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Following a truly innovative process this year due to the worldwide pandemic, the IADS Academy was conducted in full digital mode, and looked at immediate consequences of lockdowns for IADS member organisations. A number of suggestions were made by the 2020 IADS Academy who presented some answers to the question “What next?” at the General Assembly of CEOs on 30 October 2020. Their answers covered customer behaviour, convenience, private labels, and store networks, as well as organisation structure and skills for the future. They caused some important questions to be raised relating to organisations, profitability and store real estate.

The Covid-19 pandemic has affected all our businesses, and indeed has also impacted the IADS activities. This is the reason why, this year, the 2020 IADS Academy was asked to go very operational in its data collection and thinking process, to address the pandemic-related questions: what have we, as department stores, been doing in relation to Covid? and what next at this stage of the pandemic?

The outcome of the work has been a White Paper, titled “Global pandemic, local department stores, learning from the pandemic and addressing the future for the industry”, to be released soon, which covers in detail the context in which we have been operating and a whole series of innovative and speedy actions. In addition, participants in the 2020 IADS Academy were asked to go further into scenario-planning, which led to a presentation to IADS CEOs at their General Assembly on 30 October 2020 (see summary and slides here).

The Academy considered several scenarios for the immediate future. These could be described as best, middling and worst, or short-term, medium-term and long-term (up to 24 months ahead). Scenarios used for the simulations were the following:

• First scenario: another lockdown within 8 months (the 2020 IADS Academy work was finalised before the second round of lockdowns and curfews across Europe)
• Second scenario: full recovery within 14 months in Asia and US thanks to a vaccine but leading to “travel bubbles” and regional closures in the meantime
• Third scenario: painful global recovery within 24 months and adaptation to a “new normal”, including “stop and go” local approaches leading to a permanent state of economic crisis and customer insecurity.

Each scenario was aiming at constructing possible actions and strategies under three main headings:

• The department store context: cities, flagships, and local retail
• The department store offer: services and assortment
• The department store organisation: structure and roles

The matrix below synthesises their analysis:

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The priorities overall are fairly clear:

• emphasise local retail
• prioritise safety and stability
• develop digital and online operations
• innovate in services, sometimes quite radically
• upgrade and develop private labels
• shift to an agile organisation structure and leadership
• and, even further, to an ecosystem characterised by autonomous structures and empowerment

The value in this work comes not only from the suggestions but also from the structured thinking which we need more than ever for crisis management, including the scenario-planning approach we advocate at IADS.

As with all good research, its value lies also in what questions it raises for further investigation. Three such big questions should be mentioned:

I. What is involved in shifting towards a flatter more agile organisation structure?

…especially as future structures are likely to mean fewer people, as well as fewer layers. From a practical standpoint, outsourcing tasks to teams means defining those tasks very precisely since the teams will not necessarily be involved in other parts of the business: a “division of labour” approach reminiscent of early scientific management. And yet, according to many accounts, we are also moving in an opposite direction where the skills we will need for the future are analytical thinking and innovation, active learning, complex problem-solving, critical thinking and analysis, and creativity, originality and initiative (see Future of Jobs Survey, World Economic Forum, 2020). These latter are more general and pose a real challenge to HR departments to find the right profiles.

Some of our members are already tackling these issues such as Falabella’s “delayering” projects. In general, agility as it has manifested itself during Covid, as was mentioned by the Academy, is more an accumulation of small decisions taken with speed. The question is: have we managed during Covid to speed things up which normally would take longer?

According to some, the ideal command structure in the army is not a rigid hierarchy but a sphere, where the core sets the culture, and those at the edge of the sphere use their initiatives and take decisions as the situation demands. Only this allows an organisation to cope with VUCA (volatility, uncertainty, complexity and ambiguity); (see The Economist, 24 October 2020, p.58). Others suggest that one of the best ways to achieve resilience is through the establishment of routines or simple rules known as heuristics (see HBR, Building Organizational Resistance, November-December 2020).

II. Shifts cost money: how to find necessary investments?

This is particularly important since much store-based retail was already dealing with a lower-profit retail future even before the pandemic. Can we find resources through development or through charging for services?

For example, delivery from stores was initiated by Manor to respond to customers’ needs. And it was indeed welcomed. But it was also a terribly expensive service for the store. Is it worth the cost? It might be that responding to customers’ needs is always the right thing to do and that ways will be found or developed to make it profitable in the future. Should we simply act and modify and fine-tune as we go? It is perceived as a considerable risk. Are there any examples from the past of such a risky action eventually turning a profit? What does appear to be true is that the new “remote work” is often more productive than work performed at the office (this point was raised by the Academy also). This means that at least some costs should be saved by a new structure. Best practices in remote working are only recently beginning to emerge.

This strain on investments was illustrated in part by a discussion of Geoffrey Moore’s theory of “zoning” and how to bring new ideas into the mainline business. (see IADS Exclusive article: Responding to disruption)

III. What part in the business is online retail likely to play in the future?

This is probably an impossible question to answer since, increasingly, department stores are no longer separating their online and physical businesses. Indeed, in some cases they are no longer able to do so. However, it remains an important question for its implications for the real estate assets of the business, sometimes quite considerable. A number of businesses are facing the possibility of closing down less profitable stores and/or using them for other purposes such as fulfilment centres (as hinted by El Corte Ingles and already realised by Macy’s and Lotte). John Lewis has recently revealed plans to convert part of its business and real estate to other formats including residential.

In the present circumstances, the question of flagships is also raised, especially if they relied significantly on the tourist trade. Local, smaller stores were initially neglected but appear now to be nearer to the centre of department stores’ attention. Some, such as Magasin du Nord, are asking whether the value of smaller stores may have increased from the real estate point of view because of the crisis. A number of companies, as is well known, have been developing smaller, local stores for some time, such as Nordstrom Local.

Following the General Assembly held in October, elements of these questions have been incorporated into the IADS programme for the coming year as topics for meetings, exchanges, and indeed future Academy investigation. This renewed approach aims at bringing elements of answers to complex CEO questions and help our members to address their future.

Credits: IADS (Dr Christopher Knee)