Marketing Channels & Retailing

04-02-2011

Strategic Re-Positionings Report

By:

Benjamin Guichelaar Guusje van der Heijden Marloes van Klaveren Valentine Snoeren

V&D Strategic Re-Positioning

Group 4

Executive Summary

Introduction
V&D a well-known, 120 years old department store in the Netherlands consisting of 62 different shops thoughout the country. Formerly known as Vroom & Dreesman, the concept has been a succes formula in the Netherlands for more than an era. With an assortment varying from fashion, food, non-food and multimedia, V&D attracts approximately 1.8 million visitors a week in their off-line, physical stores. V&Ds stores are located across The Netherlands and they have a broad store portfolio, ranging from small, medium and large stores. Furthermore, V&D has a second strong brand format: La Place. La Place is a food chain, not only situated within the department stores but also on top locations throughout the country. As well as V&Ds department stores, La Place has a broad portfolio, varying from La Place To Go and complete restaurants. Unfortunately, V&D had faced decreasing revenues over the last decade. Despite their attempts to renew the store formula in 2006, changing their name from Vroom & Dreesman into V&D and targetting a new, younger consumer group, the re-positioning did not lead to any significant improvement. Despite their in-store traffic and A-locations and the well-received new V&D brand by the consumer, their is something else holding V&D from making profits. Our goal is to investigate exactly what V&D has to alter in order to enhance their position in the market and to eventually finish the repositioning succesfully which had started in 2006.

Table of Content
Executive summary Introduction V&D-store profile Current Trends -Online -Offline Swot Platform Development Model Proposition Statement Key issues Problem statement Re-positioning proposition

Conclusion

V&D store profile

Vision: Being the department store of the Netherlands Mision: The mission of V&D is to be again the most respected, admired and profitable retailer in the Netherlands. Well known because of her inspiring products and her outstanding service. Concerning the mission everything is focused on 100% customer satisfaction. Marketing, HRM, assortment development and supply chain management are carefully adapted to each other, as well as making sure employees are working closely together. In this way an optimal output is created for customers, employees, suppliers and shareholders History: For more than 120 years, V&D is the most well-known department store of The Netherlands. Established in 1887 by the catholics Willem Vroom and Anton Dreesmann, the concern grew into the retailing concern that is nowadays world famous in Holland. For a long time, V&D was market leader in departmentstores in The Netherlands. Re-positioning: However, in the beginning of the 21st century, V&D faced strong competition of other upcomming warehouses such as HEMA, C&A and de 5

Bijenkorf. Their sales strategy of low and contstant prices became oldfashioned and the stores outdated. This strong competition of new entrants resulted in the end of several department stores throughout the country. V&D attempted several store format changes from 2003 onwards, however a few were actually succesfull. In 2007 V&D changed its logo and began renovating all the stores, moreover, several stores were re-opened again. The new logo and new store format were a big hit amongst the customer as well as te employees. The previous colorfull logo was replaced by a sophisticated black and white one and the one by one the stores are ought to be renovated consistent to the new image of the logo. Another improvement was the more balanced mix of V&Ds private label and new, exclusive brands that are presented in shop-in-shops. All of these improvements are still under construction since there is not yet a unity amongst all the V&D stores since the renovation process is slowed down. La Place: A strong and steady growing aspect of the V&D concern is La Place, a restaurant chain which is a part of V&D. The first La Place restaurant opened its doors in 1987 in Utrecht. Nowadays, La Place is one of the most profitable restaurant chains in The Netherlands with 200 selling points in both The Netherlands and Belgium and an annual turnover of 145 million Euros. General Overview: V&D is the most well-known food and non-food retailer of The Netherlands, with 1.8 million customers and a increasingly growing webshop (250% expected growth in 2011) Food: 9.5% growth in 2010 Non-Food: 7% growth in 2010

 Implementation of mass-media communication (smartphone application, webshop, facebook, twitter) Balanced assortment of private labels like, Essentials, Soho New York and LIV combined with shop-in-shops; Sephora, Dixxons, MEXX and Mango. The combination of food and non-food creates an experience for the customer Low and constant prices Lack of unity amongst all the department stores Formerly owned by Maxeda, acquired by Sun Capital in 2010 Not profitable for 10 years (except 2010)

