The challenges of today’s Middle East retailing and the role of tech

RETALES, from retailers to retailers, with Juean Vega | Episode 2

Juan Vega, Head of Digital Product of Landmark Group, is joining us from the United Arab Emirates to share some insights about the Middle East retail: how the customers have evolved, the differences between countries even how saudization has been a great operational challenge.

Listen to the entire episode on Spotify or by clicking on this link https://anchor.fm/orquest. A transcript of the entire episode is also available below. And don’t forget to subscribe and share this episode of RETALES, from retailers to retailers.

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ADARA
Bueno, bueno, bueno… In today’s episode, we have Juan Vega. Juan is joining us from the  UAE where he has been living for the last three and a half years. Hello, Juan, It is an  absolute pleasure to have you here. Thank you very much for joining.

JUAN
Hi Adara, how are you? It’s my pleasure to share this time with you… Actually, thank you very much for inviting  me. I’m looking forward to enjoying some time with you talking about retail and technology. These are two things that I think both of us are  passionate about.

ADARA
Exactly, exactly. So Juan, you have lived in Dubai, where we first met, for three and a half years. And for much of this time, you have been Head of Strategic  Projects at Max Fashion, which is part of the Landmark Group and recently, congratulations on that, Head of Digital Product for Retail for the entire group. The landmark group was founded in 1973 and is one of the big players  in retail and in hospitality including fashion, home, footwear and accessories with more than 700 stores, across more than 10 countries. That is easy to say…but without a great responsibility, Juan. I would like to know, how did you get here? How did you start in the retail industry?

JUAN
I have always  been quite passionate about retail. Since I was 14 years old, I knew that I wanted to work in the fashion industry. So while I was studying in school, I started working in  one store, one summer, when I was 16 and then I worked for different brands. And when  I turned 18 I started at Massimo Dutti, which as you know is part of Inditex. I enjoyed it a lot…  When I was studying I had the opportunity to work part-time in Barcelona, my city, and then once I finished my studies, I went to China. I had just finished my masters there. And Inditex gave me the opportunity to join the headquarters as soon as I finished my  masters… They asked me “with your engineering background plan and your experience, what do you think you can improve in the store?”. And I said look, I think we can be much more efficient inside the stores, both in the stockroom and in the showroom. So, they told me “That’s great!  So then can you please make a project or advise us what we can do?”. They gave me a couple of weeks and I will always remember that day. It  was Saint George day, 23rd of April, and I had a meeting, in the center of Barcelona. Actually I didn’t know all the people that were there. It was very fun because after I realized that it was kind of a senior  management of Massimo Dutti. And…with my inexperience but with all my illusion, I presented the project, my advice or… or thoughts about how they could improve store operations. I think they like the idea. So one week later, they offered me to implement those improvements  in Massimo Dutti…. So actually it was very, very exciting to see how you can bring life to the proposal. So in the end it was not that I was intelligent or genius or whatever… It was mostly just speaking with people in the stores and a lot of time spent on the shopfloor trying to see things a little bit different. And then from there, I manage different projects related to store operation and technology… omnichannel, very  famous words especially in Index, and after that I started also in implementation RFID… I would say that is the projectI enjoyed the most, because it has an impact on the Supply Chain, on those in the store…This is a brief summary of how it was my experience  before Dubai  and as you were correctly saying around four years ago, I joined the Landmark Group here in Dubai. Actually, I am. Extremely happy here. I don’t know where time will take me, but for now, I’m pretty happy here.

ADARA
I bet, I bet… and what an inspiring trajectory. I love it. Without a doubt you’re passionate about  retail, technology and I’m sure that you’re a believer that transformations that together retail and technology, technology and retail can carry out. So Juan, what is retail for you?  What has it meant and what does it mean to you?

JUAN
The retail world has always been very interesting for me… since almost my childhood. For me it was amazing seeing in the TV, before Netflix and before Youtube, especially in Spain those long queues of people  waiting for stores to open  for the first day of sales. So, that was something that attracted me. Then the happiness of wearing something that you just bought. It’s weird, you know, it’s a commodity but at the same time, it has a very important emotional  component. So, I would say that that’s what attracted me the most from retail. And then, once I started working in the industry, what I like the most is that it’s a very dynamic  industry. Not two days are the same. What worked yesterday doesn’t have to work today. And this is not only in terms of fashion or trends, but in terms of customer service, in terms of omnichannel now with metaverse…So it’s a constantly evolving industry, I would say, and that gives you engage and because of my personality that I like to do different things that and be very active. Actually, I think retail fits me pretty well.

