What: An opinion piece exploring the benefits of teaming up to build a better loyalty program.

Why it is important:  This is exactly what Central Group offers to Thai retailers with its own The One loyalty program.

Retail has embraced the concept of "poly-loyalty," where shoppers are loyal to multiple retailers rather than just one. As a result, "poly-reward" programs have emerged, where various loyalty initiatives form open partnerships to share member perks and insights, benefiting all involved. These programs offer several advantages:

1. Partners gain insights into each other's customers' purchase data, enhancing merchandising and marketing strategies.
2. Brands can partner with organizations that bring complementary capabilities and resources, opening up new growth opportunities.
3. Sharing operational costs and combining promotions across channels reduce expenses and increase customer touchpoints.
4. Offering flexibility in earning and redeeming points across multiple retailers and payment methods motivates members to be more active.
5. Faster redemptions in poly-reward programs encourage higher engagement and better accounting practices.

Poly-reward programs provide an attractive solution to the growing number of loyalty programs, offering more excitement and opportunities for all involved in the retail ecosystem.

Should retailers team up with their loyalty program? 

What: India is the latest overseas market for department stores to consider but industry leaders are divided on whether Galeries Lafayette’s expansion into India (through a partnership with local group Aditya Birla Fashion and Retail Limited (ABFRL)) will spur other luxury department stores to enter the market.

Why it is important: Early movers are encouraged by the growing footprint of Indian multi-brand retailers and the under-penetration of global brands’ mono-brand store networks. Still, there is no consensus about whether the market is ready for a wave of department store openings.

Is it the right time?

It seems several players are interested in the Indian market, but any move hinges on multiple factors, including an indication of adequate demand for their brand and business model, availability of high-quality retail environments, and possibly a reduction in import duties overall or through free trade agreements. India also needs to move significantly higher on the income scale, with a larger number of high-income consumers, even though the number of high-net-worth individuals is expected to increase 108% between 2022 and 2027 to 1.66 million people.

Also, the global luxury goods industry in India is expected to hit EUR 25 to EUR 30 billion (USD 26.8 to 32.2 billion) by 2030, up from less than EUR 8 billion, last year, according to Bain & Company.

India is just the latest stop in a long-running global expansion plan for Galeries Lafayette after outposts in Europe such as Germany and Luxembourg. It is also present in Dubai, Qatar, and Indonesia. After entering a new joint venture in China with Hopson Group, it announced ambitions to grow its current footprint from Beijing and Shanghai to ten cities across the mainland.

Many department stores faced challenges abroad. Printemps shuttered their Tokyo store in 2016. Also, ventures like Saks’s experience in the Middle East could make some contenders cautious about investing in a less developed market like India. Last year, Britain’s Harrods did not renew its contract with partners in Taiwan, Thailand and Singapore, leading to concessions closures in those markets. Instead, it has focused on opening small outposts in Shanghai and Beijing. One way for department stores to test the waters in India will be digital. Last year, American chain Macy’s got into a partnership with Indian fashion e-tailer Myntra to offer products from its private labels.

The brand and product offer

One focus will likely be to bring French and international designers that don’t yet have the resources to enter the market on their own. Another will be as a supplementary channel for those already present. ABFRL could also pitch to become the Indian partner for more overseas brands who want to open mono-brands or distribute across other channels.

Local brands will be crucial as traditional clothing is still the default choice for many Indian women. Both Galeries Lafayette stores will have a local curation that is a complementary play for big Indian designers, most of whom have large flagship stores in both cities. Selvane Mohandas Du Ménil, IADS Managing Director, seems confident that the company will find the right merchandise mix based on its offering elsewhere.

Other challenges exist

Human resources will be a key one for luxury retail in the country. The regulatory environment is also testing. Currently, India allows foreign direct investment (FDI) in multi-brand retail, capped at 51% ownership by a foreign company. Foreign companies must invest a minimum of USD 100 million in the country, with at least half of it put towards back-end infrastructure. There are other constraints, such as prior approval from state governments, the inability to operate stores outside of cities of a certain size, and a compulsory 30% purchase requirement from small suppliers and manufacturers.

But despite these and broader challenges in India, the gap that Galeries Lafayette identified in the local multi-brand market was clearly too attractive to ignore. India business is expected to contribute meaningfully to its topline in the near future. The share of revenue from its international business is expected to go up to about 20% by 2025-26, up from the current 13%.

Is India the next frontier for luxury department stores?

What: A piece about why major US department stores are embracing tech to reduce the size of their stores.

Why it is important: Showrooming and smaller stores fleet might be the next step for department stores in the future.

The retail industry is shifting towards small format stores, as major department stores like Bloomingdales and Nordstrom open smaller locations to address revenue challenges.

These stores offer lower rents, fewer employees, and less inventory, resulting in lower overhead and higher profit margins.

However, to be successful, retailers must strategically curate their merchandise based on real-time customer behavior data. Understanding local audience preferences and offering the right products in the appropriate quantities is crucial for customer satisfaction and loyalty.

As customer behavior evolves, businesses should prioritize meeting individual customer needs to thrive in the changing retail landscape.

Department stores are getting smaller (and smarter) 

What: Coresight review the department store situation in China and tries to define a general direction for the market.

Why it is important: China continues to remain opaque and it is difficult to have an accurate and precise vision of the market. This report is no exception as, while it provides interesting data, it mixes several store formats and therefore does not fully address the department store situation. It is interesting also to note that Beijing Hualian Group (SKP) is not mentioned in the report, while SKP is the leading department store in the world.

In 2022, sales of department stores in China declined by 7.9% to $126.5 billion due to factors such as the shift towards e-commerce and increased competition from domestic and international retailers. In the coming years, department store sales are expected to grow at low-single-digit rates annually, resulting in a CAGR of 0.6% from 2022 to 2027.

Despite the challenges, there are positive factors driving department store sales in China, including cultural traditions and festivals, government policies supporting retail sector development, and consumers' urbanization. However, department stores also face hurdles such as lower consumer traffic, sluggish economic growth, and a high youth unemployment rate.

The department store sector in China is fragmented, with Shanghai Bailian Group leading the sector, followed by Chongqing Department Store and Easyhome New Retail Group. Many of the top 20 department store groups in China experienced declining sales in 2022.

To innovate and enhance offline shopping experiences, department stores are adopting various technologies, including self-service payment systems, member recognition systems, and interactive screens.

Looking ahead, department stores in China are expected to focus on growing their online sales, leveraging data-driven insights, and increasing online reach and shopper engagement. Embracing digital transformations and meeting evolving consumer demand will be crucial for their success in the future.

The report includes data from Shanghai Bailian Group, Chongquing Departmznt Store Co, Easyhome New Retail Group, Rainbow digital Commercial Co, Wangfujing Group, AEON, Liqun, Dashang Co, Chang Chun Eurasia Group, Wushan Group Co, Hefei Department Store group, Golden Eagle, Inzone, Wuxi and others.

The state of department stores in China 

What: Now that tourism has resumed, some wonder if it should not be limited, or capped.

Why it is important:  Opposition often come from locals. This could be soon a problem with department stores trying to attract at the same time local customers and tourists.

As international travel resumes after the pandemic, the issue of overtourism is becoming a concern again, especially in popular destinations like Venice and Fiji. European cities, including Amsterdam, are starting to take action to address overtourism.

Tourist transportation contributes to about 5% of global emissions, and the increase in international tourist arrivals has put a strain on cities' infrastructure and resources.

Some cities are considering reducing tourism or focusing on attracting "quality tourists" who spend more and have a positive impact on the local economy.

Others are implementing measures to spread tourists to less crowded areas. Amsterdam, for instance, is rebranding itself as a cultural destination, aiming to limit the number of visitors and move away from the image of a party destination.

The city has already started initiatives to reduce overstimulated tourism, such as closing sex workers' windows in the red-light district and banning outdoor pot-smoking in the city center. The Netherlands' government is also cooperating to cut the number of flights at Schiphol airport on environmental grounds.

