The Loyalty Leader: Strategies To Stay Relevant And Resilient

Now we are going to hear from a loyalty leader. As the CEO of Harvey Nichols, she heads up one of the world's top luxury department stores. Here to tell us about some of the most important trends facing the retail industry, please welcome Manju Malhotra. So Manju, you started working at Harvey Nichols back in 1998 as a newly qualified accountant. So to kick off, can you tell us a little bit about your background and your journey to that CEO role? Yeah, sure. So I often say that my career started when I was around seven years old. Very early. So my parents, who are first generation immigrants from India, set up a business selling fashion just off Brick Lane and it was before fast fashion became a concept. So their customers were principally market traders and independent boutiques. And so I used to spend my school holidays and weekends helping them out. And there's a story which I always find I guess quite pivotal that some of you may be too young to remember, but Frankie Goes To Hollywood were number one in the charts and they had their song 'Frankie says, Relax'. And we were selling T-shirts that said, 'Frankie says, Relax' and you just couldn't keep them in stock. Similar time, fame was a thing and my favorite piece of clothing was a white sweatshirt with gold 'fame' across the front. And it was just that realization that the dynamism of the consumer and how popular culture is reflected in everything we do, but particularly the fashion and the retail industry. So I think that's always been something which is unknowingly at such a young age, something I've always found really interesting. I studied economics at Warwick and then trained to be a chartered accountant and not really knowing what I want to do, I qualified and joined Harvey Nichols in the role of internal audit, which was a great opportunity to really get a good understanding of all aspects of the business. Then I moved into mainstream finance and just gradually over the years, took on more responsibility. And it just grew my areas of interest, my arenas, but always trying to maintain curiosity, maintain professional standards and be that reliable person that always delivers. Often the reward for doing a good job is you get more work to do, but it's an investment in yourself and you can really grow your experience. And then in 2017, when our CEO then stepped down, I was given jointly responsibility for our business with our then-commercial director, which was two years of running the business together and working hand-in-hand before being made CEO just about ten weeks before COVID came along. So it's interesting that even though you studied finance and qualified as a chartered accountant, you've always had retail in your blood. I want to talk to you about that moment you took over as solo CEO of Harvey Nichols in January 2020, so just before the pandemic hit. What strategies did you have in place to really reimagine and reinvent the business during that time? And what were some of the most valuable lessons you learned? So I think the first thing, I think many of us were watching what was happening in Asia, what was happening in Italy particularly, and will probably remember some of those things for a long time. And we started, I guess, in the days or weeks before the lockdown came, really how we needed to pivot our business to be online only. So the first thing we did was pull all of our stock out of our stores and put it into the DC so that it was not trapped so early in the spring-summer season. And that helped fuel the growth of our online business. And then on top of that, really thinking about how to communicate with the customer. So some was from a communication point of view, some was a transactional point of view. But looking at things like we had beauty masterclasses, we had Friday night DJ sets online, and you could order your dinner from Deliveroo, but actually why not have the tasting menu at the Oxo Tower at home on your special occasion? So really trying to stay connected to what the consumer was looking for all in that time. I think one of the early memories was that going into lockdown, I think the general feeling was that it was going to last about three weeks, but we actually planned for three months. So we had a period of time that we were thinking about all these things needed to be in place for. Then when I think about the lessons that that were important at that time. I think the agility, so being able to adapt really quickly to whatever was happening. Communication, particularly with our employees. So we had many of our employees at home from the shop floor and restaurant not able to work. And actually I wrote letters, I have a couple of colleagues here today, really about every month, writing to them. Part of it was telling them what was happening in the business, but also, just again stay connected, and often I would talk about how I was feeling, the tribulations of working and juggling two children at home during lockdown, and also really how to maintain a positive mindset, particularly those on darker days. I thought communication was really key. Consumer sentiment always an important factor. And again, going back to how I felt or my friends and family felt, often how the consumer was feeling. And so making sure that that was reflected in our tone of voice in how we spoke to them. And then when we reopened our stores, visibly showing that we were a safe place for people to come and enjoy. I think the last thing was really about mindset and how important it was to have a positive mindset at that time. And I remember, especially going with a very strict changes in to lockdowns or coming out of restrictions, often in those early days, I kind of felt like I was at the bottom of Ben Nevis. Right? Okay. How how do we go about this? And just trying to step back, What do I need in my backpack? What's our plan? And then realizing, actually we can do it and then how do we communicate that across the