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The IADS invited Green Pea to address member CEOs. This exclusive covers the most important takeaways from the meeting.

As shown in the latest IADS White Paper on Sustainability and Department Stores, the topic of converging towards an environmentally and economically durable and sustainable model is extremely complicated. The more retailers dive into CSR and ESG commitments, the more complicated questions they have to face. In addition, the majority of IADS department stores do not have the luxury of starting from scratch to create a ‘green’ or ‘sustainable’ business from the ground up. They have to pivot their centuries-old organisations to be able to meet the standards of today’s regulations and expectations while keeping business-as-usual operations.

However, it is still possible to find inspiration from new business models. In order to provide IADS member CEOs another angle, the Association invited Francesco Farinetti, CEO of the Green Pea department store in Turin, Italy to present the first “Green retail park” in the world.  The department store has been constructed sustainably and considers the impact that its business has on its community as well as the earth. Farinetti, who has been CEO of Eataly prior to this experience, presented his company’s radical take on a retailer that puts sustainability at the core of the business.

Introduction: Green Pea- Challenging the retail business model

Green Pea department store was born from the same family that created Eataly. Eataly’s offer encompasses everything that people put in their bodies, while Green Pea focuses on what people use outside of the body from furniture to fashion. In other words, it aims to be the “Eataly of things” and provide a new set of options when it comes to how people consume and buy.

Consumers are paradoxically demanding more information from retailers regarding the impact of their consumption but not actively looking for it, which is why Green Pea focuses on products storytelling. It is common knowledge for instance that fashion contributes to pollution, contributing up to 10% of water consumption and 20% of CO2 emissions, but customers hardly read the labels, so they need to be nudged. Such stories need to clearly describe where goods come from, what they are composed of, and their impact.

Green Pea asks challenging questions: Should we stop consuming altogether? Or should we consume in a new way that respects the environment? The issue in the retail business is that as soon as a good is produced, there is an impact that must be measured. Not only are goods creating impacts, but retail real estate also has a lasting impact on the communities they serve. This is why Green Pea has created its own “Manifesto” in order to create a set of guidelines for itself and its partners to shop and sell differently.

The Green Pea Manifesto

When the Green Pea project started in 2010, sustainability was not yet a major topic. But soon the team realised that there was no such thing as “green products”, therefore the road to sustainability would be long. It was not possible to be 100% green because every action taken by a retailer had a footprint, leading to the need for close collaboration with its suppliers with the objective to create a community.

Green Pea has decided to address the issues raised by creating a Manifesto, signed by all of the retailer’s partners.  The Green Pea Manifesto details the department store’s strategy which is focused on respecting the planet. The document is meant to create clarity for all stakeholders including suppliers, management, employees, and the final customer in order for them to all remain aligned on the same vision and rules that should be upheld.

The Manifesto hopes to contribute to the improvement of human life on Earth through its 10 pillars which detail a self-constraining set of guidelines for their present and future actions. While Green Pea is a seller of products, from furniture to fashion, the Manifesto ensures that all partners are in line with the company’s beliefs. This is why almost all partners are Italian or fully produce in Italy, as locality has a major impact on sustainability.

Green Pea’s Manifesto can be seen clearly in their 15,000 square meter store that spans 5 floors. Green Pea’s building has been created so that it could be taken apart with a screwdriver and a 24mm wrench in case the building structure needs to be taken apart and reused for other buildings or projects. The wood on the outer shell of the building comes from trees that had naturally fallen in a storm. The paint used in the building turns the walls into purifiers that reduce air pollution by 88% and kill 99.9% of bacteria. All sources of energy are green and include innovative energy capture opportunities with decorative wind turbines at the entrance of the store and electric floor panels that capture the energy of foot traffic to be reused to power the store. It is important to note that building the store sustainably created added a 20% cost to the building structure than it would have been if done traditionally.

Green Pea also highlights the importance of second-hand offers, and this is especially important for their fashion and home businesses. Green Pea sells second-hand items with relative success and sees this part of the activity as alignment with their Manifesto and a strong marketing vehicle. They even offer repair services and encourage customers to bring back items that need to be fixed up.

A new vision of a store, the ins and outs of Green Pea

The first thing seen by customers entering the store is a museum which aims to educate customers about complex to simple problems. The ground floor is also dedicated to cars, energy and services, all carefully curated to offer green alternatives to customers.

The first floor is dedicated to furniture (starting at €2.500, up to €50.000 and more) and appliances (it is possible to have a fully equipped kitchen for as low as €4.000). It took 5 years for Green Pea to build partnerships with brands, from artisanal companies to international labels.

The second floor displays more than 60 fashion brands, of which 80% are Italian, in addition to a book and a cosmetics area. The following floors are also dedicated to fashion, while the rooftop is only open to Green Pea loyalty card holders and aims to be a communal space.

In the fashion area, there are 2 kinds of brands:

-    The ones which have built themselves with sustainability as their DNA (Patagonia, EcoAlf),

-    The ones with which Green Pea has made partnerships, encouraging them to produce in new ways for short product series (Superga, K-Way…) creating a sense of exclusivity for the department store.

It is not limited to mid-range: Cuccinelli, Zegna and Herno are present in the store. The brand portfolio grew from 20 to 65 brands between 2020 and 2022, which shows the attractiveness of the model, and the vast majority of them are operated under concession terms (in other categories such as cars, leases are also used). There is also the possibility to generate financial revenue by setting up sponsorships with brands willing to use Green Pea as a spot to be sustainable (Mastercard, Unicredit…).

The store is completed with a wide selection of restaurants (from a bistro to a Michelin-starred restaurant) and a congress area.

During the first full year of operation, in 2021 (when weekends were closed due to Covid-19 restrictions) the store welcomed 20m visitors, of which 10m visited the ground floor, 5m the restaurants and leisure, 3m the home section and 2m the fashion one. Green Pea expects to welcome 30m visitors in 2023 with strong growth in the home and fashion sections.

Green Pea’s customer

Green Pea’s customers are 60% 55 years old and above with 60% female and 40% male shoppers, which happens to be the same audience demographic as Eataly. The retailer offers its space as a place to host more than 250 events a year as a way to attract younger customers. Events include pizza-making classes, informative courses on sustainability, as well as venues for companies that want to host events. The events are targeted to attract customers aged 28-35 years old. Green Pea will also hold some vintage sale events in order to attract Gen Z shoppers.

The department store also offers a membership programme at a cost of EUR 50 per year which allows members to enjoy 10% off on everything in the store. Currently, there are around 5,000 members that come to the store at least once a month. Unfortunately, the whole database had to be built from scratch as it was not possible due to Italian regulations to synergize the Eataly customer database.

What is next for Green Pea?

Green Pea has big plans to expand and grow their business internationally. Green Pea is currently in talks with Amazon to build out its e-commerce offer from scratch. For the retailer’s physical footprint expansion, they are first focused on expanding internationally with a store in Dubai. Then they would like to open the next Italian store in Milan. The department store is also starting to work on becoming a certifying body that could offer a sustainability certificate to brands and partners.

Conclusion: How can other retailers be inspired?

Green Pea’s Manifesto can be of great inspiration to retailers around the world, especially retailers in the EU that are facing waves of sustainability regulations. Legacy retailers will need to deeply analyse how the business can be rejuvenated from the ground up in order to account for better practices and incorporate new ‘green’ operations. This overhaul will not be easy, but the sooner action is taken, the easier it will be to comply with future laws and regulations.

Green Pea’s positioning as a retailer that prioritizes consumer education is very revolutionary. As transparency becomes a more important topic, communication and information sharing with customers will be key in order to own the company’s brand and messaging.

Credits: IADS (Selvane Mohandas du Ménil)

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It is no secret that relational shopping is becoming very important to grow a retail business from local to international clients, and anyone not aware of it learnt it the hard way during the pandemic. Mobile and web solutions are now helping sales associates understand their customers better and increase sales thanks to a single tool pulling in consumer data points from various channels. The IADS’ role as an expert body is to be aware, explore, and inform its department store members about every aspect of innovation in retail, which is why the Association invited Arnaud Barbelet, COO of Clientela, and Thomas Meyer, CEO of Mobile Now Group to share the importance of relational shopping.

Clientela is a software company based in New York City, with global operations. They aim to reinvent the store as an engine for growth, with a complete suite of Acquisition, Loyalty and Retail Operations solutions. Arnaud Barbelet is COO and co-founder, in charge of European markets. He focuses his expertise on clienteling, consumer experience and product strategy for key brands and retailers including Chloé, Diptyque and Magasin du Nord.

Mobile Now is a leading, full service, mobile development studio, with a focus on digital experiences, products, and platforms. Founded in 2009, it is now present in Shanghai, Hangzhou and Changsha, China and Singapore. An international team of 90, Mobile Now provides consultancy through to UX and UI design, as well as development across all the key mobile platforms. Thomas Meyer, CEO and co-founder, started the company in 2009 after realizing to what extent mobile phones could disrupt consumers’ and retailers’ existences.

Together, they presented examples (Magasin du Nord, Lane Crawford) in order to generate a very lively conversation.

Clientela business case: Magasin du Nord and relational shopping solutions

Overall presentation

Clienteling is seen as an opportunity to provide every tool that a sales associate needs to help clients buy products in a more automated and seamless way.

Magasin du Nord decided to implement Clientela’s solution in order to drive digital innovation around business needs, especially in the middle of the pandemic when there was a need to build bridges between online and offline (through online booking features, for instance). Following the pandemic, there is a need to focus on better understanding clients and prospects to improve their experience online and in stores.

Clientela offers rich data capture, an advanced booking engine and scheduling service, event management, 360-degree client profile details for store staff, and full integration with other applications. These key features allowed Magasin du Nord to get a comprehensive view of data related to sales and their customers.

Clienteling allows retailers to get to know their customers

Clientela’s in-depth data capture capabilities allow retailers to understand why customers are coming and thus generates more opportunities to create value so customers will return. The system implemented enables customers to book personal shoppers for any occasion. Historically, this service was reserved for weddings and special occasions, but now retailers can extend this service to help shoppers find the right products they will need to start a new job or go to a party.

Communicating with customers across various channels and frequencies helps build relationships with them and fosters loyalty. Communications can include sending personal messages such as reaching out to them on their birthday, if they haven’t visited the store in a while, or if the products they have bought need to be refilled soon.

