El Palacio de Hierro CEO speaks on the future of department stores
What: Juan Carlos Escribano, CEO of El Palacio de Hierro, shares his experiences as Spanish director for the Mexican luxury department store and how this has influenced his views on the future success of this retail format.
Why it is important: As crisis looms over many countries, the effects will vary from location to location based on their respective interdependence, according to the CEO.
The interview demonstrated Escribano’s perceived importance of specialization and scale along with the ability to execute projects and improvise when facing unexpected issues. He cites the recent EPH Coyoacán store as an example of execution and improvisation as there were two earthquakes that damaged the AC and elevators one week before the opening, yet the department store still managed to fix everything before the deadline.
International experience and age have also taught him that a strong team is more important than being individualistic. According to Escribano, fashion retail is both a mathematical and scientific execution through study, Excel and programming applications combined with an uncanny eye for operations, something that cannot be learned in school. Both factors contribute to what can be described as magical success for department stores.
For years the El Palacio de Hierro CEO has been warning of the death of department stores. His reasoning highlights the elimination of home, technology, and F&B offerings; the disappearance of which has caused department stores to turn into fashion stores. On top of this, many department stores have over-expanded by opening too many locations which Escribano believes leads to dilution and a lack of consistent standards. This is a critical point to miss when clients are looking for a perfect service that encourages them to return and spend time in-store, or even online. As well, other luxury department stores now have more outlet locations than their full-priced stores which confuses the main mission of the company.
Department stores can be competitive by having anything from a gym to a barber shop to keep people in the store and having a great time. Of course, Escribano puts a caveat on this advice by noting that a department store can’t be everything and that the company must choose in which area they will specialize to dominate that particular niche (i.e. cheapest, biggest, etc.).
His advice for all companies is that ownership and management do not mix.