What: Coresight Research has provided an analysis of the US e-commerce subscription market providing insight into key players, market growth predictions and important opportunities for strengthening business performance.

Why it is important: The overall market is expected to reach 21.8 billion dollars by 2026, having grown 10% in 2022 to 14.6 billion dollars according to Coresight Research.

Loyalty remains an important aspect of this market which Coresight has connected to personalization, proper investment in supply chain and merchandising, as well as expanded and exclusive product offers. Offering unique customer experiences will also be a significant differentiator to secure loyalty. This can be seen through flexibility that can provide non-subscription offers which can secure new customers and offer alternatives or add-ons.

Meal-kit subscription boxes are expected to capture 60% of the market in 2022 with the top meal-kit model service providers including HelloFresh, BarkBox, Home Chef and Blue Apron. The beauty and personal care subscription market is predicted to have a lower level of growth this year following the 10% year-over-year growth between 2020 and 2021 (1.5 billion dollars). By 2026, the beauty subscription market is expected to benefit from the premiumization of beauty products and innovation in personalization with a potential growth rate of 8% in 2025. Key players for beauty and care boxes include Birchbox, GlossyBox and Ipsy. The fashion subscription box market reached 3.1 billion dollars in 2021 with year-over-year growth of 20% is predicted to slow to 2% across 2022 and is likely to remain at a slow growth rate with a predicted market value of 4 billion in 2026. Key players for fashion subscription services include Dia & Co, Nadine West, KidBox and Stitch Fix.

The replenishment-based subscription market is more concentrated with the top providers being Amazon Subscribe & Save, Chewy and Sephora. Predictions expect Amazon to retain its leadership position over the next few years.

Respondents who planned to use subscription services in the next 3-6 months stated that savings (60%), convenience (58%), and high-quality products (54%) were the top three reasons that drive them to use product-subscription services.

The 15-billion-dollar market of subscription box services

What: While global revenues grew in 2021 as life began to return to normal post-pandemic, geopolitical issues and macroeconomic strain caused expectations to turn dismal in the later part of 2022 leading to an uncertain retail landscape for 2023.

Why it is important: Inflation, supply chain disruptions, rising costs, an energy crisis and increasing scrutiny on communication are leading to shifting consumer behaviours and a more challenging landscape for retailers and brands to navigate, accelerating the need for agile and clever strategies.

Inflation and geopolitics have surpassed the health crisis on the list of retailers’ concerns; however, this is a regional issue as the US and the Middle East remain relatively unaffected. This is predicted to result in new havens of growth, which will require that brands further localise designs, marketing and merchandising to attract new customers. As well, their scenario planning will need to factor in more than financial risks and opportunities.

Supply chains are being re-evaluated. Companies may choose to team up with manufacturing partners, increase nearshoring to better respond to fast-shifting consumer demand or lean more heavily on data analytics and technology to manage inventory. 75% of BoF and McKinsey’s survey respondents stated that they aim to simplify inventory by reducing the number of products and styles, while 65% plan to adjust the balance between seasonal and basic items in assortments.

Addressing consumer behaviours and demands will vary and become heavily influenced by income. Consumers will likely cut non-essential spending yet remain inclined to shop in-store leading to a decline in online DTC. In addition, consumers are increasing their sustainable and genderless purchases which is causing a need for changes in communication, a recent sore spot for brands and retailers as greenwashing crackdowns increase. With operational costs increasing as well, reputational damages or fines become a greater threat to stability. Budgets are still expected to shift toward alternative channels that could generate a better return on investment than paid social media ads, such as retail media networks, that can build stronger brand communities.

With behavioural shifts and financial strain, retailers should optimize their operational strategies to adapt merchandising, distribution channels and supply chain reactivity to ensure positive growth in the uncertain year ahead.

Navigating uncertainty in 2023: BoF’s State of Fashion report

What: Alix Partners and Sourcing Journal have released a 2022 survey report covering the main 4 paradigm shifts and new norms for fashion.

Why it is important: Retailers are already bracing for a recession making it an ideal time to improve inventory planning and production efficiency while embracing consumer-focused initiatives around ESG, CSR, and digital.

Consumers post-pandemic have adjusted to greater free time and convenience leading to shifting expectations as life returns to a new ‘normal’. Consumers are more tech-enabled and discerning with increased concerns surrounding geopolitical unrest, climate change, spiking inflation and rising interest rates. While these issues may have replaced the pandemic, retailers are still dealing with the recently exposed vulnerabilities within fashion’s supply chain, product development, distribution, marketing, inventory and HR structures.

Some companies responded to disruptions and shifting consumer behaviour by investigating digital tools and capabilities (50%), differentiating through the product (49%), investing in talent and team building (43%), investing in supply chain networks and logistics (42%), forging stronger supplier/factory relationships (41%), and conserving cash (38%). Despite this, only 53% of respondents felt their business was ready for greater disruptions and 62% were concerned about a recession in the next 6-12 months. These responses align with the identified paradigm shifts: 1. Digital First, 2. Focused Product Assortment, 3. Productivity Mindset, 4. Sustainability and Social Stewardship.

To address consumers’ new norms around online discovery and purchasing, many businesses have shifted their operating model with a greater focus on digital. Social media remains the most used digital tool to engage with consumers (69%). Surprisingly, only 31% of respondents are using in-store digital solutions for personalized selling which has been proven to enhance the consumer experience. Customers still want in-person events and activations which provide the best opportunity to build community and increase basket size.

To tackle the increased discernment of customers, some retailers are focusing on data science. The report cites Fabletics which has incorporated data science technologies leading to a 5-6% return rating, beating the average 40-50% rate for other retailers. Data allows brands and retailers to stay on top of inventory, predict sizing, build loyalty and manage both warehouse and membership systems. Inventory remains a key headache for many fashion retailers. 51% of respondents said that the size and breadth of their product lines have increased compared to 2 years ago. Reasons varied, however, 65% reported the increase is due to more categories, 64% due to more colours per SKU and 51% due to a wider size range per SKU. AlixPartners highlights Shein’s ability to be agile through its owned production chain and gamified purchase offers. This allows them to escape the inventory glut many brands are currently facing due to over-purchasing, high return rates and bad prediction.

One method for getting ahead of disruption is through the productivity mindset which involves incorporating focused practices along the value chain to protect margins and invest in quality and service. This can be achieved through greater collaboration and efficiency by using virtual design tools (48%) for example. Data surrounding cost, lead times, capacity, risk, and defect rate for example can help with decision-making speed and accuracy.

Finally, leaning into sustainability and being faithful to social values has become ever more important in the eyes of the consumer. Despite this, 35% of companies reported being behind target relative to their sustainability goals. The majority of companies that responded to the survey are not tracking or measuring their carbon footprint. Only 19% reported tracking and actively utilizing these figures. Others reported that they had plans or were in the process of setting up tracking (38%), had no plans for tracking (20%), or had something in place but weren’t using it (15%).

Resale and rental, while buzzwords for sustainability, are not as important to retailers as expected with only 13% of respondents reporting caring about offering either service. With fast-fashion brands entering the resale market, the legitimacy of resale as a sustainable offer declines.

AlixPartners 2022 survey report on fashion’s paradigm shifts

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As one of South Korea‘s leading department stores in the upper segment, Hyundai’s ambition is to “bring happiness to customers and enrich the world”. Seoul is known for its shopping culture as many people frequent department stores. Today, with the e-commerce spike caused by the pandemic, Hyundai is questioning the purpose of physical retail and answering the call for drastic changes in the industry.

Occupying no less than 89,000 sqm across a total of 12 floors (including 4 levels of underground parking) gathering nearly 600 different shops, The Hyundai Seoul first of all offers great architecture. The skyscraper complex where it is located was imagined by Sir Richard Rogers. Various international architects and designers took part of the department store project such as Cmk Architects for the cosmetics and beauty area, and Diego Burdi and Paul Filek for women’s and men’s fashion areas. Landscape designers Woo Kyung- Mi Woo Hyun-mi Design took care of the vegetal parts of the mall.

Besides offering city dwellers a place where they can shop, experience cafes, restaurants and art, The Hyundai Seoul claims it is Korea’s first eco-friendly department store, bringing together the concepts of nature and rest with shopping.

Opened in March 2021, the Hyundai Seoul also illustrates the end of a siloed business model which used to separate shopping, entertainment and communication. On the contrary, inspired by young generations and highly in line with social media posting, the department store merges the three businesses into one. IADS partner Nelly Rodi had the occasion to visit the Hyundai: check out what the new department store really has to offer and look at the collection of pictures provided.

Entertainment features from nature to GenZ content, culinary experiences and art

The Hyundai Seoul’s most striking feature can be found in how the surface is allocated as almost half of its space is dedicated to indoor landscaping. The department store wants to provide a space where customers can relax, rest, reconnect with nature and experience its healing benefits. To that end, a 12-meter-high waterfall called the 'Waterfall Garden' is visible from floor 3F to floor 1F (ground floor), and a 3,300 sqm garden located on the 5F floor comes with 30 trees, natural grass and nature sounds. It is the largest indoor garden in Korea with natural lights shedding through a 20-meter-high glass ceiling. The walkways in the shopping mall are also wider than usual, so customers don’t constantly bump into each other, which seems especially important since the department store opened during the pandemic.

llustrating a common retail trend, the department store clearly ambitions to capture the local GenZ by offering them entertaining and Instagramable spaces such as a pool full of pink balls, new brands and pop-up stores, all gathered within the B2 floor. Dubbed ‘Creative Ground’, the floor also includes metaverse and NFTs. But there’s more to attract the younger generations. Located on the 6F floor, CH 1985 (referring to Cultural House initials and to 1985 as the first year Hyundai mixed culture with retail) is the first boutique and cultural space intended for Millennials and GenZ. Defining itself as a social club, talks and masterclasses are organized such as the Late Night Salon centred around Korean culture and the bustling Seoul artistic creativity.

The food offering is probably the biggest of its kind in the country. Called ‘Tasty Seoul’ and located on B1 level, the 14,800 sqm food and restaurant area features no less than 90 different food and beverage venues ranging from a food market to food stands. As Seoul emerged as a culinary destination, Michelin-star chefs also offer upscale experiences. Wine and spirits are also developed, mostly to attract male customers and help entertain them while their wives are shopping: they can enjoy famous local sommelier advisory and taste wines while smoking cigars and reading books about Cognac or winemaking. On the 6F floor, groups of 6 people can benefit from famous chefs’ cooking masterclasses and then enjoy their meals in private dining rooms.

Illustrating the culture trend one can see growing in the retail industry, The Hyundai Seoul has a museum located on the 6F floor. Called Alt.1, it is set to offer various art exhibitions able to draw in many customers. Art exhibition examples include fashion photography with works from Paolo Roversi, Peter Lindbergh, Nick Knight and Ellen von Unwerth. The entry price is EUR 13, or at a reduced fee of EUR 10 to encourage younger generations to visit the museum.

Tech used to build a seamless and pandemic-ready department store

Located on the 6F floor, the ‘Uncommon Store’ gives a vision of what supermarkets and convenience stores could look like in the future. Before entering, shoppers are required to install an app by scanning a QR code. After registration, payments will be automatically and seamlessly registered and processed. The ‘Uncommon Store’ uses a cloud system and internet hyper connections, AI, complex sensors, and machine learning techniques, all being taken care of by Amazon Web Services which are fully integrated into the store’s retro-futuristic design. The Internet of Things also forms a two-way communication between the space and its users, allowing storage and reloading of the shopper’s purchases and consumption habits.

The Hyundai Seoul is infused with additional tech innovations, such as facial recognition to enter VIP areas, the deployment of a guide robot, a safety robot, and a special app to make restaurant reservations and check parking spaces. Given the pandemic, tech has also been applied to maintain safe shopping. Multi-recognition temperature scanners which are used in airports have been installed at all entrances while portable thermal imaging cameras and facial recognition heat scanners were installed at indoor entrances. Also, air sterilisers can be found at major customer facilities to enhance air circulation, and all door handles have been covered by a layer of 99.9% pure copper which has excellent sterilisation and anti-viral effects.

Customer-centricity and services are significantly developed

Overall, the department store offers a high level of customer service. Concierge services provide information on brands, events, as well as helping customers with restaurant and CH 1985 lecture room bookings. Dry cleaning, alterations, watch, bag and shoe repair services are also available and distributed across the floors dedicated to the fashion offer. Lockers are displayed on the B1 floor for customers to leave their heavy belongings and shop hands-free. As the 5F floor is dedicated to kids, it offers various kids-related services such as baby and kid lounges and stroller renting. Finally, a full lounge, ‘The Club Wedding’, on the 6F floor offers wedding services.

Finally, The Hyundai Seoul purposes 2 membership programs. The ‘classic’ one has 3 levels depending on their annual spending and also offers access to a private coffee shop. The second membership program is designed for Millennials and GenZ based on their level of influence.

What about the brand and product offer?

The department store offers a classic layout when it comes to cosmetics, beauty and luxury categories. Beauty brands and luxury brand concessions, including jewellery and a large watch offer, are gathered on the 1F floor (ground floor) under the ‘Exclusive Label’ area.