All of these communication channels help sales associates gather more information about their customers in order to offer efficient advice that is valuable, through one single set of tools which are simple to use.

Since Magasin’s partnership with Clientela, the department store has seen year-over-year bookings increase by 17%, returning client engagement up 13% and staff engagement up 68% on the app.

Future challenges

Clientela is now working with Magasin du Nord on a few problems aiming to simplify the processes even further:

-    Online bookings need to be easily configurable in order to adapt to a variety of product categories, client typologies and languages,

-    Data should simplify the life of the sales associate, and be also easily used by the marketing department to create dedicated communication and event without too much complexity,

-    Personal touch should be injected into the processes: the current solution allows the connection of two people (a customer to a sales associate) and, the future one should focus on how to always connect to the most qualified person in a given customer context. All in all, taking context into account is the next step for the solution in order to enrich the variety of responses and possible interactions.

The aim is to move from a Customer Relationship Management to a Prospect Relationship Manager:  the question now is not to help “if” the customer is buying, but to anticipate “when” the customer will do so. In other words, work on occasion automation (for instance, the system remembers when the customer last purchased a cosmetic cream and is able to send a reminder when the product is reaching its end of life).

Mobile Now business case: Lane Crawford WeChat O2O Commerce & CRM in China

Thomas Meyer shared how technically advanced the Chinese market is when it comes to its digital climate. WeChat, is mistakenly seen as similar to WhatsApp by Western observers, and is much richer as it offers users many capabilities within the app that allows users to even browse the internet and access apps without leaving WeChat. This integration allows retailers to serve their customers better.

WeChat Mini Program Membership and Loyalty Service

The example of Lane Crawford’s WeChat loyalty program allows synchronization between clients and sales associates. Clients can easily access and edit personal data while the tool continuously learned more about the customer as they use the tool. The sales associate can also contribute to a client’s profile by creating prospecting cards and can better serve their audience by accessing their personal data, transaction history, and communication preferences.

The sales associate is able to share recommendations via email, SMS, chat apps, or social media. Clients can then buy online and engage with the sales associate through the various channels while all the information is retained in one singular place. There is also the possibility to livestream events and commerce events to learn more about products and services. Sales associates even have the possibility to craft a shopping cart that customers can validate with a few clicks.

Lane Crawford has managed to achieve 1.5 times what they used to do with e-commerce during a full year, in the first 6 months of the launch of their WeChat account. In 2022, each month so far has doubled the 2021 performance on similar periods, with May 2022 even multiplying the sales by 6 times compared to the previous year.

Relational shopping can help global brands prepare for the return of Chinese shoppers

When Chinese customers return to shop internationally, they will be expecting WeChat-level connections and capabilities from retailers on a global scale. The rest of the world needs to be ready in a variety of ways: retailers will need to have an advanced technical landscape, and sales associates will be expected to speak Chinese. It is also important for retailers to understand that in Chinese culture, consumers shop to celebrate travel. European retailers will need to be ready to welcome Chinese customers and serve them in the same mediums that they have become accustomed to in China.

Retailers that are wanting to welcome Chinese shoppers when they return will need to focus on their customer experience, make sure that technology and digital innovation are at the core of the business, and the business needs to be ready to innovate in order to keep up with expectations.

Thomas Meyer mentions that most of the issues to overcome are cultural (this was the case at Lane Crawford, which is first and foremost a retailer which owns real estate) and human, and not technical. It is all about making sure that these projects are supported by a key sponsor close to the CEO, with an organisation able to deal with legacy systems and salespeople’s new incentivization. It also includes:

-    A shared understanding of the available tech and what it can offer,

-    Linguistic competencies,

-    Specific product offerings.

Conclusion: Customer data can create new opportunities for existing customers

Relational shopping data empowers brands and sales associates with all of the information needed to create new sales opportunities. Whether it be serving a loyal customer in a new market (as seen for Chinese customers that tend to shop while traveling) or for local customers that frequent a shop only when they need to repurchase a good, relational shopping allows brands to offer upscale services to ensure the customers are always thinking of the brand and the experience. By harnessing customer data to communicate effectively with clients, retailers can save a lot of time and effort on prioritizing the right products to ensure a five-star experience through all channels and store visits.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS attended the latest edition of the Retail Summit in Dubai, during which the Association had the privilege to moderate two roundtables, one centered on customer centricity (with the CEO of AWW group, owner of Pepe Jeans, Hackett and Façonnable, the CEO of WHP Global, owner of Toys’R’Us, and the President of Fashion, Beauty and Homeware at Chalhoub), and the second one on the future of specialty retail (with the CEO of Fred Segal, CEO and co-founder of The Latest Concept Store, and the CEO of Al Sulaiman Group).

This edition was also the opportunity to listen to great leaders and hear their insights. Below is a selection of the most interesting lessons we took home.

Overall, the Retail Summit is a rather surprising event when compared to the NRF in New York or the WRC. Its regional dimension makes it an ideal event for any organization or business interested in the Middle East, but it is also a great opportunity for networking, as guest speakers and high-ranking visitors are easily reachable thanks to its intimate and smaller format. Bumping into CEOs is easy during lunch breaks and conversations are casual.

While the first day was focused on functional approaches to the business, the second day was star-studded with retail legends, bringing the audience into another dimension. Three ranges of topics were discussed:

• New ways to address the notions of customer lifetime value, mass and scalable experience customization, and customer-centricity (a key topic in the Middle East),
• Sustainability and how it translates into fashion and retail,
• Keeping legacy businesses (either brands or retail formats) relevant for the future.

New ways to address the customer

Upon joining the company, Tom Athron, CEO of Fortnum & Mason, explained that he focused on the top 10 customer complaints collected during the previous Christmas campaign, to prepare for the upcoming one. He incentivized managers on those specific complaints. This helped him set up the right priorities, establish a climate of change and prepare for new challenges:

Taking inspiration from the hospitality sector, he created a new team, the “red coats”, whose role is to dedicate themselves to better serve customers, either by helping them when lost or providing assistance and information. Their role is really to provide high-level service and promote Fortnum & Mason as a brand. This also creates an emotional connection both with customers, but also within the staff, who increasingly sees the Red Coat team as a very desirable position, highly valued and accessible with hard work.

To better address customers’ needs, he also reviewed the product offer, making sure it was relevant to a different & younger clientele. For instance, arguing that customers were not coming to Fortnum & Mason to buy menswear (Jermyn Street, dotted with historical shirtmakers, is situated behind the store), he decided to replace the category with “supper clubs” instead, to reinforce both the retailer brand’s credibility and increase customer loyalty. In these clubs, customers can book exceptional food experiences in-store, and enjoy those experiences with their friends.

The CEO of Kiko Milano, the cosmetics brand, echoed Fortnum & Mason’s view on the fact that employees are crucial in creating and maintaining a great relationship with customers if salespersons are turned into actual brand ambassadors. For him, this is by far the most difficult part to perform. The director of Consumer and Retail Excellence at Zegna agreed, and this is why they use tech according to 3 key pillars to help teams focus on the experience and nothing else. Their systems help sales teams to:

• Show the right product at the right moment to the right person in the right channel (45% of Zegna turnover is performed online),
• Use tech at best to fine-tune and customize the B2B purchase experience,
• Have the possibility to stock, and re-stock, in a minimal time thanks to the fact that Zegna is both a brand and a manufacturer for other brands and owns factories.

When discussing customer lifetime value maximization, Majid Al Futtaim’s (MAF) Head of Customer Engagement explained that they stopped mass marketing based on promotions, after they realized that granting customers discounts, even if it could drive positive results in the short-term, was toxic. Consumers became addicted to receiving discounts and stopped purchasing at full price, while retailers ended up spiralling down and killing their brand equity. Instead, MAF believes in the importance of being an early adopter when it comes to marketing channels, in order to remain relevant to each customer according to their preferences. In turn, this requires being able to find the right marketers per channel (someone in charge of Instagram or mailing campaigns might not deal as easily and efficiently with TikTok). This is why the company massively invests in education in order to stay on top of current trends and have innovative employees, even though there are some risks involved in trying everything new.

Michael Ward, the CEO of Harrods closed the conversation by mentioning that, independently from the level of fortune owned by its customers, all of them were obsessed with their points acquired through the loyalty scheme, and the richest were probably the more vocal on this topic. After all, every retailer likes to look at tech in order to find new ideas or possibilities to increase customer loyalty, but having a sound and solid loyalty program, easily available online and offline, is the first goal to achieve.

Sustainability and retail

A panel allowed brand leaders and new-generation retailers to exchange their views about sustainability and fashion. It was interesting to hear German brand Lala Berlin CEO explain that she was hoping to learn from the other participants as she found the topic of social governance very difficult to address alone (this echoes one of the key messages from our 2022 White Paper on sustainability, in which we advocate for more cooperation and transparent exchanges between department stores). This panel was also the opportunity to hear from English social shopping platform, My Wardrobe HQ, which launched in 2019 and offers brands, but also customers, the possibility to rent and sell their collections or wardrobes, in addition to proposing a subscription model. They also provide their solution under a white label model to Harrods, Burberry and Tommy Hilfiger in the UK, and offer access to 500+ brands, including designers and luxury, from Maje to Gucci and Saint Laurent.

Addressing specific topics such as returns and fabrics, the panel shared several interesting points of view:

• To limit returns, it is key to give customers an accurate and precise set of product pictures, and the maximum information about the sizing (not only a sizing grid) to help them buy in full confidence. Asking about the reasons for returning the product is also a psychological way to make sure that customers are not simply having whims.
• Another important point stated by Lala Berlin (and which is already being applied by department stores’ private labels) is to make sure education goes both ways, with customers but also in the company’s mindset, and translates into very concrete results, such as a strict reduction of prototyping and production batches, to maximize the marginal value of each reference.
• Eyebrows were raised when new materials were mentioned, and it seemed that no one around the table was convinced that customers were either properly informed or paid a significant amount of attention to that topic. Instead of wondering about the ROI of such an operation, the CEO of Jigsaw mentioned that it was the responsibility of brands and retailers to make such efforts even though they were not directly demanded by customers.

