Arezzo & Co. CEO Alexandre Birman is prepared to handle a rough 2021.
“The first half of the year will be very challenging,” he said on the latest episode of the Glossy Podcast. “It’s not going to be easy. And who is going to survive is not the strongest, but the most adaptable. So we have to be very prepared to adapt.”
The company managed just fine in 2020, emerging relatively unscathed though big changes were necessary. Those adjustments, including putting its 6,000 store employees to work as digital sales associates, set it up for a strong start to 2021. Though 80% of its stores are now closed due to pandemic-related restrictions — they’re largely located in the company’s home base of Brazil, where the vaccine has been much less widely distributed — it finished March with 70% of the revenue it earned in March of 2019.
“That’s decent,” said Birman. “It’s going to be a gradual rebound.”
Brazil-based Arezzo & Co. owns six shoe brands and the distribution license for Vans in Brazil. In the fourth quarter of 2019, it expanded its focus to clothing by acquiring apparel group Reserva Group and 75% of online luxury resale platform Troc.
Birman discussed the company’s investment strategy, as well as its future plans for physical retail and expansion in the states.
Below are additional highlights from the conversation, which have been lightly edited for clarity.
Overcoming pandemic-driven obstacles
“Our main challenge was maintaining our sales with our stores closed. We didn’t accept the fact that, because the stores were closed, sales could not be done. So the first initiative we put together was to transform all of our 6,000 sales associates into digital sales associates — they had their own [promo code], and through their social media [channels], they could influence people to buy through our e-commerce [site], and they would get their commission. We had a motivational campaign [internally] called ‘We are all salespeople,’ meaning everyone from me to all the executive directors of the company — everyone engaged in that initiative. That worked to generate a good amount of sales. Also, we provided to the sales associates [access to] our CRM database, so that they could work [via] something that we developed; we had a sales associate app, and they could manage their [client] list based on a lot of information. And we created a virtual [store] so that they could get in touch with the customers, show them the newest trends and then generate sales via WhatsApp. WhatsApp became our main tool of communication between the sales associates and the customers. The traffic that we generated to our e-commerce was very high, and we’re able to divert most of those shoppers to buy online. [We] shipped [their orders] from the stores. So that took us a month to put together all of those initiatives. We had started our digital transformation in 2018, so we had many of the tools in the process of development. But they had to be ready to work, and they were by the second quarter of 2020. That was, for sure, the turning point. Along with that, we completely changed our fashion calendar. We had been [launching new products] on a monthly basis, and that was already fast. But we [moved to] bi-weekly collections. We put together a calendar where, every 15 days, we had a launch of a new collection. And that machine really worked out perfectly. By the fourth quarter, we were able to grow, compared to 2019.”
Making wholesale partnerships work
“The dropship program that we implemented back in 2018 is the key way we’re maintaining a good business with department stores. So we are extremely well-positioned, [thanks to] our dropship program with the main department stores, such as Nordstrom, Saks and Bloomingdale’s. And they have been able to increase our digital sales a lot through the dropship program. So this is the way we’re dealing with them. Of course, having the usual inventory in the physical locations is important, as the more doors you have, the higher possibility you have to sell. But the keys to growing at wholesale are to have a very accurate digital marketing initiative, to negotiate a good co-op investment in their media platforms and to have as many SKUs as you can on their webpage so that you can get more traffic, which will increase your conversion. And that’s where to invest a lot.”
Investing in 2021
“We’re going to invest double [the amount] we usually invest. So in terms of capital expenditure, it’s going to be around $100 million. Half of that will be into our digital transformation, and the other half will be into logistics and a store [refresh], especially for Reserva — we’re creating a new store design. Today we have 125 stores, and we intend to renovate at least 30 throughout the year. So that will be our first main investment. For Troc, we’re going to take advantage of the vacancies that there are in the malls — there were a lot of retail shutdowns in the last year — and we’re going to create pop-up stores, so that it will be easier for the customer to buy and sell; the stores will be a point for [dropping] the products that you want to resell and also for shopping products that you can buy. Also, we’re working toward a new platform via Troc. [We want it] to be the way for brands to distribute excess inventory. Most brands are facing this challenge of excess inventory, so we believe that will be a good growth initiative.”