Reprinted from Retail Drive September 18, 2017 Dive Brief: Sephora, JustFab and Walmart were the…read more
Sep 10, 2017
WWD Recognizes TechStyle, LVMH, Sephora and Gap for Bringing Silicon Valley to the Fashion Biz
Working at a start-up holds a certain allure: creative office space where people can work standing up or even take naps; a democratic environment where all voices — from the founder to the intern — matter, with everyone working toward a higher purpose. Oh, and failure isn’t necessarily a bad thing — in fact, it’s often encouraged.
Now that mind-set is seeping through the fashion world, including the failure part, and for myriad reasons — not the least of which is to better compete for talent against the techies, not to mention attract consumers who have a tech outlook all their own.
As fast as they roll out new collections, fashion and luxury brands are hustling to create in-house accelerator programs, recruit top tech executives and shift corporate culture in the digital age.
Indeed, “start-up” has become a watchword for everyone from France’s tech-friendly president, Emmanuel Macron, to Bernard Arnault, chairman and chief executive officer of LVMH Moët Hennessy Louis Vuitton, and France’s richest man.
“The customer really is the constituent in this equation that is driving what will define success in the future. In the old days, there was the traditional approach where the company knows best — we will determine the best experience and we will push that out to customers,” observed Gap Inc. executive vice president of strategy and chief customer officer Sebastian DiGrande. “The pace at which customers can share experiences, share what they like and don’t like, react and respond, it’s accelerated so much that if we can’t move at the same pace, we get left behind.”
Established players “have started to see the unique, dynamic, creative and disruptive benefits of start-up culture, and are trying to replicate some of those conditions in their own environments,” said Carmen Busquets, the majority cofounding investor of Net-a-porter, who is said to have invested more than $50 million to date in start-ups in the U.S. and Britain including Farfetch, Moda Operandi, Flowerbx and Tagwalk.
“If it works, the teams within those corporations will benefit from the chance to be more motivated to learn, work and be more dynamic and creative, and since they understand the importance of interdependence, of teamwork, some of them will naturally stand out as leaders and pursue personal goals within a larger team without the risks of joining a traditional start-up.”
The cons, she cautioned, “are that this may not all mesh very well — sometimes the old structures of companies doesn’t fuse with the smart, entrepreneurial and ambitious team spirit of start-ups. Start-up people aren’t used to working in environments where there are so many politics, restrictions and glass ceilings. With these restrictions, they don’t find the motivation that fires their creativity and hunger for innovation and learning. It’s hard to have it both ways and it may be challenging to meet so many diverse demands — that of the corporation and the start-up within it.”
Tagwalk founder Alexandra Van Houtte said the buzz around start-up culture is freeing up opportunities for the younger generations. Tagwalk is billed as the first free search engine for fashion shows and accessories.
“People are realizing that maybe younger people might have a different view on how to shop or select clothes or pick up clothes. Fashion is starting to embrace younger people actually working and bringing something to the industry,” said the budding Franco-British technology entrepreneur.
She noted that with the frenzy around tech start-ups, the risk for the brands and groups circling is that they get distracted from the principal goal of “having a really functional, perfect web site that sells.”
“Brands are increasingly interfacing with customers via software,” said Ian Rogers, chief digital officer at LVMH, who joined the luxury group from tech giant Apple. “With everything that we’re doing, we’re trying to be very proactive about that — bring the future closer, faster.”
But as brands scramble to crack the “fundamental physics of how you get the consumer’s attention” in the digital age, Rogers said he doesn’t see the tech-luxury divide as being that black and white. “Oh, Silicon Valley does A, fashion does B. ‘Let’s try to get B to do A,’ It’s not that simple, it’s tough,” the executive said.
Even before Rogers’ arrival in 2015, LVMH regularly organized field trips to technology hubs for its staff — not just to Silicon Valley but also to China and South Korea.
“China and [South] Korea are even more advanced in terms of societies online than the U.S. China has twice as many people online than the U.S. has human beings in the country. We pay attention to any market that looks like the future,” he said.