ADARA
Great. The only constant  is change, that’s for sure, right? And following your career Juan, it seems that  over time your tasks in operations, understood in a more traditional sense, have been evolving towards digital transformation. I understand that excellence in operations continues to be present  in your day to day life. But with a technology perspective, has this change been intentional or those steps of the same ladder?

JUAN
This is a very interesting question, Adara, because when we speak about digital transformation, will we imagine customer facing technology and we expect very shiny stuff? You know,  typical magic mirrors and interactive fitting rooms and all of these. But actually once you’re in the industry you can see that most of the digital developments that retail companies undertake are actually related to internal operations. So, to your question about whether there’s steps of the same ladder, I would say yes. Because technology plays a fundamental role in improving  stock processes. Our main objective is to be more efficient, to have a proper schedule  planning to improve the shopping experience for our customers, to facilitate the  checkout experience. Now, a word that it’s very famous, omnichannel. Or what is even more important, at least for me, that this helps the business to make better commercial decisions and that impacts everybody else on the sales floor. So in the end, answering your questions. I think it’s natural that you start with operational excellence and then technology, it’s only an enabler of  how you can make this operational excellence from end to end. And at the end, let’s  be honest. I would say that we need to focus on how we can make an impact on the PNL and that means or sale more or be more efficient to save some costs.

ADARA
Absolutely. And what technological changes do you think stores should be  addressing? What should they be paying attention to?

JUAN
If we try to make a very  simplified summary of the different store operations, we start with the garments or the items that I receive in the store from the warehouse. Then we display that on the shop floor with very nice and visual  merchandising. This is the part when we open the door and the customer enters our stores. Of course, we do all the customer service part including fitting rooms. And  then, finally, we have to check out the experience with PLS. After that, of course, it is very  important customer feedback to know how we can improve our sales operations And finally, which commercial decision we can take to improve those sales.

Then, of course you have some other points related to omnichannel, replenishment, etc. So, if we talk about stores and the different store operations I  think technology is an enabler that can improve almost all those operations. So you can implement for example, technology applications to be more efficient receiving the  items from the warehouse, tools to ease the initial merchandising so we can adapt better to the needs of each different territory and its  different stores. Of course, customer facing technology…. But for me what’s even more important is your brand strategy. Because you cannot plan and play the same technology for all the retailers. It’s very important that you understand what your focus is and, depending on that focus, you need to see which technology or which product can help you to achieve  that goal. Just an example, value retailers like Max fashion, Primark… like Lefties. Their technology  approach is much more focused on efficiency so at the end they are focusing for  example in the checkout experience because normally are brands with a high UVT. Also for example, with self checkout machines or something very interesting that Lefties just launched last week, that is another way to make payments through ID, or how the customer can be much more independent in terms of picking the items…

From the other side, if you think in more premium retailers, such as Massimo Dutty or Home Center, Baby Shop…your focus is much more personalized experience,  where technology helps you to have this better customer service. So I think it’s important to know that it’s not one size fits all but it’s very  important to understand that technology as I was saying before is only an enabler for  the company’s purpose.

ADARA
Totally! And what is it like to innovate in large  groups like Landmark? Is this culture of innovation easy? Could it be necessary maybe to change the culture?

JUAN
Em… There’s something that has been stuck in my mind  for some years… When I was in Inditex, there was a conference between Satya Nadella, the CEO of Microsoft and Pablo Isla, who was also chairman at Inditex. And I remember a phrase they said that technology is only the enabler of business needs. We cannot think that thanks to technology things will start to happen. It’s very important that every business wants to sell more and be more efficient. So, if we focus on innovation as a tool for the tech, which are the business needs and how to satisfy them, I think that it is not necessary to speak about innovation culture  because I don’t know any business that doesn’t want to sell more or be more efficient. And another thing that for my viewpoint, it’s important on how we can adapt that innovation culture is  the approach. I have seen that with my own eyes when there is an approach “top to  Bottom”, so when there is the CRO’’s or the CTO’s who define, which is the technology innovations that are required in the business, is when sometimes things are not going as expected.  So for me it’s very important that the approach needs to be bottom up. We cannot decide the needs of the company, sitting on a table from the headquarters. Actually store people tell us what they need. The front liners are the ones who  request those innovations and they ask us what we can do to make their job easier and our responsibility is to listen to them, understand them and give a product that not  only satisfies those needs, but even improves those requests. Answering your question, I think that if the company culture is focused on customers, both internal and external, it  has to be innovative per se.

