Bernd Hofstoetter, M-Cube

The 16:9 PODCAST IS SPONSORED BY SCREENFEED – DIGITAL SIGNAGE CONTENT

Italy's M-Cube has quietly grown into one of the larger and more pervasive digital signage solutions providers on the planet - with deployments in more than 100 countries globally, across some 60,000 retail stores.

It does mainstream retail and QSR, but the sweet and lucrative spot for Milano-based M-Cube is servicing the needs of luxury brands - something both Italy and France seem to have as specialties.

M-Cube has grown both organically and through acquisitions, including the purchase of a French firm run by Bernd Hofstoetter, who is now M-Cube's Paris-based CEO.

In this podcast, you'll hear about how M-Cube operates in Europe and globally, industry trends (particularly in retail), and how it approaches and works with luxury brands in their bricks and mortar stores.

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TRANSCRIPT

Bernd, thank you for joining me. Can you give me a rundown of what M-Cube is all about? I think there are a lot of North American listeners who probably aren't familiar with the company. 

Bernd Hofstoetter: Yeah, Dave, no problem. M-Cube is a company that has existed for over 20 years. We started 20 years ago out of Italy, with mainly audio solutions for retail, and five years later, over 15 years ago, we moved very fast and very strongly to the digital signage growing market, and we became, over the years, the leading provider in Italy, and then we bought different companies in Europe, and today in 2023, we claim to be one of the top in-store digital solution providers based in Europe, but with a global footprint delivering to over a hundred countries in 60,000 stores to 500 clients our digital solutions like audio, video, content, technology, and more and more as well omnichannel.

Would you describe what you do as a solutions provider or an integrator? 

Bernd Hofstoetter: More the first one. I would say that at the beginning, we were more an integrator and we became much more a full-service solution provider. 

We are moving more on the first part of the value chain, meaning the customer journey, and content development because technology is everywhere around and to fit the right solution, a good mix of the best content and the right technology, and of course, the power of deployment and service is the most important key success factor in this industry for the next 5 to 10 years.

Was it a case where the company saw the opportunity to expand its services, or they were being pushed in that direction anyways by customers? 

Bernd Hofstoetter: Yeah, that Dave is very often like that, the strategy you do afterward. So that means, of course, there were some global customers who were pushing us to deliver video solutions, so we moved to video. And as we have a lot of global customers, especially in luxury, we are, of course, a company that can deploy in over a hundred countries this kind of digital solutions in retail. 

Yes, it is pushed by the clients when you start, but of course, over the years, then it becomes a company where you add some parts where you are not so strong, so you buy from time to time some expertise from outside to complete your value chain. 

So you're one of those companies that were acquired by M-Cube. You're the CEO of another company in Belgium and France. How did that go? 

I'm curious because it strikes me as Europe is still regional. There are particular companies that are strong in Germany, Italy, France, or Spain, but they're not necessarily pan-European. 

Bernd Hofstoetter: Yes, I come from a company acquired by M-Cube, and we had the journey to integrate all the companies we bought to integrate in the last two years. Of course, there are still local champions in the German region or in the UK or in France, et cetera. But the tenders are becoming more and more European or even more and more global. 

I think if it continues like that, the pure local providers, they probably will have a bit more trouble in the next years to grab the business. We see more and more European-wide, or over several countries in Europe tenders.

And that's not easy, is it? Because of all the different languages and everything else. 

Bernd Hofstoetter: Yes, but we have now a position in every main important country in Europe. I'm not talking about little countries like Luxembourg but all main countries. Italy, Spain, France, Germany, UK, Netherlands, Belgium. We have a local team where we deliver local, but as well, European or global solutions. 

Your company works a lot with luxury retail. How important is that particular vertical market to you guys? 

Bernd Hofstoetter: Of course, we have grown in luxury a lot. I think we understand luxury very well because this sector is extremely demanding, it's extremely global, it's extremely service oriented and there's still a lot to be done in the luxury sector, that’s what we see, so it is important. 

That's the reason as well why we moved more and more to the content side in the last years. I think we are very fit for this sector. 

And it's a very different sector to approach as well. Like me, I get a sense that luxury retail wants to be subtle and has a kind of a minimalist bend to the way they approach digital in their stores. 

