Hello and welcome to the next episode of our show: Accenture Review TV. As always, the hosts of the program: - Jowita Michalska, Digital University, - and Karol Mazurek, Accenture. I must admit that I never thought I’d announce a fashion program, but It won’t be a traditional program about fashion.
We won’t talk about what’s in style this season on the catwalk. We’ll talk about how fashion is supported by technology, and how it deals with the difficult times of the pandemic. The base for our conversation will be the second edition of the Accenture report on how Generation Z does the shopping, so we won’t only talk about fashion but also trade. The interviewer will be Jowita, of course, accompanied by Rafał Reif, head of the fashion and trade department at Accenture.
We invite you to listen to this conversation. Dear viewers, our today’s guest is Jacek Kujawa, vice-president of LPP. I’m very excited because the market we’ll talk about today is the market that underwent a great change last year.
Jacek, the world changed. The shops closed, opened, then closed again. E-commerce accelerated significantly. Tell us, what changes did your company have to make? What did you do in LPP to achieve success in such an unstable market? Hello, everyone. We’ve had the pandemic and lockdown for a year. There was no single moment when all shops would’ve been open.
In the peak period, only 1% of shops were open. Then it became a little better, and more shops were open. But now it’s a bit worse, and about 40% of shops are open. The times are difficult for business because the loss of 50, 60, or 90% of sales is something that no business can afford.
Fortunately, there is e-commerce. E-commerces changed dramatically for a year. There are assessments that we’ve made 7, 8, or 3-years-progress for these weeks or months. The e-commerce’s contribution increased. Now 50% of our sales
comes from digital channels, which is a very good result. The second thing is that e-commerce improved. It moved several years forward. It got younger.
It’s young, fresh, and dynamic once again. A couple of years ago, when we started to strongly invest in e-commerce, it was a good moment, no matter what initiative we had, no matter what project we started, it was a success. It influenced market shares and sales. Then the market was getting mature,
we thought that the market stabilized, that everything was clear, we knew who was most important in the fashion e-commerce market, but once again, it became a mess. Once again, times are nice and exciting. No matter what initiative we have, whatever idea we implement, whatever we want to introduce, it attracts people. We see that our customers, our users, are open for technology, for changes. After a year, we can all see that we in this studio, the viewers, we were forced to befriend the technology. We have to meet each other through small and big screens, our children have online lessons, so if somebody were prejudiced against technology, they had to change their view and get familiar with this technology.
It’s visible that there is a new group of customers on the market who start to use e-commerce with pleasure. We have a nice and exciting time. It doesn’t matter what we do; e-commerce will explode. This is the moment when the company should focus on agility and a time of reaction to what happens. We must try to predict what the market will bring. It’s really difficult to predict the future in all of the markets.
We are at 38 markets right now. Closing and opening shops alternately is very unpredictable. We have to learn to react to what happens very quickly.
We have to learn how to manage commodities across different channels. It’s all due to technology. That’s the technology that becomes absolutely crucial for the trade. Right, e-commerce has accelerated recently, but it turned out that shops and shopping centers, especially for the most digitalized generation, Generation Z, as our last report shows, are still very important. It turns out that 2/3 of Generation Z members want to visit stationary shops to spend their free time or do the shopping with their family and friends. Surprisingly, it also shows that stationary shops inspire people to buy products more than social media.
So e-commerce is not as powerful as stationary shops when it comes to inspiration and social experience. How do you combine the dynamics of the development of e-commerce and the important role of real shops? Recently, we’ve been saying that it’s too early to say that stationary shopping has died. Today, we have a difficult moment, because 50% of shops are closed. But a plus point of the last year is
that whenever shops were opened, we could see that rebuilding sales in shops was very quick. The customers want to go to shops and to shopping centers. They gladly come back. When they stop being afraid for their and their relatives’ health, they go to shops. So it seems that stationary shops are still very important. What you showed in your report is something that overlaps with our observations we’ve made in the times of lockdown, regarding closing and opening shops.
Customers want to come back to shops. But since what happened that year, such a forced digitalization of the whole civilization, including online lessons, is something we can’t escape from. So e-commerce, when the pandemic and lockdown ends, which I hope happens soon, will be a much stronger channel than before. That’s the moment when all companies must show that omnichannel is the only solution. Not e-commerce, as that faces its own problems. Even the younger generations, Gen Z, millennials, indicate that a real shop is a valuable channel for them to get familiar with the commodity.
Especially when we talk about clothes, where the texture and other physical properties are something that can’t be replaced with technology. I can say it’s because of the cut of clothes. Some of the clothes are tighter, some are more comfortable.
