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Brands are no longer confined to their original product categories. Instead, they are increasingly expanding their reach into new brand territories, ranging from additional product categories to sports, culture, and entertainment, redefining not just what they sell, but what they represent. This diversification is not about opportunistic line extensions. It’s a calculated repositioning aimed at opening new revenue streams, for sure, but also deepening consumer engagement and embedding brands into broader lifestyle ecosystems. Whether through launching cosmetic lines, furnishing homes, associating with sports performances, staging cultural experiences or producing films, brands are reimagining their roles in consumers’ lives, moving from product providers to curators of aspirational living.

From that perspective, Louis Vuitton, a critical brand for any luxury department store, is probably the most striking example, ticking all the boxes of a brand that has transformed into a lifestyle ecosystem. While many other brands are expanding their territory, department stores need to adapt to welcome these new brand expressions.

Lipstick logic: When brands turn to beauty

The most usual way to expand brand territory is to venture into new product categories. At a time when the beauty and wellness industry has been booming, brands have recently ventured into the coloured cosmetics category. Hermès is a significant example in the luxury price bracket. While they first launched fragrances in 1950, the Perfume & Beauty ‘only’ represented 3.5% of the brand’s total revenue in 2024 (in comparison, Chanel’s beauty business is estimated to represent 35% of the total revenue in 2024). It took Hermès 70 years to initiate a careful foray into colour cosmetics in early 2020 during Covid, with disappointing results. Since then, the Perfume & Beauty division has built up, doubling from €263 million in 2020 to €535 million in 2024, growing 9.3% YoY. While it’s a very significant achievement, it represents limited growth compared to the rest of the business. In 2024, Hermès achieved a consolidated revenue of €15.2 billion, marking a 14.7% increase over the previous year.

On its side, Louis Vuitton began by relaunching its perfume division in 2016. This initiative marked a return to the brand’s historical roots, as Louis Vuitton had released its first perfume in 1927, though it was quickly discontinued. After fragrances, Louis Vuitton will debut colour cosmetics in fall 2025 with the British makeup artist Dame Pat McGrath as its creative director. The line, which will be called La Beauté Louis Vuitton, is the fashion house’s first foray into cosmetics since the 1920s, when it offered a range of powder compacts, brushes and mirrors.

The market is crowded with prestige and luxury brand new beauty lines: Prada, Celine, Rabanne and Dries Van Noten have all debuted cosmetics in the past years. But not only does luxury follow this trend. In 2023, Ecoalf’s founder, Javier Goyeneche (a guest speaker at one of the recent IADS CEO meetings), expanded into sustainable beauty products, seeking to bring its environmental ethos to everyday personal care with Ecoalf Wellness. Assuming customers would be seduced by the brand’s circular principles applied to skincare and hygiene, the brand eliminates single-use plastics and drastically reduces water-heavy formulations, delivering powder-based shampoos, deodorants, and more enclosed in reusable aluminium containers that can last over twenty years.

Not all ventures are successful, though. In 2019, Birkenstock launched a skincare line including eye cream, anti-wrinkle cream and more. While Birkenstock’s surprising move into the beauty sector could represent a natural yet bold progression from its DNA of wellbeing to a broader vision of self-care, these products didn’t sell because offering products such as eye cream was probably too far-fetched. Closer to its DNA and core business, Birkenstock ventured again into beauty in 2024 with Care Essentials, a short and focused foot care line that aligns more closely with the brand ethos. Overall, this transformation highlights a broader trend in which heritage labels utilise their domain expertise to expand into adjacent lifestyle categories, hoping to deepen consumer engagement and open new revenue streams.

Living the brand: How fashion brands furnish everyday life

Brands are not only venturing into beauty but also embracing home design. The first brand to truly venture into furniture, lighting, and home accessories is Armani, which introduced the Armani/Casa label in 2000. This strategy to integrate domestic life continues with the Louis Vuitton Objets Nomades collection, introduced in 2012. Initially conceived as a series of travel-inspired furniture pieces, the collection has since evolved into a substantial home design portfolio, featuring collaborations with recognised designers such as Patricia Urquiola, India Mahdavi, and the Campana Brothers. These limited-edition objects are presented as collectables, elevating Louis Vuitton from a fashion house to a purveyor of high-art domestic experience.

Fast fashion brands also account for successful forays in the home categories. Zara, H&M, and more recently Primark have each undertaken significant strategic expansions into home products to capture a rapidly growing homeware market shaped by post-pandemic lifestyles. Starting in 2003, Zara Home leveraged the same fashion calendar and just‑in‑time logistics that made apparel successful, but uses relatively low discounting compared to apparel, maintaining a premium feel. Financially, the division has matured into a significant revenue driver, with 2018 figures reaching approximately €830 million out of the €16.62 billion total revenue.

H&M adopted a similar but later strategy, first entering the home arena in 2008. Initially sold online and later in stores, the business rationale for H&M Home followed a clear logic: leverage a trusted mass-market retail infrastructure to capture lifestyle spend while maintaining price accessibility, mirroring its “fashion for the many” ethos. In doing so, H&M strengthened its omnichannel ecosystem, using home products to increase basket size and frequency of visits.

Finally, Primark’s entrance into homeware has taken a different trajectory, rooted in physical retail dominance. The retailer began testing its homeware range alongside clothing before making a decisive strategic shift in 2025. The retailer opened its first dedicated Primark Home store in Belfast, showcasing small furniture, bedding, ceramics, and travel essentials in a standalone environment.

Temporary territories: When department stores catch the zeitgeist

There is also an agile way to catch customers’ attention and a share of their wallets. Selfridges and Le Bon Marché offer vivid examples of how department stores have opportunistically tapped into lifestyle trends by temporarily expanding their product ranges to capture additional revenue streams. Following Covid, Selfridges identified an unexpected yet powerful consumer behaviour toward nature, gardening and wellbeing. By mid-2021, its London, Manchester, and Birmingham stores had introduced pop-up garden centres offering a variety of plants and tools, compost, and related apparel. The effort helped Selfridges capture a surge in “green-fingered” spending, translating consumer leisure budgets into in-store impulse purchases on plants and horticultural expert consultations. While Le Bon Marché had the same initiative, this pivot exemplifies how a temporary trend can be monetised through short-term, high-impact product ventures. These initiatives were also incredibly smart in attracting more local consumers, especially at a time when tourism was halted.

Le Bon Marché took an agile approach to pet products in early 2025 by transforming its permanent pop-up spaces into a canine playground under the exhibition banner “Je t’aime comme un chien!”. The initiative mixed dog-centric products, from designer collars, bowls, bespoke toys, treats, spa and grooming services, to a café, workshops, personalisation and photo booths, with immersive visual installations such as big prop bones throughout the store. This thematic takeover capitalised on a widely observed surge in pet spending. Generating high traffic and engagement, Le Bon Marché found the right way to bring dogs and their owners into the shopping journey, strategically steering discretionary spending toward products that align with a momentary yet powerful cultural obsession.

These initiatives are less about permanent transformation and more about momentary alchemy. Selfridges’ plant pop-ups and Le Bon Marché’s dog-themed extravaganza both illustrate a modern department store strategy: not just selling things, but staging culturally resonant experiences that trigger new purchasing behaviours. By reading the zeitgeist and moving fast, with highly curated inventory and thematic environments, these stores created agile revenue plays that capitalised on emergent consumer trends at just the right moment.

Gold, speed, and symbolism: Luxury meets global sports events

Brands venturing into sports is nothing new. Yet Louis Vuitton’s involvement in Formula 1 and the 2024 Olympic Games reflects an increasingly assertive strategy to position the brand at the centre of contemporary cultural spectacle. Over the last decade, Louis Vuitton has steadily moved into the realm of global prestige events, not as a traditional sponsor, but as a supplier of symbolism. In 2021, the brand unveiled a bespoke monogrammed trophy trunk for the Formula 1 World Championship. Its repeated presence on the podium reinforced the brand’s authority and symbol of positive rituals and victory. The move into Formula 1 coincided with a generational shift in the sport’s audience, the sport’s blending of technology, drama, and internationalism offering the brand a stage that mirrored its own values: precision, control, spectacle, and heritage. In early 2025, Louis Vuitton announced a new 10-year significant partnership with Formula 1, beginning with the title sponsorship of the March 2025 Australian Grand Prix. This initiative capitalises on Formula 1’s growing popularity, which attracted six million race attendees and 1.5 billion TV viewers last year, with particularly strong growth among women and youth demographics. The partnership will enable Louis Vuitton to offer unique hospitality experiences for top clients while reaching new audiences. It’s a compelling example of the brand’s broader transformation from a traditional luxury retailer to a cultural powerhouse.

But Louis Vuitton’s ambitions in the sports ecosystem are not isolated. In 2024, the brand expanded its reach further by becoming an official partner of the Paris Olympic and Paralympic Games, joining LVMH’s broader role as a premium sponsor of the event. As part of this engagement, Louis Vuitton designed and produced custom-made trunks for the Games medals. Similar to Formula 1, this foray signals a brand strategy anchored in recruiting new middle-class consumers. In both cases, the brand builds the physical artefacts through which these moments are staged. By embedding itself within the most visible and emotionally charged moments in sport, Louis Vuitton has redefined the boundaries of luxury participation. No longer solely anchored to the runway or its store network, the brand now lives elsewhere, and (already) everywhere.

