What: Forget about the retail apocalypse: even the US malls have managed to reinvent themselves and increase their traffic

Why it is important: Retail used to be all about curating the best assortment possible of brands, but not anymore: the place itself needs to be a magnet for customers. This is a feature that department stores have capitalized on for centuries.

Placer.ai, a start-up specialized in traffic analysis, reviewed the performance of 9 US-based malls which, through innovative initiatives, managed to increase their footfall even though customers are increasingly going online for their purchases. They basically had to reinvent themselves and question what they could bring to customers.

Through a new flexibility when it comes to leases duration, malls are able to try new concepts which would have been otherwise rejected. Among the new ventures tested, an amusement park for kids, a casino, Eataly, or an Asian supermarket.

As a consequence, malls are increasingly encouraged to turn towards experience, food & beverage and amusement, and less towards cold retail (beauty, clothing), forcing such brands, also, to reinvent their proposal if they want to stay relevant in these spaces.

The pandemic did not kill malls but made them smarter 

What: Facts and figures about the Indian retail market, collected and compiled by Coresight

Why it is important: With a market estimated to $1tr by 2025, and a young population, India is key for the future of retail not only in terms of opportunities for international players, but also in terms of innovation and new usages such a digitalized and young country will inevitably produce, just like what China did in the past 20 years.

Coresight estimates that the market is worth $768m in 2022 (up from $703m in 2021) and should grow up to 1tn by 2025. Growth in 2023 should focus especially on clothing, footwear, recreation and cultures, markets which were hit during the pandemic, particularly in 2021 (India felt the pain later than other countries).

The market is fueled by a young working population (the second-largest population in the world is on average 28.4 years old, and 68% of the population is in working age), evolving customers’ lifestyle (as customers will have a higher disposable income to spend on experiences, with a mobile-first approach), a rising urbanization (35% in 2021) and a growing digital ecosystem.

So far, the market remains highly fragmented (75% of the total sector)  but should organize in the near future, especially due to the expected growth of larger e-commerce players, leading to organized retail representing up to 35%. Online is expected to reach $75.1 bn in 2022 (+36.5% vs LY), thanks to a demand for convenience from a tech-savvy generation, a heavy smartphone adoption and habits of paying digitally. For Coresight, the e-commerce companies to watch are Flipkart, BigBasket, Myntra and Snapdeal. They also make a special focus on Reliance Retail, Avenue Supermarts (Dmart) and Titan Company (Tata).

The Indian retail market 

What: Hybrid work is here to stay, so adapting makes more sense than resisting

Why it is important: Empathy and representation are considered as key to provide a supportive environment. Retailers are faced with the challenge to find the ideal solution in a context where frontline workers, facing customers, might not enjoy the same perks than the rest of the company and therefore might go in rebellion.

The Robin Report reviews the way corporate America has changed since the beginning of the pandemic, and what it means for employers. It is now clear that employees are expecting to be given the possibility to work remotely, and would not hesitate to look for another job if this is was not the case. As a consequence, returning to full-time work at the office is risky. Instead of trying to block the tide, the Robin Report recommends to adapt and look for the best way to organize it.

5 key rules are identified:

-    Be clear of the expectations and the outcome, through shorter meeting times and prepared agendas,

-    Using time blocking to manage everyone’s schedules,

-    Respect work and non-work time,

-    Provide the best tools possible,

-    Make sure that remote working environments are checked and under control.

A supportive environment includes the following:

-    Possibility to book in advance desks if the company is practicing hot-desking, instead of promoting a first-come-first-served system,

-    Allow employees to control their schedules by themselves,

-    Make sure that all employees have the same remote working possibilities, even the underrepresented groups (which also suggests a strong sense of empathy from the organization),

-    Review the perks: do modern workers really want free lunches, or would they want for instance better equipment or rules to help them in managing their work remotely?

The new rules of work 

What: Coresight Research released an updated list of the most important and influential public retail technology companies that people in the business should pay attention to.

Why it is important: The report focuses on the most important companies to watch in terms of e-commerce, enterprise software, and infrastructure with early leaders in the metaverse including Meta, Nvidia, and Qualcomm. Since the Coresight Tech 20 was established in February 2022, it has outperformed the Nasdaq and S&P 500 Indexes.

Tech 20 Sector Distribution:

1)    E-commerce

•    Adobe: digital content company that acquired e-commerce platform Magento in June 2018.

•    Alphabet: is the parent company for the Google businesses, including Google Services (which encompasses its search engine, Android smartphone operating system, the YouTube content platform, hardware products and associated advertising businesses), Google Cloud and its emerging Other Bets businesses.

•    Block (formerly Square, Inc.) aims to increase economic empowerment through several ecosystems, including Afterpay, Cash App, Square, TIDAL and others.

•    Meta Platforms (formerly Facebook) offers social media apps Facebook, Instagram, Messenger and WhatsApp and augmented reality and VR software such as the Oculus headset and the Horizon Worlds VR environment.

•    Shopify offers Internet infrastructure for commerce, offering tools to start, grow, market and manage a retail business.

2)    Enterprise software

•    IBM offers software (hybrid cloud and AI), consulting, infrastructure (hardware and software) and financing.

•    Manhattan Associates develops, maintains and sells software that helps retailers, wholesalers, manufacturers, logistic providers and other companies manage their supply chains, inventory and omnichannel operations.

•    Microsoft provides hardware and software, including Office, LinkedIn, Dynamics, the Azure computing platform, the Windows PC operating system, Surface tablets, PC accessories, the Xbox gaming console, and search and advertising on the Bing search engine.

•    Oracle provides products and services to enterprise information technology environments all over the world, including cloud services and applications, database hardware and services and hardware, the Java programming language and networking hardware.

•    Salesforce is a leader in customer relationship management (CRM) software, having defined the industry. Major components of the platform include Sales, Service, Marketing, Commerce and Experience, in addition to Tableau, MuleSoft and Slack.

•    SAP is a global leader in software for managing business, and its product portfolio includes solutions for ERP (enterprise resource planning) and finance, CRM and customer experience, HR and people management, experience management, business technology platforms and digital transformation.

3)    Infrastructure

•    Avery Dennison produces pressure-sensitive materials in the form of tags, labels and other products, including RFID tags and inlays, plus equipment and solutions.

•    Cisco Systems offers a broad range of technologies that power the Internet, including platforms for networking, security, collaboration, applications and cloud products.

•    HP (formerly known as the Hewlett-Packard Company) is a leading provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services.

•    Intel microprocessors power most of the world’s PCs. The company also designs and manufactures chips and solutions for autonomous driving, 5G networks, client connectivity, cloud computing, the Internet of Things, client computing and AI/analytics.

•    Johnson Controls is the parent company of Sensormatic Solutions, which offers analytics, inventory intelligence, loss prevention and traffic insights through its ShopperTrak products.

•    Nvidia is a leading supplier of chips for computer graphics, AI (artificial intelligence), data centers, in addition to graphics cards for gaming and other graphics applications. The company also offers its Omniverse platform for 3D design collaboration and simulation for applications including the metaverse and creating digital twins.

•    Qualcomm is a leading supplier of chips for wireless communications, such as 5G, and its processors are used in a wide variety of devices including smartphones, VR (virtual reality) headsets, automobiles, and in a host of other applications.

•    Snowflake offers a cloud data platform that aims to support multiple data types, be massively scalable, offer optimal price performance and be easy to use. The platform is delivered as a service and supports multiple clouds in addition to providing a data marketplace.

•    Zebra Technologies offers products for asset intelligence and tracking and enterprise visibility and mobility, which includes mobile computing, data capture, RFID (radio-frequency identification) products, fixed industrial scanning and machine vision, services and workflow optimization solutions.

The New Tech 20: The Global Retail-Tech Leaders in 2022 and Beyond

Printable version here

Introduction

The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This third part is dedicated to Steen & Strom in Norway.

Company history: the oldest department store company still in operations in the world

A former member of the IADS (1940 – 1992), Steen & Strom is one of the oldest, if not the oldest, department store company still in operation today as it was founded in 1797. The first department store, built in 1874 over four floors, was destroyed in a fire in 1929 and the current 6-storey store, of Parisian inspiration, was built and opened in 1930. Steen & Strom has been instrumental in introducing novelties to Norway, from fashion to technology, as well as innovations such as the first escalators.

