Investment

Can family capital revive traditional retail?

Bricks and mortar stores in Europe have been clobbered, yet again by the pandemic, with UK-based stationer, Paperchase, the latest to collapse. But those family businesses which can afford their leases, and freeholds, are keen to find ways to improve their chances of recovery. 

The newest initiative is UK-based NearSt which helps stores feed Google listings of their inventory so refugees from Amazon will know where they can shop locally. 

Grosvenor Group, the Duke of Westminster’s family office, has supplied seed funding to NearSt along with venture capitalists Moscar Capital and James Cox’s YYX Capital, plus True Global, led by Swedish business angel Dušan Stojanović.

More than ever, luxury goods companies are seeking new ways to connect with their customers

NearSt is run by Max Kreijn and Nick Brackenbury. It has now raised a total of £5.2 million and added Facebook to its data distribution service. Agents like the initiative but say an improvement in customer service will be more crucial to the future of the High Street/Main Street, following recent cost-cutting.  

Morritz Sitte, top-rated European equity manager at Baillie Gifford says he has noticed the growing sophistication of local suppliers in using e-commerce to improve their offer.  Communities, such as Artisanry, representing the crafts movement, are setting up their own trading platforms. People will pay a premium for local products although Amazon remains tough competition on a broader front. 

Financial support from landlords is limited compared to the US. But future rents will come from a share of turnover, rather than a fixed rent, aiding the future survival of tenants.

3D Printing could become another way to use local premises to measure, model and make clothes. 

Around $600 million was raised for 3D ventures in the year to September, according to Crunchbase. Very little was invested in clothing.  But there is no reason why 3D Printers can’t appear in local stores, at some point, allowing them to double up as personal advisers and manufacturers.

It could also be a way for large distributors to “go local” through an online connection to customise their offer. For the record, Reebok is already using 3D Printing to improve the quality of its footwear.

3D Printing pioneers include Tailors Mark of Australia, which makes men’s clothing.   According to TM co-founder Dave McLaughlin: “We believe eventually there will be a world with no sizes, that’s our vision for our group.”

Baillie Gifford’s Morritz has noticed that fashion chains are finding increasingly effective ways to bond with their customers by applauding their individuality online.

He cites eye-catching narratives by Adidas, the sports clothing supplier and Gucci, owned by Kering, the French multinational run by Francois-Henri Pinault. 

Consultant Deloitte agrees: “More than ever, luxury goods companies are seeking new ways to connect with their customers.” 

The likes of Burberry, have used Twitch and YouTube streaming for fashion shows. Others are seeking to achieve a sustainable approach.  

Stefan Persson’s family, which owns H&M, and the Hong Kong Research Institute of Textiles and Apparel, recently joined forces to take old clothes and return them to customers, entirely recycled into new items. This kind of “circular economy” is extremely popular with ESG supporters. 

We often forget how bricks and mortar can add to customer experiences. Individuals throng into Apple stores because they showcase items which are new and more exciting. Apple’s e-commerce offering is effectively driving customers backwards and forwards, between stores and the internet.  

The appeal of an exclusive fashion store will remain intact when the pandemic is over, and individuals seek advice from retail assistants. 

Inditex, owner of the Zara and Massimo Dutti fashion chains controlled by the Ortega family, is a tech-driven fashion, expanding by operating tight supply lines and listening to its customers. Store sales fell in the nine months to October but gross margins improved 1.1% to 59.3%. This means Inditex can afford to remain committed to: “the key strategic pillars of store and online integration, digitalisation and sustainability.” 

Fashion chain Zalando is 21% owned by Kinnevik, backed by Sweden’s Stenbeck, Klingspor and von Horn families. 

It has vigorously promoted its sense of style, online, and recently confirmed it wanted to supply German and Dutch store outlets through its Connected Retail initiative. If you applaud individuals, you need to be absolutely sure your offer can live up to its hype. In every respect. 

 

   

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