During another talk, Chalhoub Group, the CEO of Anabela Chan, a jewelry brand, and Walpole, the UK’s association of British luxury brands, discussed the tricky question of how to include sustainability at the core of the business. For new brands, it is easy: Anabela Chan uses diamonds manufactured with carbon captured from the atmosphere or recycles aluminum from soda cans instead of using gold and silver. But for already existing businesses, the story is different as the idea is not only to go green while making sure this is not hurting the business but on the contrary look for positive outcomes for both the business and the environment. Chalhoub gave the example of their sustainable packaging project, which helped reduce the number of suppliers from 15 to 4 and costs by 20% while reducing their carbon footprint. In the same idea, Chalhoub identified that their commitment to gender equality (translated into a specific leadership program) helped the group increase its productivity, recruitment rate, and decrease its turnover within specific categories of executives.

How to keep legacy brands relevant in the 21st century

For the CEO of Manolo Blahnik, to remain relevant the company had to stop being a fashion company and focus on messages based on tradition and know-how, as Fashion, for her, is by nature transient. This view is not incompatible with a hi-tech approach, but choices have to be made: she mentions that AI is almost fully embedded in their ERP system now, while she does not believe in VR, the other hot topic among analysts, as for her this does not help convey a luxurious experience.

Zegna provided a very interesting point of view by reminding the audience that, in addition to staying on top when it comes to service excellence and luxury experience, remaining relevant also imposed remaining rooted in society and making sure to give back. This is why Zegna is the only brand in the world to own a national park, located in Italy, initially a strip of land purchased by Ermenegildo Zegna and then transformed into a park opened to the public.

The CEO of Fortnum & Mason mentioned that his biggest challenge was to “innovate everywhere while not changing anything” given the degree of public love for the iconic London-based flagship store. It was a true balancing exercise between keeping the brand alive and seemingly not changing anything, while at the same time making the needed structural changes to make sure the company would survive:

• For instance, while the store was only achieving 5% of online sales, they have grown that part of the business to 35% through a much stronger presence online and in social media, and a true digital transformation which he defines as wearing the customer’s shoes and considering the journey with a holistic approach. That translated into a subscription model for biscuit refills in a packaging that allows shipping via Royal Mail. As a consequence, this kind of new initiative allows the store to have a broader reach and use online as a true acquisition channel, for overseas or distant customers willing to have the Piccadilly Circus experience, rather than cannibalization of its in-store sales.
• Another example of subtly instilling changes in the organization is the level of attention put into hospitality, with champagne bars and restaurants operated at Heathrow airport or St Pancras train station, or in Hong Kong’s K11 art mall. Interestingly, Athron explained that hiring professionals with a hospitality background helped change the company’s retail mindset in a way which makes it much more modern and adequate to current customers’ needs. For him, keeping Fortnum & Mason relevant means being aware of what modern luxury is, and how it differs from its past definition: luxury should be, in his own words, “not for everyone, but for anyone”.

Harrods also mentioned that hospitality was the best way to remain relevant to very demanding and modern customers, as the iconic store aims to become part of their lifestyle through this new category (Harrods has more Michelin chefs than anywhere else in the world).

There were many other topics tackled during the series of interviews and conferences held during the event, and the reported selection of talks and speakers is, in essence subjective. While the sheer size of the event, much smaller than the NRF, does not provide space for more technical talks, it was interesting to hear retail leaders reflecting on their activity, always taking into account, or mentioning, the Middle Eastern customer in their talks.

After all, 16% of Harrods’ clientele comes from GCC and a recent article highlighted the fact that the region could very well be a reservoir for the growth of luxury brands in the near future.  For that reason, the Retail Summit is not as regional of an event as it may seem and it will be interesting to see its future development for next year’s edition.

Credits: IADS (Selvane Mohandas du Ménil)

What: The HBR reviews how Artificial Intelligence could disrupt creative jobs and how to adapt.

Why it is important: Department stores will also be affected in many ways, from designing their own private labels, to their marketing campaigns and other customer-facing actions. For that reason they should adapt in order to gain precious productivity points as soon as possible.

The creator economy, valued at $14 billion, allows independent creators to connect directly with audiences and monetize their work through digital channels like Substack, Flipboard, and Steemit. However, generative AI applications like ChatGPT and Midjourney may significantly alter creative work. Three possible scenarios are proposed:

1-    An explosion of AI-assisted innovation: AI supports human creativity, enabling faster and more efficient work, leading to rapid iteration and more people engaging in creative endeavors.

2-    Machines monopolize creativity: Algorithmic competition crowds out human creativity, causing a decline in authentic human content and innovation. Personalization of content may lead to loss of shared experiences and increased filter bubbles.

3-    "Human-made" commands a premium: Authentic human creativity is valued more as people may be willing to pay a premium for it. Human creativity retains a competitive advantage due to social and cultural context awareness.

To prepare for generative AI, businesses should brace for disruption, invest in structuring their knowledge, and get comfortable working with AI. Finding the right balance between AI and human creativity will be an important challenge for businesses and society.

How generative AI could change creative work 

What: 24,4% of e-commerce purchases are returned in the US, translating into $38bn in returns and $25,1bn in processing costs.

Why it is important: E-commerce capabilities are a necessity for department stores as a part of their omnichannel capabilities and offerings to customers. However, the financial structure of this business, often loss-making due to logistical costs, often impacts the bottom line, pushing retailers to paradoxically limit the size of their e-commerce business.

The US online apparel and footwear market faces a high return rate of 24.4%, translating to $38 billion in returns and $25.1 billion in processing costs in 2023. Offline-based apparel companies experience even higher return rates, impacting their bottom line significantly.

The primary reasons for online apparel returns are size/fit, colour, and damage. To reduce returns, 85% of apparel brands and retailers are using or planning to implement virtual try-on tools, which can also boost sales. Among those already using size-recommender tools, 80% report increased conversion.

The growth of e-commerce has negatively affected return rates, as customers face challenges in visualizing products accurately. Technologies like 3D body scanning can help address sizing issues, and as these tools improve, they can provide personalized customer service both in-store and online, potentially changing the US apparel market landscape.

The true cost of apparel returns in the US 

What: BoF unpacks the Bangladesh Accord, a legally binding agreement signed by fashion brands and trade unions after the Rana Plaza factory collapse in Bangladesh in 2013, which aimed to address dangerous factory conditions and improve workers' rights.

Why it is important: Retailers are facing increased pressure from regulators, consumers, and investors to improve labour conditions in their supply chains, particularly since the pandemic has led to worsening risks of modern slavery and wage theft.

The Bangladesh Accord is considered the most effective safety campaign in the modern garment industry and provides important lessons for the industry to address labour abuses, although challenges remain as brands face pressure to improve labour conditions. The Accord required independent inspections, transparent reporting, financial commitments to support improvements, and collective action from brands to address dangerous factory conditions.

Despite the Accord’s efforts and adoption, labor standards across the industry have remained poor. The International Accord for Health and Safety in the Textile and Garment Industry aims to extend the accord beyond Bangladesh to other countries but faces challenges from brands who view it as a legal risk and prefer self-regulated monitoring.

While the Accord transformed safety levels in the factories it covered, labor standards across the industry have otherwise lagged. The Accord's supporters say it offers an effective framework to help monitor and improve conditions, and its accountability, transparency and collaborative nature are what set it apart from the status quo. However, keeping the Accord's legally binding framework alive has been challenging, as it faced opposition from Bangladesh's government, factory owners, and even large companies that prefer their own programs or commitments that don't come with the same binding requirements. Despite these challenges, the International Accord for Health and Safety in the Textile and Garment Industry aims to expand the model to other garment-producing countries.

The accountability, transparency, and collaborative nature of the Accord have been crucial to its success, and it offers important lessons for the industry to safeguard workers' rights in their supply chains. Therefore, applying the same model of the Accord to address other labor-related issues beyond safety, such as wages and the right to organize, can lead to similar progress.

How to avoid another Rana Plaza

What: A US-based contribution to how physical retail is here to stay.

Why it is important: Although the view is very US-centric, most of the points mentioned (which are not new) apply to most retailers in the world and make it clear that stores still have a future even with online businesses growing.

The article emphasizes the continued importance of physical stores in the retail industry despite the rise of online commerce during the pandemic. According to the contributor, retailers should reset their store strategies to capitalize on growth opportunities. Key points include:

1-    Being strategic about store locations by leveraging data on foot traffic, sales, and customer demographics.

2-    Focusing on strip centres and freestanding small-format stores rather than underperforming shopping malls.

3-    Using data analytics to tailor store layouts, services, pricing, and product assortments to local catchment areas.

4-    Reinventing stores as multipurpose destinations, offering experiences alongside shopping, and integrating online and offline channels for seamless customer experiences.

5-    Recognizing the role of physical stores in legitimizing brands and building relationships with customers.

6-    Gaining insights into local preferences and purchase patterns from stores to inform various aspects of the business.

7-    Investing in retail workforce to ensure they are skilled and motivated, and providing platforms and applications for better employee connectivity and customer experiences.

Physical stores remain critical in the retail industry, and reinventing them to adapt to changing consumer behaviours will be essential for future growth.

Resetting the store strategy 

What: Coresight lists the key learnings from Shoptalk, an IADS partner.

Why it is important: Organizational change is probably the most interesting topic, as it is a direct consequence of all the other changes, and the topic of the 2023 Academy program.

Each year, Shoptalk unites leading brands, retailers, technology companies, investors and more to explore the evolving retail landscape and pave the way for next-generation retail. Coresight believes that brands and retailers globally would benefit from pursuing initiatives across the five identified evolving themes identified at Shoptalk, continuously innovating their organizations and operations to adjust to the shifting retail landscape and provide shoppers with the best retail experience possible, and which are:

•    Technology: Artificial intelligence (AI) and Web3 were hot topics of conversation at Shoptalk 2023, including their impact on supply chains and store and customer experiences. Coresight Research presented on the importance of intelligent, connected supply chains that utilize Web3.

•    Store experience: Empowering store associates and experimenting with new store formats are key to delivering great store experiences in the post-pandemic world.

•    Shopper engagement: To better engage with consumers throughout the shopping journey—and even after they complete their purchase—retailers should employ personalization strategies and tap opportunities in the video format, including short-form, long-form and livestream content.

•    Emerging channels: While there are many emerging channels retailers should keep an eye on, social media and secondhand markets are among the top emerging channels in the US. Moving forward, companies will need multichannel strategies to meet consumers wherever they are.

•    Organizational changes: These abound in the current retail landscape, as reimagined partnerships drive cultural relevance and companies look to hire top tech talent and increase organizational productivity.

5 key trends to keep from Shoptalk 

What: Coresight reviews how Tik Tok works for brands, retailers and resellers now that Tik Tok Shop is open.

