“It’s easy to build your business based on data, but you have to listen to how people are feeling as well,” cautions department store veteran Anne Pitcher. Listening to the customer is an art that Pitcher has honed over her four decades in the retail industry, and she insists it’s how retailers can best position themselves for future success. “Let’s get into our shops and talk to our customers; there’s no better way to understand what they’re looking for.”
Pitcher spent 18 years at UK-based Selfridges, most recently as managing director of Selfridges Group, which at the time encompassed the department store chains Selfridges in the United Kingdom, Holt Renfrew in Canada, Brown Thomas in Ireland, and De Bijenkorf in the Netherlands. This year, she takes on a new role as deputy chairman of Holt Renfrew. In this episode of the McKinsey on Consumer and Retail podcast, McKinsey’s Anita Balchandani talks to Pitcher about the future of retail, the role sustainability and authenticity play in a retailer’s success, and what it means to truly bring “the voice of the customer into the room.” The following is an edited transcript of their conversation. Subscribe to the podcast.
Anita Balchandani: Anne, many of the things you set out to do years ago—whether they were around destination shopping or re-commerce—have set the tone for how the retail industry is evolving. What’s your view of the future? What do you think is coming next?
Anne Pitcher: I’ve become increasingly aware during recent years that we need to allow people the space to think in different horizons. So “horizons one, two, and three” have been a brilliant way for me to allow people to get the job of the day done, get the money in the till, deliver the budgets, but also think about the next five to ten years.
Anita Balchandani: When you think about horizon three, what are some of the things that most excite you?
Anne Pitcher: There are some spectacularly challenging things in horizon three. Recently, we have begun to consider what Web3 or the metaverse may look like. We’ve seriously been on a path of exploration as far as how our sustainability commitments will develop over the coming years and, just as important, how our customers, teams, and partners may be feeling about those things. And of course, the number-one question is how physical stores and websites may work together in what I’ve begun to consider as a kind of infinity loop—an exploration into how a thing that happens in one channel must, without question, happen in the other—because that’s how people live, think, feel, and, ultimately, shop.
Anita Balchandani: The thesis over the past decade in retail has often been that online will trump stores, but the post-COVID-19 recovery has proven how remarkably resilient the store channel is. The deep conviction that you’ve always had about omnichannel retail seems to be gaining ground and holding strong. What do you see as the right balance between digital and physical? What are some of the experiences that you think will make the most difference for consumers?
Anne Pitcher: As retailers, we like metrics. We like goals. We like performance data. What’s happening in the metaverse—nine letters that strike fear into the heart of any executive—is an opportunity to think about how to knit these different platforms together. It would be nice to put a metric on what percentage of your overall volume should come from digital; that’s difficult today, and we’ve seen how much that has fluctuated during the past three years. When physical stores were closed, everybody went to digital. Now the two operate side by side, and there’s perhaps more balance. As we move forward, I’m just going for balance. I like this idea of the infinity loop—how we get the two to happily sit side by side.
The future of the department store
Anita Balchandani: In the past ten years or so, there’s been a lot of speculation around the department store format: Will it survive? What do you believe about the future of the department store? What will it take to create a thriving department store in the next decade?
Anne Pitcher: Well, hopefully it’s thriving now and will continue to thrive. In the future, you will be able to experience anything you wish in some form of digital space or Web3 platform. You will be able to do anything you like digitally, so surely customers must want to experience things physically—I’m sure people will want to do both. The role of the department store is to bring that to life in a way that is incredibly joyful, entertaining, experiential.
None of us will be able to just hang a bunch of clothes on a rail and expect people to come shopping, or to boast about brands in the way that we have done so successfully for the last decade or so. We will need to consider the social and environmental concerns that our customers have and bring those to life. As department stores are increasingly focused on the challenge of driving traffic into their stores and then hoping to convert customers, I think we should be friendly, open, welcoming spaces where people understand that we understand them. That’s a completely different philosophy. If we can do that, using the infinity loop of the physical and the digital, then I think the future of the department store must be bright.
