Despite the pandemic, Dutch brand Rituals, pushed ahead with store openings, including the launch of its flagship House of Rituals last year, while building its e-commerce operations and exploring new sales models. Rituals Founder and CEO Raymond Cloosterman tells BW Confidential why brick-and-mortar stores are still important, how their role is set to change, and shares his views on omnichannel strategies
How has the COVID-19 p
The year 2020 was supposed to be our 20th anniversary celebration and we had planned for sales to hit the €1bn mark. But in March last year, we landed on a different planet. We had a very tough two months at the beginning of the crisis, when there was no visibility and when our 850 stores were forced to close. But once we reopened, we bounced back tremendously. Looking back on 2020, the company has come out of the crisis stronger. We didn’t hit our objectives and our goal of growing by 20% to 30%, but we did manage to grow our top and bottom line a little. The good news though is that we reinvented the company. Our whole digital agenda was brought forward by two-to-three years. We began 2020 with e-commerce representing 8% of our sales, and by the end of the year it accounted for 20% – that is our own e-commerce sales, and so excluding pure-players and partnerships. We came up with lots of new business models – home shopping, VIP shopping booked through the internet and VIP delivery. Despite the crisis, we also managed to open 40 stores and our flagship House of Rituals. In addition to our long-term commitment to omnichannel and to a combination of standalone stores and strong e-commerce operations, we saw that in a year like this, it is important to continue investing. Our growth underlines the strength of the brand and how it resonates across Europe – Rituals is one of the fastest-growing beauty brands in Europe.
Was your growth last year primarily due to e-commerce?
No, it was a mix of everything. We have an omnichannel model and we operate around 850 standalone stores and hopefully we will open another 100 this year. Retail lost a little bit of terrain, due to the fact that stores were ordered to close. Of course, we lost a lot of trade in travel retail, which has been hit very badly. But in our wholesale business, which is our partnerships with luxury department stores, perfumeries and our pure players, we were able to grow, and e-commerce grew a lot. The good news is we were ready, as two years ago, we invested in a fully automated warehouse. Twenty years ago, we launched with one store and an e-commerce business – operating an omnichannel model when the word didn’t even exist. Looking back, perhaps we were a bit too early with this concept, but now we are benefiting from the model.
You plan to open 100 new stores. Given that 2021 is not the recovery year many had expected, why invest in stores?
To be honest, the start of the year has been very disappointing. We have planned for a poor start for the first three months, but we also expect that after that, business will pick up, especially in the second half of the year and that we’ll get back to normal and that people start to really spend again. We have a long-term perspective on how we want to build not only our brand, but how we want to build a community. We are strong believers in the combination of standalone stores, e-commerce, travel retail and wholesale, and this means that you have to keep investing. There are opportunities as rents are coming down very quickly and should continue to do so. But we also believe that customers will want to go out, be entertained and meet other people, and especially in beauty, you need to feel and smell the products. COVID-19 will go away, and we have to be ready when it does.
Many companies are rethinking their retail model, due to the rise in e-commerce. Is there a case for fewer stores and doing the volumes online?
We believe strongly in the combination of stores and online. We have a healthy portfolio of stores; we have not acquired stores, but built them ourselves, and so we have selected the locations and have a healthy set-up. We also want to grow e-commerce – we want both. We expect to double our business from €1bn to €2bn in the next 10 years. Part of that plan is a very strong footprint with our stores, and an online share of 25% to 30%. Our offline and online experience has to become a seamless kind of operation, and that’s what we’re working towards today.
But isn’t online taking business from brick-and-mortar?
Yes, of course online will take something away from the offline business, but it is adding a lot as well. So it is a combination, and part of that growth is new, and part of it is cannibalization. What it is important is making sure that your stores are relevant. This crisis and the fact that rents are quickly falling is an opportunity because we can get bigger stores for the same price, and so offer a nicer in-store experience.
You mentioned ship-from-store, do you see some of your stores becoming fulfilment centers?
We went through that whole development last year, where our employees delivered products on bicycles to customers around 30 minutes to an hour after they placed an order. That came out of necessity, but now it will become part of our program. Of course, the role of stores will change and we are working on it. Growing our company means that we need to look for different business models. We are looking at different ways to grow the e-commerce business, so click-and-collect, ship-from-store, private shopping will all help. We are working on coming up with new models where you offer new services online as well. We want to grow from the brand we are today, to more of a community and where we represent this whole idea of living soulfully. This will be not only through selling products, but through yoga classes and meditation exercises, which we already offer on our app. What will also be key is our new House of Rituals flagship.