Why it is important: While business cases are still scarce, this might change very quickly in the future.

TikTok Shop, the e-commerce arm of TikTok, launched six months ago in the US, following the success of its sister app Douyin, which generated $208 billion in sales in 2022. Tik Tok Shop allows to make purchases directly in the app, and not through a third-party interface.

TikTok Shop allows brands, merchants, and creators to sell products directly through in-feed videos, livestreams, and Product Showcase features. An exclusive feature, the Affiliate Marketplace, connects sellers with creators to share products and earn commissions.

Though major brands like Revolve are experimenting with TikTok Shop, widespread adoption is yet to occur, potentially due to US consumers' preference for using social media for discovery and research rather than direct shopping.

However, with nearly half of the US population on TikTok and the success of similar platforms like Amazon Storefronts, TikTok Shop's seamless and frictionless experience may boost direct shopping adoption in the future.

How to sell on TikTok 

What: RH ISAC reviews cybersecurity threats from the 2022 holiday season.

Why it is important: For the retail, hospitality, and travel community, the holiday season is the most intense time of year for consumers and cybersecurity professionals facing persistent threats. From the beginning of October through the end of December, cyber threats to organizations expand in both scale and intensity to match the rise in consumer traffic.

In order to examine the threat landscape facing members during theholiday season, RH-ISAC developed this report, the 2022 RH-ISAC Holiday Season Threat Trends Summary. The report is in three parts:

1. Member Perspectives: In which key subject matter experts from leading member organizations provide their insights into their current defensive preparations.
2. Threat Landscape: Where the RH-ISAC team examines the threat trends reported by the member community for the 2020 and 2021 holiday seasons from a historical and analytical perspective.
3. Associate Member Analysis: In which threat analysts from RH-ISAC associate member Flashpoint provide their perspective on the current holiday season threat landscape based on their research and data.

2022 holiday season cyber threat trends 

What: Catering to the needs of your local customer is the essence of retail.

Why it is important: Tourists are to be considered as the cherry on the cake but the past 3 years showed that they should not be considered as the engine of the department stores’ business.

Kohl's plans to open 250 additional Sephora at Kohl's locations in 2023, reaching a total of 850 stores and covering nearly 80% of Kohl's footprint.

The 2,500 sq. ft. shops have Sephora-trained beauty advisors and provide a customer experience similar to standalone Sephora stores. Such a partnership benefits both companies, with Kohl's reporting eight million customers buying Sephora products in 2022, and Sephora gaining access to new customers.

The collaboration follows a portfolio approach, adapting to local communities and their specific needs. A portfolio strategy involves analyzing local markets and tailoring stores to the community, ensuring they don't cannibalize each other's sales. The Sephora at Kohl's expansion is a testament to the success of this approach, according to Forbes.

Retail is, by essence, local 

What: Customers have less time for leisure, but are willing to spend more to make the most of it.

Why it is important:  Department stores are all about experience and disposable income. If they are able to provide the most compelling experiences, they would be able to get the lion’s share of the budget dedicated to leisure.

The labor-leisure trade-off concept in economic theory suggests an optimal balance between work and leisure for each individual. Despite increased productivity over the past 50 years, leisure time hasn't grown correspondingly across OECD countries. Germans spend 23% of their time on leisure activities, while Mexicans spend only 12%, with TV-watching being the most popular leisure activity.

Interestingly, the decline in leisure time seems to have led to increased leisure spending. In the U.S., leisure time dropped by 48 minutes per day from the 1990s to the 2010s, but leisure spending as a share of total consumer spending has risen since 2013, growing from 9.5% to 13% by 2022.

The evolution of leisure spending 

What: HBR argues that asynchronous work fuels creativity by allowing underrepresented voices to express themselves.

Why it is important: Such an approach to work is common among the younger generation, and employers need to adapt their productivity levels by making the most of these new methods, and not just undergo them.

The article discusses research conducted by Aruna Ranganathan, which analyzes the impact of asynchronous work on creativity.

The study found that asynchronous work allows underrepresented voices, particularly women, to express themselves without fear of being criticized or interrupted and can lead to better creative performance. While synchronous teamwork may decrease coordination costs, it also inhibits the expression of new or risky ideas, ultimately making teams less equal and their output less creative.

The study's findings show that asynchronous restructuring of at least some tasks is an effective and feasible solution to inequality in creative teams, as it enables greater creative freedom and provides a way forward to a more equitable future of work.

Asynchronous work can fuel creativity

PRINTABLE VERSION HERE

Retailers do not need to be reminded that disruption in the space has been numerous with up-and-coming tech (Web3 and AI), figuring out the “new normal” following a global pandemic, a war in Europe, as well as inflation. These are only a few of the things that have impacted retail businesses between 2020 and 2022.

The role of the IADS as an expert platform dedicated to the department store world is to be able to step away from the immediacy and the constant stream of news and be able to analyse the situation based on actual and reliable numbers.

This is the reason why the IADS launched the first edition of its exclusive Department Store global observatory, the IADS 100, in May 2021. This list, capturing data from a number of department store companies around the world, is intended to track the changes in the retail format and see how players in various markets are able to adapt to challenges and change. It is exclusively based on first-party information that the IADS sources itself.

In the latest rendition of the IADS 100 monitor gathering 2021 fiscal year figures, it has been clear that compiling comparable information across markets has proven to be more and more difficult. Many retailers are forecasting against ‘normal’ times and looking to beat 2019 figures rather than 2020 results. This is fair as department stores were forced to operate in limited ways or not at all for long periods of time, therefore typical KPIs from 2020 are no longer reliable when moving the business back to ‘usual’ times.

What is hard about referring to 2019 figures rather than 2020 data is that there might not be a ‘business as usual’ reference to compare to anymore. It seems as if retailers are having to constantly adapt, therefore year over year comparisons need to be deeply analysed to be fully understood.

This report will attempt to understand some of these major changes across global retail markets. In order to make comparisons year over year, all exchange rates to Euros come from March 22, 2021, which was the date chosen during the initial IADS 100 release.

2021: retailers are not out of the woods yet

Before breaking into the numbers, it is important to first look at what happened in retail between the years 2020 and 2021 as a reminder of the times that these department stores are operating. 2021 started as a year of hope and recovery, but many could not imagine the impact that the global pandemic left on the world.

In March of 2021, the Suez Canal was blocked for 6 days, disrupting the global supply chain that was already weak due to Covid impacts. If the shutdown of factories was not enough to showcase the risks for retailers to operate with a global supply chain, this 6-day disruption brought even more awareness of the impact of having reliable and locally sourced products. The shipping delays caused by the Suez Canal block and from Covid interruptions led to a number of fully packed shipping cargo being stranded in ports. By the time some products arrived, they were out of season and no longer relevant, leading to too much inventory and major markdowns at the end of the year.

These supply chain disruptions also heightened the awareness of consumers as to where their products actually come from. They started to ask more questions about where brands are sourcing their goods, how the products are made, the impact supply chains have on the environment, and what the ‘made in’ label actually means. This even led to sanctions imposed by western countries on Chinese goods as a response to the alleged use of forced labour in Xinjiang, China.

The year 2021 also saw the re-emergence of social interactions with the release of the Covid vaccine. After being locked up at home during the pandemic and shifting to a more permanent work-from-home scheme, consumers started valuing personal interactions more, and their expectations for how retailers can entertain them are higher. Shoppers are looking for personalised and experiential shopping which has shifted the role of the physical store, meaning department stores need to make the most of their square footage and prime locations to capture the interest of consumers.

Working from home also changed what products consumers needed to buy. There was an increased need for home office furniture and technology and a reduced demand for work attire and formal wear. In fashion, loungewear took over sales from suites and dresses as formal celebrations like weddings and holiday parties were pushed or completely cancelled.

Understanding that selling to consumers where they are also grew in importance, especially when it came to reaching Gen Z customers. Retailers needed to successfully add social media platforms to their omnichannel strategy. Keeping up with the latest technology to stay relevant in the eyes of young shoppers is neither easy to implement nor cheap. New platforms beyond TikTok and Instagram started to emerge, and retailers realized the importance of fully understanding how to achieve sales across such channels.

Was 2021 a year of false hopes for retailers? What the final numbers tell us

Asia: struggles to bounce back due to waves of lockdowns

Asian department stores continued to be up against strict lockdowns and Covid measures in 2021, especially seen in China and Hong Kong. In China, BHG, Wangfujing, Rainbow, Parkson Retail Group, Maoye, and New World all saw a slightly positive sales trend in 2021 compared to 2020 as stores began to occasionally reopen and citizens were allowed to leave their homes. Travel has been heavily restricted, therefore Asian tourists that typically buy luxury goods in Europe have been forced to use this money at home rather than abroad. Despite the redirection of funds to local stores, Chinese department stores such as Wuhan and Golden Eagle continued to report losses in 2021 versus 2020. And in Hong Kong, Lifestyle Sogo reported positive turnover while Wing On saw losses.

Japanese department stores also saw a range of results with Takashimaya, Daimaru Matsuzakaya, H2O, Marui reporting relatively strong positive turnover between 2020 and 2021, while Isetan Mitsukoshi, Tokyu, and Tobu reported losses. Sogo Seibu in Japan reported a major loss from 2019 to 2020, but rebounds have yet to be reported as figures for 2021 are not available yet. It is important to note that Japan was closed to foreign tourists for two and a half years due to the global pandemic, thus the reopening in 2022 is sure to help sales figures for retailers in the coming year. This will be for sure a much-needed breath of air in the market, as all Japanese department stores reported lower sales in 2021 compared to 2019, including Tobu, where sales halved, and Isetan Mitsukoshi, which lost 66% compared to the 2019 sales level.

The rest of Asia saw a variety of results. In India, Lifestyle Landmark Group and Shopper’s Stop reported positive earnings. Matahari in Indonesia reported a slight increase in turnover, which was the same case for SM in the Philippines and Hanwha Galleria in Korea. Finally, Odel in Sri Lanka reported a loss of turnover from 2020 to 2021. The whole region was affected by relatively severe lockdowns, which explains why no retailers from this group were able to recuperate the 2019 sales levels, despite the stimulus checks granted by some governments.