ADARA
Totally agree. And you have known closely and for a long time, now the European market and now you’re focused on other markets. What similarities and what differences do you find?

JUAN
The first point…, there’s a big difference between managing projects on a  global level that is what I was before in Inditex or in that… I would say continent or country level.  Now that we’re more focused on the Middle East. Obviously, with global positions, you have  this macro view and it can tell you that you become much more aware of different ways  of operating, which are the customer needs in each region. But obviously you cannot adapt or adjust your approach very much to satisfy exactly the customer needs. From the other way, when you’re speaking about…in our case, for example, in Landmark, as you know, it’s one of the major retailers in the Middle East. But what is even more interesting is that the brands we trade are actually  our own brands. So as you may know, it’s very normal here in the Middle East, because retailers use franchises to operate their businesses. But in the case  of Landmark, most of these brands are our own brands, hence I think it’s very interesting that we have this competitive advantage, you know, when it comes to  adapting to the business needs of the local customer and the operations, we are much closer to the customer. And that makes it easier for us to adapt.

ADARA
And could you explain a bit more about those differences in terms of customers and its  employees?

JUAN
Yeah, for sure. So let me keep a couple of examples, one focused on customers and the other one focused on operations, both related to our common market that is one of the biggest ones here in the region, Saudi Arabia. So in relation to the customers, many Western  brands think that the Middle East is like a package, but in reality, you can see that one country  is very different to the other and not only between countries, but even inside  the same country, the different regions. Let me give you one example, as you may know, Ramadan  is one of the biggest trading events in the Middle East. And you may think that in most of the Middle East countries Ramadan is pretty much the same from an operational point  of view. But in Dubai for example, even though there’s Ramadan season you can barely see that in the stores or in the malls, you know, people are continuing their normal life. But when we’re speaking about KSA, it’s completely different. So those who are not used to the region, they might be surprised because during  Ramadan, the timetables and the schedule of the people change completely. And the big trading time is 12 AM, so that means, midnight onwards. Before that time, the  malls are almost empty and after that, I mean, I would say that from 12 AM to 3 AM it is almost full. So that’s something that is very  interesting. Also another point that is interesting is that the online contribution in the Middle East isn’t as high as Europe for example,  we’re now trending around  10%-15% maximum while you have other places in Europe that are premature from a monetary point of view and we’re speaking around 25% or 30%. And one of the main reasons is because retail in the Middle East is… leisure time. It’s not only a commodity but it’s actually people going to the malls and enjoying their weekends there.

In relation to the operations, I will  also give you an example of Saudi Arabia. So as you may know Sudi it’s a pretty big market  we’re speaking about 35 million people. And there have been big changes in the last  couple of years. One of these big changes is the Saudization of the labor market. Before many positions were filled by expats and even frontline  positions and now it has to be filled by saudis. So that’s a major operational change.

Knowing this region first hand helps you to adapt to those changes a little bit faster and at the end that is giving you a competitive advantage from a sales point of view, from a customer point of view, you can deliver faster to your customers. I would say those are the couple of main differences between the European market or some specific things that you can see here in the Middle East.

ADARA
Very interesting and what can you say in relation to digitalization?

JUAN
So in terms of digitalization, I would say that  Dubai It’s the place to be right now…

ADARA
You love it so much.

JUAN
Yeah! For people like me it’s like Disneyland, you know. I went there this summer with my kids. I feel in Disney here in Dubai. As you may have seen or heard here in Dubai, they have auto-say that they are the capital of AI.  So right now it’s home to 1,000 companies related to the metaverse web 3 and blockchain sector as a CD attracts new players every week…

The sector right now has around half a billion contribution to UAE’s economy and you can see that increasing every  day. Then, there’s a pretty strong strategy right now called the biometric strategy that they’re expecting to have around 40,000 virtual jobs by 2030 and we expect to have  almost four billion US dollars in the next 5 years. So in terms of digitalization… I think this is the place to be and all of this is thanks to a very progressive regulations, very robust infrastructure, I know this is managed directly by Sheikh Ahmed, so you can see that people is taking very seriously is here  and as a result of these, I really believe that Dubai is creating an ecosystem that will help to speed up in general digitalization in this part of the world, but in particular in retail, I  think there’s a lot to be set.

