What: Liontree has collated a series of metrics to understand the dynamics of the 2023 Black Friday edition.

Why it is important: more retailers joined the game, more discounts were granted to more customers: is that sustainable on the long range?

Overview of Black Friday Performance: US and Global Insights

1. Survey Methodologies and Data Sources

Various methodologies were employed to gather Black Friday data. Adobe analyzed over 1 trillion visits to US retail sites, focusing on online retail and excluding in-store purchases. Salesforce's approach included data from 1.5 billion+ shoppers, notably covering 29 of the top 30 US online retailers. Square and AfterPay examined millions of global transactions, while the National Retail Foundation conducted a survey among 3,498 US adults.

1. Thanksgiving Weekend Shopping Surge

The Thanksgiving weekend set new records with 200.4 million consumers shopping, surpassing the previous year's 196.7 million. Global sales during this period increased by 6% y/y, hitting $298 billion. In the US, there was a 7.8% y/y growth in online spending, reaching $38.1 billion, and a 5% y/y increase in sales, totaling $70.8 billion. Black Friday and Cyber Monday saw significant spikes in online sales and traffic, with paid search being the primary driver of these sales.

1. Discounting Strategies and Consumer Behavior

Retailers globally offered average online discount rates of 27%, with the US rates slightly higher at 29%. Categories like makeup, apparel, and skincare saw the highest discounts. Interestingly, the average discount rate increased to -22% from -21% in 2022. Despite the increase in online shopping, the gap between in-store and online shoppers widened, with more consumers opting for online purchases. Black Friday remained the most popular day for both in-store and online shopping, but in-store shopping on the following Saturday saw a decline.

1. Cyber Monday Outshines Black Friday in Spend Growth

Cyber Monday's year-over-year growth in online spending outpaced Black Friday, with a 9.6% increase compared to Black Friday's 7.5%. Discounts reached record highs on Cyber Monday, especially in electronics, with discounts peaking at -31% off the listed price.

1. Future Trends and Inflation Impact

Looking ahead, the season-to-date consumer spend has grown by 7.3%, reaching $109.3 billion online. The full US holiday season online spend is expected to grow by 4.8% y/y. Despite the ongoing discounts, e-commerce prices have fallen for over a year, indicating that the increase in consumer spend is driven by new demand rather than just higher prices.

1. Mobile Shopping and BNPL Popularity

Mobile shopping has overtaken desktop, with 59% of online sales made through smartphones on Thanksgiving. The use of mobile wallets in the US also saw a significant increase. Additionally, Buy Now Pay Later (BNPL) options grew in popularity, with an 8% y/y increase in overall orders and a record high on Cyber Monday.

Black Friday 2023 KPIs: more volumes, more discounts

What: GDI argues that the lack of time is now a major factor of dissatisfaction with shopping among Swiss customers.

Why it is important: Retailers need to reinvent their purpose and make sure their proposed added value is in tune with the current expectations, and do not rely only on pre-existing habits.

GDI discusses the growing importance of time in consumer behavior and the challenges it poses for retailers:

1. Time as a Critical Resource: Consumers are increasingly experiencing time stress, as demands from work, family, and leisure activities grow, despite having more free time than in the past. This stress impacts their shopping behavior.

1. Impact on Life Satisfaction: Effective time management is directly linked to life satisfaction. People feel more satisfied when they engage in activities that are both meaningful and enjoyable.

1. Shopping's Crisis of Fun and Meaning: For most people, shopping, whether for groceries or other goods, is neither fun nor meaningful. It's often viewed as a chore, leading to a desire to reduce the time spent on it. This represents a crisis of fun and meaning for the shopping experience.

1. Changing Shopping Patterns: The importance of shopping in people's lives is declining. There's a noticeable trend of people wanting to spend less time shopping.

1. Diverse Shopper Types and Expectations: Shoppers can be categorized into four types: open-minded optimisers, disciplined needs-based shoppers, efficient identity-based shoppers, and aimless browsers. Approximately 85% of the population (based on the Swiss context) prefers to shop quickly and efficiently, while only 15% enjoy taking their time to browse leisurely.

1. Strategies for Retailers (Four Ps): To make shopping appealing again, retailers need to focus on four key strategies:

◦ Promptness: Making shopping experiences faster.

◦ Proximity: Ensuring shopping venues are conveniently located.

◦ Pleasure: Enhancing the enjoyment factor of shopping.

◦ Purpose: Adding meaningfulness to the shopping experience.

Retailers face the challenge of adapting to these changing consumer preferences and time constraints to make shopping a more positive, efficient, and meaningful experience.

GDI: Going shopping is dead

What: Coresight explores six low-hanging fruits in AI implementation.

Why it is important: the hype is great, but as shown by the 2024 Academy topic, making choices in implementing AI is not that easy.

Coresight focuses on strategies for brands and retailers to leverage generative AI to innovate and grow in the competitive retail sector:

1. Market Potential: The generative AI software market is projected to grow significantly, from $5.7 billion in 2023 to $74.8 billion by 2027.

1. Implementation Steps: Companies should follow specific steps including setting objectives, choosing between buying or building solutions, organizing data, selecting and training AI models, creating content, and reviewing it.

1. Enhancing Product Descriptions and Designs: Generative AI can speed up the creation of product descriptions and designs, improving efficiency and resonating better with target audiences.

1. Personalised Digital Marketing: Utilizing generative AI for personalized marketing campaigns helps in forming deeper customer relationships and maintaining brand consistency.

1. Improved Customer Communications: The use of generative AI in customer service, like chatbots and natural-language interactions, enhances customer satisfaction and accessibility.

1. Data-Driven Decision Making: Generative AI enables retailers to extract valuable insights from diverse data sources quickly and in compliance with privacy standards, aiding in more informed decision-making.

1. Boosting Employee Productivity: By automating routine tasks and providing AI-driven training, generative AI can increase workforce efficiency, allowing employees to focus on more valuable tasks.

1. Optimising Product Development: Generative AI aids in the product development process by facilitating rapid design iterations, integrating various data, and streamlining analysis.

1. Competitive Advantage: Brands that effectively integrate AI into their strategy, like Coca-Cola and Levi’s, gain a significant competitive edge. Retailers who lack a clear AI and data strategy risk falling behind.

Coresight Research emphasizes the transformative potential of generative AI in retail, offering opportunities for enhanced efficiency, customer engagement, and business growth. The technology's ability to process and create content using human language without coding is particularly noted as a key advantage in the competitive retail landscape.

Six quick wins in AI for retailers

What: The Robin Report discusses Nordstrom’s Rack strategy and its impact on the brand value.

Why it is important: Is the future of department stores to go upwards, or to compete on the lowest prices possibles while maximizing territory coverage?

The article discusses the challenges faced by Nordstrom and Kohl’s in the evolving retail landscape, focusing particularly on the rise of discount and off-price retailing. It highlights how Nordstrom, traditionally known for high-quality service and products, has increasingly relied on its off-price Rack stores for growth, raising questions about brand value and strategy. Similarly, Kohl’s, under the leadership of Tom Kingsbury, who has a background in off-price retail, may also be leaning towards this model.

The retail industry is described as being in a "race to the bottom," with consumers demanding lower prices, forcing retailers to adopt low-price strategies or risk failure. However, this strategy leads to a devaluation of perceived value, pushing retailers to constantly lower prices.

Nordstrom's expansion of Rack stores, despite their underperformance compared to other off-price retailers, is seen as a possible misstep. There are concerns about Nordstrom losing its unique value proposition by diluting its brand with a focus on discount retailing. The Rack's declining sales, attributed partly to merchandising and management issues, further complicate the situation.

The article also reflects on the synergy between Nordstrom's full-price and Rack stores, suggesting that the Rack's growth could negatively impact the Nordstrom brand as a whole. It questions whether Nordstrom can maintain its reputation for superior service and customer satisfaction while expanding into the more competitive, lower-priced retail space.

In summary, the article raises concerns about the strategies of Nordstrom and Kohl’s in an increasingly price-driven retail market, highlighting the challenges of maintaining brand value and customer loyalty in the face of the industry's trend towards lower prices.

Is Nordstrom slipping into the vortex of deflating value?

What: Bain & Co review where retailers stand when it comes to Retail Media.

Why it is important: Competition from other industries to also enter the ad space is stiff, for this reason, a strong, segmented, value proposal, mixed with a well-integrated operating system into the core business, is key.