The company went bankrupt in 1992 and from then, went from hands to hands of various owners, until being purchased by Soylen Eiendom in 2011 for €95m, who then sold the department store as well as the surrounding 11 real estate locations in 2015 to the Meyer Bergman investment company for €500m. Meyer Bergman, renamed MARK in 2020, still owns Steen & Strom to this date, through the Norwegian structure Promenaden Management which operates both the department store, the nearby Eggert shopping centre, and the luxury boutiques locations in the streets adjacent to the department store (MARK, based in London, is involved in maximizing the value of prime real estate assets such as The Whiteley in London, Richardstrasse 20 in Berlin or the Pershing Hall Hotel in Paris).

The Steen & Strom store owned and operated by Promenaden Management, is not to be mistaken with another Scandinavian company with the same name, owned by Klepierre and involved in managing 52 shopping malls across the region. To this end, the department store has rebranded into Steen & Strom 1797, also emphasizing its history and heritage.

Given the fact that the company is privately held and Promenaden Management a holding company, it is difficult to get actual numbers about the turnover of the store. Steen & Strom 1797 mentioned that they experienced record sales in Q1 2022 and claim a total footfall of 2.2m visitors, with the goal to increase that number to 5m in the coming years (the Karl Johans gate, where the store is located, is Norway’s most visited shopping street with 15.5 shoppers p.a. in normal times).

Visiting the store: a luxurious work in progress

The store, renovated in 2020 for a total investment of €29.5m, is structured on 6 floors and 12.500 sqm including the basement and a fully renovated entrance on Karl Johans gate, which allows to open the building on the outside, bringing in a lot of light and provide a spectacular space for events and marketing activations. It has already proved to be a success as the footfall and traffic have constantly increased since the opening of this section.

The department store’s revamp is timely: Oslo is ramping up its touristic attractivity, with the constant opening of luxury hotels, and fine dining restaurants, but also with the inauguration of impressive landmarks: after having opened the Opera House in 2008 and the Astrup-Fearnley contemporary art museum (in a building designed by Renzo Piano) in 2012, the city inaugurated the new Munch Museum at the end of 2021, and has just opened the new National Museum in May 2022, all located in different zones of the city, allowing to spread the development and investments. In order to be part of the game, Steen & Strom 1797 has worked on its visibility and recognition: the store is perfumed with its own recognized scent and equipped with a studio quality sound system, windows have been renovated and are at the same time promotional and educative, the visual identity has been modernized with the use of vivid colours, and the website will include e-commerce activity in July 2022.

The revamp of the store is still in progress, meaning that fully finished zones coexist with sections still under construction (at the time of visit). For instance, while the entrance on Karl Johans Gate is fully finished, spectacular and extremely inviting, opening up to the event space and giving a good view of the cosmetics section, the opposite entrance is still under process and opens directly to hoarded sections. The surroundings of the store are perfect, since Steen & Strom is adjacent to Louis Vuitton, Chanel, Saint Laurent, and houses the Gucci, Balenciaga or Burberry stores.

The basement is extremely immersive, with a series of entertaining food concepts, extremely well executed, which allowed generating a significant footfall at lunchtime with employees from nearby coming to experience the gourmet offer there (ranging from bars, restaurants, to delicacies and a deli). This floor represents 24% of the total business in the store, and upscale private labels are planned to be launched in 2023.

The ground floor is very different from what has been seen in the other Nordic department stores: while it houses cosmetics and the usual international brands, the choice has been to avoid having the classical white logo on black boxes approach, and replace it with the store’s own concept, all in low-rise white marble displays, lit with huge rounded lamps, and a space dotted with couches and activation zones including a lot of testers. As a consequence, the immersion in the store’s atmosphere works also extremely well here, and provides an enjoyable experience, completed by the atrium, which is a new space consecutive to the renovation of the entrance on Karl Johans gate, where small accessories such as Dior sunglasses and caps are sold (a small shop-in-shop in the entrance dedicated to high-end caps designed and produced by a local brand, Varsity, generates a €10,000 weekly turnover). Interestingly, the store, still in revamp and repositioning, does not sell footwear, lingerie or hard luxury accessories yet, but already outperforms its targets, convincing the leading team that the steps taken are the right ones.

The first floor is dedicated to “men’s new luxury” but, in reality, is still in progress when it comes to the offer. While all peripheral zones are at brands’ concepts, the central area is in a generic concept (but brands are not operated in wholesale as Steen & Strom 1797 is still a 100% leasing concept), including a more formal offer than what has been seen in Helsinki and Stockholm, and an underwear section located in the middle of the floor. There is also a multi-brand concept, “Collage”, which displays brands such as Givenchy, Celine, and Off White (some of them are also available in the city in their boutiques, or in other points of sales). Since the offer is a work in progress, the goal is to increase the size of the Collage space, and also go more upmarket and luxurious when it comes to the brand selection available in the generic area. Also, one must remember that the current structure of the store will be revised in the future, as the first floor is, according to the plan, to be dedicated to accessories and shoes (a category which is not yet sold at all in the store). This floor will also provide the click & collect service once activated.

The second floor is dedicated to “women’s new luxury”, and, here again, still in process, with a very large section dedicated to dummies, probably for lack of better. The whole building is structured according to 2 escalators at the opposites of the floors, allowing smooth and easy navigation on each of them. Here again, the brand selection is also a work in progress, with good visibility given to Scandinavian and Norwegian brands. There is also access, separated by a small bridge, to a very high-end hairdresser where customers can also buy beauty products, in double exposure to the ground floor. This floor also accommodates the personal shopper lounge.

The third floor gathers the “contemporary fashion” and the brand selection is quite adequate, echoing the trendy and young feeling of the floor. It is to be noted that, so far, there is no F&B space on any of the floors with the exception of the basement, and this is a topic that the leading team is currently exploring. It is possible, from this floor, to access a separate space via a small bridge where the outlet section can be found. Execution is very elegant.

The fourth floor is advertised as childrenswear and home lifestyle in the store maps, but, so far, is used as an exhibition space, just like the fifth floor, advertised as “events and services” but so far only housing the Promenaden Management offices.

All in all, the overall impression is a very good execution and attention to detail for the finished sections of the store, which conveys a convincing feeling of luxury and shopping appeal. The basement and ground floors are the zones which are closest to completion and give a very positive understanding of what the store is striving to achieve.

Interestingly, there are many internal debates in the company to take a similar road than the one taken by NK in Stockholm, namely operating directly with some multi-brand zones, by selecting, buying and selling specific brands. The rationale for this approach is to consolidate the fashionable positioning of Steen & Strom 1797 in a city where competition exists but has not coped yet with international standards.

The closest competitor in town is the Paleet shopping centre. Just like Steen & Strom 1797 (and NK in the region), it operates a business model based on leasing, including a historical fashion multi-brand, Hoyer (with brands such as Zadig&Voltaire or Anine Bing for women’s, and Burberry, Comme des Garçons, Heron Preston, Lanvin, Moncler, Nike or Off-White for mens). This is not the historical location of Hoyer, as they recently relocated to this centre, and they are said to have lost customers in route. Apart from the brand offer (which is not competitive when it comes to womenswear), the size, width and breadth of assortment presented there tends to validate Steen & Strom 1797’s thinking that they have an opportunity to become a fashion centre, in addition to already being an undisputed luxury hub.

Check out the collection of pictures here!

Conclusion

What to remember from Steen & Strom 1797? Since the store is still in work-in-progress mode, it is difficult to draw conclusions already. However, what has been striking during the visit was the fact that Oslo has considerably evolved when it comes to fashion, with a young and affluent clientele, seemingly immune to the European political events and worldwide economic woes, and eager to spend. Steen & Strom 1797 has understood that and the moves made to make the most of this opportunity have already been successful. The atmosphere, execution and quality of details in the store are all impressive and make it the most adequate place to shop in the city so far.

Of course, there are some challenges, such as making sure that the right brands are present (which implies that they realize the potential of the market, and this is not obvious as Scandinavia is often overlooked in terms of retail potential) and making a decision on the business model (leasing vs. buying) which will increase flexibility but will also imply new competencies and team structure in the company.

But whatever the decision made, it is already obvious that Steen & Strom 1797 is making all the needed steps to becoming a destination for all tourists visiting Oslo (a growing breed), in addition to entertaining the local, young and experience-hungry clientele. In addition to that, we also believe that the level of immersion and execution so far should also put back Steen & Strom 1797 on the international scene in the mid-range as it has all that it takes to become a reference for other markets too.