The 2F (‘Modern Mood’) and the 3F (‘About Fashion’) floors are dedicated to men’s and women’s fashion. They mix brand concessions and multi-brand areas (including a large Tom Greyhound shop, the Hyundai-owned affordable luxury multi-brand store), and overall try a more genderless approach to fashion in certain areas. The 3F floor also offers a multi-brand shoe section.

The 4F floor is the place to find sports and home products. The 5F floor is home to a comprehensive kids product offer and to tech brands. A Lego store is also coming along with brands such as Microsoft, Samsung and Dyson to name a few.

As it is also the case at their Seongnam branch, an affluent and fast-growing satellite town of Seoul, The Hyundai Seoul is clearly chasing after the younger generation’s wallets. But is that all there is? More broadly, and considering its size, the department store is also able to address all kinds of consumers from families with toddlers, to fashionable women and wealthy male consumers, each time developing the appropriate product, experience and service offer for each consumer group.

Overall, the Hyundai Department Store Group has evolved to provide comprehensive shopping experiences with a renewed lifestyle and cultural approach to retail. Without forgetting people’s cravings for nature, The Hyundai Seoul is a fair example of what the store of the future could be.

Credits: IADS (Christine Montard)

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The IADS had the opportunity to travel to Seattle to attend and report the Global Department Stores Summit, co-organized with Nordstrom. It was the occasion to review how the iconic US department store is articulating its attention to customers, which they claim to be superior to the competition in the country. On this occasion, we visited the Pine Street store (in the Seattle city centre), a location not as glamorous as the store at Columbus Circle in New York that we reviewed earlier this year.

What is so special about their service and how is it organized in store from the customer perspective? What are the learnings for other retailers? And most importantly, how is this helping in a city still bearing the scars of the pandemic, including a devastated “Retail Mile”?

Visiting the store: caring for customers on every floor

The store is located in the heart of the Retail Mile, not far away from the Pike Place Market (known for its fish-throwing tradition and the 33rd most visited attraction in the world in terms of traffic). However, even a few blocks of distance from this energetic zone can feel very far away given the state of retail in the neighbourhood: the Macy’s store still bears its logo although it has been closed, and so does Barney’s just across the street. The competition has fiercely reduced, and Nordstrom is now the only department store in the location, along with a Nordstrom Rack across the street, and a Saks Off 5th a block away.

The store is built on 5 floors and was refurbished in 2016. The layout is simple: men’s fashion in the basement, shoes and beauty on the ground floor, women designers’ fashion on the first floor, contemporary fashion on the second one and sports, lingerie and services on the upper floor.

The basement is very accessible through large ramps, and features a full universe for every male customer: a significant suit and formal fashion area (according to the sales manager, Men’s suiting is still a significant part of the business), an animation area, the shoes and accessories space, and a restaurant (Nordstrom Grill), offering a full lunch service, representing 1 out of 4 transactions in the store.

The animation area has been developed according to a different graphic identity and is dedicated to delivering what is new in fashion. At the time of the visit, the space was dedicated to sports, and this is the 17th edition since the launch of this concept in 2019 (popups are opened on a quarterly basis). There, Nordstrom sells “products with a point of view” (meaning either exclusive brands, products or collaborations) and takes the opportunity to produce content with its selection (for instance, a part of the sport selection was featured in a promotional clip with the rapper Macklemore and generated 200m media impressions, in addition to selling 75,000 pieces in 2 weeks nationwide).

Apart from this specific space, the brand assortment is classic for a high-end fashion department store, with luxury shop-in-shops on the periphery (even though according to the salesperson concessions only represent a mere 10% of the total business) and more accessible brands in the middle section, including a denim section. Interestingly, Topman, which Nordstrom operates in exclusivity worldwide, is displayed without any mention of this exclusivity, and feels a bit lost in the retail space.

Services are proposed with third parties, such as a shoeshine family business that has been a local partner of Nordstrom for the last 30 years.

The ground floor features beauty, cosmetics, shoes and accessories.

For the beauty section, a concierge is here to sample the whole offer, which is impressive, in addition to helping customers and directing them to the right brands, all featured in a lightly customized concept with low displays. Customers also have the possibility to bring back their empty packaging to be recycled (although the execution itself of the recycling unit in cardboard is surprising and denotes with the environment). There are also food and beverage touchpoints in the cosmetic area in order to increase the time spent in the section.

When it comes to shoes, the space felt really crowded with products, with many advertised on sale. Interestingly, the shoe offer is doubled: entry and mid-price point products are featured on the ground floor, and expensive ones are featured in the designers’ section along with the related accessories and RTW, to propose a full silhouette.

The floor also features a “service bar”, here to offer “service and convenience” (quick returns, touchpoints, purchase pickup, alterations, click & collect). In terms of managerial practices, the best employees are featured there, and are highly visible to customers.

The first floor is quite immersive with brands’ locations featuring the whole product offer and differentiated from each other with subtle variations on the walls and flooring. The animation space, mirroring what is available in the Men’s section, is much lighter in terms of concept and somehow less visible. The denim section is huge, but not called “denim”.

Here also, services are available, such as alterations (Nordstrom has the largest US network of tailors able to alter any product).

The second floor is dedicated to contemporary fashion, including Topshop and Asos (not really advertised as unique or exclusive for any of the two). Here, no brand has its own concept, as it is all about rotation and new findings. For instance, a specific concept is dedicated to new brand discovery, just in front of the escalator, and makes a new product proposal every six months. The interesting point is the variable business model, as sometimes the space can be lent or rented to brands (such as Allbirds), and sometimes, Nordstrom makes its own selection of products.

The third floor is probably the most interesting, and not for the product selection (sports, kids, lingerie, home products), as all sections are quite heavy visually due to the number of products on display.

What is striking on this floor is the click and collect area, and the fact that the stocking area is on the sales floor, visible from all. Initially, the reason for such a situation was that it was easier during the pandemic, when the stores were closed, to set up a pickup area for sales associates there, but then, Nordstrom realized that it could be an asset to show operations.

When customers are coming, they see the sales associate taking their parcel from the shelving. If the product is in a box, it means that it comes from another store or a warehouse (there are 3 fulfilment centres in the country). If the product is in a bag, it comes from the store itself. Customers are then invited to open their boxes or bags, to make sure that the product is right for them. If not, they have the possibility to have them altered by the click and collect staff, who can also gift wrap them on the spot. Interestingly, the click and collect staff are not sales persons and are not trained on what is available, meaning that they can bring an additional service, but cannot complete a sale by another product suggestion.

According to them, the visible shelving has now become an attraction and a destination for customers, who are happy to come to this floor to pick up their products. They have the possibility to wait at the nearby café (not particularly inviting) in case they have to wait for the alteration to take place.

Our opinion

Overall, at the time of the visit (early June), the sales floor was packed with merchandise, including discounted products even though the Nordstrom Rack is across the street. This was especially visible with shoes and accessories, suggesting that, even though we were told that business was great, the retail recuperation was somehow slow to take off.

Two other points were striking at the time of the visit:

-    Nordstrom takes great pride in being a knowledgeable fashion retailer, with a distinctive flavour and a specific selection. This is visible through the special concepts designed in the Men’s and Women’s sections (where they experiment with new brands or brands repositioning themselves, such as Lacoste or Aigle) and the animation zones in the women’s section. This makes it all the more surprising that they are not heavily advertising the fact that the Nordstrom customer has the worldwide privilege to shop Topshop, Topman and Asos, once global brands and now labels that only Nordstrom has the right to sell.

-    The service point on the third floor was visually impressive, and so were its organisational processes when described by sales associates. It is quite impressive to have managed to make the shelves an attraction per se, and decided to display them on the retail floor (this also relates to what we saw in the Nordstrom Men’s store in Colombus Circle, NY). However, such attention to customer service and detail should go hand in hand with the motivation of the associates: our experience at the service counter (ground floor) was, at best, poor, during the store opening hours, and somehow echoed the questions raised by the multiple signs on the sales floor encouraging people to apply and join Nordstrom teams.

All in all, the Nordstrom customer service quality is undisputed in the USA, and this Seattle store is no exception when compared to the competition. However, the level of inventory seen on the sales floor (a situation which is not specific to Nordstrom) might imply that physical retail is still difficult for stores located downtown (customers really need a very good reason to come there), leading to a focus on sales and discounted items (Nordstrom has even announced that the Rack business unit was a key component of its planned growth in these difficult times), which, in turn, reflects on the sales associates morale and the overall store experience.

The gap between the New York stores and this one is quite significant, and we are not talking about the stores’ setups (the New York units are more recent), but really, the atmosphere generated by a staff which seemed, at the time of visit, less motivated and excited in Seattle than in New York.

Credits: IADS (Selvane Mohandas du Ménil)

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Whole Foods Market is an organic food grocery company currently operating in the USA, Canada and the UK, which achieved a total turnover of $17bn in 2021. Founded in 1980 in Austin, Texas, the company has consistently grown both organically and externally, by the opening of stores and acquisitions of regional players, allowing a geographical expansion, learning and implementing new processes, and entering new product category markets. The company has been purchased by Amazon in 2017, after having posted a total revenue the previous year of $16bn in 2016, for a total value of $13,7bn, the largest external acquisition operation ever made by Amazon at the time, with a 27% premium on the share price.

In a post-pandemic world, crafting an inclusive culture able at the same time to bond together employees and act as an element of motivation and pride is more important than ever, especially now that retail companies start to feel the pinch when it comes to attracting new talents. The IADS had the privilege to listen to Walter Robb, the former Co-CEO of Whole Foods Market, during the World Retail Congress in April 2022, on the topic of “conscious capitalism” and how, when properly implemented, it could help fuel growth for the company by creating an adequate corporate culture. This is the reason why we invited him to share his thoughts and vision when it comes to leading with a purpose, as well as to share the lessons he learnt during his 26-years-long tenure within the company.

Introduction

Walter Robb, a graduate of Stanford University, is a connoisseur and ardent entrepreneur in the organic food business, an industry he joined in 1977. He is the founder of Stonewall Robb Advisors, which mentors and supports entrepreneurs, a Senior Executive Partner at S2G Ventures, and a member of the Board of various companies in food, health and hospitality. Prior to this, Walter Robb was the Co-CEO from 2010 to 2017 of Whole Foods Market, a company that he joined in 1991 as a local owner and operator before moving up the chain of command, until overviewing its acquisition by Amazon in 2017. Robb has been inducted into the World Retail Congress Hall of Fame in 2022 which honours retail’s most influential representatives whose ideas have shaped retailing through the businesses and brands they have created.

Interview

IADS – You started and operated your own grocery store for 15 years, prior to selling it to Whole Foods and joining the company in 1991. 31 years later, how would you say this experience influenced your career at Whole Foods? What would you do differently?

WR – I started my career from the ground up: I borrowed 2,000 dollars from my stepfather, bought 3,000 dollars of inventory and started a business. During my first day, I did 200 dollars of sales. We were in 1977, I was 17 years old and I was a retailer.

Would I do anything differently? Probably not: I am convinced that to be a good retailer you need to start from the ground. I made some mistakes (a bunch actually) but it was all about permanently learning. I learnt by watching the owner of a hardware store across the street, who was all about customer service and building relationships through interaction prior to any intent of selling anything. I integrated that approach and later on implemented it at Whole Foods, trying to create a business based on relations, not transactions. This is why in the stores whenever a customer was asking for a product, clerks were not simply pointing them out in the right direction but bringing them to the right location.

There is no replacement for learning by doing when it comes to understanding how a retail business operates.

IADS - The expansion of Whole Foods Market in the Northern Pacific Region in the 90s under your watch was meteoritic: what was the competitive advantage back then? Product, people, systems? Do you feel this could be the same today?

WR – I do not think the situation is the same today as we are in different times: there are many more organic food companies now and all retailers have included that segment in their offers: look at Walmart!

At the time, there was a great sense of purpose to bring natural food to the market: we were the first ones to do it, with all competitive advantages linked to being the first mover, and we had the wind in our back, even though we did not know exactly what we were building. So, definitely, the situation has changed.

I believe that our differentiating point was our philosophy, all about empowerment and based on the idea that every associate can, provided they get support from their leaders, make a difference in the way the business grows. We supported the idea of sharing the responsibilities to collectively make the best decisions possible. A few examples to show how it translated:

-    Store teams leaders had a yearly budget of $100,000 to invest, on their own decision, to improve their stores,

-    Team members had to vote when it came to accepting a new member to the team.

So looking back, it was a combination of right timing, having the wind in our back, and a strong sense of purpose, to give good reasons to people to come and work at Whole Foods Market.

IADS - You spoke at WRC in Rome about the importance of purpose and culture for a company. How did you drive purpose during your tenure at Whole Foods? How did it evolve? How did you make sure it matched business expectations?

WR – Let’s start by looking at the purpose: it is the reason why the business exists, the “why”. You do not exist to make money, but to serve your customer. Every company needs a purpose: this is the most powerful leverage we can have.

