What: Fashion brands are increasingly setting up shop in 'third places' like cafes, bars, and studios to create intimate, community-driven shopping experiences outside traditional retail spaces.

Why it is important: This strategy allows brands to connect with consumers on a deeper level, offering unique, personalized experiences that traditional stores can't provide. It also helps brands establish a physical presence without the overhead of a permanent storefront, tapping into the growing trend of hobbyism and community engagement.

Fashion brands are moving beyond traditional retail environments to set up pop-ups and events in 'third places'—venues like cafes, gyms, and art studios—where people gather outside of work and home. This approach allows brands to create unique, community-focused experiences, driving sales and building deeper connections with customers. The trend reflects a broader shift toward hobbyism and the re-emergence of physical spaces where people can connect and engage. These 'third places' offer brands a flexible and cost-effective way to establish a physical presence, while providing consumers with a more personalized and memorable shopping experience.

Fashion brands embrace 'Third Places' to foster community and drive sales

What: At a NRF conference, Walmart reviewed how they explore new use cases for the application of AI in their processes

Why it is important: it is less about “where is my order” and more about “help me to find a gift for my 10 years old nephew whose birthday is next week”.

Desi Gosby, Vice President of Emerging Technology at Walmart Global Tech, leads a team focused on conversational AI, generative AI, and extended reality to enhance customer and associate experiences. Gosby's team, already adept in conversational AI prior to her joining, has expanded its applications to include about 30 conversational experiences for associates and a beta version of a shopping assistant for customers. This new assistant aims to help users with more nuanced requests, such as finding specific gifts, rather than just tracking orders.

Gosby emphasizes a problem-solving approach to technology, involving iterative development and close collaboration with business units to understand and address specific needs. The use of AI has been pivotal in increasing the efficiency and productivity of customer care agents and in improving website content. Her approach involves direct engagement with associates to incorporate their feedback into technology solutions, enhancing their work rather than imposing new tools without their input.

How Walmart explores new chat use cases through AI

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It is not every day that a retail CEO knows and plans his exit as the leader of a retail brand, but this is precisely what made Philip Mountford, the current CEO of Hunkemöller, an interesting guest speaker for the IADS 64th General Assembly in London last November.

Philip Mountford's career in fashion retail spans significant roles across Europe and the UK. He started at Simpson Piccadilly as a purchasing director, then advanced to senior positions in renowned companies. As CEO of Moss Bros Group PLC, he led a major menswear retailer with an extensive store network and franchise partnerships with brands like Hugo Boss and Canali. He also held the Managing Director role at Gianni Versace, focusing on regions including the UK, Ireland, and Scandinavia, and had pivotal roles at Nautica and Daks PLC. Most notably, as CEO of Hunkemöller, Europe's largest lingerie brand, he grew the business to an €800 million valuation, with e-commerce driving 40% of sales. Mountford stepped down from his position at Hunkemöller in January of this year after a transformative 15-year tenure. Before stepping down, he was able to address IADS CEOs and answer their burning questions with candid and open responses.

Hunkemöller: A lingerie brand with reinvention at its core

Since its founding in 1886, Hunkemöller has been no stranger to reinvention. This reinvention has been carried out through the test of time for the lingerie brand to weather many challenges that retailers have had to face. In the 2010s, the pace and scale of this reinvention were accelerated to expand more and to encompass the new digital age. Originally, it took Hunkemöller 100 years to open 100 stores, but when Philip Mountford took over, they opened 100 more stores in less than a year and they achieved over €300 million in e-commerce sales. Interestingly, reinvention was also a strong requirement from Hunkemöller’s shareholders: in the course of 15 years, Mountford has supervised the sale of the brand to 5 different owners, all expecting a satisfying ROI, and therefore, a new and adequate strategy to achieve it.

Marketing and brand building: A strong DNA 

One area of focus that has been key for Hunkemöller is its brand DNA and mission. Hunkemöller started as a classic business with the average age of its customers and employees at 45. True to its trend of reinvention, today the average age of the employees is sub-28. Due to the increased importance of social media to reach target customers, Hunkemöller has made this area of its business a key driver and is even considered by tech providers as one of the most advanced in testing and implementing new practices. The retailer has been so open to adopting new tech that Meta and Google have even included Hunkemöller in their test team to try out new features and solutions first as they are so progressive as a use case.

For example, Hunkemöller was included in a Google project where they built out a datalake that allows them to pull information to learn more about their customers. The information gives them access to sales data which allows the business to understand the customer’s shopping habits such as the frequency they visit, the months they shop, and their e-commerce habits. This data allows Hunkemöller to stimulate the customer in periods they tend to shop. They then use this data to find customers that are visiting a little bit more frequently or spending a little bit more than the target group so they can find ways to get the customers to increase their purchase behaviour to match the next level of shopper. The Hunkemöller app helps with this process by sending customers push notifications to stimulate their activity during certain times. The whole project took 2.5 years and required Mountford to hire a data scientist who gets paid as much as a senior director.