Retail media networks, where retailers sell ad space on their websites and apps, have grown significantly, with over 150 networks globally. This growth has been aided by the e-commerce boom and changes in trade promotion due to the COVID-19 pandemic. However, the retail media landscape is set to become more competitive and complex.

Advertisers are now viewing retail media as a significant channel rather than an experimental one, with global sales exceeding $90 billion annually. This shift is leading to more strategic spending, likely resulting in a consolidation of ad spending across fewer networks. Advertisers are setting higher performance expectations, pushing retail media networks to improve in areas such as planning, capabilities, and outcome evaluation.

The retail media market is expected to grow to about $140 billion by 2026, with a significant shift in profits for retailers from traditional trade to activities like retail media. Consumer packaged goods (CPG) brands recognize the unique marketing opportunities retail media offers, especially its targeted reach and closed-loop attribution linking ad spend to sales. However, most networks currently have low Net Promoter Scores, indicating dissatisfaction among advertisers.

Challenges for retail media networks include rapid market changes, the need for a new go-to-market strategy, organizational integration, and performance measurement. Networks need to adapt by focusing on segmented strategies, integrating operations with core retail functions, and improving performance tracking.

As retail media matures, networks must demonstrate better returns and outcomes compared to other digital advertising channels. Retailers have a window of one to three years to adapt and position themselves for sustained growth in this high-margin area. The future of retail media will likely involve more collaboration, test-and-learn approaches, enhanced commercial functions, and acceptance of imperfection in the pursuit of high-margin growth.

No more easy money on the side: Retail Media enters the performance era

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*What: IADS recently held a meeting gathering CIOs/CTOs where they shared challenges and strategies in 2023. Also, IADS partner, RetailHub was part of the meeting and invited three innovative companies to share their mission and vision.

Why it is important: The presentations highlighted the possibilities offered by AI-powered and Cloud-based solutions, from reducing return rates and cutting costs related to fit and sizing problems to real-time in-store retail media and search engine optimisation.*

3D Look: Bespoke try-on platform at your fingertips

Winner of the LVMH Innovation Award in 2019, 3DLook delivers an AI- and 3D-powered body measuring technology for better fit experiences.

3D Look helps brands and retailers increase revenue and cut costs related to product return, fit and sizing problems. The company’s patented technology allows users to upload photos of themselves as well as measurements so that the computer can create a 3D body avatar with over 80 points of measurement in under 30 seconds. The platform also enables consumers to make informed purchasing decisions by offering size recommendations and a virtual try-on process.

By simplifying sizing, the tool also simplifies sizing when customers are in-store as they can scan at home and then buy in-store. At a time when personalisation is critical for customer engagement and loyalty, knowing customers' body shape and measurements is key. For salespeople, it is also less time guessing size and more time focused on sales and customer service. Additional services are included: appointment scheduling, sending scanning links to customers at home to create a more sales-centric in-store fitting experience and body scanning for store associates' uniforms.

Results announced by the company are interesting: 80% of online shoppers using it choose the recommended size. 45% of shoppers who did not order a size recommended by 3D Look requested an exchange based on the initial 3D Look recommendation.

Why do we think this is important?

A simple tool that can greatly reduce or even eliminate costs related to fit and sizing will be able to transform the relationship with customers. Retailers and brands could also see a rise in revenue through the platform’s styling recommendations as well as the building of customer trust and satisfaction.

Learn more about 3D Look here

Advertima: Real-time in-store retail media solution

Advertima’s solution upgrades and enhances in-store retail media signage which gives an advantage to the advertiser and the retailer and creates a more relevant advertising platform for shoppers. They intend to play a big role in the Retail Media revolution with their real-time performance measurements./nbsp]

The company utilises Computer Vision and AI technology to transform physical stores into a performance media channel. Customers can be segmented instantly in-store and their movements will be tracked which will feed the funnel metrics of the shop and compute predictive reaches and segments. Relevant images are displayed according to the consumer’s identified interests. Advertima offers pilots of their solution in order for the solution to be tested. The system is able to comply with privacy regulations.

Why do we think this is important?

Retail Media is quickly gaining momentum in the industry as a prime form of advertising to consumers and is playing a critical role in the success of retail businesses. But so far, retail media solutions are mostly implemented online. By bringing the success factors of online channels to in-store, Advertima offers a solution to advertise in-store in a personalised way. Advertima’s live customer segmentation and instant performance metrics can give retailers an edge in the competitive business of audience targeting.

Learn more about Advertima here 

RetailTune: The drive-to-store platform solution

RetailTune is a Cloud SaaS platform which gathers all the tools needed for a local digital marketing strategy. The platform helps brands boost their visibility and catch users’ purchase intentions. It’s a well-known fact that users act very fast after conducting local searches, transforming to online and in-store traffic. According to Google, 76% of users who click on “get directions” on their smartphones visit the store within 24 hours. Besides, 28% of local searches translate into purchases. RetailTune aims to drive the pages of its clients to be on the first page of the Google search.  The company uses dynamic store locators and refines the GBP (Google Business Profile) of its clients to represent accurate data. During the consumer’s search phase, RetailTune makes sure the user has all the information to reach the store such as addresses, opening hours, services, promotions, photos, reviews and product availability.

Actual shopping centre case studies showed the following results: doubled views of the store locator, more than YoY doubled direct access to the store locator, individual landing pages of the tenants rank in the first positions on the first page of Google Search, store locator of the shopping centre ranks first in proximity searches on Google, +20% YoY increase in GBP  listing views and +42% increase in calls from GBP listing.

RetailTune works with many brands such as Gap, Pinko, Kiko, Liu.Jo and department stores such as OVS and Coin.

Why do we think this is important?

Search engine optimisation has become an absolute necessity for all companies as it helps to improve online visibility which leads to store traffic, more sales, and improved brand awareness. Effective search engine optimisation strategies enhance the overall customer journey, increase incremental sales and contribute to long-term success.

learn more about retailtune here 

RetailHub: IADS members’ one-stop innovation shop

Following the meeting roundup, these 3 solutions were in line with what CIO and CTOs were dealing with. Department stores’ CIOs and CTOs face an increased complexity whether it’s about choosing and setting the best platforms, systems and solutions able to increase efficiency and enhance customer experience. Innovation is really at stake as companies need to improve their organisation to generate more ideas able to make a difference. This is why the IADS has struck partnerships with solutions, such as RetailHub, that can help members find the right technology and solutions for their business needs. IADS members benefit by gaining access to RetailHub’s ecosystem of carefully curated solutions and getting connected with experts who can help them bring on the right technologies. Want to learn more about our partnership exclusively for IADS members? Contact us at iads@iads.org to get your free access.

What: Vince CEO mentions during an interview that department stores remain crucial in the development of a fashion brand.

Why it is important: Not all brands are part of giant luxury groups and nurturing relationships with such brands could be the future of department stores.

Vince, a brand known for its discreet, timeless luxury inspired by California, is expanding in France, aiming to increase its presence from 15 to 25 points of sale by 2024. CEO Jack Schwefel, with over 30 years in the fashion industry, including a significant tenure at Gap, is leading this expansion. Vince has established a presence at major Parisian department stores like Galeries Lafayette and Printemps, strategically located on Boulevard Haussmann to maximize customer reach. The brand also maintains its only showroom outside the US in Paris, reflecting the city's status as a fashion capital.

Vince's growth strategy includes enhancing its e-commerce platform, with plans to make it available in French, German, and Spanish by 2024. Schwefel notes that French consumers value quality highly, a trait that aligns well with Vince's offerings. Identifying as a 'Quiet Luxury' brand, Vince has seen significant sales impact from this trend, particularly beneficial for their business.

Internationally, the UK, Asia (especially Korea and Japan), Hong Kong, and China are key markets for Vince. The French market is particularly important, with plans for major projects in the country. Vince is known primarily as a women's fashion brand, but its men's sector is growing, aiming to reach 30% of total business in three years. The brand plans to invest in digital marketing and communication to enhance brand awareness, moving away from traditional advertising methods towards digital platforms for more effective audience engagement and analysis.

Department stores are still important for brands: the Vince example

What: The post-pandemic travel surge was a boon, but is also coming to an end.

Why it is important: as department stores know very well, adapting the offer and reverting to fundamentals is key. Brands are also adapting.

