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*IADS has reported how IADS members accelerated on the sustainable front since the beginning of the pandemic in 2020 (see our latest report on IADS members’ initiatives here). They transformed their organisations from within (with dedicated committees benefitting from increased powers, and often in direct liaison with the C-suite) and communicated initiatives and changes in a crystal-clear manner to the final customer. This also translated into pain points as all these initiatives require resources, which can be overwhelming given the number of certifications and labels, and can also, sometimes seem too far-fetched compared to the immediate challenges posed by the state of the business. In other words: just like digital transformation, sustainable adaptation is costly, takes time and energy, and requires organisational re-engineering.

This is the reason why we decided to look at “Green Pea”, a new type of sustainable business, the first self-proclaimed 100% sustainable department store in the world, and which reverses the problem. Green Pea tries to bring an answer to the following question: how to build a profitable business that takes for granted the sustainable approach?

We looked at the key learnings from this business case and tried to isolate the most interesting ones for IADS members.*

Context

Green Pea has been founded by the Farinetti family, who also founded Eataly back in 2007.

At the time, the reasoning for Eataly was simple: Italy as a concept was a strong brand recognized worldwide, and the Italian cuisine was also universally recognized. Eataly therefore capitalized on the possibility to enjoy fresh food direct from the producer, that could be either bought or eaten on the premises, combined with ideas, images and clichés customers might have about Italy as a country and a way of life. The first Eataly opened in 2007 in the city of Turin, on 12,000 sqm (for comparison, the Milan store measures 5,000 sqm and the Rome one, 10,000 sqm).

Today, Eataly represents 42 stores in 16 countries, operated either directly (including in joint-venture) or through partners. The first market for the company is the US, which, with 8 stores, represents 65% of the total turnover (estimated as a whole around € 690 – 720 M pre-pandemic). To have an idea in terms of turnover, the historical Turin store achieves € 32 M a year on 12,000 sqm, to be compared with € 75M in New York (5,000 sqm) or € 44 M in Chicago (6.300 sqm).

Based on this success of an “all Italian plates and ingredients” formula, the Farinetti family then decided to capitalize on the “Eataly of things” with a focus on what the country is reputed for: food, fashion, design. And in the same manner as Eataly, which is all about local, proximity and “slow food” (a novel positioning back in 2007 for a supermarket), this new project should also tackle sustainability in retail in a new manner.

The claim

Green Pea is the first “green” retail park in the world, opened in December 2020 in Turin, in the same building that hosts the Eataly store, on 15,000 sqm and 5 floors (it is not clear what the Green Pea founders mean when talking about a “retail park” as the format resembles very much a department store one). It aims to answer a seemingly unsolvable question: “should we stop consuming to preserve the planet?”. Green Pea aims to show that it is possible to responsibly consume by setting sustainability as a non-negotiable prerequisite and make it desirable by surfing on the “Italian” aspect of its offer and approach.

The whole company has implemented sustainability at the core of its business model, by setting up a self-imposed Manifesto in 10 points that provides clear and strict guidelines on how the business should be conducted, from day-to-day operations to strategic vision. For instance, Green Pea affirms that in order to efficiently contribute to society, a department store should address new categories beyond selling fashion goods and other “traditional” categories, to prove that it is possible to live in a sustainable manner at no additional cost. This is why Green Pea sells energy (100% clean), transportation (e-cars, e-bikes…), in addition to furniture, design, cosmetics and fashion.

To exemplify the level of detail, the Manifesto states, in the furniture category for instance, that sold items should not (of course) compromise on design and quality, but also abide by strict self-imposed rules (such as limiting formaldehyde emissions, using wood coming from renewable sources and biodegradable and recyclable plastics). The company also commits to planting a tree for each piece of furniture sold, to help consumers recycle or return their pieces when not needed anymore, and to show suppliers’ information about the manufacturing process in total transparency and clarity.

Even though the Italian aspect of the business (fashion, design) is clearly visible, the most striking in this Manifesto is probably the strict methodology applied in every operational and sourcing aspect, as well as the clear communication in simple words about it. It is clear that the main focus is to ensure that customers do not associate sustainable options with high prices.

In parallel, and this also transpires during the visit, the “Eataly of things” aspect somehow misses the point as the Italian-focused offer somehow distracts from the fact that entering Green Pea is all about deciding, as a customer, to have a new approach to consumption.

How does it translate in reality?