Cities are facing the challenge of finding a balance between tourism's economic benefits and managing its negative impacts, seeking ways to ensure sustainability and preserve their heritage and quality of life for residents.

Tourists are back, is it time to tell them to stay away? 

What:  The mood is good for now in the US when it comes to consumption.

Why it is important: There are however some mixed feelings on specific topics that echo what we have found in our Liaison Officer Report from June 2023.

The Conference Board Consumer Confidence Index in the US rose by over seven points to 109.7 in June. Both present situation and future expectations components saw improvements. Concerns over a recession receded slightly but remain high, with 69.3% of consumers seeing a recession as likely in the next 12 months. However, consumers' views on their household finances are more optimistic, with more expecting improvements in the coming months.

Consumer inflation expectations for the next year fell slightly from 6.1 to 6.0, reflecting a slight drop in current headline inflation. Purchase intentions for major appliances and autos lessened slightly but remain relatively strong.

Consumer perceptions of the labor market also rebounded in June, showing continuing confidence in job availability. Views on the present business environment improved, while expectations for future business conditions remained negative but less so than in May. Income expectations remain positive but slightly weakened.

US consumer confidence up 

What:  A full report on the evolution of checkout and payment systems available on the market.

Why it is important: RFID, smart carts, self-checkout, biometric identification and AI are all game changers that retailers need to take into account.

Coresight Research predicts that the US market for checkout and payment technology, comprising hardware and software for secure and efficient checkout processes, will grow at a CAGR of 11.5% through 2027 from USD 22.6 billion in 2023.

Retailers are adopting technologies like RFID-based checkout, smart carts, biometric authentication, and identity verification to streamline the checkout process, enhance customer experience, and reduce operational costs. AI-powered chatbots offer potential for a personalized checkout experience and valuable data, albeit with privacy and security considerations.

In the future, augmented reality, digital identities, cashless and contactless payments, and AI will make the checkout process more seamless, personalized, and secure. Traditional payment providers must adapt to these changes or risk losing market share to tech-driven competitors

The evolution of checkout 

What: A long piece on Albertson’s recent efforts to remain competitive.

Why it is important: They have been early in entering the retail media market and their progression is worth being noted and observed.

Albertsons, a major grocery retailer, is focusing on driving growth through its retail media and private brands.

The company has consolidated its private label offerings under the master brand Signature SELECT, with a redesigned logo and packaging. Albertsons' Customers for Life strategy aims to place the customer at the center, with a focus on digital engagement, store experience differentiation, product assortment enhancements, modernizing capabilities, and ESG integration.

The company's financial results have been strong, with increased sales and profitability. Albertsons is also prioritizing its retail media business, launching the Albertsons Media Collective and working on establishing industry standards and best practices.

These strategic efforts are expected to contribute to the company's sustained growth and profitability in the future.

Deep dive on Albertson’s 

What: McKinsey’s latest consumer sentiment survey in Mexico reveals the lasting effects of the pandemic on consumer behavior.

Why it is important: The survey results show that the pandemic has had lasting effects on consumer behavior in Mexico. As optimism about the economy rises, businesses need to maintain their agility and respond quickly to meet the changing demands of consumers.

Consumers in Mexico are feeling more optimistic about the country’s economy and their ability to meet financial commitments in the coming year, but are still persistently looking for ways to spend less.

Looking forward to better days

30% of Mexican consumers expect their finances to be in better shape this year than last year. Unemployment rates have returned to pre-pandemic levels and real growth in consumption was significant at 6.5%. Additionally, the percentage of Mexican consumers who are optimistic about the country’s economics has increased to 46%.

In search of cheaper options

67% of respondents reported cutting their spending in the past year, which is 20 percentage points above pre-pandemic levels. 23% of respondents are trading down across their entire shopping basket, especially in commoditized categories. The trade-down trend has become more pronounced across all economic segments.

The pros and cons of e-commerce

While online shopping is no longer the main purchasing channel, its share is still higher than before the pandemic. Consumers report looking to e-commerce for better prices and convenience but worry about receiving faulty items.

Buying low-risk categories online

Mexican consumers are increasingly comfortable buying cosmetics, electronics and toys online.

Opting for home-cooked meals

Consumers are engaging in healthier eating habits such as eating at home, cooking from scratch, and buying locally sourced products.

Mexican consumers seek value and convenience

What: Luxury travel is taking off again, but patterns have changed.

Why it is important:  Certainties from the past are not valid anymore for brands, but this applies also to department stores.

In 2022, American tourists largely drove the growth of luxury brands in Europe due to relaxed travel restrictions and a strong dollar, but in 2023, Chinese consumers are expected to be the key drivers.

Despite capacity limitations, the China Outbound Tourism Research Institute forecasts 110 million outbound trips from mainland China this year. As pandemic restrictions ease, luxury travel is on the rise and the merging of business and leisure travel ("bleisure") is becoming more prominent.

Luxury brands are leveraging this trend, offering unique, non-traditional experiences. As part of this shift, hotels are incorporating retail experiences into their services. For example, the Ritz-Carlton in Montreal partnered with Christian Louboutin to launch an exclusive pop-up boutique.

Tina Edmundson, Marriott International’s president of luxury, reports that the company's room bookings are 11% higher in March 2023 versus 2019, indicating a swift recovery in the luxury travel segment.

How global luxury travel trends will impact fashion 

What: An opinion piece on how hospitality is helping retail being more relevant to current customers’ needs.

Why it is important:  At IADS we believe that more department stores should embrace hospitality codes, in order to provide a more differentiated and own identity.

Retail has evolved from conventional brick-and-mortar shops to immersive store experiences, aiming to create emotional connections with shoppers through engagement. This trend of interactive brand experiences has become the new norm, leading brands to expand their ecosystem with service-based third spaces and innovative store formats, blurring the boundaries between retail and hospitality.

Luxury brands, like Dior and Jacquemus, are at the forefront of leveraging lifestyle to elevate their equity and desirability. They design exclusive spaces and collaborations that offer customers unique ways to engage with the brand through hospitality services. For example, Jacquemus partnered with Indie Beach restaurant to create a branded beach in Saint Tropez, reflecting the brand's identity and driving footfall to its summer pop-up store.

Department stores are also evolving into lifestyle destinations. Selfridges stands out by offering high-end dining options, hosting events year-round, and creating engaging activations like the recent Barbie Dreamhouse experience. In Europe, Galeries Lafayette launched a Wellness Gallery, dedicating an entire floor to wellness services, providing a holistic shopping and self-care experience.

Retailers recognize the importance of creative initiatives to boost brand engagement and visibility. They draw inspiration from the hospitality industry, incorporating branded cafés, spas, lounges, and events to fulfill customer needs and elevate their brand's equity and perceived value. Although the ROI may not be immediate, these service-driven approaches enhance a brand's desirability and competitiveness.

How hospitality is influencing retail 

AHLENS STORE PICTURES

Printable version here

The IADS travelled to Sweden last April to meet with the new CEO and owner, Mr Ayad al-Saffar, almost a year after his inception at Åhléns. The purpose was to discuss and understand his plans and vision for the century-old department store company.

After a first year spent reviewing the fundamentals of the company, Mr Al-Saffar started to operate significant and structural changes to the business model, and they might very well be a game-changer in this part of the world. Rather surprisingly given the fact that Åhléns already operates 47 stores in a country with 10.42m inhabitants and ranked second in Europe in terms of retail density (after Monaco), he also detailed his plans to open more stores in second and third-tier cities, thanks to his new approach to business.

We review our store visit below to understand to what extent Åhléns will revolutionize the Nordic market with its new approach.

Company history and background

Åhléns was founded as a mail order business in 1899 in Insjön, a small town north of Stockholm, by two associates, Johan Petter Åhlén and Erik Holm. Within 10 years, Åhléns was a 1.5m SEK business (€128k in today’s money) with 255 employees, and the founder decided it was time to move to Stockholm in a newly acquired 7-story building.