Amid changing travel trends and economic uncertainties, fashion and lifestyle brands are adapting their strategies to remain relevant and cater to consumer needs. Initially capitalizing on the surge in travel post-2020, these brands showcased vacation-centric products and marketing. However, as travel demand slows due to factors like increased expenses and shifting consumer priorities, these brands are shifting focus.

Brands previously focused on travel and resort wear are now emphasizing the versatility and everyday use of their products. They are adapting their offerings to suit more local, low-key travel and daily life scenarios, highlighting the adaptability of vacation wear for various settings. For example, they are focusing on products that can transition from beachwear to office or evening wear, appealing to a broader range of uses and settings.

Price sensitivity is another key factor, with brands introducing entry-level price points and versatile, evergreen products to attract cost-conscious consumers. This approach caters to those seeking value in their purchases, balancing aspirational items with more affordable, timeless pieces.

Brands are also planning conservatively, ready to adjust their product lines based on consumer demand and market trends. This nimble approach involves scaling back on trend-driven, seasonal products in favor of classic styles that have more enduring appeal. The goal is to maintain brand integrity and profitability, avoiding excess inventory and heavy discounting that could erode brand value.

Overall, the focus is on flexibility, both in product design and business strategy, to navigate the shifting landscape of consumer preferences and economic challenges.

What happens when the travel boom ends?

What: A review of Shein’s competitive advantage over Zara and H&M.

Why it is important: Shein might have the advantage today, however, much might be at stake in case there is a global regulatory movement against it, as shown recently in Indonesia.

Investors are keenly observing how fast-fashion giants Zara (owned by Inditex) and H&M are responding to the market dominance of Shein, a major competitor in the fast-fashion industry. Shein, primarily an online retailer, achieved around $23 billion in global revenue in 2022, capturing nearly one-fifth of the global fast-fashion market. This growth has been propelled by its low pricing strategy, offering products like $5 t-shirts and $10 sweaters.

Shein’s strength lies in its rapid production capabilities, backed by a network of mainly China-based suppliers. Unlike Zara and H&M, which try to predict fashion trends months in advance, Shein operates with smaller initial orders that scale based on demand. This flexible approach, coupled with a direct-to-consumer model, allows Shein to introduce a significantly higher number of new products compared to its competitors.

Zara and H&M, despite pioneering fast-fashion, face challenges from Shein's model. Shein's rapid production cycle and heavy reliance on Chinese suppliers contrast with Zara and H&M's more geographically diverse manufacturing bases. Additionally, Shein's strategy has led to accusations of design plagiarism and intellectual property infringement.

Despite these challenges, Zara still holds an advantage in delivery speed, seen as crucial for customer retention and minimizing returns. Over a year, Shein introduced vastly more products in the U.S. market than Zara and H&M, highlighting the scale of its operations and the challenge it poses to the established fast-fashion players.

How Shein is winning the fast-fashion war by putting consumers in charge

What: A forward-thinking piece about the future of online advertising according to The Economist.

Why it is important: The landscape is radically changing and customers are growing tired of traditional advertising methods, which is why retailers need to figure out how to do so in the future (think: Retail Media).

Facebook and other social media platforms have become adept at personalizing ads, reflecting the internet's trade-off of free services for ad exposure. However, there's a growing trend of ad-free subscription options emerging. Meta, Facebook's owner, introduced a €9.99/month ad-free option in Europe for Facebook and Instagram, following regulatory changes demanding user consent for personalized ads. Similar ad-free models are being tested or launched by other platforms like Twitter, TikTok, and Snapchat.

The media landscape is shifting as well, with consumers, especially the affluent, increasingly opting for ad-free experiences in various mediums like news, music, and TV streaming. For instance, many newspapers and magazines have moved towards subscription models, and platforms like Spotify offer ad-free listening. TV streaming services are also adopting ad-free tiers, though with fewer ads compared to traditional TV.

Despite these changes, advertisers are finding new ways to reach audiences. This includes more effective targeted ads on streaming platforms, increased spending on out-of-home media like billboards, sponsorships, and public relations. Additionally, new advertising opportunities are emerging in areas previously ad-free, like Amazon’s retail site, Uber’s apps, or in-flight entertainment systems.

Social media platforms are also adapting, with influencers becoming a key method for brands to reach ad-free users. Overall, while ad-free options are growing, advertisers are evolving and finding alternative ways to connect with consumers.

Welcome to the ad-free internet

What: A piece about in-store experience in a post-pandemic world.

Why it is important: Experience is one thing, but do not forget about the basics of retail.

Post-pandemic, in-store shopping has seen a surprising resurgence, with consumers drawn to the social and immersive experiences of physical stores. This trend has challenged retailers to blend the convenience and personalization of online shopping with the physical store experience. Consumers now expect a seamless integration of digital and physical shopping aspects.

Retailers are focusing on creating memorable in-store experiences, as seen with the excitement around product releases like the iPhone 15, where the physical purchase process adds to the appeal. Luxury brands are particularly adept at making customers feel valued and unique, similar to personalized online shopping experiences. However, there's a growing need to elevate the physical retail experience by unifying digital and physical commerce systems, ensuring a cohesive customer journey from start to finish.

An example of this need is evident in a scenario where a customer’s high-end purchase experience is diminished by inadequate packaging, highlighting the importance of a consistent and seamless retailing approach across all touchpoints. Retailers are encouraged to use unified commerce strategies, leveraging customer data for personalized experiences and enhancing loyalty.

Physical stores also face the challenge of replicating the advantages of online shopping, such as instant access to comprehensive product information and reviews. Solutions like digital signage, touchscreens, and tablets can help bridge this gap, allowing customers to explore wider product ranges and make informed decisions. Loyalty programs and store-exclusive discounts can encourage in-store purchases over online alternatives.

To compete with online convenience, physical retailers should offer options like BOPIS (buy online, pick up in-store) or direct home shipping. Ultimately, the goal is for bricks-and-mortar stores to evolve into rich experience hubs, blending digital and physical elements to meet consumer expectations for interconnected, tailored shopping experiences.

What retailers need to know about the return of customers in-store

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*Disruption has been a very fashionable word in the past years as a general way to call for transformation in many markets where digitalization has changed the rules of engagement. Retail has not been spared of course by the rise of e-commerce, and for the past decade, retail CEOs have scratched their heads on how to adapt their analogue and legacy organisations to the new world. Going beyond the fact that everybody in the industry acknowledges that changes are needed, how can these be carried out effectively?

Back in September 2020, Dr Christopher Knee tackled the topic in his article “Responding to Disruption.” In that article, he was reviewing Geoffrey Moore’s 2015 theory (explained in his book Zone to Win) that, to innovate, companies should create dedicated spaces with specific teams, in charge of leading changes. Of course, this raises many questions in terms of how to maintain a common culture, purpose and sense of equality in century-old organisations where the sense of belonging is key. In his article, Dr Knee reviewed many real-world business cases, from Rinascente to Galeries Lafayette or SKP, Neighborhood Goods and Showfields.

A recent trip to Dubai to attend a series of conferences was the opportunity for the IADS to listen to another interesting business case, from Al Tayer, on how they created their online activity from scratch back in 2016. It is remarkable for two reasons: the first one is that Al Tayer usually keeps its business initiatives private, but the second one is because the way they carried the changes within the company can be seen as a real-life application of what Dr Knee explored back in 2020.*

Presentation of Al Tayer Group

In a world where disruption is the new norm, businesses often face the daunting task of reinventing themselves before someone else does. This imperative holds for the luxury retail sector, where evolving customer preferences and emerging digital players are constantly reshaping the landscape, especially in the Middle East, as customers are overall younger and very tech-savvy.

Al Tayer is one of the leading retail companies in the Middle East, along with Chalhoub, an IADS member. While Chalhoub was founded in 1955 with a strong focus on luxury and lifestyle, Al Tayer is a much more recent company. It was founded in 1979 as a travel agency and soon expanded into fragrances and car distribution in the early 80s. Today, the group operates in retail, automotive, real estate and other ventures such as financial services and travel agencies.

When it comes to retail specifically, in addition to operating in various verticals alongside luxury, such as lifestyle (from F&B, leisure to apparel and accessories), Al Tayer is known for its Harvey Nichols franchised department store in Mall of the Emirates, opened in 2005, and its Bloomingdale’s in the Dubai Mall which opened in 2010 (we reviewed them in an IADS Exclusive from 2022). Interestingly, the whole industry recognizes that these franchised stores, smaller in size than the original ones, are also of much higher quality in terms of overall experience, and are now world-recognized luxury destinations in the Middle East.