Bernd Hofstoetter: Yeah, totally. They are not approaching it from the technology side. They are approaching it purely from the customer's side, that's what we love. That's what we know to do. It's a specific code, what we say in our business, specific code when it comes to luxury, it's a bit different world to address to, to talk to, to communicate to.

Because a lot of the luxury brands emanate from Italy and France, so have you experienced organic growth because a lot of those companies are there and they see what others are doing and come to you? 

Bernd Hofstoetter: Of course, as we were strong or still strong in Italy and we have acquired a company in France we could have a good positioning, but we are now working as well with luxury companies, not only based in Italy or France. So our culture, our compensation, and our interpretation of the luxury challenges in terms of customer journey seems to be very appreciated, not only to the Italian-based or French-based luxury groups.

It would strike me, as an outsider, not spending enough time thinking about it, that the budgets that these kinds of retailers have are quite different from what you would have for let's say a fast fashion apparel retailer.

Is that a fair assessment or wrong? 

Bernd Hofstoetter: In the end, it comes to the return on investment. It is not about what we are thinking about whether it is the fast retailer having a lower budget or a luxury group. It's about return on investment at the end of the day. 

The solution we engineer, we design for our clients, they need to bring the expected return on investment in their stores or boutiques. 

No, I would not really say that a luxury retailer has double the budget of a fast retailer or whatever. It really depends, and at the end, it's the return on investment. 

It's interesting, with one of your main competitors, and I'm sure business friends as well, Trison based out of Spain, they work a lot with Inditex and there's a particular brand, Lefties that has stores that - I haven't been in one yet - but they look pretty wild in terms of the amount of digital in there.

Is that something that you're being asked about or is it, or would it be the opposite of how a luxury retailer would approach things? 

Bernd Hofstoetter: No, Lefties is, of course, an interesting case. I've been to one of the stores in Barcelona, Dave, and it's clear that in stores like that where you would expect a bit of digital, but when you see the level of digital investments in the store, of course, it's really amazing. But it shows one thing, screens everywhere. 

The generation who go shopping today to Lefties, they are grown up with screens, and there's no way back. I can give you a little anecdote on that. We had a client five to six years ago, and they deployed at that time 700 nits Window screens in 200 stores. 

After five years, the lady said, “Hey, Bernd, five to six years ago, we were the first. Now everybody has a Window screen, and much more, and the problem is that they are 2000 or 3000 nits. Ours look old-fashioned. I think we'll stop.” And I said of course you can stop, but you will not be recognized anymore. What is the story? They invested in the new generation, in the new technology with 4,000 nits screens. So there is no way back, and Lefties is one interesting case for that, Dave, that for me, there is no way back. Food retail is very active at that moment with screens. For example, we said years ago that food retail will likely not invest anymore. There's no way back. More and more screens everywhere. 

And what do you mean when you say there's no way back?

Bernd Hofstoetter: There's no way back to less digital. There's no way back. For us, it's clear that perhaps there will be fewer stores, but the investment per store in digital will grow over the years. We are totally sure of that. 

Yeah, I guess you have a digital native shopping crowd now that maybe you didn't have even 10 years ago because I can remember retailers screening out a store, like there were screens everywhere in a store, particularly for sports retailers, and then when they did a refresh, sometimes they would strip out a lot of those screens because they just realized it was so much noise. Have you experienced that at all? 

Bernd Hofstoetter: No. We have very few cases where the retailer has not integrated in the next version of his retail chain, of his concept, more screens. Very very few. I really need to think for a long time to find an example. I remember there was one or two in the last five years, but that's absolutely the exception. That's not the rule. Not at all.

What's been your experience with interactive retail? 

Bernd Hofstoetter: It’s not so easy to do interactive in retail. Then Covid wasn’t fair to the tech, so interactive was somewhat totally stopped, but it’s restarting. We see some projects in some specific markets, but it is not like what we imagined 10 years ago when everybody said everything will be interactive in the store.

Yeah, I've found that a lot of interactive efforts in stores just sit orphaned. They don't get used unless somebody encourages them to use it. 

Bernd Hofstoetter: We think more about the interactive, for example, as omnichannel an solution to help the salesperson in the customer journey, so to upsell something in the store, but for the end customer, it is still not so easy to make use of these technologies. Yes, I totally agree with you, Dave. 

