The city of Paris is a spectacular reminder that some of the best things never change. The Arc de Triomphe still stands majestically at the western end of the Champs-Élysées, while the quality of French cuisine remains in excellent shape and unaffected by recession or the whims of culinary fads. However, serious change is afoot for the world’s retailers and marketers, and it’s moving fast.
Sharon Henderson, co-founder of independent Kiwi creative agency Federation, was in Paris for the World Retail Congress as retail leaders from across the globe discussed the transformational change they face, their challenges, and the options for response.
Change is constant
Particularly notable was a discussion between J Crew chairman and chief executive Mickey Drexler and his counterpart at Topshop, Sir Philip Green.
“The difference in their strategies was, at times, as big as the Atlantic between their respective countries,” says Henderson. “But both emphatically agreed over the rate of consumer change and the revolution it’s driving in retail.
“For Topshop, the future is clearly about driving an agenda of global expansion with some localised contraction, while J Crew is busy adapting to its tech-enabled customers at a fast and furious rate.”
The marketing world is changing rapidly and forever, with the retail industry in particular in the midst of customer revolution.
“Smartphones are resetting the values of retail,” said Philippe Houze, chief executive of Galleries Lafayette in summing up his own presentation. “Change is the only constant.”
As a result, Houze’s organisation is making its own vision play around what it calls ‘the wow effect’, a potent combination of brand and customer experience.
Henderson points to Walmart as one of the most paradigm shifting examples of the coming change.
Still majority family-owned, the retail behemoth employs approximately two million people across its global operation. It has been the world’s largest retailer for decades, but bets are on that this too must change.
“Many retail leaders and commentators at the Congress named Amazon as their key competitor, with predictions that it could usurp Walmart by 2020 to take pole position as the world’s largest retailer,” says Henderson. “It’s a major mindshift to think that a bricks and mortar giant like Walmart could ever be overtaken by a virtual competitor.”
Research bears out such predictions, and Henderson cites global retail intelligence consultants Planet Retail’s forecast that Amazon’s sales will grow from US$66b as an online retailer in 2012, to US$185b as a multichannel retailer by 2017. Big numbers, if they prove true. But already Amazon is said to be growing four times faster than Walmart.
“New, globally aware, digitally driven consumers are emerging in their millions. Traditional businesses including retailers will have to adapt fast or face a very different future.”
“Then there’s ASOS,” says Henderson. “They ship to customers all over the world, as well as New Zealand, and they’re currently ranked the Pure Play Etailer of the Year. Yet the possibility of a bricks and mortar expansion for ASOS has also been mooted.”
New globally aware, digitally driven consumers are emerging in their millions. Traditional businesses, including retailers, will have to adapt fast or face a very different future.
“It’s easy to get excited by the gargantuan scale of predicted change, rather than get focused on what’s really driving this revolution – and that’s the customer,” says Henderson. “Today’s consumers are the true change agents.”
If it’s true that – as Drexler pointed out – whoever has a device has a store, then with one in six Kiwis owning both a tablet and a smartphone there are nearly 750,000 Kiwis with an entire store in their pockets or handbags.
“This insight underlines both the impact and the opportunity that technology represents for all New Zealand businesses over the next 10 years, and not just for retailers. There is some exciting, but very hard, work ahead for those of us who want to ride that change,” says Henderson.
As a founder of Federation, Henderson is no stranger to change or, indeed, to hard work. Five years ago, together with co-founder Murray Reid, the two former agency heads made a decision that would contribute to a deconstruction of the New Zealand ad agency landscape.
Reid and Henderson decided to break away from the multinationals and start a truly Kiwi-owned agency that would build its reputation on channel agnosticism, results, and performance for clients, rather than the traditional agency leaderboard of creative gongs. With a freshly minted company name, a clearly defined business model, one laptop, and two mobile phones, one of the largest independent agencies in New Zealand was born.