Nothing will replace the physical contact with clothes. If the youngest people see that it’s so important for them, the shop must be open and available to them. But such a shop must be changed. Definitely it must be a hybrid of stationary and online shopping. Omnichannel is necessary. We have to ensure the real experience. If somebody enters our websites
and sees novelties, must see the same products and novelties as they see while visiting our stationary shop. It’s unimaginable that somebody who visits a Reserved, House, or Mohito shop has an impression of talking to somebody else than they talk to during online shopping. The way of communication, no matter whether it’s a digital channel or stationary shop, must be absolutely the same.
That’s why we focus on omnichannel. During the pandemic, we made a series of intensive changes. First of all, we changed the structure of the company. We ended the artificial division that nobody understands, in which some employees are dedicated to one channel and other employees to the other one.
Now everyone is responsible for sales and contact with a customer. We have one department responsible for visual communication with a customer. Previously we had a separate department for e-commerce communication and a separate department for face-to-face communication.
Now we have only one department that talks to the customer with one language because there is only one customer. It deals better with both channels than other companies that still have this rigid structure of division. We introduced an unambiguous responsibility for the commodity, we unify the technology so that everything is uniform, and the customer’s experience is as consistent as possible. Omnichannel is the only way to balance sales. Omnichannel is accelerated by technology and digitalization. That’s the answer to the demands of customers who still want to go to real shops, but on the other hand, they show us that they buy more and more in digital shops.
No matter what the world will look like, hybridization will rule. Probably. The acceleration of e-commerce means that our customers, as our report shows, expect free and fast shipment. For two years, since 2019, we’ve been asking the consumers about their expectations. It turned out that the number of customers among all age groups who expected companies to ensure fast shipment increased by 10 percentage points among all age groups.
Do you see a similar tendency among your customers? Can you say that free shipment is a market standard today? When we started to invest in e-commerce and treat it seriously a few years ago, at first, all standards showed that very fast premium shipment was necessary, so we implemented it, but our observations were surprising. It seemed that the customers didn’t want to pay extra for shipment, we noticed it a few years ago. But they value fast shipment. That’s why for a couple of years, we’ve been successively investing in our logistics network, in our logistics capabilities, to ensure shipment to our customers the next day. But as I said, the shipment must be completely free. Because the interest in paid shipment, so-called premium shipment, can be expressed as per mils.
That’s why today, customers don’t want to pay for faster shipment. But they expect fast shipment. The next day or even the same day must be standard today.
That’s why brands must ensure this service to their customers, no matter what market they are in. One more question for you. Our viewers watch us to observe the companies that did well during the pandemic as LPP did. But we also want to learn what you think on how the world should change. How the companies should change. Earlier, behind the scenes, we were talking about e-commerce, about the world being hybrid.
We were talking about a bigger contribution of social media and influencers. What do you think? How will companies function after the pandemic? How should they change? That’s a very difficult question about the future. On one hand, the Accenture report shows that the customers will be glad to go back to shops, when the end of lockdown is announced. Then we should expect them to slightly lose their interest in shops.
It’s hard to say what’s next, but I’m sure about one thing. It doesn’t matter which direction the world will go, or how the trade will look. But I’m sure It will be more digital, more technological, than it’s ever been. What should companies do? Companies must arm themselves. Once again, we have a trade war, but it’s a digital war this time.
Each company must prepare for this war. They must take their weapons and improve their technological ecosystem. That’s what’s matters most right now. It’s the technology that allows us to be agile and react quickly. Only thanks to technology, when shops get closed, we can defrost the commodity and sell it online without physical movement of this commodity. This is a process that we’ve been introducing during the lockdown.
It’s been our priority since the beginning, and now we are really proud of it. But we’ve been arming ourselves and preparing because the world will be unpredictable but also digital in its unpredictability. For example, lately, we decided to create a branch of LPP named Silky Coders. It’s a branch that will be crucial for the whole business of LPP.
We decided to do it because we wanted to create a workplace and an attractive environment for IT specialists, for engineers. so that we could attract talented people to us - people who love technology, who love playing with it, but on the other hand, due to the fact that the Silky Coders belongs to the LPP capital group, we can try these technologies in practice. We are in 38 markets, we source in more than 100 countries of the world. We can commercialize and try each idea that any of our engineers comes up with, and I think it’s a huge satisfaction. It’s the great happiness of creation that we can invent something, implement it, and immediately try it practically.
