Transforming with relevance: Leveraging the power of a heritage brand

Thank you. And now I'm just going to dive right in. I think we've had a great introduction as to what tradition and transformation means by Sarah. And I'm going to invite Michael Chalhoub to come join me on the stage, for those of you who don't know, but I'm sure everyone in this room does. He's the president of strategy, growth, innovation, Investment and Joint Venture actually group. The company has a six decade history and is leading luxury in this region. So what better person to discuss transforming with relevance with. So you are the third generation correct. Enter the company. So I think you might know the saying that go is the first generation builds it, the second generation maintains it. And I'm not going to say what the third generation does, but you all know what that well, how would this one ends? But, have you heard it many times and you had a solid career outside the company you started in sports media, which I found really fascinating. And this is actually your second innings at the group. How important is it for someone who is coming in as a third generation to have all these experiences? Thank you Sujata. Thanks. Thanks to the organizers for having me here. Yeah. I'll try to answer all your questions on the, on the same order. So yes, I've heard that saying many times, but that saying is is good because it, allows you to be wary and, and, you know, I'm generally a little bit of a pessimist, which gives me the incentive to work a little bit harder to make sure that, you know, things happen in the right way. So I guess, you know, better safe than sorry. And so, trying to do my best to not let, you know, that saying produce itself, as we can hear it, but, no, listen, to be more precise, I started my career in finance and then consulting, and then I launched a sports media company that I then sold, seven years later. And I first joined the Chalhoub Group in 2017. It didn't really work out for a variety of reasons, but also in mainly because, you know, I didn't see exactly eye to eye on, you know, how exactly we should be going about the future. And so, you know, instead of, you know, letting that disrupt some very personal, family relationships, I decided to take a little bit of a step back, to go back to my first love and to go back to the sports media field. And then Covid hit, a few years later. And Covid kind of brings you back to what are the most important things in life, right. And so, I saw a father that was, you know, very stressed by what could happen or what was happening. And I was keen to help out as much as I could, you know, I'm not sure that if Covid hadn't hit, if I would have come back, to be very fair and honest, once you go or once you decide to do something, you're fully decided, and you take a very assertive step in or very assertive step out. So, that's what I had done two years earlier. And so in 2020, when I came back, you know, I knew that, you know, it was going to be my long term future and that I would be more than happy to help out. So, I asked Patrick, who probably even more people know in this room. I asked him a big question, which was what keeps you up at night? And he told me that, the joint venture side of the business was, preoccupying him. And so I told him, listen, let me, you know, take it from you a little bit to remove some of that weight, some of that pressure. As long as, you know, you helped me build a department, which is this strategy, growth, innovation and investment department, which I think was the right department to start building upon the future. What we want to be in the future to set up the strategy, the strategic blocks for the future, for some of our big business units, for some of our, you know, big group visions for 2033, for the three year, business plans that we were going to build, but also to start looking at new categories, new markets. And that's what we do with the growth department. And to start creating and building our own brands. And this is what we do with innovation. So I put in place a few departments that were very separate within the group. And we tried to together build, funnel for the future sustainability of the group. So, that's where I, where my two hats, one which I call the most important hat, which is our joint venture hat, and one which I call, you know, my passion. You know, favorite, sort of, love projects, which is the, the strategy, growth, innovation, investment department, which has been now there for about four years. And how do they both work hand in hand? And do you think they have to be together, the joint venture and the growth. No. Absolutely not. Actually they're quite different in their modus operandi. One is, you know, very much related to some of the brand partners that we have, to representing the minority shareholder with brands that, you know, do hundreds of millions, if not, billion dollar, revenues in the region. It's to help them accelerate their growth, and it's to help them, see how, you know, how best to support, that growth in the Middle East with some of our value added services. So all in all, a very sort of, traditional type of business model. And then, you have the other one, which is, basically a bunch of, consultants, brand creators, investment bankers that are looking after the long term future of the group and that have been working in ways that I think the Shalhoub