Beyond commerce: Art as identity

Over the past three decades, luxury groups have moved far beyond fashion and retail to establish a lasting presence in contemporary art and culture. Similar to sports, this shift is not simply an act of sponsoring but a repositioning of luxury as a global cultural force. LVMH, Kering, and Richemont have each established cultural ecosystems to give their brands artistic legitimacy. For LVMH, this began with the 1990 creation of the Prix LVMH des Jeunes Créateurs, followed by the launch of the Fondation Louis Vuitton in 2014, which has become a cultural landmark in Paris. The Fondation has hosted major exhibitions drawing over a million visitors annually and positioning LVMH not just as a backer of the arts, but as a producer of major cultural events on par with the world’s leading institutions.

On its side, the Pinault Collection, distinct from the Kering group, represents one of the most ambitious private interventions in the contemporary art world. Long before the 2021 opening of the Bourse de Commerce in Paris, Pinault had already established two major cultural outposts in Venice, marking a sustained engagement with art. The Bourse de Commerce not only embodies a private collector’s vision but also illustrates how the resources of the luxury sector can be redirected to create enduring cultural institutions that have a lasting impact far beyond fashion.

Richemont has taken a more classical route, yet no less ambitious. The Fondation Cartier pour l’Art Contemporain, established in 1984, predates most other luxury group initiatives and stands out for its consistent, long-term engagement with artists across disciplines. Located in Paris, it recently announced plans to move to a larger site near the Louvre, underlining its institutional ambitions.

The logic here is not transactional but foundational: art and culture are not marketing vehicles but narrative extensions of what luxury is presumed to be: timeless, intellectual, emotional, and transformative. In embedding themselves into art, luxury groups are not just financing creativity, they are quietly recasting themselves as cultural institutions in their own right. This repositioning elevates their brands beyond fashion cycles, resonating long after a runway show ends.

Fashion cinematic turn: there’s no business like show business

As the boundaries between fashion and entertainment continue to dissolve, a growing number of luxury houses are entering the film industry not as sponsors or costume collaborators, but as producers and curators. Louis Vuitton, Saint Laurent, and AMI Paris have each taken distinct yet strategically aligned steps into the film industry, using cinema as both a storytelling device and a cultural amplifier. In 2023, Louis Vuitton launched 22 Montaigne Entertainment, a dedicated production entity. Unlike earlier iterations of fashion-film collaborations, which often blurred into extended commercials, 22 Montaigne Entertainment aims to finance and develop projects. In partnership with Superconnector Studios, this division will be responsible for identifying opportunities for LVMH brands to collaborate with entertainment entities to co-develop and co-produce entertainment properties across film, television, and audio. However, it is likely that LVMH also has an eye toward producing larger, more mass-entertainment offerings, such as The House of Gucci movie, which grossed $166 million worldwide at the box office.

Saint Laurent, by contrast, has made the most direct and structurally ambitious move into filmmaking. In 2023, the house launched Saint Laurent Productions, becoming the first luxury brand to create a registered film production company. Its debut collaborations with auteurs such as Pedro Almodóvar and David Cronenberg made immediate headlines at major festivals including Cannes and Venice. Jacques Audiard’s Emilia Perez movie was a particularly striking example: it co-produced the entire feature, collaborating closely with the other movie-producing companies. The result is not mere branding, but active, creative authorship, with Anthony Vaccarello, Saint Laurent’s creative director, serving as a credited producer on the project.

AMI Paris’s entrance into the cinematic world took a more institutional turn in 2024 with the creation of the Grand Prix AMI Paris de la Semaine de la Critique, an award presented during the Cannes Film Festival that celebrates emerging filmmakers. Founded by AMI Paris’s founder and creative director Alexandre Mattiussi, the prize is designed to support the kind of filmmaking that aligns with AMI’s cultural positioning.

Together, these three brands represent different yet converging models for how fashion intersects with cinema. Louis Vuitton approaches it as a narrative architecture surrounding the brand’s universe, Saint Laurent treats it as a parallel industry in which to operate and AMI Paris uses it to enhance the brand’s emotional temperature. Each strategy points to the same conclusion. In a saturated visual economy, luxury no longer communicates through clothing alone. With its emotional depth, films offer a medium through which to project identity, build mythology.

As brands move beyond their traditional domains, a clear ambition emerges: catching all consumer life moments. Louis Vuitton’s ventures outside of its traditional categories are more than secondary revenue streams. They are expressions of the brand’s DNA and values, only reinforcing its position as a global cultural arbiter. Collectively, these moves signal a profound shift in the role of brands, from product makers to global cultural forces. In extending their territory, brands are not just chasing growth, they are shaping the consumers’ lives, raising questions about their cultural and emotional dominance.

For department stores, these new brand territories certainly require adaptation, but they also represent unprecedented opportunities to attract new consumer groups, making stores more exciting and livelier. Boring retail is, more than ever, dead!

Credits: IADS (Christine Montard)

What: AI-powered agents are transforming e-commerce by automating shopping decisions and shifting the focus from human shoppers to algorithm-driven efficiency.

Why it is important: The rise of AI agents demands that retailers overhaul their digital infrastructure to remain visible and competitive in an algorithm-first marketplace.

The retail landscape is rapidly evolving as AI-powered agents begin to dominate e-commerce, fundamentally changing how purchase decisions are made. These autonomous bots, acting on behalf of consumers, prioritise efficiency, structured data, and real-time information over traditional emotional cues and branding. As a result, the visual and experiential elements that once influenced human shoppers are becoming less relevant, while machine-readable trust signals, such as verified reviews, live inventory, and transparent return policies, are now critical. Retailers must adapt by optimising their backend systems, ensuring product feeds are accurate and up to date, and implementing standardized schema markup to enhance AI discoverability. The emergence of “Bot Battles,” where retailers’ AI agents negotiate with third-party bots, signals a new era of competition based on data integrity and operational transparency. In this algorithm-driven environment, commercial, digital, and marketing leaders must prioritise AI readiness to secure their place on the digital shelf, as efficiency and data quality become the primary drivers of success.

IADS Notes: Recent industry developments, such as Amazon’s legal action against Perplexity in November 2025, highlight the urgency for retailers to adapt to AI-driven commerce, as the balance of power shifts from traditional platforms to algorithmic intermediaries. Reports from the Financial Times and Journal du Net in September and November 2025 emphasize the need for brands to recalibrate their data infrastructure and engagement strategies for machine readability, while Forbes in February 2025 underscores the rapid adoption of autonomous AI shopping agents and the critical importance of structured data and standardised schemas for maintaining retail competitiveness.

Retailers must rethink e-commerce for an algorithm-first future

What: The luxury sector is experiencing its first post-crisis slowdown, but brands are responding by expanding digital, phygital, and accessible offerings to attract a wider customer base.

Why it is important: Adapting to a more inclusive and digitally driven luxury market is essential for brands aiming to capture new generations and sustain long-term growth.

Luxury retail is facing its first significant slowdown since the financial crisis, with global economic uncertainty and declining demand among high-net-worth individuals contributing to a projected 5% market contraction in 2025. Despite this, the sector is evolving rapidly as brands broaden their focus beyond the ultra-wealthy, introducing more accessible product lines and targeting aspirational and middle-class consumers. The shift is also marked by a surge in digital and “phygital” experiences, with luxury brands investing in seamless omnichannel journeys, immersive technology, and exclusive online campaigns to engage a younger, more diverse audience. This transformation is driven by the anticipated entry of 300 million Gen Z and Gen Alpha consumers over the next five years, who are expected to fundamentally reshape luxury retail strategies. December remains the peak month for luxury spending, with brands leveraging exclusive holiday campaigns and experiential gifting to capture demand. In this changing landscape, innovation, inclusivity, and digital engagement are becoming critical for brands seeking resilience and long-term growth.

IADS Notes: The luxury retail landscape in 2025 is marked by a notable slowdown in spending, with Bain & Company projecting a 5% global market decline and 50 million fewer customers compared to previous years (Forbes, June 2025). This contraction is driven by economic uncertainty, subdued demand in key markets like China and the US, and a sharp deterioration in spending intentions among high-net-worth individuals (Financial Times, August 2025; WWD, June 2025). In response, major luxury brands are expanding their product lines to include more accessible items under $500, aiming to retain aspirational and middle-class consumers while balancing the need to preserve brand exclusivity (Fashion Network, December 2024). The industry is also witnessing a shift toward digital and “phygital” experiences, as retailers invest in seamless omnichannel journeys and immersive technology to engage a broader, younger audience (Fashion Network, October 2025; Journal du Net, January 2025). Despite current headwinds, the long-term outlook remains positive, with BCG/WWD (October 2025) and Bain & Company (February 2025) forecasting robust growth driven by the entry of 300 million Gen Z and Gen Alpha consumers over the next five years. December continues to be the peak month for luxury spending, with exclusive holiday campaigns and experiential gifting strategies playing a crucial role in capturing demand (Press Release, October 2025).