How to make the purpose actionable? First of all, you define one, you communicate it, you lead it, you make your decisions according to it, and you share it with your teams making sure that they can give their own form of the purpose. But what does this mean?  What is key is to see it as a living concept:

-    You have to constantly talk about your purpose to the teams,

-    Your actions need to be taken in order to reflect the purpose. For instance, Whole Foods Market was one of the first retailers to walk away from one specific fish species which was unsustainably exploited, in order to be true to our purpose. We were also the first to go to a fully recyclable paper bag. Each of these steps, however little they might seem, are noticed by teams who understand that you are true to your word, which is what matters in the end.

-    On their side, your teams need to have the opportunity to act at their level through an empowered culture, to give the purpose its own expression through their own actions. We as leaders need to set up a culture where teams have room to make decisions. Giving them authority and power, you help bring the purpose alive throughout the organisation.

Now, a note about what I mean by “culture”. The Whole Foods philosophy, that I call “conscious capitalism”, is based on 4 pillars:

-    A sense of purpose, which is “why” the company exists,

-    Empowerment and leadership,

-    Values,

-    Culture, a mix of the purpose and values in a living form: how people feel shopping or working with you.

The culture is where we invested a lot of energy, time and money at Whole Foods Market.

IADS - When Amazon bought Whole Foods, the price strategy drastically changed: how did loyal customers react? What was the impact on WF culture and what did it take to remain true to the original promise?

WR – Amazon changed a lot of things for Whole Foods Market!

In terms of pricing, in 2016, the market had caught up with the organic food trend and our shares were down from the high 50s to the low 30s: the analysts were disappointed with our inability to adjust prices quickly enough. We had not realized that we had gone from a market where we were the only ones selling our products and setting our prices, to a market with fierce competition. The reason why we did not adjust the pricing and margins soon enough, was probably because the culture could not be adjusted even though we had already started some initiatives. But our freedom to test was limited, being a public company with the obligation to report every quarter. Amazon, being a private company, had the ability to go faster in the price lowering process, and they maximized the gross margin through a series of investments which showed results within a year. This was a great example of Amazon’s power and positive side. They also allowed us to invest in cybersecurity and e-commerce, for instance.

When it comes to the limitations of the partnership, I would probably say that the culture, which was so precious and particular at Whole Foods Market, could not be understood and maintained by Amazon. For instance, when we started discussing with Amazon, both teams were asked what they learnt from each other. The Whole Foods Market team answered that they learnt about data management, decision-making tools, and tech. The answer from the Amazon people was: “we learnt how to hug”, which is disappointing because they could not manage to understand our specificities. As a result, many of the Whole Foods Market teams left as the culture changed too much.

But on a broader note, I would say that the acquisition by Amazon has been a good thing for Whole Foods Market because it allowed the company to grow, including by making the pricing more adjusted to today’s competitive market.

IADS – You used to be Co-CEO at Whole Foods Market. What is a Co-CEO and how does this work?

WR - You have to remember that John (Mackey) and I were friends for 35 years and that before being appointed Co-CEO, I had already served as President and COO so it was not something coming out of the blue but a natural progression.

John is an extraordinary thinker but not so much interested in details, which is my case. We were really complementary to each other, without a strict division of actions even though in reality it came naturally (for instance I managed the relations with Wall Street). It was a specific set-up of 2 people doing something together in which they believed very much.

I would say that the clear benefit was to have 2 perspectives and points of view, both wanting to win together, and the downside is that we had to take the time to work it through with each other.

For instance, one time we were trying to decide to raise some product prices, I woke up in the middle of the night and I realised that we needed to act and I wrote John a note, he wrote back straight away at 4 am thinking the same thing. There were also times when we disagreed, for example on investments and tech. This is where it became a challenge because we ended up agreeing on compromises, turning out not to allocate enough capital to the projects.

When it came to the teams, of course, they were probably playing the mom and dad game, but I had most of the direct reports, so most of the organisation ran through me, which made things simpler.

At the end of the day, even though analysts were criticizing our set-up, it was working well for both of us, and it lasted 8 years!  Keep in mind that we had been friends for 35 years before. It was a unique arrangement, specific to our company and our history. I would not rule it out for other organisations, but it was quite unique and specific based on our personalities and situation.

IADS – How do you see the role of the CEO now and how did it evolve?

WR – The most important quality for a CEO is that they set the vision, and use the strategic chops they have access to, to understand the market and figure out how to proceed.

Beyond that, for me, as a CEO you have to be authentic and empathetic, all the more that you have to work with multiple generations of employees. In the US, we had social situations forcing CEOs to talk, without playbooks as this was an entirely new situation. A lot of CEOs told me that they found these situations strenuous. We are all different, there will never be a playbook on how to be meaningful and empathetic, especially given the fact that a lot more is expected from CEOs today compared to in the past.

Another set of qualities is agility and curiosity: now CEOs have to be willing to move, discover and act quickly, especially when it comes to technology.

All in all, there has been a crack in the idea that CEOs are all powerful and that teams are working for them: the work from home trend, among others, has changed the way organisations are led.

A lot more is asked from CEOs today in terms of skill set and the qualities needed. I do not think that it is possible to be a CEO without being so on a 24/7 basis. It demands a lot from you as a person and requires a strong, and permanent, willingness to grow. One of the principles of conscious capitalism is that if as a leader you do not grow, you will not be able to make your organisation grow either.

IADS - In terms of Price / Quality / Experience, what works and does not according to you? How did you drive customers’ attention?

WR – The three components of retail are price, quality and service. You can have two of the three but usually not the three at the same time. We chose quality and service. We never aspired to be the cheapest but we wanted to provide the highest quality. Of course, this depends on companies and what they want to achieve.

We developed a set of quality standards that evolved with the years, laid out in full transparency with vendors and suppliers. Again, this relates to our culture, our goal was to motivate our store leaders by showing that we were true to our purpose. We were known to have the highest product standards on the market.

When it came to the service, we invested a lot in the workforce and how to constantly better serve the customer. Our model was based on interaction and we were known for the great customer experience when they were coming to the stores. We controlled that with mystery shoppers but that was almost superfluous given the strength of our culture at the time.

It is all about the role of the leadership: to take care of teams who in return can take care of customers.

IADS - With the current limitations (staffing, experience), what would be your view for department store food retailing: go with a partner or develop ourselves?

WR – I went to several department stores in Berlin and Amsterdam, and I loved the way they set up restaurants on the roof-top. Food is a great business to bring animation and traffic to department stores, but a very complex one too because fresh products have a very limited shelf life.

For that reason, I would say that having a partner would be probably easier, but, if I had the choice, I would rather go direct by recruiting someone from the food industry, leveraging his own contacts, as I truly believe that outsourcing leads to losing a part of the experience. Plus, you might make more money by going direct.

IADS - How did you deal with innovation at Whole Foods Market? By sequence? In parallel? How did you create a culture of innovation?

WR – This is getting us back to the power of culture, in our specific case the notion of individual empowerment: our team members were able to make their own decisions at their level. In our case, we expected our 500 or so stores to be all different from each other, so we did not centralize the store development function at the national level, but, at best, at the regional level. This allowed all store leaders to do their things, all the more that our culture included a right to do mistakes. In Denver for instance, a store displayed a full Mac & Cheese aisle. Nobody told him to do that, but he came up with the idea which was specific and differentiating. Another example is when for material reasons, a store started to over self-serve bakery whereas so far, we were serving ourselves bakery over the counter.

IADS - How do you deal with innovation-related investments within a company? And how can you mitigate risks?

WR – For the food industry, there is more innovation now than in the past, and this is only going to accelerate. It would be suicidal for any retailer to ignore this. There is no way to succeed by holding on to what you have in such a competitive market today.

In terms of my investments, everything starts by meeting an entrepreneur who at the same time has the ability to build a sustainable company, which shows his seriousness, and at the same time provides a truly different and differentiated offer which will fuel my unique value proposition in a new way.

***

Question – Going back to the notion of purpose: how did you deal with all stakeholders (board, team members, directors, shareholders…)?

WR – Purpose is a living thing. It is not like you say it and that’s it. You have to consciously invest in the process of reviewing your purpose and see how it can evolve, first because you are a bigger company now and you can do more things, and second because you are focusing on the right things.

We had a meeting every 5 years called ‘Future Search’ when we were gathering about 150 stakeholders, and we worked through a process where we looked at the past, present and future, including reviewing our purpose.

Also, remember: simpler is better than more complex, and this is true for purpose too.

Question – Going back to the notion of culture in Whole Foods Market, in department store companies, usually legacy companies, we need to move fast but at the same time also deal with company owners, usually members of a family. I am sure that you have gone through the same changes, but how to deal with the needed changes which might, at the same time, make them very nervous?

WR – Always remember that the culture of a company is a living thing, it is not set forever. We took some leadership principles from Amazon, for instance. Another example is that we opened a leadership academy as we realized that a lot of our store managers lost, with time, their ability to drive with purpose. It is all about growing an organic set of values and ideas.

In order to pilot this, we were asking our whole staff twice a year about our culture, where we had to invest, where we were strong, and what were their ideas too.

In the department store world, Nordstrom is a good example: they are all about serving the customers. And this is not going to change: even if the “how” changes, the “why” does not.

Now, when it comes to the reaction of owners and how to deal with this, this is an excellent question and I will ask Pete and Eric Nordstrom about that!

Question -  How do you inspire all teams with purpose and make sure they embrace it?

WR – Give the possibility to the teams to embrace the purpose and make it theirs, by granting them autonomy to test ideas (as long as they enter within the purpose framework of course). Give them the possibility to do so in full autonomy (for instance, we gave a budget of $100,000 to store leaders to spend on an annual basis on their store, they were accountable for the expenses but the decisions were theirs). And, most importantly, keep in mind, and remind them, that it is ok to fail.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the collection of pictures here

Printable Version here

Introduction

The IADS travelled to Turkey (now known as Türkiye) last June to meet with Cem Boyner, the CEO of Boyner Grup, a former IADS member, to get an update on his latest initiatives following the Covid-19 pandemic. Located between Asia and the West, often tarnished with its international policy decisions (to the shame of Turkish businessmen), and riddled with inflation (estimated at 78,35% for 2022, a 24-year high), it is easy to overlook the country and consider it done.

In reality, the retail market is buoyant, and many innovations are taking place, which made the trip all the more interesting as many of these innovations could be interesting for IADS members to look at. We review below our store visit, as well as the insights collected during the meeting with Hopi, Boyner Grup’s data venture.

Company history and background

Department stores capitalised on the expansion of Turkey’s ready-to-wear sector in the 1990s and a concurrent boom in large shopping centres that have continued further. Despite continuous unfavourable exchange rates making imported goods significantly more expensive, as well as extremely expensive customs fees (up to 35% for merchandise coming from some parts of Asia), fashion and luxury found their way throughout the country. On another hand, the growth of Turkey’s economy gave rise to a new middle class and more wealth among the already rich. This transformation led to increased foot traffic at premium department stores as people became more eager to try new brands and spend beyond basic necessities.

Among the significant players shaping up the market, Boyner Grup was founded in 1952 as a clothing manufacturer, by Osman Boyner. The first Boyner store opened in 1981 and was operated under the name of Çarşı (name converted to Boyner in 2004). Nowadays, it is led by Cem Boyner and is mostly addressing the middle class, operating under the brands Boyner, YKM, Boyner Sports, YKM Sports, and Boyner Outlets. They report 276,000 sqm of retail space in 97 stores spanning across 37 cities.

The merger with YKM, another department store company, was achieved in 2012, which ultimately led to Boyner’s resignation from IADS in 2016 (YKM was a member since 2003 and membership had been transferred). Business includes international brands (active sportswear, Men’s, Women’s and Kid’s footwear, accessories and RTW, cosmetics, home decoration) and a significant private label business (13 brands). Boyner also launched Boyner Home in 2017, with stores dedicated to kitchen, bathroom, home textile, and electrical household appliances.

In 2015, the group was composed of 2 main arms: the Boyner retail and textile activity, including the manufacturing capabilities and some private labels sold through their own retail network, and the retail branch, composed of Beymen (a luxury department store brand name founded by Boyner in 1971) and AY Marka. Cem Boyner increased his equity in Boyner Retail and Textile Investments, while Qatar-based Mayhoola (which also owns Valentino, Balmain and Pal Zileri) invested in the retail branch. This led to the restructuring of the group in 2019: Beymen and AY Marka are now owned by Mayhoola while Boyner Holdings remain the full owner of the textile retail and production unit, including:

• Boyner stores,
• Altinyildiz (textile manufacturing),
• BR Magazacilik (retail distribution of the Altinyildiz brand, in partnership with Ran Retailing – BR reports 200 stores in 60 cities in 2020, and 300 points of sales including wholesale),
• Hopi (mobile and telecommunications),
• Morhipo.com (online retailing, launched in 2011 and ranked 6th online retailer in Türkiye with a turnover of $172m).

No financial information has been officially released at least since 2018.

Visiting the store: A holistic department store

We visited the latest Boyner store, in the Cadde location (in a residential part of the Asian side of Istanbul), which opened in September 2021 on 4,200 sqm and 5 floors. This store, seen as a prototype for the new Boyner concept, replaced a much bigger unit which was, according to Cem Boyner, in a much better location, and which became a local meeting point for residents in the past 22 years in addition to being a cash machine, thanks to a private brand, Limin (not sold in the new store). Boyner made the decision to challenge all this (and make the most of a real estate opportunity) as the goal is to move from being a department store company to a “multi-brand lifestyle store”, positioned on the mid-range segment (the goal is not to compete with Beymen, which operates all international luxury brands in).