So the answer to your question is short: technology, technology, technology. The world will be more technological and digital than ever before. I noticed agility, talents, and playing with technology. That’s very interesting because it’s not the first time that somebody mentions playing with technology.
Jacek, thank you very much for the conversation. Thank you very much. I’m happy to say that Mikołaj Gazdecki, e-commerce director of Eobuwie, is with us as well. - Hello, Mikołaj - Hello. We couldn’t think about a better guest to talk about e-commerce and market changes.
I know that Eobuwie is one of the leaders in the e-commerce market in Poland and you’ve been focusing on technology and investing in it for a long time. We could fit your shoes virtually even before the pandemic. But I’m sure that the pandemic surprised you, and the increased demand for e-commerce must have been a challenge for you. Can you tell us what the biggest challenge this crazy year was? Sure. The biggest challenge for us was to secure the operations of the warehouses. As you can imagine, the warehouse is the heart of all operations in each e-commerce because the commodity is its lifeblood.
Securing the warehouse had a strategic value and a strategic goal. Without a functioning warehouse, any e-commerce shop ceases to exist. Fortunately, we were prepared quite well because we’d been preparing for a bigger scale of trade. And we invested in the development of a new logistics center that we launched in the first part of 2020.
It’s a logistics center that is strongly automatized. There are automatic packing robots, we have machines that pack the commodity themselves. In these terms, we were able to prepare earlier for a potentially increased sale, so-called sales peaks, which, actually, we expected.
But we expected it would happen a bit later than March or April this year. We rather expected a 3-year prognosis for sales during the end of this year. Finally, it turned out that closing real shops made e-commerce accelerate. Our warehouse was ready for it. What’s more, thanks to the automatization of warehouses operations, we were ready for an extreme situation. Such as a case in which a group of employees would suffer from COVID-19, and we could operate these processes even without the physical presence of employees.
So it was definitely a challenge because this logistics center had to start earlier. Fortunately, everything went well, and exactly as we wished for. The company worked during the whole period of the pandemic, and is working very well and is still very stable. There was also a second challenge. A lot of companies had a problem with the absence of their employees in offices.
It’s a challenge for each company that switched to online work because these employees must be managed differently. For us, it was a challenge because we let our office workers work online. We were afraid of the effects of such work, but it turned out to be effective. It turned out that the employees did very well.
Of course, it’s more difficult, but on the other hand, they have more time because, for example, commuting takes about an hour of their lives. During the pandemic, we were sending questionnaires to our workers to learn about the atmosphere of such a work system. And we were surprised.
The assessment of their work was progressively better. Now I can say that it’ll probably be difficult to come back to the previous model. People noticed that such a system has some additional value. E-commerce accelerated during the pandemic. We saw great dynamics in this channel, but the report of Accenture titled “post-pandemic generation” showed that the interest in this channel doesn’t cease. What’s interesting, it shows that every third person from the youngest generation of customers, Generation Z, want to shop online more.
What does Eobuwie think about this segment of consumers? How do you plan to react to the needs and expectations of the youngest customers? These consumers are really important to us. Their number is not big, if we look at the whole population, but what we observe is that the value of the addition is higher. They tend to buy on impulse. We, as a company, try to adjust to this trend and address their needs. As the Accenture report showed, although they are digitalized, they need real face-to-face contacts. I think that because of the pandemic, this need is even bigger.
First of all, we changed marketing communication. We created the campaign “Each pair creates a new history.” Each pair of shoes is with us for some time, and each has a story attached to it. We showed stories of young people. What was really innovative to us was to run the fashion show during the pandemic.
It was a fashion pack, a mixture. So we wanted to answer to the needs of young and old people so that they can get inspired as far as fashion is concerned. I have to say that we are positively surprised because it was watched 13,000,000 times. This number really surprised us. We didn’t even expect such a public. A fashion show is not a TV series packed with action, it’s just the presentation of various designs of clothes.
To our surprise, the interest was really big, so a large number of customers watched the fashion show. What also really matters for us, as we know from the study, is that members of Generation Z, young people, spend a lot of their time, using social media. The area of influencer marketing becomes more important to us. Many companies talk about influencer marketing but not all of them know how to do it well. What we try to do is focus on the trustworthiness of influencers because we try to work not only with the greatest names, but also micro and small influencers because they are more trustworthy.
We plan to initialize a program in which the influencers will be able to advertise our company for samples. That should reach young people. That’s very interesting. Our report shows that
half of young consumers use social media. That 1/3 of them treat influencers recommendations very seriously before they buy a product. Interestingly, the generation that is at the other extreme, the silver generation, is also online. As our study showed, for two years, the percentage of people, belonging to this generation who don’t use e-commerce has decreased. What can you say about the activity of such people in e-commerce? How do you address their needs? In 2020 we saw a tendency for the number of 50+ people visiting our websites to increase.
