$427 million, up 9.8 per cent on revenues of $3.87 billion. Same store sales were up six per cent in the US.

COO, Troy Alstead, told Bloomberg the single biggest contributor to sales growth was food.

“It resonates with customers.”


Germans nervous over US

German discount supermarket, Lidl, says it has delayed plans to enter the US market until 2018.

The move follows the unexpected departure of two senior executives in March.

Lidl, archrival of Aldi, has been on a rapid expansion across Europe, and now boasts 9000 stores in 26 countries. It was expected to open 100 stores in the US from 2015, targeting cities where Aldi already has a presence.

Aldi debuted in the US in 1976 and operates nearly 1300 stores there, most of them in the midwest and east coast areas. It plans to open another 650 nationwide over the next five years.

Klaus Gehrig, the CEO of Lidl’s parent, Schwarz Group, confirmed the delay but declined to comment on the reason.

German media speculates it relates to the departure of former chairman, Karl-Heinz Holland, and Dawid Jaschok, head of buying and marketing, due to “unbridgeable” differences of opinion over the grocer’s future strategy.

Closer to home, Lidl is also planning to expand into Serbia and Lithuania.

The Schwarz Group, which also owns the hypermarket chain Kaufland, is Europe’s third largest retailer behind Carrefour and Tesco.


Walmart pushes Aussie higher

US retail behemoth, Walmart, has announced a new executive lineup in Asia.

Most significant is the elevation of former Woolworths executive, Greg Foran, to CEO of Walmart Asia.

Foran took on a senior Asian regional role with Walmart after being overlooked by Woolworths Australia for the CEO role he was the obvious heir to. He was most recently head of Walmart’s China operations and in the new role will relocate to the company’s regional headquarters in Hong Kong.

Scott Price, currently president and CEO of Walmart Asia, will move to a senior management role as EVP, international strategy and development, real estate, mergers and acquisitions, integration and purchase leverage, based at Walmart’s world headquarters in Bentonville, Arkansas.

Sean Clarke, Walmart China’s current COO, has been named president and CEO of Walmart China.

Walmart’s Asia region serves customers through more than 870 units and over 150,000 associates serving customers in China, India and Japan. The company also serves customers through e-commerce in China and Japan.

Meanwhile, Walmart has paid US$334 million to break its six year joint venture partnership with India’s Bharti Enterprises.

Walmart has settled debt of about $234 million in connection with agreements related to the Bharti retail business and has spent another $100 million buying out the Indian partner’s stake from the then 50:50 cash and carry joint venture, Bharti Walmart.

The transaction resulted in a net loss of about $151 million.

The retail giant ended its JV with Bharti in October to fully operate the 20 wholesale stores Best Price Modern.

This article first appeared in Inside Retail PREMIUM issue 1996.


Comment Manually

Inside Retail Polls

What were the biggest challenges during the 2019 holiday period?


Department store Myer has further streamlined its executive team, cutting 35 roles from its head office in Melbourn…

2 days ago

Clothing retailer Jeanswest is the latest retailer to enter voluntary administration, citing difficult trading co…

3 days ago

Our contributor recalls a few once-popular retail metrics and suggests we should think twice before moving on to th…

3 days ago