“I would have set up a loyalty program on day 1.”

Norway’s foremost authority in retail, Pål Wibe, has become an investor in Diller. We took the opportunity to interview Pål to hear his thoughts on what we can expect in the retail sector in the coming years.

Pål Wibe has an impressive background in retail, serving as CEO of XXL (2020-2022), CEO of Europris (2014-2020), CEO of Nille (2006-2013), and Managing Director of Travel Retail Norway (2004-2006). Wibe has held various positions at Ica Ahold (1998-2004) and McKinsey & Co (1993-1998). He holds a degree in Business Economics from NHH and an MBA from the University of California, Berkeley.

Engagement that has produced impressive results

Wibe has achieved excellent results for the companies he has been involved with. Pål was interviewed by Hilde Oreld in Norwegian newspaper Finansavisen before joining XXL in 2020, and at that time he said: “I’m not so concerned about what people think, but I like engagement. The worst thing is to be indifferent. It’s possible to turn people who are engaged. Without engagement, it becomes difficult,” said the man who during his time at Nille increased operating profit from 96 to 205 million kroner, and at Europris ensured growth in both top and bottom line by over 40 percent.

What do you think about the development in retail in the coming years?

– In the short term, I think it will be a bit rough, both in Norway and internationally, because we have seen major changes that have been going on longer and more forcefully than we thought, such as increasing inflation. More and more people have used up the reserves from the COVID era. The economic changes have also come a bit later than expected. It was thought that 2023 would be a tough year for retail, but I’m afraid the toughest time is ahead of us. However, I still believe that this will turn for the better for the consumer – and thus also for retail.

It may be unusual to feel more uncertain about the short term than the long term, but that’s how it is now. However, when inflation is under control, growth will come.

– Retail must take action to survive

When asked what retailers should do now, Wibe is clear: – In tough times, it is always important to streamline and take control of costs. It is essential to review significant cost elements. How can you reach your customers better and cheaper? How can you become more efficient in all parts of the value chain? How can you reduce the need for support functions? The retailers who succeed are those who can think through an economic cycle, in other words, those who prepare for the time after the tough times we are in now.

You should already be preparing for increased online shopping, ensuring an even better customer experience, and using new technology to improve customer dialogue. Those who can think long term in tough times will gain a clear advantage. Sometimes you have to make investments now to keep up the pace when times get better.

“Mr Retail” in a portrait interview in Norwegian newspaper Kapital

When Pål Wibe was interviewed by Lene Tangevald-Jensen in Kapital a couple of years ago, he was asked what he thinks his success is due to. “Engagement and diversification,” said Wibe back then, and he stands by that today. “It makes the team much stronger. If you hire people from the same school, with the same background, and who are like you, it becomes very poor. Of course, it’s comfortable because the frames of reference are the same. But it’s important to have different approaches. Think of a football team! Clearly, the mentality of the forwards compared to the goalkeeper is very different. Goalkeepers are often peculiar people. They are alone, and if they make a mistake, they are also alone in that. If you put the goalkeeper in attack, there will never be a goal and vice versa.”

– Data is the new gold

Pål Wibe is clear about what is important for retail in the future.

Data is the new gold. It is essential that purchase information and customer data form the basis for all good customer dialogues. Having control over this is in my opinion absolutely crucial.

What do you think about the future of online shopping?

– I believe that online shopping will continue to increase significantly in many industries – it is a positive wave that is coming. Online shopping has grown more in 2023 than physical retail. The distinction between “online shopping” and “non-online shopping” becomes much more blurred because what is the definition when you research and purchase a product online and pick it up in-store? Is it online shopping or in-store shopping? Omni solutions make it difficult for customers to distinguish, and what is important is that it is easy for the customer. If you can also deliver the goods in a cheap way, you win the hearts of the customers. As a retailer, you must work along both axes. The share of online shopping will increase. In an industry like electronics, it will probably still increase, but it has already come a long way. On the opposite side, we have groceries – where online shopping accounts for a few percentage points. Most sectors are somewhere in between and have significant potential for further growth.