Because of the pandemic, they had to start to trust e-commerce more. Because up to that moment, I assume they used to use stationary shops that were more familiar and friendly to them. The pandemic changed that, and the data also shows it.
From our perspective, it’s a good sign, because we have a new group that we can reach. Of course, the question is – how does it change? What are the characteristics of this group of customers in comparison to other groups? What’s important for us is to support these people when they do shopping. We try to open to such channels of direct communication as a hotline or an online chat because such people, while making an order, need physical contact with another person before they buy something. I know it from experience. My parent also belong to the 50+ group. It’s a new environment for them. When such a person uses these services once, they become a loyal customer.
We notice that they are more attached to brands than younger customers that we have to surprise and activate all the time. The group of 50+ people tend to be more attached to brands. I think that for us and other companies in Poland that use e-commerce, it was a challenge of the last year to convince such people to shop. But we managed to do it - we approached these customers, as I said at the beginning, with the biggest dynamics.
We hope that these people stick with us even after the pandemic. It’s good that we talk about the end of the pandemic because it would be nice to end our meeting positively, but let me ask you one more question because I can’t resist asking you about the future. What kind of trends do you think will be emerging both in Poland and the entire world of trade? We have e-commerce, but we can see how people behave when the shops get opened. The old habits come back, and people want to go outside. How do you perceive it? You show great interest in this market and surely have some ideas about the post-pandemic world.
It’s difficult to predict the future. We want to observe global trends. It’s not the first pandemic in history. We observe China, the Asian market, where the previous SARS pandemic made e-commerce accelerate. When we talk about pandemics, we talk about waves. The first, second, third wave.
I think that, from the point of view of e-commerce, because of last year and this year, we’re going to face the second wave of e-commerce. Many companies, or most companies, in Poland right now appreciate the e-commerce market. Although e-commerce isn’t anything new but it was marginalized for a long time, in many branches. The companies used to the traditional sale focused their strength in this area.
COVID forced all the companies to learn to use e-commerce. So companies investing in e-commerce would cause this market to grow very fast. The last question is related to the behavior of customers.
In my opinion, the behavior of customers will be stimulated by companies. They will be rebuilding their activity in the digital world. The investment in this area will get bigger, so the customers will migrate to this channel. Let me tell an anecdote from my life. I used to work in the branch of consumer electronics.
I started to sell washing machines. My mother laughed at me and asked: “who will buy washing machines via the internet”? Now half of consumer electronics are sold via the internet. In my current branch, the branch of fashion, the penetration of the internet stays at a level of 20-30%, depending on a country. Now we can see that after the pandemic, this branch will accelerate. There were such brands… Let me tell something from my life.
Once, I thought that the whole garden, like trees, was impossible to be bought from the internet. My wife bought 3 packed trees, via the internet, we planted them, and they grow very well. The companies had to get familiar with the internet, the offer of available e-commerce services got bigger. In my opinion, thanks to this, the acceleration of e-commerce will proceed quickly. Now we are going to see a fashion show with our digital avatars and shopping in the virtual space, but I hope we’ll have an opportunity to discuss that in another episode. Thank you, Mikołaj. You passed on a great deal of knowledge
to us and our viewers. - Thank you for your participation - Thank you for having me. We had a great deal of interesting information, and wonderful guests. I have one conclusion from these conversations: technology is in style in this season. Technology helped e-commerce companies to survive the pandemic.
It revived e-commerce and refreshed it. refresh sales models. What was interesting for me was the importance of a comprehensive experience while using many channels.
In online shops, but also in a traditional way. In fact, it’s also interesting how innovative this branch is. So apart from technology, we need innovations, agility and competences. Or maybe especially competences. People who have knowledge and ideas of introducing new solutions in a branch of economy that we’ve known for years. We’ve known fashion for the whole history.
An interesting conclusion for me was something not obvious Generation Z, which seems to be very digital, also likes real shops and wants to have more such experiences. We were asking our guests about the post-pandemic world, and it will be hybrid. It will be both stationary and digital but in the long perspective, there will be a third place. Perhaps a metaverse.
That’s really fascinating. What’s interesting is that online shopping is good, And not only for Generation Z. Older people also go shopping via their web browser.
That was very interesting. Thank you for watching this episode, See you soon. See you.
2021-05-12