Credits: IADS (Selvane Mohandas du Ménil)

What:  the Harvard Business Review takes stock on the data scientist position and determines to what extent it has evolved since being identified as the sexiest position in 2012

Why it is important:  Department stores are among the industries trying to lure in data talents in order to improve their digital capabilities. Knowing where this position stands is key to understand what could be the most interesting for the promising candidates, as it was discussed during the 3rd CEO call in 2022.

Ten years ago, the Harvard Business Review called the data scientist position the sexiest job ever, given that the job was in demand from tech companies, but everything had to be built since it was relatively new. The HBR anticipated that such a position would be then extremely coveted by other companies, once the benefits of this new job become clear and the framework could be specified (at the time, candidates could come from experimental physics, astronomy, psychology, or meteorology)...

A decade later, the job is more in demand than ever (the demand as increased by 256% since 2019 and it is expected that data science will grow more than any other field until 2029).

However, the hurdles that were identified a decade ago have survived: data scientists spend most of their time cleaning and wrangling data (in spite of AI progress), they struggle with organizations which lack data-driven culture, and they are led to think that they can not make an impact in their organizations.

But all in all, the frame of the position has been specified, largely thanks to a growing data science-oriented educational offering, the fact that they are now part of organizations which tack their needs into account and provide support (ML engineers, AI specialists, analytics, data-oriented product managers, also due to the fact that the topic is so complex that it requires many different skills coming from various areas of specialization).

The HBR also expects the position to keep on evolving, due to the changes in technology and the fact that coding, which was a must have back in 2012, is now no longer essential to perform.

Is Data scientist still the sexiest job?

What: In his weekly column, Benedict Evans challenges the notion of DTC business from the loyalty perspective

Why it is important: Brands and retailers tend to think in terms of exclusive relationship to customers, while they should integrated, and consider themselves, in a broader ecosystem, which would allow to take some distance and possibly inject new services or products taking into account this ecosystem. The launch of the Geek Squad in the early 00’s by Best Buy is a good example of such an approach.

Benedict Evans, a tech analyst, reflects on the notion of brands’ relationships to customers and “users”. He reminds that there are not such things as captive customers anymore, which brands are often assuming. This applies to tech as well, with “users” on Facebook or Google but not thinking about Facebook or Google as an entity per se, part of their lives.

This applies to the Web3, which is all about creating direct relationships, but is there a limit to what customers, fans or users can gulp on a daily basis in terms of relationship or interactions?

Benedict Evans’ views on direct relationships

What: Plausible deniability is everywhere, and allows customers to escape decisions they would otherwise commit to.

Why it is important: Retailers can not expect customer behaviour to change out of the blue and spontaneously. They need to find ways to help customers evolving, and making them feel good about it. Nudging techniques might help.

It is no secret that customers are willing to consume more responsibly, as they probably sincerely hope to adopt a more sustainable behaviour (2/3 of Americans report reducing their reliance on single-use plastic, 50% report choosing brands based on their environmental performance, and electric vehicles sales are soaring in the US).

However, the reality is delusional compared to the self-declarations: customers may claim to be willing to pay more for green energy, but they do not look for it, and electric vehicles only amount to 10% of annual sales. An experiment with the Salvation Army might bring some explanation: when volunteers (collecting donations) are in front of all doors of any given supermarket, donations are high. But they plummet when volunteers are only at one of the doors. This is the concept of “plausible deniability”: people who are committed and who would have donated otherwise, choose not to do so when given the possibility. It is also better to walk out through the other door than saying no to the Salvation Army, socially speaking. The author suggests that this behaviour might explain the gap between desires and reality when it comes to sustainable consumption.

Nudge actions could be an answer in order to eliminate the plausible deniability. The article provides many actions from other industries, including health and commodities. When it comes to retail and marketing, wiping out the plausible deniability will require coordination amongst industry members and regulators, in order to find ways to stand in front of all the doors.

Nudging customers to help sustainability 

What: Coresight has compiled a comprehensive set of data in order to understand the actual situation of retail in China.

Why it is important: Whenever the consumption in China will speed up, the world will feel the heat both in terms of international presence of Chinese tourists, but also in terms of products being sucked in the country, and therefore potentially hampering other markets. However, Coresight does not see such an event taking place as soon as the recuperation is slowed.

Coresight reviews the Chinese retail market, estimated to grow by 1.5% in 2022 to $5.9tn, and by 4.2% in 2023. The expectations are lower than a few months ago, due to the impact of the zero Covid policy, the shrinking population and the youth unemployment rate (23% in August 2022). In addition, the market remains fragmented, with a clear domination by the e-commerce companies (Alibaba and JD.Com representing 75% of the total online market).

For these reasons, the analysts remain cautiously optimistic about the speed of recuperation, which will of course have several repercussions in the rest of the world.

The report also provides some key numbers about a selection of national players. Coresight expects that omnichannel shopping is only going to increase even more, as this is a perfect answer to the Zero-Covid policy, especially in lower tier cities and rural areas. In addition, they recommend to watch the rise of domestic brands which are harnessing both a growing nationalistic pride and the departure or store closures from several international brands, such as H&M, Ikea, or Pull&Bear.

China retail market outlook 

What: As customers return to in-store shopping, DTC and tech retailers are struggling to adjust to decreasing sales amid the economic downturn.

Why it is important: Brands that thrived during the pandemic are changing strategy in response to shifting consumer behaviour. The result is a cascade of layoffs at the executive level as well as adjusted distribution models.

Fast-growth strategies were beneficial during the pandemic, but now existing retail disruptors are facing the consequences. As these companies attempt to course correct their bottom lines, the retail industry is seeing a reduction in the workforce for both big and small players alike. Many, like Shopify, assumed the e-commerce boom, which propelled such brands during the pandemic, would continue for the next 5-10 years. However, consumer behaviour is not only shifting in-store but is declining as macroeconomic trends point toward a recession.

Ipsos for Publicis Sapient and Salesforce reported that internet-native brands are twice as likely than brick-and-mortar stores to report they’re unprofitable. Newer startups are also struggling to find funding as global startup funding has dropped 23% year-over-year in the second quarter. Job openings are also decreasing especially in retail, increasing the severity of the layoff trend in the US job market.

A majority of layoffs are happening at the executive or corporate levels. Warby Parker, for example, has fired 15% of corporate staff, yet it stated the downsizing will not involve store or customer service employees. In fact, the company expects to open 40 new brick-and-mortar locations with a goal to expand their footprint to 900 from 175 stores today.

Aside from layoffs, brands are making changes to their supply chain. In the case of Glossier, the DTC brand has completed flipped its distribution strategy by entering a wholesale deal with Sephora. Peloton, on the other hand, has announced it will stop owned-manufacturing operations and has established a partnership with a third-party Taiwanese company. Other notable brands restructuring include Stitch Fix, Klarna and StockX.

Overall, these brands view restructuring as vital to their growth and profitability and a natural reaction to the shifting consumer behaviour brought about by macroeconomic global challenges. As the recession continues to trouble consumers, it is likely brands will continue adjusting their strategy to maintain stability.

Economic downturn forces disruptive retail restructuring

What: A review of the top 12 RMN sorted into 4 categories: big box retailers, online retailers, specialty retailers and pharmacies

Why it is important:  the articles reviews the partners these retailers work with, and also provides an understanding of the offers proposed by the 12 reviewed retailers.

Retail Media Networks are identified as the new strategic source of income by many industries eager to harness and leverage their digital capabilities as well as the size of their customer databases. Elizabeth Marsten, a blogger, took the time to compare the top 12 of them, excluding Amazon which outpaces the competition with 200b monthly average unique visitors (the closest to this number is Home Depot with 183m MAUV).

The article reviews Walmart, Target and Kroger for the big box retailers, Instacart, Ebay and Wayfair for online retailers, Home Depot, Best Buy, UIta and Macy’s for the specialty retailers, and Walgreens and CVS for the pharmacy sector.

The article does not mention Nordstrom Retail Media initiative launched earlier in 2022 (click here)

The top 12 Retail Media Networks in the US

What: Visa explores the multilayers impacts of the Gen Z’s rise

Why it is important:  A new customer base is coming, and they master the digital codes better than the retailers. The latter should be prepared.

Visa observes that the world economy is about to undergo a significant change with the rise of the tech-savvy Generation Z, in parallel with the emergence of new technologies such as the Metaverse and digital currencies. This could prove pivotal for the payment industry and its trajectory. For them, this economic change is secular, as opposed to cyclical or even structural.

