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Jan 12 2022
In this episode of RETALES, we discuss how digital solutions are the key to handle the complexity of fashion retail stores, simplifying the whole management process while maintaining flexibility. Our guest is Lorenzo Zacchia, a seasoned Retail Director with more than 20 years of experience working in international fashion brands such as Pinko, Trussardi or Guess. Currently he’s the Motivi’s Director.
Listen to the entire conversation to discover more insights from Lorenzo Zacchia on the operational complexity of fashion retail brands. 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… How much I enjoy conversations with this italian gentleman. Not only because of his accent but especially because of his brilliant career and knowledge of retail operations. I’m excited to welcome you Lorenzo Zacchia to our podcast. Thank you for being here.
LORENZO
Thank you very much Adara. I’m really happy to be part of this very interesting podcast today and happy to share my retail experience.
ADARA
Awesome! More than 20 years in the Retail Industry: strategy and operational management. Today director at Motivi, one of the 9 female fashion brands from Miroglio Group, with more than 900 stores across Europe, 900 stores, not bad. But Lorenzo, in your trajectory we also find Pinko, Trussardi or Guess as well as the Boston Consulting Group… How did your career begin? What can you tell us about your trajectory?
LORENZO
Well, Adara. Let me say that when you start your career, you never know exactly what will be its real evolution, right? What is critical to me and what has conditioned my trajectory is to fall in love with a specifIc topic or a set of topics or businesses that you discover over time. And at one point, you defInitely become obsessed in a positive way with these topics and you enter into a continuous learning process on this. So this is why thinking about my trajectory and this was really my decision, I wanted to start with management consulting in one of the top three or four management consulting firms, which was Boston Consulting Group. To really have… first of all a very fast learning, be exposed to several business problems and business situations and have the chance to really find my obsession. To really find exactly the topic or the business that I really loved. And at the end it was retail. I spent many years at Boston Consulting Group working with different international retailers across Europe. And after that, of course, there was a point where I decided to move out of consulting, and really do business myself, and be in charge of a profit and loss in retail. So the destination was Guess and then Trussardi, Pinko and currently Motivi, always working basically as a retail director. Today, even in a broader role taking care of stores and thinking about how to improve customer experience and how to bring incremental results into the retail industry.
ADARA
Awesome. So speaking of Trussardi, Motivi… There is a saying in Spain that says talk like a British, kiss like a French, drive like a German and dress like an italian. Did you know this saying? Do you think it’s right to “the dress like an Italian”?
LORENZO
Yeah, it is right. It is right. I think it’s right.
ADARA
So jokes aside, I was mentioning that you have worked with brands strongly Italian and strongly rooted within the country. How is the Italian market? How is Italian retail seen from your perspective? Is it complex to grow or is it complex to get established? How are they selling channels there…?
LORENZO
That’s an interesting question. I think it is a very particular fashion market, or at least it is different compared to others… European markets for sure and even more different from North America or Asia. To simplify I will mention three different things that defInitely are more peculiar of the Italian fashion market and retail market. First of all, there is a very specific geographical distribution. So if you compare Italy with France or the UK, even Spain, where most of the market is really concentrated around a few cities whether it’s Paris in France, London in the UK, Madrid and Barcelona in Spain. I think in Italy, you have much more geographical opportunities, and you have a lot of CDs and regions that are extremely relevant in retail. And of course, in fashion retail, whether it’s Milan, Rome, Florence, Sicily, Venice and this has to do a lot with tourism, of course. But also to the fact the retail distribution It’s quite much sure it’ll be everywhere? So that’s definitely one element. The second one I would say, coming back to your question, is the distribution channels because in Italy you still have a lot of what we call multibrands stores and multibrands distribution. We call them mom-and-pop shops, but you still have in fashion even 10,000 pop shops, selling different fashion brands. And this distribution is still alive. And at the same time you also have a lot of shopping malls distributed across the country and a very well developed factory outlet channel, which is really relevant not only for tourists, but also, for local Italian customers with a lot of even luxury brands there.
So It’s a quiet articulated distribution. The very last point that I would mention to better describe the Italian market is defInitely the consumer attitudes and consumer behavior. That as usual is different across countries. In Italy, I would say there is as you said before as a joke but in general, the average consumer buys very often. They really go shopping for fashion once a month and they go to a little store once a month to buy and they always want to have continuous newness in store. And I would say the other element is that, this is probably valid in many other countries, value for money in a product today is even more critical than the price itself as a key driver to buy or select a brand or a product.
ADARA
Of course, a particular market, I’m sure, and for sure challenging and exciting to work with. Not for nothing is one of the top fashion markets in the world. I understand Lorenzo that your vision of the markets comes directly influenced by your international experience. For example, at Pinco, as Global Retail Director, you worked with more than 200 stores in EMEA, APAC and America… How are those territories? Is it very different, the operation management in Mexico compared to the USA or Singapore or China?