“The interesting thing about LVMH is that it’s not an operating company, it’s a holding company, and the maisons are very independent; some of them are quite small and very much like a start-up. I’m sure if you talk to Simon Whitehouse [ceo] at J.W. Anderson, he’ll tell you that [the brand] is definitely a start-up, or Nicholas Kirkwood. Even some of the older houses like Acqua di Parma where they have new ceo’s and relatively small teams, in my opinion, watching them operate, they operate very much like a start-up,” Rogers said.
“The way that Arnault has prevented centralization is to preserve the entrepreneurial spirit inside of the maisons. The thing that is really different is, I come from a world where the product is software, and these guys come from a world where the product is physical, and technology plays a relatively minor role. That’s maybe a more profound change.”
Likewise, Le Bon Marché‘s new global e-commerce site 24 Sèvres is “very much a start-up,” Rogers added. “It’s based in a building in the 15th arrondissement, everything is in-house, from the tech to the creative. Obviously they worked with some consulting teams to get up to speed while they were hiring, but they’re proud of how self-contained it is. It’s just like a start-up, it’s agile, it sprints; they release early, release often, as we say in the start-up world.”
Marie-Claire Daveu, chief sustainability officer at Kering, parent of brands including Gucci, Puma, Boucheron and Stella McCartney, echoed that, historically speaking, “innovation has been at the core of the luxury sector.”
“What is interesting with start-ups is the way they work, with a lot of agility and an entrepreneurial mind. It’s something that has been strong since the beginning for Kering; [Kering ceo] François-Henri Pinault himself has always had an entrepreneurial spirit. Luxury is linked with savoir faire, heritage and beautiful product, but it’s also linked with innovation.”
Initiatives that fall under the French group’s so-called Create pillar, one of the three pillars of Kering’s 2025 sustainability strategy and focused on disruptive innovation, also include the company’s Italy-based Materials Innovation Lab focused on “identifying new and sustainable fabrics.”
According to a source, Artémis, the private investment arm of the Pinault family, is also eyeing tech initiatives, especially those geared to the retail sector, while Gucci has a shadow executive committee that contributes to the brand’s development.
For Daveu, collaborating with start-ups “but also universities and a lot of non-governmental organizations,” opens the group up to new technologies and opportunities, including alternatives to traditional materials and energy and water saving innovation. They serve, she said, as a vital contributor to achieving Kering’s 2025 sustainability targets that include cutting carbon emissions by 50 percent and reducing the company’s environmental impact by at least 40 percent, mainly from the production of raw materials.
But while start-up culture is synonymous with Silicon Valley, luxury and retail firms are increasingly turning to other geographies for innovative ideas — including France’s budding start-up ecosystem.
After New York and London’s Shoreditch a few years ago, Paris is “having its moment,” according to Rogers, citing an “almost over-investment in start-up culture across all of Paris.”
Incubators are mushrooming all the way out to Station F, he said, referring to a new hub housed in a former railway depot in the city’s 13th arrondissement. Billed as the world’s biggest start-up incubator, it’s the latest brainchild of telecommunications and technology tycoon Xavier Niel, often described as France’s Steve Jobs. He is also the partner of Delphine Arnault, second-in-command at Louis Vuitton.
France in June introduced the so-called French Tech Visa facilitating access for tech workers from outside the EU. But homegrown tech moguls are also heading back in droves, with Rogers citing a “reverse migration” of talents such as Oussama Ammar, who recently returned to France from Silicon Valley to cofound The Family. It’s billed as a long-term strategic investor that empowers entrepreneurs through education, services and capital.
Other local start-up initiatives include École 42, a fees-free school for would-be programmers, also backed by Niel; start-up incubator The Village by CA, backed by local bank Crédit Agricole, and the tech forum VivaTechnology, co-organized by LVMH-owned media group Groupe Les Echos and advertising and public relations agency Publicis. The fledgling event, said Maurice Lévy, ceo of Publicis, has the ambition to become the “digital equivalent of the Cannes Film Festival.”
Across the channel, Natalie Massenet, Net-a-porter founder and chairman of the British Fashion Council, in March revealed she was partnering with Nick Brown, a partner at venture capital firm 14W, to launch venture firm Imaginary Ventures. Russian entrepreneur and Buro 24/7 founder Miroslava Duma, meanwhile, in May launched Fashion Tech Labs, a venture capital fund and accelerator targeting new technologies and sustainable innovations geared to the fashion industry.
