Latest / The Retail Podcast / What Zalando & Primark Are Actually Doing With AI | World Retail Signals

Transcript

What Zalando & Primark Are Actually Doing With AI | World Retail Signals · The Retail Podcast

• 0:21
  Hello and welcome back to another fabulous edition of
• 0:24
  World Retail Signals with my awesome guests Ian and Need from
• 0:28
  World Retail Congress. We've just literally had World's
• 0:31
  Retail Congress last week. So obviously Ian's looking a bit
• 0:35
  battered worse for where although we've had a week to
• 0:38
  recover. So, but that's it.
• 0:40
  But listen, without any further ado, these are the World signals
• 0:44
  that we are interested in as people who spend our days and
• 0:48
  lives wading through the world of and landscape of retail.
• 0:52
  So nee, why don't we start with you?
• 0:54
  What's top of mind for you this week?
• 0:55
  Hi, Alex, lovely to be back again following our World Retail
• 0:59
  Congress last week. For me today, what I'm thinking
• 1:03
  about is the news that's come out this morning really
• 1:06
  highlighting that graduate and entry level jobs are down, in
• 1:11
  some cases quite significantly, largely because AI is now
• 1:15
  stepping in and complete those tasks that junior roles
• 1:19
  traditionally handled. And that headline might sound
• 1:22
  worrying, but interestingly, it's exactly what a number of
• 1:26
  leaders were already grappling with on stage at World Retail
• 1:29
  Congress last week. And for decades, businesses have
• 1:33
  been built like pyramids with those large numbers of entry
• 1:36
  level staff at the base. And as AI sort of takes over, as
• 1:40
  we said, some of those more manual tasks, it really
• 1:44
  compresses that base. So we're seeing fewer of those
• 1:48
  traditional graduate entry roles and also fewer people coming
• 1:52
  into the business, making succession planning and
• 1:55
  organisational planning much more difficult for for retail
• 1:58
  leaders. So, but for organisations, it's
• 2:01
  not about removing people, but really about redesigning roles
• 2:05
  and thinking then about how the entire organisation needs to be
• 2:11
  rethought, how, you know, junior staff are going to get the
• 2:14
  experience they need to step up into those more senior roles
• 2:19
  with AI sort of taking on most of those more manual
• 2:22
  opportunities. So organisations really need to
• 2:26
  be far more intentional about how they're, they're thinking
• 2:29
  about their future leadership. So I think especially given that
• 2:33
  news about, you know, grad jobs being down, it's not that I
• 2:37
  think AI is going to replace that talent, but we really need
• 2:40
  to make sure that we're designing proper pathways for
• 2:44
  the next generation of, of leaders to come through and to
• 2:47
  be able to contribute effectively to the to these
• 2:50
  organisations. Yeah, it's one of those save now
• 2:53
  it will bite you later sort of conundrums.
• 2:55
  Actually one of the I I heard it on.
• 2:57
  Stage already thinking about it, you know?
• 2:59
  Yeah, yeah. Absolutely.
• 3:01
  Like we'll reduce our intake, we'll save money that way.
• 3:04
  And then in five years it's like, Oh no, we don't have any
• 3:06
  middle managers because we didn't recruit any graduates.
• 3:11
  And then we don't have any new seniors, right.
• 3:13
  Because that sort of it stops coming in.
• 3:15
  And so I think 100% it's a structural process that you need
• 3:19
  to get your head round and think, OK, I may, I may save
• 3:22
  here, but how am I going to mitigate the.
• 3:24
  Yeah, However, down the line, no one's going to know the business
• 3:27
  because everyone's getting old and leaving.
• 3:29
  So, yeah, fantastic. OK, Ian, how about you, Sir?
• 3:32
  Hi Alex, good to see you. Yeah, I'm reflecting on one of
• 3:36
  the highlights for me from last week's Congress, which was
• 3:39
  hearing David Schneider, the Co founder of Orlando.
• 3:41
  He was one of our open speakers because we were remotely and
• 3:45
  yeah, he was really humble, modest, but it's amazing
• 3:48
  business. Yeah, we'll play enough.
