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Introduction

Last May, the IADS had the occasion to travel to Andorra to visit the local landmark Pyrénées department store and meet with its leading team to understand where the company was heading. In Andorra too, the Covid-19 pandemic left its mark and forced retailers to rethink their business approach and positioning, especially in such a landlocked country normally living on touristic flows.

*Even though the size of the business is relatively small when compared to other IADS members, the Pyrénées business case raises a set of interesting questions when compared to the rest of its local market:

-    What does loyalty mean for the Pyrénées customers? Is the game all about attracting local customers to the Pyrénées ecosystem, or making sure that tourists will return to the store? And what is the differentiation point: price, or selection?

-    How can a retail company stand out from the crowd in a country where the whole industry is based on duty-free product sales, from tobacco and liquor to fashion and accessories?*

Given the specificity of the Andorran market and operations, such a visit was extremely informative as it helped to see another approach to differentiation and segmentation. Interestingly, in Andorra too, the game is not anymore to sell products (even at extremely competitive prices) but to provide a new, fresh and compelling experience both in-store and online.

Company history: a very big fish, in a very small pond

The Pyrénées department store (whose original name is Grans Magatzems Pyrénées in Catalan) has been founded in 1930 by the Perez family, twenty years before the touristic boom that took place in the 50s. At the time, Andorra was an isolated country living in autarchy, selling wood and tobacco, and there was an opportunity for a retailer to bring in novelties and a taste of the outside world fashion. It is remarkable to note that the country is still rather difficult to reach, with no international airport or railway connection, and that, in spite of this, it has built its reputation among some travellers thanks to the low VAT level of 4.5% and good retail prices (up to a third of the French ones).

The Pyrénées group (which used to be an IADS member from 1979 to 2019) grew remarkably in just a generation, and entered many different markets: local wholesale distribution (for brands ranging from Samsung, Sony, Leica, to Ray-Ban or Montblanc, and including food such as Horeca), automotive distribution (from Mercedez, Citröen, Jaguar, Land Rover to industrial vehicles or motorcycles), travel agency, banking and credit, insurance, in addition to its retail activities. The Group operates, in addition to two department stores in Andorra-la-Vella and Pas de la Casa, the FNAC-Darty stores in the country, hypermarkets and other franchises such as L’Occitane, McDonald’s, or various hotel chains.

It now represents 9% of the national GDP, employs 3% of the Andorran active population (1,200 persons), and the name is a household name for many, if not all, Andorrans. Being privately owned and managed by the third Perez generation (who lives in a cult of secrecy, following some succession scandals that took place in 2010 and 2020), it is difficult somehow to have an idea of the turnover achieved by the department store itself, knowing that the group total turnover is estimated at €271m in 2019.

Visiting the store: Testing new ideas in a changing context

The Pyrénées department store, that every Andorran knows, is located in the heart of the city and can be considered quite accessible taking into account the difficult local geography and tiny roads. Rather massive, with a complex floor plan, the store has a total surface of 15,000 sqm on 5 floors. There are several entrances, and each of them has a very distinctive flavour: according to the exit, the store can feel like an international department store with a nice selection of accessories, or, on the contrary, one can feel as if they are entering in a typical duty-free store if taking the massive tobacco and liquors entrance.

Even though the store is divided into 5 floors, not all of them are dedicated to the department store in itself: the basement is operated by FNAC/Darty (it is necessary to go through the department store to access it, which reminds a bit the Inno/Mediamarkt partnership in Brussels), the third floor adds to a reduced retail space a level of carpark, and the fourth floor is dedicated to customer service and carpark.

The ground floor is large and provides different experiences: hard and soft accessories, cosmetics and beauty, men’s fashion, and tobacco products, with an impressive cigar lounge. The whole floor is designed with mobile display units, whatever the section and the category, with only the peripheral sections being fully decorated by the brands, suggesting flexibility if and when needed.

When it comes to the accessories section, the brand range is international and attractive, with Longchamp, Furla or Michael Kors in corners decorated with the brands’ concepts, and generic areas in the middle featuring Ralph Lauren, Moreau or Coach. The execution and feeling in the leather goods section is more qualitative and distinctive than in the watches and custom jewellery section, essentially due to the level of brands available and the fact that in the rest of the town, the competition in that segment is harsh.

The tobacco products space is just near the parapharmacy space, which is somehow intriguing. There, customers can buy cigarettes, luxury cigars, but also chocolates and souvenirs. A dedicated cash counter allows separating such sales from the rest of the store (where customers have to go to central cash desks, Pyrénées is not yet equipped with mobile cashing solutions).

Probably for the same competition reasons that limit the business on watches and jewellery, the cosmetics and beauty section is less impressive than in other international department stores, and takes much less footprint. Once again, here, the story is about having the category present to capture any potential sale and making sure that no opportunity is missed, but without having the possibility to fully differentiate from what one can find in stores in the rest of the city.

Finally, the men’s section is probably the more immersive, with a surprising selection of luxury and semi-luxe brands (Boggi, Ralph Lauren, Hackett…) in a very nice and well-executed environment, neighbouring a younger and more contemporary offer, from Rains to Tommy Hillfiger. It naturally leads, and without much of a transition, to the sports section which is mixed and includes international brands which have claimed to stop wholesale distribution, such as Nike and Adidas (but Andorra is a specific and small market).