group has, you know, not very much done so in the past, or at least with a much fewer number of people. And so, we're trying to do this, which, you know, some could call transformational. So, really the meeting point between the two is, is exactly, you know, the theme of the day that the tradition on the one side and the transformation on the other side. Your job title almost is this, what we're talking about today I guess. It's interesting to me that many larger retail players have decided that they want to launch multi-brand channels when it comes to the websites, and you have decided to make, doing omni channels for each brand your way forward. Why did you decide this and what are your omnichannel priorities for the rest of the 2020s? Yeah. Well, I mean, the reality is that with most of the brands that we represent, which are the ultra luxury brand, there is a customer experience which you want to control, right. And it's very hard to control that customer experience when you're in a multi-brand store, whether offline or online. And so, yes, we've launched ecom platforms for each of those brands. But we've launched them in an omnichannel way. So that means when we build an e-com channel, we build them with, some offline capabilities, the click and collect capability, the, in-store, booking of services capability. And the same way when we build a store, we try to make sure that it comes with, you know, the right online, capabilities as well. And so, we really now have a customer that throughout their journey will spend as much, not as much, but will spend time both online and offline. You have to realize that that customer probably looks at the ad online, goes to the store, tries the shoe on, goes back, ponders that with their partner, looks at the different prices, goes back to the store, and maybe makes the purchase online or offline. But that doesn't really matter as long as it's a seamless customer experience that goes omnichannel online and offline. And the acquisition of, Threads Styling is obviously something that gained a lot of international media attention I know. We also wrote about it in Vogue Business. You believe now investing in more brands and not just being a JV partner? And I think maybe shoe brands of particular interest, tell us about your strategy for this part of the business. Yeah. So that's the investment part of the business. And ideally we were looking at, an investment thesis that encompassed four big pillars, one which was, the new business models, business models like the Threads Styling business model, which is, you know, hyper personalization at scale, customer experience, actually, it's a new customer experience, both for our end customer, but also for our brand partners, which, you know, in some way have been our customers for a very long time at the Chalhoub group. So we're trying to offer them that new experience with Threads Styling. So back to what I was saying. Sorry, I digress. So new business models, retail technology so that we can, start becoming more and more, the retailer of the future or building the store of the future. We want to invest more and more into new geographies. So we've been investing in Latin America. We've been investing in Africa. And last but not least, we want to invest in brands for a very long time. We've been an agent for brands for a very long time. We've been an ambassador of brands for a very long time. We've been a preferred partner for brands, a thinking partner for brands, you know, a growth partner for brands. But right now we're at a point in our journey where we want to to be part of that brand, internationally, to be part of the top coat. And yes, you're right that we look more at shoe brands because, you know, we do believe that we have a fantastic shoe concept. And I know Elisa's speaking in 15 minutes, so. Yeah, I mean, we do have, the legitimacy, to say, we can accelerate your shoe brands not just in Dubai, but, you know, with all the new platforms that we're building for level shoes. Should we be watching this space and a shoe brand moment about to happen? Yeah, I think so. Okay, he's not going to give any more away. But you did introduce… You've just hiked the price up of my purchase. Sorry. Level shoes, as you said, is one of your big homegrown success stories. I mean it, what it's done. It's almost. You come to Dubai, you see Burj Khalifa, you go to level shoes. It's like a tourist destination. You introduced, re-Commerce last year. What are the digital opportunities here? Well, first, if I were to put my scientific sort of data hat, what we've figured out is that the re-commerce luxury market is about a $500 million market. And it's growing at double digit speed, obviously, but probably about to become an $800 million market in 2026. So in just three years time or two years time. So there is a huge opportunity there. And this is why, you know, we're trying new business models out to we're trying and testing with level. We've launched our pre-loved tab, which, you know, we buy and sell, some shoes, but not just some shoes and we help, you know, our re commerce, platform or re commerce customer to find what she's looking for. And then, you know, we've with Tanagra, for example, we've tried out the rental model where, you know, you can rent out, table pieces for, you know, let's call it 15 dinners a year. So this is where we, we we started as part of our innovation department. We