05.02.2021 08:30
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Костянтин СимоненкоCOO DeFacto on plans for a retail network in Ukraine, a focus on online sales, innovations in retail and customer service, the quarantine situation, and much more.
– In 2020, you planned to open three more stores in Ukraine (two in Kiev and one in the city of Dnipro). Did you have to change your plans?
– The pandemic has affected almost all industries both nationally and globally. And ready-to-wear / prêt-à-porter is among those industries where this effect is felt the most.
At DeFacto, thanks to our robust financial structure and resilience as well as our capacity to fine risk management and rapid decision-making capabilities in the face of suddenly changing conditions, we have launched several projects throughout the year with both our employees and our valued suppliers; and continued to strengthen our position in the industry.
Due to the changes in consumer habits as well as the global measures taken during the pandemic, we have shifted our focus from physical store investments to further strengthening our e-commerce practices, which had already been a chief area of investment for us and one of our strongest muscles in global sales.
Ukraine is one of our most important markets. Moving forward, we will continue our investments in Ukraine without pause.
In 2020, we opened a 900 m2 store in Kiev Retroville Shopping Center and 1 store in the Most City Center in Dnipro. Since Blockbuster Shopping Mall cannot reach its trade volume due to the pandemic, we will open our store here on March 15 in 2021.
As with all global companies, we revised our plans because shopping mall investors could not continue their projects and the shopping malls were closed for a long time. Although we budgeted 5 stores across Ukraine in 2020, we opened 2 stores due to the pandemic. This year, we are planning to open a minimum of 6 stores in shopping centers that provide our brand with suitable commercial terms.
– How many stores and where exactly can be opened in 2021? When will you be able to reach the target of 25 stores in Ukraine?
– Even though 2020 was an extraordinary year in several aspects, as DeFacto we continued its domestic and international investments by retaining our manufacturing strength and, particularly focused on our e-commerce actions.
In 2021, our growth strategy in Ukraine will continue to be more controlled in online and offline channel. We have 6 new store opening plans in this year. Our priority projects will be in Kiev, Odessa, Kharkiv and Lviv cities.
We currently have 5 stores. We will reach 11 stores by the end of 2021. If the global pandemic process decreases and trade activities in the countries return to normal, we have a target to reach 25 stores by the end of 2022.
– Earlier, you said that you are actively investing in the development of e-commerce, including in Ukraine. What did you manage to do in a year and what are your development plans for the coming years (not only in Ukraine)?
– At DeFacto, we have been focusing on digitalization for many years, and the digitalization investments we made by founding DeFacto Technology 3-4 years after we were established, helped us take correct actions particularly during the pandemic period.
Thanks to our fast and robust technological and logistics infrastructure, we boosted our revenues on the online side. Our online sales continued without pause in the 50 countries where we have a presence across Asia, Africa, Europe, America and Latin America.
Pandemic is changing consumer habits. And we created a strategic plan to boost the share of online trade in total turnover and started in-house organizational planning. Before the pandemic, we had drawn out our strategic planning to generate 50 percent of our turnover online by 2025. As a result of the changes brought about by the pandemic, we project that this goal will be attained by 2023.
Our plans for the new year also focus on the digital and the customer. In line with this digitalization focus, we will take a strong position in Ukraine across online, offline and omni channels and continue our actions to have a strong presence in the market. We will repeat our success in the market also on our website, providing the Ukrainian consumers with a seamless experience through omni channel integration, which is one of our strengths.
Our offline and online investments continue in Ukraine. On the online side, our DC warehouse with a capacity of 550,000 products will start the operations in Kiev in April. We will start our online operation with the opening of our E-commerce Website in April. Another important project is that we will integrate offline(Ukraine stores) stock with our Ukraine e-commerce website. Thus, we plan to serve our customers better by showing the stocks of all products.
– How does the development of Ukrainian e-commerce differ from that in Turkey and other countries?
– The e-commerce industry continues its rapid growth both in the world and in our country. E-commerce, which had already been in an upward trend, has developed considerably particularly thanks to the pandemic. The Turkish market stands out as one of the markets that adapted the fastest to online shopping in the post-pandemic period. According to the data released by the Republic of Turkey Ministry of Commerce, e-commerce volume grew by 64 percent year-over-year. E-commerce entered our lives irreversibly and will remain on our agenda.
At DeFacto, our e-commerce volume has also grown considerably during the pandemic. Every day, we are adding another new feature and experience point on our online channel in Turkey in order to provide our customers with a better experience. We are accelerating our efforts to ensure the best possible experience for our customers on our omni channels. In the near future, we will also launch in Ukraine the entire technological infrastructure we developed in Turkey. Ukraine has considerable potential in adaptation; and as DeFacto, we will introduce a variety of new technologies in this market moving forward to create a competitive advantage.
– Will you continue to cooperate with Kasta in the sale of your goods in Ukraine? Or will you build your own sales channel?
– We entered the Ukrainian market in 2018, and having witnessed the admiration of Ukrainian consumers for DeFacto products, we started our collaboration with Ukraine’s foremost online shopping website Kasta and made our quality products available to Ukrainian fashion enthusiasts. Kasta is a trusted business partner with whom we enjoy good relations. Accordingly, in addition to our investments at DeFacto, we will continue our collaboration with Kasta as well. In addition, we will continue in 2021 with Intertop, Rozetka and lamoda online platforms.
– How has the pandemic and the associated economic hardships affected your business? What lessons can be drawn about changing consumer, landlord and supplier behavior? How do you deal with the new business challenges that have arisen in 2020?
– Ready-to-wear and textiles were among the most affected industries by the Covid-19 pandemic, and have seen significant changes across a vast area from ways of doing business to the expectations and purchasing preferences of consumers. To be sure, this change has also affected our plans in a variety of ways like all other players in the industry.