Today, Al Tayer operates in all of the Gulf countries (namely Saudi Arabia, the UAE, Oman, Qatar, Bahrain and Kuweit), a 56 million-customer large market representing 3% of the global luxury consumption. In the retail division, department stores take a lion’s share of the activity, and are completed by joint-venture and franchised businesses as well as digital activities (local Gap, Bloomingdale’s and Mamas and Papas website), which include Ounass.com.

Ounass.com is a very recent creation, which was stirred by one single observation made by the top management at the time: while in 2016 Al Tayer was virtually non-existent in the e-commerce realm, it was increasingly clear that pure players were gaining strong positions in the Middle East, and fast. In addition, while Middle East customers represented a growing source of income for luxury brands, 50% of their purchases were made abroad, which suggested that there was an opportunity for a new player combining product curation, services and online convenience. This is why Al Tayer decided to disrupt themselves, before being disrupted and launched Ounass as a strategic reaction move.

Why Ounass.com was launched

Ounass (which means “a select group of people” in Arabic) was launched from scratch in 2016 and now represents 46% of the group’s digital activities revenue and claims to be the number one online luxury destination in the GCC. Average delivery time is 2h in Dubai and 3h in Riyadh, with the highest order to post-delivery satisfaction rate in the region, through personalization at scale (with dedicated and localized content in the Arabic language, sometimes even created independently from the brands’ worldwide campaigns).

In Khalid Al Tayer’s own words, however, “it was a very difficult journey”.

While physical stores excel at providing a unique experience, Ounass sought to differentiate itself by offering luxury convenience, as they recognized that competing solely on price was not an option. For that reason, they decided to focus on assortment and service, and initially launched with a mere 250 brands, which was a critical mass just enough to grab customers’ attention (today they list 1,300 brands). To compensate for their initially limited size of assortment, they even allowed competition to list on their website, which contributed at the same time to reinforcing the luxury positioning but also to become the go-to digital platform in the GCC (for example Skims decided to launch in the region through an exclusive partnership with Ounass.com).

From the beginning, Khalid Al Tayer wanted Ounass.com to solve a few pain points for different stakeholders:

-    For customers: Ounass.com should reduce friction and solve their time issues, through easy-to-order and highly qualitative, fast delivery options.

-    For international brands: the website should be a profitable way for them to reach a customer base which complements, and does not overlap, their existing regional one,

-    For regional brands: Ounass.com should be a platform helping them to grow in scale and acquire international visibility faster,

-    For shareholders: Ounass.com should be profitable from day one.

To achieve these ambitious goals, Khalid Al Tayer, after attending the Singularity University in California back in 2016, inspired himself from the advice of Salim Ismail, Peter Diamandis and Michael Malone, co-authors of Exponential Organisations, and created Ounass as a new entity, partially separated from Al Tayer while sharing brands and infrastructure.

Ounass.com innovates through a series of structural specificities

The “key ingredients” as described by Khalid Al Tayer are doubly interesting, first because Al Tayer is a notoriously secretive company and does not usually communicate on its initiatives, and second because they suggest an alternative approach to internal innovation:

-    Vision: Their guiding principle was to "go build and disrupt," rather than to develop a traditional business plan. This helped also foster a sense of emergency and, as a consequence, the burgeoning of many new ideas from the whole team.

-    Separate Governance: A distinct board with a digital focus was created and coordinated with the group retail board. Both boards communicated between themselves, however, the need for a digitally native one was felt early in the project and is now seen as a key factor of success.

-    Tech Native Team: While buying and merchandising expertise was transferred from the parent company Al Tayer, the rest of the team consisted of fresh digital talent recruited from the outside. Khalid Al Tayer did not expand on how he maintained corporate cohesion between all team components (including, but not limited to, pay gaps).

-    Cultural Maintenance: Ounass worked diligently to maintain its unique culture throughout the transformation.

-    Tech Operating Model: A modern technological infrastructure was essential, suggesting heavy investments that were correlated with the following point.

-    VC Fiscal Model: Khalid Al Tayer made quarterly agreements with the board, implying that the company could be shut down and people let go if key performance indicators were not met. As a consequence, this acted both as a team-building tool and a strong element of motivation. This is probably the most striking: after each board, Khalid Al Tayer would go back to his team, share in full transparency the situation and objectives, and make clear that the whole project could be unplugged if they did not deliver collectively.

Key learnings

For Khalid Al Tayer, the main learning from this adventure is that he believes Ounass.com would not have succeeded had this been part of a broader venture, i.e. if the digital teams were not dedicated to digital only.

Looking forward, Khalid emphasized the importance of continued disruption and being “paranoid” about it. Ounass plans to expand its online presence further while also venturing into physical stores for the experiential aspect. They recognize that omnichannel retail is the future, combining the best of both worlds.

Interestingly, Khalid also candidly admitted that not all experiments yielded success. While Ounass thrived, Nisnass, a middle-market sibling, faced stiff competition even though they applied the same recipe. This serves as a reminder that even in disruption, there is no one-size-fits-all formula for success.

Conclusion: Ounass.com is a working example of innovation from the inside out.

Ounass.com's journey demonstrates that internal disruption can lead to success in the ever-changing retail industry, emphasizing the importance of a customer-centric approach applied to a specific service or market (in this case, luxury convenience). But the most important is probably how they managed to build a new entity within a traditional company while preserving its unique culture highlights the importance of a visionary leadership, separate governance, and a tech-native team in navigating the challenges of digital transformation.

One can say that they almost applied by the book Moore’s vision of a successful transition from “incubation zone” to “transformation zone”, and now, to “performance zone” even if, in this particular case, it is not clear to what extent Ounass.com has “contaminated” Al Tayer with a new mindset, or remains a separate entity that could be sold in the future without consequences for the group.

Credits: IADS (Selvane Mohandas du Ménil)

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*Following the IADS CEO meeting in Mexico City last May, the IADS had the opportunity to travel to Panama to discover the Felix B. Maduro and Steven’s department store chains. The purpose was also to meet with the Felix B. Maduro leading team.

Small in size, but with a disproportionate GDP, Panama is an interesting country, standing both as a transit point between North and South America and as an entry gate (the country is dubbed “the Hub of the Americas"). While the Canal is a significant driver of the country’s economy, annually racking in $2bn and contributing 3% to the country’s GDP, it contributed to the development of a very dynamic service sector now representing 80% of the country’s economy.

Thanks to the service sector in a well-connected country, Panama was able to grow its GDP four times the regional average prior to the Covid-19 pandemic, at an average of +4.7% p.a., and in 2023 should grow +5.7%. As such, the combination of such dynamism with the fact of being a hub allows the country to attract regional and international money, which in turn favors retail.

We review our market visit below to understand how local department store companies have adapted to such conditions.*

Panama’s national retail background

The Covid-19 pandemic hit Panama’s economy hard, all the more that the country is reliant on global trade and tourism. As a consequence, the GDP contracted by 18% leading to an increase in the poverty rate. This led to a major deterioration of the labour market, impacting retail, with more than one out of five formal workers becoming informal.  Consequences remain visible today in terms of the quality of service in stores.

However, retail recovered rather swiftly, with sales growing in 2022 as high as in 2021. E-commerce took the lion’s share, as there is a growing middle class in the country, equipped with smartphones, and willing to make the most of the country’s advanced logistics and payment systems. Panama is the entry gate to Central and South America for many consumption goods, and as such, e-commerce has the advantage of being able to quickly present the widest variety of products to customers as soon as they are unloaded from ships and planes.

In addition, international brands are incentivized to open their own stores to make the most of the growing tourism taking place in the country (Panama is home to tropical beaches and temperate mountain regions, with tourism representing 15.9% of the country’s GDP in 2019), and the fact that they often already have logistic facilities there (either operated directly or via partners and distributors). Therefore, while the national airline, Copa, is clear about its ambitions to become a major regional player , tourists visiting Panama are now able to find any international brand they are familiar with, from Adidas, Lacoste, and Pandora to Chanel, Gucci and Louis Vuitton.