Luxury shopping is no longer just for the affluent - Full Report

What: OpenAI’s $38 billion AWS deal positions Amazon to dominate AI-powered retail infrastructure and potentially marginalise rival e-commerce platforms.

Why it is important: This deal accelerates the shift to agentic commerce, raising the stakes for retailers to adapt as Amazon consolidates power in AI-driven retail infrastructure.

Amazon’s landmark $38 billion deal with OpenAI to provide AWS infrastructure for ChatGPT and related AI services is set to transform the retail landscape. By securing this partnership, Amazon positions itself as the primary enabler of AI-powered commerce, with the potential to marginalise rival e-commerce platforms and consolidate its dominance in digital retail infrastructure. This move comes alongside Amazon’s investment in custom AI chips, which aim to lower costs and make advanced AI more accessible to retailers of all sizes. The rise of agentic commerce, where AI platforms mediate product discovery, purchase, and brand engagement, is fundamentally shifting power away from traditional websites and toward digital intermediaries like ChatGPT. As homepage-centric retail gives way to AI-driven personalisation and curation, retailers must adapt their digital strategies to maintain relevance and visibility in an increasingly algorithmic marketplace. These developments underscore the urgency for brands to optimise for AI-driven discovery, rethink customer engagement, and prepare for a future where success depends on navigating the answer economy.IADS Notes: In November 2025, Inside Retail analysed the AWS-OpenAI deal’s implications for Amazon’s dominance and the risk of marginalising competitors. Bloomberg’s November 2024 coverage highlighted Amazon’s custom AI chip strategy, while the Financial Times and Journal du Net in late 2025 emphasised the rise of agentic commerce and the need for retailers to adapt. Forbes in July 2025 confirmed that AI shopping agents are driving a shift away from traditional retail models, validating the urgency for digital transformation.

Will OpenAI’s Amazon deal shut out rival e-commerce players?

What: Walmart and other major retailers are deploying AI agents to automate back-office operations, streamline workforce management, and enhance merchandising and customer engagement.

Why it is important: The use of AI agents is accelerating productivity gains and reshaping workforce structures, aligning with key insights from the past year.

The rapid integration of AI agents in retail is fundamentally reshaping both operational and strategic dimensions of the industry. Walmart’s pioneering use of AI agents to automate HR and merchandising tasks exemplifies a broader movement toward efficiency, with measurable gains in productivity and revenue reported across the sector. As retailers like Walmart, Amazon, and Target restructure their workforce strategies, the focus is shifting from task execution to oversight and upskilling, reflecting the urgent need for adaptability and new talent models. The evolution of AI agent capabilities, supported by platforms such as Salesforce and Workday, is making advanced data analysis and customer engagement accessible to a wider range of retailers, while also highlighting the importance of robust integration and security frameworks. Distinguishing true autonomous agents from enhanced chatbots is increasingly critical as companies invest in technology that can deliver end-to-end automation and actionable insights. Meanwhile, synthetic consumer research powered by AI agents is emerging as a powerful tool for simulating market behavior, enabling retailers to make more informed decisions with unprecedented speed and scale. These developments underscore the necessity for comprehensive governance, continuous workforce development, and a balanced approach to technological innovation and human expertise.

IADS Notes: Recent industry reports confirm these trends. In October 2025, Forbes and Le Monde highlighted the transformative impact of AI agents on retail operations and workforce management, with BCG in September 2025 emphasizing the need for upskilling and organizational redesign. Journal du Net in July 2025 and Hugging Face in January 2025 documented significant gains in customer service efficiency and productivity, while Coresight and Josh Bersin in early 2025 detailed advances in merchandising and integration platforms. Forbes and BoF in early 2025 further explored the rise of synthetic consumer research and the distinction between true AI agents and chatbots, reinforcing the sector’s shift toward data-driven, autonomous decision-making.

Fashion’s other AI revolution

What: Status quo bias and inertia are major obstacles to generative AI adoption in organisations, but targeted leadership and peer-driven strategies can overcome them.

Why it is important: This insight aligns with recent findings that only a small fraction of retailers successfully scale AI, highlighting the need for leadership-driven change and workforce engagement.

Status quo bias and inertia remain significant barriers to the adoption of generative AI, even when employees acknowledge the advantages these tools could bring to their daily work. People tend to default to established routines, often exaggerating the risks of change while overlooking the dangers of remaining static. Overcoming this requires organisations to reframe AI adoption as the new standard, making inaction appear riskier than embracing innovation. Leadership plays a pivotal role, with senior executives modeling the desired behaviors and visibly integrating AI into their workflows. Peer influence is equally powerful; celebrating early adopters and positioning them as internal champions accelerates cultural acceptance. Tailored training and exposure to successful AI integration in other organisations further help shift mindsets. These combined efforts create an environment where change feels natural and safe, encouraging employees to adopt new technologies and supporting the organisation’s broader transformation. This approach is essential for retailers aiming to remain competitive in a rapidly evolving market

IADS Notes: In September 2025, BCG reported that only 36% of retail workers felt prepared for AI-driven change, despite widespread tool adoption, highlighting the need for foundational upskilling. Forbes in October 2025 found that only 10% of retailers had scaled AI solutions, emphasising the importance of governance and cultural adaptation. BCG’s July 2025 research demonstrated that leader-driven change programmes were key to successful transformation at Saks, El Corte Inglés, and Galeries Lafayette. In April 2025, BCG showed that CEO leadership and employee engagement drove up to 30% operational efficiency gains. By September 2025, BCG confirmed that scalable GenAI innovation depended on infrastructure, oversight, and celebrating internal champions.

The cognitive brakes on the gen AI accelerator

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Over the past three decades, hospitality, whether in the form of restaurants, bars, cafés, or hotels, has evolved from a brand-building side project into a strategic pillar for non-hospitality brands across various sectors. What began as bold experiments by luxury fashion houses has transformed into a multi-industry movement, as companies seek to deepen emotional engagement, increase traffic and customer dwell time, and unlock new revenue streams. Hospitality now serves as a customer acquisition tool and can transform into a profit centre. As the lines between retail, lifestyle and experience continue to blur, hospitality has evolved not just as a trend but as a long-term strategy, one that requires brands to demonstrate creativity and operational excellence.

Hospitality has been an integral part of the department store business since its inception. Almost two centuries after Le Bon Marché opens a reading room free of charge to husbands waiting for their wives, department stores up the hospitality ante to better serve customers and compete with their brand partners’ own hospitality engines.

No longer a vanity sideline, hospitality is becoming the front door to brand ecosystems and a credible profit driver. Department stores that curate these experiences can turn lattes, food and maybe room keys into the next generation of retail loyalty.

A selective 30-year history of hospitality at non-hospitality brands

Luxury fashion at the forefront…

Hospitality ventures by non-hospitality brands began in 1998 with a luxury brand. Giorgio Armani unveiled plans for the first hotel, an idea realised in Dubai and Milan a decade later and widely viewed as the proof-of-concept for luxury fashion hospitality. The following year, Ralph Lauren opened RL Restaurant in Chicago, showing that restaurants could amplify a lifestyle label’s aura without leaving its home market. The early 2000s marked the first wave of upscale experiments: Versace debuted Palazzo Versace in Australia in 2000 and in Dubai in 2016. In 2004, Bulgari launched its Milan hotel. Soon enough, non-luxury brands entered the hospitality game.

Luxury fashion’s second wave occurred between 2014 and 2020. In 2014, Prada took an 80% stake in Milanese pasticceria Marchesi 1824. Dior launched Café Dior in Seoul in 2015, Fendi installed Zuma on its rooftop in Rome in 2016, and Gucci Osteria earned a Michelin star two years after opening in 2018. In the 2020s, the movement matured into scale plays and mixed-use flagships. While planning a hotel to open on Paris’ Champs-Élysées in 2026, Louis Vuitton opened its first in-store Le Café V in Osaka in 2020 and Paris in 2022, as part of the LV Dream exhibition. That same year, Dior Paris’ Avenue Montaigne flagship store reopened, flanked by a café and a restaurant by renowned French chef Jean Imbert. Exploring other hospitality options, Louis Vuitton then opened a lounge on top of its Doha airport store in 2023. The space includes designer furniture pieces, as well as a 3-star Michelin restaurant.

… Followed by other industries…

By the mid-2000s, other industries had joined in, including the automotive, beauty and banking sectors: BMW introduced fine dining at Munich’s BMW Welt in 2007. The momentum accelerated in the 2010s with a second wave of ventures. With six different restaurants, Ferrari World in Abu Dhabi (2010) proved that theme-park F&B could drive sales, while beauty label L’Occitane combined cafés and spas from 2011 onward. Financial services moved next: Capital One Cafés debuted in 2012, and American Express rolled out its Centurion Lounges in 2013. In 2016, Samsung opened its NYC flagship store, including a Stand Coffee.

