What: According to Visa, consumer confidence was on the rise at the end of 2022.

Why it is important: US customers’ morale is going to stay as important in 2023 as it was in 2022, especially for European department stores.

According to Visa, the consumer confidence index has been at its highest point in 8 months last December, both when it comes to present situation and future expectations. This positive result was fuelled by the decrease of gas prices (-12% vs. November and -34% vs. June) as well as an easing inflation.

As a consequence, purchase intentions remained steady for autos but softened slightly for homes and major appliances. Holiday spending increased marginally from November. However financial concerns have made their way into holiday spending plans, with consumers taking on debt as well as altering spending plans based on their pricing perceptions.

US customers confidence remained positive for 2022… 2023 is another story

What: Ports evolution tells where logistics businesses are looking at: East.

Why it is important: Department stores are heavily relying on logistics to get their goods on time. A shift in the traditional relationships between logisticians and hubs will impact the way they operate and force them to adapt.

The Tuas Mega Port in Singapore is a vision of the future for ports worldwide, as it uses technology to meet demand in the face of obstacles to new developments. It is the first of 21 berths planned for completion by 2027, with an estimated cost of $15bn. PSA International, the Singaporean owner of the port, expects it to be the largest container port in the world when completed in 2040. The development is part of a larger trend in the logistics industry, which is betting on the rising importance of Asia, particularly South-East Asia.

The IMF expects the region's five largest economies to be the fastest-growing bloc in the world by trade volumes between 2022 and 2027. However, the expansion of seaports is becoming more difficult worldwide as space in the right locations is scarce and environmentalists are becoming more vocal in opposing new developments. One solution is to make existing logistics networks more efficient. Another is to reclaim land from the sea, but this is expensive. Some ports are choosing to build upwards, using automated cranes to stack containers higher. Another option is to build elsewhere and consider the options of “dry ports”, i.e. load the goods into containers well in advance and load them on ships as they arrive. For instance, a network of 13 dry ports has been built in China, with some being 2.400 km away from the sea.

According to The Economist, this points out the shift of gravity of the ports business eastward. Asia's trade has become more multidirectional, and Asian economies have become large markets. The logistics industry is investing in the region, with a focus on warehouses and distribution hubs. Global manufacturers are looking to diversify production away from China and India is likely to see a boost. Shipping giants are also investing in the region, with a focus on intra-Asian trade.

Investments in ports foretell the future of global 

What: Even though the global context is very tense, luxury does not seem to feel the pinch.

Why it is important: The richest customers have changed in nature and behaviour. Department stores have noticed and are all adapting their strategies. But can this last if luxury brands decide to go solo?

A new study by Bain & Company shows that while retail sales in general have been falling, and the stock market was down by 20% last year, spending on luxury goods and experiences actually grew by roughly the same amount in 2022, as wealthy individuals unleashed their animal spirits. The data challenges much of our conventional wisdom about luxury spending and the rich in general.

The boom in the luxury market was driven almost entirely by Gen Z and Y, who dominated the personal goods market, and it was not driven by China but by the US, particularly New York. Luxury experts say that there’s simply been so much wealth created over the past two decades that even a 20% stock market price correction is a blip for the top 5% of the market. And it is this top 5% that represents 40% of overall luxury market sales.

Wealthy people have more time in which to spend their money, since they now live roughly a decade longer than their low-income counterparts, thanks to better healthcare, diet, nutrition and rest. Additionally, there are more of them than there used to be, because of the continued growth of an asset-owning class in developing countries. The growth of a secondary market and lack of worry about conspicuous consumption are additional contributing factors.

While the lower 80% of luxury consumers may fall off as inflation increases, the world's richest are spending more.

Luxury boom shows the staying power of the ultra-rich 

What: Returns in e-commerce are killing the retailer margin, and many operators think that they have gone too far in facilitating customers’ lives at no cost.

Why it is important: E-tailers are now starting to follow the example set by many brick-and-mortar operators and charge for returns. This might help change customers mindset and habits, but for the good or the worse?

In the fashion industry, implementing paid e-commerce returns has become necessary for some players since the Covid-19 pandemic. In France and the UK, where respectively 21% and 33% of fashion sales were made online in 2021, return rates were around 20/30% before Covid while Germany was already around 50% due to its historical culture of mail order. Today, return rates in Germany have hardly increased but exploded in France and the UK, where they have increased by 10 to 15 points compared to 2019. This increase in returns is also linked to a change in the categories of products (fashion is more size-sensitive than joggings).

This change in policy comes at a time when online fashion sales are slowing down, as with Boohoo and Asos. The costs are such that for low-value items, it is less costly for the e-commerce company to offer the item rather than proceed with a free return. A majority of Shein returns end up in landfill. This is also the case with Amazon.

If they decide to ask for payment to return goods, some retailers highlight the environmental argument, so that the billing will be less painfully perceived by their customers. But for retailers like Uniqlo, Zara, H&M and Etam, who have both physical stores and an online presence, charging customers for returns seem to be a profitable strategy. Due to their physical stores, they can offer a free alternative: returning the item in-store, which generates foot traffic. This is crucial at a time when in-store traffic is continuously decreasing, plus obviously generates additional sales (between 40% and 60% of consumers leave the store with additional items).

Anyways, the equation does not work. In Europe, the average cost of returns charged to customers is on average between €3 and €5. In France, the average is €3, with variations: the cost of a return is €0.95 at H&M and €5.99 at Levi's. According to a Sendcloud study conducted among 10,000 European consumers in 2022, for an order of €15, customers are willing to pay €2.90 in return fees. This is far from covering the actual costs (€6 to €7).

In spite of all this, e-retailers are starting to follow suit: Boohoo now charges €3 for returns, and it is expected that Asos will also change its policy as sales are slowing down.

Pure Players are increasingly asking customers to pay for returning products (IN FRENCH)

What: AI is transforming the retail industry in many ways, from supply chain operations to in-store operations to the customer experience.

Why it is important: Even though the report might look a bit optimistic, it is a refreshing reminded of everything which is currently on the market and designed to optimize retail operations. Articulating everything and making sure all systems works and interact together will be the first major challenge, the second one being to make sure this makes economically sense.

According to Coresight Research Analysis, global revenues generated by AI for retailers will exceed $38 billion in 2030, up from an estimated $8.5 billion in 2023.

Contactless commerce will be prevalent in brick-and-mortar retail through 2030, thanks to service bots, personal assistants and payments that enable contactless and personalized shopping experiences. AI will prove central when it comes to data analysis and store merchandising adaptation in real-time, including reorders but also in-store activity and how to improve product display. Coresight considers that this will be a great margin contributor margin (which will be needed to compensate for the cost of equipment).

Virtual agents and robots will be able to handle most store operations autonomously by 2030. Additionally, nearly every aspect of the supply chain will be impacted by robotics and AI by 2030, with significant benefits in warehouses (fulfilment made by robots, use of IoT, RFID…), in-store inventory, loss prevention, and the last mile (autonomous vehicles).