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Luxury and personalization
Anita Balchandani: The past decade, as we know, has been one of huge growth for the luxury industry. It’s been powered by the increase in high-net-worth individuals around the globe, particularly in North America, the Middle East, and China. The industry has been on an ever-increasing quest toward premiumization, and yet you’ve been a voice for democratizing luxury, which makes you quite unique in the space. What’s the worldview that inspired that?
Anne Pitcher: I think luxury will continue to show strong growth, but the luxury customer doesn’t always just want to shop in a monobrand luxury environment. And the luxury customer isn’t always head to toe in luxury; we all like to explore, have fun, and embrace a wealth of different ideas, styles, and products. I think by introducing luxury to Selfridges and balancing that with an entirely accessible range of products and services—yes, it has been a secret formula.
People often say to me, “You just pile everything in.” I say, “No, it’s a very carefully curated edit,” whereby for every item of luxury we have something to balance it. We bring the everyday to life with luxury. Most Selfridges stores are places where you can buy a pint of milk and a newspaper, or you can buy a luxury handbag. That sparks a sense of excitement, an experience of, “I’ve come in to buy a luxury item, but I found something I never knew I wanted, or something that was just so interesting.”
Anita Balchandani: We’re going to be watching what you do next in this space; I’m sure we have a lot to look forward to. Let’s talk about personalization. Clearly, personalization in luxury takes lots of different forms: it could be a personalized handbag, but more fundamentally, it could be through deploying your understanding of the consumer through the data that you capture, to make sure you’re bringing them experiences and brands that they care about and that resonate with them in the moment. How do you think about the personalization of experiences through the use of data?
Anne Pitcher: Let me place a health warning on it. As most people talk about the power and the importance of big data, I will always be the one who brings you back to real life: I believe that in the future, people are going to be much more protective over their data. I may be talking about horizon three—ten or 20 years from now—but we must all consider what that will look like and how we will develop. We also have to be aware of the cost. We’ve all seen the cost of digital marketing soar—it’s almost unaffordable, and it’s becoming less and less effective. So if we’re going to look at understanding our customer better through data, we have to think about how much money we want to spend in order to achieve that.
Let’s not forget that we have hundreds of thousands of square feet full of real live people. Let’s get into our shops and talk to our customers—there’s no better way to understand what they’re looking for. My other health warning for data is: don’t believe everything data tells you. Have an eye to the future as to what people are looking for. It’s easy to build your business according to data, but you have to listen to how people are feeling as well. If you can put the science next to the reality, then you can surely build a far better business. Let’s not just rely on data.
Let’s not forget that we have hundreds of thousands of square feet full of real live people. Let’s get into our shops and talk to our customers—there’s no better way to understand what they’re looking for.
Sustainability and inclusion as ‘a value exercise’
Anita Balchandani: Sustainability is another area where you were a frontrunner. Today, almost everybody has sustainability as a top three item on their agenda, but you were very early in championing it at Selfridges. What drove that? And how do you think about the complex conundrum between shopping, consumption, and production in the face of climate change?
Anne Pitcher: Our sustainability journey began in 2004 when we made the decision to remove fur from our business. That was a direct result of listening to our customers. It was a brave decision; I mean, it wasn’t a small business. But by taking it away, I can prove that we met a whole new bunch of customers who took notice of that action.
It took us a while to understand how to move forward with the removal of single-use plastics. It took us two years, not only to work out whether to do it (because that’s a split-second decision) but how to take a category out of our organization with a huge sales number attached to it, and not budget a downturn in sales, but instead put a 10 percent increase and come up with a different way to sell water. That was an interesting moment for me, when I understood that you could take a different path and build a bigger business.