With the goal being to outperform 2019 numbers, the only department stores in Asia that reported higher sales in 2021 than in 2019 are BHG, Wuhan, and Golden Eagle, all of which operate in China. BHG in particular grew an astounding +62% vs 2019, thanks to its exceptional positioning in the country when it comes to luxury brands and experiences. Such a performance allowed the Beijing location to secure the title of the most profitable department store in the world, which Harrods lost in 2020.

This indicates that department stores in Asia still have quite a journey to make to return to usual operating times and they might be heavily dependent on the reopening of Chinese borders, that was decided early 2023.

Europe: mostly a recovery story

The year 2021 was seen as a time to get back on track for European department stores. In the UK, John Lewis, Marks & Spencer, Selfridges, Harrods, Fenwick and Liberty all saw positive, but almost flat, results compared to 2020 figures. While Fortnum & Mason was not as fortunate and saw a continued downward trend in their sales figures. Harvey Nichols has not shared 2021 figures, but the department store shows the same 2019 to 2020 trend of a -67% drop in sales during the 2020 fiscal year.

Other European players such as Kaubamaja from Estonia, Stockmann from Finland, El Cortes Inglés from Spain, Ahlens and NK from Sweden, and Coop and Jelmoli from Switzerland showed positive but almost flat sales results from 2020 to 2021 that prove the road to recovery will not happen overnight. Europe is not only recovering from the direct impacts of Covid but also have new challenges which will make the bounce back even more challenging. This will be discussed further in the section below dissecting what is to be expected from 2022 results and beyond.

Only Marks & Spencer, Coop Group, John Lewis, and NK beat 2019 ‘normal time’ KPIs in 2021, making a swift recovery from the 2020 decline. The remaining European department stores will be looking to close the gap in the coming years with many barely missing the mark.

Interestingly, in the 4 department stores that increased their sales in 2021 compared to 2019, 3 of them (Marks & Spencer, Coop Group and John Lewis) include large food sections and a strategy based on prices, which explains their resilience in tough times thanks to their proximity with their customers (El Corte Inglés also belongs to this typology, however, the business in the company is also very much based on touristic flows, especially in Madrid, Barcelona and the Balearic islands).

NK is an anomaly as a luxury department store (hence also very much dependant on tourism), which is explained by the fact that it changed the nature of its business between 2019 and 2021. In 2021 NK bought the Departments Stores Europe AB company, a brand importer, and started de facto to purchase and manage product flows, while prior to this acquisition NK was only managing the real estate space within its department store.

Finally, the variable gap between 2019 and 2021 sales for the companies who did not pass also gives an idea of their sensitivity to tourism. For instance, in the UK, Selfridges and Harrods are much more dependent on tourism than Fortnum & Mason, which explains why returning to normal is harder for the two former companies.

Americas: 2021 sees positive growth

Department stores in the Americas (the sampling including United States, Mexico, and Chile) all saw positive sales trends between 2020 and 2021. In the United States, Macy’s, Kohl’s, Nordstrom, Dillard’s, and Neiman Marcus all saw a strong recovery in 2021 sales figures. While the United States was also hit by the global pandemic, stores did not shut down as drastically in the US as in other parts of the world such as Europe or Asia. US retailers were also able to reap the benefits of numerous stimulus checks granted to US citizens in 2020 and 2021 that boosted the economy.

In Latin America, positive sales trends were also noted from El Palacio de Hierro and Liverpool in Mexico, and Falabella, Ripley, and Cencosud in Chile. These countries have not only faced the pandemic but also lived through drastic political changes in government leaders that have shifted right winged regulations to more left policies since 2018. These changes might prove to bring more challenges in the upcoming years.

Compared to 2019 figures, most US department stores neared the 2019 target but slightly fell short except for Dillard’s and Neiman Marcus which reported figures just over 2019 figures. In Chile and Mexico all department stores in the sample outperformed 2019 turnover. This shows that at the end of 2021, the Americas retail markets were showing strong signs of recovery from the pandemic, but this might not be enough to get them through the next set of challenges that 2022 is to bring.

What to expect from the 2022 fiscal year and beyond

While fiscal results for 2022 are still being calculated and modelled, we can already predict what the data might reveal. While most of the world is rebounding from the global pandemic, China and parts of Asia are facing waves of lockdowns that have impacted travel and store operations. Beijing was also the host of the 2022 Winter Olympics which typically welcomes international travellers and is a major economy booster, but the event was strictly limited to citizens living in China to avoid any further spread of the Covid virus.

Chinese consumers being stuck in Asia has also impacted European department stores, especially the French ones that dedicate a lot of resources to selling to Chinese tourists. These department stores have had to shift to appeal to locals and US tourists to try to get their sales figures back on track. But with restrictions starting to lift for Chinese tourists, Europe could record a major bounce back in 2023 sales reflecting the return of these prized consumers. Across the English Channel, the UK faced the death of Queen Elizabeth in 2022 which closed shops for a short period of time and the country is dealing with an unstable government representative and heavy criticism of the leadership.

Another major headline in Europe in 2022 has been the war incited by Russia’s invasion of Ukraine. As countries and businesses show their support for Ukraine, many retailers had to pull their operations out of Russia, including department stores which were previously selling their private labels on the market, for instance. Russia and Ukraine are also both heavy exporters of goods that have impacted the global supply chain and created scarcities in a wide array of goods and increased the price of goods worldwide. Energy scarcities have led to a crisis that has heavily impacted the overhead costs of retail operations.

Between the Covid recovery and the war, the increase in the price of goods has led to painful inflation. Governments are now weary to respond with raised interest rates for fear of causing a recession. If a recession is in fact in the near future for 2023, this will greatly impact sales figures for retailers as consumers will stop spending on unnecessary goods and products.

Finally, regulations surrounding climate change and sustainability are starting to become more concrete with mandatory steps that are needed to be taken by brands and retailers. At the beginning of 2023 regulations will be enforced by Europe and the US that will heavily disrupt how they operate and communicate with consumers. But with the threat of inflation and a recession, it will be interesting to see if such sustainability issues will still be prioritized as profits and recovery take precedence in the eyes of governments and business leaders.

The ultimate test for department stores is not merely to encounter these disruptors, but to be able to make it out on the other side and learn lessons along the way. The unknown challenges that retailers face year after year are never black-and-white topics and each market has its own unique set of hurdles in their own time. Facing these obstacles alone is the greatest challenge, but difficult times can be eased by understanding how similar business cases have been dealt with by department store partners around the world. Exchange associations such as the IADS give global retail leaders an opportunity to ask hard questions when facing difficulty and share the lessons of their triumphs.

<u>IADS Note*</u>

While department store diversity can be a strength, it also makes comparisons difficult. It is clear, for example, that data concerning revenue, profits, selling space etc. will often not be available from privately held companies. If the IADS obtains such data privately and confidentially, we will not publish it.*

Read the financials from 2020 and 2021 here:

2020 and 2021 FINANCIAL RESULTS

Credits: IADS (Mary Jane Shea)

PRINTABLE VERSION HERE

Sucharita Kodali is the Vice President and Principal Analyst at Forrester Research, where she addresses e-commerce, omnichannel, and consumer behaviour topics. She is also an authority on technology developments that affect the online commerce industry and vendors that facilitate online marketing and merchandising and authored “The World’s Most Future-Proofed Brands” report, which reviews global consumer-facing brand manufacturers.

At IADS, we know that sustainability is increasingly a burning topic for retailers, and this is not expected to change in 2023. As we demonstrated in our latest White Paper on the topic, “Reinventing department stores through sustainability”, the pressure grows and comes from all stakeholders. Customers might not be the only ones asking for more action in this field. In addition, retailers who already started their journey also realized that with actions came more complexity, as there is for now no charted path. This is the reason why the IADS asked Sucharita Kodali, who boasts experience in the department store retail format, to talk to the IADS CEOs earlier in 2023. This IADS Exclusive is an excerpt from this talk.

The rise of the conscious customer

Like it or not, the rise of a new conscious customer over the past decades was inevitable. Starting in 2000, when China joined the WTO, the cost of manufacturing soft goods considerably decreased, allowing the category to literally explode: in the fashion category for instance, prices deflated, allowing customers to buy more products, and generating a never-ending hunger for new garments (with the United States losing their predominant position as a clothing manufacturer along the way).

The rise of e-commerce fueled this hunger even more, as it brought the convenience of being able to order products from the living room, and customers became avid.

It took some time for everyone to realize the environmental cost of shipping products from a given warehouse instead of purchasing them at the store, and, when becoming aware, customers started to ask brands and retailers to steer towards more sustainable practices.

Tackling sustainability: three sides to the story

However, the topic became complicated fast, as sustainability, at least in the US, quickly included a social dimension (employees’ health, fair wages…) as well as a backlash against the negative externalities of businesses (including, for instance,  privacy management or data confidentiality).

Kodali suggested considering the notion of sustainability according to three angles.

The first one is to acknowledge that customers have radically changed.

In a study conducted by Forrester, 4 segments reflecting customers’ shift towards more “consciousness” were identified.

The identified profiles are the following:

-    “Non-greens” (14% of the respondents), for whom environment comes second and who are not looking for green products,

-    “Dormant greens” (36%), who might be looking for green products and who are unsure if the environment comes second or first,

-    “Convenient greens” (26%), for whom the environment comes second but who are actively looking for green products,

-    “Active greens” (24%), for whom the environment comes first, and who are actively looking for green products.

All in all, this segmentation shows that at least half of the consumers (convenient greens and active greens) are now receptive to finding ways to make their consumption greener.

This implies new attitudes toward recycling (38% of positive answers), opting for higher quality (26%), and purchasing second-hand (21%), which in turn suggests that customers will, at some stage, reduce their overall consumption, which will require retailers to adapt.

The second angle to consider is regulation. 

Many countries are eyeing (and for some, voting or enforcing) new laws which can either encourage new behaviours, through tax incentives or, more frequently, be restraining. Kodali believes for instance that surcharges on packaged deliveries are coming, as well as extended producer responsibility (i.e. surcharges allowing to address the product afterlife and finance its recycling or destruction, as South Africa decided at a national level).

This raises new questions (How to finance it? as a levy on the final price point? a tax on the manufacturer? or on the retailer?) which will anyways impact retailers. This is a norm in electronics across the planet now, and highly probable that soft goods will follow suit soon.

The third angle is to understand that sustainability is not only for consumers.