… And premium and mass retail

In 2001, French lingerie brand Etam opened a now-closed 4,000 sqm flagship store in the former Samaritaine Sport building, featuring a restaurant supervised by renowned chef Alain Ducasse. Urban Outfitters’ first Terrain garden café launched in 2008. The first Muji hotel opened in 2018, followed by Maisons du Monde (which opened two hotels in 2019, in Nantes, and 2021, in Marseille) and IKEA (in Grand Canaria in 2025). In 2023, Tokyo saw the first Maison Kitsuné café. That same year, Zara opened its first café in Dubai’s Mall of the Emirates, refining the concept through 2024 with the opening of Zacaffé in Madrid, part of its premiumisation strategy.

This concise three-decade history highlights brands’ expanding ambitions—from single-brand one-time initiatives to global, data-driven ecosystems that boost customer lifetime value, foster loyalty, and deliver EBITDA margins sometimes exceeding those of their core product lines.

Between halo and headwinds: hospitality’s retail reality

Beyond the buzz: when hospitality fails

Hospitality is not a perfect world. On top of potential rising operating costs and economic downturns that refocus customers on commodities, several risks are attached to hospitality:

- Concept and customer fatigue: for example, Lexus restaurant in New York’s Meatpacking District shut permanently in January 2022 after struggling to fill seats outside the launch buzz. This shows that even a best-in-class collaboration (with Danny Meyer’s Union Square Hospitality Group) cannot offset footfall gaps if the brand story isn’t locally resonant. This also highlights the potential struggle of partnering with a different industry.

• Brand-licence fracture: Versace walked away from its 15-year branding deal on Australia’s Palazzo Versace. The resort was renamed Imperial Hotel in 2023. Even with the right partner, licence renewals can hinge on one side’s changing strategy.
• Market oversaturation: when you’re not Starbucks, how many lattes can a brand sell? Rapid café rollouts can dilute exclusivity. South Korea’s coffee shop count fell for the first time in decades, down 743 outlets YoY in Q1 2025, making it more difficult for brands to find their way in the hospitality business.
• Brand dilution: a mediocre execution can undermine the halo effect brands seek. Additionally, even successful brands in the hospitality business face challenges. Maison Kitsuné, for example, has opened 25 Café Kitsuné, which represent around 10% of the company’s turnover. While they have played an essential role in the growth and development of brand awareness, cafés are now somehow more successful than the RTW products.

From dwell time to data: hospitality as a retail growth engine

Hospitality can help non-hospitality brands exploit under-served white spaces in the customer journey (such as banking wait time or car showroom friction). For fashion retailers, hospitality touchpoints can nurture loyalty and transform into high-frequency visits between low-frequency purchases, such as those between 18 to 24-month handbag purchases. Moreover, hospitality can lead to increased customer spending. Harrods’ director of restaurants and kitchens mentioned in 2023 that they had “almost 10,000 bookings made for the Dior café in the first four days of opening. If we take the Gen Z customer, they are telling us they want to spend their money on luxury, fashion, and dining. This combination is gold.” The restaurant and café business is also a data goldmine, providing retailers with new customers and additional information, such as dietary preferences, that can feed CRM personalisation engines. Customer acquisition costs are also unrivalled compared to digital ads, as a €5 café voucher can result in new customer data and future conversion.

In the case of IKEA, restaurants represent a sophisticated retail strategy that leverages food at break-even or slight loss to drive traffic, increase dwell time, and ultimately boost sales. IKEA is essentially subsidising food costs to generate higher-margin furniture sales. Restaurants extend store visits and increase impulse purchases. The traditional shopping journey, “browse → select → purchase”, transforms into an enhanced model: “dine → browse → rest → browse → purchase → maybe dine again.” IKEA restaurants have a strategic psychological impact, too. In a somewhat overwhelming shopping environment, they reduce shopping fatigue through strategic breaks, create positive associations with the brand and transform utilitarian shopping into a leisure experience1.

Overall, brands can leverage hospitality to extend lifestyle narratives, capture higher dwell times, generate significant turnover, and build high-margin revenue streams, as restaurants can achieve approximately a 23% EBITDA, significantly above core RTW margins.

Temporary, tactile, tactical: the rise of ephemeral hospitality

A coherent hospitality concept should make the intangible brand universe sensory: scent, music, menu curation and service rituals translate logos into lived experiences. While many brands have turned this ambition into a series of café openings, how to differentiate from the crowd? Onitsuka Tiger succeeded in that mission on the occasion of their red concept opening in London’s Covent Garden in Spring 2025. Instead of opening a permanent in-store café, the brand decided to partner with a local pub, the neighbourhood staple Crown & Anchor, blending a Japanese night feeling and a British pub atmosphere. The pub was transformed for a limited time into the “Onitsuka Tiger Tavern”. The classic British watering hole was reimagined through a Tokyo nightlife lens, completed with heritage posters and a karaoke session. The usual wood-panelled pub interior was given a crimson red Onitsuka twist. Bartenders served Japanese Suntory whiskey, Wagyu tartare plates, and a Japanese take on traditional fish and chips. Instead of a permanent café, the Onitsuka Tiger Tavern will resume only for significant moments such as brand events or product launches. Communication will go through the brand’s Instagram account. Not only does it allow the brand to blend into the local environment and community, but it also avoids heavy investments in CAPEX and staff as well as potential customer fatigue.

Similarly, to better anchor itself in Paris, the Italian brand Pucci partnered with a laid-back institution in Saint-Germain-des-Prés, Bar de la Croix Rouge. The café’s awnings and terrace are adorned with one of the iconic, colourful prints until the end of July 2025. A one-night-only aperitivo hosted local celebrities and friends of the house, mixing Italian and Parisian flair.

Another interesting and unprecedented hospitality offspring initiative comes from IKEA. During July 2025, they opened their ‘Billy-othèque’ (a pun mixing Billy, the name of the iconic bookcase, and the French word for bookcase) in Paris. On the Seine bank in front of Paris’ biggest library and shrewdly positioned just 15 minutes away from their latest Paris store, a 30-metre-long open-air Billy bookcase displayed thousands of books of any kind with a simple idea based on sharing and community-building: participants gave out a book they love and left with another book that has caught their attention. Reading advisors were available to assist the public in selecting their books. Readings for the younger generation were organised every day at 4.30 pm. This initiative demonstrates how alternative hospitality formats are evolving and becoming increasingly relevant in terms of standing out from the crowd.

How hospitality reinvents department stores

Gastronomy and gross margin: when retail goes gourmet

One of the oldest examples of a retailer embracing in-store dining is the Walnut Room, which dates back to 1907 at Macy’s in Chicago. Now integral to any elevated retail experience, food offerings, and especially fine dining, have become a department store staple. The past few years have seen some interesting ventures. In 2022, El Corte Inglés became the first department store in the world to get a Michelin star for its RavioXO restaurant, opened at its Castellana store with renowned Spanish chef Dabiz Muñoz. The collaboration with El Corte Inglés continued with the opening of a second restaurant, located in the Serrano store, a few months later.

Hospitality feeds cross-selling models. Research by Harrods showed that when customers engage with their 26 restaurants and bars, they spend twice as long in the building and twice as much money. Additionally, when the Prada Caffè opened at Harrods in London in April 2023, a viral TikTok reel showcasing the cafe recorded 220,000 views within the first 24 hours of its posting, generating brand awareness and attracting customers in-store. In NYC, Printemps Wall Street’s recently opened store follows a similar strategy and dedicates a third of the space to F&B offerings. They have appointed renowned Haitian chef Gregory Gourdet as their culinary director, who has created five distinct concepts for the store, including an all-day casual café, a classic Parisian-inspired raw bar, and more. However, the most critical F&B option is undoubtedly the Maison Passerelle restaurant. It aims for a Michelin star and is considered one of the 10 most important restaurant openings in NYC in 2025.

In Summer 2025, Galeries Lafayette established an unprecedented partnership with Air France, transforming its rooftop into an aeroplane-themed dining destination, featuring Business Class menus created by three-star chef Régis Marcon and World’s Best Pastry Chef Nina Métayer. The restaurant, accommodating 20 covers both indoors and outdoors with two lunch services daily, recreated the intimate atmosphere of Air France’s airport lounges while offering panoramic views of Paris. The Air France rooftop restaurant builds upon a series of successful dining experiences. In September 2024, as it celebrated its 130th anniversary, Galeries Lafayette showcased its expertise in culinary ventures with an exclusive dining event under its iconic dome, setting a precedent for innovative food partnerships.

From retail to lodging: hotels as the ultimate brand touchpoint

Whether it’s Armani or Bulgari, luxury brands have been pioneers in opening hotels. Lately, building on its Art of Travel DNA, Louis Vuitton is adding full lodging to its now-usual “shopping + café” model. 103-111 avenue des Champs-Élysées in Paris will become a hotel again2. The 25,000 sqm block sits a door’s distance from Louis Vuitton’s current flagship at 101 avenue des Champs-Élysées. This will enable the luxury giant to open a mixed-use complex featuring an enlarged Louis Vuitton megastore on the lower floors and a luxury hotel spanning approximately 6,000 sqm. Every square metre will then become a loyalty touchpoint. If Paris succeeds, it could serve as a blueprint for further openings.