Diversification started in 1932 with the opening of a first department store chain, Tempo, promising the lowest prices possible to customers. The physical retail activity of the company grew consistently, leading to the closure of the mail order business during the ‘60s, the opening of Åhléns City, the current flagship store, in 1964, and the progressive conversion of Tempo stores into Åhléns until 1985.

In 1988, the Åhlén family sold the company to Axel Johnson AB, a Swedish family business specialized in trade and services in Europe and part of the Axel Johnson Group, a Swedish international conglomerate. Åhléns was the only department store business operated by Axel Johnson AB, which portfolio also included Kicks (an beauty & fragrance e-commerce pure player which mutualized purchases with Åhléns), Axfood (a 300-large grocery stores chain under various names), an investment company in retail businesses, a restaurant wholesaler and an IT reseller. At Åhléns, the owner focused on developing the brand portfolio (mainly through concession deals and private labels development), automating the operations with a new warehouse, developing an outlet offering, and pushing the e-commerce business. Investments were made in both existing stores (Åhléns city stores were refurbished in Stockholm and Gothenburg in 2018) as well as in expanding the network (including outlet stores).

Åhléns reached a total turnover of SEK 5,019 (€431m) in ‘19, compared to SEK 4,809m in ’18 (€412m) and posted a net loss of SEK -116m (-€10m), compared to SEK -131m in ’18 (€ -11.2m), with 1,806 employees at the time. Just before the pandemic, the main focus of the company was to expand the outlet stores network, push private labels, and, more importantly, continue its heavy investments in IT to support e-commerce and marketplace expansion, which explained at the time the losses posted. The Covid-19 pandemic took its toll on the company, which saw sales decrease -15%, and losses almost tripling, even though Sweden never went into a lockdown and stores never closed. These difficulties, combined with Axel Johnson AB’s strategic focus on turning away from consumer goods, led to the sale of Åhléns in ‘22 after 34 years of ownership to a group of investors led by Mr Ayad Al-Saffar.

Al-Saffar, a seasoned retailer, came from Lebanon as a refugee to Sweden in 1984. Incarnating the “Swedish dream”, he started as a salesman on markets, before founding a watch wholesale company in ‘91 and being offered to purchase loss-making Ur&Penn, a 40-store-wide watches and jewellery specialist then owned by the H&M group. Al Saffar managed to turn the company around in one year by reviewing the assortment and the price point, and the company grew to 100 stores today. Al Saffar achieved a similar turning-around performance with Dutch loss-making retailers Lucardi in 2006 and Kijkshop in 2007.

Today, Åhléns as a whole achieves a total turnover of SEK 4.7bn (€403m), with 47 stores and an e-commerce platform, operated by a total of 3,000 employees accommodating the needs of some 60m annual visitors (in a country with 10.43m inhabitants). It concentrates on fashion, beauty and homeware, and has a loyalty program (Åhléns club) with 2.5m members.

Åhléns positions itself as “the department store with a smart mix”, providing solutions for time-pressed customers to simplify their lives by mixing the right brands, including sustainable ones (Åhléns issues ESG reports in Swedish every year).

Visiting a Tier II location

The first Åhléns store visited is located in Östermalmstorg, a posh neighbourhood 500m away from Birger Jarlsgatan, an avenue planted with luxury and fashion free-standing stores, from Chanel, Louis Vuitton and Prada, to Zadig & Voltaire, Max Mara and Zara, and faces a square with significant traffic in terms of local customers (this is not a touristy place).

By European standards when looking at a city centre unit, the store is disconcerting: windows are not fully utilized, as it was chosen instead to allow customers to see through them and see the store, and the small size of the store appears at first sight when entering (1,500 sqm).

The ground floor is dedicated to cosmetics, displayed with standard brand fixtures and name reminders, while fragrances are presented behind a closed glass wall, forcing customers to ask an operator to access them. The floor also displays summer wear and accessories (all with generic, middle-priced, local brands) and a para pharmacy section. The cash desk does not offer additional services.

The basement is connected to the subway system, and the entrance is also equipped with Post Nord pickup stations, allowing customers to retrieve parcels and click & collect items, not far from the cash desk. The floor displays kids wear and toys, as well as the home category, rather well-staged. However, overall, the experience lacks inspiration, and each retail space has a visible reference number, likely to help retail operators and brands to locate where they should set up their stores but instead impacts the customer experience.

The upper floor is mainly dedicated to women’s fashion and lingerie, with a mix of generic concepts and branded shop-in-shops. For fashion brands, shop-in-shops are more detailed and immersive than for lingerie brands where in reality they are only dedicated and delimited spaces with a brand reminder on the walls. A section is dedicated to activewear with brands such as Esprit, Levi’s and the Åhléns private label, and there is also a tiny men’s underwear section.

During the visit, the clientele was exclusively composed of middle-aged women.

Even though the visit was, somehow, disappointing, when discussing with Mr Al-Saffar, it appeared that this store, which was to be refurbished and modernized, was profitable, just like 100% of the 47 stores currently operated in the country.

Visiting a flagship location

The second store visited was the massive Åhléns City store, right in the centre of the city, at the same distance from the Royal House, the museum island, the train station, the Culture house and the high street. Talk about a flagship: the department store, built in 1964 and now rented from a real estate company, occupies an entire block of 40,000 sqm, and represents 20% of the company’s total revenue (125m€) thanks to very significant traffic for such a small country: 15m people visit the location every year (more than the Stockholm train station and airport).

The massive façade is windowless in red bricks as the initial objective was to make sure it would be easily recognizable and become a landmark. Åhléns uses this space to advertise collections and brands.

The ground floor is dedicated to cosmetics, fragrances, shoes and accessories. However, the plan is to move the shoe section and increase the space allocated to bags. The CEO explained that the first year of his tenure was dedicated to stabilizing and structuring operations (especially in terms of brand supplies) and that the new zoning of the store was next on the plan.

The luxury usual suspects (Dior, Byredo, Chanel) are operated in concession, in a high-traffic section at the entrance of the store (in semi-personalized spaces) with the purpose to increase the brand portfolio there. A Joe & the Juice bar, still present at the time of the visit, is planned to be removed and replaced with a watches section, in order to not interfere with the fragrance space. The rest of the product offer is a mix of private labels (such as Carin Wester, a private label developed by the previous management with a local designer celebrity, which Al-Saffar has repositioned both in terms of image and price point, and decided to design internally), and foreign brands operating in consignment, with good margin rates for Åhléns (more than 60%).

An upscale café completes the experience, which is overall very nice, as the store, in spite of its huge dimensions, is airy and the sight gives an impression of unconstrained space.

The first floor is dedicated to women’s fashion (luxury, contemporary, denim and activewear) as well as lingerie. The fashion section is mostly an alignment of shop-in-shop with each brand’s concept, with the exception of Åhléns Studio, a multi-brand section right in the middle of the floor (similar to the SKP-S multi-brand sections at SKP in Beijing) with a specific in-house concept. Most of the floor is operated in wholesale terms, which allows for negotiating discounts against immediate payments, with the exception of a few brands (Tiger of Sweden, Filipa K and others). This has been one of Al-Saffar’s main points of focus in the past 12 months as his goal was to reduce the number of brands operating in concessions, in order to regain control of the assortment and increase the operating margin, by reverting to a 90% rate of brands operated in wholesale.

This is why, for instance, the denim section was under construction at the time of the visit, as the new brand assortment (a mix of labels already in Sweden and exclusive ones) was being finalized. Switching from a concession business to a wholesale business obviously requires acquiring the needed savoir-faire (buying team), which means time in terms of recruitment and training.