• 3:51
  For like. And unsurprisingly, he talked a
• 3:54
  lot about AI. I mean, obviously it was a
• 3:56
  pioneer anyway in being an online business, really
• 4:00
  transform things in its day, which isn't that long ago.
• 4:03
  It's only sort of 17 years old as a business.
• 4:06
  But he talked a lot about AI and it was, you got the sense in the
• 4:10
  room that people were really sort of sitting up and listening
• 4:12
  when he said things like 90% of their marketing content is now
• 4:16
  generated and created by AI. The way they can create new
• 4:20
  products and new campaigns in a matter of days rather than weeks
• 4:24
  and months, which I think, you know, that was a huge takeaway.
• 4:27
  And then just earlier this week they published their first
• 4:29
  quarter results, which absolutely reinforced that.
• 4:32
  Yes, it wasn't just talk. This really is driving the
• 4:35
  business. I mean, they increased revenue
• 4:37
  in the first quarter by nearly 24%, which is I think nearly €3
• 4:42
  billion of turnover in that, that quarter.
• 4:44
  And they've, they're they're kind of forecast for the full
• 4:48
  year are looking really, really strong.
• 4:50
  But it's again, in their statements that they made, it's,
• 4:53
  it is AI that's driving it. And I think, you know, as, as
• 4:55
  you'd imagine, we, you know, it was a, you know, a big part of
• 4:58
  many of the discussions at the Congress and still a little bit
• 5:02
  of a sense of like, yeah, we're just getting started.
• 5:04
  And some people saying if you're not in the game, you're going to
• 5:06
  be behind the game. Whilst Orlando, I think is a
• 5:09
  perfect example of, you know, this is where you need to be.
• 5:11
  This is why you embrace AI because, you know, it really
• 5:17
  will transform your your business in terms of making it
• 5:20
  more efficient and faster, more reactive.
• 5:22
  And I think David talked as well about being ever closer to your
• 5:25
  customer, which has to be, you know, an important thing for all
• 5:29
  retailers to think about. Yeah, there's, there's so many
• 5:32
  places I want to go with that. But in terms of the, the whole
• 5:35
  marketplaces in general, anagentic and I think I was
• 5:39
  going to this was going to be 1 of topics, but we won't talk
• 5:41
  about it. But in the sense of how
• 5:42
  marketplaces are the future almost Anagentic is that sort of
• 5:47
  rather than search is some sort of agentic journey that starts
• 5:50
  and goes into that. And that's what the universal
• 5:54
  protocol is getting. And and it feels like Zalando
• 5:57
  are like it's operations, it's front end, it's supply chain.
• 6:01
  There really are yeah. And I guess it's always easier
• 6:03
  for a tech based company to start doing that.
• 6:06
  So super interesting. Fantastic opening keynote leave
• 6:09
  coming back to you. Yeah.
• 6:11
  So my second signal from the Congress is really about where
• 6:14
  growth is coming from. And across several community LED
• 6:18
  sessions, we heard from a number of different brands and
• 6:22
  businesses who were finding growth and all doing it through,
• 6:26
  no, none of them trying to serve everyone.
• 6:29
  They're all built around very clearly defined communities,
• 6:34
  whether that's undeserved needs, values, identity.
• 6:38
  They're being intentionally niche, deeply focused and
• 6:42
  staying incredibly close to their customers.
• 6:45
  And I think linked to my previous signal around AI and
• 6:49
  what Ian was just mentioning about the success that Zalander
• 6:53
  have found as well. But I think that focus around
• 6:56
  your community, that individual customer, who they are and what
• 7:00
  they want, that insights and relevance really comes to the
• 7:04
  fore. And I think we have more than
• 7:06
  ever last week about brands who aren't just selling products,
• 7:10
  who don't see themselves at all as as simply a retailer, but
• 7:14
  really is solving very specific problems for specific people,
• 7:20
  often often in collaboration with those communities and those
• 7:23
  customers. So I think that model is really
• 7:26
  interesting and coming out more and more strongly about how how
• 7:30
  retailers are really redefining who, who and what they are.
