Two definitive store closures, decreased sales of clothing and accessories; as well as the restriction of mobility to control and reduce coronavirus infections in Mexico were the main causes that led Palacio de Hierro to have a drop in its total sales in 2020, considered the “Year of the pandemic”.
The Palacio de Hierro by Alejandro Baillères Gual, who at the end of April took the place of his father Alberto as chairman of the board of directors of Grupo Palacio de Hierro and Grupo Profuturo, reported net sales of 26,334.7 million pesos (mdp) in 2020 , 26% lower than the 35,610.1 million pesos registered the previous year.
Adapt or die, the saying goes, and nothing more ad hoc for the time we are living as a result of the appearance of COVID-19. Palacio de Hierro and department stores in general had to make use of digital channels to avoid a further fall in their finances.
The sale of electronic devices – computers and tablets – to comply with the online classes and remote work helped the company to reduce its sales, as people stopped buying clothes and accessories, but had to invest in technology to carry out your daily activities within the new normal.
“What is interesting here are all the strategies that companies used to get ahead. Its direct competition, which is Liverpool and Sears, began to make sales through online channels. Those channels, that part of the digital transformation, registered a sales growth of 136% ”, explains Marisol Huerta, consumer analyst at Grupo Financiero Ve por Más (BX +).
“During this contingency we will continue to operate by telephone, as well as sales through Personal Shopping and sales through WhatsApp, to continue satisfying our customers,” said Grupo Palacio de Hierro in its 2020 annual financial report.
The department stores had advantages by strengthening their digital channels, and among them, having their own credit card stands out, which facilitates online purchases.
“This pandemic has been less catastrophic for those companies that already had a previous digital structure, such as the case of Palacio de Hierro, which allowed them to have a little previous experience and accelerate all the processes they brought”, highlights Eva González, professor of Marketing and Analysis of the EGADE Business School and the Tec de Monterrey Business School.
In 2020, Grupo Palacio de Hierro kept 100% of its workforce, taking care of its staff with strict sanitary measures, as well as providing support on health care issues through a remote network, highlighted the 2020 corporate report.
Faced with the new normal, Grupo Palacio de Hierro implemented strict safety and hygiene protocols focused on safeguarding the health and safety of employees, customers and suppliers. The different measures involve distancing, use of face masks, sanitizing mats, taking temperature and limited capacity, among other provisions, he added.
Something that favored Palacio de Hierro has to do with the type of client: people who are more used to the use of technology, of digital channels; more accustomed to using a credit card and making remote payments. “He is not afraid of it and has some confidence and experience in the consumption of products and services online,” adds Eva González.
To analyze sales at pre-pandemic levels, Huerta estimated, we will have to wait until next year, although in 2021 there may be better dynamism because there is limited capacity in stores and because the pandemic has had an impact that ended up affecting the consumer’s pocket.
In Mexico, after losing more than a million formal jobs last year due to the pandemic, around 500,000 jobs have been recovered.
After the pandemic
Just as technological advances have come to stay, modifications in consumption habits and certain prevention and hygiene measures will also be maintained, with this we will also see new forms of consumption, warned the specialists consulted.
Although online sales are expected to continue to gain ground, in Mexico there is confidence that everything will return to normal as 2021 progresses. However, this normality will be accompanied by less touch behavior (less contact contact) in physical stores, not only when choosing products, but also when paying, says the EGADE Business School specialist.
In the short term, it is expected that purchases will continue to materialize in stores, and although people will be able to see offers and specials online, they will continue to go to stores to convince themselves whether or not to make the purchase. While in the long term, the new generations – more accustomed to technology – will prefer to buy remotely, says Marisol Huerta.
“There will be a segment that stayed and will prefer it (buy online) and there will be another segment that will say ‘I saw it’ and will reach the stores to confirm and make the purchase,” adds the BX + analyst.
In this new reality, there may no longer be new stores openings, but delivery points, which will benefit both urban and rural areas, because large exhibition spaces will no longer be needed, thanks to internet pages and applications. mobiles.
Way to go
One of the differentiators of Grupo Palacio de Hierro is the experience when visiting its stores, something that does not exist in digital channels, so the company will have to work to offer that plus that distinguishes it from the competition that is capable at the same time. of keeping your customers and attracting new consumers.
“The path that remains to really generate that online experience is still important,” says Eva Méndez, who adds that she has analyzed the Palacio de Hierro page and that “that experience (which is offered in physical stores) has not been transferred to the web ”.
In this new reality, Palacio de Hierro will have to work harder on personalized attention as a differentiator.
There will also be a reconfiguration in physical spaces, including as part of the less touch , thanks to technology, applications that allow consumers to see how a garment or some accessories fit without the need to put them on; as well as less human interaction and more interaction with technology.
“Through artificial intelligence, robots, augmented reality and this type of technology, they will allow you to live a different experience than the one you were used to. I don’t know if better or worse, but different ”, says the EGADE professor.