The second floor is dedicated to home and kids. The Home section is rather beautifully staged with a very Nordic taste, and both this section and the kids one (apparel and toys) offer a selection of international and local brands, completed with private labels either developed by Al-Saffar or redeployed (such as the Rikiki kids line). A family room is available for customers willing either to relax from the shopping heist with their families or have their kids under supervision while they are in the store. The family room is astutely located near a café and the toys section.

The third floor is dedicated to menswear, services, such as a barber, and personal shopping services. Just like for women, menswear is a mix of international, local and private labels, and the target is to increase the number of brands operated in wholesale terms. The barber is quite well-executed, albeit not really visible from the floor and only customers in the know might find it easily.

The personal shopping service space is very welcoming and spacious, dotted with products in double exposure in order to entice shopping. The space can be booked in advance and is connected with the club membership program, with a system developed in-house and based on purchase value, with 3 different membership levels. The software developed by Åhléns teams also includes a system in which customer feedback received via email is collected, compiled and reviewed with the adequate teams on a daily basis.

The fourth floor is currently rented by Muji but the plan is to replace them with a new offer that remains to be defined. It could be either an extension of the Gourmet section which already occupies a side of the building, or a new upscale F&B section taking full advantage of the terrace, or a flex office space based on what Saks Fifth Avenue has developed in New York with WeWork at the time.

Interestingly, there are also many questions about the corporate offices, which are also on that floor, with offices enjoying incomparable views and a huge private terrace which is completely underused while avoiding demotivating employees who have been used to these offices since the 60s.

The Åhléns project is a work in motion, and the visit came at the right time to fully grasp the size of the transformation Mr Al-Saffar has started for the company.

What’s next for Åhléns?

Al-Saffar's most important plan is to review the way the department store company has worked with suppliers so far.

Historically, and for various reasons (non-aligned seasons, high import duties, different currencies), retailers in Nordic countries have always relied on third parties acting as importers and distributors to bring in brands and operate them. We already reviewed what it implied with NK, also in Stockholm: until the pandemic, NK was acting as a mall and leased spaces to brands and operators. When one of those operators went bankrupt in 2021, NK had no choice but to purchase its operations and learn how to operate fashion instead of simply managing real estate. Al-Saffar, a seasoned retailer, wants to go much further than that, and this is why he spend the past year cancelling concession agreements and reverting to a 90% wholesale model.

*While such a model theoretically allows to keep a much tighter control on the product selection and therefore the store positioning, Al-Saffar also states that it allows him to take a greater share of the pie, as he does not share the margin with anyone. This is also the reason why he wants to expand the private label business from 20% today to 35%, and his approach is very simple:

-    Either source products in Asia and label them adequately,

-    Or negotiate with foreign brands the exclusive rights of distribution in the whole of Sweden (the 47 stores fleet is an argument in that kind of conversation), as exemplified with the cosmetics brand Inglot

-    Or purchase the rights of an individual and build a brand accordingly. For instance, he made a deal with a Swedish chef to be able to use his name and face on a new line of kitchen accessories he will develop and sell in his stores.*

This approach allows him not only to consider keeping all 47 stores, which are all profitable but to plan expansions, including in second and third-tier cities and smaller ones, where the new stores will present 65% of private labels in their product offer.

That new approach, in which third parties are eliminated from the equation, is quite new in Sweden and in the Nordics in general and might very well be a game-changer for Åhléns and the region. While it is some kind of normalization as this move would make the Nordics more in line with usual business practices in the rest of Europe, it might also contribute to a more general movement for brands to see Scandinavia as a new market, as they could expand there with fewer constraints than in the past. As a consequence, the hype we noted last year when visiting the region could be very well fuelled by a new gold rush for brands looking for European pockets of growth.

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

The IADS helps members address multifaceted issues from answering their most operational questions or coordinating information flow to helping them address future challenges by questioning their methodologies and providing a different perspective.

This is the reason why the IADS invited Demet Ikiler, COO EMEA at Publicis Group, to discuss the white-hot Retail Media topic. Retail Media Networks (RMNs) are making the headlines for their ability to generate an additional flow of revenue with high margin yields, while making the most of department stores’ most prized assets: their own sales channels. However, since the press often emphasizes big players’ actions, such as Amazon and Walmart, the purpose of this conversation was to give all department store CEOs a good understanding of the situation and the stakes at hand while discussing what would be needed for a department store company to launch its own RMN.

Demet Ikiler was appointed Chief Operating Officer of Publicis Groupe EMEA in January 2023. She joined after over two decades at WPP, where she was a member of GroupM’s global leadership team as CEO of GroupM EMEA and WPP Country chair, responsible for scaling and delivering more innovative cross-culture solutions for clients. Demet has been recognized by Fortune and The Economist as one of the ten most powerful female CEOs and as an Empower 100 Executive Role Model in 2022. She is also a board member of the United Nations Global Compact, leading its diversity and inclusion chapter. Prior to WPP, Demet Ikiler worked at Zenith and Saatchi & Saatchi.

Introduction: Defining Retail Media

Publicis Groupe defines Retail Media as selling advertisers the possibility to operate online campaigns aimed at the retailer’s own audience, on both its onsite platforms (own website) or offsite (on publisher premise), as a major evolution from pure trade marketing.

The development of retail media has been catalyzed by the progressive disappearance of third-party cookies, as, thanks to this move, retailers’ infrastructures gain more value in the eyes of advertisers (brands): it is no longer only about near-term sales on the platform (the purpose of trade marketing), but also a way to generate visibility, awareness and raise consideration as well.

In short, retail media answers more marketing needs than trade marketing and can provide much more precise ROI evaluation than ever before. CPG brands, for instance, need to reinvent their whole performance marketing approach, and retail media allows them to do so very precisely.

Also, the fact that retailers operate both e-commerce and stores enables advertisers to target customers during their whole journey, starting offsite on a publisher’s website with a co-branded retailer/brand display, continuing in-store with a digital screen, then to social media, and in product search results, all which is happening in real-time.

Ikiler explained that the net new revenue to be expected is capped: 60% to 70% of retail media revenues are new, an already significant and sizable new share. While a fraction of the money comes from the trade marketing budget (30% to 40% maximum for Publicis), its biggest share comes from a reallocation from other digital or traditional channels (print, TV/radio, social media...), i.e. a net gain for the retailer.

An opportunity first seized by the largest players

Retail media is in the headlines now and is generating a lot of noise, justifiably so: Arthur Sadoun, Publicis Groupe CEO, expects retail media to surpass traditional TV advertising spend by 2025, i.e. in 18 months (Ikiler notes that this new budget allocation dispatch is already happening for some of Publicis’ customers).

Such a rise is linked to the continuous e-commerce growth from the past 20 years in an exponential manner, transforming some retailers into “audience hubs” with massive scale:

-    Amazon, which moved early, is the first retail media network to have emerged, and by combining its other assets (grocery and supermarkets) was able to take a dominant position with advertisers.

-    Walmart has an addressable audience (expressed in millions of monthly viewers or users) that surpasses Google’s and Facebook’s. Therefore, they can gather massive amounts of consumer data, which opens opportunities to monetize this audience.

The stakes are high: while there is a ceiling in terms of margins when it comes to retailing physical products (10 to 20%), it can go as high as 40-45% offsite and 80% onsite when it comes to selling advertising inventory, due to the low cost of production. Amazon’s advertising services, which started in 2020, already represent almost $40bn in 2022, i.e. half of AWS, the largest non-retail activity within the company. The advertising activity’s margin is estimated between 70 and 90%, which explains why this activity drew a lot of attention.

Publicis Groupe believes that retail media, even though it is massively growing (US digital media budget allocation to retail media has increased from 16% in ’19 to 25% in ’21, to reach $77bn in ’21 and $95bn in ’22), is still on the rise.

At some stage, Europe (and the rest of the world) will be closing the gap and should contribute to the global growth of this industry. It is not a US and China-only phenomenon, and new players are appearing in other countries, such as Carrefour and Intermarché in France, Boots and Tesco in the UK, and Falabella in Chile. While everybody has Amazon’s success in mind, there is room for other types of retailers, in terms of businesses and sizes, for them to monetize their platform.