Investors are now also fully utilizing CSR and ESG tools and KPIs in their decision-making process, even though there are still some disparities at the global level due to uneven regulation (42% of European investors are required to invest in socially responsible products, vs. 15% in North America). There still are some investors (especially in the Americas) that might think that such commitments are a waste of time and energy, however, Forrester thinks that this is a disappearing breed as investors are increasingly encouraged to measure the ROI of their actions also taking into account CSR KPIs.

In that context, how can retailers thrive?

Opportunities for retailers and brands

Kodali suggests looking at the current e-commerce practices and seeing how these practices could be twisted and mirrored in a way that makes retailers more sustainable than the industry leaders such as Amazon. In fact, in many cases, this is equivalent to coming back to the traditional usages in physical business:

-    No additional packaging coming on top of the product, just like when customers go to the store and bring back their purchases,

-    Encouraging customers to receive all their purchases together and not in a fragmented manner the same way that they do only one trip to the store and bundle their purchases,

-    Restrict returns in the same manner.

Whatever the case, the landscape has evolved and change is now required. But Kodali points out that some retailers might be in a more urgent situation than others, as the proportion of green customers might vary from one brand to another.

For instance, while Chanel or Adidas have more than 70% of green customers overall (i.e. sensitive to sustainability), this proportion falls to 37% for Home Depot, suggesting that, in the latter case, sustainability efforts might make less sense (unless new regulation or investors are coming in the game).

Brands also have to keep in mind that customers are, by default, suspicious that any of the actions might be only greenwashing, as many empty claims were made in the past.

To go further, Kodali cites a few opportunities for retailers to consider:

•    Repair Café in the Netherlands, where customers can bring back any product that needs a repair (adding new services and facilities to department stores),

•    SOEX in Germany, which recycles raw materials,

•    Initiatives going beyond extended producer responsibility laws, with some initiatives even charging the customers for taking back their old products and recycling them (based on the belief that convenience can always be charged).

She also encourages retailers to adopt stricter sustainable standards than the ones imposed by law (this was also a discussion during the last IADS General Assembly): once a law makes something standard, being compliant with it is not a competitive advantage anymore. Also, Forrester expects regulators (especially in the EU), investors and NGOs to be increasingly demanding, so anticipating their requests makes sense.

Finally, retailers should expect a revolution similar to what took place in tech. Kodali points out that Amazon, Apple, Google and Microsoft all radically shifted the nature and source of their income between 2000 and now, and for that reason, looking at new revenue streams in retail (third-party marketplaces and retail media) makes sense as the whole sector might go through a transformation in similar dimensions in the future.

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE LINK HERE

Highly regarded by many key players in the retail industry, EuroShop is a trade fair founded in 1966 at the initiative of the EHI Retail Institute and takes place every three years since the 1975 edition. The 2023 edition took place from February 26 to March 2, and the IADS attended the session to understand the remarkable trends emerging from this year’s EuroShop fair, as the first post-pandemic edition.

In the same manner that department stores are houses of everything customers need, EuroShop is truly the warehouse of everything retailers need. From hangers or cardboard boxes to advanced customer recognition systems and startup tech, the variety of topics is impressive. This year, 1,830 exhibitors from 55 nations gathered on more than 120,000 sqm, disseminated across 17 pavilions and covered 7 areas of interest: Retail Marketing, Retail Technology, Lighting, Shopfitting & Visual Merchandising, Store Design (including materials and surfaces), Food Service Equipment, and Refrigeration & Energy management.

81,000 trade visitors attended the session, of which 50% were retail professionals (from manager to C-level) and 68% came from abroad (especially from Southeast Asia, Africa and North America). In comparison to 2020, just before the global pandemic outburst at the end of February, 2,300 exhibitors welcomed 94,000 visitors, which suggests that, although the world has reopened, the fair industry has not yet fully recuperated to its pre-pandemic levels (this is probably due to the subsisting difficulties for Chinese nationals to travel in spite of being authorized to do so).

At first sight, the fair is overwhelming, and it is difficult to know what to explore. This is why we asked IADS partner Retail Hub’s CEO Massimo Volpe for his opinion and angle. Together, the key learnings that we took home were the following:

-    Autonomous (checkout-free) stores are developing fast. This raises an interesting point for department stores, as they may have to adapt to customers who are increasingly used to buying in checkout-free stores for a certain type of goods. Even though checkout-free systems might not be adapted to the nature of the business in department stores, customers may be expecting new and frictionless experiences while shopping and at checkout in department stores.

-    Computer vision is now used for any type of store analysis and most retailers are embracing (or claim to do so) this technology. Given the fact that AI is the next stop for retailers, and as such, it needs to be fed with data, equipping points of sales with tools, enabling computer vision is becoming absolutely critical.

-    AI makes the headlines in the newspapers and is poised to give birth to an increasing number of commercial applications, either through off-the-shelves products or via tailor-made solutions. We identified three interesting business cases as a very subjective selection.

-    Sustainability was a very important topic of discussion during the fair, with many different technological approaches provided to retailers.

The IADS wandered along all the aisles to identify the most interesting suppliers and exhibitors. The following list is, in essence, subjective and not exhaustive.

What are the potential consequences of the checkout-free frenzy for department stores?

Autonomous store initiatives are a topic that we closely follow, as the technological value proposition is great (improved customer experience, reduced costs), but can also come with downsides (mistakes inherent to the system or lack of interest from customers). The industry is reported to have grown by +11% in 2021 in terms of systems shipped globally.

All visitors paid a visit to the “Just Walk Out” stand from Amazon, a technology launched in 2018 that is now available in 40 Amazon Go and Amazon Fresh stores in the US (and other destinations too). The technology is also made available to other brands, such as Starbucks or WH Smith.

Amazon is reportedly the retailer that is operating the largest number of checkout-free stores globally but is not the only one in the game. Tesco opened its first checkout-free store in London end of 2021, through a partnership with computer vision start-up Trigo Retail which uses a combination of cameras and weight sensors to define what customers have picked up, and then charge them directly through the app when they leave the store (Trigo is also behind the scenes for grocers REWE and Aldi in Germany and the Netherlands respectively).

The interest of this technology is that nobody has to scan products (customers or sales assistants) and, in the most optimal use case in which customers have to “log in” via an app to enter a store, this equates for the retailer to have as many data collection points as on its online interfaces (and often leverage its online technical capabilities and apply them to the store). However, this raises questions when it comes to potential customers’ resistance to such data collection, not to mention customers who are actually coming for advice and interaction with salespersons (which would also explain why, for now, this technology has mainly spread among grocers). Analysts believe that this technology is mostly valid for products involving low engagement, which is often not the case in department stores.

As a consequence, department stores often focus on the cash-desk experience, as most of them have, so far, developed self-check-out capabilities, as a middle way to reduce waiting time at the cash desk and give customers options in terms of the interaction they want to have. It is therefore all about going frictionless, but with some limits.

Shopreme, for instance, offers a scan & go solution, for now mostly available at grocers and hypermarkets, but the solution is also available in white label and can be integrated into any retailer’s shopping app. The point of the solution is its real-time feature: customers can see in real-time the value of their basket, while retailers can see their selection, and nudge their purchases, or offer on-the-spot promotion (or cross-selling purchase selection), through live actions. As a consequence, it is interesting to note that Shopreme’s selling point is not to be ‘simply’ a purchasing app or a smart-cart solution such as Cust2mate, but insists on its relevance as a part of larger retail media solutions.

Regarding the payment aspect, it was interesting to see that some suppliers were pushing the reasoning a bit further in terms of leveraging existing online e-commerce capabilities and the need for modernization in stores, by merging the payment experience online and offline (in other words, processing instore customers’ payments through the same platform of online customers). Adyen’s technology, or the “smart checkout” from Vivawallet, a European neo-bank, were two good examples.

Monitoring your store through the eyes of your computer

Smart checkout (or cashier-less stores) is in most cases powered by computer vision (a technology that enables machines to see and understand images and videos), which explains why this part of the business was also quite visible at Euroshop, given the keen interest for smart checkout. However, computer vision is now central to many more applications:

-    Retail heat maps, showing visual representations of customer behaviour and preferences in stores, and footfall analysis tools, to understand customer traffic patterns, peak hours, dwell time, and conversion rates. They can help retailers optimize store layouts, product placements, merchandising, and marketing strategies. Going further, the combination of computer vision with AI allows some suppliers to propose on-shelf availability improvement tools with real-time fulfilment, such as Envelope OU.

-    Image recognition, or the ability to recognize objects, brands, logos, faces, emotions, etc. in images and videos. It can help retailers enhance customer experience, loyalty, personalization, security, and analytics. For instance, Blimp proposes a technology that is able to recognize uniforms in order to exclude salespersons from real-time analysis of the store.

-    Virtual mirrors coupled with recommendation engines allow customers to try on clothes or accessories in fitting rooms and receive personalized recommendations based on customer preferences, style, or body shape.

Computer vision does not only mean equipping the store with cameras and physical sensors, but combining any device and system interacting with the customer to make sense of the data collected, as proposed by various suppliers such as InPiazza, combining data collected from cameras, Wi-Fi routers, beacons, sensors and databases, to provide real-time analytics, reporting and marketing activities.

Given the importance of this topic and the jungle of suppliers available in this field, we will closely collaborate with our partner Retail Hub in order to identify the most valuable potential partners and their competitive advantages over their peers.

Three interesting examples of AI applied to off-the-shelf solutions

AI is all the rage in the media since OpenAI released ChatGPT, which acted as an eye opener not only for individuals but for businesses also. We have recently attended a conference held by Bain, which announced a strategic alliance with OpenAI, and will release our report on this conference soon. The current state of the market implies that retailers have two possibilities when addressing AI:

-    Either as a built-in feature in their core operative model (as suggested by the OpenAI and Bain alliance), with the associated costs and risks, and any CEO who had to reinvent their ERP system would easily draw a parallel in terms of benefits – risks aspects,

-    Or as a product feature already integrated in a specific tool addressing a special and well identified need. The key selling point when it comes to these proposals is usually the ease of implementation (edging to plug & play) and return on investment in terms of time saved.

Falling into the second category, we came across three different examples:

-    Velou, which acts as an automated co-pilot for e-commerce, reviews each category and product performance in real-time and produces reports, but also identifies missing product metadata, suggests new products additions and generates product descriptions automatically, adapting the tone to the platform (mail, social media, website) and profile.