LORENZO
I think the real difference always has to do with consumers. That’s why I think the important element is to spend a lot of time, at the very beginning, understanding the local customer. This is going to make a real difference, so you never have to address a market with the same approach. First you have to spend time learning and studying the local consumer, their behavior and attitudes, the approach that they have towards retail… And then you identify where you, as a brand, can really or not play a relevant role. After that you start with everything else: how do I enter? Should I start from a certain distribution channel? Should I start from the online or from a physical flagship store? What is the perfect product offer and the best pricing strategy…?
But definitely, starting with the consumer and understanding the consumer is the first thing. In terms of operations management, there are differences and the most complicated thing is that you still have a lot of complexity. The more markets and countries that are added, the greater the complexity. So that’s the most critical thing, especially if you work in a role like the one I had, where you see the headquarters and you have to coordinate and deploy strategy across different geographies.
ADARA
Yeah, absolutely. In terms of that market study and in that complexity, how is it for an Italian brand addressing for example 20 markets with 20 different legislations?
LORENZO
I would say there is a lot of complexity and as a company or the manager, you have to embrace this complexity, you don’t have to fight the complexity thinking that you can
simplify everything or it’s too hard to address. To do this, my experience is always to be equipped with the right tools and the right processes that can really reduce complexity or simplify to a certain extent or management complexity keeping at the same time a lot of flexibility, especially in the market environment, which is changing very fast and things are happening very fast.
So in this sense, I would say that digital tools in general or digital platforms in my experience, over the last 4-5 years, helps a lot. It helps a lot to manage the complexity and to simplify certain things and to address the proper solutions, being flexible at the same time. In this sense, Orquest for example, the platform that you have in retail operation it’s critical, in the sense that it could really help you, especially if you have a lot of geographies to manage, different countries, different people, different cultures… It’s a digital tool and a digital platform that can really help you manage a lot of aspects of the retail in-store activities, with the different staff of the stores and address this complexity centrally and manage it in a proper way. Otherwise, you would end up with hundreds of tools and things without, without having a proper visibility on that.
Same thing would apply to digital tools like that help you for example to address retail allocation, replenishment and store transfer. So how you manage the stock and the products from your warehouse down into the stores and how you transfer products across the stores Unless you have proper digital tools In this case… it really becomes something too complex to manage.
ADARA
Of course. And in a strategy for international expansion, I understand that it requires addressing subjects like this one from the individual context of each country and not assuming that what works for one country will work for the rest, but finding partners that can help you through it, covering your needs within the different realities. In that sense, I believe it is key as you are mentioning. So you were talking about different consumers, different places, different behaviors and at the end different people, right? So are the employees also different?
LORENZO
Well employees, for sure, as you said are anyway key in the sense that the right or the wrong team or employees, for example inside one store, can really make a big difference. And the same store in the same location with the same product can do, really minus 10 or plus 10-20% just changing the people and having the right people in place.
So it’s really a critical lever that you have to manage. The difference I think is the way to engage them and to address their motivation. So it has to do a lot with cultural differences and that’s why you really have to understand whether it’s a Chinese employee or Italian employee or French one or an American one…what are the key actions, even from a human resources point of view. But you have to put them in place to really be able to make them engaged with the company, the results and the strategy, and improve their motivation. And this is very different country by country.
ADARA
Yeah. The employee is key for sure. Key because in retail, be it fashion as Guess, Trussardi or any kind of retail each retail interaction with the customer counts and the employees are key in those interactions. So, speaking of employees Lorenzo, for a while now, we have been noticing a big need for flexibility. A need for flexibility that makes it harder to retain employees and it’s increasing the turnover. Is this something that you’re also seeing?
LORENZO
Yeah, that’s absolutely true and visible.
ADARA
And do you think this is conjectural, for example I’m talking about the pandemic, or is it something more structural related to the incorporation of the new generations to the market? Is it in all markets or more within Europe?
LORENZO
Actually something that I’ve observed and I saw in many markets, not only in Europe. Probably in Europe, we were not used to this… Let’s say requirements or need for flexibility compare, for example, to the SU. But actually, it’s visible across markets, even in China to a certain extent. I think in Europe we are surprised because it never happened in the past, maybe in North America. For example, something that I saw even many years ago, but actually I think it has a lot to do with the new generations to me. New generations, especially because in retail stores you have employees in their 20s, their mid 20s or early 30s, or relatively young in many markets. And I think the approach is completely different. First of all, they want to be engaged with the company and their job. They don’t need just a job because they need a salary or they have to find a job. They really want to have a strong connection with the company first, that’s a critical aspect even during the recruitment process.