There is room and interest for department stores also to enter the hotel business, as profitability doesn’t compare, especially at a time when traditional retail is under pressure and customers are looking for experiences over shopping. FY 2024 adjusted EBITDA as a percentage of total revenue is around 29% for Host Hotels & Resorts (the largest U.S. lodging company), 30% at Hilton, and only around 8% at Macy’s Inc. Selfridges considers venturing in the hotel business. The dormant Old Selfridges Hotel occupies the block at 1 Orchard Street and 40 Duke Street, directly behind the Selfridges store on Oxford Street. The 294-key hotel shuttered in 2008 and has since been stripped back to a concrete shell used for fashion-week shows and art pop-ups. When Central Group and Signa bought Selfridges for £4 billion in December 2021, they announced that reactivating the hotel was the deal’s “significant value-upside” lever. There has not been any update on the project to date. In any case, hospitality can be an option for unused real estate and leverage new potential, as is the case with LVMH using a part of the Samaritaine store for a 5-star Cheval Blanc hotel.

Beyond VICs: when hospitality becomes a status strategy

Hospitality in department stores reached a new peak in June 2025 when Selfridges announced it would transform its 4th-floor executive offices into a members-only destination, marking a significant evolution in its customer engagement strategy. Named 40 Duke, the private club will feature an internal bar and lounge accommodating 80 covers, a private dining room and terrace with 14 covers, and an external dining terrace seating 50 people. Operating hours will extend from 8:00 am to 12:30 am, Sunday to Thursday, and until 1:30 am on Friday and Saturday, with the terrace available from 9:00 am to 11:00 pm daily. This strategic transformation of office space into a premium members’ venue reflects the broader luxury retail trend of creating exclusive experiences for high-value customers turned members, while maximising property utilisation in prime locations. Building on that perspective, IADS members could build a luxury department store network to offer hospitality membership perks to travelling VICs.

As it gives a renewed purpose to physical stores, hospitality is no longer an accessory but the new retail battleground for loyalty. The past thirty years illustrate a shift from one-off showcases to data-driven ecosystems that extend the brand narrative and drive additional business. Yet not every venture succeeds: brand dilution, oversaturation, and poor execution remain constant risks. The future belongs to retailers who can design resonant concepts that add meaning, not just margin. Whether through immersive restaurants, temporary cultural takeovers or full-scale hotels, brands that turn hospitality into a genuine extension of their identity will be best placed to capture customer loyalty and lifetime value.

Enhanced lifestyle credentials, elevated perceived value and brand equity, increased customer engagement and dwell time, and a way to differentiate from competitors. Although the ROI may not be immediately quantifiable, the impact of these hospitality-inspired experiences is a strategic investment for future retail success. For customers, it offers the convenience of multiple services under one roof, the experiences they crave, and entertainment and engagement beyond shopping.

Credits: IADS (Christine Montard)

What: Middle managers play a critical role in bridging strategy and execution, ensuring organisational resilience and effective performance.

Why it is important: Recognising the value of middle management is crucial, especially as digital transformation and organizational restructuring increase pressure on these roles.

The Monocle article defends the essential role of middle management in large organisations, challenging the widespread narrative that bureaucracy stifles innovation and slows progress. It argues that while visionaries and senior leaders set direction, it is middle managers who translate strategy into practical action, maintain operational discipline, and ensure continuity during periods of change. The text highlights how middle managers act as interpreters between the executive suite and frontline teams, balancing competing demands and absorbing organisational shocks. Despite being criticised for perpetuating bureaucracy, these managers are depicted as vital for maintaining morale, fostering psychological safety, and sustaining performance, especially during digital transformation and restructuring. The article also addresses the growing reluctance among younger professionals to pursue middle management roles, noting that organisations must rethink talent pipelines and support structures to attract and retain future leaders. Ultimately, the piece calls for a renewed appreciation of middle management as a stabilising force that enables both innovation and resilience in the retail sector.

IADS Notes: As seen in the latest IADS White Paper on middle management, recent industry analysis from January and October 2025 confirms that middle managers are under increasing pressure, with 75% feeling overwhelmed and many seeking new roles. The Economist’s October 2025 report details a wave of layoffs and organisational delayering, yet underscores that effective middle managers remain crucial for technology adoption and operational resilience. Harvard Business Review in January 2025 emphasises the importance of middle managers in translating executive vision into actionable strategies, while its October 2025 findings highlight the need for psychological safety to foster innovation. The Financial Times in February 2025 notes Gen Z’s reluctance to take on these roles, signaling the urgent need for retail organizations to reimagine middle management to ensure future leadership and sustained performance.

In defence of middle management: why bureaucracy keeps companies running

What: Facing regulatory pressures, AI disruption, and maturing markets, Airbnb is diversifying its offerings and seeking new ways to sustain user engagement and differentiation.

Why it is important: Airbnb’s evolution underscores the importance of brand differentiation and experiential engagement as digital marketplaces expand beyond their original offerings.

As Airbnb matures from a disruptive start-up into a global platform, it is contending with slowing growth, heightened competition, and mounting regulatory challenges in key markets. The company is responding by diversifying its business model—expanding into hotel bookings, launching new experience-based services, and exploring loyalty programs—to attract new users and deepen engagement. While its core accommodation business remains strong, growth in established markets has cooled, prompting a strategic push into emerging regions such as Brazil and India, where bookings are rising more rapidly. At the same time, Airbnb faces threats from both traditional travel competitors and the growing influence of AI-driven travel planning tools, which risk commoditizing the platform. Regulatory restrictions in major cities and evolving consumer expectations further complicate the landscape. To maintain its edge, Airbnb is investing in brand differentiation and richer, more personalized experiences, aiming to foster lasting connections with users and remain relevant as digital marketplaces become increasingly crowded and complex.

IADS Notes: Airbnb’s current trajectory reflects a broader pattern seen among mature digital platforms as they seek new avenues for growth amid intensifying competition and regulatory scrutiny. As noted by Inside Retail in February 2025, companies like Coupang are diversifying and restructuring to sustain momentum, a strategy echoed by Airbnb’s expansion into experiences, hotels, and loyalty programs. The Robin Report (January 2025) and Inside Retail (September 2025) document how brands are increasingly investing in experiential and community-driven offerings to deepen engagement, paralleling Airbnb’s efforts to move beyond core accommodation. At the same time, regulatory pressures are reshaping platform-based business models, as seen in Journal du Net (April 2025) and GDI (August 2025), where new rules and local restrictions are forcing adaptation and innovation. The rise of AI agents, detailed by Journal du Net (September 2025) and BoF (January 2025), is accelerating the risk of platform commoditization, compelling companies like Airbnb to rethink their value proposition and user engagement strategies. Finally, the evolution of loyalty programs and holistic lifestyle platforms, as highlighted by Drapers (May 2025) and Inside Retail (September 2025), underscores the importance of differentiation and sustained customer connection as digital marketplaces mature.

Has Airbnb reached its peak?

What: APAC retail is leading global AI adoption, but workforce readiness and governance are lagging behind rapid technological uptake.

Why it is important: The gap between AI adoption and organisational readiness mirrors global findings that only a minority of retailers achieve scalable, sustainable results.

Asia Pacific’s retail sector is emerging as a global leader in AI adoption, with frontline employees and local technology platforms driving a rapid transformation in operational efficiency and customer engagement. Despite this momentum, a significant gap persists in workforce preparedness and organisational governance, as only a small proportion of retail workers feel equipped to navigate AI-driven changes. Much of the AI adoption in the region occurs informally, often without adequate oversight or structured support, raising concerns about compliance and the sustainability of productivity gains. Agentic AI is already delivering notable improvements in service efficiency, yet the lack of comprehensive training and clear leadership direction threatens to dilute these benefits. China’s retail market, with hundreds of millions of users engaging with AI-powered solutions, exemplifies both the scale and the challenges of this shift. The APAC experience highlights the critical need for systematic upskilling, robust compliance frameworks, and proactive leadership to ensure that the promise of AI translates into lasting competitive advantage for the retail industry.

IADS Notes: Visa’s October 2025 report highlights APAC’s rapid retail evolution through AI and digital payments, while BCG’s September 2025 analysis reveals only 36% of retail workers feel prepared for AI-driven change despite high adoption rates. Journal du Net in July 2025 documents 71% weekly AI usage among retail employees, with 15-30% efficiency gains but ongoing training and governance challenges. BCG’s June 2025 study shows unauthorised “shadow” AI usage is common, and SCMP’s December 2024 coverage of China’s 230 million retail AI users illustrates the scale and global relevance of these trends.

AI at work: Is Asia Pacific leading the way?

AI at work: Is Asia Pacific leading the way? -slideshow

What: Retailers in Europe face both opportunities and challenges as they adapt to growing digital convergence, evolving customer expectations, and stricter data privacy regulations.

Why it is important: Successfully navigating the balance between convenience, control, and compliance will determine which retailers can thrive in Europe’s hyperconnected retail landscape.