Retailers should not take customers’ adhesion to RMN for granted

Some might be wary that customers might not be very happy with retail media, as clients could get annoyed to see a bunch of ads on retailers’ platforms across their journey. 70% of product search results on Amazon are sponsored. While this might not be much of an issue for Amazon, other retailers whose reputations lie on curation and selection might see this, justifiably so, as a risk.

This is why Publicis Groupe advises being extremely careful of the onsite customer journey and leveraging data to target consumers off their platforms, in other words, on publishers’ sites. Retail media is, in that sense, a great way to attract and capture new customers, in a more subtle way than hammering them on the retailer’s website itself. The cherry on the cake is that such customer acquisition is funded by suppliers.

The scale effect: how to compete with giants

Most retailers, especially in Europe, present a very fragmented offer, with a variety of products and different measurement tools, when compared to giants such as Amazon or Walmart. In that perspective, being able to compete with them can be seen as an illusion. However, Publicis believes that this fragmentation might represent an opportunity, and they have already started exploring it through new ventures, such as Citrus, a white label offering for a variety of retailers.

Ikiler argued that retail media is a reality that will end up hitting every market and vertical. Brands will increasingly ask to have access to such capabilities, which is, in itself, a very good reason to get prepared. In other words, this represents an opportunity that should not be shed for fear of competition. The reason is that retail media is inserting itself perfectly in the omnichannel transformation that all department stores are currently going through, as the physical stores themselves represent a competitive advantage compared to Amazon.

CEOs interested in retail media should focus their attention on two vital topics:

-    Systems: the market is increasingly gearing towards self-service proposals, i.e. SaaS offerings to brands, in contrast to managed services in the past. This requires a very significant tech investment. However, this will allow being able to deal with more brands at the same time, with a lower marginal cost. Also, retailers entering this space now will have access to all-in-one solutions available off-the-shelf and already up to date, which will reduce the time to market.

-    Organization: while the trend is moving towards in-house sales teams to have more strategic conversations with brands, which can be resource-intensive, new offerings on the market allow outsourcing services to optimize the ramp-up of activities, which is then progressively transferred to internal teams.

Ikiler concluded by observing that, given the relative similarities of department store companies in terms of size, nature of the business and offering, there would be some logic in teaming up and harmonizing technology and ROI calculation, while tracking across the board  to generate a common approach with brands. In other words, she recommends retailers team up together to generate new revenues out of their current existing assets.

Is the topic of retail media network a strategic one for department stores? There are so many priorities to deal with that it could be tempting to disregard this subject as it is more an opportunity than a necessity (digital transformation, human organizations, addressing AI or dealing with the sustainability requirements are examples of vital necessities for department stores). However, we also believe that any topic helping department stores when it comes to their productivity is crucial to know and to consider, which is the reason why the IADS will be dedicating its 2023 White Paper to Retail Media, in order to dive deeper into the topic and understand in full its ins and outs, and what’s in for department stores.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS joined cybersecurity professionals from various retail businesses at the RH-ISAC conference hosted by Nestlé in Barcelona in April ‘23. RH-ISAC provides a trusted forum for its members in the retail, hospitality, and related industries to share cybersecurity threat intelligence, best practices, and mitigation strategies. IADS attended on behalf of its members in order to get a better understanding of what is happening in the space.

The two-day workshop was an occasion for industry leaders to share the latest information and challenges around the cybersecurity landscape. Retail experts discussed the latest cybersecurity trends and threats especially in regard to advancements in ChatGPT, AI, Machine Learning, as well as the importance of implementing fusion centres.

ChatGPT: Cybersecurity risks vs business opportunities

To kick off the workshop, an icebreaker question was raised: How will ChatGPT impact cybersecurity? The answers varied from opportunities to warnings. First of all, ChatGPT offers opportunities for the task force of a company, especially lower-level employees, that want to learn new skills and received AI assistance. However, its performance is not always perfect and has even been proven to adopt biases based on its training. And as ChatGPT is susceptible to the information it is fed; it can also be taught to be bad. Therefore, attackers have even more opportunities to automate or expand their attacks.

One cybersecurity expert brought up the point that ChatGPT is technically the new-gen Google or Facebook because when these platforms came around, users were openly sharing their private and sensitive information. Without thinking people share their location, post photos of themselves, and search for information that should be treated privately. ChatGPT users are doing the exact same thing, but now also including private company information. For example, a software engineer might copy and paste code into ChatGPT to ask it to fix any problems with it. But within the code, there could be proprietary or sensitive information.

The more the workforce relies on AI to complete their work, the harder it is for companies to control and ban its use. ChatGPT is not the only AI tool, as now there are various iterations of ChatGPT’s power thanks to the APIs that have been released by OpenAI. Banning all of these tools would be impossible for companies. Therefore, reactive organizations will need to create policies and promote best practices, while also reviewing NDAs (Non-disclosure agreements) with the teams to ensure there are no risks with the AI tools being used in terms of data breaches.

Despite the red flags, ChatGPT and generative AI technology should be seen as exciting opportunities that can be harnessed for the good of a company. There are ways that organizations can use these solutions to scale and automatize their business to create more efficient operations.

Maximizing cyber resilience with AI and Machine Learning

Ignasi Paredes-Oliva, Data Science Project Manager at Nestlé shared how he is using AI and Machine Learning (ML) to automate the company’s threat detection and response. ChatGPT is integrating itself in almost every business unit thanks to various solutions harnessing its technology. For example, Microsoft has introduced Security Copilot to respond to incidents faster using AI. AI is becoming so advanced that tools such as AutoGPT are even allowing users to give an objective to a machine that then runs fully autonomously to complete a task.

As such technology advances, it is important for companies to keep in mind that threat actors will increase as tech barriers decrease. Attackers will be better overall, especially in terms of effectiveness, automation, and scale. But from a defense perspective, companies can also use the same type of technology to empower themselves to better counterattacks.

Historically, threat detection has been set by static rules, past incidents, and user behaviour. So currently, companies are protected against known attacks, but AI can help defend against future types of attacks that have not been seen before.

Nestlé is experimenting with AI to be able to anticipate threats while also automating processes. One solution that has come up with is a machine that automatically categorizes incidents into low, medium, and high risk and then, therefore, assigns a task to it. For example, all low-risk incidents are closed automatically, medium-risk ones are sent to the 24/7 incident response team, and high-risk incidents are escalated to the right people. Another AI machine can detect phishing emails based on language used within the text and warn the user. A third example is a machine that can detect brand impersonation of Nestlé’s logo across other sites so they are aware of any trademark infringement or impersonations that could negatively impact the brand.

Nestlé has already developed 10 to 15 AI solutions within their security business. So far, these solutions have resulted in increased threat detection and better operational efficiency. This suggests there are massive opportunities to boost cyber resilience with AI. Nestlé found that in this domain, the focus should be on building software products that actually bring real ROI to the business. Finally, in order to push such solutions through the business, there will need to be clear alignment with the management team as well as constant communication across all stakeholders.

Fusion centres: Bringing efficiency and communication to cybersecurity teams

Ahold Delhaize shared the process they undertook with Booz Allen Hamilton to build their Cyber fusion roadmap which is a framework that outlines the process of integrating and coordinating cybersecurity operations across the organization. Cyber fusion is the unification of all security and related functions—such as orchestration/automation, data analysis, incident response, and threat intelligence—into one operational group in order to better integrate threat detection, management, and response processes, and facilitate security collaboration between people, teams, and devices. For example, the September 11th terrorist attacks in NYC could have been prevented if the right information had been uncovered in the data and shared. Therefore, governments are now creating fusion centres to anticipate and prevent major issues such as attacks on the country from occurring.