AI is also automating interactions between humans and machines, and all activities in the metaverse (including the embodiment of virtual idols such as Lil Miquela). It is expected that 95% of interactions will be powered by AI in 2025. Integrated with VR and AR technologies, AI is providing customers with smooth and seamless interactions with AI assistants, which are not possible in today's world, including a true capability to interact in natural language and being able to respond to sentiments and feelings, well beyond written communication (i.e. an app or a website could interact with a customer in the same way than a sales associate answers questions today in the store). It is expected that 76% of US customers will use AI-enabled voice activation to make purchases in 2030, up from 17.8% today.

Personalization and the overall customer experience will greatly benefit from improvements in AI over the next 10 years. Artificial empathy will allow retailers to build fully complete customer profiles, providing them with highly personalized experiences thanks to the combination of all customers’ elements (e.g. connected home devices).

Although AI algorithms today are still crude and not fully capable of seamless interaction with humans, they are advancing at a rapid pace and will impact the retail sector in a meaningful way. It is important to note as well that, even though all these technologies already exist and are available, integration at scale for full autonomy within stores will be expensive and painful.

The future of AI in Retail 

What: Wunderman Thompson explores 100 trends that they see as noteworthy for 2023.

Why it is important: While many are related to brands’ problems, some might also very well be interesting for retailers.

Wunderman Thompson reviews, in an extensive 226-pages report, the trends to be watched, divided into 10 categories: culture, tech & metaverse, travel & hospitality, brand & marketing, food & drink, beauty, retail & commerce, luxury, health and work.

Among the various trends spotted, some of them are worth IADS’ members’ attention:

-    In culture, the ‘next-gen ownership”, or how digital platforms own the membership rather than renting a social experience. In other words, they propose a new way of allowing brands and consumers to interact with digital goods, services and content,

-    In travel & hospitality, the “urban sanctuaries”, or how hospitality brands are designing luxury spaces at the heart of cities to help locals and tourists to refresh and recharge. It would not take much to see such spaces open in department stores,

-    In brands & marketing, the notion of “virtual ambassadors”, already experienced very successfully by Brazilian retailer Magazine Luiza for twenty years, with Lu boasting more followers that any other virtual influencer on Earth…

-    In the same category, the “earth as stakeholder”, following what Patagonia did at the end of 2022, and which might, as some stage, become a must-have for any brand or retailer willing to prove its commitment to sustainability,

-    In food & drink, the “clubstaurant” trend is noteworthy, providing ultra-elite dining experiences. Given the general trend within department stores amplifying and upping their F&B offer, here again, this could be a way of differentiating.

-    In retail & commerce, the “multiversal design” is also important, as store designers need now to take into account both online and offline, and make sure that both dimensions are well-articulated in a meaningful way,

-    In luxury, the “wellness guilds” is a clear echo to the initiative launched by Galeries Lafayette on 3,000 sqm last September 2022,

-    In the work section, the notion of “workplace wellness” is seen as a way to attract and retain talent, by going beyond generic wellness programs.

Trends and changes to watch in 2023

PRINTABLE VERSION HERE

Introduction to Thirteen Lune

IADS interviewed one of the co-founders of Thirteen Lune, Nyakio Grieco, to understand more about the inclusive e-commerce beauty marketplace. Grieco created her first beauty brand 20 years ago to celebrate the sophistication of Africa in premium beauty, inspired by the teachings of her Kenyan grandparents who shared their beauty secrets with her. During the racial reckoning of 2020, she found herself and many other founders of color on various lists celebrating Black beauty founders.

This pushed her to start researching these brands and founders, which then led her to realize that many of these brands had very little distribution or representation in large retailers. This is what led her and her co-founder Patrick Herning (founder of plus-sized fashion brand 11 Honoré) to create Thirteen Lune to be the first of its kind truly inclusive retail beauty platform. The company has a 90/10 rule: 90% of all the brands carried are created by people of color around the globe who make products for people of all colors, and 10% of the brands are dedicated to fostering allyship. Thirteen Lune is deeply committed to building generational wealth in Black and Brown communities while helping to make the beauty industry more inclusive.

A catalyst for change

IADS: What has been the catalyst for change in the beauty industry that has led it to focus more on inclusion and diversity? How do you feel that brands and retailers are adapting their business to put inclusion at the core of their decision-making process as well as their investments?

*Nyakio Grieco:* The catalyst for change is making the industry more equitable. People of color spend billions of dollars within the industry and deserve more shelf space and products that better reflect their needs on shelves.

I can only speak on behalf of what we’re building at Thirteen Lune and at our Thirteen Lune store in stores at JC Penney. Our business is built on the mission of a more fair and equitable representation for all in beauty. That is at the core of what we do, we deliver beautiful, non-toxic beauty brands to all, especially a consumer who has been long underserved.

Private Labels

IADS: You launched a new private label collection in Q2 2022. Can you share more about this collection? What was the inspiration? Are you doing anything different or innovative with your private label offer?

NG: Creating Relevant: Your Skin Seen is a culmination of 20 years of experience as a beauty founder. I created this brand, not only to evoke joy at a time of much-needed healing but to better serve all with formulas that don’t leave anyone out. Through building Thirteen Lune I was able to identify white space in the market where we could better serve consumers in regard to science-led innovation married with plant-based clean ingredients that provide efficacious actives at safe levels for all skin.

Being a Black female founder, I’ve experienced many wins but also extremely soul-crushing challenges. Mostly due to lack of access to capital, support from partners, or at shelf including opportunities to distribute successfully in large retailers. Relevant: Your Skin Seen is a testament to the fact that when you give a Black female entrepreneur the autonomy, support and runway to create - she is able to create the brand of her dreams dedicated to serving all!

Relevant is giving me the opportunity to truly build a globally conscious brand celebrating beauty rituals from around the world. I look forward to expanding our distribution globally to celebrate many cultures that have inspired the creation of these products. So many ingredients and beauty rituals come from the most marginalized parts of the globe. Relevant: Your Skin Seen is a manifestation of sharing and giving back to the communities that inspire this journey.

Empowering Allies

IADS: Thirteen Lune has created a place for brands to diversify their product offer to be more inclusive, labeling such players as Allies. How do these partnerships come to light? Are the brands typically approaching you first for guidance?

NG: We define an ally brand as a conscious beauty brand that was dedicated to empowering all long before 2020. They were considering everyone in their formulations, both in front of and behind the scenes, at the executive level in their companies, and in their campaigns modeled their commitment to moving the needle toward positive change in this industry. In the beginning, we invited ally brands to be a part of Thirteen Lune who displayed a non-performative commitment to change within their companies. Many of our early ally brands, Goop, Sara Happ, Olaplex, etc have been true allies to me personally in my 20-year journey. Now we get calls from major ally brands every day wanting to join our mission and it gives me enormous hope for our future as an industry. Thirteen Lune provides our Allies with an authentic space to reach a diverse consumer base to further their offerings to a range of eager customers who truly appreciate being seen and considered.