A focus on the target customer: age is not just a number 

Hunkemöller as a lingerie brand fully understands what it means to support women while being in touch, playful, and empowering at the same time. This is why they call their target audience “Sheroes” (a word invented by supporters of female voting rights in the 1920s) to capture the powerful image of their customers (this is more than just a label: Hunkemöller has assembled a focus group with which tests their new ideas and give feedback).

The target customer does not fall into a certain age category, rather it is about having a certain mindset. Mountford gave the example that a woman in her 20s and a woman in her 50s pick the same products to buy. As a lingerie brand, it is also very important for them to have a strong focus on diversity and inclusion, especially when it comes to the models that represent that brand.

The lingerie brand has also found a lot of success through its various forward-thinking marketing activities. They found that they can push the boundaries of where the brand can go through influencer collaborations, which have proven to be very successful. As a riskier venture, Hunkemöller prepared a Fashion Show in 2022 with an audience of 1,500 guests, which was unusual as this takes a very big investment, and they are an accessibly priced bra and underwear brand that usually would not have the budget to support such an event. The fashion show ended up being a success and very important for the overall brand image. The company will be continuing the Fashion Show with more than double the number of attendees.

Omnichannel: Returns, wholesale, and third-parties

Hunkemöller was very early to e-commerce, which represents 38% of the business, and therefore they are fully equipped with click-and-collect, check and reserve, fulfilment and dispatch from the store, with 80% of e-commerce sales coming from their app (4.5 million active members use its 2-click purchase feature). As an omnichannel retailer, Hunkemöller is as concerned as any other retailer when it comes to the issues that returns bring in terms of depreciating margins. However, the brand has noticed that for every return in the store, 48% of customers repurchase.

When it comes to the customer journey, customers who enter the store are greeted by scanning their membership badge, which allows the salesperson to understand their shopping habits across all channels and share the size and type of products that fit and correspond to the customer. This information helps achieve personalization through the empowerment of technology, such as Einstein from Salesforce, that can help customers get their sizing right, resulting in a reduction in return rates when purchases are made online for instance. This is critical:  Hunkemöller’s bras come in 73 different sizes and their bras only range on average between €30-50 per item. While these price ranges do not fall under the luxury category, Hunkemöller is offering high-street services, such as insights and personalization that help customers repurchase after a return, a service that you would typically only find from luxury brands.

Originally Hunkemöller was not open to wholesale and third-party models, but their partnership with Zalando pushed them into such a wholesale agreement which ended up being very successful for the business, doing €40 million in sales. Today the brand works beyond just Zalando with partners such as Amazon, Asos, Next, and Tmall to name a few. The brand is doing €140 million in turnover now with concessions, marketplaces, and wholesale. The brand’s global reach encompasses 19 countries, and 29 international franchise stores, with a projection of 972 own-operated stores by 2025.

In order to get ahead of returns in the third-party market, Hunkemöller takes any products off marketplaces that are not profitable and that have a return rate that is unacceptable after 10 days. While Hunkemöller’s return rates on their own site are 32%, the return rate on Zalando is 60%. Another downside to marketplaces is that EBITDA margins are very low in comparison to wholesale and a retailer’s own site. Overall, marketplaces are not easy to manage as they each have their own algorithms and Hunkemöller does not make a lot of money off of these partnerships. Originally Hunkemöller entered marketplaces to be able to prove themselves for wholesale relationships, but now marketplaces are being used so that there is no commitment to the stock by third parties.

To combat returns, Hunkemöller has 73 sizes and various styles from 65AA to 100J. They have also created a guide called “Sexy comes in all shapes” which assigns a shape to its customers. Customers start with their size and then pick the style that they would like to ensure the right fit. This categorization reduced returns from 48% to 32%. This is extremely difficult to master even with personalization offered in the app and online. Having consistent sizing is very important to reduce return rates, especially for Hunkemöller as the e-commerce business accounts for such a large portion of the activity.