Paradoxically, Gen Z will represent 1 out of 3 adults in 2026, to be compared with the baby boomer generation which represented 1 adult out of 2 in its time. However, their understanding and capabilities to use tech are expected to help them lead a secular change, as when this generation will mature, 60% of the world population will  have been born in a world where the Internet is essential.

Visa expects the metaverse to take off along with the evolution of gaming and the price reduction of the devices needed to access it. It will also help the use of cryptocurrencies, which are still either a niche or a gimmick today.

Gen Z and the metaverse according to Visa

What:  CEOs do not have to know how to do what their data scientists are doing, but they absolutely need to understand what they are working on to make the best decisions possible.

Why it is important:  It is tempting to rely on a Digital Officer to take care of the issues and only tackle the business aspects with this person. However tech is now so central in the business and so crucial for strategic development that leaders need to understand the concepts and master terminologies if they want to be able to make the best investment decisions possible.

Leaders across the world are all aware that tech is a vital part of the business, but many of them wonder about what they really need to know about it, since there are usually dedicated people in the organizations taking care of this important topic.

According to the Harvard Business Review, coding, once a must-have for anyone interested in tech, is not a necessary skill today for leaders. This does not exempt them, however, to learn how to work with people who code, for instance via 30 minutes-long weekly meetings with technical specialists to understand what they are working on. It is all about bridging the business part of the organization with the tech part.

Long gone is the myth of billion-dollars businesses created in garages. Modern leaders who do not have a technical background (Stitch Fix or Air BnB founders, for instance) have instead learned how to collaborate with technology teams and make the right investments based on their understanding of the situation.

The Harvard Business Review advises to learn concepts rather than skills, and understand at minima the terminology.

Coding is not a necessary skill, but digital literacy is

What: McKinsey proposes a few solutions to the meeting obesity in organizations and reviews how to save time while at the same time be more efficient

Why it is important:  Leaders need to fight time waste by making the most of each and every tool at their disposal. Each of them has a specific purpose and should not be used as a fit-for-all solution.

McKinsey tackles the never-ending issue of time management and meeting fatigue (be them offline and online). In response, organizations are becoming more complex, without improving the decision-making process. As a potential solution, McKinsey propose to tackle the topic by identifying and focusing instead on the 3 types of collaborations usually taking place during team meetings:

-    Decision making: for complex or uncertain decisions, meetings with clear dispatch of accountability and roles. Cross-cutting routine decisions can be achieved via videoconferences.

-    Finding collectively creative solutions and implementing coordination: innovative sessions do have to take place physically, while routing working sessions can be taken digitally during short sessions.

-    Information sharing: if it is one way, a memo, mail or podcast will do the job. If it is two way (for instance, requiring a Q&A session), then an in-person meeting is better.

McKinsey observes that companies are increasingly shortening the meetings durations, to 30 or even 15 minutes, only based on the decision-making process, provided that all the needed information has been shared in advance.

Also, they encourage leaders to constantly ask themselves the reason why they have to attend any  meeting, their role and their possibilities to impact the outcome or not. If their presence is not essential, they are encouraged to excuse themselves and get a quick update afterwards. If the leader is not essential in the meeting, McKinsey is confident that the meeting will be successful without this person.

If we are all so busy, why isn’t anything getting done?

What: The Robin Report reviews how museum stores have evolved from souvenir shops to sophisticated points of sales.

Why it is important: Museums too are looking for new sources of revenue by monetizing their offer and spaces. As a consequence, they come with fresh ideas (such as monetizing exhibitions in a novel way) which could be sources of inspirations for retailers… or spark some ideas of collaborations with them.

The Robin Report takes a closer look to the memorabilia shops that we are all accustomed to seeing after visiting museums. There has been quite a significant revamp of the typical souvenir stores, and it is not about selling postcards and T-shirts only anymore, but $2,000-worth pieces of stone, collaborations, and even pieces of design in addition. This is now needed as museums need to cater for the needs of tourists, but also sophisticated museum  members and visitors willing to consider a broader selection of products.

As a consequence, for instance, the MoMa has opened 2 stores, one dedicated to souvenirs, and one to more particular products. Interestingly, they are designed in a way which does not oblige a customer to visit the museum to access the stores. Reviewing the Art Institute in Chicago, the Met in NY, the gift shop at the Jacob Javits center and other museums, the Robin Report wonders if those stores could be standalone, i.e. cut apart from the museums themselves (i.e. acting as branded flagships) and, most importantly, if retailers could learn a few lessons by watching how each exhibition is monetized and merchandised, along the usual stapples, in order to cater for the needs of all customers.

Can Museum stores be a source of inspiration for retailers?

What: While digital advancements push for a stronger virtual presence, physical retail locations will remain an important part of omnichannel sales.

Why it is important: Despite concerns that shifting further into a virtual world will eliminate the need for physical locations, the metaverse has highlighted the enduring importance of key cities and in-person experiences.

Following the pandemic, people continue to value real-life experiences and in-store shopping. The metaverse proposes a substitute for the physical world, however, it is unlikely it will fully replace physical stores. With more opportunities to live and work remotely, companies should be more strategic in locating their corporate hubs in key cities.

The metaverse is meant to enhance physical retail by improving the virtual shopping experience for consumers through more realistic visuals and functionality, such as virtual try-on. Its benefits can be seen in the ability to expand the content offer, improve personalization, optimize data processing and decision making, as well as lower location switching costs and transaction costs. However, body language, serendipity and human interaction, which create a great selling and working environment, remain reliant on real-world experiences.

Some cities have already begun to establish themselves as hubs for innovation, global corporate headquarters, flagship locations and leaders in the world’s artistic, cultural and research institutions. The metaverse is beginning to become another factor in these cities’ appeal. Cities like Dubai and Shanghai are launching strategies aimed at attracting metaverse-focused businesses and people. This will strengthen the need to establish physical presences in the best locations for experimentation to attract enthusiastic early adopters, recruit and connect with talent, and ultimately balance a company’s physical and virtual footprint.

The metaverse can also assist in real-world product development through the ability to collect richer data across broader networks and improve processes in cost-effective ways through virtual testing. Virtual reality and more readily accessible smartphone-enabled augmented reality can assist in improving the user experience and company performance.

Physical stores can act as a portal for customers to access the metaverse by providing the proper hardware and education to facilitate customer understanding. This combination can offer more opportunities to add value by enriching experiences and drawing clients in-store. In addition, the metaverse has an important complementary role in broadening access to talent pools by filling specialized and/or fully remote roles, ensuring a diverse employee base, and allowing employers to connect with job candidates virtually before investing in in-person meetings.

Thus, companies need to think more strategically about what the office is for and where physical presence is required to optimize all processes from work collaboration to customer retention.

The Metaverse won’t replace physical retail

PRINTABLE VERSION HERE

Introduction

*With Covid, the search for wellness has become increasingly important for consumers. In a survey from McKinsey, the global wellness market was estimated at USD 1.5 trillion in 2021, with a predicted annual growth of 5 to 10%. In this survey, 79% percent of the respondents said they believe that wellness is important, and 42% consider it a top priority.

As a consequence, retailers started to tip toe in this relatively unknown part of the business, in the intersection of beauty, sports practice, health products and services. Selfridges first launched a wellness program in February 2022. Dubbed “Superself”, the initiative included paid sex counselling sessions, confidence coaching sessions and other services to help customers live a “brighter lifestyle”. This month, they are transforming their Corner Shop into “The Feel Good Bar”, a well-being destination focusing on sex and sleep-enhancing products and services. The cinema at Selfridges will also be part of the program, converting into a sleep session area. Health-based experiences like acupuncture sessions, IV drips, bio-hacking, and oxygen therapy will become available later this year. Also in the UK, on top of a cosmeceutical space, Flannels partnered with Barry’s Bootcamp to open a gym in their new Liverpool store. In the US, mental health initiatives developed in the past months for instance at Walmart, CVS and Rite-Aid drugstores.

In France, last year, Monoprix launched “La Santé au Quotidien”, a new department dedicated to products that are in between traditional beauty offerings and medical treatments. In March 2022, Le Printemps Haussmann store also launched a new beauty floor gathering beauty services such as manicures, pedicures, brow services, hair products and a salon, dermo-cosmetics and food supplements, as well as a spa developed with the Face 2 Une beauty tech brand, proposing no gender services through manual massages and machines. Next September, using a more confidential approach, Le Bon Marché will also open a permanent 150 sqm beauty salon.*

Obviously, initiatives are plentiful but Galeries Lafayette goes further than any other department store in the wellness business. Last week, and after a year in the making, they opened the “Wellness Galerie” in their Haussmann store. On 7 July, Alexandre Liot (Haussmann Store Director) and Arthur Lemoine (Offer and Buying Director) unveiled the new floor. The IADS attended the floor visit for you, and we are delighted to report back this exciting member news.