Thirteen Lune x JCPenney

IADS: Thirteen Lune has started to open physical retail locations in partnership with a US department store (JCPenney). How did you decide to start offering products in physical stores and how has this been working as a strategy for the company?

NG: From day one, my co-founder and I built Thirteen Lune to be a full omni-channel business. Even though we are a company that was born on Zoom while we were all in lockdown, we knew that physical retail would come back strong. Thirteen Lune is committed to meeting customers wherever they show up to have their beauty and wellness needs met.

We were connected to JCPenney only three months after the launch of thirteenlune.com. We were so thrilled to find that from day one we were completely aligned in our shared mission of hyper-inclusion and truly serving the consumer to feel seen, heard, considered, and valued.  It was love at first sight and it’s been amazing ever since. Partnering with JCPenney in their reimagined JCP Beauty space allowed us to bring brands to our Thirteen Lune stores within JCP to flourish and reach a wider audience.

IADS: What have you learned so far since partnering with JCPenney?

NG: I’ve learned that consumers want to experience discovery in their retail settings and that staff and consumers truly buy into people before they buy into products. Consumers are smart and want to spend their money for good. I believe the success we are experiencing is due in large part to the fact that the founders behind all of the incredibly efficacious and gorgeous products we offer at Thirteen Lune, are amazing authentic founders with rich stories to share and who deserve success.

IADS: Do you see physical store formats being a major part of the business growth going

forward?

NG: Yes, 1000%! Our plan is to have a global presence with many Thirteen Lune stores, coming soon! Any chance that we get to bring thirteenlune.com to life in a physical setting is a goal. The greater the presence we have globally, the more consumers we get to serve in a truly inclusive format.  As mentioned previously, we deliver on discovery and outside of our site which is truly a storytelling platform, we know that we have the opportunity to bring that experience to life in stores worldwide.

Thirteen Lune as an incubator

IADS: Thirteen Lune has now taken on a new role as becoming an incubator and accelerator for inclusive and diverse beauty brands. What does the process look like for these smaller brands once you onboard them?

NG: Incubating existing brands into Thirteen Lune and collaborating on new brands with diverse founders is on the horizon, and I can’t wait! We come from a place of support, mentorship and guidance through the retail process. It was so important to me to create the retailer I always wish I had with my first brand. Even when I got to shelf in some retailers, not having the capital support or mentorship needed to win at shelf truly held me and my brand back. I spent many sleepless nights wondering how I could afford to stay on shelf in those moments. I am very proud that we are committed to making sure every brand we onboard at Thirteen Lune, both smaller and bigger brands, has the support they need to focus on scaling their businesses and not being held back because of lack of said support.

IADS: Speaking of innovation, are there any exciting and upcoming trends that you have been noticing in the beauty and cosmetics space?

NG: Yes, the beauty of inclusion! If you are a large strategic or retailer and are not already working diligently to serve diverse founders and brands or aren’t truly looking at this mission as a necessary investment and proposition now, it might be too late. We all know how diverse this world will look like the majority in the not-too-distant future. If you as a corporation are not looking at the diversity of Gen Z and generations to come now, the future consumers who are already deeply committed to sustainability and diversity, you definitely should be!

What’s next for Thirteen Lune?

IADS: Thirteen Lune is starting to expand into new countries and regions. Can you share where the company is going and what opportunities you have found in these markets?

NG: While I can’t officially announce where we will be next, I am so thrilled about what’s to come this fall!

IADS: Are there any other target markets that are not on the roadmap that you would like to

reach? If so, what are the reasons you would like to enter these markets?

NG: Honestly, we’re exploring all major international markets. Personally, I see a huge opportunity for us in Europe, Southeast Asia, Dubai, Korea, and of course as a first generation American of Kenyan descent, would love to see a future presence in East Africa, South Africa and territories in North Africa./nbsp]

IADS: How will the company operate internationally? Will it be focused on e-commerce,

physical stores or take an omnichannel approach?

NG: In the same way we envisioned a full omnichannel approach here in the U.S., the same stands true for our international expansion. Whether it be through joint retail partnerships or stand-alone stores, we look forward to expanding our reach and mission globally.

IADS: Is there any other exciting news you would like to share about Thirteen Lune’s

projects and activities in the near future?

NG: I’m so excited to continue to release more Relevant: Your Skin Seen products across various categories, expanding our global distribution, and launching more portfolio brands under Thirteen Lune coming in 2023.

I’m also ecstatic about bringing these incredibly talented founders and brands we carry and are onboarding every Tuesday at Thirteen Lune on this global journey with us. This is what happens when you take your pain, and turn it into purpose ….. you get to build an amazing beauty business!

Credits: IADS (Mary Jane Shea)

What: McKinsey reviews the role of the Chief Transformation Officer, an increasingly growing role in CPG and retail companies.

Why it is important: The IADS tackled some of the issues raised in this article in its 2021 White Paper about organisations. It is all about finding the right balance between organisational efficiency and avoiding adding layers and complexity into organisations.

CPG companies are under pressure to quickly adapt to new market conditions and transform both their business model and operations. They need to transform, and this is not just a fancy word, but a harsh reality requiring to build new capabilities which are foundational. McKinsey has polled 40 CTOs from the CPG industry in order to understand their role and their scope.

23% of them report to the CEO, and 86% came in 2020 or later. Since this is a new role, its scope is inconsistently defined across the board. Some have very specific finance goals, while others have broader targets to achieve, including a change in culture for instance. The role is challenging as the CTO “owns nothing but is accountable for everything”. McKinsey suggests to approach the role with 3 archetypes:

-    CTOs are responders (to a crisis, a setback) and triage, stabilize the business, by enabling rapid reaction forces,

-    CTOs are revitalizers, by adding emphasis on sustained and long-term change.

-    CTOs are reinventors, and contribute to shifting the business model.

While those archetypes are clearly defined (and synthetised below) the roles and profiles might significantly differ from one company to another.

McKinsey identifies the following skills for successful CTOs:

-    Has a business acumen,

-    Is able to think outside of silos,

-    Can build trust and respect,

-    Is curious and humble,

-    Is confident challenging the status quo,

-    Brings out the best in others,

-    Keeps the organization’s energy up.

Of course, full support from the CEO is expected and this also includes the possibility for the CTO to engage all employees.

![McKinsey

Meet the newest member of the C-Suite: the Chief Transformation Officer 

What: In the US, malls are increasingly injecting high-end food operators in their retail sections in order to generate interest and spread traffic.

Why it is important: Department stores have taken this road a few years ago, but now, they might have difficulties to convince the top players to join them, if the latter have the possibility to go big and direct in malls offering them AAA locations.

Specialty food retailers and cafés are increasingly going higher-end and for that reason, tend to favour mall locations over food courts in the US. As a luxury cake brand puts it, their idea location would be between Louis Vuitton and Hermés, and not near a Subway restaurant. This trend is favoured by the fact that mall owners see F&B as a way to draw people in and differentiate themselves from the competition. As a consequence, they try to lure in influencer-owned restaurants, celebrity chefs and luxury food brands, which means giving these newcomers retail locations, possibly and paradoxically at the expense of the good old food court in the very same malls.