Current Trends
Due to new technology and other changes in the shopping behaviour of the consumer, V&D needs to take into account significant upcoming trends in order to adapt itself to the changing market and environment. Below we have defined the most important trends recognized for offline, as well as for online marketing by V&D. Online: Mobile e-commerce Consumers feel the need to increase the use of e-commerce trough their mobile phones. The most important possibilities under consumers at the current moment are; purchasing online, searching online information about offers from the competitors and to cash in coupons online. In order to provide these mobile e-commerce possibilities V&D needs to make adjustments to their ICT system. Cloud computing will be mainstream The management of costs by ICT solutions trough the internet

providing services will be generally applied in 2011. Bear in mind the fast moving changes en seasonal related demand; cloud-computing can offer V&D exquisite opportunities Reduced influence of advertisement Nowadays the consumer decision is made by the consumer themselves but also by interacting with co-consumers. Think of discussion forums, review and assessment sites, and social media. This results in consumers that are less impressionable to advertisement, shopping adds, advice and store personnel. Form the store, consumers want to orientate on alternative purchases trough their mobile phones in order to make their final purchase decision. High value of security and compliance The protection and security of personal information like national identification numbers and credit card information is high valued by the consumers because of the increasing use of new technology. This means V&D needs to communicate and insure their customers the security and compliance of their personal customer information Offline: Decline and elimination of independent shops Today consumers expect an integrated shop-experience, that includes cross channelling of web shops and physical shops and vice versa, and the use of smart phones.

Platform Development Model

Current Situation: We described the current situation of V&D below according the the Platform Development Model (Retail&Branding, Michel van Tongeren). We divided each element into positive and negative findings. 1: Experience + V&D can benefit from the role of La Place in the stores. Combination of food and non-food attracts the customer into the store Shop-in-shops make the store dynamic and therefore creates an exprience At the moment a visit to V&D is no experience Customers do not have any expectations when

entering the store The store is to fragmentated to name it an experience V&D can benefit from the role of La Place in the stores opportunity to create experience bringing food and non-food together Focus more on in-store dynamics: new technology, interactive elements, theme2: Staff + weeks, smartphone apps Currently, approximately 11.000 employees Training possibilities available Helpfull when asked Dressed properly; easy noticable Lacking proper transfer of know-how because of hiring young temporary workforce Training possibilities are not obliged, so not often used Staff is constantly rushing, because most shops/departments are understaffed Because of the broad assortment, staff is constantly re-stocking and therefore not able to serve customers 3: Instore Communications + Introduction of new logo is perceived well by customers Prijzencircus is a well-known concept of V&D Numerous folders are spread and are available in-store Signposting is done properly. Install a shop-inshop around a well-known brand New brand-identity is not communicated well to customer

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 New logo caused some confusion amongst customers Too much themes and campaigns overlapping each other Too many folders are handed out too often; customer and staff get confused Store-map is often hidden; not visible enough 4: Visual Merchandising + No/low music in-store Goods are presented everywhere Point-of-sale material available and identical at every cashier Store windows are messy and do not attract customers inside Store windows are not lit well during night: even when store is closed, potential customers do still windowshop!! Presentation of goods is fragmentated and unclear; too broad assortment 5: Store + There are functional starting point visible. V&D is often located at top locations and the store is designed in a way that people have to walk thought the entire groundlevel in order to reach another part of town/street Because of the shelfs, that are designed in a way that people can overlook the enitre storelevel, the store seems synoptic The renovated V&D stores have a more luxurious and tidy store design in comparison to the more old-fashioned ones The La Place bakery is tempting customers to buy because of the nice smell it produces The routing throughout the stores is not clearly

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markedcustomers are not guided through the store in a specific way which often causes confusion. The design of the V&D stores in general is not very trendy and attractive for the younger group they are currently targeting V&D is lacking the implementation of light and sound affects in their stores. Music and specific colours/lights stimulates buying behaviour 6: Mass-media Commuications + V&Ds online-webshop recently boosted in terms of sales V&D uses a number of mass-media communication: television, internet, leaflets, application for smartphone, facebook, twitter The amount of leaflets is to high: customers get confused by this mass-communication V&D does not communicate the current themes and campaign on the mass-media communication channels enough The online webshop has to be closely linked to the facebook and twitter pagemake it a more 7: Location + interactive experience V&D departmentstores are always located at Alocations; city centre, easy accessible In the city center, the stores are designed so the customers have to walk through the entire ground floor in order to reach another part of town/street. This creates a high in-store traffic La Place is located at A-locations as well: trainstations, busy streets, alongside highways Because of the walk-though design, people may not see V&D as an eactual department store, but as a short-cut 12

8: Price +

Affordable prices; everyone can shop at V&D Promotions are common and promoted via leaflets The introduction of the V&D VIP-card ensures loyal customers of extra discount on their purchases Affordable, yet exclusive brands (Sephora) The V&D VIP-card cant be used at the online webshop, which is currently boostingV&D can lose those loyal customers Broad assortment available Good combination of private label and shop-inshops Overall good quality Too broad assortment: causes confusion amongst customer and staff Product range is not cohesive; no fit between products Too many bulked products If the customer isnt satisfied with his/hers purchase, they get a refund VIP-card is an exclusive service The smartphone application is an new technology service No customizing available No day-care/dog-watching or other complementary services present in the store The exclusive service of a VIP-card cannot be used via the webshop Repairs are not done by V&D

9: Assortment +

10: Service +

Below you kan find the orginal Platform Development Model in figure 1. We graded the different elements according our findings, stated in figure 2. 13

Figure 1.

