As retail rights itself post-pandemic, Paris’ Galeries Lafayette has bounced back with sales reaching 2019 levels.
The retail group hit 3.6 billion euros in sales in 2023, chief executive officer Nicolas Houzé revealed during a presentation at the company’s flagship in Paris. The busy holiday shopping period last December even topped pre-pandemic numbers, and those sales continued to accelerate in the first quarter, he said.
That puts the company on track to hit 3.85 billion euros in sales across the group, including the 18 regional Galeries Lafayette stores, by the end of 2024. To that end, the group has returned to profitability after the lean pandemic years and will invest 400 million euros on building improvements such as the facade of its Paris flagship, plus significant tech and omnichannel investments over the next five years.
This year will also mark Galeries Lafayette’s 130th anniversary. Houzé’s great-grandfather opened the first outpost a few blocks away on Rue Lafayette, and it moved to the current location in 1902.
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The store will hold a big birthday party with a special event under the store’s famous dome, details of which are still under wraps, in September, Houzé said.
Pop-ups and special events will increasingly become a core PR pillar for the store.
“We have continued to strengthen our events policy, since we are convinced that the department store must be an events business,” Houzé said.
Olympic Expectations
The anniversary celebration will follow this summer’s Olympics, which will bring expected disruptions to the city and the stores to the tune of driving sales down 5 to 10 percent.
Still, Houzé expects that it will ultimately be good PR for the city itself.
“Our conviction is that this global event will give the city of Paris new visibility, and ultimately make new tourists and customers want to come visit Paris. Therefore we will make up these sales losses following the Olympic Games, between the month of September and the end of the year,” he said.
“It would be completely stupid to say that everything will be business as usual. Obviously there will be disruptions and we must take this into account,” added director of operations Alexandre Liot. “But we see the Olympics as an opportunity for Paris and for France for the future.”
To capitalize on the games, Galeries Lafayette will invite 20 designers to create exclusive products for the store that will roll out around the celebrations.
The Olympic shine will also continue the polishing-up project of the Champs-Élysées, which is in the midst of a multiyear revamp to improve the boulevard. The group believes that shine will also rub off on its second Paris store on the famous shopping street, which has underperformed since its opening in 2019.
“With everything that is happening on the Champs-Élysées, the new openings that will take place in the months and years to come, the Champs-Élysées will also undoubtedly be a very powerful center during the Olympic Games. It allows us to believe in a bright future for the Champs-Élysées store,” Houzé said.
It was launched with a more avant-garde, experimental point of view.
“We were frankly very innovative and pushed the concept as far as possible. The fact is that the performance didn’t live up to what we expected for many reasons,” he said, in part because the concept did not resonate with shoppers, as well as the tough retail climate.
They have revamped the concept with a more classical offering, as well as changed marketing tactics and increased communications spend. It will still serve as a space for emerging brands and new ideas, but they have added a more classical twists. Houzé noted that the personal shopper concept was a success in trials at that store, and has since been rolled out to other locations.
Foot traffic to the group stores has also bounced back, to 30 million visitors in 2023.
With More Locals, a New Luxury Brand Mix
But with the loss of Chinese tourists and the giant buses that used to deposit them in front of the Boulevard Haussmann flagship, that mix has shifted.
Before the pandemic, about 33 percent of its customers were from China, while that number now stands at 20 percent. Those are mostly individuals, and fewer large groups.
Those losses have been made up by French customers, which now make up 40 percent of the store’s customer base with a particular focus on local VIP clients.
The remaining 40 percent are international tourists, with other Asian nationalities, such as South Korea, Japan and Thailand, filling in that gap. The Haussmann flagship reopened its international tour group welcome center last year to make for a more pleasant customer and sales floor experience, he noted.
The local customer base has become increasingly loyal since 2021, Houzé added.
“Ultimately it allowed us to address a much more balanced clientele,” he said of the new demographics.
The loss of Chinese tourists and large groups also shifted the mix inside the store. They revamped the first floor, with larger spaces for key luxury brands, including Chanel and Rolex, while removing some unnamed brands that had mainly appealed to Chinese customers.