The same can be said about retail. The 2013 Target data breach where hackers stole credit card information from millions of customers also could have been prevented if they had a better grasp on their network security environment. These tragic and damaging instances have led to the importance of getting fusion centres implemented across every business type to be able to respond, escalate, and communicate during incidents.

Implementing a fusion centre takes a lot of planning and evaluation. In order for a fusion centre roadmap to be built out, there needs to be a complete understanding of who needs to do what and when. A very detailed blueprint of the fusion centre maps out the organization of people, processes, technology, and governance. Implementing the fusion centre typically takes 3 years to build out the core functions, enhance and expand the opportunities to other areas and to deploy proactive measures.

Each company's fusion centre will be unique but aims to make headcount more efficient while eliminating redundant work or gaps between silos. Transforming operations can be challenging, but convincing employees to abandon inefficient practices is crucial for success. Ultimately, fusion centres allow staff members to have more bandwidth for tasks they are passionate about but previously lacked time for.

Conclusion: Cybersecurity teams are transitioning from defense to offense

According to ENISA (European Union Agency for Cybersecurity), which was created to enhance the EU’s cybersecurity capabilities and assist member states in addressing cyber threat vulnerabilities, the Commerce and Retail sector faces major threats that are targeting monetization services. For example, such threats can impact booking and payment capabilities, which are key components of the core business.

Retail businesses are also being hit with data leakage, ransomware, and malware which can occur through website infections, skims or stolen payment card information, among other things. For example, in 2020, South Korean conglomerate and retail giant E-Land suffered a ransomware attack causing 23 of its retail stores to suspend operations while they dealt with the attack. As retail businesses rely more and more on technology, the opportunity for threats increases, but so do the opportunities for advancement.

Specifically, the cybersecurity space has been hit by major technological advancements thanks to progress made in AI and ML solutions that are bringing new challenges to businesses. As technology advances, so do the techniques and capabilities of attackers. But the ‘bad guys’ are not the only ones that are becoming more empowered, cybersecurity teams can now leverage advanced AI tools to be able to build machines that can anticipate future attacks and automate processes to better manage, categorize, and escalate the various threats.

As such technologies advance, the human side of the business remains key. Cyber-attacks can be prevented through the implementation of proper communication channels.  Therefore, fusion centres are being built out to create a unified security team that addresses gaps and removes redundancies, thus making each position more efficient and reactive.

Historically, cybersecurity teams have played defense – addressing threats and incidents as they occurred, and responses were based on past events. But now, thanks to generative AI and ML and efficient communication hubs, a company’s cybersecurity team is able to anticipate future issues in order to put out a flame rather than face a fire.

Credits: IADS (Mary Jane Shea)

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To the relief of many retailers, Chinese borders reopened in January 2023 after 3 years of closure. While they learnt how to survive during and after the pandemic by addressing local clients and other nationalities, they eagerly waited to see Chinese tourists back in stores, especially in Europe, where they represented 50% of luxury sales before the pandemic, according to Altagamma.

2022 was not bad for continental European retailers: Galeries Lafayette and Printemps in France almost fully recovered to their 2019 levels, while La Rinascente in Italy, Breuninger in Germany and El Corte Inglés in Spain all exceeded either their 2019 sales revenues or profits. This can be attributed to several factors, the strength of the US dollar (an incentive for US tourists to splurge into luxury purchases in Europe), European tourists criss-crossing the continent to spend their Covid-19 savings, the UK decision to scrap VAT relief channelling clients to Paris, Milan and other destinations, among others.

However, these conjunctural factors are not expected to last. In parallel, while the Chinese appetite for luxury has not faded, overseas retailers wonder if they will be able to get a piece of the pie, which is why anxiety about Chinese tourism is mounting. Knowing when exactly they will be back, and what they will be looking for, is key to make sure stores are properly prepared to welcome such customers again.

This article was first released on MindRetail as an op-ed.

Will Chinese customers be back on time to save the next season?

According to various sources, a large-scale return of Chinese tourists should be expected in Europe only during the second half of 2023 (either during the summer or the Golden Week in October), while the most pessimistic reports mention early 2024.

It’s not that they do not wish to travel, on the contrary: just after the borders reopened, Fliggy (Alibaba’s travel branch) reported an increase of 200% in travel bookings, while Chinese travel agency Trip.com noted that outbound travel bookings multiplied by 18 times last April. However, long-haul international trips are another story:

-    A backlog of passport renewals and visa applications in China after 3 years of closure explains why closer destinations such as Hong Kong, Thailand, Japan and Singapore are easier to visit (not to mention the efforts these countries actively pursue to court Chinese tourists, such as Hong Kong giving away free airline tickets and food vouchers to encourage visits),

-    Airline tickets are scarce, as ramping up the frequency of flights takes time and people. For instance, Air France opened 6 weekly flights in May, up from 1 in January, far from the 30 operated pre-pandemic. Add to that diplomatic arm-wrestling since Chinese companies are not restricted to fly over Russia to come to Europe, while European companies see their operational costs increase by more than 20% to go around Russia (due to the war-related restrictions), and this is the perfect cocktail for high flight prices and a lengthy return to normal,

-    In addition, China developed its own luxury market during the pandemic, as illustrated by Hainan, the duty-free national mecca, where overall sales doubled in 3 years and customers can find prices which are competitive even with France (while, in the past, the price difference could justify a trip there).

Consequently, the sight of Chinese tour-operators in European city centers is still a distant idea. On XiaoHongShu (the “Chinese answer to Instagram”), out of all cities mentioned from September 2022 to April 2023, only London made it in the top 10 destinations (Paris is ranked 13th).

This does not mean that Chinese tourism has not resurrected at all. LVMH’s CFO mentioned that a new breed of Chinese tourists, travelling as individuals and not in tours anymore, was spotted across the globe. This raises another question about the very nature of these post-pandemic Chinese tourists.

Who are the Chinese tourists currently travelling to Europe?

So far, they are wealthier, with a higher education background, and probably more demanding than the ones that came to Europe in tours before the pandemic. This is not to be taken lightly:

-    They favour safe and Chinese-friendly places, i.e. countries that offer easy access to visa and security. For instance, Italy is taking the lead over France when it comes to visas. While French retailers are pressuring the government to speed up the flight frequency, Italy lowered the visa application cost, a smart move given that the first country visited usually pockets a significant share of tourists’ budgets. Security also explains the rise of newcomers, such as Balkan countries (Montenegro, Croatia, Georgia), as they are being seen safer than traditional destinations.

-    They are highly digital, well-informed, and unresponsive to clichés (such as rabbit-shaped products for the year of the rabbit). They favour experience and discovery over products and are also extremely interested in wellness and health-related options. Some of them even combine business trips and leisure travel, which raises questions in terms of how to accommodate such customers.

In short, recipes of the past won’t work. First, retailers’ attractivity should not be taken for granted, and the ones who invested during the pandemic to overhaul their shopping experience (such as Printemps’s revamp or the Galeries Lafayette flagship store renovating its cupola) will reap the benefits of their patience. Second, Chinese customers will be expecting a very different set of products and services, which should come as a justification for such travel. In other words, European retailers are now facing competition from China itself when it comes to tourists visiting their stores, and the risk of disappointment is real.

How are retailers preparing themselves?

The reopening of Galeries Lafayette’s Shopping and Welcome centre last month, a 2,800 sqm space dedicated to Asian clientele after 3 years of closure, is only the visible part of the iceberg on how Europe is preparing itself to welcome back Chinese customers. It would be misleading however to believe that retailers rely on old recipes to welcome these new-gen tourists.

First, they are preparing through a total reinvention of their product offer:

-    While they had to cap that category during the lockdown, stores are muscling their ultra-luxury offer, mirroring what brands are doing either at home (with the opening of a mega-flagship such as Dior or Cartier in Paris) or in China (with salons only opened to ultra HNWI in the Chanel, Louis Vuitton and Gucci stores at SKP). This has translated into new and larger spaces (such as with the new Rolex boutique in Galeries Lafayette or the double-decker stores in El Corte Inglés) but also the multiplication of takeovers, as seen in Harrods (Louis Vuitton, Dior, Celine) or KaDeWe (Dior). When it comes to the category, it is all about stocking up bags and hard luxury goods over RTW, which implies difficult negotiations with brands who prefer to keep these high-margin products for themselves.