Figure 2. Obvious is that the element location is graded highest, with 10 out of 10 points. This is because the stores are all located at A-locations. The elements with the lowest scores are store and mass-media communication. This is because, currently most V&D stores are messy, confusing and non-consistent. In fact, they are not a union. The massmedia campaigns V&D is currently communicating are outdated and not 14

targetting the desired customer group. Other elements that scored low service and assortment.. Our ultimate goal is to revise all those elements resulting in a proper recommendation in order to eventually increase V&Ds revenu and make them profitable again.

Proposition Statement
V&Ds attempts to alter their outdated image over the past decade didnt succeed in an optimal way. As stated above, (Platform Development Model 15

and SWOT analysis) V&Ds overall performance is lacking behind in several areas. In order to change V&Ds current stagnating performance and to increase profitability, we will first discuss the key issues that are holding down V&D at the moment. After that, the formulated problem statement will be presented, followed by our proposition statement for V&D Key Issues: We will first define the Key Issues in terms of the elements that scored relatively low in the Platform Development Model explained in chapter 4. Store: Currently, V&D departments stores do not form a unity. The difference between the already renovated stores and the other stores is too big which causes confusion. Moreover, there is no clear unity within the stores. The departments in one store are too different from one another. Mainly because of this fact, visiting V&D cannot be seen as an experience for the customers. The lack of atmosphere in the store is due to the missing music and suprise effects. Overall the store is too static, combined with a messy shelf here and there. These missing factors explain why the stimulation to purchase is low, although the in-store-traffic is relatively high. After the implementation of the new V&D logo, that was designed in order to attract a more younger target group, V&D did not live up to their promises. The interior and design of the department stores are not trendy at all and mostly attractive to housewives and older generations rather than youngsters. Another aspect V&D has to work on is the groundplan, that is not very clear at the moment. Customers are not stimulated to walk a certain route

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throught the stores which again causes confusion. Mass-media Communication: The communication channels that V&D is using at the moment are reasonably outdated. For instance, V&D comes with a new flyer every week. In this cheap-looking leaflet, V&D presents their discounted products and other promotions. This abundance of information results in promotions overlapping each other in the customers and V&Ds staff perception. Morover, the more discounts and promotions are presented, the less willingly the customer is to immediately run to the store to buy a specific discounted product, because The product will be discounted again soon. In chapter 3 we elaborated some more on the trends for the upcomming year concerning department store shopping behaviour. In the near future, customers are expected to discuss their purchases on the internet via discussion panels/forums. This development eliminates the power of onscreen advertisement and posters. In terms of V&Ds target market, it would be a wise decision to look into the effects of social media and what it can mean to create a new store identity. After having a close look to V&Ds website/webshop, we came to the conclusion that there men are somewhat left out in terms of advertisement. Same thing came across when we looked at the twiceweekly send digital newsletters. V&D does have a facebook page and twitter account, however, these are not clearly linked to the webshop. V&D should make use of the social media channels in a more optimal way in order to attract a younger target group. Service: Because of the fact that V&D is recently acquired by Sun Capital, some internal changes are inevitable. We spoke to some employees in a V&D department store and they were had concerns considering possible high employee turnover and the fact that V&D is currently hiring young,

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temporary workforce that will reduce the transfer of know-how within the company. Many stores are over-stocked and that results in a decline in service. The staff is extremely busy with re-stocking the empty shelves, and therefore has less time to actually serve the customer.