How do you think Norwegian stores should compete internationally?

– There is more and more competition from abroad, look at the Swedish chains that have entered Norway. At the same time, this is an opportunity for us in Norway. Many Swedish chains are better at thinking globally from the start. In Norway, it is often “first Sweden, then the Nordic region, and then out into the world”. I cheer for Norwegian companies that want to make the global leap early like the Swedes are so good at. I feel that Diller is doing just that and setting the bar high. I have great faith in that.

How can you get more loyal customers?

– Traditionally, too little has been done! Most loyalty programs are what I would call “email spamming programs”. This leads to low engagement. One misses a good opportunity to create much higher engagement and loyalty. In the long run, we will see hyper-personalization, and to achieve this, you need a modern, digital loyalty program. Traditionally, the costs associated with loyalty programs have been too high.

Everyone understands that loyalty programs are extremely important because digital external marketing is becoming increasingly expensive, but the challenge is that loyalty programs have been too costly. Exciting things are happening now because cost-effective loyalty programs have emerged that also create engagement among customers.

The market, which has been dominated by the very expensive, generic “email spamming programs”, has faced some resistance, and this is not to the benefit of retail. It is a dilemma that loyalty is becoming more and more important, while many retailers have loyalty programs that are too expensive relative to what they get out of it.

Why have you invested in Diller?

– I believe that customer loyalty is one of the greatest and most exciting challenges for modern retail. The largest providers of loyalty solutions have been expensive and provided little value for money, so I have been looking for good alternatives. Diller is one such actor. They have a much more cost-effective product, which is just as good, if not better in some areas. It is a more modern and flexible platform, and the company has an international focus.

I have been looking for investment opportunities in companies that can challenge current providers because I believe that customer loyalty is the most important challenge to solve for retailers. When I came across Diller, I saw a completely different cost-effectiveness, along with a modern digital platform.

– Advertising is not sustainable as the sole marketing strategy – retailers must own their own channel

We asked Wibe about his assessment of the current advertising market. – It has become more expensive to advertise digitally. Digital players have become better at personalizing ads, but ad space has become significantly more expensive. The actors are good at extracting value, but retailers face a dilemma: Marketing is shifting massively to digital, while costs are increasing.

The main focus in all the retail chains I speak with is to have their own marketing channel to reach customers. Retailers who do not own their channel will not survive. With paid channels, you have to have start a new dialogue with customers continuously and pay each time. This is not sustainable for retailers in the long run.

What must point-of-sale suppliers do to remain competitive in the future?

– My perspective is that in the old days, the cash register could be an “isolated island” that you only encountered in the store at payment. In modern retail, however, everything is integrated. The cash register must be connected to the customer club, and it must seamlessly work with all other systems. The cash register is going from being an “island” to being integrated backward towards the company’s own systems, as well as towards the loyalty program and the online store. The cash register is the front line for collecting the “gold” – customer and purchase data, so that you can use the loyalty program for further dialogue with customers in a way that makes sense to them – and ultimately, this is the basis for hyper-personalization.

– Everything must be made as easy as possible for the customer

When asked about how payment solutions play into the competitive situation in retail, Wibe responds: – It’s exactly the same; everything must be integrated and seamless in a way that makes it as easy as possible for the customer. At Europris already 7-8 years ago, we used the payment solution to register people in the customer club, and we saw that this was an important driver to increase the proportion of members who shared full purchase data. We chose it because it was easiest for the customer. We Norwegians are also “fans” of cost-effective payment solutions – we are a bit spoiled with easy payment.

Finally, if you were to start up Europris, Nille, or XXL today: What would you have done differently considering how market dynamics have changed?

– That is a very (!) big question! But in short, the competitive situation has changed drastically in the last 10 years, and it is more challenging to become profitable. I know for sure that I would have started with a loyalty program from day 1, so that I could start with direct customer dialogue in my own marketing channel right from the start!