Given heightened interest in start-up practices and culture, tech talents are now highly sought after.
“The demand is high and the compensations are going up,” said Stuart Leibach, a principal consultant and head of the retail practice at Irvine, Calif., executive search firm McDermott & Bull. “This is why search firms get involved because it’s a smaller pool to draw from….A lot of companies are immediately excited about executives from those [tech] companies, but having said that, it’s the executives who really understand the consumer and the retail landscape that are attractive — to be able to put together both the technology and the retail knowledge. That’s the sweet spot. Those are the people who are most valuable and that’s what the industry demands right now.”
Snaring top talents from the tech world comes with its challenges, Busquets added. “The problem is that the smartest founders and teams don’t want to live under the comfort of a big corporation. They want to stay independent, so it’s very difficult to acquire the good ones without paying a huge premium.”
Consider LVMH’s Rogers, whose main vocation before joining Apple was in start-ups — “I created seven, I sold one to AOL, one to Yahoo and one to Apple.” He said “the only way I ever worked at a big company [was] through an acquisition.”
Launchmetrics ceo Michael Jais, who is part of a group of investors looking to establish a fashion-tech hub in Cannes in partnership with the city’s officials, said he’s dubious that “in the long-term” luxury groups experimenting with start-up style initiatives will be able to have “a big flow of internal entrepreneurs.” He agreed that “there is a limit to trying to disrupt teams by just bringing in external gurus or experts.” Internal start-up style initiatives, for Jais, are “a way of saying that maybe, especially in fashion or luxury, instead of recruiting guys who come with their Google or Facebook culture who will not be totally aligned with the brand, that we try to disrupt from the inside.”
That disruption from within has helped fuel swift adoption of incubators such as Wal-Mart Stores Inc.’s Store No. 8 unveiled earlier this year and accelerators, ranging from Sephora Accelerate to Target’s partnership with Techstars and the launch this year of its own retail accelerator called Target Takeoff. The latter was a bid by the discounter to mine for companies focused on what Target spokesperson Justin Barber described as “better-for-you products and services.”
“We learn a ton from [the accelerators],” Barber added. “You learn how to work more nimbly. You learn how to run an accelerator, how do you engage start-ups in new ways and how you build programs faster.”
Target has set the goal of launching more than a dozen new brands over the next 18 months, representing a more accelerated development and rollout timeline versus how the retailer has worked historically, according to Barber. So while last year’s launch of the children’s line Cat & Jack took about a year to develop, 2017 has already seen three new apparel lines and one home brand for Target.
LVMH-owned Sephora Accelerate so far has shuttled 18 founders through its program.
Entrepreneurs are invited to San Francisco for a weeklong boot camp that provides opportunities for networking, mentorship and access to capital. The benefit to the Sephora organization is multifold, said Corrie Conrad, the beauty retailer’s senior director and head of social impact and sustainability. Entrepreneurs accelerate their businesses’ growth, the initiative can be a feeder program for Sephora and employees within the organization are motivated to be working for a company that exists with a purpose beyond revenue growth. The idea is not necessarily new for Sephora, Conrad pointed out, but it’s certainly gaining traction across industries.
“Here at Sephora, perhaps before entrepreneurship became the catchy thing that it is today, it was active and it worked,” Conrad said. “So for as long as we’ve been creating new goops on our skin to play with, there have been entrepreneurs who have been doing this. For beauty, there’s just long been a culture of innovation and we at Sephora have been about finding the hottest new things. It’s a key piece of who we are….There is a general zeitgeist around entrepreneurship right now. I would offer that’s long been the case in beauty.”
Other, more traditional players have caught on by retooling how they look at themselves. Westfield is a good example, with the mall operator fancying itself a “PropTech” firm — thus adopting the start-up jargon of tacking “tech” onto a prefix to signify its fusion with technology.
Westfield Labs, founded in 2012, changed its name earlier this year to Westfield Retail Solutions, indicating its desire to be a solution provider — another borrowed label from the world of tech whereby it offers innovative solutions to the companies it works with throughout its centers. The point? Stepping up its service offerings.