This is a way for developers to make sure that the whole mall becomes interesting again, by dotting it with locations worth to be checked out by customers, including the younger generations. In some ways, while in the past retail supported for dining category, the trend tends to be the reverse these days.

Food courts are dying, but mall food is thriving 

What: Business of Fashion explores how different tools and services can help fashion and beauty industries prevent financial loss caused by abandoned carts by making checkout frictionless both online and in-store.

Why it is important: Brands and retailers need to optimize operations around shifting shopping behaviours by using technologies that eliminate checkout steps, reduce financial and psychological barriers to purchase (such as Buy Now, Pay Later services), and reformat in-store checkout through RFID tags.

When used well, these tools help retailers convert more browsers of their sites into buyers and

create a better UX that helps to convince shoppers to return for future purchases as well. This is paramount as consumers are growing more cautious due to economic and geopolitical pressures causing businesses to compete for every purchase from cash-strapped consumers, adding to the already tough conditions they face from data-privacy measures that have made digital advertising more expensive and returns on spend harder to track. Coresight Research, an advisory firm specialising in retail and technology, recently found that US online retailers are losing between USD 111 billion and USD 136 billion in sales due to a less-than-optimal checkout.

While the case study’s guidance largely focuses on US and European shopping, the lessons can be applied globally to improve overall performance and customer loyalty.

BoF case study: removing friction from commerce

What: The FT reviews the hurdles experienced by online retailers in a context where customers are ‘window-licking’ websites.

Why it is important: Increasing conversion is not about prices, but user experience seen and reinvented through really useful new perks, though to facilitate the customer’s life.

The Financial Times columnist reviews the various attempts from e-retailers to convince consumers to close their deals and confirm their purchases, after having browsed their websites without finalising their buy. This goes through various ways, from reminders sent via email, to discounts, or offers of specific curation.

Now that e-commerce has flattened (after a rise during lockdowns), it is increasingly difficult for e-retailers to boost online revenue. There are two options. The first one, less appealing, is to increase advertising investments in order to bring more traffic. The second one is to increase conversion from traffic, which, according to the journal, can not go through good deals (which kill margins) but through improvement of the online experience. The example of Hilton is given: customers are able to use small icons to search for specific amenities in their rooms, which allows to have 30% of visitors ending up booking a room.

However, as the article points out, steering the customer to the right item and closing the deal is not the same thing, and a complicated purchase and confirmation process might repel many customers.

Closing online deals for e-retailers is increasingly painful 

What: The WRC, a partner of the IADS, has interviewed with 21 experts and retail leaders to identify the top 3 priorities in the sector for 2023.

Why it is important: Uncertainty is here to stay, and this creates a wide variety of views on what’s in store for 2023.

The president of the World Retail Congress (WRC), Ian McGarrigle, is looking back at a tumultuous year and asked 21 experts for their views on what 2023 has in store. Interestingly, the notion of “uncertainty” was one of the most used words across the panel, as next year is not supposed to be much different on that aspect.

Overall, the top 3 priorities that can be synthetised are:

-    Sustainability, its costs and the new upcoming regulations,

-    Teams: how to attract and retail talents,

-    How to serve customers already under pressure in an inflationary context, by reviewing the value of what’s being sold and the customer experience,

Regionally, some experts also mentioned watching closely the Mainland Chinese travellers’ behaviour, how to implement and deal on a long-term basis with new energy-saving processes, use tech to gain productivity points. The IADS contributed to this issue with an article on the acceleration and uncertainty, as well as a special report on the Christmas windows in department stores (visible here as the PDF does not display the pictures).

World Retail Congress end of 2022 Report

What: McKinsey polled a number of CEOs to identify the top 6 strategic issues for 2023.

Why it is important: Even though the context is challenging, it is all about being able to keep the mental space enabling to think differently, in order to identify and cultivate new opportunities, engage the teams. This supposes to be able to understand what tech can do to help and can not, especially when it comes to maintaining the course to net-zero.

McKinsey acknowledges the fact that the business world has considerably changed in the course of 2 years, leading to an increased difficulty in the management of complex organisations. Time management and prioritization are key for CEOs and the consulting company has polled a number of them in order to understand what the 6 priorities are (or skills to acquire) for this year:

-    Resilience, in order to face any potential disruption, survive in a downturn and regain ground in the next cycle. It is a question of being able to review much faster the six dimensions of resilience: finance, operations, technology, organization, business model and reputation.

-    Take courage, with a leadership supposed to be both prudent and bold, in order to play offense and defense at the same time. Postponing initiatives and scaling back plans might seem tempting, but McKinsey sees them as wrong moves. It is all about managing the day-to-day business but with the next decade in mind.

-    Be able to spot any now opportunity to hatch a new business (McKinsey sees green technologies as a good example and a future market estimated at $12 trillion). How to do so? By setting the bar very high (think unicorns) and then protect the new business form business as usual.

-    Consider tech as the basis for growth, which implies to be tech-literate. This includes CEOs.

-    Continue the course to net-zero in spite of the current events (war in Ukraine) as this is the only future. CEOs must be able to face headwinds and maintain their course towards this goal.

-    Rebuild the employee experience taking into account the purpose of the office and how it can bring additional perks to employees for whom work-from-home is a new norm. It is all about reengaging the workforce.

The 116-pages long report details in depth each of these points and provides concrete business cases.

What matters most for CEOs? 6 priorities for 2023 

What: Visa’s bets for 2023.

Why it is important: Even though many hypotheses are considered, Visa believes that a recession is unavoidable and if so, it might be longer and shallower than the past two ones.

Visa has collected a variety of reports in order to give some insights on the various possible scenarios for 2023 by region, after a year 2022 rigged with high levels of inflation and low margins of manoeuvre for central banks:

-    All eyes are on Europe, where the cost-of-living crisis is harder and taking place later than in other regions. For now, it is unclear to what extent savings from the pandemic episode and the high employment rates are going to act as cushions in the wake of the fall in growth related to interest rates bound to be raised to limit inflation.

-    While there might be a housing crisis about to burst in some countries (albeit milder than the US subprime crisis back in 2009), Visa also bets on the fact that tech companies’ valuations are going to increase, in spite of their current slump.

-    The strength of the US dollar comes at a cost for many countries in the world, which might induce some stress on the financial markets, and it is unclear (if unlikely) if China will be able to act again as the “world engine” for growth.

Visa expects 2023 to see inflation impacting global consumer prices growth and GDP growth, leading to a recession.

What is in store for 2023?

What: A plea for more simplicity in the approach to ethics.

Why it is important: According to MIT Sloan, successful companies do not outsource their thinking and processes, do not rely on checklists, and do not make big promises. On the contrary, and as also shown in the IADS latest White Paper on sustainability, it is all about being transparent, explaining how money is made in a clear manner to all stakeholders.