What is sure is that the store is highly visible: the entire façade is covered with a 38-meter-long screen displaying anamorphic art pieces (a technology allowing to have a striking 3-D feeling from the store entrance) and Boyner makes sure people see it, thanks to a Costa Café just nearby (they have secured the franchising agreement for the country). Art is basically everywhere in and on the store (this is unusual for Boyner) and every artwork has been co-developed with artists, to make sure they are interactive and echo what is going on in the store, to avoid giving a museum feel.

The basement, dedicated to sportswear, is striking: all walls have been built in recycled plastic and wood (the eco-conception is at the core of the store model, for instance, solar panels on the roof help power the store, and toilets are used with collected rainwater) and, in addition to an immersive décor and visual merchandising, many services are offered to customers: a cold room to try the garments (similar to Canada Goose in Toronto), bikes where customers can pedal to recharge their phones, free water fountains in the gourds section… all in the middle of an advanced VM set up (a step forward for the company according to the staff), using interactive LED-lit flooring and artworks, or 3D holograms on the shelves to animate the products. This selling space is working extremely well and generates 25% of the total store turnover.

The ground floor displays a space dedicated to sustainable goods at the entrance, and the cosmetics spaces (25% of the turnover).

The sustainable goods space, where many products have been developed in collaboration, also features artwork developed by artists concerned about sustainability (a common trait across the whole store) and collecting points, where customers can leave their unwanted items, which are then recycled and sold, financing grants to students. Art is only displayed and not for sale.

The cosmetic area is more classic, with the usual names (Clarins, Lancome, Estée Lauder…) displayed in their own concept boxes with white logo on black background, all operated in concession (even though the system is quite exotic in this store: brands pay for their salespersons, do not pay rent but Boyner collects 100% of the turnover, making this system a mix between wholesale and concession).

What is more striking is the 40m high LED screen that goes from the ground floor to the 4th floor, displaying artwork which interacts with customers through their cell phones (an astute way to collect data!). This proves that it is possible to use screens in a lively manner, and not just as a décor like in, for instance, the Nike House of Innovation in Paris.

The first floor is dedicated to Women’s fashion, with an upgrade in terms of brands presented compared to what Boyner has in its other stores: Lagerfeld, DKNY… (the retailer wants to remain accessible to its customers and not go full speed on luxury). They also promote local initiatives, by collaborating with influencers and artisans to produce and sell one-of-a-kind products at accessible prices. There are no cash desks: Boyner is testing on this floor mobile payments. When asked about how they were dealing with the antitheft tag removal and the gift wrapping, they showed a mobile unit where all these actions can be performed on the spot and moved very quickly from one side of the floor to another.

The second floor is dedicated to activewear and denim. There, the seating section has been developed by an artist whose artworks are displayed in the entrance, echoing what she does in her art, and is completed with videogame booths and the possibility to interact with the screen, which increases the time spent in-store.

The third-floor features men’s collections. Interestingly, and due to the nature of the market, the mannequins also display women’s products there, as many customers are females looking for gifts for their husbands.

Finally, the top floor is dedicated to homeware and kids offers, as well as the “customer relation” lounge, where customers can proceed to click and collect and ask for home delivery. The lounge seemed to be still under construction at the time of visit, and was very surprisingly uninviting, in stark contrast with the rest of the store.

In terms of F&B, in addition to the Costa Café at the entrance, the store is flanked with a new concept, “Vertical restaurant”, which is a must-see. The concept is to be entirely sustainable at 100% and self-sufficient in terms of energy, water and consumption (except the aliments). This goes through, of course, the decor (entirely recycled), zero plastic and carbon policy, the use of recycled and filtered water at the bar, but also specific partnerships with LG, Electrolux or Bosch to create kitchens that customers can rent or where they can follow lessons with chefs, as well as an upcycling workshop, a local vegetable growing unit, and the systematic recycling of 100% of the food waste into facial cream (from the coffee waste), soap (from cooking oil), compost and pet food. On 800sqm, the restaurant features a high-end and vegan Turkish cuisine restaurant, a pizza place, a Japanese place as well as 3 locations that are offered to up-and-coming Turkish young chefs or street food stars every week, to generate curiosity and traffic.

What’s great and what’s next

The Cadde store is delivering results: the average ticket is 27% higher than in other stores, thanks to a different brand selection and a lifestyle approach, with many places where it is great to spend time (time spent in-store increased from 30mn to 1 hour). This concept will be rolled over to 20 stores in 2023 and 30 additional ones in the next 5 years.

Overall, the bet to create a “multi-brand lifestyle store” is paying off, as the general feeling is an energetic store, full of great ideas, addressing a young clientele and giving them an immersive concept, which feels rich but not expensive. Is that to say that Boyner has developed a new concept store? When discussing with Cem Boyner, he confirmed that such a concept was to be deployed on 9,000+ sqm stores. Among the good ideas that we spotted:

-    The many fun services (cold room to try warm garments, bicycles to charge phones,

-    The collaboration with artists to make art part of the store (and not museum-like, for instance, Le Bon Marché in Paris) and with sustainability in mind,

-    The practical approach, for instance with the mobile wrapping and antitheft tag removal unit, which has been developed by salespeople themselves,

-    The ‘Vertical’ restaurant and its radical approach, which could be interesting for IADS members in their food offer.

Of course, we had some questions when it came to salesperson management: 60% of them are paid by the brands, and only 40% are managed by Boyner. In these conditions, given the fact that the store has a cohesive, holistic lifestyle concept, how to make sure that they are all working together and orientating customers, instead of only selling their own brands?

Moving forward, we were also introduced to the Boyner online business, which is currently representing 30% of the total group’s turnover, with 17m loyal cardholders (in a country of 85m people).

Boyner is launching a new delivery service, “Boyner now”, with a 90mn delay in the whole of the country. When customers use this service, a Boyner-branded delivery person comes to their house (including, in the case of fashion items, a +1 / -1 size unit, just in case), waits for the selection confirmation and retrieves payment (meaning that customers pay for what they keep and not during the order itself). With this new service, Boyner hopes to capture 60% of its turnover online. In terms of technics, this service is fulfilled from the 97 stores in the country, and customers have access to 4m references, vs. 10m on the “normal” e-commerce website, which is also going through a revamp in order to increase the length of stay online from 1mn and 1% conversion to 8mn and 4%.

This growth in digital is supported by Hopi, another venture that Boyner launched in 2015, and dedicated to data management for B2B (marketing solutions, digital transformation, payment systems solutions, BNPL solutions) and B2C (hyper-personalized services for their 13m app users), leading to a full ecosystem which is truly competing with what Amazon or Alibaba can propose to Turkish retail companies today. Boyner will be looking at international expansion for Hopi in 2023 and hopes to equip foreign retailers in the future.

Conclusion

Following the split with Beymen, Boyner Grup knew they had to reinvent themselves and the experience they wanted to provide to customers, so they initiated a sea of changes well before the Covid-19 pandemic. As a consequence, the pandemic acted as a catalyst and also allowed to speed up some of the planned changes.

Today, many boxes are ticked: a new approach to instore experience (which really competes with many higher-end world-class department stores), the use of art at the design level of the store to make sure it is echoed in the customer journey rather than just sitting there, a radical approach to sustainability with many innovative processes, and a clear vision when it comes to the use of tech and data in order to accompany today, and predict tomorrow, customers’ purchases. The setup of the Boyner Now delivery in 90mn in the whole country is a tour de force and it would be worth it for IADS members to go and see how this is actually performed in terms of systems and processes.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the collection of pictures here

printable version here

Introduction

The IADS was invited to take part in the 2022 Future of Retail Conference organised in Athens last May by the Hellenic Federation of Retail. The Association was interviewed on stage, along with Mr Dimosthenis Boumis, the CEO of Attica, the emblematic Greek department store, and invited to discuss the future of retail in city centres.

It was also the opportunity to reconnect with old acquaintances, since the former CEO of Minion, a defunct department store in Athens, used to be a member of the IADS and is now a member of the Attica board. Attica has gone through the Covid-19 pandemic with the same difficulties as other department stores in the world and came up with a new strategy designed to rely less on international tourists (even though they remain more than welcome) and more on the local Greek clientele, from every social class. If appealing to the rich Greeks is not a head scratcher, the current social and revenue structure in Greece makes it a bit more complicated to appeal the to lower classes without losing glamour or soul.

We visited the City Link flagship, in the heart of Athens, very close to the infamous Syntagma square, in order to see how the store is implementing and executing the new strategy.

Company history: just turning 17 and already a complicated story

The Attica department store (not to be mistaken with Attica Group, owner and operator of boats) has a recent and rather complicated history, since the company (and the brand) is only 17 years-old, in spite of the flagship City Link location in the heart of Athens being located in a historical building. Just like in other countries when it comes to the history of retail, it is mainly a story of powerful men and capital management, even though it is much more condensed in time in the case of Greece.

To fully get a grasp of it, one needs to have a quick historical approach to the Greek retail market, marked in 1934 by the opening of a small kiosk, called Minion, by Ionnis Georgakas. There, he only sold products in bulk, which proved so successful that just after WWII, he was able to buy a larger location in the city centre, increasing  progressively the surface until being able to sell 120,000 references in the 1950s, with 1,000 sales associates. Minion became a European-class department store and introduced escalators, air-con and computers to Greece, in addition to allowing Greek customers to become exposed to foreign fashion and tastes, generating queues in the streets to enter what would soon become an iconic location for any Athenian.

Georgakas, a wise businessman, understood early the role of seasonal discounts as well as TV and radio advertising,  and ruined the competition of the then-ubiquitous local bazaars. Unfortunately, the iconic 9-storey store was destroyed during a fire provoked by a criminal arson in 1980, and the company was ruined. Georgakas rebuilt the store but was not able to recover from the heavy losses, and the company was nationalized in 1983. Georgakas attempted a come-back in 1991 by purchasing back the company but failed and ultimately left the following year. The company survived until 1998, before being sold to another Greek company, Elmec, which in turn was acquired by Folli Follie, which had the project to renovate the store, a project dropped in 2018. The store, left empty for more than 20 years, has been sold in 2021.

Folli Follie was founded in 1986 by Dimitris Koutsoliotsos and is famous today for its luxury jewellery, watches and  fashion accessories, sold in 95 stores across the world. Koutsoliotsos, aware that the closure of Minion had left a hole in the Greek retail market (and before opportunistically acquiring it), founded the Attica department stores company in 2005 with the City Link location and the idea to replace Minion. Due to the nature of its business, Folli Follie was able to secure exclusive distribution rights for Greece (and other countries) for some brands, such as Shiseido, which were presented in the Attica stores. In 2018, Koutsoliotsos had to resign from his role at Folli Follie, but remains involved in Attica, where he appointed Dimosthenis Boumis as CEO. Boumis, who has a finance background, founded Cosmobrand in 2011, a joint venture between Attica and himself, dedicated to the import and distribution of cosmetics and food, as well as e-commerce. The CEO appointment came in 2021 and makes Attica quite special in the worldwide landscape, with a non-family-member acting at the same time as a major stake shareholder and CEO.

Today, Attica operates 4 department stores in total, including City Link (2005), Golden Hall (2008), Tsimiski (2014) in Athens, and a location in Thessaloniki (2012). All locations sell women’s, men’s, and children’s fashion wear, footwear, beauty and accessories and are recognized by customers and brands as true luxury hotspots. According to the Greek press, the company posted a total turnover of €140m in 2021, vs €98.8m in 2020 and €180m in 2019.

Visiting the store: a true and visible improvement from a year ago

The City Link store is located in a historical building that has been part of a city centre renovation project back in 2005, helping to preserve buildings that were built just before WWII. It is structured on 8 floors and 34,000 sqm, 4,000 of which have been added in 2021, mainly to house extensions of the Women’s Fashion and the sportswear sections, in addition to new services such as a VIP room, a hair & beauty salon, and new F&B points.

The large windows on the street are inspiring, quite efficient, and open on a space which is complex due to the structure of the store: the basement and the ground floor are narrow and the whole game is to make sure that customers are naturally going into the upper floors, which is the reason why the escalators are massive and just in front of the entrance, at the risk of overlooking what is left, right and down (to the point of not having visited the basement for this review…).

The narrow ground floor displays the cosmetics offer, with all brands having a shop in shop at their concept in the periphery, including a large Byredo location at the entrance. Circulation is not easy, but sales associates are omnipresent and willing to help. Security guards, too, are very visible and can be intimidating when it comes to entering the store. Interestingly, each floor displays the whole list of brands available, which suggests a certain effort to keep it up to date of course from season to season but also in season when popups and temporary collaborations are launched.

The first floor is dedicated to formal men’s RTW, shoes and accessories. The brands are high end, such as Hugo Boss, Zegna, Kenzo or Brooks Brothers (a company in which Konstantinos Tsouvelekakis, another significant shareholder of Attica department stores, has shares). The whole floor is closed, without windows, which can be somehow oppressing, and although all brands have their own concept,  some logos obviously produced on site are not entirely perfect.