-    They also focus on curating new brands, to provide younger customers (84% of Chinese travellers are Millennials and Gen X) uniqueness and originality with niche product offering. This is why Breuninger has opened B-Spaces, designed to provide a radically and highly curated selection of products.

-    Surfing on the growing interest from Chinese customers for fragrances, perfume bars have been reinvented:  Printemps and KaDeWe both redesigned their spaces. More generally, wellness is growing in China, as Covid impacted mental health. As a consequence, gyms are opening everywhere in the country, and wellness is now a trend meaning that new offerings, such as Galeries Lafayette’s Wellness Galerie, could prove to be a master move.

However, as mentioned, retailers also adapt to the fact that Chinese customers look beyond products (8 out of 10 favour experiences):

-    They crave for in-store experience (a common sight at home in places such as SKP-S). This is why luxury brands’ flagship stores and initiatives (such as the LV Dream restaurant) should attract crowds, and retailers should develop new concepts, such as WOW in Madrid. Also, culinary experiences are now key in department stores, which is why the first Michelin-starred restaurant opened in a department store, at El Corte Inglés.

-    Services are crucial, as Chinese customers no longer wish to queue for hours outside of a store. They prefer to connect with a local sales associate who knows them and can advise them personally. This pushes retailers to invest in their CRM, such as with Magasin du Nord. Also, being able to deliver products to their hotel, or offering them click & collect for products selected when in China for pick up while in the store, are services that are being developed. Every detail counts: La Samaritaine’s automatic tax-free kiosks are a competitive advantage for customers valuing speed and convenience.

-    Overall, retailers are developing “China-ready” teams, including Chinese speakers, translating point-of-sale material, and offering Chinese payment systems (China UnionPay, Alipay, WeChat Pay). Such teams are also trained to learn the culture codes and avoid any misstep.

Conclusion: standing out of the crowd will not be a question of products, but systems

The most difficult will be, however, to stand out of the crowd not only by being perceived as the “must-be” visited place, but also by being visible where Chinese customers look for information, i.e. the appropriate social media (60% of wealthy Chinese customers research a product online before buying it). Retailers have to make a choice, as there are significant differences between WeChat (where Harrods launched branded stickers), Tmall (where El Corte Inglés has a store) and others. That also implies having a dedicated content and marketing team, understanding the market to partner with the right KOLs, and a Chinese-focused promotional calendar (while CNY and Golden Week used to be the main events, Single Day, Couple Day and Women’s Day are now significant opportunities).

Finally, CRM systems that companies have rushed to deploy in the past few years will be delivering their full value, especially trans-national ones. Central Thailand’s unified system, which allows customers to accumulate points when indifferently shopping at la Rinascente (Italy), Illum (Denmark), Globus (Switzerland) or Selfridges (UK) represent, a good use case that should appeal to Chinese customers when travelling in Europe.

Credits: IADS (Selvane Mohandas du Ménil)

What: Covid changed the way we work, and some new usages appeared, which are being challenged out of realism now.

Why it is important: There is a gap between romantic ideas communicated by the media and the world reality, which might be an involuntary obstacle for companies looking to recruit and having to adapt to impossible demands from candidates.

The concept of "digital nomadism" gained significant traction during the COVID-19 pandemic, as remote work became more prevalent and countries launched "digital nomad visas" to attract remote workers.

However, the dream of digital nomadism has encountered practical challenges such as tax, immigration, cybersecurity, and labor laws.

As a result, companies are shaping digital nomadism into a more controlled form, allowing employees to work from international locations temporarily, but with restrictions on duration and location. For instance, Cisco recently sent 17 employees to Rhodes for three months in a collaboration with the local government.

Despite these corporate adaptations, the romantic ideal of digital nomadism persists among some individuals, such as Lucy Rogers, a scientist and engineer who chose to work from various locations around the world.

What: BNPL solutions are increasingly being used by distressed customers, for purchases ranging from groceries to equipment.

Why it is important: Goods ideas today can become nightmares the day after: will BNPL be one day subject of a warning from the US General Surgeon just like social media last May.

Buy now, pay later (BNPL) options, provided by companies like Klarna, Affirm Holdings, and Afterpay, have seen increased popularity, boosting sales for businesses. However, there are growing signs that consumers using these options are struggling, which could impact businesses.

BNPL options allow consumers to split the cost of a purchase into several payments over a few weeks or months, often with little or no interest. Despite a 14% growth in BNPL use for online purchases in 2022, there are indications that some users are struggling to make payments, with a significant increase in the use of BNPL for necessities like groceries.

BNPL users were also found to be more likely to have a delinquency of at least 30 days on their credit records. This trend could lead to a potential risk of default, impacting consumer spending habits and potentially affecting businesses offering BNPL options.

Buy now pay later boosts sales but also stress customers 

What: Coresight reviews how tech can help retailers become more sustainable.

Why it is important:  Digital transformation is central for every retailer now, as not only it allows them to address the present (remain relevant and competitive) but also the future, by being able to tackle complex problems such as sustainability.

In 2023, brands and retailers are preparing for a business environment where regulators and consumers increasingly demand transparency and compliance regarding environmental impact and sustainability.

Key drivers of this trend include growing investor demand for corporations with clear sustainability goals, new laws to regulate corporate environmental impacts, rising consumer expectations for transparency and sustainability, and competition among brands to enhance their image and meet demand.

However, challenges such as complex supply chains and a lack of global sustainability standards persist. To address their environmental impact, brands and retailers can leverage innovative technologies to track environmental data, optimize energy use, reduce waste, and promote supply chain transparency.

Coresight has made a selection of interesting companies for the five trends:

-    Environmental impact management platforms: In Bold Print, Smarter X

-    Cloud computing suppliers (Google cloud, Microsoft) help companies reaching efficiency,

-    Smart buildings are also a trend now, as shown by Walgreens and Whole Foods Market,

-    Electrical deliveries: Nuro, Canoo,

-    Blockchain is also seen as part of the future for sustainability

Five green techs driving sustainability in retail 

What: A piece looking at how new payment options born in other parts of the world could challenge Western dominance.

Why it is important:  Any player aiming at a global audience needs to be fully aware of what is going on the payment front worldwide.

Historically, trade began with barter, then evolved to include early forms of currency such as shells and coins. Credit, first used around 5000 years ago, improved liquidity and commerce, but came with its own challenges around trust and verification. Physical cash has long been the standard for transactions, with banks initially serving as safeguarding institutions for commodities before expanding into consumer payments with checks and credit cards.

The advent of digitization, spurred by smartphones and the internet, has brought a new wave of changes to payments. Digital payments reduce friction in transactions, enable remote payments, facilitate trade from afar, and leave a clear, auditable trail. Emerging technologies, such as crypto protocols, fintech wallets, and digital central-bank money, promise to overhaul the global payment system, which earned about $2.1trn in revenues in 2021.

Though the transition to digital payments has been global, there's considerable variation in the systems being developed. In some countries, like India and Brazil, new state-sponsored payment platforms have become dominant, bringing large numbers of unbanked citizens into the formal financial system. The bank/card model remains largely intact in Western countries, despite the rise of fintech.

Digital payment platforms also raise questions about the relationship between money and the state. Governments might use digital finance to monitor their citizens more closely. The shift could also decrease Western financial clout. Meanwhile, there are concerns that frictionless movement of money could increase financial instability by making it easier for customers to withdraw bank deposits.