Business leaders are called upon to act in a manner that is ethically and socially solid, in addition of course of being mindful of the bottom line. This can be complex, as they are measured through various KPIS: environmental, social and corporate (ESG) governance, diversity, equity and inclusion (DEI) commitments, corporate social performance (CSP) indicators. It can be tempting to process, set up guidelines, and make partnerships with third parties, in order to cope with this complexity.

MIT Sloan argues that on the contrary, simpler is better. This involves not outsourcing ethics, for instance, as shown by the case with Starbucks and Ethisphere, which did not prevent a social scandal in 2018 in the US. The article says that ethics need to be proprietary because they must be rooted in the company’s DNA, as exemplified by Patagonia, for instance.

Another way to address ethics with simplicity is to skip the checklists, algorithms and measurement tools. This is the best way to replace open conversations about ethics by a hamster race to strike the highest score possible. In addition, this can lead to losing sight on the big picture.

Finally, MIT Sloan recommends to drop the grand speeches and replace them by a full transparency, rather than obscuring reality with statements and measurement. The Social Impact Measurement Model from Deloitte is heavily criticized in the article, with the 75 measures and the “go big or go home” approach which does not help the topic. Uber or Pepsi were caught red-handed with big but shallow promises which anyways do not attract the younger generation. The article mentions Target which has consistently set near-term incremental goals, helping to show an honourable result after a few years.

Three ways companies are getting ethics wrong 

What: Inside Retail review the various hypotheses following David Jones’ acquisition by a venture capitalist company.

Why it is important: Even though this is pure speculation, the article sheds some light on the state of the Australian retail market, and the difficulties experiences by department stores in the country.

Inside Retail explores what the acquisition of David Jones by Anchorage (at an estimated discounted price of $100m, to be compared to $2.1 bn paid in 2014 by Woolworths Holdings) might mean for the retailer. After all, the purchase of Myers’ in Australia by TPG did not turn out so well so this might be a cautionary tale.

Inside Retail recalls that Anchorage already invested in retail, with the acquisition of Brand Collective, then unprofitable in 2014. As soon as the deal was closed, Anchorage approved the acquisition of another brand by Brand Collective, invested into a new ERP, and turned the retailer into a $280m business, sold earlier this year with a profit. However, the newspaper also recalls that, on average, 70% of businesses acquired by venture capitalists fall, as exemplified by electronic chain Dick Smith, bought by Anchorage in 2012 and which collapsed in 2016.

Inside Retail believes that the potential strategies for David Jones will be to reduce the retail footprint, develop ecommerce, and maximize the leverage of its brand perception on the domestic Australian market.

What the acquisition of David Jones by Anchorage might have in store

What: Capital venture company Andreessen Horowitz shares its views and recipes for success about paid memberships.

Why it is important: Tech companies are not the only ones to look for such programs, retailers such as Amazon and Costco increasingly understand that this is a great way to create additional flows of revenue while increasing customer loyalty and harvesting data.

China is considered to be much more advanced than the Western world when it comes to paid membership programs, essentially because its digital growth went directly through mobile phones without a PC and credit-card based development stage, which led Chinese players to experiment with monetization techniques which downplayed ads (not easily readable on smartphones).

Weibo, iQIYI (Chinese equivalent of Netflix), Bilibili and others see memberships as a method of customer engagement. For instance, in 2020, Weibo VIP membership accounted for $123m (7% of its revenue) but its members posted on Weibo for times more than on-VIP members.

Leading Chinese companies all have in common 4 traits when it comes to paid memberships:

-    A mixture of earned and paid perks: even though customers pay, they have only access to an initial baseline membership package, and can only get additional perks by increasing their usage through gamification. Earned perks are carrots to encourage specific behaviors and this helps to know more about the customers (Bilibili for instance has a 100-questions long questionnaire for customers willing to become VIP members).

-    An intricate levelling and points system, in order to give users a sense of progress. Weibo offers 7 levels of VIP membership, which gives access to various perks and allows the retailer to encourage specific behaviours.

-    A balance of flexing and functionality: membership level can be signalled by specific skins on social media, which encourages others to follow the example and try to achieve the same level of membership. But this is not all, some functionalities on Bilibili, such as posting comments for instance are only reserved to VIP members.

-    Partnerships with other companies, including in social media in order to provide a full ecosystem of functionalities to VIP members.

How to build a winning paid membership program 

Printable version here

The IADS took the opportunity of the 63rd General Assembly in Geneva to issue POAPs (Proof of Attendance Protocols) to member CEOs as a virtual representation of their 2022-2023 membership as well as POAPs to the graduates of the 2022 Academy Program as a virtual certificate of participation. The inspiration for this activity was to be able to learn by doing and put ourselves in the shoes of our members as they face questions about Web3 and its various applications. The following synopsis is a look into our Web3 journey as well as the takeaways we gathered from the experiment.

Introduction: testing the waters

As retail adopts more technological advancements to create a greater omnichannel experience, IADS felt that it was an ideal time to experiment with Web3. Our team began with questions, considering what our members might also be asking when deciding on their latest digital strategies: How can this technology work for us? What could it be? What would it cost? How would we distribute it? How does it add value for our members/community/customers?

After an initial brainstorming session, the team created a list of possible applications without constraints on whether the ideas were feasible:

•    Celebrating member achievements with a yearly POAP leading to a page that highlights individual accomplishments (think of Spotify Rewind)

•    A virtual hall of fame in the metaverse that includes current and former IADS members who made big impacts

•    POAP for events/membership that can grant access to a ‘vault’ of all our archives and data gathered over the years

•    Discord for members to exchange with separate channels per department and activities (i.e., Merchandising channel, PL channel, Academy channel etc.)

•    Member Stories – a ‘jukebox’ with members sharing how they solved a problem, a funny story, hopes for their company, etc. (similar to a short podcast; adds a fun part to the immortalization idea & gets members involved in a new way)

•    NFT awards – annual recognition tokens that signify exemplary retail achievements (i.e., ‘Most Sustainable’)

•    NFTs that are sold to the general public (if we go toward a more capitalistic strategy)

•    POAP for academy completion (leads to a gallery of photos from Châteauform and their presentation)

•    Virtual news map – inside a metaverse platform like Decentraland to make getting informed more fun and exciting

Once our extensive research and concept proposals had reached exhaustion, the team moved to make a selection between two possible starting points: a digital asset strategy or a metaverse strategy, both with a short- and long-term plan. We again narrowed the selection down to keep the strategy realistic and within budget. The process included discussions on how we could leverage our understanding and research on innovative technology to bring IADS to the forefront of digital retail knowledge (adding hands-on experience to our practical knowledge). As part of our inspiration, we revisited what IADS stands for. The team listed the reasons for creating NFTs based on four principal functions of IADS: Communication, Support, Organization, and Certification. Aside from trendiness, NFTs and POAPs can function as methods for protecting sensitive information, Discord servers, Google forms, websites, or VIP events online and off – perfect for what we do. While the initial focus of our strategy was broadly based on the sale of NFTs, due to the complications of monetizing data and navigating unofficial tax regulations, our team moved in a different direction. This will be expanded upon later in the text.