Check out the a collection of pictures of the Wellness Floor here

The Wellness Galerie in a nutshell: sports, beauty, health, wellbeing, and more

This recent move is part of a larger modernisation plan which already witnessed the revamp of the floors: 2 and 3 (women’s fashion), 4 (women’s shoes) and 5 (kid’s wear). The Wellness Galerie is located on the -1 floor where women’s shoes used to sit, and one of the most important floors in terms of traffic. The idea behind such a space is to make wellness accessible to a larger part of consumers as it is still quite segmented to date in France.

With this new 3,000 sqm department, Galeries Lafayette has an ambitious goal: the holistic concept is set to become the destination for well-being in Paris, where people come to think about themselves and do something good for their body and mind. In a nutshell, the Wellness Galerie splits into 3 main areas: a gym studio and a fitness product offer, beauty and health  (services, and a care-oriented beauty store. Many brands are exclusive, and some are introduced for the first time in France.

In terms of architecture, the Wellness Galerie is full of rounded spaces, even using a reverse cupola to mirror the store’s famous one. Curved walls and ball-shaped private rooms echoing the 70s are emphasizing the impression. Walls are usually tiled with earth-tone ceramics. Hardwood and concrete floors come one after another depending on the area.

Galeries Lafayette gets physical

La Source, a Parisian bootcamp studio, is opening a 200 sqm workout space which will offer group coaching, as well as other classes, such as boxing and cardio starting at EUR 30 for a 50-minute class. With its direct access from the subway station, the gym can open outside of the usual operating hours, from 6:30 am to 9:00 pm (the store is open from 10 am to 8:30 pm). A large sitting area, thirty shower cabins, supplied with bath towels, body soap and lockers make the place a true gym.

This part of the floor also includes a trendy yet technical athleisure product offer, the “Fitness Store”. Some 15 responsible brands recognized for their expertise, from big names (Adidas, Under Armour, The North Face, Eres and Wolford) to emerging brands are gathered on a 200 sqm surface: Born Living Yoga and Alo Yoga (exclusive brands), Luz Collections and Girlfriend Collective for fitness and Pilates, Circle for running and Chlore for swimming are completed by Colorful Standard for loungewear and the latest yoga accessories from Bala and Athlé. Finally, Champion Spirit, sports accessories and equipment that connect digitally, are available to shoppers. The “Fitness Store” doesn’t sell sports shoes.

A wide array of services focusing on well-being, care, beauty, and fun

What makes the ‘Wellness Galerie’ special also lies in the plentiful service offers. First, through the “Lobby Wellness”, the “Wellness Team” welcomes customers and guides them in choosing the program that best suits their current objectives. The Wellness Team can also carry out a broader assessment of one’s physical, mental and emotional condition to guide clients toward the right treatment. A dedicated platform on Galeries Lafayette’s website is available to book any service.

When it comes to brands and partners, the space proposes unexpected pure health-related or well-being services such as Aantomik. Created by 2 osteopaths, services combining prevention and treatment such as cryotherapy, hyperbaric chamber, osteopathy, meditation, muscle strengthening, yoga and Pilates in group sessions are available. Many other services oriented towards well-being and beauty are also proposed: Belleyme offers sessions in their infrared saunas for detoxing, disconnecting, and regenerating your body. The famous Martine de Richeville combines Chinese medicine and psychology to remold the body through her special and renowned massage technique that targets fatty deposits, circulation issues, deep skin tissue, and internal organs. L’Institut Nathalie Duarte is a physiotherapist, masseuse, and official trainer of the Renata Franca method. Les Bains du Marais brings ancestral rituals for beauty and well-being thanks to a hammam and a collection of bathing products. And Alexandre de Paris will open a hair salon in the  Wellness Galerie in September.

To improve body figures, Skinneo delivers anti-ageing and silhouette-enhancing treatments by using exclusive technology to care for the face and body. Chronodiète offers nutritional coaching for diet and well-being using a methodology based on chronobiology and the glycemic index to adapt to the rhythm of each person for an efficient weight loss journey.

More oriented towards beauty, the Galeries Lafayette buying team recruited Chillhouse in New York to differentiate their manicure offer. The brand offers fun and accessible body, face, and nail services. Le Boudoir du Regard develops innovative bespoke eyebrow waxing, eyelash and eyebrow dyes, long-lasting eyelash extensions and permanent make-up services to provide structure and harmony to the face. Finally, Djula proposes piercing services with a trendy line of body jewelry made from 18 Carat gold, diamonds and other precious metals and gemstones.

Two “bubble spaces” are available for private bookings. In these two cocoons, customers can celebrate a birthday, a bachelorette or bachelor party, or any other occasion. Some treatments can be organized in the intimacy of the “bubbles” as they can be entirely personalized. Nutrition being a key aspect of wellness, a restaurant, the DS café, has been designed to offer healthy meals and juices, to stay or to go.

The Beauty Store is focusing on care

Central to the floor, the 600 sqm Beauty Store is divided into shop-in-shops and a multi-brand area. New names mix with famous ones that were previously available on the ground floor. The idea here was to leave the tri-axis brands such as Chanel or Dior, the perfume and makeup brands on the ground floor and to move the more care-oriented ones to the Wellness Galerie: for instance Augustinus Bader, Origins, The Ordinary, Clinique, Aesop, Shiseido, Kiehl’s, Aveda, Clarins, Dermalogica, LA:Bruket, Rituals. New brands are introduced such as Seasonly, the 100% clean and vegan French line of beauty products, benefiting from a large area. Sunday Riley provides innovative and exclusive formulas to see rapid results and rebalance skin for the long term. And 111SKIN which reproduces surgical and clinical treatments through innovative formulas.

Brands developing alternative products have also been onboarded. L’Officine Immortelle combines phyto-aromatherapy and grimoires to bring ancestral formulas up to date through its herbal teas, oils, treatments and elixirs all 100% organic and made in France. Aromatherapy Associates has been a leader in the wellness industry for over 35 years by producing handcrafted natural formulas using essential oils designed for physical and emotional health. Finally, a food supplement section with Sensiness and Maison Louno, and a book store gathering 500 books are also available for a 360° product offer.

Conclusion

Department stores recently entered a relatively new business: wellness. Being about beauty, well-being, ageing, nutrition, health and sport makes this holistic trend and the market coming with it difficult to be clearly defined. While the wellness trend remains unframed, retailers are experimenting with various options from traditional beauty treatments to healthcare-related services. Some department stores are even going further by offering injectable services like Saks Fifth Avenue in the US. In France, Galeries Lafayette certainly takes the lead in this area by devoting an entire floor to its Wellness Galerie. It also marks an additional venture into experience and service offerings.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

Introduction

*Among the many consequences for retail stemming from the Covid-19 pandemic, which we are exploring at length, a major one is the international tourism crash and the closure of China, which historically steadily contributed to department store companies’ growth in the past years. Even considering the recent closures taking place in Shanghai, Beijing and other Chinese cities, the business has flourished domestically for the past 2 years in China and the acceleration of retail digitization has also taken place there. The road seems to be still very bumpy, but there is definitively a light at the end of the tunnel. What can we learn from what took place in China and are there lessons to have in mind? To answer this question, we interviewed two specialists from Mobile Now Group and Clientela.

Mobile Now Group, founded in 2009, is a development studio with a focus on digital experiences, products, and platforms. With offices in Shanghai, Hangzhou, and Changsha, in addition to their Singapore office, they have a commanding understanding of the Chinese market and its evolution. They have worked on more than 100 projects with leading companies in the world such as Richemont, Cartier, IWC, Montblanc, Sephora, DFS, Hennessy, Lane Crawford, Shiseido, NARS, SMCP, La Samaritaine, and others.

Clientela, a software company based in New York founded in 2010, has developed a complete suite of acquisition, clienteling and retail operations for stores, in order to cater to customers’ needs through an optimal experience, while maximizing efficiency and profitability for retailers. They have developed solutions for several leading global brands, such as Cartier, Benefit Cosmetics, Marc Jacobs, Chloé, MaxMara, and Carolina Herrera, and they have led a pilot project with IADS member Magasin du Nord in Denmark.