As a consequence, while in general retail looks promising for Panama, such perspectives are mostly about e-commerce and specialty stores, as well as the malls housing these businesses (Multi Plaza, Metromall, El Dorado, Multicentro). Unlike in other parts of the world where tourism is strong, Panama department stores do not house luxury brands, which operate by themselves their own stores. In addition, strong brands from other categories (sports, lifestyle) often do the same, forcing department stores to address B and C-level customers with a product offer which, at best, is made of relatively small brands sold in exclusivity, and at worse, a value proposition which mimics what is available elsewhere in the country and online.

Introducing Panama’s department store: Felix B. Maduro

Felix B. Maduro is the oldest department store in Panama (and one of its oldest companies), founded in 1877 by Esther Piza de Maduro under the name The Maduro Co. (then changed to Felix B. Maduro in 1928). The company initially focused on offering European imported perfumes, hats, and scarves and was the only store with an air-conditioned salon for displaying dresses, as well as the only business with windows to display products. Over the years, the company evolved and expanded its product offerings to cater to a broader range of customers: a second store was opened in Via Espana in 1972, a third one in 1985 and the first specialty retail units in 2001 (a toy store and an outlet, both under the department store name).

In 2015, after 138 years of family management, the retail chain composed of 4 stores by then was sold for $74m to Abdul Waked, a businessman who was later arrested for money laundering charges by the United States in 2016. As a consequence, the company was sold for $60m the same year to FBM Retail Corp, whose leading shareholder is Grupo Arrocha of Panama (which operates 33 pharmacies with 2,500 employees in the country), along with Grupo Diunsa, S.A. (the largest department store chain in Honduras), and A.F. International Corp (which has investments in supermarkets and real estate).

This sale allowed the department store company to continue operating (including its payment card and loyalty program schemes) and look at the future, with the objective to reach $120m revenue by 2020 and open 2 stores a year to reach 13 units. International expansion in Costa Rica and Honduras was also considered.

In 2019, e-commerce was launched, with a plan to increase the brand portfolio (including names such as Karl Lagerfeld, DNKY, Calvin Klein) and a partnership was inked with El Corte Inglés to expand its private label Sfera in Panama.

However, the difficulties created by the Covid-19 pandemic forced Felix B. Maduro to restructure its $70m debt in December 2020 by going through a bankruptcy process, which lasted until early 2022.

Numbers are not available; however, the turnover is estimated to be below $10m and today the company operates 5 locations: Via Espana, Multiplaza Pacific, Albrook Mall, Altaplaza Mall, Town Center.

A regional competitor: Steven’s

The history of the department store is more recent: in 1948, Samuel Eskenazi founded in a city outside Panama City a small shop, El Campeon, which grew to become a 9-large department store chain competing exclusively on the price point, operated by its holding, Grupo Tova. The group also opened Steven’s in 1999, and Madison Store in 2006 (7 stores in the country, also targeting the price-conscious customer).

Steven’s, contrary to its two sister companies, is competing in the same segment as Felix B. Maduro, in fashion, cosmetics, accessories and lifestyle, combined with elevated basics sold under private labels. The store chain has 5 branches and offers various services such as a loyalty program, Be You, which claims to have 135,000 members, and S Wedding, a wedding service.

It is extremely difficult to find any information about the group, which does not communicate about its financial performance.

All in all, both Felix B. Maduro and Steven’s compete in the same categories (luxury cosmetics, fashion, beauty, perfumes, makeup, toys, video games, accessories, homeware), at a similar price point, with a relatively similar brand offering.

Visiting Felix B. Maduro in Via Espana

Via Espana is the second-oldest location for the department store in Panama City, which opened in 1972 in a big box format (there is little to no architectural effort put into the building). The area was up-and-coming at that time, as Panama City has been sprawling for the past decades, and today includes many upper-end hotels located on large avenues.

The store's look, however, reflects its age: it has been built as a closed box, without windows but with large perspectives inside, reflecting the taste in terms of shopping in the 70s and 80s. As such, it looks relatively worn down today, all the more so with its surprising store zoning.

The ground floor represents the largest part of the store, and the transitions between categories can be sometimes brutal: the entrance leads the visitor directly to the men's ready-to-wear section (including a mix of brands like Jack & Jones, Nautica, Brooks, Dockers, and Levi's) and the women's shoe sections.

Both sections are very limited in terms of brand signage with a few exceptions (Ralph Lauren, and Brooks Brothers, which the group used to operate in free-standing stores in the past). Shoes are organized by brand with minimally branded wall units and lack visibility.

Then, cosmetics and Women’s RTW sections appear. Cosmetics present a selection of international brands in a very classical way (individual units with retro lit logos on black background), while women’s fashion (Michael Kors, Vero Moda, Ralph Lauren Esprit or Naf Naf ) is presented on flexible displays, just like the accessories nearby (Michael Kors, Kate Spade, and Calvin Klein). On the sides, lingerie shares the space with contemporary fashion and children's clothing.

The first-floor offers houseware items and an extensive toy section strangely separate from children’s clothing and which feels more like a supermarket display (which would suggest it is operated by a partner). A small food & beverage area managed by another partner can also be found alongside a beauty salon situated near restrooms—an odd zoning choice.

There is no Wi-Fi available within the store, making navigation difficult for foreign customers potentially visiting the store from a nearby hotel.

Visiting Felix B. Maduro in Multi Plaza Pacific Mall

The Multi Plaza Pacific mall belongs to the Salvadorian Grupo Roble company, which operates a total of 27 units in the region, but only one in Panama under the name Multi Plaza (there is another mall, Metromall, also owned by the group). Multi Plaza Pacific was built on the premises of a former airport and was designed as a “tourist mall”, including a luxury avenue including names such as Hermés, Chanel and Dior. It hosts more than 500 stores and features amenities such as valet parking and free Wi-Fi across the entirety of the premises.

The Felix B. Maduro store in this mall offers a stark contrast from the Via Espana store and is in line with its immediate environment (Saint Laurent, Dolce & Gabbana, Ferragamo), with attractive windows displaying Longchamps and Kate Spade.

The store is on two floors, and just like Via Espana, the zoning is somehow disconcerting. The entrance on the main avenue of the mall leads directly to the Accessories section, with dedicated and customized corners for brands such as Kate Spade, Longchamp, Vera Bradley and Ralph Lauren. The transition to the Women’s RTW section is more seamless than in the other store and gives brands an appealing visibility, be it through the space they are allocated, or the signage.

The floor also houses men’s RTW and accessories, as well as children’s wear, however, the transitions are often confusing from one universe to another. In spite of this, the floor has a lively atmosphere with ample lighting and is populated by efficient and accessible salespersons.

The first floor is confusing: here again, a large space is dedicated to a toy section near a home section and a café which is not particularly inviting. The confusing part comes from the fact that there is another Women’s RTW section, displaying brands also available on the other floor, such as Esprit, Vero Moda or Sfera (El Corte Inglés’ private label). According to the sales persons, this part of the store was dedicated to emphasizing both newness and large sizes, which sounded paradoxical.

While the Via Espana store gave the impression not to be tourist-ready by simple lack of Wi-Fi, here, purchasing a product proved difficult for anyone not speaking Spanish at the central cash desk.

Visiting Steven’s in Multi Plaza Pacific mall

Paradoxically, and contrary to what was expected, the Steven’s was not significantly different from the Felix B. Maduro store. The entrance leads to a luxury cosmetics section which displays the same international selection with the same type of display units. The ground floor is also home to the men’s fashion department, which has an elevated feeling with brands such as Givenchy, Perry Ellis, Carven and Oscar de la Renta. While brand signage is clear and visible, the general feeling is confusing due to crammed visual merchandising: for instance, shoes are presented in stacked boxes which gives an outlet feeling.

The Accessories and Shoes section, also on the same floor, gives the same elevated feeling with brands such as Kenneth Cole and Guess.

A buy-online pick-up instore stand was remarked during the visit, which was not spotted at Felix B. Maduro, suggesting that this service is not offered by the latter.

On the women’s floor, while the visual merchandising is as confusing as in the men’s section, brands are well put forward and the general feeling is very similar to Felix B. Maduro. The kidswear is probably a bit more chaotic. Interestingly enough, the size of the toy space is as large as in the Felix B. Maduro stores, suggesting that this is a very important market in Panama, however, the biggest difference is that in Steven’s, toys are organized and presented in branded corners, which at the same time suggests that brands are more involved, and also give a more international feeling to the store.