The second floor is dedicated to Men’s casual fashion, and, contrary to the first floor, has all windows opened on the main avenue (a decision taken by Boumis when he took the job) which gives light and a real sense of depth since the building is narrow and long. Interestingly, all cash desks (for those not related to the shop in shops) are located at each end of the floor (this is the case for all floors) which can be painful as customers are obliged to go through the whole floor to pay for their purchases.

The third floor has been, just like the second one renovated, but also extended, with a very efficient sportswear section (the largest in Greece) on the other side of the building (the lower floors in that building are not part of the store as they belong to the Pyraeus Bank, and are under negotiation in order to re-structure properly the store for its basement, ground, first and second floors). The whole space has been imagined as a running track and this works extremely well given the structure of the building, with very large Nike, Lacoste and Adidas shop-in-shops. The “young fashion” space is also spectacular, including the Levi’s shop-in-shop of uncommon proportions. One caveat due to the structure of the building, is that the whole space feels like a tunnel, however immersive it might be, meaning that once customers have started their journey, they might have some issues in terms of circulation and finding the staircases to go up or down.

The fourth floor is dedicated to women’s fashion, and just like the third floor, benefitted from an extension which allows displaying, in addition to the traditional names (Max Mara and all its other lines for instance) a very wide selection of local Greek brands such as Forel. The hair salon is located just behind (not the old school salon, but a very spacious, well-lit and luxurious space), just near the jewellery and small accessories section. This floor also includes a very inviting bar (serving alcohol) and an interesting Carpo shop-in-shop. Carpo deserves a special mention, as it is somehow reminiscent of what Steen & Strom has done with headwear brand Varsity, by teaming up with a local partner and is making extremely good sales thanks to its premium positioning: Carpo is all about selling Greek nuts and chocolate in very nice boxes. The space, located in front of the bar and in a section where customers can not do anything but go through, is a must-see and very well decorated. Average ticket: €80 (literally for nuts).

The fifth floor displays contemporary fashion and lingerie, with a huge Zadig & Voltaire shop-in-shop, a smart sense of merchandising (for instance, Hei Poa cream is available just near the cash desk in the swimming wear section), but the execution of the lingerie space is somehow disappointing.

The sixth floor is dedicated to kids, duty free and also gives access to a rooftop café which, although it has a very nice view, is difficult to access (in terms of escalators and time to get there) and even to find on the floor itself.

What to remember and what is next?

Even though Attica used to be considered a second-class wholesaler by brands in the past, this is no longer the case. The brand selection is good (and improving) but above all, the new floors extensions show a very modern and acute approach to retail immersion, which also explain the dense traffic in these sections at the time of visit (noon, with a scorching 30°C  temperature outside) even though the building is difficult in terms of structure.

Also, the CEO is all about increasing omnichannel capabilities but also experience spaces, as shown by the extremely well-designed café and Carpo nuts store, which are both generating a fantastic return on investment.

In terms of what’s next, the company has announced a major and ambitious plan for the next 2 years, with new store developments taking place until 2026, and, of course, the relaunch of the e-commerce activities including full omnichannel capabilities.

The e-shop, launched in 2017, is to be relaunched during summer 2022, with, in addition to a new product curation, a new technical platform allowing the interaction with physical stores, i.e. picking products bought online in stores, or dealing with products purchased in store and exchanged online. In addition, while at the beginning the e-store will be limited to cosmetics and fashion accessories, RTW will be integrated at the end of the year. This development should contribute to connecting the department store with local customers.

However, we mentioned in the introduction that tourists are always welcome, especially the customers from the Balkan countries, who might not have the same exposure to international brands at home as, for instance, Dutch or French customers. For them, the offer sold in the Thessaloniki stores will be upgraded and amplified, in order to make the most of their appetite for international brands.

Finally, Attica is planning a new opening in the hip area of Ellinikon in 2025, near Athens, where rich Athenians either own a house or enjoy the beach, 25 mn from the city centre. The massive urban renovation project includes 2 retail areas, the Vouliagmenis Mall (“Ellinikon commercial hub”, on 185,000 sqm)) and the open air Marina Galeria, on 19.000 sqm. The new department store in Marina Galeria will display on 10,000 sqm an exclusive selection of brands, completed by a series of mono-brand stores that it will lease to international luxury labels.

Conclusion

The realisation that Chinese and Russian tourists had acquired a place too central in the business forced Attica to rethink its point of differentiation. But how to do so? Can you really compete for international tourists who are spoilt in their home cities and rushing through Athens to get to the islands?

This is why the nut stand is not as anecdotical as it might seem. Attica is well aware that it needs to differentiate in order to reach the customers it targets. This goes through providing experience, but also providing the right level of prices for the right luxuries: dry fruits delicacies for local customers who might want to treat themselves with something inspiring but not to the point of buying a Chanel bag (or being able to), or the right brands to tourists coming from zones where they do not have the same choice than in central European cities.

Even though this is an ongoing journey (which will be completed by the finalization of the omnichannel capabilities in Q3 2022), Attica has made a significant step up when compared to its pre-pandemic aspect and offer. The exciting and ambitious Ellinikon project will also be something to watch closely, as it will be all about experience and entertainment.

Attica company profile

Credits: IADS (Selvane Mohandas du Ménil)

What: Self check-out solutions, which have been around for a while, should have taken flight with the Covid-19 pandemic. However, they experience difficulties as customers are slow to respond and form new habits.

Why it is important: For department stores, tech is part of the equation, but probably less than customer relationship, education and ability to bring them a proposal with is actually a real solution answering a need, and not a new way of creating frustration.

Self check-out solutions are here to bring frictionless and fast payment solutions to customers. However, many US retailers experienced some issues with the deployment of such solutions, among which Wegmans or Walmart.

The issue is not the tech, which has been around for a while, but rather the time needed for the customers to adopt such a new feature in store. Theft is also an issue, which leads to the implementation of new barriers which are each new sources of frustration for customers. In addition, making sure that customers download the right app can also be quite of a challenge.

As a consequence, 67% of US shoppers are frustrated with such solutions, and only 21% of the 18-34 year-old customers (the most prone to adopting new habits) use them.

The issues with self-checkout solutions

What: McKinsey has teamed up with Eurocommerce to produce a study based on a number of companies’ answers to their survey, in order to estimate the cost of what they call the “triple transformation.”

Why it is important: Additional investments are expected in sustainability and systems, in order to keep up with the pace of international competition and local customer demands. However, since these changes also impact roles, HR budgets will also need to expand in line and outside of the already planned budget framework. All these extra-investments are set to dent even further the margins of retailers already under serious constraints.

McKinsey review the top 3 challenges that retail is facing in the EU: sustainability (decarbonization of a value chain that contributes to 40% of the EU greenhouse emissions, of which 95% are coming from scope 3), digitalization (with e-commerce expected to double from 15% to 30% of the business, driving 90% of the growth), and skills and talents shortage.

McKinsey estimates that the needed investment will amount to an additional investment on revenue of 0.8 to 1.6%, or €315bn to €600bn.

Sustainability will involve an investment of €335bn to prepare the sector for green growth, with a focus on net-zero operations, sustainable offerings, circularity and waste management. For McKinsey, a focus on warehouses could address 20 to 40% of Scope 2 emissions. Scope 3 emissions could be tackled with green vehicles fleets, among others.

Digitalization is expected to cost up to €230bn to transform the industry, and is both an opportunity and a disruption. Digital channels, automation, advanced analytics and IT modernization are part of the solution.

When it comes to skills and talents, the distribution sector as a whole employs 26m people in the EU (13% of the workforce) and McKinsey estimates that 13m people will need to be trained and 1,5m hired every year through 2030, costing an additional €25bn to €35bn coming on top of the €70bn already planned to be invested. Roles are being reinvented: cashier, stockists, warehouse roles, transport roles, category management or HR, all of them are impacted by the digital transformation.

The triple transformation: transforming the EU Retail and wholesale sector 

What: A white paper dedicated to the BNPL market and what can be expected now.

Why it is important: The report covers the 3 most important topics when it comes to BNPL: number of providers on the market, potential risks of fraud, and, most importantly, the regulation which is soon to be expected given the risks it can create for the customers in a context when purchasing power becomes a key focus for governments.

Buy Now Pay Later solutions have grown 81% in 2021 vs the previous year according to Accenture, and is the 7th most popular payment method in the world. It is increasingly seen as a viable payment alternative for inexpensive everyday purchases bur also for bigger tickets. Its maturity level varies according to the region and while BNPL is popular in Northern Europe and Latin America, there are reservoirs of growth in APAC, US and China.

However, such a growth is a both a blessing and a curse, because while BNPL solutions allow to significantly increase sales, it also encourages customers to make purchases without properly assessing their capability to withstand their debt. As a consequence, retailers are faced with 3 elements to safely consider:

-    The number of players on the market, as a concentration will necessarily occur,

-    Fraud, linked to the softer controls implemented when compared to the more solid and ancient payment solutions (the report reviews the types of fraud that can take place).

-    Regulation, which is on the rise in most of the countries.

A deep dive into Buy Now Pay Later solutions 

What: Nespresso being certified as B Corp in spite of a poor track record generated questions about the B Corp certification.

Why it is important: The label is tempting and attractive for companies willing to lure in younger customers, which is why larger corporations are increasingly applying. This might be a concern for the certification process, which is seen by some as running the risk to lose its soul.

For Nespresso, being certified as a B Corp company was a milestone and the company heavily advertised this achievement. However, this unleashed a backlash from 30 certified B Corp companies which pointed out the history of child labor and factory workers abuses that plagued the company.

They also called for stronger standards, as B Corp otherwise runs the risk of undermining its label. This is not the first time that such a request is done, as the label certification requests grew +44% between 2019 and 2021 and some B Corp certified companies already behaved badly.

The badge of morality that B Corp has become attracts the attention of larger companies which are increasingly applying, but this poses risks for the soul of the label. Analysts are questioning whether some companies might be too large to be properly assessed according to the methodology applied by B Corp while the founders of the certification remind that the goal is not to build an empire of B Corp, but to provide a tool to change the planet, which should include the larger companies to be truly impactful.

The backlash against B Lab 

What: The WRC has consulted with a panel of 19 leaders to understand how they face adversity in what the WRC call “extraordinary times”

Why it is important: Is the moment we live in that out of the ordinary or is it the new normal that we all have to adapt to?

The president of the World Retail Congress, Ian McGarrigle, decided to dedicate the next session of the WRC to the notion of resilient retail, as the story now is to permanently find the most optimum solution at any moment of time, even though one or more crises might be taking place at that very moment.

Among the 19 experts contributing to this special report (and who all mention that, in spite of very good retail results now, a downturn is imminent), Francisco Irarrazaval, the CEO of Falabella, talks about inflation in Chile, Peru and Colombia, and how this affect operations (70% of the imports are paid in US dollars), talent retention (which goes through bonuses and pay rises) and how the company tries to redirect traffic towards the stores rather than the ecommerce channel in order to keep control of the logistical costs.

Overall, solutions suggested by the report to retailers are of common sense: reduce energy consumption in stores, offices and warehouses, reduce long-distance sourcing, support wages (even though this might indent the margin), and manage cash. 6 conclusions are drawn:

-    Inflation is a shared issue and value is central to winning over shoppers,

-    A store revival is under way,

-    Strategic buffers are adding resilience to supply chains,

-    Pressure is mounting on policymakers,

-    The war on talent persists,

-    The sustainability agenda is not going anywhere.

Resilient retailing: 19 leaders reveal their responses to the crisis 

What: DTC brands have found a winning retail formula by putting a modern spin on routine services.

Why it is important: Service-oriented outposts created by direct-to-consumer brands foster repeat visits and encourage customers to spend more per transaction than online-only customers.

The costs of service-oriented retail may also be less intimidating as profitability is more reliable than purely online retail. These outposts serve as a billboard for the brand, enticing customers to spend time in the space which ultimately costs less to acquire new customers through discovery rather than using online advertising.

Naturally, interiors have ‘Instagrammable’ atmospheres and incorporate savvy branding. Customers visit for a routine service, buy products and post to social media which in turn supports the DTC brand in terms of earned advertising and increased revenues.

While having a service-based offer from the start of the brand is not necessary, recruiting talent is one of the biggest challenges of a store-based strategy.

In-store services help DTC brands go physical

What: The Economist addresses the crucial question to know if profit-seeking companies can really help save the planet.

Why this is important: The cost of switching business is extremely high, and might seem deterring for structures which role is to generate long-term value, unless regulations change and make this type of strategies a profitable option.

On the surface, it seems that the answer is positive: $35tn of assets worldwide are said to be monitored through a sustainability lens (+55% since 2016) and ESG has become a common topic among investors, banks and business leaders.

However, there are some clear contradictions: since the goal of a business is to generate long-term value for its investors, it can be tempting to dump some costs (such as pollution) on the society rather than bear them, not to mention potential clashes with regulators and investors in places without a consensus on the climate policy.