“It was one of those serendipitous moments in time when we realised we had a window to do something we were passionate about,” says Henderson. “And that was to start a 100 percent New Zealand-owned agency for clients who wanted a fresh, hard-working and egalitarian approach.”
Henderson and Reid had another driver, too. They wanted to create a serious employment alternative for Kiwi ad agency people. A change from working for networks focused on reporting to unknown people in an unknown building somewhere, usually in New York.
Federation had started its journey at the beginning of one of the worst ever global recessions. Less than a month later, with its first two client briefs underway, the agency moved into its first office in the lofty legal and money belt of Auckland, Shortland Street.
“We’ll never lose the huge sense of gratitude towards those companies that stepped forward to appoint us.” says Reid.
“If it’s true that whoever has a device has a store, then with one in six kiwis owning both a tablet and smartphone, there are nearly 750,000 New Zealanders with an entire store in their pocket or handbag.”
Among those early adopters were iconic Kiwi brands Fisher & Paykel Finance and Cavalier Bremworth, which appointed Federation as their agency within the first year. As New Zealand’s largest home-grown consumer finance organisation and the home of Q Card and Farmers Finance Card, Fisher & Paykel Finance was seeking a partner that shared its Kiwi culture and commitment to performance.
“We’ve been strategising, creating, learning and delivering with Federation for over five years now,” says Fisher & Paykel Finance head of product and marketing Hugh Robinson. “We truly value their breadth of ability across everything. From TVCs to direct, digital, mobile and experiential marketing, it all aligns perfectly with our marketing strategy.
“Without doubt, our favourite achievement to-date is the Q Card brand transformation. The Feds listen to us, to our customers, and to our retail merchants. They’ve worked alongside us to deliver a massive change to the future of the Q Card brand.
“They also happen to have Best Ugly Bagels just across the road. It doesn’t get better than that!”
In securing the Cavalier Bremworth business, Reid says a commitment to longevity had to be on the table.
“We had to give a fair bit of reassurance to senior management that we wouldn’t sell up within a couple of years and vanish. Five years on, we’re still going strong.”
Federation’s roster of local and global clients now makes it one of New Zealand’s biggest independents. Despite this, Henderson and Reid stay true to their revolutionary spirit and remain committed to the cause of independence as an unencumbered agency model for Kiwi marketers.
“The freedom to think, act, and express ideas without boundaries and internal hierarchies is in the DNA of Federation and its success to date,” says Henderson.
It’s a business culture that has steered Federation into full free-flight mode. In business model terms, the agency has continued to act as a change agent, continuously evolving to stay head of the curve on both customer engagement platforms and consumer behaviour trends.
The same change driving the current retail revolution is driving some exciting changes in its agency model as Federation invests in the areas core to the future that Drexler and Green articulated in Paris.
“Brand differentiation, customer information and intimacy are the name of the game,” says Henderson.
While Federation has enjoyed great success with some of New Zealand’s most established and respected brands, it has also won the confidence of global brands, including the recent wins of Emirates and Volvo.
“Volvo New Zealand changed creative agencies over a year ago now, with very pleasing results to date,” says Steve Kenchington, Volvo cars general manager. “Federation stood out as highly effective, providing a detailed response that hit the mark and has since delivered on its promise.
“It’s a partnership that’s been hallmarked by a team attentive to our needs, motivated to learn, understand our market, and listen.
“They also happen to be a pleasure to work with. A great choice for marketers looking to work in a mutually beneficial long-term partnership.”
It’s a sentiment echoed by Chris Lethbridge, regional manager for Emirates airlines, and one of the biggest global brands.
“We broke the norm of international agencies when we appointed Federation,” says Lethbridge. “The key to their successful relationship with us is not only their understanding of the role of a global brand, but also our customers’ needs and desires.
“Federation have this belief and understanding in our busines. Their way of working goes beyond the client-agency relationship. Instead we are one. It’s a great change.”