-    Miros, a ‘wordless search tool’ for fashion brands. AI analyses browsing behaviour and past searches and then translates the results of this analysis into product suggestions based on untold words. Given the fact that, for instance, the OpenAI GPT-3 model is based on guessing the next word to write, the Miros solution is a commercial application of this feature and is already used by online retailers such as Debenhams.

-    Brame, which is in the very specific niche of gamification and allows retailers to easily (and quickly) design and produce games for customers, in order to generate interactive experiences and, hopefully, increased loyalty and conversion rates.

Interestingly, in all three cases, AI was advertised at the same time as a key feature of the product, but also as a reason for extremely easy implementation within existing systems, Miros even mentioning being as sensible to implement as Google Analytics.

Retailers have an increasing number of practical options when it comes to sustainability

Sustainability is a major topic in retail, and this is the reason why the IADS dedicated its 2022 White Paper to it. At EuroShop, there were many stands presenting new solutions to enhance sustainability at the point of sales level, and what was interesting was the variety of options available. Of course, many exhibitors advertised their energy-saving lighting systems, sustainable material for shopfitting (such as UCGE), or other virtuous initiatives. But what we found interesting was how existing technologies or customer-facing devices were re-invented with sustainability in mind.

For instance, RFID-specialist Checkpoint Systems advertised its solution for reusable packaging, suggesting that it could help trace packaging consumption and waste, inform customers, but also potentially help set up a deposit refund process in order to encourage customers to return their packaging (to be used again).

Reverse vending machine manufacturers Tomra, Envipco or Recyclever advertised the new capabilities of their devices to be able to recognize (thanks to machine learning) the waste returned in bulk in their machines, and separate it by typology, easing waste sorting, in order to create a recycling loop. While department stores are not the usual place where people would bring back their waste to have it sorted and recycled, such machines would nonetheless be advertising their commitment to sustainability while also helping clean waste in their food halls or F&B zones.

There are many other lessons learnt during this visit, and IADS will continue to review them with Retail Hub, in order to keep providing interesting, up-to-date and relevant content on innovation to IADS members. As a closing thought, it was interesting to note that, just like at the NRF event, Retail Media, which is an omnipresent topic in the media (as it is seen as the future for margin-strapped retailers), was under-represented at EuroShop. This suggests that while everyone is aware of its importance and potential, there are not yet any actual off-the-shelf solutions for players, so they are unable to develop this capability in-house by themselves.

See you in 2026 EuroShop!

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

OpenAI, a research laboratory based in Los Angeles dedicated to Artificial Intelligence technology,  is the parent company of groundbreaking AI technologies such as DALL·E 2 which creates original art and images based on a text description, and Whisper which is a speech-to-text AI solution that can very accurately transcribe speech across languages.

ChatGPT is OpenAI’s latest release that has turned heads. ChatGPT is a chatbot technology that has the ability to generate human-like text, which could bring value to businesses that want to add a layer of sophistication to their digital communications. The solution offers human-like responses to a variety of questions, admits when it makes a mistake, and can even help write or correct code.

ChatGPT has been creating a lot of buzz since OpenAI released the free version, and the company has also shared that they will be monetizing the tool by offering it as a cloud-based API (Application Programming Interface) that businesses and developers can integrate into their own applications and services. But what does this mean for retailers and businesses? Will such sophisticated chatbots bring added value to businesses in the short term or will the technology need more time to learn and be applied in a way that serves consumers and businesses without the fear of impacting brand image?

What are we talking about? Testing ChatGPT

The funny thing about ChatGPT is that the Association could ask it to write this exclusive for us, as many analysts and commentators did as a test this year. Unfortunately, the results from various tests and approaches were not quite as detailed as we hoped. We started out by first feeding it text from past IADS exclusives so the AI could capture the tone we typically use. From there we requested that the bot offer an introduction text sharing why department store leaders need to pay attention to ChatGPT and AI solutions. The result was an eloquently written paragraph of fluff listing the key highlights of ChatGPT for retailers: improved customer engagement and targeted product recommendations. Not a very insightful start, but remember we are talking to a machine, so we decided to dig deeper.

We then guided ChatGPT to list 5 specific areas that retailers have used AI in the past. The response was a little more detailed than before: personalization, pricing, demand forecasting, inventory management, and in-store navigation. And we followed up that question with what retail leaders should consider when planning to use AI in their future business. The response once again highlighted the benefits of AI from a customer engagement and product recommendation point of view, but the reply also came with warnings. These warnings included reminders that AI solutions are only a piece of the puzzle and AI models can have biases, stereotypes, and errors if not properly evaluated and monitored. Therefore, it is very important that companies use AI as a tool but not as a replacement for human interactions.

Where ChatGPT failed in our trials was in sharing specific examples and references. When it shared information, we requested sources of where the information comes from so we could read further, but the bot does not have access to search the internet (it finished its training in early 2022, which also provides some limitations taking current events into consideration).

Work smarter, not harder: AI as a personal assistant

AI (Artificial intelligence) is not a new concept to retailers as the whole purpose of automation is to increase efficiency and reduce costs. With such golden promises, smart retail leaders started to implement AI across their businesses with a variety of use cases from running inventory operations more efficiently to accommodating clientele in a more personalized approach. Department stores are especially versed in AI’s capabilities as retailers around the world have hired the power of AI to enhance their store experiences and capabilities in order to better serve their customers.

Pre-ChatGPT, department stores have harnessed AI solutions that offer inventory management, personalization, chatbots, visual search, marketing campaigns, product localization, analytics, virtual stylist services, and logistics. So what is it that ChatGPT can really bring to retailers that they already have not experimented with?

In its current iteration, retailers are hoping that ChatGPT can bring more intelligence to current chatbot functions that have already been put in place. ChatGPT has the ability to react in a more human-like way which can boost customer service capabilities and can free human employees from repetitive admin tasks. Outside of customer service, ChatGPT can help create product descriptions, website copy, employee notice emails, and company HR notifications.

It seems that embedding the AI capabilities of ChatGPT is where the trend is turning. Around the same time that ChatGPT was released, many other companies started to release similar AI functions within their existing tools and products. For example, Notion, is releasing a beta version of Notion AI which will help users with content creation. And Canva has also released Magic Write which offers an AI text generator. Such integrations can be an inspiration as to how department stores and retailers can use AI text generators to enhance product descriptions, marketing materials, and personalization campaigns to ensure all content is optimized.

When it comes to customer service, ChatGPT can be used to personalize the shopping experience for each individual customer by recommending products based on past purchases and browsing history. It can also be used to share important information with customers such as the status of their order, delivery details, and personalized promotions and offers. If used well, AI chatbots can increase conversions and reduce cart abandonment, and the more that the chatbot collects data over time, the more benefits it can bring.

Will chatbots impact retail jobs? The jury is still out

As mentioned, AI tools such as ChatGPT are able to harness large amounts of data and can be taught to mimic human responses and feedback. Such a tool could be very powerful for businesses, giving them the opportunity to optimize their human teams with AI tools. Giving employees tools that can automate their daily jobs and that can increase their productivity should in turn reduce the number of full-time employees, right?

According to the World Economic Forum's "The Future of Jobs Report 2020," there is a potential for 85 million jobs to be displaced by 2025 thanks to AI. But the same report shares that another 97 million jobs could be created as well. This means that while AI might replace some jobs and roles, it is more likely that it will shift the skills of workers that are impacted by such changes. The CEO of OpenAI warned that there is still a lot of progress to be made on the robustness and truthfulness of what ChatGPT can offer, so companies should not base mission-critical projects on it at this time.

All good things come with time: ChatGPT is still in its youth

Based on tests conducted by the IADS team on separate occasions and with differing goals in mind, we can conclude that in its state as of early 2023, ChatGPT still has a lot of ‘learning’ to do in order to offer more specific and relevant information. But what the tool promises is even greater than what it currently lacks, therefore innovative and patient users have been able to learn how to manipulate the tool enough to reap the benefits. Most use cases shared thus far have centred around content creation, SEO implementation, code generation, and personal assistant-type manual work coverage.  While ChatGPT can help bring human-like responses to customer service functions, consumers are still expecting real human empathy behind responses and not bot-generated speech. This is going to be a major hurdle for retailers to overcome in the short-term.

Currently, there are still a lot of red flags about ChatGPT that might make retailers weary to adopt the solution as it is now. Unlike other chatbots that will admit when it cannot answer a question, ChatGPT has been trained to give a confident response to almost any request even if the information is false. AI tools are limited to the information that it is fed and can result in outdated information or even biases that could negatively impact the brand image of a business. This is why those that are ready to use AI tools for customer-facing applications need to be sure to have a human audit.

Despite its many flaws and warning signs, AI tools are the future, and those that shy away from implementing them will be left in the dust. Innovative companies must respond to disruptive products in order to stay relevant. In the beginning, there will be tradeoffs such as accuracy, but in return, companies can benefit from lower costs, speed, and simplicity that the tool can bring to their businesses. Also, the good thing about investing in AI early is that the more information that it is fed over time, the more accurate and valuable it becomes. While ChatGPT lacks critical thinking, creativity, and strategic decision-making, it makes up for these flaws by improving efficiency and productivity through its automation features.

What’s next for retailers? Learning from big tech’s response to ChatGPT

ChatGPT is one of those innovative technologies that will inherently change the tech landscape. Companies such as Google and Microsoft have had to completely rethink their AI strategies to ensure that they will not be left in the dust as newer AI native solutions pop-up to steal some of the market share. As big tech players have been the first to act, it will be important for retailers to note what changes are on the horizon.

For example, big tech players are having to consider how AI solutions such as ChatGPT can plug into their current line of products and operations. They will need to make swift decisions and take risks to implement the technology as a basis for new products or as an integration for existing ones and to claim their position in the market. According to LionTree LLC, an investment and merchant bank that focuses on the global digital economy, so far big tech has taken four major approaches when implementing their AI strategy. Microsoft has partnered with OpenAI to integrate key production into their products, Google has invested in R&D to be able to leverage AI solutions, Apple has focused on localization in order to offer AI software for Apple hardware products rather than on the cloud, and Amazon is betting on the infrastructure play as they sell GPU compute power on AWS and have invested in assets within autonomous vehicles and IoT devices.

As large organizations start integrating ChatGPT into their business foundation and establishing their position in the market, retailers need to be doing the same. ChatGPT and AI can be very powerful tools that can help large retail businesses, especially department stores, provide even more unique services to their various clientele from loyal clients to newly converted GenZ customers. AI solutions only get ‘smarter’ as more information is fed to them, therefore the sooner it is implemented, the better the output.