Metaverse: a more gamified approach

The concept of a metaverse is currently very popular and offers many opportunities for brands and retailers to strengthen consumer loyalty. This portion of Web3 activity has some of the most exciting applications: the integration of gaming and discourse channels, the development of functional virtual storefronts, VR events, and the integration of data into a virtual world. While IADS did not choose to move in this direction, it is still a potential avenue for experimentation. Of course, digital teams must be agile and create a strong roadmap with key points for transition.

When considering this path, the team asked practical questions: What would our metaverse look like? Why would people visit? What features would be offered? Where would it be? How much would it cost to build and maintain?

Due to the current lack of interoperability across metaverse platforms, IADS was hesitant in pursuing this strategy. Investing both time and financial resources in a strategy that does not fully serve our members and is not guaranteed to last was deemed unwise. In light of IADS’ capabilities, a virtual storefront would be the most feasible option from our team’s proposals. However, due to financial barriers and limited technical experience, it was determined that this virtual location would not be a fully functional storefront. Thus, we moved in a different direction.

Virtual land on the popular metaverse platform Decentraland costs around USD 3,000-15,000. After, the fees to have a software developer or programmer build and test a virtual store in Decentraland would cost between USD 20,000 and 36,000. Having an in-house developer would also be expensive at USD 75 to 175 per hour.

According to our research, setting up a functional virtual store also requires a tremendous amount of time. Our team discovered that it takes around 3,040 hours to register your virtual crypto-based business on the digital network of Binance, which could cost around USD 228,000 to 532,000 (for an in-house developer). Another popular platform, Cryptovoxels, does not appear to be cheaper. Famous voxel architect, Bileca quotes USD 10,000 to 300,000 for a full build. Unfortunately, verifying credentials when choosing an architect also appears to be a challenge, making this option better for companies with the proper internal team that has more funding and lower risk aversion. A deep understanding of gaming and metaverses would also be beneficial.

POAPs: certification & commemoration

A short-term digital asset strategy became the most realistic for IADS. The final proposal was a POAP for member CEOs (a virtual representation of membership), and a POAP for Academy graduates.

POAPs are a type of NFT which stands for Proof of Attendance Protocol and can be described as an ecosystem for preserving memories. A POAP is a digital record for the holder that acts as proof of events that they attended or participated in, whether physically or virtually. Because POAPs are technically NFTs they have the capability to act as a utility for potential future events or product drops. They can be compared to any collectable such as the ticket stub for a famous concert or a band tee from the start of a musician’s career - proof you were there or proof of your fandom.

We believe POAPs provide the most relevant qualities for our mission. Our Academy program, which was established in 1995, seemed like the ideal way to begin fortifying our seal of approval through POAPs. As an association that is approaching its 100th anniversary, our expertise in retail insights and innovation certifies the skills development that Academy members receive upon completion of their project.

Another benefit of POAPs is that they are free to mint. For the creation of general NFTs, the cost can vary tremendously depending on the gas fees - a cost incurred from minting as one would mint fiat money. The cost can change hourly and based on the demand, the platform/marketplace, and the cryptocurrency selected. In general, selling on OpenSea, an NFT marketplace, requires two initial payments for creators: USD 70-300 to establish the account and USD 10-30 for OpenSea to be given access to generate your NFTs. Alternative sites exist, one of which is Rarible. The Rarible marketplace platform offers a lazy minting feature that makes creating NFTs free and diverts the gas fee cost onto the buyer. The platform also takes 2.5-5% of the final sale.

Once the team began creating the POAPs, the co-founder of POAP France, Sebastian Orellano, reached out to inquire about our motivations and goals as it was quite an unusual use case for his team. POAP France has assisted luxury fashion companies to distribute POAPs at their events such as Christian Louboutin at Paris Fashion Week this year. Following a meeting with him, he offered some insight into how he can assist us and our members. Thus, those who have questions can contact the Association to learn more or to be put in touch with him.

Ultimately, we distributed the POAPs through printed QR codes that were distributed during the IADS General Assembly. Sebastian also recommended incorporating NFC (Near Field Communication) tags into our strategy to better distribute to users that are unfamiliar with crypto wallets and digital assets. While it was too late in the process to incorporate NFC tags, we are considering this for any future initiatives IADS might launch to create a physical and virtual representation of membership or certification.

Going forward: challenges & opportunities

Looking toward a long-term goal, we believe it would be necessary to develop a method of separating monetizable non-sensitive information from private insights that should only be accessible to our members. This path would likely mean creating NFTs for purchase that commodifies our research and reports, such as our lists of emerging brands determined during our IADS Visual Merchandising Meetings. This would involve more work developing a business-focused production of these elements by creating an internal IADS position responsible for Web3 activities. The current membership structure poses an issue for pursuing the sale of NFTs as it might require constructing a complex hierarchy of subscription levels. As a non-profit focused on connecting and supporting our members, this goes against our values. The most tangible monetization of IADS activities is through our city guides. This idea is still being explored through pay-wall map platforms that can organize specific locations based on tags.

Another complication came from the unclear legal and regulatory framework in place for Web3 activities: To whom and how do we report virtual earnings? Will we sell securities or utilities? Do we need an accountant specialized in the Metaverse and crypto? What resources and team capabilities do we need?  Where is Web3 going?

We understand that the Association is not expected to carry out such activities, however, we consider ourselves a research lab, and therefore, felt that this emerging trend would be perfect for experimentation. Our conclusion: it does not have to be intimidating. Web3 specialists are eager to assist companies with entering this emerging digital space. With so much potential, we recommend exploring how Web3 can work for you, within your teams, and for your customers.

This initial trial of POAPs for IADS showed us the importance of understanding the different levels of familiarity with Web3. Ideally, this can be addressed by providing enough time to educate and assist newcomers. Digital innovations can be intimidating, and it can be tempting to wait for the trend curve to reach its peak. Yet, waiting does not equal eventual understanding. To best attract young consumers, being educated on the future discovery and shopping channels they will use is imperative to securing their loyalty. IADS will continue to provide insight and education on digital innovations and hope to connect you further with POAPs, NFTs, and all the exciting new Web3 developments.

Credits: IADS (Devon Blowers)

IADS recently held a meeting all about the leather goods & shoes brands to look out for in 2022. Based on market research, IADS and NellyRodi presented a curated selection of 13 brands that are trending right now. Check out our selection of these brands!

PRINTABLE VERSION HERE

SHOES

![CLARIS VIROT

CLARIS VIROT

The Claris Virot brand is above all new collections with injections of new

skins and new models such as the arrival of the basket for the summer or

the 100% leather line. Tanned, grained, smooth or tie and dye, the Claris

Virot leather, like the python used in all the models, is worked by hand in

Balinese workshops.

Check out the claris virot website here

![REIKE NEN

REIKE NEN

The inspirations are expressed every season by mixing the formal and the

atypical, the flexible and the hard, the raw and the refined. Contemporary

and new elegance Contemporary Refinement this is the purpose of this

rake nen.