But on top of that they want flexibility so they don’t live for the job itself. They want to have a proper work life balance. That’s a critical aspect that really came up and exploded over the last few years. They really want to have a proper work life balance. They want to be happy at work. They want to have something that they believe in and they want to still keep a good balance between spending time at work doing their job but at the same time, taking care of their private life in a proper way. So that’s why we have to adapt very fast. And even the recruiting process is becoming very difficult and you really have to change some of “historical rules” in terms of how many hours per day you work, how many days per week and that’s becoming critical to even recruit new people. So you really have to change some of your policies and some of your processes.
ADARA
So, and that comes to my next question, I don’t know if you want to add something else to that? And how can brands face this situation? What is the cost in your opinion of not doing so?
LORENZO
That’s a very important question because I think the cost of not doing so is extremely high. If you don’t adapt to these real needs of the new generations or people working in the stores in retail the risk is very high because first you have problems in recruiting. So every time you have vacancies, which happens very often in retail, it takes months and months and months to recruit new people. This means at the end of the day that you’re losing sales, that you lose business. So the court is extremely high and to address the situationI think you really need two things. First, you need to centrally change some of your HR policies. As I said before, in many companies, there are some historical rules in HR like “the store manager should work aways six days out of seven” or “should do every day eight hours” and things like that. So you really need to completely change this approach and understand what is the real need of the market and what the competitors are doing and adapt and change your HR policies and be extremely flexible on that. That’s the key, be flexible. It’s not mandatory for a store manager to be in the store three Sundays per month or two Sundays per month. At the same time if you start to increase these levels of complexity also, because it means that you are adopting rules and your policies depending on the country or depending on the employee then you really need something like a tool or a platform that can help you manage this complexity. Otherwise you become crazy and you are not really able to address this. I’m coming back to the same point but for example Orquest in the sense, or can be any other platform, It’s relevant in the sense that you put everything inside and you manage all the complexity. It’s a digital tool or a system to manage this complexity.
ADARA
And speaking of technology, I was recently listening to an interview from the CEO at Miroglio, speaking about the importance of making innovation tangible.I interpreted it as making it useful. How can technology be useful for the stores, Lorenzo?
LORENZO
I think technology and…, that’s the approach we have at Miroglio, like you said It came up from an interview from our GEO, I think it becomes useful as long as it creates a specific value for the consumer. So the application of technology even inside the stories is critical, but it’s critical as long as it creates a real additional value for the consumer, whether it’s around, improving the in store experience, whether it’s simplifying certain activities or processes for the consumer, making everything frictionless, simple and to a certain extent even invisible for the consumer. So technology is relevant for the consumer, especially when it becomes invisible. So you don’t as a consumer need to understand how to use a certain technology but it just helps your experience inside the store. That’s the reason why technology is relevant now.
ADARA
Okay. And what about the uncertainty that technology could reduce in the stores, do you think it could have an impact as well?
LORENZO
Yes, for sure. Technology has an impact. Technology can, in physical stores, right now be the key enabler to enhance the consumer experience.
ADARA
And at what point do you think the stores are right now? Where is the physical store evolving to and what can we expect from them in 5 years?
LORENZO
I think…there are different, you know, voices, and points of view that you hear from the market. When Govid started, everyone was saying that stores were almost dead, that there would be a big reduction in the number of stores around the world… But then after the covid, when we started to come out of the pandemic, we actually saw a big increase in the number of stores. Exactly the opposite of what people said. So many brands or many retailers are opening stores. Why? Because stores are and always will be relevant, even in five years from now. Just to take a medium term view, they should become more and more a point of experience and the point of engagement for the consumer. So you don’t have to think about the store, always and only in terms of “we have to produce sales and profit”. Companies should start thinking about the store also as a point of acquisition, a point where you acquire new customers, first. Second It’s a point where you improve the customer experience and then you can maintain and retain consumers. So as long as you evolve the concept of store this sense and you put together all these aspects, then stores will survive and the store will become more and more relevant over time.
ADARA
Great. So Lorenzo, we’re running out of time. Lovely talking to you, as always. Thank you so much for sharing all of this with us. But before we finish, I always like to ask this question from a personal perspective. What is your philosophy in retail? What is your vision?
LORENZO
The vision I have, and it is also the reason why I love retail and I’m obsessed with retail, is that it is really about what we live every day. It’s really about culture. It’s really about what people do every day, how they behave and how they approach their life. So it really goes into a kind of a philosophical aspect and it translates really into how you’re able to address people’s needs and people’s approach to their life.
ADARA
Awesome, awesome. Thank you Lorenzo, and thanks everybody. One more episode of RETALES. Thank you all for listening.
LORENZO
Thank you.
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