This flagship store opened to celebrate our 20th anniversary and with it, we wanted to open the store of the future. Two or three years ago, we started thinking about a new store experience, which would be a laboratory for new products, and this is hopefully the start of the next 20 years of growth for us. We are testing new product concepts, new design concepts and new brand ideas. The store measures 1,900m2, whereas our normal stores are 100m2. It has a restaurant and two floors of products and experiences, and on top of that, we will open a body spa and a mind spa – the first mind spa in the world, where we take people by the hand to learn about meditation. This store lives and breathes the DNA of our brand, which is about being a compass to wellbeing.
We have launched 600 products, which are only available in the House of Rituals and online, and that is an interesting model because, it is creating a long tail. We are offering new product lines, from luxury bed linen to very large luxury candles; you can create your own luxury fragrance sticks and your own bespoke candles. We offer shoppers the opportunity to create their bespoke perfume, to personalize body creams, and we have also launched complementary product categories, such as personalized shampoo.
At the same time, we have a very big community through our CRM program, whereby we can send consumers newsletters to offer them this assortment. And maybe we will have small corners in other stores with this online-only assortment. This flagship store is a new start-up and there are powerful thoughts in it that could help us achieve our 25% to 30% share objective for online sales.
Do you plan to launch House of Rituals flagships in key cities around the world?
I would say yes, that is the dream, but then there is the business reality. My dream is that in 10 years’ time, we have House of Rituals in every capital in the world and then little satellites around that. But the truth of the matter is that we first have to make this one work and learn. The initial first eight weeks after opening were very promising, but we have to wait until tourists come back and traffic is back in the high street. For now, it is the flagship of our e-commerce operation and the flagship of our store operation.
Is the idea to take the features that work in this store and roll them out in a smaller way at your other stores?
Yes, it is a laboratory. One example is a luxury laundry line based on two of our rituals, which we launched the store and online – it was a great success, so next year we will launch it in our stores. These are the kind of things we would never have learned if we had not tried them out in the flagship.
We are committed to stores and the trend at our company is to move to bigger stores to give people a better experience and something extra. When we launched the brand 20 years ago, we had 60m2 stores, and now we have 120m2 stores and premium stores covering 200m2. We are increasing the size of our stores to bring in new categories and more experiences.
Given your model of bigger stores with more experiences and e-commerce, is there still a need to sell through department stores?
We still believe in department stores. They have been a partner from day one. When we start in a new country, department stores and retailers like Sephora and Douglas are very important partners to help build the brand. And after a couple of years, it turns around, and we become a very good partner to them to help drive traffic and to bring incremental sales. It is a win-win partnership and a very powerful base for future growth. But we cannot, and we will not, depend on it. It is a small percentage of our business, but an important part of our brand-building model.
Services are an important part of your brand. How can you do that online?
We are in the middle of that, and it is a huge challenge for everybody. First of all, the idea is to build a community. Of course, we have to make sure that the online experience is interesting, and we are working hard there to take extra steps in this area. We will offer different services, but it is not easy because it remains a 2D kind of experience compared to a store. The kind of things we are offering are nicer prices and online-only products, for example.
You recently opened an office in Hong Kong. How do you see China and Asia fitting into your strategy?
Asia is the golden nugget for a company like ours. We have a solid performance now in Europe, but we still have many new countries to enter. We will open Poland this year, but we still have to launch in Italy and maybe Russia, and we have tremendous growth opportunities in France and Germany. For Europe, there is a plan in place and there is a strong foundation.
But now we are looking carefully at the next step, and that, of course, is becoming successful in different continents, and Asia is our future. We began very carefully in 2019 by opening stores in Hong Kong, but then we were impacted by the civil unrest there and also by COVID-19. We also launched on Tmall Global. For Asia, we want to open stores there and set up a strong e-commerce business. We would love to go China, but we are against animal testing on products or ingredients, so haven’t taken the extra step. Having said that, the situation on animal testing is changing rapidly there, so we expect that brands like ours will be able to open the market in the next one-to-two years, and we want to be ready for that.
Is the US also a focus?
Yes, although we had a very tough year there in 2020 with the violence, COVID-19 and the elections. We decided to use that year to reorganize our company. We closed half of our stores – and now have around 13, but we improved our e-commerce performance and focused on the supply chain and the assortment to make it a digital-first kind of set up. This will be used as a basis for our stores and for our partnerships with Sephora and other big players and pure players.
Will you remain committed to travel retail given the difficulties in the channel?
We have seen a temporary dip in travel retail, but we are sure that the business will bounce back, and we will prepare for that. We have a strong focus on Asia, with two travel-retail locations opening in Hainan this summer. We also have very exciting projects for standalone stores in the pipeline.
There are also opportunities in travel retail currently: Airports are now reinventing themselves and their shopping experience, and hopefully waking up to see that they need the kind of price segment we offer, and not just luxury. Secondly, business models are shifting at airports and we are seeing a trend whereby airports are beginning to do business directly with brands; this will add a new dimension to the whole market. We are watching this closely and will be ready to jump in. In the meantime, we continue to support our partners, as they are going through tougher times than we are.