100,000 euros. This is the amount that La Redoute will donate to its employee-turned-shareholders who had bet, under the leadership of management, a few hundred euros on their company when it changed hands in 2014.
This exceptional payout illustrates the exceptionally quick recovery of the former king of mail-order, founded in 1837, which was but a shadow of itself in the 2010s, overwhelmed by online commerce players and a bygone image of fashion.
In 2014, its owner Kering (François Pinault’s group) actively searched for a buyer and sold the company on the verge of bankruptcy (300 million euros in accumulated losses over 5 years) for a symbolic 1 euro to two of its executives in office since 2009: Eric Courteille and Nathalie Balla.
We take them for crazy whose project is doomed to fail, but these two have a multi-layered plan.
From 1 euro to a valuation of 1,000 million
This initially painful plan quickly proved its worth as four years later the Galeries Lafayette group decided to acquire a 51% stake in the company valued at less than €1.2 billion, before scaling to 100% in 2022. To say that starting in 2016, La Redoute recorded successive quarters in the green, the first in eight years, and frankly accelerated during the 2020 lockdowns.
What were the levers of this recovery? The adventure begins with an inevitable and difficult restructuring since 1,178 positions out of 3,437 are eliminated, with forced departures.
However, the unions agree to play the game, visibly convinced by the proposed strategy, the leadership’s ability to instill momentum, and the immediate opening up of part of the capital to employees. This is an essential first step to reconnect with success: being able to involve everyone in a project.
It should also be noted that Kering is injecting 500 million euros before the sale to cover losses and ensure priority investments.
The catalog of 1000 pages in oblivion
This strategy obviously revolves around 100% online commerce, relying on a still very strong reputation among French consumers, a presence in the Roubaix region and, above all, a drastic refocusing of the items offered for sale.
La Redoute is based solely on a fashion (women’s/children’s) and home positioning. At the same time, the famous quarterly catalog on paper of more than 1,000 pages is definitively discontinued. Which generates significant savings.
This refocusing is accompanied by an increase in in-house ready-to-wear and decoration collections, which automatically generate more margins. You still have to aim straight.
The idea is to highlight “the French style” with dedicated design teams, collaborations with fashion designers, at affordable prices. An offer that finds its audience, especially the youngest.
Better, the physical stores dedicated to decoration are open. “A complementarity that has allowed La Redoute to rediscover a link and this is very important in the field of furniture. Consumers want to try a sofa before trying it on, for example”, emphasizes Frank Rosenthal.
Prepare and deliver orders much faster
But it is above all the modernization of logistics that has made it possible to consolidate these strategic choices. The historic warehouse is abandoned, 50 million euros are invested in particular in a new building called “Quai 30” to improve the quality of service and delivery times. A crucial step that should allow you to compete with the faster and faster delivering web giants.
Result, orders prepared in two hours and guaranteed deliveries within 24 hours, a performance also made possible by Relais Colis (4,700 relay points in France) which belongs to La Redoute.
In 2021, La Redoute reaches 1,000 million euros in business volume, 20% more, in line with its objectives, and generates 100 million euros of profit. The company has a million new customers and even plans to expand internationally. The Galeries Lafayette group now has in its hands a high-performance tool that is in line with consumer expectations.
The speed of recovery of the brand is surprising and denotes in a highly competitive sector that is claiming many victims.
A “Double Weird” Twist
“It’s doubly weird. There are few successful relaunches in the trade and even fewer where employees take advantage of them. Especially when you look at all these textile brands that have tried to re-launch, that pass from hand to hand and that the common point of all these brands is the lack of a clear positioning. La Redoute is more protected”, analyzes the expert.
Whether this will hold in a context of high inflation and consumer arbitrage remains to be seen.
Thus, while the electronic commerce sector (products and services) rose last year to 146.9 billion euros, 13.8% more in one year, product sales decreased by 7% compared to 2021.
“There is a real slowdown in the sale of products online. And this change is happening in all major markets. It is a threat in the short term, particularly for customer experience issues. However, the Galeries Lafayette group has everything interest in supporting La Redoute to make it the armed wing of its e-commerce strategy”, believes Frank Rosenthal.
Source: BFM TV