“What’s really changing, and this is an evolution for us, is that the relationship that we’ve had primarily in the past has always been a tenant-landlord relationship for us,” Westfield chief operating officer Bill Hecht told WWD earlier this year. “What we think has really substantially changed is that it is much more of a partnership that’s really creating brand-right properties in the physical and the digital [world], whether it be a car manufacturer, apparel manufacturer, technology or in food.”
Challenges certainly abound, particularly when applying concepts that make sense for small start-up teams but not necessarily the armies of people who make up more mature organizations where hierarchies exist.
Gap Inc. last year acquired San Francisco start-up Weddington Way, pulling the e-commerce company for bridal parties into its fold.
“We acquired Weddington Way because they bring a really exciting start-up culture and innovative spirit with them,” said Gap Inc.’s DiGrande, who joined the firm last year from Boston Consulting Group to head up its now year-old Customer and Strategy Team focused on driving a culture of innovation. “It’s a small, scrappy team that has built a digital-first community commerce experience. We wanted to learn how they built that and to think about how we could extend some of that capability across the enterprise into some of the other brands.”
Weddington Way is now in nine Banana Republic stores in the U.S., where it offers shoppers a showroom experience. The result is greater conversion for Weddington Way and new customers for Banana Republic. The first test of the showroom concept wasn’t perfect but that’s how it should be, DiGrande pointed out. He stressed a new focus on testing and learning — quickly. Gap Inc. has since rolled out native apps for its core brands in a matter of months and continues to iterate on that technology. It’s also quietly testing a babyGap outfit box subscription service.
“It’s a great learning environment,” DiGrande said. “Our customers are responding very well. Is it perfect? No. But, again, we’re learning and adapting quickly as opposed to waiting for the perfect solution before we release it.”
Part of the key is a level of communication that the old ways of doing things don’t always allow.
Australia-based Cotton On Group, with U.S. headquarters recently relocated to Glendale, Calif., has more than 22,000 employees globally. The multibrand retailer earlier this year launched its You Learning platform in Australia and in July rolled it out to U.S. employees.
“As a global retail business and one that employs a mostly Millennial base population, it’s really important to us as we continue to grow to continue to find ways to keep people connected to who we are,” said Haylee Newton, Cotton On Group head of people and performance, USA.
The platform contains more than 1,000 pieces of content aimed at employee development.
“Something that we’re hugely passionate about is how to cultivate that owner’s mentality,” Newton said. “It’s really important to keep an emotional connection and to create personal investment.”
Transparency helps. At El Segundo, Calif.-based TechStyle Fashion Group — parent of Fabletics, JustFab, Shoedazzle and FabKids — Tuesday team meetings are open to anyone across the company’s offices and during that time anyone can ask a question and key performance metrics are shared.
“Fashion companies don’t think like Silicon Valley companies where they’re about giving people ownership in what they do and really thinking about how they’re connected to their company and their coworkers. One of the biggest differences [between tech and fashion] is that higher purpose,” said Shawn Gold, corporate marketing officer at TechStyle and former Myspace chief marketing officer. “Every tech company has that higher purpose of how they’re looking to disrupt an industry or have some kind of game-changing technology or experience.”
That’s been the jumping off point across TechStyle’s brands: positioning each business’ mission statement around how they intend to solve customer pain points.
“We’re probably a ways away from being Google, but our employees truly believe we’re one of the most innovative fashion companies, so that’s been great for recruiting people,” Gold said. “They think they’re joining the future rather than the past.”
Looking to involve potential future business leaders into its decision-making process, Kering in 2018 plans to launch its Young Leaders Advisory Group. “It’s too early to share details, but we believe that, if we want to raise awareness all over the world and understand the issues facing the Millennial generation, it’s clear that we have to have Millennials with us,” Daveu said.
How that cohort and the up-and-coming Generation Z works is different. Employers who have realized this are catching on and it’s dramatically changing the workplace and what fundamentally makes a company tick.
“You have this new workforce that, in some sense, there is more entitlement than there’s ever been before. But there’s also a level of productivity in human beings that we’ve never seen before,” Gold said. “So you have to service this new kind of worker. Then you have these highly profitable tech companies that are looking to reengineer the way business is done because they have the resources to do it. The cat is out of the bag in that people know how Google treats their people and so there’s a new standard of how companies should treat their people. Many companies are falling in line because there’s this new generation of worker that expects to be treated this way.”