Check out the reike nen website here

![ILIO SMERALDO

ILIO SMERALDO

Ilio Smeraldo’s shoes are crafted in Tuscany by local artisans, every single

piece is handmade with care using Italian leather and locally sourced

materials. They pursue the ancient Florentine tradition, ensuring quality

and uniqueness.

Check out the ilio smeraldo website here

![YUME YUME

YUME YUME

YUME YUME creates unique design pieces for all creatives in the world.

Check out the yume yume Website Here 

![MOEA

MOEA

MoEa uses innovative bio materials from recycled fruits and plants to create

low carbon and vegan sneakers.

check out the moea website here 

![ROMBAUT

ROMBAUT

Using luxurious plant based materials, recycled fibers and high grade

artificial leather, ROMBAUT creates unique sneaker styles with a story.

Often experimenting with cultural stereotypes and cross pollination of

archetypal footwear classics we create a new aesthetic of purity, optimism

and gloom, which feels very relevant today.

Check out the rombaut website here

LEATHER GOODS

![DESTREE

DESTREE

DESTREE tells the story of a colorful and singular passion, of a Parisian yet

different style, drawing its beauty from the visual dissonances it evokes and

which it translates through a graphic and structured aesthetic.

Check out the destree website here 

Check out the collection of pictures here!

PRINTABLE VERSION HERE

As of 2022, Walmart accounts for 10,585 stores in 24 countries, operating under 46 different names in the United States, Canada, Mexico, Central America, India, China and South Africa to name a few. Walmart is the world's largest company by revenue, with about $570 billion in annual revenue, according to the Fortune Global 500 list (Amazon comes second). It is also the largest private employer in the world with 2.2 million employees. Walmart was the largest United States grocery retailer in 2019, and 65% of their sales came from U.S. operations.

To keep its position and secure recurring customers, Walmart started a transformation before Covid to offer in-store seamless omni-shopping experiences. The new Walmart store has convenience, experience, and membership in mind, and it’s no surprise. The transformation came in 2 phases: the first one was completed in September 2020, and the second one has been in testing since February 2022. While the first phase was focusing on in-store navigation and efficiency, the second one is about giving stores a new look and feel, as well as offering customers a digitally enabled shopping experience. In parallel, the Walmart+ membership program was launched and gained traction.

On the one hand, by developing new visual merchandising features, Walmart is encroaching on Target’s turf, both taking cues from department stores that are usually masters in the visual merchandising area. On the other hand, by heavily boosting their membership program, they are chasing after Amazon.

Focusing on navigation and wayfinding

Focusing on a customer-centric approach, Walmart developed new store signage with a sleek and bold aesthetic. The update goes from the exterior to the interior of the store. New very visible signage (Dairy, Pizza, Bakery…) highlights product categories and brings enhanced visibility to key products and departments throughout the store. With surfaces ranging from 6,400 to 24,200 square meters (the average surface being 16,500 square meters), it’s key for Walmart to be able to quickly guide customers to the section they are looking for. In that perspective, using airport signage navigation has proven  efficient: as a result, Walmart stores’ aisles are now marked with letter and number combinations.

The new signage goes hand in hand with the store app. It has also been updated to reflect the Walmart app and make customers accustomed to downloading and using it from the very beginning of their journey. To that end, a store directory at the store entrance invites customers to download it thanks to a QR code. The app offers end-to-end digital navigation and guides customers throughout the store.

Stores also include self-checkout lanes with Walmart+ members dedicated ones, as well as contactless payment solutions, including Walmart Pay. Select locations also offer a Scan & Go service to help customers manage their checkout directly. Shopping cart’s comfort has also been improved to include phone and drink holders.

Overall, by helping customers navigate more easily and quickly throughout the store, Walmart wants to offer a more efficient and convenient shopping trip, hoping this will help retain customers in stores, and possibly to larger purchases. The first phase of the new concept was tested, got very positive shopper feedback and has now been rolled out in more than 1,000 renovated stores.

Competing with Target using visual merchandising tricks

Walmart launched phase 2 in early 2022. The new store experience developed there is called ‘Time Well Spent’ as the retailer ambitions to become a destination where customers want to spend time, and not just deal with shopping fatigue. As a result, the focus is on experience, product try, touch and feel, which are not necessarily the usual features of a supermarket. Walmart also increases comfort by offering wider lanes and more space within its key departments, in an attempt to make shoppers feel more relaxed and have the impression they spend some quality time shopping.

Walmart is amplifying the physical design elements to inspire customers and elevate the experience thanks to lighting, space enhancements and dynamic displays. New displays are featured at the most strategic corners of some departments to attract customers in and help them touch and feel products. For instance, home sections feature a bedroom or a living room set up where shoppers can try pillows or blankets and buy them on-site or order them to be home-delivered. Also inspired by Target, electronic sections have been reorganized with long display tables, including proximity stocks. In the apparel, nursery and beauty departments, the new Walmart store makes room for brand shops and intends to develop a “store within a store experience”, still following Target’s footsteps.

Digital touchpoints are also developed. Using stores as a primary display, a larger range of products and services is available a click away thanks to QR codes and digital screens. For example, in the pet area, a customer can scan a QR code to find additional product options, learn about Walmart’s pet insurance service or have their dog food bags home delivered. Smart screens are also used for a variety of purposes. For example, a passively interactive widescreen above the men’s grooming section will automatically display reviews of a product when a shopper takes it off the shelf.

Competing with Amazon thanks to a strong membership program

To compete with Amazon Prime, Walmart launched its membership program, Walmart+, in October 2020. Five months later, it was already considered a success thanks to its estimated 7.4 to 8.2 million users representing 30% of US online grocery transactions whereas Amazon was only accounting for 27%.

Early June, and in an attempt to coincide and compete with Amazon’s Prime Day, the first Walmart+ Weekend three-day sale event was held exclusively for Walmart+ members who received special access to sales on thousands of items. It remains to be seen whether this sale will become an annual event but the results seem quite promising: the average Walmart+ Weekend spend per order was $69.75: while it is slightly more than the regular average Walmart.com order of $64.99, it is much more than the Amazon Prime Day 2021 order of $54.17. Forty-seven percent of the Walmart+ Weekend orders were placed for $100 or more, compared to just 27% of Amazon Prime Day orders last year.

Walmart+ Weekend was also open to customers outside of the membership program even though they would not have access to the best deals. But it has obviously been a way to attract more customers and generate more sales.

Walmart+ membership is noticeably less expensive than Amazon Prime: it costs $12.95 per month (or $98 per year) compared to Amazon Prime’s $14.99 per month (or $139 per year). Since its inception, Walmart+ has attracted urban, young and affluent online shoppers, on top of the usual customers. Like most memberships, Walmart+ gives access to special prices, product releases, early access to sales, online special deals, free shipping with no order minimum required, and free same-day grocery delivery from local stores (with a $35 order minimum). At a time when inflation is skyrocketing and consumers are reducing their discretionary expenses, Walmart+ offers interesting additional perks: members can save up to 10 cents per gallon at more than 14,000 gas stations and receive 6 free months of Spotify Premium.