At DeFacto, we kept a stable growth performance in recent years. Looking at the past data, we achieved an average annual growth performance of 35 percent over the last three years. We also had a similar growth projection for 2020, and we even achieved a similar performance in the first quarter. However, the pandemic also changed our expectations. When the first case was recorded in Turkey, we shut down our stores, which remained closed for nearly two months. This also had an effect on our growth.
However, with the reopening of stores as a part of the normalization actions we put in place as of May, and the start of the new normal in June, we started to post the turnovers we had seen a year earlier. Before the pandemic, we had launched a lean organizational plan that would make us much more agile, and launched our Smart Store concept in 2019.
Particularly the recent developments have led us to expedite the implementation of ‘phygitalization’ as our new growth strategy. Accordingly, we introduced our Phygital Smart Store to customers in November 2020. In addition, we also continued to take actions in line with consumer expectations during the pandemic.
Inspired by increased remote-working, the desire of individuals to find convenience and style at affordable prices, and the global rise of the healthy living trend, we introduced our new brand DeFactoFiT, which we had patented 5 years ago, featuring active sports, home and underwear products covering all styles. During the pandemic, we received positive return on the customer-oriented investments we had made in the previous years. We will continue these investments, and we are hoping to carry on with our transitions in line with the preferences and expectations of our customers after we hopefully leave behind this pandemic safe and sound.
In the meantime, we observed that while suppliers and companies rapidly focused on the requirements of the new period and developed several new projects on both digitalization and customer experience sides, shopping centers failed to take such rapid actions in response to these developments. Moving forward, we project that customers will not act with channel selection as an option in mind and shopping centers will become a fully integrated part of the purchasing process and digitalize. We believe that a shopping center system that both provides logistics services and maintains the shopping center module while incorporating omni channel functions for all brands with a hybrid model structure. We expect those shopping centers that made the fastest transition to this model to remain strong.
– You spoke earlier about the integration of all stores in the virtual space at the warehouse level. In particular, to open new generation warehouses in Ukraine, which will be fully synchronized with all stores, e-commerce companies and marketplaces. How far have you been able to move in this direction? What has been done and what remains to be done?
– As you know, retail industry also takes its share from developing technologies, rapidly evolving into a digital world. We are also preparing accordingly. In a first for the industry in Turkey, we launched our Digital Smart Warehouse project. We built a Fully Automated Smart Warehouse in Çerkezköy; annually, we are moving nearly 250 million items. We are using the software developed by our engineers at our warehouse, which is entirely run by robots.
A fully digital infrastructure is also used for the entire shopping process at our DeFacto Digital Smart Store where we launched the smart store concept in the field of fashion for the first time in Turkey. At the DeFacto Digital Smart Store, our customers can purchase products available in all DeFacto warehouses and stores.
Soon, we will open store concepts which carry no products but only experience areas featuring screens that can recommend sizes and where we can see the clothing immediately on us.
We consider this practice not merely a trial but a long-term business plan, and as we mentioned earlier, our investments are underway with the goal of launching it across our stores all around the world. We aim to be one of the brands that lead digital transformation in fashion retailing both in Turkey and the world.
– You were going to test in Istanbul the idea of creating separate stores of 500 sq. M. m with goods for children or sporting goods, where 30% of the area will be allocated for the warehouse of goods. Did you manage to implement this project and what are the first results?
– At DeFacto, we have a system in place that aims to launch innovation and different ideas through correct investments. Our priority has always been accurately analyzing customer expectations and focusing on generating innovative solutions accordingly.
We started to launch our innovative store solutions in 2019 with Turkey’s first smart store and we continue to further develop them. Building on our experiences with the smart store, we created a more hybrid version, the “phygital smart” store, which we put in last November in the service of our customers as a first in the field of fashion in Turkey. The greatest advantage of the phygital store for our customers is that they can make their purchase through an optional system whereby the products they liked are delivered either there or at their home. This store model also stands out with its omni channel inventory shipping capability. Moving forward, we will continue to offer different solutions based on customer needs and to stand by fashion enthusiasts through concept stores.
– What innovations have you already implemented in your stores and which ones will you introduce in the future? What can be expected from this in Ukraine?
– As a firm, DeFacto has adopted the principle of continuous development. Levering this approach, we aim to be an international fashion brand from Turkey in the field of ready-to-wear. Since the day one, we have been continuing on our path in line with the business model and strategies we created towards this end.
As I mentioned earlier, prior to the pandemic, we had already launched an organizational planning in which we viewed all markets not merely as offline stores but as “phygital”, incorporating both physical and digital. Accordingly, the first example of our concept, DeFacto Smart Store provides our customers with a fast, effortless and comfortable shopping experience thanks to robot sales assistants, smart mirrors, and virtual reality glasses. Furthermore, at the Phygital Smart Store we opened, again in İstanbul, at the end of last November, we combined physical retail with the opportunity of purchasing digitally, giving visitors a fast, easy and comfortable shopping experience. At the Phygital Smart Store, we provide our customers not only with the opportunity to touch, try and choose products but also to purchase the products they like on smart screens without the hassle of waiting in a line and paying at the register.
We are rapidly developing and launching the entirely new applications through the solutions developed by our 125 R&D engineers working at DeFacto Technology, which we founded 3-4 years after we were established. We intend to continue our work and make our brand one of the most preferred phygital brands in the world. In the store, which will create a rapid and flawless ordering experience in light of these technological edges, we will introduce our customers in all countries where we operate to new purchasing features such as payment in store, ordering in store, product reservation and collection, fast delivery options, “click and buy.”
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