The advance of hyperconnectivity and digital convergence is reshaping the European retail sector, presenting both significant opportunities and complex challenges. As consumers increasingly expect seamless, integrated experiences—often facilitated by multifunctional platforms and messaging apps—retailers must adapt their communication and sales channels to remain accessible and relevant. However, the European market’s strong regulatory environment, particularly around data privacy and competition, complicates the adoption of super apps and all-in-one digital ecosystems. While platforms like WhatsApp and emerging fintech solutions are expanding their roles in commerce and customer engagement, cultural preferences for decentralization and legal requirements for data protection limit the dominance of single, unified apps. Retailers are therefore compelled to innovate within these constraints, embracing new technologies and direct digital communication while ensuring compliance and maintaining customer trust. The ability to strike the right balance between convenience, control, and regulatory adherence will be a key differentiator for retailers aiming to succeed in Europe’s increasingly hyperconnected retail environment. 

IADS Notes: The rapid evolution toward hyperconnectivity and integrated digital experiences in retail is strongly reflected in recent industry developments. Inside Retail (September 2025) and Inside Retail (March 2025) highlight how AI agents, instant checkout, and hyper-personalisation are fundamentally reshaping customer journeys, with 71% of consumers now expecting tailored interactions and brands needing to optimize for AI-mediated commerce. The expansion of messaging platforms like WhatsApp into multifunctional business tools, as detailed by Fashion Network (June 2025), demonstrates the growing convergence of communication, commerce, and marketing, while Supply Chain Movements (February 2025) documents the rise of mobile and social commerce, with a majority of Dutch consumers preferring smartphone shopping. In Europe, the launch of the Wero digital payment platform (Sifted, February 2025) and the increasing integration of generative AI (Retail Dive, November 2024) underscore both the opportunities and regulatory challenges of building seamless digital ecosystems. Privacy and trust remain central, as Forbes (November 2024) and Bain & Company (September 2025) report that 75% of consumers now factor data ethics into their purchasing decisions, making robust security and transparency essential. Finally, the push for unified “phygital” models and omnichannel integration, as advocated by Dimas Gimeno (Fashion Network, October 2025) and Journal du Net (January 2025), shows how retailers are rethinking communication, sales channels, and technology to remain accessible and relevant in a hyperconnected world.

Superapps in Europe: pros and cons

What: Luxury brands in China are shifting from rapid expansion to immersive, personalised experiences and innovative store formats to deepen customer engagement and maintain market share.

Why it is important: The shift highlights how brands are adapting to a challenging market by prioritizing engagement and differentiation, consistent with recent market analyses.

Luxury brands in China are recalibrating their strategies, moving away from rapid expansion to focus on deeper customer engagement and improved sales per store. This transition is marked by a surge in immersive, personalised experiences—such as exclusive events, innovative store formats, and culturally integrated retail concepts—designed to attract and retain high-value clients. The market’s transformation is underscored by a significant decline in overall luxury sales, with an 18-20% drop in 2024 and flat sales now considered the ‘new normal.’ Despite these challenges, brands like Louis Vuitton are setting new standards for experiential retail, as seen in the launch of “The Louis” in Shanghai, which blends retail, hospitality, and cultural elements to create a destination experience. Multibrand retailers such as Dongliang are also embracing experiential and culturally relevant spaces, reflecting the broader trend of entertainment-driven retail environments. The evolution of the market is further characterised by digital integration, sustainability, and the rise of lower-tier cities as luxury powerhouses, demanding brands innovate and optimise to gain market share in a flat landscape.

IADS Notes: Recent market data from January 2025 confirms the end of exponential growth in China’s luxury sector, with flat sales and a pronounced shift toward top-tier consumer engagement. The March 2025 BoF report highlights the rise of lower-tier cities and the need for cultural adaptation, while January 2025 and June 2025 sources document the industry’s pivot to experiential, entertainment-focused retail. Dongliang’s Shanghai concept in November 2024 exemplifies how brands are responding by creating unique, immersive environments, aligning with the broader trend of integrating culture, technology, and hospitality to sustain relevance and drive performance.

Why luxury brands are turning on the charm in China

What: Excessive in-store noise negatively impacts staff well-being, customer experience, and overall retail performance.
Why it is important: Retailers who treat sound as a strategic asset can reduce turnover, boost conversion, and differentiate their brand in a crowded market.

Unmanaged noise has emerged as a critical but often overlooked challenge in retail environments, directly affecting both employees and customers. High levels of background music, overlapping announcements, and general store clamor contribute to staff fatigue, increased stress, and lower job satisfaction, which in turn drive higher turnover and make hiring more difficult. For customers, excessive noise disrupts communication, erodes trust, and diminishes the overall shopping experience, leading to shorter visits, lower conversion rates, and reduced loyalty. Despite significant investments in store design and digital engagement, few retailers systematically measure or manage their auditory environments, missing an opportunity to enhance productivity and brand value. The risk of “sonic overload” is particularly acute in fashion and specialty retail, where ambiance is closely tied to spending. By intentionally designing and managing soundscapes, retailers can create healthier, more engaging spaces that support employee well-being and customer satisfaction, ultimately strengthening their competitive position in the market.

IADS Notes: Recent research confirms that unmanaged noise in retail environments is a significant but often overlooked factor contributing to employee stress, burnout, and high turnover. As highlighted in July 2025 by the Times of India, 45% of retail employees report frequent high stress, with workplace stress costing retailers $5.4 million annually per organization and driving critical workforce challenges. Sifted’s April 2025 analysis further demonstrates that high-stress employees are substantially less productive, taking more sick days and making more mistakes, which directly impacts operational efficiency and retention. On the customer side, The Retail Bulletin in April 2025 and McKinsey in June 2025 both emphasize that sensory elements, including sound, are crucial for creating compelling retail experiences, influencing customer attention, dwell time, and conversion rates. The risk of “sonic overload” is underscored by LUXUS PLUS in December 2024, which warns that excessive branding elements, including sound, can erode authenticity and alienate customers, particularly among younger generations. Meanwhile, Maeil Business Newspaper in July 2025 and Forbes in July 2025 document how leading retailers are embedding ESG principles and inclusive design—such as sensory-friendly initiatives—into their strategies, recognizing that a well-managed auditory environment supports both employee well-being and customer accessibility, and aligns with broader ESG goals.

Do you pay enough attention to your sound identity?

What: AI-generated nostalgia and escapist marketing are reshaping retail strategies and consumer engagement in 2025.

Why it is important: This shift demonstrates how retailers are adapting to changing consumer desires by prioritising emotional resonance and escapism over traditional authenticity, as confirmed by recent industry analyses.

In 2025, the retail industry is witnessing a profound transformation as AI-generated nostalgia and escapist marketing take center stage. Gen Z consumers, overwhelmed by constant connectivity and digital saturation, are gravitating toward idealized visions of the past, often created with advanced AI tools. These digitally fabricated memories, though inauthentic, evoke strong emotional responses and drive purchasing behavior, prompting retailers to rethink their approach. Rather than focusing on strict authenticity, brands are now crafting immersive, emotionally resonant experiences that tap into collective longing for simpler, low-tech times. Social media platforms are flooded with AI-generated content that blurs the line between reality and fantasy, while luxury brands and mainstream retailers alike are launching campaigns that blend nostalgia with cutting-edge technology. This new paradigm requires retailers to balance technological innovation with the emotional needs of next-generation consumers, ensuring that their messaging resonates on a human level. As escapism becomes a dominant force, the industry must adapt to meet evolving expectations and redefine what authenticity means in a digital age.

IADS Notes: The interplay between technology and nostalgia in retail is increasingly evident as Gen Z’s purchasing behaviour is shaped by AI-driven content and escapist marketing strategies. In May 2025, Vogue Business reported that Gen Z’s reliance on AI for fashion advice and shopping recommendations is fundamentally altering traditional retail dynamics, with 72% of consumers now expecting AI-enhanced experiences. This aligns with the September 2025 Inside Retail analysis, which found that brands are shifting from mass-market approaches to community-driven engagement, leveraging cultural fluency and exclusivity to foster loyalty and belonging. The January 2025 Robin Report highlighted the rise of experiential retail, where consumers prioritise emotionally resonant experiences over authenticity, driving innovation in both traditional and unconventional retail spaces. Meanwhile, the Financial Times in September 2025 documented the adoption of AI-generated influencers by major retailers, enabling scalable, customizable campaigns that challenge conventional notions of authenticity. Finally, Monocle’s February 2025 article underscored the cognitive impact of digital transformation in retail, emphasising the importance of balancing technological efficiency with genuine human connection and creativity. Collectively, these developments illustrate how the oxymoron of tech and nostalgia is redefining retail marketing, customer engagement, and the very nature of authenticity in the industry.

The oxymoron of tech and nostalgia

What: Amazon and Target are implementing significant job cuts as artificial intelligence and automation reshape the structure and skill requirements of the retail workforce.

Why it is important: This development reflects a sector-wide shift toward automation, echoing recent findings on the growing impact of AI on retail employment and operational models.

Amazon and Target’s recent decisions to reduce their workforce underscore the accelerating influence of artificial intelligence and automation across the retail sector. These job cuts are not isolated incidents but rather part of a broader transformation, as leading retailers restructure operations to integrate advanced technologies. The adoption of AI is fundamentally changing the composition of retail workforces, with a particular impact on entry-level and support roles, and is prompting a reevaluation of the skills required for future employment. As automation streamlines processes and boosts productivity, companies are compelled to balance efficiency gains with the need to invest in employee training and development. This shift is also driving a redefinition of productivity, moving beyond cost-cutting to focus on value creation through technology-enabled human capability. The evolving landscape highlights the necessity for retailers to adapt quickly, ensuring their workforce remains relevant and competitive in an era increasingly shaped by digital innovation.