Assortment: V&D is having troubles not only to create a union in the stores, but also when it comes down to the product assortment they offer. V&D is a wharehouse where you can find nearly everything you need, however, there is so much choice that customers eventually decide not to make a choice at all. The brand and product portfolia V&D offers is extremely broad, not only in terms of quantity, but also in terms of quality. V&D offers a mix of their private label brands (Soho New York, LIV, Yes or No) combined with shop-in-shops and other famous brands (Benetton, Mexx, Mango, Sephora, Dixons, Desigual, La Senza). The combination of private label and other brands is in fact a good thing. The problem is that V&D fails to align these brands all together to create a union in their assortment. Moreover, the broad assortment causes confusion amongst employees and customers. When you ask a staff member about a certain product that is on promotion, they usually dont know what you are talkin gabout or where the product is situated on the shelf. Problem Statement: V&D currently misses the connection with their target group. They are attempting to create a fit between the stores and the customers wants, needs and desires, however V&D is lacking in several areas. Therefore, the problem statement for V&D is:

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How can V&D connects wit hits target group again in terms of image, communication, trends and brand/product cohesiveness in order to make a visite to the physical or online store an experience. In order to do so, We have created a re-positionings proposition for the retail concern in order to solve the current problem.

Re-positionings Proposition: V&D must take immediate action in the areas discussed in the key issues as stated above. The lack of service, cohesiveness within the store and the assortment and communication towards customers holds the V&D down and are causing the main problems in terms of loss making and store perception. We recommand the following changes for the retail concern: Narrow down the amount of brands in the store and make sure that all brands are coherently aligned with eachother to create a unity in the stores Attract more exclusive and unique brands to spice up the dynamics in the store. Sephora is a good example; affordable, yet exclusive since the V&D is the only retailer that has permission to distribute the brand in The Netherlands. Moreover we thought of the implementation of customizing within the stores to create suprise-effects and to attract the younger generations. (e.g. Hire a grafitti artist to the annual Schoolcampus to pimp the agendas/T-shirts) Make the store overall more appealing to the customers; create a union with clear groundplans and implement La Place more into the

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stores. (e.g. create small stands next to new spring fashion and promote small dishes in the same seasonal colours as the fashion) Moreover, re-design the entrances. Lighten up the display windows and make them attractive at night as well. Get rid of the leaflets/flyers and in stead bring out a seasonal luxurious magazine. A magazine is a better option than cheaplooking flyers for several reasons. a magazine increases the brand image the weekly flyers are confusing to customers, seasonal magazines are more synoptic and clear for both the customer as well as the employees Magazines have a broad reach; they end up in customers houses Via a magazine, V&D can create a lifestyle experience, with background stories of products, an interview with the head-designer of Mango and recipes. This lifestyle experience will eventually be brought to life in the physical store. Nice fotoshoots can contribute to that life-style experience certain hot topic. We suggest a green-week, that focuses completely on social responsibility and environmental conscious shopping behaviour. Implement the V&D signature tree in this week and create a new lifestyle experience for the customers. For example, give away recycled handbags together with the customers purchase and make this a fashion item (attract a famous green designer and let him/her sign the bags). Focus more on the social media to communicate with the younger target group. Link the website, facebook page and twitter account together to make it a more interactive experience for the digital customer. Morover, make sure that the VIP-card can be used via the website. Another application that can be implemented for smartphones as a hot-or-not app. Via this app, customers (targetgroup: teenage girls) can post pictures of their purchases/V&D-outfit to the app so Promote different theme-weeks/promotion-weeks and link them to a

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that their outfit can be ranked/liked by other girls. In this way V&D creates an online community. Increase the current service-level of the employees. Offer olbliged training-sessions in order to secure the know-how transfer within the company. Divide the targetgroup into subgroups (men, children, sports, electronic, teenagers). Send out newsletters that are targetted to the right consumer group in stead of focussing only on middle-aged women.

Conclusion
Now that we have put our finger on the sour spots, we know exactly what V&D has to do in order to alter their current instable position in the market. The problem that V&D faces is not only a decrease of revenue over the past decade, the store image of the retail chain has declined as well. In fact, you can call it a viscious circle V&D is in at the moment. V&D is the biggest, yet only loss-making department store in The Netherlands. If it werent for the stable and steady growing La Place, V&D 21

would most likely be bankrupt by now. Alongside with the internal stagnating performance of V&D, the external financial crisis was not beneficial for the concern at all. However, now the crisis is comming to its end, it creates opportunities for V&D. Customers are willing to spend more on luxury items again and V&D can definately take advantage of that tendency. V&D has to focus on the experience they are giving their customers. The magazine, theme-weeks and social media interaction are all aspects that have to be implemented in the stores in order to actuallu create that lifestyle experience the customer desires. Another important issue that needs attention is the overall cohesiveness and unity that has to become the rule and not an exception. V&D has to align their new image which fits to their logo with the assortment they are offering. In our opinion, V&D has all opportunities to create that lifestyle-experience and cohesiveness within their stores, as long as they are consistent, focussed and alert.

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