They added brands such as Bottega Veneta, Ferragamo, Patou, MaxMara and Victoria Beckham, and have added pieces from runway collections to up the fashion quotient.
“We reinforced our offer with a strengthening of partnerships with luxury houses,” he said, to be more in line with the desires of the newer customer mix, especially Parisian VIPs.
Those expansions came to the tune of about 200 million, with half coming from the group and the other half coming from the brands themselves. The store has also added a lounge and concierge services as it banks on bigger local spend.
“And so, we must evolve, we are not going to deprive ourselves of growth drivers that are close to us,” he said.
The luxury brand offerings are about on par with what they would carry in their own flagships. To differentiate the department store, they are seeking more exclusive brands and products.
The Jacquemus and Nike collaboration was only available at the brand’s flagship and the Haussmann store worldwide.
Kim Kardashian’s Skims brand is only available at Galeries Lafayette in France. It opened a pop-up at its Nice, France, store when that brand arrived to amplify its exclusivity. Strategies like this will help it stand out in an ever-crowded market, where customers have almost every brand at their fingertips.
To that end, the group is also investing heavily in developing its own omnichannel services. Houzé said it is “the right response to the expectations” of customers today.
Changes in customer behavior shaped by the pandemic have borne out in the numbers. In 2019, about 1 percent of the company’s sales were online, while for 2023, it was about 10 percent. Many of these are shipped-from-store home delivery sales and other convenient systems the company developed during the pandemic closures.
The company is also starting to test AI systems on several fronts, including efficiency on the customer service side, creating product descriptions as well as using it on image generation.
Houzé called it a “real revolution” for retail. More than anything the executive believes that the tech will eventually be deployed to “speak to our customers in hundreds of languages” be it in store or via chatbot.
It has also invested in developing its luxury resale channel in the Haussmann flagship through the Re-Store section, which was inaugurated in 2021. With 5,000 square feet dedicated to circular fashion, the section generated 90 million euros in sales in 2023.
“It’s a category which is truly an important expectation of the young generation,” he said.
In addition to expanding the luxury spaces, it has added new contemporary brands such as Jeanne Damas’ Rouje and Balzac, a young Parisian brand which only has one brand-owned flagship and is carried in three Galeries Lafayette stores nationwide.
The shoe department has also been revamped. The category has seen a growth level upward of 30 percent and continues to accelerate with the move to a new floor and upscaled section.
With its massage, personal care and gym, the wellness space opened in 2022, appeals particularly to tourists who are staying in Airbnbs that do not have access to hotel services, Houzé noted. Most of that is services, only about 20 percent of that space is devoted to products.
For its next act, the store will expand the spaces dedicated to the growing category of menswear starting in 2025.
Houzé emphasized that all of these investments are self-financed from the group’s profitability, and not from private investments or the selling off of the BHV department store.
That decision was made post-pandemic as the group wanted to refocus its portfolio on its core brand.
“We have decided to concentrate our efforts on the Galeries Lafayette brand and the 19 department stores that we consider a priority,” he said, of the 18 regional stores plus the Boulevard Haussmann flagship. “We sold BHV to focus our financial and personnel efforts on the historic name.”
That name is also expanding into new markets, with previously announced franchise partnerships in China and India.
“The objective is to make 15 percent of our turnover internationally by 2028,” Houzé said. It stands about 10 percent now, with outposts in Doha, Dubai and Qatar.
“It is our partners who carry the investment,” noted Houzé, who said it does not factor into the 400 million-euro investment number.
The group will continue to upgrade its 18 regional stores, including new approaches such as a shopping and entertainment complex in Annecy, where it includes other brands such as Uniqlo and a climbing wall.
As for the French franchises, which were thrown into chaos by the bankruptcy of owner Foncière Immobilier Bordeaux last year, a commercial court approved a safeguard plan earlier this year to keep the company afloat.
The relationship has stabilized since the decision, Houzé said.
“We have entered into a completely normalized relationship between us as franchisors and them as franchisees,” he said.