Mobile Now and Clientela partnered in 2020 realizing that retail clients needed a global clienteling approach that brings together two important approaches:*

• The maturity and knowledge of global clienteling best practices,
• The specificity of the Chinese digital ecosystem, especially in mobility, social commerce, and O2O commerce.

We interviewed Thomas Meyer, co-founder of Mobile Now, and Arnaud Barbelet, COO and partner at Clientela. Thomas spent 20+ years in Asia (14 in China) and most of his career in tech and mobile development before co-creating Mobile Now Group 12 years ago, with experiences at Wunderman, OgilvyOne, and WPP among others. Arnaud has 18+ years of experience in start-up development centred on customer approach and understanding. He brings a complementary eye to what’s going on in China and helps draw conclusions for retailers from other regions.

IADS – With your combined experience, what are the key learnings and innovations that you noted over the past years in China? What should the rest of the world be aware of?

TM, Mobile Now - Social commerce, and how it became central for Chinese department stores and international brands, is on top of my mind and especially WeChat. Many players are operating in social commerce: Douyin (equivalent of TikTok), Little Red Book… They all work a bit differently and most of them are in reality engagement and branding platforms. For me, WeChat stands out from the crowd.

WeChat has a multilayer spectrum:

• There, brands can build their apps (Miniprograms) hosting the whole product catalogue, acting like websites or native apps we know in the West. In addition, these Miniprograms include WeChat Pay and easy user identification.
• It is at the same time a livechat platform, used by brands and sales associates for anything: pre-sales, sales and after sales, making appointments in stores and reserving products.
• It also offers retailers a wide range of analytic data, through WeCom (a professional sister app) to track KPIs and perform additional analyses.

Not all brands have jumped onto WeChat online-to-offline (o2o) commerce and in some way, this is what seems to differentiate losers from winners in China. For customers, the possibility to use WeChat customer service and Miniprograms now make a difference between good and bad service.

AB, Clientela – For me, international department stores willing to attract Chinese shoppers once the pandemic restrictions end have no choice but to invest in WeChat or other significant national super apps (such as Kakao for Koreans or Line for Japanese customers). However, China has crafted this business model, we see WeChat as a sort of digital lab for social o2o commerce. The Korean and Japanese examples show that this model might very well happen in other countries as well (for instance, India).

IADS – Thomas, e-commerce in China is extremely different, and much more competitive, than in other markets. How have Chinese department stores adapted to the digital ecosystem and what were their main innovation points?

TM, Mobile Now - E-commerce in China is a completely different ecosystem, and structural changes are constantly happening, which complexifies the picture. The way the different platforms work changes over time, which can be disorientating for outsiders.

For instance, many brands heavily invested in Alibaba’s TMall without taking a broader look at the whole ecosystem, and forgot to build brand awareness and engagement prior to these heavy investments.

To avoid this, WeChat really stands out as a Swiss Army knife: it is at the same time a platform for brands, their omnichannel commerce enabler, bridging online to offline and vice versa. By acting as a DTC platform for brands, WeChat has been central for Chinese department stores, and probably for others located outside the country and who wanted to catch the train.

In any case, investments need to be made step by step, and with thorough due diligence: WeChat is not the only option. For instance, when it comes to dynamic marketing and engagement, Douyin, Weibo or Little Red Book (aka XiaoHongxu) are adequate platforms for social PR and Communications teams and agencies. To make a parallel, this is more or less the difference between Facebook and Instagram outside China.

IADS - What is your understanding of the Chinese customers’ expectations now that they have everything available at home at the same price (Hainan…)? How have they evolved?

TM, Mobile Now - Hainan has indeed gone through an amazing development for home-based Duty-Free business in China in the past couple of years. But this situation may not last, as Chinese consumers can’t wait to also be able to travel again internationally.

Many brands are still cheaper to buy in Europe, US or Australia than in Hainan due to other costs than taxes or pricing policy differences. And Chinese consumers know very well that brands are usually cheaper in their original market andoffer more choice and improved experience.

Once the restrictions stop, we believe, and analysts do so as well, that the Chinese will be heavily travelling again.

AB, Clientela – Actually we expect a massive revenge travelling and shopping behaviour to take place. As the Chinese have waited a long time for this to happen, they are comparatively richer than prior to the pandemic, they have more savings, and prices are higher in China (even in Hainan) than in most international brands’ home countries. So, we expect a wake-up call and surprise revenge shopping spree.

IADS - How can department stores in the rest of the world prepare to welcome Chinese tourists again? To what extent are we talking about a shift in terms of the offer, store experience, or anything else?

AB, Clientela –The Covid-19 pandemic took marketing and IT departments by surprise as they had to identify and set up new digital solutions quickly, such as e-consultations and masterclasses, but also with queuing and online booking solutions. Department stores can’t afford to make any new mistakes, especially by waiting for Chinese tourists to ask employees to install WeChat. By “install WeChat” I mean to set up a new technical environment, teach sales associates how to use it and define new business flows to collect data, better prepare boutiques visits and provide results.

In addition, there is a trend for department stores to differentiate themselves according to the audience they want to serve (international travellers vs local crowds, such as La Samaritaine vs. Le Bon Marché, or Les Galeries Lafayette Haussmann vs. Champs-Élysées in Paris) and we expect it to continue.

This positioning differentiation (international vs local) will be paramount in defining traffic generation strategies, leading to strategic decisions to make. International travelers-focused stores will probably double down on Chinese tourists once they are back, and will need to re-activate and refresh their plans very quickly.

For us, the key steps to efficiently preparing the Chinese travelers’ return are:

• Brand awareness and reputation,
• Chinese focused product/brand assortment and overall experience,
• Chinese-speaking sales staff and consultants,
• Mastering Chinese platforms and delivering above expectations on omnichannel and clienteling services, (and that’s clearly WeChat first and foremost, but also other social media platforms as well) to optimise their customer experience and journey. This is paramount as it naturally drives word of mouth, creating a virtuous circle.

IADS – And what about international department stores’ digital tools and ecosystem?

AB, Clientela – It is important for department stores not to miss the Chinese revenge shopping spree we expect to happen eventually. This is why Clientela and The Mobile Group have teamed up to help our partner clients, mono brands, and department stores to be ready to welcome Chinese customers.

They use WeChat to prepare for their trip, book their shopping experience, pay, reserve products, share with friends, and ask questions to the Sales Associates they are bonded with. They expect a truly o2o shopping experience. Like what they have at home. It is crucial for department stores to be ready for that. And like in China, there will be international winners and losers.

IADS - What would be needed which is not yet implemented outside China?

AB, Clientela – Provide a differentiated and relevant experience including a product catalogue, Customer Service, the ability to reserve products, book their shopping visit and enjoy their VIP experience with other perks and services. They come with very high expectations. The trip is like the realisation of the dream, and the risks of disappointing them are therefore very high.

TM, Mobile Now – Such an approach based on WeChat will help customers to ensure a direct connection with Chinese-speaking sales associates. In turn, sales associates and retailers will have access to tools helping them to better manage this customer flow, help them, and know them or track them in a more efficient manner.

IADS - Can we expect Chinese tourism to be the same kind of fuel for growth for department stores as it used to be in the past? And how can it be combined with local customers that have been (successfully) courted for the past 2.5 years?

AB, Clientela – Eventually, borders will reopen, and I am personally convinced that the return of Chinese travellers will totally and positively surprise flagship retail and related tourism business. I think it is clearly going to be even stronger than before.

TM, Mobile Now – Of course, the tricky topic is to define the nature of the Chinese tourists who will come back. But keep in mind that change is constant in China and during the 14 years I spent in China I have been surprised every year to see how fast decisions could be made, right from the top, and how impactful they can actually be for business. When I talk to Chinese friends, I hear how eager they are to travel back across the world (Europe included, of course) and I personally believe this will happen sooner than most people think.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the review of NK in pictures here 

pRINTABLE VERSION HERE

Introduction

*The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This second part is dedicated to NK in Sweden.*

Company history: a leaser learning the art of retail

A founding member of the IADS (1928-1991), Nordiska Kompaniet was founded in 1902 in Stockholm by Karl Ludvig Lundberg and Josef Sachs, who wanted to bring a store with the same level of service that what Paris or London has to offer at the time. The Stockholm flagship store opened in 1915 and took its inspiration from American department stores, with a steel structure and a granite façade (which still contributes to the dramatic aspect of the store today). The emblematic circular neon sign was installed on the façade in 1939 and is still a well-known sight in the city today. NK is reputed for having brought both innovation (for instance, the first escalators) and fashion to Sweden: it was for instance visited by Mr Dior who decided to open a salon there.