A lot of people look at sustainability as a cost exercise. I believe it’s a value exercise, in terms of the emotional response of your people, customers, teams, and partners. Our sustainability journey comes from a position of authenticity. We’ve been at it for years. We’re not greenwashing. At every point we try to prove that, and I think our customers know that. So first, fur; second, single-use plastics; third, the removal of precious skins. And we continue, with our commitments, to pledge a way forward.
So, don’t look at it as a cost exercise but as an opportunity to engage and acquire a new customer. And it is not only better for the planet but also probably better for the purse, because the cost of acquiring customers through data today has to change in some form. Perhaps this could be a new route. I think customers know that regulation forces you to do it, but businesses that work ahead of regulation show that they have an authentic position on sustainability.
A lot of people look at sustainability as a cost exercise. I believe it’s a value exercise, in terms of the emotional response of your people, customers, teams, and partners.
Our goal has always been to bring it to life for people, so we have tried to create a model where we put the voice of the customer into the room. We’ve heard that saying a lot, but we’ve tried to understand what it means to them. We have three priorities; the way we’ve set our sustainability journey is around models, materials, and mindsets.
“Models” refers to how we are exploring how people are shopping and what that means to our organization. Years ago, it took retailers—department stores, particularly—ages to work out how to build websites and integrate them into their organizations. We cannot let circular models and the new “green” business models put us in the same position; we need to explore those today.
Our materials commitments are public, and we are determined to meet them. It’s very difficult for a retailer that doesn’t make anything to work closely with their partners, to understand products and materials and where they come from and what they’re made of. Our journey is ambitious. This is hard stuff, and no single business will be able to fix this on their own.
The third part of our mission is to change people’s mindsets and the way they shop. Those are very customer-driven focus areas, but 87 percent of our teams work here, they tell us, because of our commitment to sustainability. Interestingly enough, north of 85 percent of customers tell us the same thing: they care passionately about sustainability, and they like what we’re sharing with them and the experiments we’re conducting. So it seems like this is the right stuff, but it’s really hard.
What’s critical as well—and it’s not always put under a sustainability umbrella—is this: a business that talks to a wide customer base and has a huge variety and breadth of individuals working within the organization has to understand its position on diversity, equity, and inclusion. This has been a very recent journey that Selfridges has been on. We’ve always prided ourselves on having a diverse team, but having the statistics around that has been really important. In recent years, we’ve been able to understand the makeup of our teams much better and particularly understand the gender pay gap. We’ve made a big commitment to equal pay across our entire organization.
Again, most businesses would think that comes with a healthy price tag. Actually, I passionately believe that when you explore the details, it’s the plan that matters, and it starts at the very basics of an organization—with recruitment policies and the understanding that a balanced boardroom gives you a better solution. A balanced team in store is far more welcoming to a very diverse customer group.
Anita Balchandani: All of the McKinsey research on diversity and inclusion would absolutely back up what you’ve just said. We see a very clear correlation between improved financial performance and the diversity index of a company. Yet the track record of the fashion industry, particularly at senior levels, is still not brilliant. How do you see the next phase of this evolving?
Anne Pitcher: It’s a really big question. I think soon we will be forced by legislation to create more balanced executive leadership teams, but let’s not wait to be forced. Let’s try and understand how or why it makes a difference. Yes, the metrics say you get better financial results—I think that’s motivating—but if you ask your people what they think, they will tell you this has to happen. I would encourage everyone to talk to their teams and find out what inspires them, and you will find that a balanced boardroom and leadership team is inspiring, and not just to women.
Anita Balchandani: My sense from this conversation is that there’s a lot you’re excited about as you look to your next chapter. What are you most excited about?
Anne Pitcher: I am excited about the future of retail. I think there’s so much negativity out there, but there’s so much more to be done. I think so many people are waiting to go shopping and have fun, and I have a role to play in that. I’m excited to be working with Holt Renfrew and continuing my journey of bringing sustainability to life within organizations, helping women in leadership roles, and creating a conversation about experience that is future-thinking. The future is bright for us all if we look, listen, and learn.