For instance, Blackrock is currently being accused in 19 US Republican states to use its market power to boycott fossil-fuel firms, while Democrats consider the company not green enough. As a consequence, financial institutions are becoming worried about signing green alliances as this type of situation could put them under unnecessary strain and tension. CEOs too discover that their words have impacts: JPMorgan CEO has to deny that he is woke following some comments about the company’s social commitment, while Unilever CEO had to step down after not achieving enough compared to his oral commitments.

Lip-service, however, remains cheaper than actual investments: more than 2/3 of the world’s 166 biggest greenhouse-gas emitters have promised to reach net zero by 2050 but less than a fifth have medium-term target or quantified decarbonization strategies.

The Economist argues that governments have to reconcile the goals of profit maximization and a safer climate. In other words: give companies a good reason to save the planet.

The fundamental contradiction of ESG is being laid bare

What: The trend among US retailers is to go towards more personalization and customization, through an ultra-local approach based on community management, focused product assortment and neighborhood approach.

Why it is important: This is exactly what Fenwick has done for decades before dropping this approach in the 00s. For the department store companies with a wide store network, they are also expected to be more localized now that international tourism should be seen as a bonus, but not as the core business.

Following the first trials made by Macy’s (Macy’s Market), Nordstrom (Nordstrom local) and Bloomingdales’ (Bloomies), large US retailers are all trying the smaller store format in order to get back in touch with their customers. It’s all about personalized service (the new Kohl’s concept store) and ultra-local approach (Glossier).

Big-box stores, which offer a breadth of assortment and depth of sizing or colours, are slowly returning to recipes from the past, when it was all about personalization and localized features. This is a must-do now that they also realized that instore interactions are one of the most efficient ways to capture customers, even though they might end up in the retailer’s digital ecosystem later on.

However, this approach requires a real range of freedom granted to the local teams, especially for retailers who have thousands of locations, and this should not be taken for granted. It also requires a strict product management system in order to avoid being swamped with various SKUs all different from one location to another.

The return of the neighborhood store 

IADS recently held a meeting all about the women’s fashion brands to look out for in 2022. Based on market research, IADS and NellyRodi presented the most innovative brands from different segments of women's fashion: DNVB, designer, contemporary, young talents and everything in between! Check out our selection of these brands!

DNVB

![salut

SALUT BEAUTÉ

Salut Beauté is an innovative and sustainable Parisian brand that creates

colourful, original, and comfortable sets for women. These sets are made

with different fabrics from second production circuits recovered from

luxury houses or manufacturers from there they are refurbished and made

into fashion forward yet powerful suits.

Check out the Salut Beauté website here

![never fully dressed

NEVER FULLY DRESSED

Never Fully Dress is a flattering effortlessly feminine fashion brand that was

designed for all shapes, sizes, and styles. The products are made with

premium quality materials without the premium price tag. They have

introduced recycled polyester and natural and biodegradable fabrics to

help reduce their environmental impact.

Check out the Never Fully Dressed website here

CONTEMPORARY BRANDS

![icicle

ICICLE

Icicle is a high-end fashion brand from Shanghai that presents a fine

elegance while still being made with sustainable materials with 100%

natural materials, vegetable dyes, recyclable packaging,

Check out the Icicle Website here

![LVIR

LVIR

LVIR is a modern and natural brand that can be enjoyed by all generations.

It is a flexible style that can blend with the attitudes and emotions of the

customer. It is refined women’s clothing for fashion professionals and

wants to focus on simple colors for a more comfortable and stereoscopic

style.

Check out the LVIR Website Here 

DESIGNER BRANDS

![MERYLL ROGGE

MERYLL ROGGE

Belgian brand curating an energetic medley of unexpected styles.

check out the MERYLL ROGGE website here 

![NENSI DOJAKA

NENSI DOJAKA

Albanian designer known for her lingerie-inspired dresses and cutout

pieces that reference '90s aesthetics.

Check out the NENSI DOJAKA INSTAGRAM here

NEW YOUNG TALENTS

![SUPRIYA LELE

SUPRIYA LELE

Led by her Indian heritage, British identity, and her passion for minimalism

in her creations she uses a deliberately vintage and subversive approach to

textiles, cutting and manufacturing, thus elevating them to the rank of

“new luxury”.

Check out the SUPRIYA LELE website here 

![HELIOT EMIL

HELIOT EMIL

The collections are unisex and monochrome, taking inspiration from

Scandinavian heritage and using different fabrics from around the globe.

Check out the HELIOT EMIL website here 

OTHER

![ELSE

ELSE

Elevated, everyday lingerie, loungewear, and swimwear brand for modern

women.

Check out the ELSE website here

![SPORTY & RICH

SPORTY & RICH

Collection of simple, yet thoughtfully designed products that emphasize

longevity over momentary relevance.

Check out the SPORTY & RICH website here

Check out Delipop's store front here

Introduction

The IADS recently sat down with Marek Piotrowski, Chief of Marketing Operations at Retail Robotics, a technology company that has been improving the efficiency and convenience of delivery and click and collect processes for e-commerce and e-grocery for more than 30 years. Marek Piotrowski has been involved in marketing and design for the entirety of his career working with top brands all over the world through advertising agencies where he utilized different successful strategies for a slew of brands. He joined the Retail Robotics team and oversees marketing, design, PR, and user experience at Delipop in France.

Delipop harnesses Retail Robotics’ click-and-collect multi-retailer smart parcel lockers that serves as multi-brand or single retailer pick-up points. Delipop recently opened its first locations across Paris, so the IADS team decided to use the opportunity to take a first-hand look at the ‘store front’.

An introduction to Delipop

The Delipop automated pick-up point locations have been created with customer experience at its core. As you are walking down the streets of Paris, your eyes are quickly drawn toward the colorful façade of the building which boasts bold blues, lime green, hot pink, and yellows. The entrance of the building is guarded by a keypad where customers can use a unique code to enter when they have a scheduled delivery. Inside the building, there are color-coded and numbered kiosks where customers are invited to scan a QR code to retrieve their goods. The machine registers the information and moments later, large, refrigerated drawers open to reveal the customer’s goods. Depending on the size of the order, multiple drawers can be used to fulfill the delivery. If the customer also has frozen items, they will need to scan another QR code at the same kiosk, which will then signal a separate frozen section that has numbered parcel lockers. The parcel with the item will light up in green and the door will pop open, then customers can retrieve the remainder of their goods.

The interior of the store is meant to help the customers disconnect from the outside world by offering soothing sounds such as birds singing as well as the specific use of colors, lights, and smells just like what other food retailers have started to do in their newest formats, such as Monoprix’s Monop’ iteration in Paris. As Delipop is committed to local communities, each Delipop offers a mural that highlights famous people and places in the neighborhood. This, however, is not particularly standard in terms of grocery retail, at least in Paris.

IADS: Can you give an overview of how Delipop came about, giving more detail about what the solution is and where it is going?

Marek Piotrowski: Parcel lockers have been around in e-commerce for a very long time, but they are gaining more importance as they consolidate flows and create a ‘hub effect’ which leads to improved economic benefits and sustainability. Retail Robotics is one of the biggest producers of parcel lockers in the world, and we believe that the concept of Delipop offers an interesting alternative to couriers and home delivery while also decreasing the limits of traditional e-commerce delivery options. On average, one courier could only deliver around 15 orders a day, but Delipop allows more orders to be fulfilled and reduces the cost of delivery.

Delipop offers a pickup point for e-grocery orders to local consumers. The pick-up point is equipped with smart parcel lockers that offer refrigerated and frozen sections. Before Covid, there were not too many issues with grocery deliveries, and the demand was growing slowly. But in the wake of Covid, it was almost impossible to get your grocery delivery scheduled and delivered. Delipop is now the only viable solution that can cope with the problem.

Partnership with Carrefour

*IADS: Delipop opened its first parcel location, in partnership with Carrefour, in Paris at the end of 2021. Can you explain the logic behind this partnership and what you have learned so far? What is the plan for the coming years and how are you going to achieve it?*

MP: Carrefour decided to join the network as the first partner because they like to show that they are the leader in retail and innovative solutions. The partnership has been in effect for over half a year, and we are satisfied. The most important thing we have learned is that once a customer starts using Delipop, they are very loyal. Over the last five to six months, we have had some clients use Delipop 50 times, which comes out to be almost 10 times a month. Now it is time to build the network and optimize logistics.

The two key factors that are important to our customers are location and price. We also set up Delipop to be user-friendly so that anyone can use it. Now we are planning on expanding partnerships as well as locations. The plan is to have 150 Delipop locations across Paris and to expand across France to be able to offer products locally and sustainably to more people.

IADS NOTE: Since the time of the interview, Delipop has added Monoprix as a retailer. Read their press release here.

Opportunities for departments stores

*IADS: What are some tangible takeaways from the Delipop solution that Department Store leaders should note?*

MP: Putting parcel lockers in stores will increase foot traffic, and 70% of customers that pick up a package from a parcel locker will stay and shop for other items. We are actually working on a project now to build a big network of parcel lockers in local convenience stores. This network of parcel lockers has no additional cost to the retailer, all they have to do is dedicate some space to a logistics partner and it will bring in additional foot traffic to the store. This helps retailers convert online traffic into physical in-store traffic.

(note from IADS: given the fact that for grocery pick up the parcel locker zone needs to be relatively accessible and easy going, which often implies ground floor locations, there is a hidden cost related to the missed turnover that is usually achieved on such locations)

Delipop and Sustainability

Delipop recently conducted a sustainability insight report titled ‘Sustainability in the last-mile delivery of groceries’ which takes a deep dive into how Delipop is addressing the challenges caused by scheduling e-commerce deliveries and changing customer habits. The report reveals that the growing demand for e-commerce delivery will result in 36% more delivery vehicles in inner cities by 2030. Delipop hopes to contribute to the 15-minute city concept developed by Professor Carlos Moreno where citizens can fulfill life necessities within a 15-minute walk or bike ride from their homes. The demand for last-mile solutions is growing rapidly and is expected to grow globally by 78% by 2030. The report suggests that a universal network of multi-brand hubs, such as Delipop, can solve many last-mile delivery issues from increasing costs to more sustainable operations.

Delipop plans to offer a multi-merchant pedestrian drive that provides local customers with all the products they need from various retailers at affordable prices. Delipop also offers greater efficiency for couriers as well. With home deliveries, a single courier can deliver around 15 orders a day, but with Delipop’s network, they will be able to fulfill 200 to 300 orders a day. The Delipop concept claims to reduce emissions, enhance local business, respect traditional commerce, harness technology, and offer an efficient multi-brand network to contribute to the overall improvement of the communities it serves.

IADS’ take on parcel lockers and city centers

While Delipop is providing a solution that is more specifically focused on the grocery market, parcel lockers that can house a variety of products could amplify retailers’ BOPIS and e-commerce fulfillment options. Such solutions are introducing a “buy online pick up in locker” option which can potentially reduce various types of friction related to the transfer of goods between retailers and consumers. Contactless fulfillment options can also save retailers’ employee service time and they could provide more flexible solutions to customers. Parcel lockers can also provide an alternative option for returns, which is a major cost to retailers with the uptick in e-commerce sales.

Parcel lockers are also providing solutions that contribute to localization, and as department stores are typically situated in the heart of cities, this makes them the perfect candidates to offer such services to citizens. Last-mile delivery, especially in large cities, has become quite the challenge as governing bodies are starting to regulate how deliveries are made to reduce traffic and make deliveries greener. Between the rising costs of inflation and supply chain disruptions, parcel lockers could offer a more sustainable and affordable way for retailers to create top-notch experiences for their local customers, while also bringing in more foot traffic to physical stores.

It is interesting however to note that specialized companies, such as Delipop, focus on local supermarkets to plan their expansion and often take for granted the presence of a parking lot in their reasoning. One could see that there is an obvious possibility of collaboration with department stores, but it seems untapped so far. Is it due to the fact that profitability perspective is not in line with expectations, or simply because the said specialized companies also fall victim to the biased perception that department stores are not a format fit for the future?

Credits: IADS (Mary Jane Shea)

printable version here

Introduction

Last May, the IADS had the occasion to travel to Andorra to visit the local landmark Pyrénées department store and meet with its leading team to understand where the company was heading. In Andorra too, the Covid-19 pandemic left its mark and forced retailers to rethink their business approach and positioning, especially in such a landlocked country normally living on touristic flows.

*Even though the size of the business is relatively small when compared to other IADS members, the Pyrénées business case raises a set of interesting questions when compared to the rest of its local market:

-    What does loyalty mean for the Pyrénées customers? Is the game all about attracting local customers to the Pyrénées ecosystem, or making sure that tourists will return to the store? And what is the differentiation point: price, or selection?

-    How can a retail company stand out from the crowd in a country where the whole industry is based on duty-free product sales, from tobacco and liquor to fashion and accessories?*

Given the specificity of the Andorran market and operations, such a visit was extremely informative as it helped to see another approach to differentiation and segmentation. Interestingly, in Andorra too, the game is not anymore to sell products (even at extremely competitive prices) but to provide a new, fresh and compelling experience both in-store and online.