business? I mean, this still probably feels like a Ben Nevis summit at the moment, doesn't it? Because this current retail environment is really tough. I know you've described it as a potent cocktail of pressures that no one has seen before. Can you tell us about some of the strategies you now have in place to distinguish Harvey Nichols from some of its competitors and really win back consumer spend? Yeah, absolutely. And that cocktail is so we came through the pandemic, we had supply chain issues, the labor shortages, inflation, geopolitical risk, which gets even more difficult. So all of that and periodically we get something new to deal with. But everything that we deal with is staying there. So we broke it down into probably about four or five key strategies. The first, talking about loyalty this morning or just now that we launched our new rewards program in January '22, and very simple for our employees to understand, really easy for the customer to understand, generous points system, but also tangible benefits as well. We've really seen with the engagement and loyalty that customers like both the proposition but also the fact that there's a flexibility of when customers can redeem their points and also that they can personalize the benefits program that suits them. And after that, we've seen that when customers redeem their points, for every pound they redeem, they'll spend about another £14. So that multiplies, it's really valuable, and we'll see about 70% of our customers will attach to loyalty as well. So it's been a really successful thing that we've done in the last year. We have replatformed our website, so it went live last week and it's probably being the biggest IT business project in my lifetime there. So not only the website replatform changing, but all the associated systems. So new payment method, new delivery methods, new navigation for the customer, really trying to improve the user experience and supporting the growth of online, which had legacy systems before and now best in class for our type of business. Another one has been our private shopping business. So whilst we've had private shopping in the past, we brought in a new head of private shopping to really focus on the high net worth 24/7 customer. So whether you want to come into store, you want to have an appointment at home, or you want to have it virtually, any of those are possible. We offer a wardrobe refresh service, so someone can come into your home, sort out your wardrobe, take away what you don't need, and help you build outfits out of what's left. And it's a very informal but authoritative service. So it's warm, it's friendly and the convenience of it. You know, I've seen lots of people there who say they hate shopping, but when you're armed with a glass of champagne, walking the floor with a stylist is not quite so bad. So that's been another kind of success as well. I love the sound of that wardrobe refresh, I'm going to have to sign up for that. You talked about customer experiences. How are you using data to really take those customer experiences to the next level? So just talking again about our rewards program, the great benefit for us also is having that data and I think many retailers realized a number of years ago that when you have a customer shopping online, you actually have all the data. You know who they are, what they're buying, where they live and everything about them. But in-store, you don't have that visibility and so there's a missing chunk of information. So having a program where the customer is incentivized and valued to give their data is definitely the way forward. So for us, that's been invaluable. So if you bridge our loyalty program with our private shopping, so our highest tier customers, what we might do for, say, gifting season, if we know they bought an amazing Chloe bag, we may give them the wallet over because we know what their spend has been for Christmas. So really trying to personalize how we interact with the customer based on the data we can get. According to the British Retail Consortium, Britain has lost 6000 storefronts in the last five years. I'd love to know what role you think bricks-and-mortar play in the current environment. I mean, in terms of the loss of stores I think in reality, this is probably the most complex and costly time to run a retail business. When you look at the rent, the rates, the utilities, the staffing. And so naturally, some businesses are just not generating enough in order to offset those costs. And so when you look at the store, really what's the purpose of the store today and what's the reason someone's going to come in versus sitting on their sofa at home and shopping online? Well, we see the two channels as complementary. So today you might need a gift for somebody and order online and send it to their home. But actually, tomorrow you want to come in, you want to have an appointment with the stylist, you want to have your nails done, you want to have a glass of champagne in the bar. So all of those things are the reason somebody comes into a store and it has to be an evolution as well and really supporting that discovery of service brand proposition alongside customer service in an authoritative way. There's lots of information out there, but how do you really dissect and decipher it and the trust that customers have in our sales team, I think helps that trust. Manju, as a retail leader, I'd love to know what your current challenges are. So what's keeping you awake at night at the moment? I think definitely the employee side in terms of attraction, recruitment, retention. It's obviously a tight labor market. But on top of that, we have a very different approach to recruitment now than we ever had before. And so when you look at the workforce, you've got multi-generations of employees. You have younger individuals who want flexibility to enable them to do the things that they love, but you also have an older generation as well that wants flexibility. So we have to be really clear about what's