Today, the company operates 2 stores (Stockholm, Gothenburg) and is owned by Hufvudstaten, a real estate company, which posted total net revenue of €168m in 2021, down -4% vs. 2019. An interesting point, however, is that until 2020, NK was exclusively operating under leasing agreements and, therefore, was only focused on the maximization of the assets. During the pandemic, one of their operators, an importer of fashion, cosmetics and jewellery brands, went bankrupt. Given the fact that this operator represented 25% of the total offer (turnover 2019: €72m), NK made the decision to repurchase its activities for €5.5m in February 2021 (the value of the inventory) and launched a new division, NK Retail, which generated an additional turnover of €59m and a profit of €9m from February to December 2021.

As the President, Bo Wikare, put it when the IADS met with him, “before the pandemic I was running a real estate company with 40 people, now we are collectively learning the retail job and how to manage 450 people”. Mr Wikare joined Hufvudstaten in 1994 and was appointed CEO of Hufvudstaten and President of NK in early 2020. Q1 2022 showed promising trends as turnover (both from property management and retail activities) already exceeded the same period back in 2019.

Visiting the store: a true temple to luxury

The monumental entrance, fully covered with granite, still works its magic more than a hundred years after its opening: the store is spectacular and can face even the most modern competition, as during the visit, the impression made was probably on par with La Samaritaine which re-opened two years ago. It displays, on 5 floors including the basement, a spectacular assortment of Swedish art de vivre and international luxury brands, all organised around a central well of light, just like what La Rinascente has done in the Via del Tritone location, but significantly bigger, giving a true sensation of space.

The monumental ground floor is dedicated to international luxury shop-in-shops (Hermès, Loewe, Balenciaga, Burberry…) including the newly opened Saint Laurent space, near a high-end café and restaurant. The space then unfolds on the cosmetics, shoe, accessories, jewellery and watches sections, all sold in multi-brand zones by third parties, meaning that each zone has its own cash desk and anti-theft system (an incongruous sight for anyone more familiar with continental department stores). The cosmetics area features all international brands with their own concept and is a first taste of the offer that continues in the basement. Finally, a space dedicated to cultural exhibitions, at the time of the visit displaying the collaboration between NK and Monsieur Dior, finished bridging the glorious past of the store to its future.

What was striking during the first minutes was truly the quality of execution: the store felt really spacious, airy, well-lit, and luxurious, thanks to the quality of the materials used, but also the attention to detail (the toilets are remarkable, for instance).

The basement is dedicated to the beauty lounge (including a hair and nail bar), the home and design offer as well as a café (very inviting and looking very artisanal), a restaurant, a pharmacy, a library, a candy shop, and a baker. From this section, customers can join a pharmacy and the subterranean network to the rest of the city. Here also, the execution is perfect, with one caveat related to its connections with the ground floor, as there are not many escalators and their locations can make them hard to find when visiting the store.

The first floor gives a good feeling of what Hufvudstaten has excelled at for the past 50 years, leasing, as the neat alignment of perfectly executed branded shop-in-shops is a reminiscence of the Asian luxury department stores operating according to the same leasing business model, such as Lotte in Korea. The only, but significant difference, is that all the retail units are displayed according to a very airy store plan, including around the atrium space, on which edges a café is being built, which gives more a feeling of a department store than a mall. The floor is dedicated to Women’s fashion and lingerie and dotted with very welcoming and smiling sales persons (the visit was done at the opening of the store). 3 zones popped up during the visit:

• The Seazona space, a partnership with a local online marketplace, is entirely dedicated to promoting, Swedish designers. A good way for NK to promote local creativity while limiting the stock risk,
• The second-hand space, which has been played according to a very different line when compared to Stockmann: here, no treasure hunt feel, and products are presented in a very exquisite way (mostly accessories) thanks to dedicated podiums and lights, making them stand out of the crowd and feel very special. The setup is perfect, and features an astute selection of luxury and affordable luxury items,
• The “NK stage”, a space dedicated to popups allowing also to generate a permanent animation on the floor (goods are purchased by NK).

Also, all across the store, dedicated zones, dubbed “NK designers”, “NK international fashion”, and “NK Wedding”… show a selection of brands that have been purchased by NK Retail and sold directly.

The second floor is dedicated to men’s RTW, accessories and shoes, as well as luggage, through a series of shop-in-shops. NK also displays its own multi-brand selections in the “NK Street” and “NK Design” points of sales, all equipped with specific cash desks, separate from the other retailers’ shop-in-shops’. This sales organisation is somehow complicated for anyone not familiar with the store, and also suggests complex systems behind the scenes to retrieve the sales data (we did not test a purchase within a third party shop in shop, but salespeople at NK spaces are systematically asking if customers are NK loyalty card holders).

The third floor, dedicated to sports and home, adds drama to execution and selection: aside from the sports brands shop-in-shops, the multi-brand spaces operated by NK for both categories are spectacular. The sports section is divided into the female, male and exhibition (called gallery) sections where all products are mixed: garments, equipment, and devices… giving a sense of freedom and space which is remarkable. The home section is extremely immersive and well set up. This floor is also, just like the others, dotted with many F&B spaces, many of which are around the atrium, which is treated as a sight to be seen in the store (a feature that is not achieved, for instance, by La Rinascente in Rome).

The fourth floor is dedicated to kids, books, restaurants and customer service (wardrobe, click & collect). Interestingly, it is at this moment of the visit that we realized that there are only two floors equipped with toilets, the basement and this one, while at Stockmann every floor is equipped.

What about the competition?

There is another major department store chain in Sweden, Ahlens, which was founded in 1899 first as a mail-order business. It ventured into the department store business in 1932, and the flagship store, Ahlens City, opened in the heart of Stockholm 500 metres away from NK in 1965. Today, the company manages 57 department stores and claims a total turnover of €450m, which makes it the biggest retailer in the country. It was rumoured in 2009 that Ahlens offered to purchase NK for a total value of €41m.

The feeling offered by Ahlens is radically different than at NK: in addition to being more mid-market, the model seems in its vast majority on a wholesale basis, leading to structural differences (lack of anti-theft systems from zone to zone, sections more intrinsically mixed together, navigation from one section to another less abrupt, less shop in shops) which impact the customer experience:

• Windows are not dedicated to one brand in particular, but mix different products, indicating where to find them in the store,
• The ground floor, dedicated to cosmetics, fragrances and accessories have a traditional setup with international brands shop in shops in the central zone and multi-brand spaces in the periphery. If the cosmetics offer is rather classical and repeats brands already on display at NK, the accessories section has a lower positioned offer: Furla, DKNY, Sandqvist… The space is delimited into sections through walls which are not so much of an issue for the sight thanks to the very high ceiling height. Coming as a strong difference from NK, customers have to queue to pay at central cash desks with are regrouped in specific sections of the ground floor.
• The first floor is dedicated to women’s fashion and lingerie. Here again, one can find corners with brand concepts, but only Malene Birger seems to be sold in a shop-in-shop. The central “Ahlens Studio” section displays cooler and younger brands such as Stine Goya and Jeanerica, but apart from this section, the feeling is less luxurious than NK,
• The second floor is not dedicated to men’s, but to kid’s, home decor and lights. Cash desks are visible from afar, and customers are also invited to wander through “Sally & Voltaire”, a restaurant which also sells the products used in its dishes,
• The third floor is dedicated to the whole men’s offer, including RTW, accessories, shoes, sportswear and services (barber). A personal shopping space and a dry cleaner are located behind the underwear and socks section (a surprising location choice) and a burger restaurant is located right in the middle of Lacoste and Ralph Lauren Polo, giving the location a distinctive smell.
• The fourth floor is leased and dedicated to Muji just like what Illum has done in Copenhagen. It is possible from there to access the rooftop restaurant which provides a great view of the city.

All in all, Ahlens presents a more classical approach when compared to NK, for anyone familiar with department stores across the world. The notion of “everything under one roof” is clearer there, even though the range of the offer does not approach luxury, contrary to NK where the message is clear. As a consequence, both department stores are really contrasted and it is highly probable that customers at Ahlens are much more looking for a bargain or a good deal, and less looking for an experience or the latest or most fashionable product.

