Latest / The Retail Podcast / IKEA vs. Puma: How APAC Giants are Solving the Retail Supply Chain Crisis

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IKEA vs. Puma: How APAC Giants are Solving the Retail Supply Chain Crisis · The Retail Podcast

• 0:00
  Hi, I'm Reef Quayle. I'm managing Director of NRF
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  Retail's big show Asia Pacific. And this is Five Things Friday
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  APEC Edition. Hello.
• 0:10
  Hello everyone.
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  How are you? Back.
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  We're back. It feels like it's New York a
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  whole time ago. Was only two weeks ago.
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  I'm going to, I'm going to China tomorrow.
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  I'm like. So fantastic.
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  How are you both? We're good, we're good.
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  I'm excited to talk about what I want to share today.
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  Yeah, you. And so listen, let's just get
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  straight into it, you. And why don't we start with you?
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  OK. I want to talk about the Lunar
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  New Year, Chinese New Year dilemma paradox for retailers.
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  You know how retailers we're always deciding on what we're
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  buying for Lunar New Year like months ahead.
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  We put in our orders very early on what trends and decide only
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  weeks before. So one very clear conversation
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  that we keep still having is about the Mandarin orange
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  trends. If you pull up this picture that
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  I kept taking and I'm like rolling my eyes out all the time
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  is that the trends for Mandarin orange is only clear like after
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  it's too late. So we buy way earlier.
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  Decisions are locked in, orders are placed months ahead.
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  We look at great, we look at origin, we look at forecasted
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  demand, we look at all last year's consumer preference and
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  then closer to Chinese senior like right now, right now mostly
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  through social chatter. And then they will talk about
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  attributes like sweetness, thin skin versus thick skin, low
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  seeds or no seeds, Is it easier to peel?
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  What are the freshness like? What is the gift worthy
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  appearance? So this gap really is how
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  retailer is not noticing the pattern recognition, right?
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  We're not winning it reading the attributes, we're not looking at
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  how repeated praise, repeated complaints.
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  We're not looking at how customers are sending us clear
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  demand patterns. But we are really not being a
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  lot more productive in terms of how we are buying.
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  So I think this needs to change somewhere along the line.
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  We need to really think about how we are looking at the what
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  is on the shelf stories, how we rebundling, for example, very
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  quickly. How are we it's tiring during
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  the Chinese New Year season, you know the the amount of
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  replenishment we have to make just on Mandarin oranges is
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  crazy. But if the the customers not buy
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  thing then that is a business problem already.
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  So this is something that AITA needs to solve.
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  What do you, how do you, how are you listing that?
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  What are you listing for? How do you how are you doing
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  that listing? So we, we have to buy, we have
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  to buy all this way earlier, right?
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  So that means we really can't change the way we are looking at
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  oranges, especially when it's fresh produce that comes in like
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  weeks ahead. So that's that's really
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  something that the whole world in terms of value chain needs to
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  reconsider and need to rethink how we are selling as more and
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  more people can buy direct from e-commerce.
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  So how is the physical store going to fight is a big question
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  mark. I understand, I understand.
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  Awesome. Interesting reef, why don't we
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  move to you next? Cool.
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  So mine's not about China's, do you?
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  But it's still about China and Japan for that matter.
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  So one of the things that struck me in the media in the last few
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  days is IKEA's strange of strategy.
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  So the IKEA are not withdrawing from Japan and China, but
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  they're closing stores. So they're also reopening
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  stores, but they're closing a lot of stores.
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  So in, in China, IKEA closed something like 7 major stores.
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  Wow. And these are, you know, large
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  format stores, the big in, in, in, in major cities and
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  secondary cities, So places like Nantong and Harbin, but they're
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  really shifting. What we're seeing is obviously
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  we're seeing weak consumer demand in China.
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  It's a, it's a sluggish market at the moment.
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  And so it's slower home furnishing buying and that type
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  of thing. But what we're finding is that
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  IKEA is repositioning. So they're actually opening
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  smaller urban focus stores in places like Beijing and Shenzhen
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  over the next two years. So they're and they're really
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  focusing on that digital Omni channel piece, which is it's
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  something that's not what's super strong in China.
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  China is a really digital format place.
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  It's less so around the Omni. In Japan, it's the opposite.
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  So in Shinjuku, for example, and and Harajuku, they've closed two
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  city formats are the smaller format, but then they're
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  doubling down South in Shibuya, their main flagship.
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  They're investing in that and they're actually opening,
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  opening a large store around the region.
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  So 2 markets side by side, but opposite strategies really for
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  China, they're not abandoning the market.
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  They're, they're pulling backs from large underperforming
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  stores and recalibrating towards smaller urban stores and digital
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  sales. Whereas in Japan that it's,
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  it's, they're not exiting either, but they're, they're
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  seeing, they want fewer and, and more effective touch points, so
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  more larger stores. So that's amazing that within
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  China and Japan, we have two really disparate strategies for
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  retail, for our, for our, for IKEA, they're definitely not
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  with, but they're completely calibrating for the market.