First of all, the building itself has been fully built with recycled material (wood, metal, glass) which can all have a second life in case the building has to close. In other words, the architecture can be fully taken to pieces and used to build another structure. The structure is classified Nearly Zero Energy Building (A3) thanks to the materials used, but also the approach to energy:

• Photovoltaic panels (which are integrated into the decor, in the form of giant flowers) and wind turbines provide near to 90% of the energy needed for the lighting of the building.
• It also uses the energy generated by the footfall itself, in a quite literal manner: in all floors, piezoelectric zones use the energy diffused by the steps to also produce electricity.
• Heat pumps installed in the foundations of the building provide heating of both the building (88% of the need) and water (87% of the need), which is also kept circular thanks to a closed-circuit allowing the building to be free from external water supply (it also recycles the rains).
• Within the building, 2,000 trees and plants are also grown, which contribute to purifying the air while also setting up a nice setting for customers.

However, a green building is not enough to make a sustainable strategy. This is why Green Pea founders have spent 2 years prior to the opening to assemble a 100% sustainable product offer that goes beyond the usual categories found in other department stores (fashion, design), totaling more than 100 brands and partners in this adventure.

A department store, really?

The approach taken might seem counter-intuitive for any person familiar with department store structures, with a disturbing floor plan:

• Ground floor: museum, energy and transportation goods
• First floor: home, furniture and design goods
• Second floor: fashion
• Third floor: beauty, books and restaurant
• Fourth floor: members club, sauna, swimming pool and recreation surface.

Starting with a museum to educate customers about the need to care for the planet and how to behave sustainably seemed crucial for the founders. This is why the first things seen at the entrance are the structure and construction details of the building, explained and dissected in simple and amusing ways, to entertain and educate both adults and children. It shows how the building saves energy and water. This is the first touchpoint of a customer journey mixing discovery with education as all floors also contribute to sharing knowledge by explaining how materials are produced and how they impact the planet compared to non-sustainable options.

Also on the ground floor, the founders wanted to address the most basic customers’ needs: energy, money and communication. This is the reason why they have offered green energy suppliers (Enel X, Iren…), new and second-hand cell phone sellers (TIM, Samsung…), green banking players (UniCredit, Mastercard…), green & perchloroethylene-free laundry, and an electric vehicle manufacturer (Stellantis, which displays all the e-cars produced by the brands pertaining to the consortium, including Jeep, Chrysler, Peugeot) a significant retail and showroom space, to educate and sell.

At this point it is key to note that during the visit, the CEO stressed his two main goals were:

• To contribute to making the sustainability topic an everyday cultural one (i.e. knowledge should help customers to address this topic with more confidence, and help them make enlightened decisions). This translates into a large amount of information made available across the ground floor (but also in the other ones), as well as tips and behavioural advice to make an impact in the everyday life, streamed in the Green Pea app, downloadable for free.
• To propose only sustainable options that do not cost more than non-sustainable ones. This means that prices are always clearly displayed and explained, including their margin components, to help customers to make arbitrations.

These two aspects are a constant when visiting the upper floors.

On the home & furnishing floor, for instance, customers can have a fully equipped, 100% sustainable kitchen, ready to be set up, for as low as € 3,500 VAT included. Green Pea worked with manufacturers on materials to reach this impressive retail price (which also helped Green Pea launch its own private label, Green Pea Casa). Of course, the range of products offered also includes more luxurious brands, leading to higher prices (from Whirlpool to FontanaArte, including also Guzzini or KitchenAid). All across the floor, customers are informed of the nature of the components and materials, where they come from and to what extent they impact the environment, as well as a comparison with non-sustainable options.

The fashion floor displays 65 brands in corner or shop in shop formats, of which 70% are operated by the brands themselves. This includes local brands (Esemplare, Antidoto 45, Giampaolo, PT Torino) or larger ones such as EcoAlf, K-way, Timberland, Superga, Kappa, Sebago, Borbonese, Napajiri or Patagonia. All staff are paid by the brands and trained by Green Pea. The RTW section continues on the third floor as a small section of the beauty floor is dedicated to luxury and fashion, with exclusive shop in shops (specific to Green Pea) from Cucinelli, Herno, Zegna and Sease. Both floors (fashion and beauty/luxe) also propose tailor-made experiences, be them via personalization ateliers (from specific details to the production of the whole garment if needed) for fashion items, or via individually formulated cosmetics according to each one’s skin, exclusively developed on site with Alkemy Spa.