The first floor is dedicated to women’s and kid’s fashion, as well as toys. Interestingly, on the whole floor, the feeling is much less generic as many brands do have their own concept all along the aisles, giving a feeling of shop-in-shop even though all purchases are also processed on central cash desks in the middle of the floor. This brand concept approach is not linked to a specific positioning such as in the Men’s luxury section a floor below, and goes for brands from IKKS to Scotch & Soda but also Tommy Hilfiger.

The lingerie space is large and impressive, and at the time of the visit, was one of the busiest sections of the store, entirely with female customers, which suggests that this section is more well-suited for local customers and their own consumption (probably for historical reasons as Pyrénées was one of the first retailers in the country) rather than being a duty-free location such as Victoria’s Secret airport stores where travellers can buy spicy lingerie on the go.

Interestingly, a portion of the floor is dedicated to a specific concept, called “Gallery”, where designer brands are available, such as Isabel Marant, Ganni, MSMG or Vince. Some kids’ fashion is also available here and also comes, just like the women’s selection, as a complement to what is available on the rest of the floor. This space feels like a laboratory where Pyrénées tests new brands or new processes, as some second-hand luxury handbags are also available. The space, equipped with carpets and sofas, is also somehow a bit more comfortable than the rest of the store, which is fitted with a cold luxury kind of approach (marble, generous lights…).

The second floor is dedicated to food but looks more like a supermarket than a gourmet food section. Aisles are pretty basic and advertising is more price-centred than product-centred. A click and collect service, “shop and go”, is available on this floor and works with a dedicated app.

The third floor welcomes customers with the reproduction of an old fountain, which can direct customers either to the food court, with a selection of a few restaurants (well suited for lunch but quite unappealing for dinner options), or home equipment, including pet accessories, a locksmith, and a dry-cleaning service. A spa is advertised but, in reality, is not much more than four massage tables in a private room, closed for Covid-19 regulations at the time of visit.

Customers can access the carpark from here, and this floor is the only one with all amenities, including toilets.

The fourth floor is dedicated to customer service, where all clients are accommodated in the intimacy of a private cabin with a customer representative. There, customers can deal with purchase pick-up, and returns, but also tax refunds, credit limit increases or other requests. Attention to the customer is maximal but overall feeling a bit vintage.

What to remember and what is next?

A duty-free store is not precisely expected to be the place testing and trying new full-price categories or services. Even though they are still at the very beginning of the journey, the leading team of Pyrénées is well aware that in a city like Andorra, the price point is no longer a competitive argument, however old or familiar the retailer’s brand name might be.

This is why they have started pre-pandemic to go upwards in terms of brand positioning, which explains the nice luxury spaces spotted in the Men’s section on the ground floor or on the first floor with the Women’s section. It also explains why the “Gallery” space acts as a laboratory of new ideas, both in terms of new brands (many of them are not sold elsewhere in Andorra), or categories (by mixing design with fashion, for instance).

Most importantly, Pyrénées has been working a great deal behind the stage, with the launch of My Piri, the loyalty programme boasting a subscription rate of as much as 80% of the total Andorran population, allowing the retailer to have a very good understanding of its purchase behaviour, and its data, which could turn up into a gold mine since Pyrénées is the only player on the market.

Is that to say that Pyrénées is now all about bringing “the best quality and the largest brand and product assortment in the country” to local customers? Not exactly: it also wants to reclaim its status of destination store for any tourist coming into town, which is the reason why the expansion plans include in the coming year the opening of a new floor entirely dedicated to wellness and spas (which also explains the reason why the current “spa” lounge space is closed) and a rooftop overlooking the roofs of Andorra-la-Vella.

Conclusion

Travelling to Andorra is fastidious, and long, as it can take up to 3 hours from Barcelona or Toulouse to get there. Now that customers can access good deals from the comfort of their homes (with some limitations to this claim as it is difficult to find cheap cigarettes online, if not illegal), they are asking for something more.

A good illustration is the fact that now, there are 3 distinct types of tourists travelling to Andorra: the travel retail tourism, aiming to take advantage of the prices which can be up to three times lower than in France or Spain, the “white” tourism, people coming to Andorra during winter for ski, and the “mountain” tourism, a new breed of travellers increasingly hungry for outdoor and rock-climbing experience, a population for whom smaller cities in Andorra are building equipment and designing trails in nature.

The Pyrénées department store has well understood that, in a city where the price point is a reason to come for a third of the tourists, selection, curation and experience were the best way to differentiate. The cherry on the cake is that this allows to killing two birds with one stone, as locals might also very well enjoy a place to hang out. The opening of an entire floor dedicated to wellness is, for sure, a major piece of news for the city of Andorra-la-Vella, and will deserve a review in a year or so to see how they executed their vision, all the more that some interesting benchmarks are coming to light at the same time, such as the new space at Galeries Lafayette.

All in all, a new destination within the destination is born in Andorra, proof that department stores all across the world, whatever their size or market, are alive and kicking, in spite of what some might say.

Check out the collection of pictures here!

Credits: IADS (Selvane Mohandas du Ménil)