However, despite the hype and subsequent market downturns, three significant changes have emerged:

1. Crypto and fintech firms are unlikely to overthrow banks and card networks. Despite their growth, the traditional banking system has adapted effectively to digitization.
2. Emerging markets have developed open payments systems, providing an alternative to the bank/card model in the West and the closed fintech systems in China.
3. Many governments are reducing their dependence on Western payment networks and the US dollar, building national and multilateral payment systems.

These changes may challenge Western dominance in international finance, as control over payment systems confers significant political power. Lastly, this report will assess the role of cryptocurrencies, central-bank digital money, and government strategies for reducing Western dependence.

How emerging economies built alternative payments models 

What: Coresight explores how data sharing, if seemingly contradictory with the notion of competition, could actually help retailers thrive together

Why it is important:  This report echoes the call for collaboration the IADS has made in its White Paper dedicated to sustainability.

In this report, Coresight explores how data sharing and collaboration can benefit retailers, brands and suppliers, analyzing thepotential for data sharing to accelerate and improve decision-making processes while also enhancing sustainability.

For the research company, the value of retailers’ unique data continues to grow, and so do the benefits of sharing it and collaborating with partners. Data greatly impacts allocation decisions: they estimate that $28.5 billion in revenue could be lost in the US apparel, footwear and accessories market in 2023 due to allocation issues alone.

Coresight considers that:

• Data sharing and collaboration can enhance the entire retail value chain, particularly in merchandising, the supply chain, managing e-commerce and physical stores.
• Creating a common data source—a “single source of truth”—with common data formats can drive speed to insights (eliminating the time wasted in converting data that delays its transformation into actionable insights).
• By collaborating and sharing data, retailers can better understand total brand performance by several attributes, and brands benefit from analyzing their products’ performance across the retailer’s stores.
• Accurately matching supply and demand results in less waste in manufacturing and from excess supply, and real-time demand data can identify issues early on that lead to costly returns.

For Coresight, there are numerous, clear benefits for retailers and brands to leave behind their legacy behaviors and technologies for data management (and secrecy) and implement data sharing and collaboration through the retail value chain. These activities can raise revenues, improve efficiency and boost margins, while at the same time improving sustainability, which has become a key theme among consumers and stakeholders in recent years.

How data sharing and collaboration can accelerate sustainability 

What: Coresight reviews the situation of the American mall and where they are heading.

Why it is important: What Coresight calls ‘Top Tier malls’ featuring luxury and DTC brands are actually in a very good position to properly address the future.

Dying shopping malls are points of cultural fascination in the US, and content on the death of the American mall generates intense nostalgia among Americans who grew up enjoying these cultural destinations. Yet the picture is nuanced, and top-tier American malls are outperforming.

Headlines, online columns, YouTube channels and even entire websites dedicated to dying malls have populated the mediaover the past decade. Then, in 2020, the pandemic hit, devastating all malls across America as they were forced to close.

Since the lifting of restrictions and consumers’ gradual return to more normal ways of living, physical retail has bounced back, with 2022 seeing Coresight Research track more store openings than closures for the first time since 2016.

In this report, Coresight presents data-driven research into the American mall format, analyzing recent occupancy rates and revenue growth of top-tier malls. They explore the reasons behind the robust performance of malls, analyzing the halo effect of omnichannel, rising online customer acquisition and marketing costs, changing consumption patterns and more.

The state of the American Mall 

What: The HBR reviews the key success factors for multinationals operating in India, where their subsidiaries often do better than their international ones.

Why it is important: India is another world and department stores should start preparing themselves in welcoming and accommodating this entirely new population.

Indian subsidiaries of multinational companies are outperforming their parent firms, as evidenced by their significantly higher price-to-book (P/B) ratios. Factors contributing to this include better growth prospects, higher profitability, and more efficient asset utilization in the Indian market. Despite the parent companies' size and established presence, Indian subsidiaries, such as those of Unilever, Nestle, and Siemens, show significantly better performance metrics.

The rapid growth of India's middle class, combined with urbanization and increased disposable income, offers tremendous market opportunities. India's urban transformation is progressing at a pace unmatched globally, with the middle-class population projected to increase from 31% in 2021 to 63% by 2047. This expanding consumer base, along with lower production and distribution costs in India, have resulted in higher profit margins for these subsidiaries.

India's rapid GDP growth, projected to be the fastest globally in the 2020-2029 decade, also indicates promising market opportunities. By 2075, India is expected to be the second-largest economy in the world after China.

Given these factors, it's crucial for multinational companies to develop an India-specific strategy to leverage these growth opportunities. Such a strategy should include significant resource allocation to India, customization of products and services to cater to local preferences and cultural nuances, and leveraging India's digital infrastructure, known as the "India Stack". This strategy should focus on creating products specifically for the Indian market, produced in India using local raw materials, and distributed using local channels and digitally enabled infrastructure.

Does your company have an India strategy? 

What: McKinsey discusses the potential economic benefits and impacts of generative artificial intelligence technology on various industries and work activities.

Why is it important:  Generative AI has the potential to add trillions of dollars in value to the global economy.

Generative AI has proven to be able to add value to the global economy in a number of use cases. The technology promises to boost labour productivity by 0.1% to 0.6% per year and could add USD 2.6tn to USD 4.4tn in economic benefits. Generative AI can also improve customer experiences, provide virtual experts to augment employee performance, streamline content generation, and accelerate drug development processes. With its capabilities, generative AI has the potential to significantly impact a number of sectors, especially banking, high-tech, retail, and life sciences.

In terms of generative AI’s impact on the retail sector, it has the potential to increase productivity by 1.2 to 2.0 % of annual revenues, equating to an additional USD 400bn to USD 600bn. Here is how it can enhance the sector:

-    Automate key functions such as customer service, marketing and sales, and inventory and supply chain management to streamline processes

-    Create applications that give shoppers a next-gen experience that can give shoppers a personalized interface

-    Facilitate copywriting for marketing and sales and brainstorm marketing ideas

-    Accelerate content analysis and creation for increased brand awareness and conversion rates

-    Enhance the process of developing new versions of products by creating new designs rapidly

No matter the benefits, there is still a lot of caution that needs to be taken as sectors begin to adopt generative AI. Companies need to be mindful of data constraints, regulation for different processes, type of end user, intended level of work automation, the need for quality control and explainability when integrating generative AI into operations. Generative AI may also negatively impact workforce transitions, security, reliability, organizational and social impacts, and environmental consequences. Therefore, there is a need to strategically keep humans in the loop and ensure security and privacy are top considerations of any implementation.

Overall, the time to act on generative AI is now, but stakeholders must act quickly to prepare for both of the challenges and opportunities presented by this technology as it has the potential to be both destabilizing and transformative at the same time.

The economic potential of generative AI

What: McKinsey identifies 10 shifts which have transformed organisations.

Why it is important: Even though the pandemic is now over and a thing of the past, the changes it brought in the way we work are still heavily felt and are game-changers for deciders.

The State of Organizations 2023 report by McKinsey discusses the significant organizational shifts that businesses across the world are currently grappling with. These include dealing with economic volatility, geopolitical instability, and the residual effects of the COVID-19 pandemic. The report identifies 10 key organizational shifts and offers advice on how to navigate them. These shifts are related to various areas, such as organizing for speed to enhance resilience, striking a balance between in-person and remote work models, addressing the declining mental health of employees, and creating new institutional capabilities amidst rapid technological changes.

The report is based on a survey of over 2,500 business leaders worldwide, conducted between May and June 2022. The results revealed that only half of the organizations felt adequately prepared to anticipate and react to external shocks, while two-thirds viewed their organizations as overly complex and inefficient.

The report recommends four points to consider in addressing the ten organizational shifts:

1. Setting a direction to calibrate their ambition, which may involve fine-tuning to flatten structures and clarify roles, or a more radical transformation.
2. Cultivating talent regardless of the type of transformation undertaken.
3. Investing in leadership that will propel the organization forward.
4. Integrating all these aspects to ensure that large-scale changes can occur within an organization that is prepared to adapt to new situations, challenges, and opportunities

The state of organisations 2023