The home section is larger than at Felix B. Maduro and somehow ‘cleaner’, which is probably only due to the fact that a larger section of the store is dedicated to showing a similar range of products. The only true point of differentiation is the Pets section at Steven’s, a category not carried at Felix B. Maduro.

What can be remembered from such visits?

*Answering this question is complicated, and this is probably the biggest issue department stores in Panama face. Not only in both cases was the product offer, at best, standard, with a rather mainstream selection of brands available everywhere in the world, but the impressions, feelings and experiences were very similar from one to another. Neither Felix B. Maduro nor Steven’s were able to stand out of the crowd and differentiate from each other.

At the same time, it was clear when visiting the city that with tourism came an international crowd, not only from the US but also from Europe, and that this crowd was looking for surprises and different experiences no local department store was able to offer. As a consequence, both stores in the Multi Plaza Mall were rather empty during the visit while the mall itself was rather crowded (it was clear from the visit that the Felix B. Maduro store in Via Espana was a tier-2 location and treated as such).

This creates a vicious circle: by not taking risks or looking for a different positioning, none of these companies give themselves the means to attract interesting brands, which do not see the point in being in the retail environment they propose. As a consequence, the type of traffic they attract is mostly qualified in terms of price expectations, but neither in terms of expectations about selection nor brand curation, putting these companies at risk of having to face a competition better armed in the price war.

In short, both companies are swimming in the same pond of blandness with a very similar selection of brands, which is not enough to attract a new type of clientele. In addition, their lack of differentiation does not particularly encourage loyalty to one name or another. If Panama was an inaccessible country, or isolated from the rest of the world like how Chile has been in the past, this would not be an issue, but at a moment when, on the macro level, it is expected that Central and South America grow thanks to their structural strength, and on the national level Copa is determined to transform Panama City in a world-class hub, this is seems strategically dangerous.

This is why the partnership that Felix B. Maduro has inked with El Corte Inglés in 2019 to promote and develop their fast-fashion private label, Sfera, was a strategic step. It seems clear that there is a maximum ceiling in terms of price point that department stores can sell in their premises (both due to the nature of local demand and traffic, but also due to the fact that luxury brands are, so far, not incentivized to join them). For that reason, developing an exclusive fashion offer, with desirable labels at the right price point only available in their stores, is key. It addresses a growing demand from local customers that we have witnessed in the whole region, for new fashion labels at the right price. In that perspective, Felix B. Maduro has a card to play with Sfera, and, why not, could also benefit from a deeper collaboration with El Corte Inglés in order to sell more of their privately-branded products, including the El Corte Inglés homeware line (that Almacenes Siman in Salvador started to sell with great success).*

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION

IADS recently held a meeting all about the men's fashion brands to look out for in 2023. Based on market research, IADS and NellyRodi presented a curated selection of 17 brands that are trending right now.

Check out our selection of these brands, and the pictures, by clicking the button above!

MUST HAVE

AMI PARIS

Ami is a versatile brand that offers a wide range of clothing for everyday wear and special occasions. Their collections redefine Parisian elegance with each release, incorporating a touch of international flair. With a blend of classic and contemporary elements, Ami provides stylish and sophisticated options for individuals to express their personal style.

Check out the AMI Paris website here

CHECK OUT THE AMI PARIS INSTAGRAM

CARHARTT WIP

Carhartt WIP is a versatile and high-quality brand that offers products for all occasions. With a strong presence in Parisian department stores like Galeries Lafayette, Citadium and Printemps, it has become a popular choice for fashion enthusiasts.  From pet coats to working boots, Carhartt and Carhartt WIP offer a comprehensive range of products. .

Check out the CARHARTT WIP website here

check out the CARHARTT WIP instagram here

ARTE ANTWERP

Arte Antwerp offers accessible and stylish apparel at a wide price range. It is rapidly gaining popularity in department stores and becoming a wardrobe essential for men. Drawing inspiration from various arts, the brand combines contemporary and minimalist elements, catering to fashion enthusiasts and those seeking a chic yet simple style.

Check out the ARTE ANTWERP website here

check out the ARTE ANTWERP instagram here

NUDIE JEAN

Nudie Jeans is a retail brand that prioritizes sustainability. With an annual sustainability report, they showcase their eco-friendly practices. Through the Re-Use initiative, customers can purchase repaired pre-owned denim with patches and quilting. They specialize in mono-fabric and is committed to creating tomorrow's denim with upcycling techniques and innovative designs, all while maintaining an eco-conscious approach.

check out the nudie jean website here

check out the nudie jean instagram here

ISABEL MARANT

Isabel Marant, an established brand since 2017, has brought a fresh breeze to men's wardrobes by offering a blend of styles and colourful pieces. With a strong commitment to sustainability and durability, the brand consistently delivers high-quality products.

check out the isabel marant website here

check out the isabel marant instagram here

COMEBACKS

GANT

GANT made a surprising and audacious comeback under the leadership of Christophe Bastin, who revitalized the brand's preppy cool Ivy League heritage with a fresh perspective. GANT's new image communication embraces modernity and incorporates new generation codes for a contemporary and relevant appeal.

Check out the GANT Website Here 

check out the GANT instagram here

LACOSTE

With 90 years in the market, Lacoste has successfully reinvented itself through a GenZ and modern artistic direction. The brand has introduced a new line and a more fashionable collection to cater to evolving consumer tastes. Lacoste is also committed to diversity and inclusion, fostering an inclusive and welcoming environment for all.

check out the Lacoste website here 

check out the LACOSTE instagram here

AIGLE

Aigle, with its new visual identity, exudes modernity, freshness, and style. Under the artistic direction of Études Studio since October 2022, the brand demonstrates a strong commitment to sustainable fashion. Find Aigle at La Caserne, the esteemed hub for responsible and CSR brands in Paris.

check out the aigle website here 

check out the agile instagram here

RISING

S.S.DALEY

S.S.Daley embodies a poetic and delicate vision of men's fashion, crafting a wardrobe that exudes sensitivity and artistry. Their innovative designs have earned them the esteemed LVMH Prize 2022. With their unique aesthetic, S.S.Daley is riding the wave of the New Fashion Movement, redefining the boundaries of contemporary menswear.

Check out the s.s.daley website here

Check out the s.s.daley instagram here

BODE

Bode showcases a one-of-a-kind creative vision, revitalizing old fabrics from across the globe and infusing them with newfound vibrance. With their presence in Men's Fashion Week in February 2023 and the introduction of their new women's line, Bode promises to be the next ultimate brand to watch and follow closely.

check out the bode website here

check out the bode instagram here

ELEVENTY

Eleventy brings a fresh perspective to the world of tailoring, offering a range of versatile options designed to take you from morning to midnight. It presents a diverse colour range that exudes sophistication. The brand prides itself on delivering exceptional quality, craftsmanship, and value, with a perfect balance of style and affordability.

check out the eleventy website here

check out the eleventy instagram here

THISNEVERTHAT

Thisneverthat draws inspiration from the vibrant K-waves, creating clothing and prints that reflect this cultural influence. The brand is known for its numerous collaborations with renowned names such as New Balance and Casio, adding a unique touch to their collections.

check out the thisneverthat website here

check out the thisneverthat instagram here

DE BONNE FACTURE

De Bonne Facture effortlessly combines style and quality, delivering garments that never compromise on craftsmanship. Paying tribute to various local manufacturing cultures, the brand embraces a rich textile tradition that is artfully modernized for the demands of contemporary life.

check out the debonne facture here

check out de bonne facture instagram here

HIDDEN GEMS

CHERRY LA

Cherry LA brings a fresh and contemporary perspective to the classic American west wardrobe, offering a unique take on timeless styles. Their collaboration with Dover Street Market L.A in 2022 showcases their innovative approach. Handcrafted in Los Angeles, Cherry LA exemplifies exceptional quality and craftsmanship.

Check out the cherry la website here 

CHECK OUT THE cherry la instagram here

OUEST PARIS

Ouest Paris presents a modern and boundary-breaking vision of streetwear, challenging conventional codes by celebrating sexual freedom, diverse bodies, and life. With its new oversize forms, cutting-edge designs, and a distinctive blend of upcycled materials, Ouest Paris allows for endless mix and match possibilities, making a unique statement in the world of fashion.