ADARA
Interesting. So you were speaking about Saudization and I understand that this will increasingly make store management more complex, right’ So how do you manage this from the Landmark Group without forgetting profitability?

JUAN
It’s a good point. I think the key word is profitability. It’s very important to understand which are the real business needs and then we’ll try to find out the solutions.  And these are great examples. As you were saying in the recent years, not only in Saudi but in other regions, there has been increasing regulations related to work and working  conditions also have improved in some countries, what’s great. So actually having a tool  that helps you to be compliant with all those complex regulations from one side, It’s  extremely important. And in addition to that having a tool that also helps you to better manage the team to be more efficient in both ways, first in the non sales tasks ( not related  to customer experience), but also, and even more important, the selling task and all the interactions with the customer. I think this part is very important and having a tool that helps you with these complex management operations and how to ease that… It’s great because from one side potentially it can give you an improvement in sales because of you improving customer service. Also it helps you to be more profitable because you put the correct people on the correct time.

ADARA
This is definitely a very interesting moment for the region for sure. I

personally had the occasion to see during the trips there and through conversations  with customers and definitely.  It is a key moment to be innovative and forward thinking, right? A moment that requires to think not only on what is needed now but what will be needed soon enough as everything is changing so fast and so much. I totally agree with you that every customer interaction in the store counts, that every interaction in retail counts and makes a difference and that’s basically our vision at Orquest. Making  every interaction count. So Juan, what will retail be and where will the stores be in 10-15 years?  What will the stores look like in 2030?

JUAN
So… I don’t like to play the guru side, but from my side I think that there are things that will be very similar to the ones we have and some other things that will be very different. Remember, we still sell clothes and will be selling clothes for a lot of years, and we will continue doing that. So that needs to remain the core of the business. But at the same time, we need to facilitate that customer experience and we’re speaking especially in the most conflictive points. Which are the most conflictive points? I would say that everything is related to time. I think that’s why it is becoming increasingly important to use technology such as RFID or workforce management that helps you to speed up those  operations, for example the checkout or even use RFID as an EAS so people stop using the hard tags. So the check out experience is seamless.

Also another concept that  is very use is omnichannel. So it’s obvious that the stock should be available for the  customers no matter where it is located, in which store or warehouse, but I think one of the big changes in the next few years will be the interaction of our mobile phones  within the stores will increase. So all of us were permanently using the phone for almost everything, but when you go shopping actually there’s not a lot of interaction. So I would say that I will be following up with some of the retailers that  are starting doing that and we’re gonna start using AI. The brand’s applications  within the stores to make it easier and more convenient the customer experience. We’ll use them to ask or to have queue in the fitting rooms. You will use it to know for example which is the supply chain path. Also you see blockchains, you can clearly see especially for higher products which is the traceability of that or even in a store  level to be able to locate the garment in the exact place located.

To conclude, I think it will continue being less focused on shiny  stuff and again it will be more focused on making practical and easy and convenient  customer experiences for people, that is visiting the stores and giving even more information to the customer.

ADARA
Fantastic. It is about time to finish Juan.  Thank you so much for sharing these minutes with us. It has been an absolute pleasure to hear your experience in the sector but I don’t want to finish today without asking you something a little bit more personal. So what would you say is your philosophy in retail?

JUAN
So okay…. Let me think. I would say one of the things that I try to be pretty focused on the positions that I have been taking in the last years is to make things easy.  Especially related to technology there is sometimes that people get scared or even frontliners say “Okay what are these guys implementing in the store?”. But actually if we understand that technology can help us to make our daily life easier. I try to broadcast that to the teams, to the  technology teams, to the rest of the business stakeholders and especially to the frontliners. And this makes things easy for the customers, it can be for our internal  customers, for our teams in the shopfloor and I believe this because time is the most  valuable thing in our lives.

Thanks to technology we can give people extra time and that makes me happy. So I would say that’s my philosophy in retail.

Thank you very much. It has been a great pleasure to spend this time with you and looking forward to see you and everybody who wants to visit Dubai. You’re very welcome to this amazing city.

ADARA
Thank you so much Juan.

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