So, will the transformation be enough for Walmart to keep its position? Directly competing with Target and Amazon, Walmart is taking from both to become a perfect combination of experience, convenience, and membership. They are testing new ways to elevate their stores and design them as destinations rather than only competing on the price point. They are also in a ‘test and learn’ process and are making changes based on the customers’ feedback.

While such changes are important in the customer’s eyes, analysts are showing scepticism as consumers still prefer Amazon, Target or Home Depot, and as sales growth slowed down during the first quarter of 2022 first. The question is whether Walmart’s new store features and, crucially, distribution capacities will be enough to compete with Amazon growing its capacities very fast to shrink the delivery delays so much that customers won’t have a reason to go to stores. As an answer, Walmart will build 4 new fulfilment centres in the next 3 years including automation, machine learning and robotics, to offer next-day or two-day delivery to 75% of the US population. So far, one of Walmart’s strengths is also that half their sales are coming from groceries which are still mostly purchased in stores, whereas Amazon’s Wholefood and Fresh supermarket results have been disappointing so far. Also, having stores within 10 miles of 90% of Americans is an unparalleled opportunity to thrive in the omnichannel business, and - maybe - defeat Amazon?

Credits: IADS (Christine Montard)

What: The FT makes a synthesis on retail media, its potential, the issues it raises and how they could be overcome.

Why it is important: Scale is based on ability to exploit data, which requires the right tech to do so. In the eyes of the FT, this is another reason for industry-wide concentration, as shown by Kroger’s acquisition of Albertsons, leading to a total audience of 85m households. Given the revenue generated at Amazon and Walmart, this seems worth the game.

The FT remarks that there are dozens of retailers, mainly in the US, that are trying to emulate Amazon’s success in building a marketing business on the back of a sales platform, therefore creating a new form of mass media competing with publishers and Big Tech.

For the journalist, Retail Media, estimated at $37bn in 2022, is the third wave in digital advertising, after search and social media. Retail media already outpaces radio and print spendings, and is closing the gap with TV advertising. Retailers realized the potential additional revenue that this network could represent by witnessing that Amazon earns more from its advertising services than from its subscription services, and almost double than its physical stores sales (including the Whole Foods grocery chain). As Accenture puts it, “the scale of digital attention allows to monetise data in a new way”, and Walmart is on track to generate $2.2bn revenue in advertising in 2022, with higher margins than in the retail business.

There are multiple advantages for brands: their advertising is much more embedded in the retailer’s platforms than banner ads, embedded videos or other online promotions. In addition, retailers owning the first party data, retail media networks solve the issue of Apple’s restrictions on following users and Google removing cookies. In addition, retailers have access to so much information that the knowledge of their customers is deep, and helps to carefully send targeted messages to the right person at the right moment.

This comes at a price for brands as it is not anymore unusual to pay 10 times what it costs to run a programmatic advertising on the Web, for slots on retail media networks, even though some marketers and brands are also now asking for a clear information about the ROI.

The main limitations to a full-scale expansion are:

-    Legal restrictions, especially in the EU and UK, where privacy laws are much more constraining than in the US,

-    The needed tech to make such a shift, in a context where smaller retailers already struggled to embrace e-commerce, let alone “digital transformation”,

-    Customers’ potential reluctance in the future as they will become increasingly aware that their data, including for instance purchases history, are made available to brands and advertisers.

Nevertheless, the Financial Times is confident that this new usage, which potentially creates a new and significant stream of revenue for retailers, will also expand in the EU and UK.

How retailers are reshaping the advertising industry 

What: The former MD of Selfridges reviews the four points she believes are crucial for retailers willing to embrace the future

Why it is important: The speech is less a PR stunt and more of an open list of questions, revolving on 4 topics (business model, sustainability, metaverse and organizations) all approached honestly by a true retail veteran.

Anne Pitcher, former MD of Selfridges and new deputy chairwoman of Holt Renfrew, shnares some thoughts about what the future of department stores could be, at the light of the past 3 years, which, instead of providing a post-pandemic hedonistic framework, ended up with more stress and issues at the entire social level. She believes that the needed changes can also be brought by the retail industry, not only at the brand level, and identifies 4 challenges:

-    The structure of the business, from top-down leadership to something more collegial and based on teamwork, helping to collectively solve major issues such as sustainability (this is also a thesis we are defending in our most recent White Paper on sustainability, issued in Q4 2022),

-    The climate crisis, which once again requires new models (Selfridges expects to achieve half of its turnover through circular models by 2030). Pitcher goes so far as to envisioning a future where customers will be able to monitor in real time the evolution of their product’s value. Interestingly, she mentions that this obviously raises some pressing questions in terms of margin and profit.

-    The Metaverse: she turns down Meta’s vision of it (which is essentially a better version of Zoom) but remains convinced that the metaverse can create new opportunities for retailers who should be thinking outside the box (this also raises questions about the physical store and its purpose in the future),

-    Retailers’ obsession for control, all the more than working flows are increasingly stemming from ecosystems and not in a top down manner anymore. For her, this involves discarding the old ways of working.

Anne Pitcher about the destination of the future 

What: the BOF reviews the state of the fashion rental market.

 Why this is important: Department stores have also tried these services, and for now, are unable to operate them at a profit. Major market players are also still looking for the wining formula.

The Business of Fashion reviews the fashion rental business model, through several examples of various size, from Ponybox (2,000 customers) to Runt the Runway (2,5m subscribers). This business model is challenging, as it comprises on the one hand the capability to stock the right inventory at the right price point, marketing and customer service, but also be efficient in reverse logistics in order to be profitable. Runt the Runway posted a net loss of $76,4mn in Q1 2022 for a total revenue of $131,4mn. As a consequence, its stock value has plummeted by 90%.

Rental is less successful than second-hand, however this is still a business model that attracts newcomers (such as Ponybox). It appears that niche markets are interesting for such a model, and the two key elements to consider are on the one hand, what to do with the leftover stocks (and how to maximize the resale process) and how to make sure that bi-directional supply chain is fully working and efficient. In-house delivery service instead of relying on third parties is also part of the equation.

How to make rental work 

What: A rather emotional reflection on the end of a consumption cycle.

Why it is important: A decade ago, no one believed that consumers would end up mixing in their look fast fashion items with luxury goods, which is the case today. Frugality in luxury consumption might be very well a new reality in the coming months or years, which might impact the strategies, and profits, that luxury houses developed for the past ten years, based on streetwear and pre-worn looks.

The Financial Times compares the current context to the difficult situation that prevailed in the UK in the early 80’s, with an economy which was quite demanding on all social classes. Now that the whole country is trying to save on energy bills and cope with inflation, the newspaper draws a parallel and questions the utility of luxury fashion in such a context.

The journalist argues that now that a super consumption cycle is coming to an end, it might be the right moment to review what consumers own and actually wear and use the products, rather than keeping on buying new items that look pre-worn because this is the trend. The article is in a reality a call to more frugality, even going to the point of copying runway shows by similar-looking items purchased in thrift shops.

It is time to rethink our approach to luxury fashion