So for a salesperson, it's like assisted selling, this is a tool they can use?

Bernd Hofstoetter: Exactly. That's what we can offer.

When you go into engagements with a new client, let's say it's a luxury retailer that you're not yet working with, what are those first questions you guys are asking? 

Bernd Hofstoetter: The expected return on investment of a digital solution, because it does not make sense to make technology for technology. So the benefit of the technology, of the solution is the key for us. It's absolutely key. 

And do the clients have a sense of that? Because I've sat across the table from customers in my consulting days and asked them why, and in a lot of cases, they couldn't really quantify that. 

Bernd Hofstoetter: More and more. We have more and more technology to understand what could be the return on investment of a digital solution.

We always run proof of concepts or tests or pilots. But you are totally right. When I look back 10 years ago, it was like, oh, we need to have a screen. Today, this is really totally over. We hear questions like, “What is the objective?” “What is the return on investment expected?” “What do we really want to achieve?” And from there, it's the design of the solution and the integration of the technology into the customer journey. These are the most important points at the beginning of the discussions.

Are you marketing your own technology, or do you work with partners? Obviously, you would on the display side, but do you have your own software?

Bernd Hofstoetter: Yes, Dave, one of our DNA is to have our own platforms, audio and video platforms. Of course, if the customer says, I want to work with this non-proprietary platform, we can do that. But we prefer to run our service on our platforms where we have invested over the last 15 years now. We still have a lot of software development people in the company continuing to develop the platforms, hosting and maintaining, and evolving the platforms. Yes, it's one part of our DNA, our proprietary platforms. 

Are you typically, or most typically managing the networks for your retail clients?

Bernd Hofstoetter: We are more and more integrated into the networks of our clients. Monitoring is becoming very important. Of course, that was not so important years ago. That's now key. Proactive monitoring is very important. Reliability and security are becoming more common in the last two years in big tenders; the security level and tenders are only increasing, not decreasing, only increasing. The request for more security is increasing. That's clear as well. 

Yeah, I saw a comment from your president, Manlio that you were getting into some deals and replacing existing software vendors simply because you could offer the level of IT security they could not.

Bernd Hofstoetter: That's totally true. For example, one and a half years ago, we had a global deal where we replaced the existing provider and the main driver of this client was security level to enhance.

You're operating, as you said, in the north of a hundred countries. How do you manage all that, like do the deployment in places like China and India? 

Bernd Hofstoetter: In China, we have an operation. In Hong Kong, we have an operation. In North America, we do it with a partner. We have a network of installations. We have three hotlines in different time zones. So we cover our customers 24 hours, seven days a week. 

China is a bit of a mystery to a lot of people within digital signage just because it's such a huge market internally. How do you compete there?

Or is it more a case o,f you have European clients who are expanding into China with their luxury retail?

Bernd Hofstoetter: We do both. We help our customers from Europe to serve and support in China, but we have a local business development team as well. Yes, China is, of course, totally different in terms of competition, in terms of market environment, that's clear, but it's a huge market. We have been there for a couple of years now, and we are quite happy. 

When you're going into competitive situations in China, do you even know the names of the companies you're competing with? 

Bernd Hofstoetter: After some years, yes. In the end, we can identify the relevant set of competitors in China. 

Are they mostly domestic companies? 

Bernd Hofstoetter: Yes, mostly domestic. 

So you would never bump into in North American or European companies? 

Bernd Hofstoetter: No. 

For the technology, are you seeing trends in terms of what's interesting to your customers? 

Bernd Hofstoetter: We see the combination of the online and offline world, which is not only a trend; it's a real demand from our clients to prolong the online journey into the store. So that's something where we are investing. We have a special team for that, and we upsell our clients with this kind of Omnichannel solution. This is one part. Then, of course, technology is becoming more and more powerful. Because you better integrate it into the customer journey. 

I would say that's the two main drivers for technology coming from our clients. 

So when you're talking about omnichannel it's this whole idea of retail media networks?

Bernd Hofstoetter: No, it is not the retail media. That's another subject we are looking at now. 