IADS Notes: Amazon’s October 2025 announcement of 14,000 layoffs illustrates the sector’s rapid move toward automation, as reported by Le Monde in October 2025. The same month, Le Monde highlighted how AI is accelerating workforce changes, especially in entry-level and white-collar roles. Stanford Digital Economy Lab’s September 2025 report emphasised the shift toward workforce augmentation, while BCG’s September 2025 analysis revealed that only 36% of retail workers feel prepared for AI-driven change. Forbes in March 2025 documented a 4.5% annual productivity growth among leading retailers, reinforcing the importance of reinvesting in both technology and people.

Amazon and Target job cuts reveal how AI is reshaping the retail workforce

What: The Asia Pacific retail market is experiencing rapid change as digital payments, AI, and new consumer trends redefine sector performance and competition.

Why it is important: The convergence of digital payments, AI, and innovative business models is creating new growth opportunities and operational efficiencies for Asia Pacific retailers.

Asia Pacific’s retail sector is undergoing significant transformation, fueled by the widespread adoption of digital payments, artificial intelligence, and evolving consumer preferences. Visa’s October 2025 data highlights a surge in digital transactions, reflecting a shift in how consumers interact with retailers and make purchasing decisions. Strategic investments in AI, such as Central Retail’s substantial commitment, are reshaping competitive dynamics and moving the sector beyond traditional cost-based advantages. The rise of quick commerce, premiumisation, and sustainability is driving growth, while established brands adapt to new market realities and consumer expectations. Macroeconomic factors continue to influence retail performance, with India’s robust discretionary spending contrasting with economic challenges in Japan and South Korea, underscoring the need for localised strategies. The integration of digital currencies, AI, and instant payment networks is further enhancing operational efficiency, customer experience, and cross-border commerce. In this dynamic environment, retailers must remain agile and innovative to capture emerging opportunities and sustain growth in the Asia Pacific market.

IADS Notes: Recent reports from October 2025 (Visa), April 2025 (BCG), February 2025 (Inside Retail), June 2025 (McKinsey), and September 2025 (BCG) consistently highlight the Asia Pacific region’s rapid retail evolution. The integration of digital payments, AI, and omnichannel strategies is driving both operational efficiency and customer engagement, while macroeconomic and consumer sentiment analyses reveal the importance of tailored approaches for each market. These findings reinforce the critical role of innovation and adaptability in maintaining competitiveness within the region’s diverse and fast-changing retail environment.

Visa Business and Economic Insights: Asia Pacific Spending Momentum Index

What: Gen Z and Gen Alpha are reshaping the US fashion industry by prioritizing authenticity, digital engagement, and product value over traditional brand loyalty.

Why it is important: The rise of AI and social commerce among young shoppers is accelerating changes in retail strategy, echoing insights from the past year’s market analyses.

Gen Z and Gen Alpha are fundamentally changing the US fashion industry, with their influence projected to account for more than 40% of fashion spending in the coming decade. These generations are redefining what matters in retail, moving away from traditional brand loyalty and heritage in favor of authenticity, cultural relevance, and community-driven engagement. Their shopping journeys are increasingly digital, with social media evolving into a direct commerce platform and AI tools becoming central to product discovery and decision-making. Young consumers are more likely to seek inspiration from influencers and peers, value personalization, and expect seamless digital experiences. At the same time, they are highly price-conscious and focused on product quality, often mixing established and emerging brands to express their individuality. Retailers are being challenged to adapt quickly, embracing new technologies and strategies to remain relevant and competitive in a landscape where the pace of change is set by the next generation of shoppers. 

IADS Notes: The transformation led by Gen Z and Gen Alpha is clear, with these generations expected to drive more than 40% of US fashion spending in the next decade, fundamentally changing how brands connect with consumers, as shown in the BCG/WWD report from October 2025 and Retail Week in February 2025. Their growing influence and shifting priorities, highlighted by WWD in May 2025, are pushing retailers to rethink what truly matters to shoppers, with a stronger focus on personalization, convenience, and digital-first experiences. The traditional weight of brand heritage is giving way to authenticity and youth culture, a shift explored in LUXUS PLUS from December 2024 and March 2025, and Inside Retail in September 2025. The rapid rise of social media as a direct shopping platform is evident in Forbes and Supply Chain Movements from early 2025, while the widespread use of AI-powered shopping tools, as reported by Vogue Business and CB News in May and February 2025, is changing the way young consumers interact with brands. Finally, as seen in WWD in May 2025, BoF in January 2025, and Vogue Business in November 2024, young shoppers are making choices based on product quality and price rather than brand loyalty, prompting brands to deliver genuine value and stand out in a fast-moving, competitive landscape.

How Gen Z and Gen Alpha are rewiring the fashion industry- article

How Gen Z and Gen Alpha are rewiring the fashion industry- full report

What: AI and machine learning are now central topics in global CEO and analyst discussions, reflecting a major shift in business priorities.

Why it is important: The growing focus on AI highlights a widening gap between early adopters and laggards, emphasizing the need for strategic investment and leadership

The latest CEO Radar analysis reveals a significant transformation in executive agendas, with AI and machine learning now dominating discussions among CEOs and analysts worldwide. This shift marks a move away from the defensive mindset driven by tariff and recession fears, toward a renewed emphasis on innovation, growth, and long-term performance drivers. AI has entered the top ten trending topics for analysts, with mentions rising sharply, while CEOs continue to prioritize AI as a tool for managing supply chains, boosting efficiency, and navigating external pressures. However, only a small elite group of companies is currently realizing substantial value from their AI investments, creating a widening gap between early adopters and those struggling to scale. Regional differences persist, with North American leaders focusing on technological integration and European executives remaining cautious due to economic volatility. Overall, the report underscores the urgency for companies to move beyond pilot projects and deliver measurable results from AI, as the market increasingly demands evidence of return on investment. 

IADS Notes: Recent industry news from July and September 2025 confirms that only 10% of retailers have successfully scaled AI, resulting in notable productivity gains and stronger long-term performance. This has led to a pronounced AI value gap, with early adopters outpacing competitors. The shift from defensive strategies to proactive, growth-oriented approaches is also evident, as retailers restructure supply chains and leverage AI-powered analytics to enhance resilience. Regional contrasts remain, with US retailers prioritizing technology and European companies focusing on regulation and customer acquisition, as highlighted in June 2025.

The CEO Radar -Q4 2025 : Signals shaping tomorrow

What: Walmart’s integration of OpenAI technology marks a shift from traditional search to personalised, AI-powered retail interactions.

Why it is important: This shift demonstrates how strategic alliances between retailers and tech firms are redefining competitive dynamics in the sector.

Walmart’s landmark deal with OpenAI signals a transformative moment for the retail industry, as the company moves beyond the conventional search bar to embrace AI-powered, conversational shopping experiences. By integrating OpenAI’s technology, Walmart aims to deliver highly personalised and intuitive interactions, allowing customers to bypass traditional search methods in favor of natural language queries and instant checkouts. This approach not only streamlines the shopping journey but also sets a new standard for customer engagement, positioning Walmart at the forefront of digital innovation. The partnership underscores the growing importance of generative AI in retail, as competitors race to adopt similar solutions to meet evolving consumer expectations. As AI-driven personalisation and automation become central to retail operations, the competitive landscape is being reshaped by strategic collaborations between major retailers and technology firms. These alliances are accelerating the pace of innovation, enabling retailers to differentiate themselves and respond more effectively to market shifts.

IADS Notes: Walmart’s October 2025 partnership with OpenAI exemplifies the industry’s pivot toward AI-driven commerce, as seen in similar moves by Target and other major retailers throughout 2025. The adoption of generative AI is transforming product discovery and customer experience, while strategic alliances—such as Alibaba Cloud’s retail AI ecosystem in December 2024—highlight the sector’s commitment to collaborative innovation and operational efficiency.

End of the search bar? What Walmart’s landmark deal with OpenAI means for retail

What: Retail media networks are rapidly expanding as a key revenue stream, but face mounting challenges in trust, transparency, and ROI measurement.

Why it is important: The evolution of retail media networks is reshaping retailer-brand relationships and business models, reflecting trends seen in the past year.

Retail media networks have quickly become a crucial revenue driver for retailers, with spending expected to rise by $10 billion in 2025. This surge is accompanied by increasing complexity, as brands and retailers navigate a fragmented landscape lacking standardised measurement and integration with other digital channels. Retailers such as Delhaize are setting benchmarks by using loyalty data and transparent KPIs to demonstrate measurable impact, which builds advertiser trust and drives sales growth. The sector’s evolution is marked by the integration of physical and digital touchpoints, with first-party data enabling more precise targeting and stronger partnerships between retailers and brands. Despite these advances, inefficiencies persist, including ineffective targeting and budget misalignment, prompting industry-wide calls for greater transparency and accountability. The adoption of Real-Time Bidding is seen as a promising solution to these challenges, offering the potential for standardised operations and democratised access to advertising inventory. Ultimately, the ongoing focus on trust, transparency, and effective measurement is essential for sustaining the momentum and credibility of retail media networks.