When it comes to pure retail, Hunkemöller has about 15% of physical stores that are loss-making (this figure used to be only 3% pre-Covid). Hunkemöller sees that their e-commerce business is a strong driver of their profitability, although the e-commerce business is down as it is normalizing from the Covid spike, it is still stronger than pre-2019 levels. Today, salaries and rents are so expensive that these line items kill the margins for physical stores. While e-commerce is definitely easier to control, overall physical stores for Hunkemöller are running at around 85% profitable locations which is not a bad figure. Hunkemöller has an 82.2% intake margin, when Mountford joined, they were only at 64%, which gives them the cushion for positive performance. E-commerce is very profitable with a 38% EBITDA contribution, a returns rate of only 32%, an average pick at 5 pieces, and an average basket of around EUR 80. Hunkemoller uses JDL, a highly efficient and commercial pick rate provider from China, with a cost rate of less than 14%. Hunkemöller thought that the notion of “girl gangs” and their need to go to physical stores vanished just after the COVID-19 pandemic. However, while flagship store traffic remains challenging, 3 years later, it appears that mid-tier cities and small-town stores are doing very well.

Challenges as a risk-taking retail CEO

Being at the end of his tenure, Mountford shared insights into some of the challenges he faced as a CEO in retail, especially in the last couple of years. He shared that he had tried to take the company to IPO, but they got to three days before and the investors pulled the plug which was a huge disappointment as a CEO. They were able to finally re-stabilize the business to talk IPO again, but then Covid hit. Following Covid, there have been a lot of changes and growth in the business, but there are a lot of new challenges for retailers that operate in this age. Global inflation has led to an increase in rents, supply chains, and other expenses that are out of the business’ control. Mountford expects that management is going to become very complicated, because of external factors (for instance, a UK picker in a warehouse needs to be paid £41,000 a year to remain competitive compared to £48,000 for a loyalty manager in marketing).

An additional risk that Hunkemöller took on was increasing prices to address inflation and increased costs. Last year Hunkemöller increased prices by 7.5% and this year they are increasing them by 9.6%. Now, this is the first time that the brand has been conceived by its customers as expensive. This means that the future leadership will need to be very careful about the price threshold of their customers. Hunkemöller has also seen the units per transaction come down, this figure used to be 3 but now it is just under 3. While the average selling price and basket price are still increasing, the number of visitors is decreasing.

When it comes to discounting, markdowns fell close to 25% and 6% of this represents the discount to members from the point program. There is about 15 to 16% of failed fashion markdown in the business. And there is about 73.8% of on-price sales. The biggest influence on the markdown percentage comes from the membership program. Cardholders get discounts when they shop (€5 off every €50 purchase), which has become a drug for the business that has proven to be difficult to stop using. Every time this is scaled back, sales go down. Overall, there is a lifetime value of around EUR 800 per customer.

In his view, this is only the beginning of a very challenging period for retail leaders and businesses, especially for high-street businesses, as they will have to grapple and make do with factors of change that are entirely out of their reach and control.

Philip Mountford’s leadership of Hunkemöller leaves us with rich takeaways. During his tenure, he was not scared to fail and take big risks, which in turn brought high rewards from the success of the Fashion Show to his technological advances by partnering and being willing to act as a ‘guinea pig’ for large tech companies to test their new products on the company. These both boosted the brand’s visibility and recognition as well as drove their digital capabilities, setting them up to be able to serve their customers. He also emphasized the importance of retailers needing to intimately get to know their customers. Knowing your target audience, who they are, and what motivates them can allow retailers to better serve and even influence customers to buy more and return less. In the current landscape retailers are operating in, agility and reinvention such as the ones displayed by Hunkemöller need to be constant considerations for growth.

Credits: IADS (Mary Jane Shea)

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*Paris’ Champs-Élysées have a rich history. Originally designed in 1667 by Le Nôtre, the famous French architect created a long tree-lined promenade starting from the Tuileries Palace. In the 20th century, the avenue experienced spectacular growth with the arrival of major stores, cinemas, and famous cafés such as Fouquet's. These establishments attracted an international clientele, earning the Champs-Élysées the reputation of "the most beautiful avenue in the world” where something was always happening. Luxury brands opened stores, transforming the avenue into a high-end shopping area./nbsp]

However, starting in the 1980s, the avenue began to experience a period of decline, luxury brands gradually gave way to more mainstream stores such as McDonald's, Zara and H&M, leading to a gradual dissatisfaction among Parisians. Between 1990 and the 2000s, many shopping arcades, once the pride of the Champs-Élysées, were deserted. The avenue lost its lustre, failing to attract the sophisticated clientele it once did. Allowing easy access from the suburbs, the opening of the regional train also changed the avenue's visitor profile, reinforcing its mass consumption image. More recently, the avenue faced years of "yellow jackets" protests, strikes and the pandemic, which drove away potential customers.

But the renewed appeal of the most famous avenue in the world is confirmed: there is a Champs-Elysées Renaissance.

Welcoming 300,000 pedestrians on busy days, the avenue is transforming into a prime showcase for brands. As measured by Knight Frank, the avenue recorded 46 brand movements in 2022 and 2023, especially in the sports and luxury sectors: 46% were new store openings, and 54% were relocations, expansions, or renovations. The movements recorded over the past 2 years involved 24% luxury brands and 17% sportswear brands.

