That’s a very ambitious timeline within which to transform your entire and very extensive network. What is the progress of this transformation now? Where are you at?
900 days could be viewed as very short or very long — but what we are doing is splitting this timeline up into 90-day intervals — screening the progress of each stage in 10 slots, every 90 days. So we know what we want to reach at the end of this 900-day road, but we are not sure what we will do exactly in sprint two or sprint three of sprint four. Some sprints and some activities and brand will go faster than others, but we will define that at the beginning and and of each sprint.
In the first 90 days, we have already made sure that our shift is in place, that we are correctly communicating and working with all our business units — particularly those who are dealing directly with the customer, so the more operational and commercial teams, to ensure that they incorporate at their end all the necessary infrastructure in order to be able to shift. The result of that was a few quick wins — the opening of a few more e-commerce sites, and a lot of new people reinvigorating the business. In this first shift we have also started working on the mind-set and the culture — internally — of the group, in order to, again, move without changing our core values but to a position where we can reinterpret those values, and support a foundation where we favour the entrepreneurial spirit much more — and that is part of our initial value system, and part of the experience — but the idea is now to favour initiative and innovation a lot more, rather than perhaps making sure we are perfect from the start.
So in our culture, we want to move from being entrepreneurial just at the top, to ensuring that we empower everyone, across the company — so that ideas are not just approved by someone like myself, who has to validate it and improve it, but so that all staff will be entitled to have a good idea and just do it with a small pilot — and if they fail, they’ll learn from it and from each other and share in that knowledge to become better? I want our company staff to able to not just bring the idea to the table but I want him to be able to have that power to execute it, to improve it.
We also have signed with a few digital platforms, including Farfetch, so we’ve made plenty of progress to date and a lot of achievements I would say, but we are not at the sprint of acceleration just yet, we are still at the shift stage as we still need to make some fundamental work on the culture, on the enabling services. But I absolutely want our sprint two to be one of speeding up more, and then sprint three or four and beyond to be the sprints of real acceleration.
In this race to conquer the new age Middle Eastern market, you've joined forces with Farfetch as you mentioned — which is obviously a huge tie-up. How did this partnership come about, what made Farfetch the right partner for the Chalhoub Group and how are they going to aid you in this transformation?
First, we started discussions with Farfetch — but not only with Farfetch — about a year ago. We only signed with them at the end of January, but already we’ve seen progression. We definitely had a total fit between our two cultures from the outset — particularly in the sense of empowering our client, and empowering our people to be relevant and offer the best in what is convenient for our customer, while still being aspirational at the same time. There was also a fit between people, our teams and a fit of options available.
So, a lot of the elements which we were looking for with a pure player, were embedded into Farfetch when I compare it to some of the other platforms which exist —including not becoming a discount site, but more an aspirational site.
Globally what we are saying is very simple. Farfetch is trying to conquer customers around the world within the Middle East, which was not to their priority market, although they had customers in the Middle East. With our tie up, the Middle East will become their priority market and they will focus more attention on the Middle East, using the Farfetch platform and develop that market. From our side, we are looking to be relevant for our customer —including the old traditional touch-points and the new — and as a pure-player platform, Farfetch was totally fulfilling these aspects we were looking for.
What are we trying to put together? Definitely the website for one. We launched an Arabic website a couple of weeks ago. Also the launching of Farfetch Middle East will be first priority. We’ve already ‘Arabized’ the website — so not only using the Arabic language, which is now up and running, but also adapting the contents of the offering, talking to the customers, so we can connect them from the Middle East to the Middle Eastern world right now. There’s a whole team permanently working on it, on the customer service, on the connection to our client which is the most essential, and to promote the site to the customers, in a very relevant way, in order to adapt the global Farfetch image to the Arabized part of the Middle East.
For me, it’s a marriage made in heaven. Fantastic.
I will see more progression as we develop our partnership, but already the first few results — putting more focus on these points — are fantastic. This without yet properly launching the site.
You’ve previously said that less than half of one percent of luxury business in the Middle East is being conducted through the digital platform — how do you see this growing over time?
It’s a small percentage at the moment, but it's growing year-on-year, and the estimate is that within about five years it will be at 24 billion dollars, the whole market — and at that point it will make up about four or five percent of the global market.
In luxury, particularly, we feel that in time it could reach six, eight, 10%. For our group and for our shift and agility effort, we say we do not care if tomorrow luxury digital is 50% of the market, which is not anywhere in the world or 10% of the market. We want to be relevant here and there — in both the digital world and in physical stores.
The difficulty for us — and part of our shift goal — is that not only do we have to be relevant in the digital world, by offering our customers e-commerce sites and capturing the three, five, 10%, 30% of the market, but to do this without letting our brick-and-mortar physical stores die.