What to remember from NK?

The transition from a purely real estate model to a hybrid one, which has been decided out of necessity but is extremely convincing on the sales floor, one year after its inception. This evolution perfectly follows the retailer’s vision of remaining a destination store for both the local customers looking for an international and luxurious offer, and tourists coming to Stockholm: it goes through curation, differentiation and a point of view, only achievable when the offer on display is managed one way or another.

The quality of execution and a perfect mix between retail and F&B makes NK a perfect place to hang out, and could be considered a good and relevant example by many other retail companies across the world. Visitors feel pampered and privileged when walking along the aisles and are encouraged to shop (it is extremely difficult not to feel in the shopping mood).

The capability to permanently create surprise and animation on all floors, not only by relying on brands’ own capabilities, but by mixing the business models: own operated popups, specific seasonal zones rented to brands, partnerships with a fashion marketplace, and own retail zones with superior execution such as the sports section.

Conclusion

*NK has long been seen from the brand point of view as a true luxury hub, only accessible to the most established companies able to deal with local retail operations, or to the ones with the adequate relationship with the relevant local agents able to operate on their behalf.

Now that NK has a retail arm, following a trajectory that has been taken by others already (see SKP for instance), this is going to be probably helpful to widen the distance with Ahlens and contribute to its international reputation. Already designed to be a place of leisure and discovery, NK is on the right way, at least in Stockholm, to become a regional standard and maintain its status of an unmissable destination when visiting Stockholm in the coming years.*

Credits: IADS (Selvane Mohandas du Ménil)

What: Digital IDs are looking to provide brands the chance to track products past the point of sale, keeping them in circulation for longer.

Why it is important: The goal of digital IDs is to create an “ecosystem” that will allow brands to go beyond understanding what happens to their products after the sale and develop a network of trusted — and paying — partners in the circular economy.

Digital IDs provide real-time environmental impact reports on each product to which it adds an ID, allowing brands to calculate their overall impact more accurately (assuming they have sufficient transparency throughout their supply chains).

Brands may soon be legally required to follow the digital ID wave. At the end of March, this year, the European Union published its strategy for sustainable and circular textiles, outlining a series of proposed legislative changes to curb textile waste and bring the industry in line with the Paris Climate Agreement and the UN Sustainable Development Goals.

However, there are challenges: to create a new ecosystem at scale, one example is Eon who has to convince brands and their third-party partners that digital IDs are necessary. And consumers need to come on board too.

Brands including Mulberry, Yoox Net-a-Porter and Gabriela Hearst are getting ahead of incoming EU legislation by implementing digital product IDs. By unlocking supply chain transparency and resale, it could mean more revenue from less products. The challenge for Eon is how to spur behaviour change and investment at scale, while overtaking its rivals. It is hoping high-profile brand partnerships and pre-competitive initiatives can help.

Digital IDs: A game-changer for fashion?

What: Self-checkout systems are fast spreading across the world, thanks to Covid-19 and pandemic concerns.

Why it is important: Are these systems delivering the additional productivity points they promised by reducing the need for staff? Or is this happening at the expense of customer satisfaction?

CNN looks into the woes created by self-checkout systems: failures, mistakes, need to wait for a sales associate to unblock the system. In addition to making some customers’ lives miserable, they can also turn into nightmare for retailers: machines are expensive to install, can break down, can lead customers to purchasing fewer items, in addition to increasing losses and shoplifting.

A scholar from the University of Leicester mentions that if a retail store has 50% transactions made through self-check-out systems, it is likely to increase its losses by 77%.

In spite of this, self-checkout systems are expanding, from 23% among US grocers in 2019 to 29% in 2020. Once seen as a magical formula putting customers to work, and reducing the need to have staff, the pandemic has accelerated the expansion of a system which has flaws, but which is also a common trend among all retailers. CNN compares this to an arm race: “if everyone else is doing it, you look like an idiot if you don’t have it”.

Nobody likes self-checkouts but they are everywhere 

What: Virtual immersive experiences can create a positive impact on purchases, but most U.S. consumers aren’t completely sold on the experience.

Why it is important: Recent data from an Alter Agents survey commissioned by Snap and Publicis Media shows that shoppers who use AR are less likely to make returns but adoption of these services is still slow.

Because of a lack of awareness and adoption, retailers who invest in virtual experiences may want to focus more on community building than immediate revenue results. Other digital capability improvements, for things like personalization and store experience, might be a higher priority for retailers right now. Plenty of retailers have been focused on expanding augmented reality try-on features this year, as opposed to virtual reality experiences involving headsets.

The study of over 4,000 consumers found that 80% felt more confident in their purchases when using AR tools.

Tech adoption slow despite positives

What: It is predicted that the next wave of billion-dollar unicorns will come from climate tech.

Why it is important: Bain has noted some innovations poised to have an important impact on the sustainability of seven industries: advanced manufacturing services (AMS), automotive, retail, banking, energy, healthcare, and consumer products.

These areas of innovation include:

• 3D printing- lowers the cost of construction activities making building more affordable while reducing the materials needed,
• AI- increases the accuracy of monitors and reduced scope 3 emissions,
• Banking is becoming more sustainable by including greener, impact-driven products and services.
• Investing in green energy
• Waste reduction, especially in plastics
• New approaches to agriculture and eating such as vertical farming and lab-grown meat
• The automotive industry to reduce impact and emissions

Overall, it can be noted that innovation and sustainability go hand-in-hand and are both important to a balanced value chain.

Innovations for the C-Suite to accelerate sustainability

What:  IADS’ partner GDR quarterly report on innovation in retail.

Why it is important:  GDR scouts the world to source retail innovation on all its forms, from all segments and all categories.

This quarter, GDR identifies 7 trends : the discount lure, digital concierge, pixels are not enough, hyper-mersion, metaverse enterprise, IRL NFTs and Eco game-changers.

The discount lure: it is all about proposing a new win-win approach between customers and retailers, as the latter offer the former bargain prices in exchange for their data:

• For instance, Amazon’s Alexa is able to offer discounts (under the form of coupons to be redeemed in third party physical stores) to customers, and also tracks this way their behaviour.
• Hyperjar proposes a Buy Now Pay Later alternative where customers can pledge to buy a specific product and save until the amount is reached, while also gaining an interest rate on the saved amount on the process.
• Ziscuit is a grocery search engine scanning local shops and the lowest prices possible on the list of desired products provided by customers,
• Muni in Colombia connects local wholesales to final customers, who get access to wholesale prices but have to pay in cash at their doorstep when the order is delivered. Mara in Brazil is a supermarket chain with the same concept of offering wholesale prices to customers.

Digital concierge relates to how retailers increase their one to one capabilities to better serve customers. Notable examples in retail are:

• Walmart proposes a service of turning photos of leftover ingredients into shoppable recipes,
• Beauty Buddy offers data-backed advice to shoppers and brands,
• At-home Yves Saint Laurent device that prints a made-to-measure and on-request lipstick color,
• Korean beauty brand Amorepacific creates bath bombs based on customers’ brainwaves,
• Dior communicates with its customers via a 1 to 1 Whatsapp strategy

Pixels are not enough:  DNVBs also need a physical space to convey their messages and animate their communities. Physical stores are also entering the digital world. Meta, Google, and even Deliveroo have opened retail spaces, while Harvey Nichols sells NFTs and Gucci accepts cryptocurrencies.

Hyper-mersion: physical spaces are doubling down on the experience to make sure they leave a lasting trace in customers’ memories: WOW instagrammable department store in Madrid, 10,000 sqm Dior flagship store in Paris, Balenciaga’s boutique entirely covered in pink faux-fur in London, Jacquemus immersive installation in Selfridges…

Metaverse Enterprise: brands continue to explore the commercial opportunities in the Metaverse. Coca Cola makes product placement there, Wendy's opens a hangout space while Zara launches a hybrid collection, and CitizenM hotels open metaverse hotel to support its physical locations.

IRL NFTs: or how to monetize NFTs in the real world and build another bridge between the Metaverse and the real world. For instance a furniture company proposes 15% discount on its products for NFT holders.

Eco game-changers: it is all about accelerating in the sustainable practices and go beyond the obvious:

• Ikea has create a store which improves local biodiversity and microclimate in Vienna,
• Mastercard ties employee bonuses to ESG goals,
• ReSell Tag simplifies the resale process for customers,
• Cosmetic brands force customers to change their behaviours,

GDR 82nd Global Innovation Future