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  I mean, my assumption would be 1 costing and I think you know how
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  it is more expensive in Shizuku for example and how actually the
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  way Japanese shop really they do they don't mind large, large
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  format that much, especially if it's in a neighbourhood space
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  versus China that is very driven on e-commerce.
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  So just show them what's necessary then they will just do
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  it online, right. And then so they don't really so
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  be pace. Yeah, yeah, that's how and.
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  Then you I think you're right. I think it's the China play is
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  very much omniplay. It's a digital and physical
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  store. Yeah, why don't we come back to
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  you for your second one? So I want to talk a little bit
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  about my wrap of NRF New York. And I think everywhere you turn
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  in NRF New York, you only see this work agent agentic, you
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  know. So I guess the take away really
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  is retailer really need to think about if you're invisible to the
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  agents and you really are invisible to the customers.
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  Now it is looking like the way the way I'm seeing how NRF
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  position is it as if like agents is the new front door shopping.
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  I agents is going to interpret the intent of the customers.
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  They're going to compare options for the customers and then they
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  will trigger actions, you know, whether it's putting in the cart
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  or or ordering it or tell me when you want this to be
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  ordered, when the price hits this, etcetera, etcetera.
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  But then at the same time, I think earlier this month or late
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  last month and then there is this huge conversation about
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  mocked book. You know how this social media
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  platform that is created for agents where all the agents come
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  together and talk about and allowed in the space.
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  I think a lot of really strange conversation in the corridors a
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  lot. You see, that's what we cannot
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  even do agents. It's really dangerous.
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  We don't know what they're up to and what if our information gets
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  exchanged. And I'm like, please understand
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  what multiple really is and what the conversation amongst agents.
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  It's interesting, but that is not the most risky factor of not
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  deploying agents. So not understanding what agents
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  can do for your business because that's how consumers behaviour
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  is going to move towards too. And then if you're not fixing
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  what fundamentally needs to be fixed at the retailers and
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  you're first going to be completely left behind this
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  conversation. And second, you can't even find
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  your way through much later when everyone is already on it.
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  So I remember Reef talking about how in June last year we were
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  talking about AI and then when we finished the NRF APAC
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  conversation, it was all agents. Like like almost weeks.
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  It became agents, it was AI, and then it became agents, right?
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  And now? I felt like we missed it, like
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  the whole thing we we talked about generated by the whole
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  time and then then all of a sudden 4 weeks later the whole
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  conversation just shifted. Yeah, just like that.
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  And so it's also the same thing, the same conversation about how
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  I felt, right? Like we were talking about
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  agents all the time. And then now as I walk down the
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  corridor of my fellow retailers and they were all like, did you
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  read about multiple? You know, did you understand
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  that? You know, it just don't need
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  human anymore. We can't get now, we have to
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  stop it. Stop it can't stop that.
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  You know you're completely not getting the right story.
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  Moving on, back to you Reef, I think, right?
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  So I'm going back to my passion points.
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  I long time ago I used to work in advertising and one of my
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  favourite categories was sportswear.
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  I worked on Nike, I worked on Adidas for the Rugby World Cup I
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  worked on, I've worked on Puma as well.
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  And what was what we've seen something happen that's been
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  transformational, I think in the category.
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  So Anta China, for example, are two big are two big Sportsweb
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  brands leaning named after The Olympian.
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  He's his own brand. And then the other one is Anta
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  Anta Sport. So these are the Chinese
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  homegrown brands. OK, now Anta have just bought
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  almost 30% of humour. Wow, right.
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  So Puma is an iconic ground. They already they already own
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  feeler, for example, but Puma is a big one.
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  So in terms of this, what does it mean?
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  It means that this is this breaks a a century of
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  Eurocentric Chinese of eccentric sportswek in the category.
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  It means that they are the largest single shareholder in
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  humour. They'll take a board seat.
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  They don't, they don't from what they've signalled in media and
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  their releases, they haven't signalled they're going to buy
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  the whole lot. But Puma has been
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  underperforming. But this is a this is an
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  opportunity to recapitalize a brand that's been struggling and
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  put in some Chinese capital and some operational muscle that
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  will can outplay both the international brands like Adidas
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  and Nike, but also play tough at home.
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  Yeah, because obviously China is a big market.
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  It's, it's, it's, but it's, it's early to say what will mean.
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  It's, it's, it's a statement. And right now I think that we
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  should be watching Nike and Adidas's stock because this is
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  the shift in, this is a global shift and it could accelerate
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  the shift in the sportswear brand.