IADS Notes:  In July 2024, research highlighted the potential for retail media networks to double retailer margins, signaling a major shift in revenue strategies. By October 2024, leading retailers had significantly expanded their digital networks, intensifying competition and innovation in the sector. The focus on measurement and transparency became even more pronounced in February 2025, as Forbes reported a $10 billion surge in retail media spending alongside persistent challenges in ROI measurement. In June 2025, Retail Detail showcased Delhaize’s use of transparent KPIs and loyalty data to drive measurable results, while April 2025 Forbes articles discussed the adoption of Real-Time Bidding and the industry’s efforts to address inefficiencies and promote accountability. These developments collectively illustrate a sector balancing rapid growth with the need for trust, transparency, and sustainable business practices.

The importance of trust and transparency in retail media networks

What: Stablecoins and blockchain infrastructure are transforming retail payments, enabling faster, cheaper, and more accessible transactions across the global economy.

Why it is important:  The mainstreaming of crypto payments reflects a broader transformation in retail finance, building on the momentum of digital currencies and advanced payment infrastructure.

The State of Crypto 2025 report highlights a turning point for the retail industry as crypto matures into a foundational element of the global economy. Stablecoins have become the backbone of onchain commerce, powering trillions in annual transactions and offering businesses and consumers near-instant, low-cost payments that rival traditional networks. Major financial institutions and retail platforms, including Visa, PayPal, Shopify, and department store chains like Bealls Inc., are integrating crypto products, accelerating the adoption of digital assets in everyday transactions. This shift is particularly evident in emerging markets, where mobile wallet usage and onchain activity are surging, expanding access to global commerce. Advances in blockchain infrastructure have dramatically increased transaction throughput and reduced costs, making crypto payments viable for high-volume retail environments. The convergence of AI and crypto is also reshaping retail, with AI agents automating transactions and personalising customer experiences. As regulatory clarity improves and infrastructure matures, retail stands poised for a new era of operational agility, innovative business models, and enhanced customer engagement.

IADS Notes: The rapid adoption of stablecoins and digital currencies in retail is confirmed by the January 2025 a16z report, which details how near-zero transaction fees are reshaping payment models. The September 2025 BCG Global Payments Report further highlights the integration of stablecoins by major retailers and the resulting innovation in cross-border transactions. The October 2025 article from The Street documents Bealls Inc. accepting crypto payments, illustrating the mainstream shift in retail payment experiences. Additionally, the January 2025 Journal du Net article emphasises the evolution of payment terminals toward AI-driven, crypto-enabled solutions. The September 2025 Journal du Net and March 2025 Inside Retail articles provide evidence of AI agents automating commerce and personalising retail, underscoring the convergence of these technologies as a transformative force in the industry.

State of Crypto 2025: The year crypto went mainstream - article

State of Crypto 2025: The year crypto went mainstream - full report

What: Middle managers experience the lowest psychological safety in organisations, undermining their ability to transmit critical information and support organisational agility.

Why it is important: The issue is significant because it directly impacts innovation, talent retention, and the ability to adapt to market changes, as highlighted in recent industry analyses.

Middle managers, who serve as the vital link between strategy and execution, report the lowest levels of psychological safety within organisations—lower than both their senior leaders and direct reports. This lack of safety stems from fear of failure, insufficient peer support, and a lack of vulnerability modelled by senior leadership. Newly promoted middle managers are particularly vulnerable, facing steep learning curves and heightened scrutiny, which can lead to isolation and risk aversion. The consequences are far-reaching: critical feedback loops break down, innovation slows, and long-term performance suffers as problems go unaddressed and learning is stifled. The article argues that organisations must redesign accountability systems to encourage constructive risk-taking, foster open communication from senior leaders, and create robust peer support networks for middle managers. Without these changes, companies risk undermining their agility and falling behind in a rapidly evolving market. The solutions lie in building cultures that reward learning, normalise fallibility, and provide genuine support for those in the middle.

IADS Notes: Recent findings from January and October 2025 underscore the pivotal role of psychological safety for middle managers in retail, as highlighted in Sifted and The Economist. These sources reveal that middle managers are essential for translating strategy into execution, yet often lack the support and trust needed to transmit critical information upward and downward, especially during periods of organizational change or delayering. Research from BCG in September 2025 and Harvard Business Review in May 2025 further demonstrates that low psychological safety undermines innovation, agility, and long-term performance, with only a minority of retailers successfully fostering employee-driven innovation. The unique challenges faced by newly promoted managers, including high turnover intentions and reluctance among Gen Z to take on these roles, are documented in Sifted and the Financial Times in early 2025, emphasizing the need for structured onboarding and mentorship. Leadership modeling, as discussed by BCG and McKinsey in April and June 2025, is crucial for building a culture of openness and adaptability, while the persistent issue of structural isolation is addressed in Inside Retail and The Economist, highlighting the importance of peer support networks to combat burnout and disengagement. Collectively, these insights confirm that strengthening psychological safety for middle managers is fundamental to organizational resilience and sustained performance in retail.

Middle managers feel the least psychological safety at work

What: AI assistants misrepresent news content in 45% of cases, undermining trust in both technology and the brands associated with it.

Why it is important: This issue mirrors retail’s own challenges with AI, where transparency and responsible implementation are essential for consumer trust.
A major international study led by the BBC and the European Broadcasting Union has revealed that AI assistants misrepresent news content in nearly half of all cases, regardless of language or territory. The research, which evaluated over 3,000 responses from leading AI tools, found systemic issues with accuracy, sourcing, and the distinction between fact and opinion. Despite these shortcomings, a significant portion of the public—especially younger audiences—continues to trust AI-generated news summaries, often assuming machine-generated content is inherently accurate. However, the presence of errors has a profound impact on trust, not only in the AI tools themselves but also in the news brands cited within summaries. The study underscores that accountability is widely distributed, with audiences holding AI providers, regulators, and news organizations responsible for mistakes. These findings highlight the reputational risks for any brand associated with AI-generated content and reinforce the need for robust oversight, transparency, and responsible implementation as AI becomes more deeply embedded in information delivery.

IADS Notes: The BBC and EBU’s findings on AI-generated news errors closely mirror trends in retail, where trust, transparency, and responsible AI implementation are increasingly critical. As detailed in Retail Dive’s “Retailers face trust challenges as generative AI becomes more integrated” (Nov 2024), consumer trust hinges on clear disclosure and value-added use cases. Harvard Business Review’s “Consumers don’t want AI to seem human” (Jan 2025) emphasizes the importance of transparency and human oversight, while Inside Retail’s “Retail’s AI psychosis: The industry must not outsource its brain” (Sep 2025) warns against over-reliance on automation at the expense of human insight. The business imperative for responsible AI is underscored in Harvard Business Review’s “How responsible AI protects the bottom line” (Mar 2025), which links privacy and auditability to adoption and satisfaction. Finally, Forbes’ “AI-powered shopping growing dramatically, Adobe reports” (Mar 2025) demonstrates that as AI becomes mainstream, accuracy and responsible implementation are essential for sustaining trust and driving business value.

Largest study of its kind shows AI assistants misrepresent news content 45% of the time – regardless of language or territory

Full report: Audience use and perceptions of AI assistants for news

What: The adoption of AI agents in retail is reshaping business operations, demanding robust oversight and cultural change to realise significant performance gains.

Why it is important: The need for governance and workforce adaptation aligns with industry reports highlighting the challenges and opportunities of scaling AI in retail.

AI agents are rapidly redefining the retail landscape by automating core business functions such as pricing, planning, and store operations. This technological shift is not only driving substantial efficiency gains and revenue growth but also fundamentally altering the division of labour between humans and machines. Retailers are experiencing measurable improvements, including reduced procurement risk management time, increased employee productivity, and notable revenue uplifts for those able to implement and scale AI solutions effectively. However, the transformation is not without its challenges. The success of AI integration hinges on robust governance frameworks that set clear boundaries for autonomous decision-making, as well as comprehensive training to ensure employees can effectively supervise and collaborate with AI agents. Organisational redesign and cultural adaptation are essential, as the workforce must transition from task execution to overseeing and guiding AI-driven processes. Ultimately, the future of retail will belong to those who can balance technological innovation with strong oversight and a commitment to workforce development.

IADS Notes: In February 2025, Journal du Net reported that AI agents delivered a 75% reduction in procurement risk management time and a 30% boost in employee productivity. BCG in September 2025 found that 87% of retailers using GenAI saw revenue increases of at least 6%, though only 10% managed to scale these solutions, highlighting the importance of governance and organisational redesign. Hugging Face in January 2025 noted 15-30% improvements in customer service efficiency, with 76% of executives calling for better AI governance and cybersecurity. Journal du Net in July 2025 emphasized that 71% of retail employees use AI weekly, stressing the need for training and clear guidelines. Forbes in March 2025 observed that leading retailers achieved 4.5% annual productivity growth through AI integration.

The next retail shake-up: AI agents that redefine your job