Göran Bille, acting president and CEO of KappAhl, about the past fiscal year 2017/2018.
A CHALLENGING YEAR
How was the year?
Quite clearly it has been a challenging year. There are things we have done well and things that did not work as we wanted, but in total we are not satisfied with the year’s performance. The tough competition and effects of fewer visits to stores impacted our sales negatively during the year.
What do you think you did well?
Childrenswear and above all Newbie have been our grains of gold during the year. Newbie has landed well in the United Kingdom and we see that it is also going well for Newbie in our other sales markets. In childrenswear we also concentrated on developing brands such as Rückie, Woxo 720° and Lab Industries, which has meant a strengthening of our offer. The Positive performance in Poland is also a cause for celebration. KappAhl has been on the market for a long time and we have now adapted our strategy to more local conditions, which has been successful both regarding price strategy and the offer in general. It is also gratifying that we are moving towards our ambitious sustainability objectives.
What did not work out as you wanted?
Above all our campaign and price strategy focusing on full price sales. The industry has worked intensively on campaigns during the year, which meant that we got out of step and had to go back to the more campaign-intensive strategy we had before. Nor are we satisfied with the outcome of our endeavours to keep inventory levels down in stores. This meant shortages of some goods in stores, mainly the womenswear range in seasonal transitions, with weakening sales as a result.
What is the approach to expanding Newbie?
We have created the embryo of a fantastic brand and we are caring for it like a baby. We want to continue the roll-out at a sensible pace and position ourselves in the United Kingdom in particular. It is terrific that Newbie has received so much attention and won several prizes during the year. The launch of Newbie as a stand-alone brand has been a fortunate move and we want to continue further development of the range in a similar way in the future.
What are the greatest challenges in the rest of the world?
The simple answer is digitalisation. That is a major transition – not just from an eCommerce perspective, but also in terms of communication and design of physical stores through omnichannel solutions and similar. We can see, just like our colleagues in the industry, that traffic to physical stores is declining and this is partly due to increasing eCommerce. Other important challenges are to contribute to effective solutions for a sustainable and circular fashion industry, for example as regards fair wages and sustainable technologies etc.
What impact does digitalisation have on KappAhl?
Of course it has a great impact, on everything from our communication to how we organise ourselves internally. Sales in Shop Online have increased by 38 per cent during the year and our omnichannel solutions such as Click&Collect and Shop Online in Store have been successful. At the same time it is important to remember that 95 per cent of our sales are still made in physical stores. In the past year we have put a lot of effort into Shop Online. This was necessary and important to us, but in the coming year we will focus more on our physical stores.
How will you do that?
It is an ongoing task to adapt the store network and this applies to store space, location and rent levels to optimise sales per square metre in relation to traffic to the store. During the year we upgraded 23 KappAhl stores and among these we reduced store space in eleven stores. That work will continue in coming years. In the future we also want to allow stores to take greater responsibility as regards the customer meeting. I believe that in the future we will work in a more decentralised way with more locally adapted stores and this will also strengthen our offer. We also want to help the stores become more efficient so that they have more time for the customer meeting.
How will you tackle the inventory levels?
We must constantly work a bit smarter and ensure that the goods are where they meet the customer. In the coming winter we will implement a major logistics project to create a common inventory for our physical stores and Shop Online. This is a very important step towards managing our inventory levels, but also to increase the efficiency of the distribution centre.
What are you doing to be the customer’s first choice?
KappAhl has been strong in the market for 65 years. Our focus is on the customer and product and we will intensify this work in the future. It is all about our offer and our meeting with the customer, regardless of channel. Developing the analysis of our different targets groups and how we best meet them is an important part of this. We work a lot on developing an attractive, more sustainable range and giving it a better balance as well as a better expression. During the year we have changed our design language in campaigns. I think our autumn campaign “My Everyday Essentials” with Lena Olin and Bahar Pars is a good example of this.
How do you work on sustainability at KappAhl today?
Well-developed and integrated sustainability work is also important for KappAhl’s long-term success. The work in this area is based on our sustainability strategy Responsible Fashion, which is part of our business plan, which we have rolled out in the organisation during the year. The strategy captures important questions; anything from sustainable materials and production processes to human rights and wages in the production countries and on to textile collecting and circular economy. To create participation and increase knowledge of our sustainability work in the organisation, all coworkers have undergone training in “The sustainable customer meeting” during the year, which was much appreciated.
What progress have you made in the area during the year?
We are proud to have increased the percentage of sustainability labelled fashion from 53 to 57 per cent. We have also implemented our scorecard for sustainable design in our assortment and design department. In May we joined the Sustainable Apparel Coalition, where we act to harmonise our working methods with other actors in the fashion industry to create increased transparency and a faster rate of development of sustainable working methods. Together with our customers we also reduced sales of plastic bags by 70 per cent during the year as part of One Bag Habit. It’s impressive!
There is some shifting of production closer to the sales countries, what are your thoughts on that?
We are exploring how to locate more production closer to our sales markets to increase flexibility in our supply chain.
Working with suppliers close to sales markets has several advantages: above all we can reduce delivery times, but also improve our inventory levels by working with suppliers who themselves can store fabrics and finished goods close to our sales markets. Today it is usually more advantageous to be able to submit certain orders later in the season, albeit at a slightly higher purchase price, since it reduces the risk of price reductions.
Where is KappAhl headed as a group?
There is incredibly great commitment among our coworkers to make KappAhl the best company for customers, shareholders and coworkers. During the year we have taken several steps to develop KappAhl, but I would like the next President to be the one to map the way forward!