started a new, sub department called the corporate Innovation Department, where we're helping out our GMs that are slightly, let's call it more traditional because they're looking after what grows their top line, what grows their bottom line. And those things don't make a huge difference on their P&Ls, let's be honest, at the beginning. So we help them, figure out what it is that they're, that they can innovate with. And we help, you know, we act as internal consultants of sorts that will perhaps build their re-commerce platform, build their rental platform, and help them build those, sort of new business models that might only weigh 1% or 2% of, of their revenues, but still, open up a new, category for us, open up a new, type of luxury buyer, luxury customer for us, that that is perhaps more apt to buy, some, secondhand, clothes or bags or shoes. And so we're definitely trying to open up new avenues for growth and with a bit of a, you know, trial and error type of ways. So, you know, we allow ourselves to fail fast if we have to fail fast and we allow ourselves to scale fast, if we can scale fast, because thankfully, you know, we have the means to do so. So that's what we try to do. And you also just before I think it was just before Covid, the Chalhoub group introduced muse, which is your loyalty program. How important has that program being and how is it changed, perhaps because you introduced it just before Covid and then you went through this whole transition? Yeah. Listen, it's been a it's been a journey. It's been a fun journey. But, at the end of the day, you know, what we know is we are in the field of hyper personalization. I think Sara was speaking about personalization, but I think today luxury is personalization, right? So, today we have, a lot of data points on our customers that we acquire thanks to the muse platform. And with those data points, we managed to create an experience for her that is perhaps more personalized experience, obviously, if you're on the higher echelons of the news. Do you want to just talk us through how you sort of personalize in the news. So you grow your, the same way you would with any points system. So, when you become an elite member, then, you actually have a room that's dedicated to you within some of the malls, where, you know, we personalize your shopping with personal stylists that will help you figure out your style. But on top of that, you get invited to a variety of different experiences, you know, concerts, meeting with the right, you know, the right people with some fun designers, with some, you know, artists. And so what we're trying to do is invest more and more in the experiential part of the business because, since Covid, I think everybody has realized that buying a product is something. But, you know, buying at a nice amount of time for yourself is the real luxury, right? So, yeah, that's what we try to do. Experience and time is a real luxury. You spoke about data, and, what I've always found fascinating as a journalist is how open Chalhoub Group is to share data compared to many other players in this market. Why do you feel it's so important for you to do, be so open with your data? Well, it's a big question, but the reality is that, we we unfortunately are in a region where, data is, is not very prominent, is very hard to get. Right. So, we've invested a lot of energy, time and money, into producing our own data, and we produce it thanks to the partnership of, a lot of our brand partners, but also a lot of our competitors. And we're really, really thankful for that. And so for us, it's our way to sort of give back to the community to be able to open up that data and to be able to build upon that data. So what we're trying to do is have data driven decision making that allow us to not just, you know, eat the pie from our competitors or whatever, but grow the pie together. And for us to do so, we have to act in a super transparent way. And it's so that's, you know, that's how our founders thought. That's how, you know, our president thinks and I think, you know, at least from my way of thinking, I think that's the best way. Right. Then I wanted to talk about the Greenhouse Initiative, because that's also something very unique to Chalhoub group and sits within your role. It's been a key strategy, but you're now taking it to Saudi. How are you taking it to Saudi? And is it is there any different to how the greenhouse as we know it here is and how it will be in Saudi? Well, the greenhouse, you know, as it was created has a number of different function, but probably its number one function was to foster an entrepreneurial mindset within our group. One of the three big values of our group was always the entrepreneurial spirit, and it still is. But sometimes, you know, when you get lost in a corporate of 15,000 people, you realize that it's really hard to keep that entrepreneurial spirit alive. So, the greenhouse has really serve that function, by helping our aspiring entrepreneur colleagues, to achieve their dreams by helping our ecosystem with, accelerators and incubators to help those startups work with our, you know, big corporate sort of non-to-agile, type of company. And so we do believe that we've, accomplished a few of those missions for the grander mission of fostering an entrepreneurial mindset. When we started focusing on Saudi Arabia for a variety of reasons, we felt that the entrepreneurial mindset