CHECK OUT THE ouest paris WEBSITE HERE

CHECK OUT THE ouest paris INSTAGRAM HERE

MANASTASH

Manastash, born in Seattle and raised in Japan, is a brand that seamlessly blends functionality and style. They specialize in crafting outdoor clothing that not only serves its purpose but also prioritizes environmental consciousness, utilizing eco-friendly materials, offering a new and refreshing alternative to Patagonia.

Check out the manastash website here

check out the manatash instagram here

BAZISZT

Baziszt is a dynamic wardrobe that pays homage to Mediterranean craftsmanship. Their garments are perfectly suited for long summer nights and exude a vibrant and stylish aesthetic. Recognized for their excellence, Baziszt was featured in French Vogue's esteemed "Fashion: 18 Lovely French Brands to Know" ranking.

check out the baziszt website here

check out the baziszt instagram here

What: The Economist reviews how Covid has changed customers’ behaviour across the world.

Why it is important: How can department stores, places of socialization, can cater for the needs of consumers increasingly tempted by hermit lives?

The COVID-19 pandemic has resulted in a long-lasting shift in consumer behaviour in the affluent parts of the world, signaling the onset of the "hermit economy." While the unemployment spike of 2020 quickly reverted and GDPs recovered, the allocation of consumer spending did not bounce back in the same way. Before the pandemic, the trend was an increasing share of spending on services. However, the lockdowns led to a collapse in this sector and a surge in demand for goods as people stayed home more.

Three years later, spending on services like hospitality and recreation remains persistently below pre-pandemic levels. Consumers are now redirecting their expenditures towards goods, such as home appliances and food. The trend is more pronounced in countries with longer lockdown durations, and this "hermit" behaviour is evident in reduced outdoor leisure activities and lower interest in industries like hospitality.

Anomalies exist, such as the difficulty in booking restaurant tables, which seems contradictory to this trend. However, this is attributed more to a reduced supply due to a shortage of workers in the service sector and a halt in the opening of new venues, rather than an increased demand.

Businesses have taken note of this USD 600 billion shift in consumer spending. For instance, traffic at Darden Restaurants is around 80% of pre-COVID levels, while home improvement stores like Home Depot have seen a significant increase in revenue. The stock market also reflects a preference for companies that cater to homebodies over those that benefit from outdoor activities.

The persistence of hermit behaviour could be due to ongoing concerns about infection, changes in work patterns with more remote work reducing the need for services related to office life, and a possible shift in values, with people now favoring more solitary activities and home-centered lifestyles. Overall, COVID-19 has left a substantial impact on societal preferences, seemingly pulling people apart and changing the landscape of consumer spending.

Are you prepared for the hermit consumer?

What: The Financial Times reviews the overall situation of e-commerce players in the luxury sphere.

Why it is important: “Expect some further consolidation in the sector in the future”: good or bad news?

Farfetch, a luxury ecommerce platform, recently gained approval from the European Commission to acquire a significant stake in competitor Yoox Net-a-Porter. This deal allows Farfetch to sell Richemont brands, boosting its portfolio. However, the company has faced challenges, with its shares plummeting about 98% since their peak in 2021. The luxury ecommerce sector, in general, is struggling with several companies like Yoox Net-a-Porter, Matches, Lyst, and The RealReal facing losses, cost-cutting measures, and restructuring.

The challenges are attributed to a post-COVID cooling in the luxury and ecommerce sectors and the increased digital presence of luxury brands themselves. These brands are now directly engaging with customers, offering personal services and reducing reliance on wholesale models, impacting multi-brand retailers. Costly online advertising and changing distribution models add to the pressure.

Some companies are exploring new strategies like e-concession models or focusing on discount luxury and second-hand markets. Despite the challenges, multi-brand ecommerce sites are still seen as valuable for their curated collections and the discovery of new labels. However, more consolidation in the industry is expected as these companies search for sustainable and profitable business models.

Luxury ecommerce groups lose their appeal

What: The MBS Group reviews the role of the CFO in the age of AI.

Why it is important: CFOs are presented both as the guardians of the company here to mitigate thr risks, but also as the ones helping to identify the relevant use-cases.

The UK's inaugural AI Safety Summit at Bletchley Park, focusing on the risks and potential of AI, highlighted key issues for businesses, especially in consumer-facing sectors. The summit emphasized the significant impact of AI, especially generative models like ChatGPT. Key themes from a related roundtable with finance leaders included:

1. Generative AI's Significant Leap: Recognizing the profound advancement represented by generative AI, such as ChatGPT, which expands AI's capabilities beyond traditional bounds.

1. Rapid Pace of AI Integration: Businesses must prepare for swift AI integration, with AI expected to transform businesses in under a decade. This 'AI transformation' is predicted to be faster than digital transformation, leveraging existing data frameworks in businesses.

1. CFO's Role in Mitigating AI Risks: CFOs face the challenge of addressing both known and unknown AI risks, including bias and misinformation. Current frameworks for ethical and safe AI use are still maturing, placing responsibility on business leaders.

1. CFOs Driving AI as a Value-Add: CFOs play a critical role in using AI for enhancing efficiency, driving growth, and creating new revenue streams. An example includes IKEA’s retraining of call center staff as interior design advisors, supported by AI, generating significant revenue.

1. Identifying AI Use-Cases: CFOs need to carefully choose AI applications, balancing risk and value. Initial use cases should demonstrate AI's business value effectively, with some areas like marketing posing less risk than others like investor communications.

The summit and discussions reflect a broader recognition of AI's growing influence in business strategy and risk management. There's an increasing need for leadership teams and non-executive directors to understand AI, with future expectations for CEOs with AI experience in consumer-facing industries.

How should CFOs consider AI?

What: Every year, Bain & Altagamma provide a synthetic perception of the luxury market evolution.

Why it is important: This tool is key to having a macro-understanding of what is going on.

The 22nd edition of the Bain-Altagamma Luxury Study, focusing on the luxury goods market in 2023, provides several key insights:

1. Market Overview: The report presents an analysis of the luxury goods market's performance during the first three quarters of 2023, along with projections for the final quarter and beyond. It includes expectations for market evolution and Bain's recommendations for future growth strategies.

1. Record Growth: 2023 witnessed record growth in the luxury markets, with a significant shift from product consumption to experience engagement. The growth rates were 8-10% compared to 2022 and 18-20% compared to 2019, aligning with the growth trends of 2021-2022.

1. Segment-Specific Trends:

• Luxury Toys: These continued robust growth due to the resilience of high-net-worth individuals and easing supply chain constraints.

• Fine Art: The market saw subdued growth with a dichotomy between auction houses and dealerships. Auctions faced downturns, while dealerships expanded, with an escalating shift in the customer base towards Gen Y and female clients.

• Fine Dining and Spirits: There was a resurgence in social interactions driving growth in this sector, with strong growth in fine dining and varied performance in spirits.

• Luxury Hospitality and Cruises: These thrived with a surge in demand for unique, personalized, and transformative experiences.

1. Consumer Trends: There was a notable rebalancing in discretionary spending, with a tilt towards lived-in experiences over products. Experience-based goods and luxury experiences outpaced the growth of traditional luxury products.

1. Regional Dynamics: The report highlights the balanced growth of luxury markets across regions, with Asia as a significant growth engine. Specific trends in personal luxury goods, fine dining, and hospitality were observed in various regions.

1. Personal Luxury Goods Market: This market continued to grow amid uncertainties in 2023, with a clear upward trajectory projected through to 2030.

1. Generational Influence: Multigenerational complexity is unfolding as a key influencer for future market evolution. Brands are adapting to serve different generational needs, with Gen X and Y representing the bulk of luxury purchases and Gen Z emerging as a significant influence on cultural and social values.

1. Sustainability Focus: Luxury brands are increasingly committing to decarbonization goals, with a need to shift focus from corporate to business unit levels, aligning incentives with overall targets.

1. Market Dynamics: There's a continued elevation in price across categories, with a shift towards high-end items and a quest for iconic and investment pieces. This shift is partly driven by the strong performance of the Asian market.

This study provides a comprehensive overview of the luxury goods market in 2023, highlighting growth trends, segment-specific dynamics, consumer preferences, regional market differences, generational influences, sustainability commitments, and overall market dynamics.