Company history: a very big fish, in a very small pond

The Pyrénées department store (whose original name is Grans Magatzems Pyrénées in Catalan) has been founded in 1930 by the Perez family, twenty years before the touristic boom that took place in the 50s. At the time, Andorra was an isolated country living in autarchy, selling wood and tobacco, and there was an opportunity for a retailer to bring in novelties and a taste of the outside world fashion. It is remarkable to note that the country is still rather difficult to reach, with no international airport or railway connection, and that, in spite of this, it has built its reputation among some travellers thanks to the low VAT level of 4.5% and good retail prices (up to a third of the French ones).

The Pyrénées group (which used to be an IADS member from 1979 to 2019) grew remarkably in just a generation, and entered many different markets: local wholesale distribution (for brands ranging from Samsung, Sony, Leica, to Ray-Ban or Montblanc, and including food such as Horeca), automotive distribution (from Mercedez, Citröen, Jaguar, Land Rover to industrial vehicles or motorcycles), travel agency, banking and credit, insurance, in addition to its retail activities. The Group operates, in addition to two department stores in Andorra-la-Vella and Pas de la Casa, the FNAC-Darty stores in the country, hypermarkets and other franchises such as L’Occitane, McDonald’s, or various hotel chains.

It now represents 9% of the national GDP, employs 3% of the Andorran active population (1,200 persons), and the name is a household name for many, if not all, Andorrans. Being privately owned and managed by the third Perez generation (who lives in a cult of secrecy, following some succession scandals that took place in 2010 and 2020), it is difficult somehow to have an idea of the turnover achieved by the department store itself, knowing that the group total turnover is estimated at €271m in 2019.

Visiting the store: Testing new ideas in a changing context

The Pyrénées department store, that every Andorran knows, is located in the heart of the city and can be considered quite accessible taking into account the difficult local geography and tiny roads. Rather massive, with a complex floor plan, the store has a total surface of 15,000 sqm on 5 floors. There are several entrances, and each of them has a very distinctive flavour: according to the exit, the store can feel like an international department store with a nice selection of accessories, or, on the contrary, one can feel as if they are entering in a typical duty-free store if taking the massive tobacco and liquors entrance.

Even though the store is divided into 5 floors, not all of them are dedicated to the department store in itself: the basement is operated by FNAC/Darty (it is necessary to go through the department store to access it, which reminds a bit the Inno/Mediamarkt partnership in Brussels), the third floor adds to a reduced retail space a level of carpark, and the fourth floor is dedicated to customer service and carpark.

The ground floor is large and provides different experiences: hard and soft accessories, cosmetics and beauty, men’s fashion, and tobacco products, with an impressive cigar lounge. The whole floor is designed with mobile display units, whatever the section and the category, with only the peripheral sections being fully decorated by the brands, suggesting flexibility if and when needed.

When it comes to the accessories section, the brand range is international and attractive, with Longchamp, Furla or Michael Kors in corners decorated with the brands’ concepts, and generic areas in the middle featuring Ralph Lauren, Moreau or Coach. The execution and feeling in the leather goods section is more qualitative and distinctive than in the watches and custom jewellery section, essentially due to the level of brands available and the fact that in the rest of the town, the competition in that segment is harsh.

The tobacco products space is just near the parapharmacy space, which is somehow intriguing. There, customers can buy cigarettes, luxury cigars, but also chocolates and souvenirs. A dedicated cash counter allows separating such sales from the rest of the store (where customers have to go to central cash desks, Pyrénées is not yet equipped with mobile cashing solutions).

Probably for the same competition reasons that limit the business on watches and jewellery, the cosmetics and beauty section is less impressive than in other international department stores, and takes much less footprint. Once again, here, the story is about having the category present to capture any potential sale and making sure that no opportunity is missed, but without having the possibility to fully differentiate from what one can find in stores in the rest of the city.

Finally, the men’s section is probably the more immersive, with a surprising selection of luxury and semi-luxe brands (Boggi, Ralph Lauren, Hackett…) in a very nice and well-executed environment, neighbouring a younger and more contemporary offer, from Rains to Tommy Hillfiger. It naturally leads, and without much of a transition, to the sports section which is mixed and includes international brands which have claimed to stop wholesale distribution, such as Nike and Adidas (but Andorra is a specific and small market).

The first floor is dedicated to women’s and kid’s fashion, as well as toys. Interestingly, on the whole floor, the feeling is much less generic as many brands do have their own concept all along the aisles, giving a feeling of shop-in-shop even though all purchases are also processed on central cash desks in the middle of the floor. This brand concept approach is not linked to a specific positioning such as in the Men’s luxury section a floor below, and goes for brands from IKKS to Scotch & Soda but also Tommy Hilfiger.

The lingerie space is large and impressive, and at the time of the visit, was one of the busiest sections of the store, entirely with female customers, which suggests that this section is more well-suited for local customers and their own consumption (probably for historical reasons as Pyrénées was one of the first retailers in the country) rather than being a duty-free location such as Victoria’s Secret airport stores where travellers can buy spicy lingerie on the go.

Interestingly, a portion of the floor is dedicated to a specific concept, called “Gallery”, where designer brands are available, such as Isabel Marant, Ganni, MSMG or Vince. Some kids’ fashion is also available here and also comes, just like the women’s selection, as a complement to what is available on the rest of the floor. This space feels like a laboratory where Pyrénées tests new brands or new processes, as some second-hand luxury handbags are also available. The space, equipped with carpets and sofas, is also somehow a bit more comfortable than the rest of the store, which is fitted with a cold luxury kind of approach (marble, generous lights…).

The second floor is dedicated to food but looks more like a supermarket than a gourmet food section. Aisles are pretty basic and advertising is more price-centred than product-centred. A click and collect service, “shop and go”, is available on this floor and works with a dedicated app.

The third floor welcomes customers with the reproduction of an old fountain, which can direct customers either to the food court, with a selection of a few restaurants (well suited for lunch but quite unappealing for dinner options), or home equipment, including pet accessories, a locksmith, and a dry-cleaning service. A spa is advertised but, in reality, is not much more than four massage tables in a private room, closed for Covid-19 regulations at the time of visit.

Customers can access the carpark from here, and this floor is the only one with all amenities, including toilets.

The fourth floor is dedicated to customer service, where all clients are accommodated in the intimacy of a private cabin with a customer representative. There, customers can deal with purchase pick-up, and returns, but also tax refunds, credit limit increases or other requests. Attention to the customer is maximal but overall feeling a bit vintage.

What to remember and what is next?

A duty-free store is not precisely expected to be the place testing and trying new full-price categories or services. Even though they are still at the very beginning of the journey, the leading team of Pyrénées is well aware that in a city like Andorra, the price point is no longer a competitive argument, however old or familiar the retailer’s brand name might be.

This is why they have started pre-pandemic to go upwards in terms of brand positioning, which explains the nice luxury spaces spotted in the Men’s section on the ground floor or on the first floor with the Women’s section. It also explains why the “Gallery” space acts as a laboratory of new ideas, both in terms of new brands (many of them are not sold elsewhere in Andorra), or categories (by mixing design with fashion, for instance).

Most importantly, Pyrénées has been working a great deal behind the stage, with the launch of My Piri, the loyalty programme boasting a subscription rate of as much as 80% of the total Andorran population, allowing the retailer to have a very good understanding of its purchase behaviour, and its data, which could turn up into a gold mine since Pyrénées is the only player on the market.

Is that to say that Pyrénées is now all about bringing “the best quality and the largest brand and product assortment in the country” to local customers? Not exactly: it also wants to reclaim its status of destination store for any tourist coming into town, which is the reason why the expansion plans include in the coming year the opening of a new floor entirely dedicated to wellness and spas (which also explains the reason why the current “spa” lounge space is closed) and a rooftop overlooking the roofs of Andorra-la-Vella.

Conclusion

Travelling to Andorra is fastidious, and long, as it can take up to 3 hours from Barcelona or Toulouse to get there. Now that customers can access good deals from the comfort of their homes (with some limitations to this claim as it is difficult to find cheap cigarettes online, if not illegal), they are asking for something more.

A good illustration is the fact that now, there are 3 distinct types of tourists travelling to Andorra: the travel retail tourism, aiming to take advantage of the prices which can be up to three times lower than in France or Spain, the “white” tourism, people coming to Andorra during winter for ski, and the “mountain” tourism, a new breed of travellers increasingly hungry for outdoor and rock-climbing experience, a population for whom smaller cities in Andorra are building equipment and designing trails in nature.

The Pyrénées department store has well understood that, in a city where the price point is a reason to come for a third of the tourists, selection, curation and experience were the best way to differentiate. The cherry on the cake is that this allows to killing two birds with one stone, as locals might also very well enjoy a place to hang out. The opening of an entire floor dedicated to wellness is, for sure, a major piece of news for the city of Andorra-la-Vella, and will deserve a review in a year or so to see how they executed their vision, all the more that some interesting benchmarks are coming to light at the same time, such as the new space at Galeries Lafayette.

All in all, a new destination within the destination is born in Andorra, proof that department stores all across the world, whatever their size or market, are alive and kicking, in spite of what some might say.

Check out the collection of pictures here!

Credits: IADS (Selvane Mohandas du Ménil)

Printable version here

Introduction

The IADS had the occasion to travel to Brussels and took the opportunity to visit Inno, the iconic Belgian department store celebrating its 125th year of activity this year and a founding company of the IADS. A new CEO was appointed in 2019 with a new plan, and this visit was the opportunity to take stock.

What can we learn from the Inno revamp? Where do they stand? To what extent the Belgian retail scene has evolved after the Covid-19 pandemic and where is the company heading?

Historical background: the many ownership changes added to the market difficulties

“A l’Innovation” (the original name of the company) was founded in 1897 by Julien Bernheim and the Meyer family rue Neuve, in Brussels. In 1928, the company was a founding member of the IADS, where it remained until 2011.

Just like many other department store companies, A l’Innovation was all about novelties and first times for the Belgian market, and developed a network of stores across the whole country, until becoming the largest retailing company in Belgium 40 years after being founded. After WWII, the market consolidated and A l’Innovation merged with its competitor Bon Marché to become Inno-BM in 1969, and then with GB Entreprises to become GB-Inno-BM in 1974 (also increasing the store portfolio).

However, difficulties increased with the evolution of new retail formats (mass distribution, specialty stores) leading to the purchase of Inno (a new name minted in the 90s) by German department store Kaufhof (another long-term member of the IADS, from 1930 to 2015), then the property of Metro AG, in 2001. When Metro sold Kaufhof to the Hudson’s Bay Company in 2015 for €2.42bn, Inno was part of the deal. History repeated itself in 2018 when Signa Holdings purchased Kaufhof (which had been renamed Galeria Kaufhof) to the Hudson’s Bay Company for an estimated €3bn, and merged it with the other German department store it already owned since 2014, Karstadt, into a new entity called Galeria Karstadt Kaufhof (the new name was released in 2019). On the same occasion, Inno was rebranded as Galeria Inno on the Belgian market.

This long and complicated story of ownership is not entirely unrelated to the difficulties of the company up to 2019: it has never been a priority for its successive owners, due to its isolated (and smaller) market, and its size when compared to its Canadian or German counterparts.

Bringing in the changes

A new CEO, Armin Devender (a Kaufhof veteran with 23 years of experience in the company, followed by a 3 years stint at the Hudson’s Bay Company), was appointed in October 2019 with the clear mandate of revamping the company’s appeal and increasing sales. Even though the Covid-19 pandemic obviously did not ease things for him, a strategic transformation plan was implemented and executed, with visible results.

The plan included 21 projects, among which:

-    The most visible part was the rebranding of the stores into Inno in April 2021. Devender was aware that Belgian customers did not recognize Galeria Inno as the original brand and he was eager to recreate a sense of proximity between the general public and the iconic store (the current tagline of the company is “Inno for you”),

-    Stores also had a makeover, both in terms of spaces (larger and easier circulation areas, opening of new lounge spaces, lighting, the opening of the windows on the outside…) and offer, with an increased range of brands sold (including younger or more upmarket ones) and new partnerships, especially in the F&B area with the opening of BON restaurants on the ground floors of the stores,

-    Somewhat more impressive, behind the stage the plan also included a technical upgrade. During the pandemic, Devender and his new management team have managed to implement a new ERP with SAP in only 7 months, which allowed them to relaunch a proper e-commerce website which also includes a marketplace, allowing them to test new product categories not sold in stores such as design pieces, furniture units or lights and either delivered via dropshipping or picked up in stores.

According to Devender, the results were quick, with an increase in the conversion rate noticed as early as in November 2021, and when the IADS met with him in May 2022, he mentioned that total sales were now almost back to pre-pandemic levels.

Strangely enough, however, the rejuvenation plan was first launched in secondary locations (Schoten end of 2020, Liège, Louvain and Waasland in 2021-22) and not in the capital city flagships. This has raised some critics about a strategy which requires capital and time to refurbish a 16-wide network of stores, in a very uncertain context, and questions about its realism and time needed to achieve it. For instance, the company had to put on furlough 50% of its overall staff, including HQ, in early 2022 due to liquidity issues.