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  We could see Puma reinventing itself and in our backyard for
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  Asia Pacific. You know, this is something that
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  you know, you put that operational grunt and sourcing
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  behind it from a Chinese perspective and you you could,
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  this could be a, an another level, Yeah, another league in
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  terms of product. I love it.
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  I think yeah, the sports fashion apparel brands have been on
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  trend for a while. And if you've not been crushing
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  it while you've been like the one of the key drivers of
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  growth, it's interesting and also it gives Puma fantastic
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  access to the APEC market, right.
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  And that's where growth is rather than in Europe.
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  OK, cool. So I'll I'll close off.
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  I want I was shocked. Obviously I had so much fun at
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  NRF, came back and went to Abu Dhabi to go to shop Talk Lutz,
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  which this was its first. How was it?
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  It was really good. So I should have put some
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  pictures of Short Talk Lux, but it was at the Emirates Palace in
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  Abu Dhabi on the beach. So in my mind, eyes, very iconic
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  type environment where you're listening to talks as the sun is
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  setting on the beach and it's beautiful weather in the winter,
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  in our winter. So I thought it was a fantastic
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  place. I thought it did really well.
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  They had a diverse group of speakers from all of the major
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  fashion houses or maisons. They had Vera Wang doing the
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  keynote and and that was fantastic.
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  But the one thing that no one really talked about, and I guess
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  who would talk about it was the problem that I see about, you
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  know, what's the everyone mentioned that luxury's been
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  having a bad time over the last couple of years.
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  And it's it's been declining. And specifically in Europe, the
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  powerhouses that we've got over here, they've been declining.
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  But no one really sort of said the quiet bit out loud, which in
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  my mind this is, you know, it's an uncomfortable truth.
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  But ultimately the product itself, thanks to TikTok, thanks
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  to social media, leather bags are being dissected by
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  influencers and they're talking about the Leathers.
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  They're talking about what part of the animal did it come from?
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  How much did it cost to make? And consumers are no longer
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  especially this new generation, they're not low, not no longer
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  just going to be sold to from a marketing perspective,
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  authenticity of product means that that quality or value that
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  you're saying actually has to be there.
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  And that's not to say that Chinese products are not at that
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  calibre because 100% they are. The craftsmanship and everything
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  else is there. But you can't sort of ship it to
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  Europe just to stick a label on to then charge a little bit
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  more. And I think that's what
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  consumers are waking up to. And I think it would have been
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  good to that in my mind would have been the guidance that I
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  would have had as a talk, you know, talk about the product.
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  What are you doing from a product perspective?
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  And I would, I would say, I would say in that instance,
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  you'd we sort of it links nicely back to what you were saying.
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  Luxury brands have lost the rational narrative around their
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  products. And what I mean by that is
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  you're obviously saying the consumers dissecting the
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  leather, the brat, the bag or whatever, right?
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  Because the brands aren't putting this conversation to
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  market. And you know what these
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  consumers who were discovering and making these discoveries,
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  other people's content, which is, are not the brands are doing
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  it through agents because the agents have gone in the absence
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  of content, we'll take the best available and guess what?
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  It's not by, you know, one of the luxury, it's actually by the
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  influencer who has been backed into being able to buy one of
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  these expensive band bags, pull it apart and reveal the secret,
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  The Dirty little secret of luxury brands.
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  And it and it makes it that all of a sudden there's lesson
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  features. Yeah.
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  And that's how the and that's and the agent to learning in
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  that environment because of the absence of content that's been
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  rational kind of it's been put out by the brands.
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  Yeah, I guess we're not talking about it.
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  It's definitely a problem, yeah. I think it's, you know, it's
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  putting your head in the sand and saying someone's going to
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  sort it out. It won't be us we've got.
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  The agents, well, the agents are sorting it out now.
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  Yeah, I think it'll be the great equaliser and I met some
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  wonderful and I've met some the other people that I met that I
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  met a lot of AIPAC startup brands, like there was an
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  Australian sock company who make hygienic like with alternative
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  material socks. They were on your Australian
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  Shark Tank, So I'm going to bring them onto the show.
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  So I did meet a lot of young brands who are aspirational.
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  You know, their pricing is aspirational.
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  They're not luxury yet, but that was nice to see as well in terms
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  of APEC brands flying across to to do that whole sort of cause.
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  Shop Talks quite famous for its table talks.
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  That was. Yeah, yeah, there was nice and.
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  It would have been with the combination of the hosted buyer
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  and a beautiful destination. I can see why it would be
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  compelling. Yeah.
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  So anyway that that's it our our first show.
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  What is it is our first show of the year, right?
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  Yeah, we've been, you know, we have been, we have been pretty
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  good. Listen, we're back into the slow
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  into the swing. Thanks.
• 14:28
  Thank you so much and I look forward to seeing you both.
• 14:31
  Next week, see you again soon. Thank.
• 14:34
  You bye.