Apr 23, 2021
International growth continues to be the order of the day at Desigual. Coinciding with the label’s latest strategic opening in Japan, a 217-squarre-meter flagship featuring a renewed interiors concept in Osaka, FashionNetwork.com has interviewed Desigual’s Jordi Balsells, channel strategy director, and David Sgreccia, geographies business director. The conversation centred on Desigual’s projects in Japan – the label’s fifth market worldwide, with a 5% share of revenue and 130 employees – as well as on the recovery from the pandemic’s impact and the Spanish group’s future projects.
FashionNetwork.com: How has the pandemic affected business in Asia and, specifically, Japan?
Jordi Balsells: Asia was the first market to be hit, especially China, but it was also the first to start recovering. The impact on the retail business was noticeable, although now everything is returning to some kind of normality.
David Sgreccia: If we talk about the market and our customers, we can say that Japanese consumers are very loyal to the brand. The premium positioning we have in the country is distinctive. Japanese customers are sensitive to trends and go for more daring looks, a trait that has always fitted perfectly with the character of Desigual, during the pandemic too.
JB: [Japan] is a market where we have a large percentage of local customers. Even so, mobility has been affected. Even in terms of internal tourism, there were locations where footfall was especially hard hit. On the other hand, as has happened in other countries, the growth of our online business has been significant.
FNW: What adjustments did Desigual have to make to its expansion strategy in Asia and Japan?
JB: From a sourcing point of view, we have been serving Japan from Hong Kong. But only a few months ago, we opened a warehouse in Tokyo. It is a strategic undertaking for Desigual in this market, with the aim of improving our online business as a whole, especially the customer experience, and shortening delivery times. Our goals for this market remain the same. They haven’t been greatly impinged, things have progressed with a degree of normality.
FNW: And globally in Asia?
JB: We have a robust digital strategy, striking partnerships with the region’s leading marketplaces. We have a well-established presence in Singapore and in other markets we operate through partners, via franchised stores, multibrand retailers and department stores. This is the strategy we want to continue with.
FNW: What percentage of your revenue does the Japanese market account for?
DS: It currently accounts for 5%, and it’s Desigual’s fifth-largest market. Spain accounts for 20% of revenue and Germany for 12%, for example.
FNW: Is Japan set to remain the fifth market in future or, at some point, will it overtake the European countries?
JB: In the short term, it won’t. [Japan] is a market where we have been growing for years, and we are expanding in a buoyant way, with an important presence in terms of staff. We have a lot of confidence in [this market] and it will remain our focus, because our results validate this. We do not believe that, from a revenue point of view, it will become our fourth-largest market, because the current top four are very important for [Desigual], but it will continue to grow.
FNW: How is business going in the first months of the year in Europe, which is so conditioned by restrictions at the moment?
JB: Right now, there are restrictions everywhere. Our stores are closed in several markets, and even those that are open have had to adopt a number of measures. For example, in the case of Germany, some shopping malls ask [customers] for a negative PCR test, and this means that footfall is actually very limited. In this respect, about half of our retail network is currently closed. The situation is changing week by week as new measures are introduced, and this requires a lot of flexibility. That is how we are dealing with the situation, constantly adapting to the status of each market.
FNW: How do you think consumption will adjust when these restrictions will be loosened, or when you’ll be able to reopen stores?
JB: People are looking forward to going out and enjoying themselves. Whether because of capacity limitations or health protection measures, it’s not the best time to enjoy a great customer experience, but the mood is positive as restrictions are lifted. We are happy and optimistic about the future. The desire to buy will come back, and will be compatible with a very powerful online channel. For us, the winning formula for the future is an omni-channel approach, allowing customers to always decide what they want, where they want it and how they want it.
DS: We are seeing differences among countries because of their different cultures. Right now, in Germany it is very difficult to access stores while in Italy it is much simpler, and we are seeing a super positive turnover. We believe that in two months, as vaccinations progress, we will be able to better understand how the second part of the year will unfold.
JB: We have some experience of markets with high vaccination rates, as is the case with Israel. There we operate through a franchised partner and our performance is satisfactory, the figures are very good. It encourages us to think that things will move forward.
FNW: What role will brick-and-mortar stores play in the future of Desigual?
JB: We are currently engaged in deploying a new store model. In two years, all of our stores will have been renovated, adopting our new, high-quality concept. It is a genuine upgrade for the brand, with products becoming extremely prominent, and a very easy, inspiring in-store journey.
DS: We believe that brick-and-mortar stores will still play a significant role in the omni-channel experience we are keen to provide for our customers. One of our objectives is to increase and improve the one-on-one experience.
FNW: And what about digitalisation?
JB: We have a broad view of digitalisation, and we are working on it from different angles. We are focused on developing Desigual.com and on expanding it in 100 countries. We are also working with local marketplaces such as TMall in China, Zozo in Japan, Dafiti in Latin America and Zalando in Europe.
FNW: Since the start of the pandemic, many companies have accelerated or introduced initiatives relating to the second-hand market, or the opening of their e-shops to a multibrand format. Are these issues featured in Desigual’s upcoming projects?
JB: Times of change are times of opportunity, and for exploring new business models. In this sense, we are in the exploration phase, open to and working on alternative models. But for the time being we haven’t defined them fully, and we have not taken any decision. We are analysing the situation.
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