The IADS visited the two stores in Brussels city center, in the posh location of Place Louise and the original one of Rue Neuve. The feeling, look and touch differ considerably from one location to another and even allows to have a “before / after” kind of understanding of the work done so far.

Place Louise store

This store is the place to go to have a taste of what the department store concept looked like prior to the arrival of the new CEO, as the revamp has not started yet. This retail unit is surprisingly out of synch with the immediate neighbors (the usual luxury brand suspects, Hermès, Louis Vuitton, Tiffany’s…) and looks at best dull, at worst unattractive.

Organized on 4 floors, the zoning is classical with a few surprises:

-    The basement is dedicated to lingerie, and visitors land immediately in the section from the escalator facing the entrance. This is somehow surprising as there is no boudoir nor intimacy feeling here, but this clearly reflects a practice from the past (many department stores in the Northern part of Europe used to display lingerie either on the ground floor almost immediately at the entrance or in the basement). One can wonder about the efficiency of such a set-up in modern times.

-    The ground floor is rather classical: cosmetics, accessories with multi-brand generic central displays, and walls with brand concepts, showing an assortment of local and international brands. The wholesale model seems predominant with no shop in shop with separate cash desks in view, but a large bank in the middle of the floor, flanked by a guard, where customers can line up and pay for their purchases under his close watch. The fact that customers are given their purchases in new concept packaging is destabilizing and shows that the store is about to be upgraded, which would explain why the barber space is closed and under construction.

-    On the first floor, the feeling is airier thanks to the large windows overlooking Avenue Louise, and customers can find access prices and contemporary RTW and shoe fashion. Construction is being carried out in the middle of the floor, with a sign “this is the right moment for a relooking” and workers are busy with the upgrades.

-    On the second floor, mature fashion is presented. A mannequin was lying on the floor unattended at noon, facing the escalator exit, which raises questions about the attention given to service and image.

-    The last floor is dedicated to Men’s and Kid’s Fashion. The height of the ceiling and structure of the walls makes it almost impossible for salespersons to see who is in the kid’s section, which is a problem and leaves customers being left alone there. The customer service space is under construction and without any type of hoarding or explanatory sign.

During the visit, sales assistants were either not in sight, or discussing between themselves. None of them were saluting customers, even at a moment when affluence was low, and they seemed pretty much left to themselves, as some of them were having surprising behavior (hiding behind a corner or spending time folding garments at a moment when customers were gathering in front of them with questions).

Overall, the visit was disappointing and far away from the promise implied by the new plan. The CEO latter confirmed that this store should be upgraded in S2 2022 / S1 2023.

Rue Neuve store

This location is a stark contrast to the posh Place Louise area: like many other areas in Europe, this area used to be a must-go during the 20th century, and gradually lower-range retail and restaurants started to get locations there and make the most of the traffic. As a consequence, the Rue Neuve location is rather mainstream with a concentration of fast foods and high street fashion boutiques.

However, the store, due to its historical status, has started to undergo a makeover launched in November last year. The new logo is proudly displayed on huge banners floating on the façade. However, they are made less visible from the street as Media Markt, the partner leasing the last floor of the store, has also displayed their logo on the building.

On the total 5 floors, 4 are occupied by Inno itself, from the basement to the third floor (the last one being entirely occupied by Media Markt):

-    The basement is dedicated to home products, design and decor. Even though it had been revamped in 2019, hence not with the current concept being deployed, the feeling is the antithesis of the Place Louise store, with perfect lighting, a feeling of space and the use of bright colors. In comparison, the cash desks are inviting and look like places where one can receive advice and help, rather than just paying bills. The way the floor is organized allows us to comprehensively measure and sense the dimensions of the store, and this is impressive.

-    The ground floor allows customers to enter directly through the main entrance into a cosmetic space which has been built with international standards: brands are properly displayed in their own shop in shops with their own concepts, with competent, welcoming and smiling staff, and this is clear that here, the floor is being looked after both by the retailer and by brands. The cosmetic area is then connected to the lingerie space (with a cozier feeling than in Place Louise) and bags and accessories. The brand selection is also a bit more upmarket than in Place Louise, with names such as Furla, Coach, or Calvin Klein, coming as a top up to the Guess or Liu-Jos of this world.

-    The first floor is dedicated to women’s fashion, organized in nice spaces with corners build with specific brand concepts. The whole floor is clear, and gives a sense of space with set ups and displays which are supporting the glance while not cutting it.

-    The second floor is dedicated to men’s fashion, with a similar sense. It was noted there that all sales staff were wearing their own looks, not uniforms, giving a sense of youth and credibility.

-    The last floor shows a bit of everything, from shoes, sportswear, gift, travel accessories and a restaurant that is a reminiscence from the 80s (not in a cool way). Here, the rebranding is still on going, with signage mixing both the old and the new concept. Again, the space gives a feeling of light and is quite welcoming.

Although both stores were visited on the same day, within 20 minutes of each other, traffic intensity and quality were incomparable, and seemed out of synch with the environment itself: the younger, cooler and apparently richer customers were not in the posh area location but in the more popular one, which suggests that the rebranding strategy is beginning to bear its fruits.

Online presence

It is interesting to see that even though the rebranding of the company now dates back more than a year, not every detail has been yet fixed: for instance, Google still displays “Galeria Inno” on its maps for the Rue Neuve location, which Place Louise is simply called “INNO Louise”. This is the kind of detail that can be confusing for tourists and people unfamiliar with the names, for instance.

When visiting the neat and very efficient website (where marketplace products are presented in an indistinct manner until the product page), the accent is clearly put on the loyalty program recruitment, using the anniversary celebration as a pretext to display the new perks according to the 4 levels of membership (‘Unique’, ‘Amazing’, ‘Exceptional’ or ‘Premium’: perks are quite classical and range from free parking, alterations or make up sessions, to access to special and VIP events, and including point-based vouchers, birthday date discount and extended return policy).

Even though the overall display is very simple (and somewhat unappealing for the younger generation), it is probably the best way to make sure existing customers start to use the online channel, and one might wonder if the current website is not simply a transitional one for a more sophisticated version once the customer based has evolved.

Check out the collection of pictures here!

Conclusion

It is paradoxically too early to know if the plan launched by Armin Devender in 2020 is bringing success, from visiting the flagship stores only. While the idea of testing new concepts and projects in the second-tier stores can make sense in order to limit risks, the current look and feel in the capital city stores suggests that this approach was too shy and timid given the timing. Now that tourists are coming back and local customers are looking for new experiences, the situation in Brussels is not on par with everyone’s expectations which is a shame given the fact that the corporate revamp has now been launched close to two years ago.

Also, even though the revamp in the Rue Neuve store is not finished yet, the progress made so far suggests that there is still a long way to go for Inno to get to international standards: while the offer is more attractive, there is no hint that the stores are becoming more experiential and able to generate new streams of revenue in the same manner than what we see in France, England, Spain or Germany. As a consequence, critics in the local press stating that the overall plan is too slow and not radical enough (especially in terms of restructuring and rightsizing the network) can be understood: there is no evidence that Inno is currently building the solid foundations it will need to succeed in the future.

Additional reading

Also see the press release (rebranding and new rue Neuve Store)

Credits: IADS (Selvane Mohandas du Ménil)

What: Two studies conducted by Opinionway and Quantaflow reveal the relationship French shoppers have with retailers, particularly shopping centres.

Why it is important: The studies showed how committed French shoppers are to particularly shopping centres (70% among 18-24-year-olds) as well as their desire to shop in physical locations (71%).

Shopping in-store can be tied to the human interaction that customers receive with 85% believing that they receive better advice and 73% appreciating the benefit of better after-sales service. Shopping in centres also contributes to the perception of more security (80%) and traceability of products (71%).

For shoppers who don’t frequent shopping centres, 71% expressed interest in sites that offered recreational, cultural and sporting activities, restaurants (63%), a health centre (52%), cultural activities (29%), or a place to party (25%).

Other services are also popular, such as places to collect orders (56%), administrative solutions (Pôle Emploi, La Poste, CAF, etc. for 45%), places to study or work (40%), as well as crèches or nurseries (31%).

What French consumers expect from shopping centres

What: The World Retail Congress met to take stock of the pandemic and its accelerated change on retail development around the world with the Russian-Ukrainian war as a new rattling force on business stability.

Why it is important: Industry leaders from around the world met to discuss the challenges they have been facing which include inflation, market volatility, job vacancies, a more discerning customer, energy prices and cost-of-living pressures, among more individual concerns that vary from region to region.

China’s economic health has been declining. E-commerce is experiencing a slowdown which has illuminated new shopping trends by wallet-conscious Chinese shoppers who are focusing on niche- and need-based shopping like pet care, collectables, outdoor and active gear, frozen food and ready-made meals. Covid restrictions still threaten offline retail and consumers continue to slow their in-store shopping.

French retail is facing a crisis of retail and logistical job vacancies along with increased consumer expectations for digital and CSR. Of all the European countries, France is doing relatively well and is pursuing a long-term strategy of investing in data and merchandise flows.

Retailers in Germany are suffering tremendously from inflation due to middle-class erosion that will have lasting effects on the country’s businesses. The sentiment of the German retail expert appears to be that the world will become less global, less stable and less predictable with more frequent disruptive events. Adaptability and providing essential and value-driven offers will be of the utmost importance. Understanding the consumer will be the key driver to competing in the new landscape.

The Italian retail expert provided recommendations for retailers to reduce energy consumption across the chain as a 360° cost-cutting exercise. Other advice centres around pulling in long-distance sourcing and considering wage increases when setting prices, especially in low-earning categories.

The CEO of the British Retail Consortium highlighted the shrinking basket size of consumers due to the cost-of-living crisis. Balancing the bottom lines is increasingly difficult as retailers are squeezed between higher costs in the supply chain and lower consumer demand. With changes in the government, consumers and retailers are both looking at policymakers to offer solutions.

For the US, consumers have cut back on spending at price-conscious retailers showing signs of caution that has also been creeping up to higher income groups. Input costs have eased from unwinding gas prices and shipping costs falling back. Labour cost pressures are set to be persistent. Retailers have been looking to avoid supply chain issues by bringing in inventory earlier; however, with demand dropping, many have likely over-ordered. An emphasis was placed on understanding the consumer to remain competitive, reiterating the German market-based sentiment.

Japan is facing a weak currency, rising logistics costs and supply chain disruptions which is making it a challenge to keep local customers from switching to global brands. Retailers are proactively adapting their distribution models and having a wider spectrum of affordability in the brand mix.

Falabella retail shared its struggles with currency volatility and its private-label supply chain management. Ultimately the private label being imported from China and required to be purchased in advance makes costs and prices across the group unstable, especially during this challenging recession in Chile. Despite having decent e-commerce performance, adapting to the online-offline mix has also posed a challenge for the group.

Spain is looking to the positives such as value offers, new product ranges, brand storytelling and sustainability to shape both a short- and long-term vision.

Retail responds to worldwide crisis

What: The cost of living and rising inflation might be a new component of the e-commerce returns equation.

Why it is important: Returns are directly hitting the bottomline, and retailers are scrambling to find ways to either reduce them, or change their customers’ behaviour, by, for instance, charging them when returning items (a not so popular policy).

The Economist takes a look at e-commerce, and the difficulties created by the management of returns (21% of all online orders in America in 2021, for a total value of $218bn). This problem lies deep in the DNA of e-commerce: free returns are perks that were made available since day 0 of e-commerce, to be able to compete with brick and mortar stores. As a consequence, it is now a basic expectation.

However, with the rising inflation and increase of cost of living, this might become a problem. Boohoo and Asos have already lowered their forecast in anticipation of a higher return rate. Each step is costly and labour-intensive. In addition, the question of what to make of the returned items is raised (only 5% of returned goods can be resold immediately), leading in more costs for the retailer. As a consequence, some retailers, such as Uniqlo or Zara, have started to charge for returns. Tech might also come as a help, either to try to solve the issue by providing help on the logistics front, or by helping customers to virtually try their products before buying them.

A tidal wave of returns hits the e-commerce industry 

What: McKinsey raises the important topic of Gen Z engagement at work and how it can be improved.

Why it is important: Department Stores are not usually seen as attractive as other sectors to the younger generation. As a consequence, and since they spend much energy and time at recruiting Gen Z workers, knowing how to retain them over time is key.

“Quiet quitting” is a new trend on TikTok and is used by workers for whom their job does not mean anything else than just a pay, and therefore are not looking to overachieve their goal but simply do the work and leave. “Acting your wage” is another phrase used by Gen Z workers showing their disengagement.

McKinsey considers that Gen Z are specially prone to this new phenomenon due to several factors:

-    Their mental exhaustion due to remote working is real, and high (they have often started to work remotely and have never met their colleagues),

-    The downside of being online is that it eases connecting with others, sometimes too much, leading to a social burnout,

-    They do not see, like Millenials, work in the same way and are looking for a job that supports their dream rather than their dream job.

To address this, McKinsey recommends to review the way Gen Z workers are rewarded when overachieving their goals (and not just providing them with hybrid working perks), especially when it comes to their relation with top management (i.e. more pat on the back?).

Are your Gen Z employees “quiet quitting”?