• 7:34
  Yeah, I think it sounds like I was everywhere I was, but the
• 7:38
  talk that was sort of highlights that for me was the Primark and
• 7:42
  the lady who creates access accessible clothing second.
• 7:47
  It's called unhidden. Brown hidden and and again, this
• 7:51
  was so she went through the pain of telling us all about how
• 7:56
  horrible or difficult it is, for example, for wheelchair users to
• 8:00
  buy a pair of jeans because they they need a lower bottom and a
• 8:04
  higher back and different parts of the jeans taken out.
• 8:07
  And I mean, hats off to Primark who have sort of gone in and
• 8:11
  based on what you're saying, right?
• 8:12
  They're looking at that sort of segment of shopper and the
• 8:15
  identity in helping them in and being seen and I think that's
• 8:21
  another thing that how retailers struggle about helping their
• 8:24
  customers be seen in whichever way they want to be seen.
• 8:28
  You know, fantastic. OK, Ian your.
• 8:31
  Final point, I hadn't realised the link when I was thinking
• 8:33
  about my things, but it's it's another entrepreneurial LED's
• 8:35
  German retail business which was Fresnap.
• 8:37
  We had the the founder, Torsten Feller speaking on the day after
• 8:42
  David Schneider. That's another charismatic
• 8:45
  character, sort of, you know, larger than life, actually,
• 8:48
  unlike David, but you know, he's built over 30 something years
• 8:52
  now amazing business. I mean, it's he is an
• 8:55
  entrepreneur and he's still there leading it.
• 8:58
  He has ACEO now, but that's on one level that's quite
• 9:01
  extraordinary about for an entrepreneur entrepreneur to
• 9:03
  still be with the business that he created.
• 9:05
  But, you know, but it's, they do have online, but they've got
• 9:09
  1400 stores in now 12 countries, which is really, really
• 9:12
  impressive. But he was asked about where's
• 9:15
  growth coming from for Fresnap. And more importantly, you know,
• 9:19
  our thing was the road map to 2030.
• 9:21
  What, what did he think his business was going to look like
• 9:24
  in 20-30? And he was, you know, he didn't
• 9:27
  even hesitate. He said, you know, I see our
• 9:29
  business doubling by 20-30, which is, you know, less than
• 9:33
  five years away, four years away even, which is extraordinary.
• 9:36
  But it's the way he sees that where that growth is coming
• 9:39
  from. Yes, they may go into more
• 9:41
  countries and yes, more store. But he talked about this, the,
• 9:44
  the, the approach of building an ecosystem that again, it was a
• 9:47
  theme that came out from a number of retailers that you,
• 9:51
  you know, for, for retailers and brands, they really need to stop
• 9:54
  thinking that traditional way that they've got, you know, a
• 9:57
  sort of mono track business of, you know, it's a store online
• 10:00
  that, you know, you, as Neve said, you know, you've got
• 10:02
  communities of customers. What is it they want?
• 10:04
  Where can you connect with them? And Torsten was talking about,
• 10:07
  you know, pet owners, you can reach them and by adding in a
• 10:10
  whole range of new services, as we've seen, we are say pet Pets
• 10:13
  at Home in the UK. But but the potential that
• 10:16
  Torsten was talking about for adding services, collaborations,
• 10:20
  partnerships, moving into a whole range of other, other
• 10:23
  areas, you know, and, you know, people are, you know, spending
• 10:27
  and do spend money on on their pets.
• 10:29
  And, you know, he you just go stay really, really close that
• 10:32
  he came out with a wonderful phrase that dogs behave the same
• 10:35
  all over the world. It's just their customers that
• 10:37
  behave differently. And so therefore, you really
• 10:39
  have to stay close to understand your customers.
