Kering looks to build a digital culture
Kering will end its joint venture with YNAP in 2020. The latter has operated e-commerce for most of the brands of the group, except Gucci, since 2012. Grégory Boutté will lead the process of taking back direct control of e-commerce operations. One major challenge for the group is that e-commerce sales (cash outflows) currently represent just 10 percent to the group’s total revenue but are expected to increase significantly over the coming years. The former vice President of eBay, recruited by Kering at the end of 2017, has arrived to optimise the group’s digital integration. Boutté shared the vision with the press and investors for the first time at the end of last week. E-commerce is only the tip of the iceberg when it comes to the business’ digital innovation plans. Beyond the key business transition with YNAP, Kering will change its actual business model for digital. Kering intends to control this commerce itself moving forward and, perhaps even more importantly in today’s world, access to data.
“In numerous sectors, digital disruption is real. There’s no doubt about it and there will probably be no way of going back,” said Boutté. “It has arrived in the luxury sector to a somewhat different degree. “I think we have been fortunate to have an industry where brands make both unique products and control their distribution. We see this as an opportunity. The luxury sector is used to building luxury experiences for its customers. I think that technology can help luxury businesses to go further.”
Data collected is consolidated at the group level and brands to not have direct access to information concerning other labels. Projects can however be conducted according to individual brand’s needs. If these projects prove relevant to other entities, they can be deployed on a larger scale. The digital director has also put forward initiatives which could constitute small cultural revolutions for the various sectors of the group on how digital must be made a part of the business empire which has a turnover of over €13.6 billion.
Boutté has built up his team from four people upon his arrival at Kering to over 80 people who work on several different areas. “We realise that digital based professions are very different to what we have become used to in luxury. We recruit world-class experts across all digital horizons including data science, e-commerce, and CRM etc. With brands, we create platforms that are operated at the group level. We allow brands to interact with them to create tools that allow them to increase their performance and respond to their specific opportunities. We are already implementing some of these actions.”
A data factory at the heart of the group
To deliver the best solutions, the team accumulates the data from the group’s different brands and collects it on one network and also partners with suppliers whenever possible. Then the data is organised and analysed. This database and its utilisation allows the business to create better tools and it uses artificial intelligence for this.
“Artificial intelligence is truly important for businesses like ours. I think that Kering is in a unique position in the luxury industry. The reason is that it’s a big company. That means we have a lot of data,” said Boutté.
“And we are working on using this data to truly understand our customers and to offer them an incredible personalised experience. The more data we have, the more precise our algorithm is and the better the experience is. The other thing is that it should lead us to excellence in terms of our operations.”
The number of possibilities is at once exciting and dizzying because, although it is working with historical structures, the organisation that Boutté has put in place is looking to create new ways of working. Of course Kering does not want to replace its existing trades. These new tools are designed to accompany professionals in their work. The group has developed an application for sales personnel called Luce. The application is available in store and allows the retailer to be close to the customer by allowing for direct access to the brand’s inventory as well as the customer’s history. The digital team estimates the sales from its VIP customers have risen by an average of between 15 and 20 percent thanks to the use of this application. Another application which uses compiled data is its after-sales service. The group has started a new, centralised customer response service which uses customer history and brand information. The first of these centres opened on Cherche-midi street in Paris in 2017. After being tested, the concept was deployed to the US was also launched in the Asia Pacific zone this year.
AI to optimise inventory allocation
The area upon which the impact of AI could be major, according to Boutté, is that of planning. The development of a new algorithm could change the business’ practices. “We have teams of planning specialists who constantly forecast sales figures and evaluate how they can allocate products between regional warehouses and store inventories,” said Boutté.
“This is very important because, if it is not done well, you risk stores being out of stock of products for the customers. We use data at the boutique level for each product for renewals as well as keeping up to date. This can help the planning team. We have been working on creating an algorithm for several months. From the most recent data, we have seen an increase of over 20 percent in our forecasts compared to the use of our existing tools.”
Beta testing of the application has already been carried out and it is due to launch in July. It will first focus on a product category that is very important for the European market. Then, if the testing goes well, it will be deployed for different product categories in different markets before finally being applied to other brands.
The approach is therefore operational and the organisation of the teams is kept flexible in order to meet the challenges of a changing global economy, one in which the luxury sector is not known for being the most up-to-date. The team is thus working on new models such as leasing and second-hand, large modifications that could intrinsically change production such as biometric development and the integration of RFID for logistics.
One of the main projects is to identify technologies that could be game changers such as blockchain or voice technology. “We are looking into if it is significant to us and how it would affect the luxury market. If that is the case, we will create pilot projects with brands,” said Boutté.
“Beyond these points, we also have people who work to identify emerging trends in terms of models. We test this by working with brands. We train the teams to have a “test and learn” approach which is very current. Each time that we develop a project, we reach out to new people in the technical organisation, as well as in logistics, sales, and finance. This brings our approach closer to that of digital businesses.”
There are numerous challenges to change mentalities and to circulate information and collaborative work is part of this new practice. In terms of CRM, the group uses the expertise of Salesforce and also has links with several technology companies including Apple for developing new applications. Boutté said that he is even open to work with LVMH on blockchain with the Aura project, if it is made open-source. More than a change of culture, this represents a new paradigm.
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