our employer brand. We support that flexibility. Looking at shifts, how we can adapt them, and also giving that career path to give people that experience so that they see that staying with Harvey Nichols because they can really grow as individuals. So I think that piece is an ongoing consideration. And what about the opportunities? What are some of the key growth markets you're looking at at the moment? I think if you look at the one big opportunity, which has come very quickly for all of us is AI. So, along with the data piece on rewards, AI will be the next thing that we look at. And fundamentally, AI is, from an employee point of view, how to take away the friction to make their jobs easier? And then from a customer point of view, how to take away the friction so that the customer journey is as smooth and as enjoyable as possible? So that presents an opportunity of improving productivity, but also giving more, I guess, personalization effectively to what the customer really, really wants. And what about international markets? Where are you looking for growth? So we already have a number of stores internationally. We have two stores in Hong Kong and then four in the Middle East. So our store in Saudi has been open for 22 years and we really see, particularly during COVID and since that time that those markets have grown exponentially and even post-COVID when customers could shop locally, they still shop when they travel and it just strengthens their ability to shop. So it's not that they're trading shopping in one market versus another. So we expect that to carry on. And you touched on AI there, so give us a glimpse into the future. What do you think the future of luxury retail will look like in ten years? I mean, ten years is quite a long time. But if you look at some of the trends we're seeing today, which we expect potentially to carry on. I think the first is that flight luxury. So in any economic cycle, people will always value nice things. And even in the last week, price of gold has increased. So you know that's always going to be a factor. What we see from customers really being thoughtful in their purchases and potentially buying more investment pieces and buying better. So I think that naturally also leads into sustainability, and fashion is not going to hit its targets without volumes declining of what they sell. You know, I went into my local charity shop just a couple of weeks ago, beautifully merchandised and shelter boutique, and it was full of young women in their twenties, thirties, forties, that might have shopped previously at Topshop or at Harvey Nichols, but actually really enjoying the opportunity to buy resale. So sustainability has got to be a feature of how people shop going forward. I think the other one is around climate risk. So I think businesses often talk about sustainability but see climate risk as a long-term risk rather than an immediate risk. When we look at the summer, we had the extreme weather patterns of flooding and soaring temperatures, and now we have, you know, unseasonably warm autumn that naturally will have to feed into supply chain possible disruption and customer behaviors. We've seen this week that Next and M&S both took a dip in their share price because of the late start to autumn. I think all of those have something to be considered. And the last one which we were talking about just before is if you look at where the customer base is growing, whether it's China, India, Middle East, that naturally will shape preferences going forward, and also the brands emerging in those markets. So Riyadh has its first fashion week later in October, Dubai has a Fashion week, and they're all hosting local brands. So I think the customer of the future in those markets will absolutely have an influence over what the brand could be as well. And just to pick up on your point around sustainability, what're you doing at Harvey Nichols to really capitalize on the growth of the resale market? So we've done a couple of things over the last couple of years. So one of our partners is called Reflaunt. So it's a network of international marketplaces and we're all very good at pulling out stuff from our wardrobe that we don't want or need anymore. But I don't know about you, but mine often just stays in carrier bags. Should I take it to the charity shop or should I sell it or give it to somebody? But actually, what we do are Harvey Nichols, we can take the product, we do the photography, we can put it on these marketplaces and once it's sold, you can either get cash or you can get Harvey Nichols vouchers in exchange. So that's one area. Then we also have worked along Talbot, The Restory, which is a repair service. So if you have your favorite bag or pair of shoes or pair of jeans, we can restore that to its original form. Then we also partnered with My Wardrobe HQ during COVID actually for the rental market. So these are becoming more mainstream now as well as a number of brands we carry, particularly from Copenhagen to which are naturally more sustainable in all their features. And Manju, I know you're leaving Harvey Nichols at the end of this year. So what's next for you? Probably slowing down a little bit. So I had a milestone birthday last year, celebrated 25 years of Harvey Nichols and just want to explore the world and I have a couple of non-exec positions, which I'm looking to build on. Brilliant. Thank you. Any questions from the audience for Manju? One of the things I was interested to hear about was just how you balance all those amazing things you do with your customers with profitability and margin costs, which is obviously such a big topic at the moment. It's definitely harder in this market. I think it's got to be down to looking at what's working and what's working profitably versus maybe what's not working quite so well. You've got to really back your resources and effort around the things that are doing well and be brave enough to slow down, even stop the ones that are dilutive from a P&L point of view.