• 10:41
  But I loved hearing in amongst all the challenges that
• 10:44
  retailers are facing, you know, there's a retailer still
• 10:47
  entrepreneurially LED who can see his business doubling in
• 10:50
  less than five years. And that's, that's the exciting
• 10:52
  part of retail that there are opportunities to to be seized
• 10:56
  upon. Yeah, I mean, just to put this
• 10:58
  into perspective, I've got a baby Cam looking at my son's
• 11:02
  tortoise because we've just got a new tortoise.
• 11:04
  We've put a light in there and he's up to keep an eye on it in
• 11:08
  case we France up. Here you go.
• 11:10
  Like, here's the thing, here's the kicker.
• 11:13
  But the whole setup cost about £20.
• 11:16
  The lamp to keep the thing warm. 150 quids on keeping him on.
• 11:22
  I so see this ecosystem around pets and so no thing.
• 11:26
  One quick question for you. I know we're doing OK on time,
• 11:29
  but very quick. The tandem CEO, he sort of
• 11:32
  became a bit of a movie star. Did you hear what he said when
• 11:36
  he said about he made a reference?
• 11:37
  He said, oh, it's politically. I don't think it was.
• 11:40
  He said, look, I'm married to my wife.
• 11:41
  I know my wife and I know my custom because the question was
• 11:44
  around AI and he was sort of batting off this.
• 11:47
  I don't need more AI in my business because I'm serving a
• 11:51
  specific customer that likes to buy underwear.
• 11:54
  Did you did you see that or hear that?
• 11:56
  I'm just curious on your thoughts.
• 11:58
  Yeah. I mean, I think I heard him.
• 12:00
  I mean, he said quite a few things that were really quite
• 12:02
  interesting. But I think he said something
• 12:04
  like, you know, we can't serve everyone.
• 12:05
  We can't serve, You know, you shouldn't even try.
• 12:08
  You shouldn't pretend. But you know, you really, Again,
• 12:10
  he talked about understanding who your customers are and
• 12:12
  serving really, really well. Yeah, you know.
• 12:15
  Yeah, yeah, yeah, yeah. So I just.
• 12:17
  Feel I was saying and know who you're going after.
• 12:20
  I think it's really good point. No, no, go ahead, Neath.
• 12:22
  Sorry. I.
• 12:23
  Cut across you? No, no, no, no.
• 12:24
  I was just agreeing. Yeah, No, I felt it was, you
• 12:28
  know what, it was the first time I saw a CEO sort of say, yeah,
• 12:31
  AI is important. I know my customer and my
• 12:33
  business is built around my customer.
• 12:35
  So unless it's serving that like the whole action journey that I
• 12:40
  went on on the on the on the trip, again, they only have and,
• 12:44
  and they have zero AI, but they have three people in the whole
• 12:47
  of Germany managing their finance business like they're in
• 12:50
  operations finance, right? Yeah.
• 12:52
  They are run centrally from Amsterdam and their model is 95%
• 12:58
  of their product is repeated with 5% variations at a local,
• 13:03
  which again from an AI tech perspective, they're like what?
• 13:06
  What is AI or tech going to streamline for us because we are
• 13:10
  so streamlined already, right. And I again, I thought they've
• 13:14
  still got a model of the future built on legacy thinking.
• 13:17
  Yeah, yeah. And I think, yeah, the action,
• 13:20
  the action CEO always says that she challenges her teams all the
• 13:23
  time. OK, so how can we do that
• 13:25
  faster, better, more efficiently all the time, as you say, within
• 13:28
  the confines of quite a limited assortment business and you
• 13:32
  know, tried and tested format, you know that the store opening
• 13:34
  programme, how can we get that ever faster and open more
• 13:37
  stores? So it's, but they're using the
• 13:39
  tool that are now available to make that happen.
• 13:42
  So you're absolutely right back. Yeah, OK on that.
• 13:45
  I'm gonna we. I've definitely done 5 or 6.
• 13:47
  I've spoken more. I'm going to keep us time.
• 13:49
  So Ian, leave. Thank you so much.
• 13:52
  It was a cracking show. Until next week, goodbye.
• 13:55
  Thanks all. Bye.
• 13:56
  Bye.