wasn't fully there. We felt like, when we had built, Saudi Arabia or when we had built our presence in Saudi Arabia about 35 years ago. It was built with the right entrepreneurial mindset. But today, as Saudi is starting its entrepreneurial journey of its own country. We probably had, you know, managers and solid, you know, lieutenants, but perhaps not the full impact of an entrepreneurial mindset. And so we needed to hire entrepreneurial talents. We needed to engage with startups in the ecosystem that were starting to form, and this is where we decided, yes, let's take the green House to Saudi and so we're there since, Q4 last year. So, we're. Were just about to launch our first few startups from there with some of our entrepreneurs are colleagues that have entrepreneurial aspirations. And we're just about to launch, a fashion, incubator, a beauty incubator, and a retail tech accelerator the same way we do, in Dubai with our greenhouse team. Well, I look forward to hearing more about that later in the more about Saudi later in the year. You also mentioned that you're going into Latin America and Africa. How did you decide that these markets and other markets in the world to do group has its eyes on that? Well, let me start with the second answer and I'll say yes. But apart from that, I think that, initially, let's be honest, this came in a very opportunistic way. Right. We realized that, what we've brought to our brand partners is a little bit of stability in unstable markets, and, a lot of them didn't need us. If they are expanding into, Spain or South Africa or, China or, Canada. So those are mature markets where, they had their presence and they knew how to operate. However, in countries like the Latin countries in which we operate or, you know, sub-Saharan Africa bar South Africa, where we don't operate, with Elafrique, those are countries where we felt that our business model was, slightly similar. And without having a, a copy-paste approach, because you can't have that, you do reproduce, some things that are really important. So you choose, the most ethical partner, which is not a given. Right. And when we've spent a couple of years vetting the right partners or asking the current partner that we have to make sure that all of its trade is done in the most ethical, most shall hoop way, then our brand partners trust us. Right. So. So we've taken the business in countries like Nigeria, in countries like Colombia where, it's not a given to find, you know, the right ethics. It's not a given to, to find the right sort of loyalty to brand, to find the right long term vision. And we've brought that with the Shalhoub name. Right. And so that's what we're trying to do. We're probably going to look at other emerging markets. We're probably not going to go, you know, very far into the mature markets, except for, some of the brands that we might buy maybe one day. Right. But, you know, there's… A lot giving that away. There's a lot of interesting markets out there. I mean, you know, I can think of Muslim markets in the Southeast Asia. That could be interesting for us. So, there's a ton of markets where we have our eyes on, but, it's still a little bit farfetched for me to speak about it today. Perhaps as we're getting towards the end, I just wanted to know if you wanted to share one recent innovation from your company that makes you most proud that you've probably helmed since you've been there from 2020? Well, I'll talk to you about one of those startups that started with, one of our colleagues who used to sit, across from me when I first started at Shalhoub in 2017. She was a buyer for Max Mara, and now she owns, or she co-owns with us where that which a lot of you probably know about, which is, personalized, boxed, personal styling, concept where, you give your budget, you cooperate, you collaborate with a personal stylist to find your own style, and they send you a box with a variety of products that will probably cost twice your budget. And you can send back whatever you don't need. And you generally spend a little bit more than you should. But that's fine, because it allows us to fine tune our knowledge of our of the customer. And so the next time around, we'll know you better and we'll be able to. So where that has started its journey about five years ago now. It's had a tremendous growth. You know, double digit if not triple digit, year on year, for years and years now it's, you know, close to becoming, $10 million companies hopefully soon. And it's been doing fantastically well. And recently it just launched its own private label, which it called Serena, in reference to, I think the, the Siri, Gossip Girl and Yeah. And Serena's performing really well. It was nearly 20% of its sales right now. Wow. Okay. So we're going to come to a close now, but I'm going to play a little rapid fire with you. Just three phrases. Whatever comes to you head first AI role in retail. Hyper personalization. Tradition versus transformation. Interesting fireside discussions between my dad and I. Can we get a look into those, please? And future proofing. Being more involved in what the brand does and helping them grow wherever they are. Thank you so much, Michael. I think you've given us lots of insights and also made us want to really watch out as to what the group is up to in the next year and beyond that. But thank you so much for your time. I know you're very busy and I appreciate it.