But despite the various promises that ChatGPT and AI can bring, companies that are willing to integrate such revolutionary and innovative technology into their business need to be careful that bots do not completely take over the human experience. While advanced technology can help free human workers from redundant tasks, it is very important to consistently audit them to be sure the built-in bias and unknowns do not negatively impact the overall brand image. To sum it up: proceed, but proceed with caution.

Going further on ChatGPT:

Companies tap Chat GPT to make their chatbots smarter

How retailers can use Chat GPT

Credits: IADS (Mary Jane Shea)

What: GDR reviews the examples of Starbucks, Nike and YSL and how they use NFTs to consolidate their loyalty programmes.

Why it is important: NFTs went below the radar from their 2022 fame, with Web3 is revolutionizing loyalty programs for brands by leveraging tokenization and blockchain technology to create more engaging and rewarding experiences for customers.

Digital tokens such as non-fungible tokens (NFTs) are being used to represent ownership of digital assets and access to perks in loyalty programs, with utility NFTs bridging the physical and digital worlds.

Web3 also offers advantages for building loyalty through gamifying interactions, tracking user engagement, and enabling new community interactions through decentralised autonomous organisations (DAOs).

Starbucks, Nike .Swoosh, and YSL Beauty are among the brands leveraging Web3 for their loyalty programs, with Starbucks offering interactive journeys and access to exclusive events, Nike .Swoosh building a virtual community with co-creation opportunities, and YSL Beauty using NFTs to enhance the online shopping experience and support a non-profit organization.

Web3 loyalty programmes, an introduction 

What: Shein’s meteoritic ascension was the tree hiding the forest: more are coming now.

Why it is important:  A new breed of disruptors are coming for department stores’ businesses and customers, and this time, with digital embedded at the core of their model. It is high time that department stores review their value proposition and unique selling proposal in order to limit the potential damage.

Chinese e-commerce companies Shein and Temu are expanding their operations to international markets such as Australia, New Zealand, and Latin America.

Shein is currently hiring for various positions in Mexico, Brazil, Belgium, Ireland, and Turkey. It has been valued at $100 billion and surpassed Amazon in terms of shopping app downloads from US stores. However, Shein is facing scrutiny for its sustainability practices in the US.

Meanwhile, Temu, owned by Pinduoduo parent company PDD Holdings and headquartered in Boston, is expected to launch in Australia and New Zealand this week, with a commission-free offer for sellers joining the launch.

Shein and Temu both offer low-priced goods through an app, and they are spending heavily on marketing to build brand awareness in multiple markets. Temu enables Chinese vendors to sell directly to shoppers without local infrastructure, while Shein is synonymous with cheap fast fashion. Both companies aim to support the Chinese economy and manufacturers by selling low-cost goods to global consumers. Experts suggest that Temu’s business model may shift more towards replicating its social commerce-oriented community group buying success in China, while Shein plans to expand into a marketplace-type business. As both companies grow and become more popular, they may face more scrutiny related to security, data privacy, and national security issues.

How Temu and Shein are planning expansion beyond the US 

What: Inclusion has been often seen as secondary compared to the environmental issues, but actually its importance is the same in terms of productivity and employees’ commitments.

Why it is important: Through a dedicated, visible and fully supported policy, employers can significantly improve happiness at work, reduce exists, and can advertise their employer brand to be even more attractive.

When facing the topic of sustainability as a whole, many companies consider it from the angle of the environment (CSR) and people come second. Some markets have been taking the leadership when  it comes to inclusion and equality, usually for historical reasons, such as the US. Even today, inclusion can be seen as a secondary topic or an ‘exotic’ one by non-US employers.

The Boston Consulting Group advocates that this topic (summed up by making sure that all employees feel valued, respected, and therefore are motivated), is actually central and benefits not to a minority but all employees.

DEI (Diversity, Equality and Inclusion) programs, for instance, increases happiness for both women and men, showing that such programs usually have influence beyond the group it targets. However, it is difficult for companies to actually measure the impact of their DEI policies, which is why the BCG has developed a new index, BLISS (Bias-free, Leadership, Inclusion, Safety and Support), to model the impact. According to them, an increase in the BLISS score can increase happiness at workplace by 30% and halve exits.

Of course, this requires full support from the leading team which should also reflect this approach to diversity in its own structure.

HR: Why Inclusion is no longer a nice to have 

What: Just like other industries, retail is discovering ChatGPT as a new way to do business.

Why it is important: We are at the dawn of the use cases, and for now, they are somehow simple. However, AI has the potential to bring deep revolutions to the business.

ChatGPT is an artificial chatbot that can answer consumer questions across various topics and store knowledge to apply it to related problems, recalling conversations and context.

Retail companies like Shopify, Instacart, and Carrefour are using ChatGPT to provide product information and make recommendations. ChatGPT has the potential to improve customer experiences by functioning as a personal shopper, AI event planner, robot dietician, and aiding parents of growing children and people with disabilities.

However, despite its capabilities, the journalist argues ChatGPT cannot replace the emotional intelligence and understanding that human interactions provide. Retailers and brands should focus on ensuring the algorithm identifies customer needs and understands the reasons behind their queries, rather than just selling products.

ChatGPT Is Getting To Know Retail. Will Shoppers Be Happier? 

What: Coresight makes a comparison of fast-fashion giant Shein and the new marketplace on the rise, Temu.

Why it is important: China is increasingly giving birth to international giants with business models mixing industrial capabilities with a digital core, who disrupt the retail industry.

Two Chinese e-commerce players, Temu and Shein, are attracting significant attention from consumers and retailers alike. While Temu is a marketplace that utilizes a consumer-to-manufacturer (C2M) model, Shein is a traditional retailer.

Shein uses a real-time fast-fashion model and adds about 6,000 new items every day. The company has started testing an e-commerce platform model in Brazil, which could help it diversify its revenue sources. Temu leverages the C2M model to provide fast and inexpensive services.

Both companies ship individual orders from China, but Shein is expanding its distribution centers in North America to get its products to customers faster.

When it comes to sustainability, Temu claims to offset carbon emissions for every delivery made, while Shein has invested $15 million in upgrading factories and launched a resale platform to appeal to Gen Z consumers. Both companies are expected to pursue sustainability initiatives to address concerns about the environmental impact of their products.

Comparing Shein and Temu 

What: Harvard Business Review presents a framework to help define the position and responsibilities of the Chief Sustainability Officer.

Why it is important: The report defines and outlines eight critical tasks for CSOs that allows the  C-suite to understand where the role fits into the overall organization.

The eight tasks are:

1. Ensuring regulatory compliance.
2. ESG monitoring and reporting.
3. Overseeing the portfolio of sustainability projects.
4. Managing stakeholders’ relationships.
5. Building organizational capabilities.
6. Fostering cultural change.
7. Scouting and experimenting.
8. Embedding sustainability into processes and decision making.

In order to properly align the role with all eight tasks, the CSO needs to spend time covering each item, rather than just focusing on one such as reporting or compliance. Each piece is just as important as the next.

The tasks listed above can be overwhelming, so it is essential that the CSO learns to prioritize gaps and weaknesses and understands how to tackle and prioritize the efforts. A spider-graph approach can help communicate the evolution of the CSOs tasks with the executive team to ensure everyone is aligned.

The 8 Responsibilities of Chief Sustainability Officers

What: Live-streaming is poised to become a significant part of the e-commerce business by 2026.

Why it is important: Coresight reviews the set of opportunities for US retailers, which might be very well the same for companies outside of the US.

Livestream shopping, which is especially relevant to Gen Z, is estimated to grow in 2023 to $32b globally, and represent 5% of total e-commerce sales by 2026.

The key insights of the reports are the following:

-    As retail companies are increasingly rethinking the role of shoppable livestreams in their overall business, strategy, they will use emerging retail tech and a variety of livestreaming formats to meet consumer demand and deliver personalized experiences.

-    Brands and retailers with successful livestreaming campaigns understand the importance of consistently scheduling streams and meeting consumer demand for interactive livestreams, discounts and giveaways.

-    While various retail verticals have adopted livestreaming, educational content and transparent information remain key strategies to maintain loyal customers for companies across the retail space.

-     Marketers are looking to capture customer testimonials and partner with industry experts and knowledgeable influencers to provide consumers with authentic and informative cont

Here are the 10 key trends shaping livestreaming e-commerce in 2023 in detail, within 4 recommendations:

-    Recommendation One – Utilize emerging technology:

o    Trend #1 – Companies will use multiple platforms to reach more viewers: US consumers use an average of 2.5 platforms to watch livestream shopping events, and retailers will respond by tapping into multiple channels

o    Trend #2 – Effectively meet target consumers by analyzing user data: 46% of surveyed companies had collected and analyzed data from livestream shopping events to generate detailed customer insights

o    Trend #3 – Livestreaming can support personalization strategies: 26% of surveyed companies said one-to-many livestreaming events were “most appropriate” for their audience, while 3 in 10 livestream viewers preferred the one-to-many format

-   Recommendation Two – Promote livestreaming programs:

o    Theme #4 – Regular scheduling encourages return viewers: Two-thirds of all surveyed retailers hold livestreaming events more than once a week

o    Theme #5 – Incentives will drive sales: 36% of livestream viewers will watch a livestream to participate in a product giveaway or challenge

-    Recommendation Three – Transform content to what consumers desire:

o    Theme #6 – Livestream shopping will expand to new retail verticals: In the past few months, home improvement and grocery have seen accelerated consumer spending via livestreams

o    Theme #7 – Livestreams will include more educational content: Of the five key factors determining the success of a livestream, retailers found that educational content has the biggest influence on customers

o    Theme #8 – Consumer demand for transparency will increase: 47% of respondents expect to see more industry experts’ reviews or customer testimonials during livestreams moving forward

-    Recommendation Four – Partner with talent to expand online communities:

o    Theme #9 – Authentic conversations will drive organic user growth: Customers w/ authentic testimonials are the top-rated type of livestream hosts, per 42% of all respondents; They’re particularly popular w/ Gen X

o    Theme #10 – Livestreams will create new online communities: As consumers demand more exclusive livestreaming formats, brands and retailers are likely to work with content creators and community leaders to grow tight-knit groups of mission-driven consumers who follow both the brand.

10 key trends shaping livestreaming e-commerce in 2023