When it comes to the food offer (located at the cosmetics floor), the pricing range is also quite wide, from a bar with entry price point snacks (using all Eataly ingredients and suppliers) to a Michelin-starred restaurant.

Finally, the rooftop is dedicated to the member’s club, including a restaurant, a terrace, a sauna and an infinity pool. To be a member of the club costs 300 euros a year and gives full access to the location (to be noted: the regular customer loyalty card, which does not offer access to the club but the same benefits otherwise, from anticipated sales, points and special promotions, only costs 50 euros a year).

What can we learn from this model?

Green Pea is all about being “green” without being suspected of greenwashing. Having a fully sustainable building and displaying only sustainable brands is of course impressive and nice but does not fully support the “first sustainable retail park” claim of the retailer as these initiatives can be also spotted elsewhere in the world. This is the reason why the educational part of the customer journey is key, as it helps the retailer to achieve 3 goals:

• Contribute to expanding the general public’s basic knowledge on materials, practices and behaviors.
• Show in quite a literal manner the initiatives they have taken.
• Promote the selection of brands they have made.

This focus on information is key, as it differentiates them quite a lot from other retailers who promote certifications, initiatives and labels, but who do not really contribute to educating customers on a broader level and, from there, influence culture as a whole. In other words, they are using their physical retail space to create and pre-empt content on sustainability.

This is completed by a specific approach when building the assortment and selling it:

• All salespeople are paid by the brands but fully trained, on a regular manner, by Green Pea on sustainable topics (they are given information to be able to stand a conversation addressing their brand of course, but also the rest of the assortment, Green Pea’s approach and even broader conversations).
• The price range is adapted and answers concerns customers might have about having to pay more to have the same products, but made sustainably.
• By proposing a paid loyalty program (a strategy the IADS is very much supportive of), they astutely create a club of “those who know vs. those who don’t”, therefore creating some kind of social curiosity and interest for sustainable topics, through a membership giving access to an exclusive location at a reasonable price.

Binding all these elements together helps Green Pea to be credible when they claim to be the place to be (and to shop) when it comes to sustainability. However, is this enough to make a business? Many questions are raised when looking more in detail at the model.

First, in terms of traffic, it is of course extremely probable that a 100% sustainable “shopping temple” is attractive to many customers, at least to see what it means. But how is it possible to make sure they come back twice or more? The ground floor, with its utilitarian offer (green energy, finance and communication), is, without a doubt, interesting but raises questions that are more about the customers’ lifestyle than the simple joy to go shopping. Is that amusing for them in the long run? Moreover, one might wonder to what extent a ground floor with such an offer (including a museum to educate customers) could be reproduced elsewhere in the world, in a more competitive context than this specific part of the city of Turin.

This leads to another crucial question, the business potential of the store. When asked about the profitability of the model, Green Pea’s CEO answers that the store has not been built with sustainability seen as a perk, but as a key constitutive element. As a consequence, the brands’ margin model remains the same as for a ‘normal’ business, as sustainability does not create a specific economic advantage or handicap. For him, it is just the way to see things today.

However, it is not really possible to know how well this concept can perform yet. For one thing, it opened in December 2020, in between lockdown episodes, in Turin, which is a smaller city than Milan or Rome. Therefore, KPIs are not relevant for now. Secondly, during the visit, it seemed that the Italian approach of things was too diffused to be as impactful as in Eataly (plus: does it make sense in the same way?). As a consequence, this side of the marketing approach might be less impactful than simply relying 100% on the “first sustainable retail business model”. At the same time, relying 100% on the first “sustainable business model” might limit the number of brands that can be part of the concept, leading to questions on the maximum profitability of the model: can it be comparable to what we know in other department stores? What do you do for instance when Louis Vuitton or Chanel do not fit with the commitments made in the Manifesto? And is the “first sustainable retail business model” enough to become a long-lasting attraction for customers that can get easily bored, and who might not enjoy being reminded of serious things every time they take a trip to the store?

So far, even though the whole Green Pea concept consolidates a series of new approaches and proposals to the customer in the same way that Eataly did back in 2007, it seems that it is still in the laboratory stage, not in terms of maturity of the concept (which is already quite convincing), but in terms of realism of the economic equation. The ingredients that made the success of Eataly (local, circularity, Italian identity) might not be enough to be transferred as such in the Green Pea retail concept, at least outside of Italy.

Credits: IADS (Selvane Mohandas)