Bain and Altagamma release their 2023 report on Luxury

What: With the cost of life increase and inflation, many customers have seen that the cost of experiences (dining, concerts, travels) has increased, and are expecting a proportionate raise in terms of outcome.

Why it is important: As department stores are increasingly entering the experience economy, they need to be aware of the “extra mile” expected by customers if they want to charge premium prices for said experiences.

As the cost of entertainment and experiences rises, people's expectations for fun also increase. This can lead to quicker disappointment if the experience doesn't seem worth

the high price tag.

People are willing to spend more on experiences than physical goods, but expensive experiences don't always equate to greater satisfaction. Satisfaction depends more on meeting expectations. When money is tight, dissatisfaction with expensive purchases is more likely as people think of other ways they could have used the funds. Strategies like finding cheaper pleasures, focusing on the overall experience rather than just the cost, and mentally reframing disappointments can help counteract dissatisfaction with expensive experiences. But some letdowns can't be spun positively no matter what. People may still regret and feel disappointed by expensive experiences that fall short of expectations.

As both goods and experiences rise in cost during inflationary times, shifting spending toward experiences may increase overall satisfaction. But expectations need to be managed.

In summary, the higher the cost of an experience, the higher the expectations tend to be. This puts more pressure on experiences to deliver proportional fun and satisfaction relative to the price tag.

Experiences pricing: beware of the customer mindset change

What: A report from The Retail Bulletin on the validity of NPS in the 21st century

Why it is important: Retailers consider NPS as a staple when it comes to customer satisfaction measurement. But is that still valid?

The report examines the challenges and limitations of using Net Promoter Score (NPS) as a metric for customer satisfaction. It suggests NPS alone is not sufficient and should be complemented by other metrics.

The main limitations highlighted are:

• NPS varies by region due to differences in employee turnover and store management.

• NPS is time-sensitive, with "hot" feedback right after purchase being higher than "cold" feedback later on.

• Smaller, local stores tend to score higher NPS than larger chains.

• Using NPS as a bonus metric can corrupt results by pressuring employees.

• Keeping brand promises to customers is key for good NPS.

The report recommends improving NPS by:

• Tracking it over time rather than a one-off score.

• Comparing similar store types/regions.

• Focusing on customers not just the score.

• Showing NPS's link to revenue to prove ROI.

• Using NPS insights to drive internal culture change.

Overall, the ebook suggests NPS has limitations if used alone, but can still provide value if complemented with other customer metrics and used to drive business change. The focus should be on the customer, not just the NPS number.

Are NPS still valid for the new retail age?

What: The current financial context should be a real issue for BNPL, but actually, this is exactly the contrary.

Why it is important: BNPL remain useful tools to recruit and keep clients captive.

Despite expectations that higher interest rates would slow down the growth of buy now, pay later (BNPL) lenders like Affirm, these companies are experiencing unexpected benefits. Unlike banks, which rely on deposits, BNPL firms fund loans from market sources and are theoretically more vulnerable to rising interest rates. However, banks are facing instability in their deposits and increased capital requirements, leading them to reduce consumer lending.

Affirm, in particular, is attracting investors, including pension funds, with its high-yield credit offerings. This demand is boosting not only BNPL firms but also alternative asset managers who are seeking non-traditional credit options. Affirm reported a gross merchandise volume of USD 5.6 billion in its recent quarter, surpassing expectations and increasing its revenue net of transaction costs. Its total net revenue grew by 37% year over year to USD 497 million, and its stock value has seen significant growth.

The appeal of BNPL credits lies in their short-term nature and the ability of firms like Affirm to increase yields through higher lending rates. Affirm has maintained stable credit performance, with a low delinquency rate. Despite not reaching the disruptive potential anticipated in 2021 and still working towards profitability, Affirm's current trajectory is garnering renewed investor interest.

Why high interest rates are supporting buy now pay later schemes

What: Coresight reviews a selection of interesting immersive retail concepts.

Why it is important: While going too much tech might sound gimmicky in stores, retailers need to bridge the gap between the real world and the virtual perception of customers increasingly used to dealing with online environments.

Coresight explores how US brands and retailers plan to invest in and offer immersive experiences based on a survey. It highlights several key immersive experience trends:

1- Virtual Stores

• Virtual stores allow brands to offer engaging 3D shopping online. 61% of retailers surveyed have invested in virtual stores.

• 88% saw increased total sales and 91% saw increased online sales from virtual stores. Virtual stores also increased click-through rates, time spent, and new customers.

• Coresight estimates US virtual store sales will reach $7.1 billion by 2030, growing at a 27% CAGR from 2022.

2- Personalization

• 71% of retailers surveyed have invested in AI-enabled personalized content. This drove a 77% increase in online sales for most companies.

• Personalized content mainly increased click-through rate, time spent on site, and net promoter score. Fashion brands saw gains in new customers and conversion.

3- Gamified Experiences

• 40% of retailers surveyed have created gamified shopping experiences. These drove a 77% increase in online sales overall.

• Gamified experiences increased time spent on site, net promoter score, and average order value for most companies. Fashion brands saw higher online sales impacts.

4- Social Shopping

• 65% of retailers surveyed enable social shopping features. 78% saw increased online sales, especially non-fashion brands.

• Social shopping drove more clicks, new customers, and time spent on site. Fashion brands saw customer acquisition and higher order values.

Overall, the report shows immersive experiences like virtual stores and personalized content are top investment priorities for retailers to boost customer engagement and sales. Advanced experiences allow brands to craft more tailored and interactive shopping journeys online.

Immersive experiences in retail: Coresight’s take

What: Boomers are the wealthiest customer generation for now, and should be the focus of all retailers.

Why it is important: This is exactly what was discussed at the last IADS CEO meeting.

The article discusses how Baby Boomers continue to significantly influence consumer spending, despite earlier beliefs that their impact might wane. While Millennials and Gen Z face financial constraints like student loans and lower-paying jobs, Baby Boomers remain a powerful consumer force. Historically known for their high spending habits, Boomers have shifted from their youthful idealistic values to a more consumption-driven lifestyle, often living on credit and home equity loans.

Despite the financial crisis of 2009 and the disappearance of rich pensions, the value of Boomers' homes generally increased, and they still possess significant wealth, partly due to expected inheritance. Businesses are advised to target this demographic, as Boomers account for a major portion of U.S. consumption today, in contrast to younger generations who are cutting back due to financial pressures.

The article notes that while many Boomers are affluent, enjoying comfortable retirements and home values, there's also a significant portion who are not as financially secure, relying on Social Security and small pensions. However, the spending power of the wealthier Boomers is still substantial, impacting sectors like travel, home improvement, healthcare, and entertainment.

In contrast, industries like fashion and children's products might not see as much spending from Boomers, though they often spend on their grandchildren. The eventual passing of wealth from Boomers to younger generations is acknowledged, but there's a hint of uncertainty about how much will be left, considering Boomers' ongoing spending habits.

The Boomers are not done booming

What: Ozempic is a new diet drug that will disrupt many industries, including retail.

Why it is important: It is extremely rare that new drugs have such a disruptive potential. In retail, it might affect many factors, from size grids to menus in restautant, or the notion of health itself.

A recent medical presentation in Philadelphia revealed that Wegovy, a new weight-loss medication, significantly reduces the risk of death from heart attack or stroke by 20%. This drug, along with its cousin Ozempic, belongs to the "semaglutides" class which slows digestion and mimics natural appetite-reducing hormones. These drugs, first commercialized by NovoNordisk, have gained immense popularity, leading to a 300% increase in prescriptions in the US since 2020. They are expensive, yet Bank of America predicts that 48 million Americans will be using them by 2030.

Their impact goes beyond healthcare. The pharmaceutical industry is seeing significant shifts, with companies like Novo Nordisk and Eli Lilly thriving due to their semaglutide offerings, while others without such products are facing challenges. The drugs are disrupting markets beyond pharmaceuticals, including fast food, insurance, and health and fitness industries. For instance, companies like Krispy Kreme are being downgraded due to reduced consumption of sweet treats among semaglutide users

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The broader implications for the US healthcare system are significant. While semaglutides are costly, they could potentially reduce overall healthcare costs by lessening obesity-related conditions like kidney failure and heart disease. However, their long-term health effects remain unknown, and they do not address underlying causes of American obesity, such as lifestyle and dietary habits. Despite these uncertainties, semaglutides are transforming both economic and health landscapes in the US.

Behold the Ozempics business