But it's about the clienteling, it’s about e-commerce in the store, this kind of application. The retail media, Dave, we discussed in Munich as well, is something that has been in Europe for years, and there is now a new dynamic of the retail media and of course, with our stores deployed, we have quite good positioning here on that.

Would you envision third-party advertising going into places like a luxury retail store? 

Bernd Hofstoetter: No, I don't think so. I think there are sectors where retail media in the store will not be applicable because there are retailers who want to manage the exclusivity of branding in their stores.

I was working before in the advertising industry. I know about this world. I don't see that even in five years in a luxury store there is advertising for automobiles or whatever, don't see that. 

And most of what you do is luxury brands for beauty, for timepieces, bags, all kinds of stuff like that. Do you deal with automotive as well? 

Bernd Hofstoetter: Yes, we have a team specialist in automotive. We had one year ago, a huge tender for a global rollout for a global automobile company. In automobiles, we are moving very fast. That's another sector where we still see a lot of business to be done. Telecom, we are strong as well. Food retail, we are reshaping it. Of course, fashion is a bit down in Europe. We had some bankruptcies in fashion chains. So fashion in Europe is not in a super shape. But automotive, yes, it’s a sector where we have acquired a lot of experience in the last three to four years now.

You've mentioned, or we've talked a lot about luxury, but you also have QSR clients, correct? 

Bernd Hofstoetter: Yes, we have in Italy QSR, we have in Germany, QSR. We have in Spain a bit of QSR in France as well. 

Those are very different meetings, I suspect. 

Bernd Hofstoetter: Very different. QSR, the subject very often comes with franchisors, and there's a lot of franchise business out there for QSR, which is again another world. Not in terms of finances, but in terms of technology, technology is not a subject. The menu boards are not a problem at all. It is; it's not a challenge. It's more the contracting and invoicing part where you have to, where you have to work with many franchises or single sites one by one, which is a bit different.

Is your company and your development team looking at AI and how it can be applied to what you do? 

Bernd Hofstoetter: We look to that, of course. I think everybody is looking at that. We have our ideas how AI could improve efficiency for us. 

I'm curious about North America. You mentioned that you have a business partner over here. Is the plan one day to establish an office here as well? 

Bernd Hofstoetter: We are thinking about it. When you see our geographic footprint being in Europe and Asia, you could say, “Hey, M-Cube, why are you not covering the North American market?” It's something that we have to think about, sure, but we want to do it right. That's very important because America, of course, is a market in itself, and we want to make it right if we make it with a known and operated structure. 

Does it present a barrier at all that you don't have an office there, or can you talk about your partner? 

Bernd Hofstoetter: We do not have the feeling today that we do not get the global deals because we do not have our own office and team in America. So for us, It's not a downside. We see that if we move there, there might be a potential upside. 

It's a nice to have, but not a need to have. 

Bernd Hofstoetter: Today, it's not the missing partin our business, but we see that the deals become more and more global and that it would really make sense of course to have a strong team in America.

I'm curious about marketing and getting your name out there. When you work with these incredible luxury brands, they tend to be very quiet and cautious, and I'm guessing that it's not often that they allow you to talk about your projects with them. 

Bernd Hofstoetter: That's totally right, Dave, unfortunately, but that's the price to pay. But to be clear, luxury is a very interesting and challenging world, and to be honest, we do not need to do our marketing for that because when people move from one brand to another, and they worked with us in Brand A and will work now in Brand B, it's the best advertising we can have.

Is there a store that you can talk about, that once people say what's your kind of showroom or the one that you send people to if you can? 

Bernd Hofstoetter: In Milano, we have several stores of several global luxury chains and retailers. When we do a store visit, we mainly do it in Montelliana in Milano, where you see the power of the M-Cube solutions life. 

So once you engage with a prospective client, then you can hopefully get them to Milan and show them around that way. 

Bernd Hofstoetter: Yeah.

You are based in Paris, correct? 

Bernd Hofstoetter: I'm based in Paris, yes. 

But you're back and forth all the time, I suspect.

Bernd Hofstoetter: Yeah, but I'm based in Paris today. 

It’s nice to have two cities like that to cycle between. 

Bernd Hofstoetter: Yes, very nice cities. Paris and Milano. 

Alright, Bernd, thank you very much for spending some time with me. 

Bernd Hofstoetter: Thank you, Dave. Take care.