Who will win the attention of tourists coming to the Olympics? Considering their investments, luxury and sport-style brands seem best positioned. Moreover, in the long run, who will win the 110 million people passing through the Champs-Élysées each year? Will the Olympics bring additional business?*

The Champs-Elysées Renaissance began before the Olympics, with luxury brands paving the way

In 1989, the city hall declared avenue rehabilitation was a major priority, aiming to restore the avenue's original purpose as a promenade. To that end, more than 4 additional hectares of sidewalks were created, with 2 rows of trees forming a pedestrian mall over a kilometre long. Truly enhancing the avenue, the works were completed in 1994 and involved famous international architects such as Norman Foster for the urban furniture.

The opening of the Sephora flagship store on number 72 in 1996, a milestone for the avenue, paved the way for luxury brands. Reopened in October 2023 after 6 months of strategic refurbishment, the store aims to reinvent the flagship experience ahead of the Olympics, especially as Sephora is an official partner of the torch relay. The store now offers a brighter, more open design, with elements inspired by Parisian architecture. Features include a central white marble path, a 90-meter-long glass-illuminated ceiling, and more natural materials like wood and plants. The store layout has been optimised for better navigation and customer experience to cater to a high volume of international visitors, previously recorded at 12 million annually. Louis Vuitton’s flagship store (number 101) opening in 2005 marked the beginning of the avenue’s retail transformation. Other luxury brands followed, reaffirming the Champs-Élysées' status as a luxury avenue: for example, also opened in 2005, Cartier settled close to the Arc de Triomphe, as well as Bulgari opening in 2016.

Closer to the time being, in March 2019, Galeries Lafayette launched a new department store format on number 60, willing to be more of a concept store than a traditional one. The store has 3 floors offering women's and men's fashion and accessories, beauty, restaurants, and a food court. Since then, the store has gained efficiency by rethinking the brand mix, offering a combination of premium, social brands, streetwear, designer and luxury brands. When asked about the Champs-Elysées store in June 2024, CEO Nicolas Houzé acknowledged that the store performance had "not been what we expected" for the store opened "at the worst time in the avenue's history". However, a "significant effort on the product offering, the teams, and the communication allows us to believe in a promising future."

Dior, Moncler, and Saint Laurent soon followed and settled in the highest part of the avenue (numbers 127, 119, and 123), in the surroundings of Louis Vuitton, the avenue’s luxury staple. Dior opened in July 2019, Moncler in December 2020 and Saint Laurent in December 2023. Same as Moncler, Saint Laurent made a bold choice as it is the brand’s largest boutique in the world. Presenting the entire range, including men's and women's fashion, accessories, and jewellery, this four-story store offers a minimalist aesthetic, blending raw textures with luxurious details. The store features art pieces and a VIP area.

At the intersection of luxury and sport-style, Calvin Klein unveiled a new global flagship store on number 44 in June 2024. The opening is part of a long-term strategy rather than solely driven by the Olympics. “We are not opening because of the Olympics. We are opening because it’s the right place to be for our brand. We’re excited by the momentum around the Champs-Élysées”, said global brand president Eva Serrano. The 850-square-meter store includes the brand’s full range of products, including menswear, womenswear, accessories, eyewear, fragrance, underwear, loungewear, swimwear, and sportswear. Ideally positioned in the lower part of the avenue close to Sephora and Lacoste, the flagship aims to solidify Calvin Klein’s positioning as a lifestyle brand focused on aspirational customers.

The Olympics, a booster for the ‘sport-style’ segment on the avenue

Streetwear and sportswear retailers and brands were early contributors to the avenue Renaissance. Taking over Nike, Citadium opened a second Parisian flagship store on Champs Elysées in July 2017 (number 65). Printemps’ streetwear and youth-oriented retailer new store is 1,600-square-meter on 3 levels. The store is supposed to attract 3.5 to 4 million visitors annually, with tourists potentially representing half of the clientele.

Nike House of Innovation opened in July 2020 at number 79. Blending digital and physical immersive experiences, the store was the brand’s first House of Innovation in Europe and the third worldwide, following locations in New York and Shanghai. Spanning 2,600 square meters over 4 floors, the flagship store features phygital initiatives such as QR codes on most items allowing quick delivery in your size in a fitting room. The store also offers self-checkout stations: order your item and have it delivered, try it on, buy it via the app, and leave the store. Storytelling is also emphasised, with a memory wall retracing the evolution of the Nike Air sneakers through to 2020, pointing out its progress and innovation.

Opened in June 2022 at number 50, Lacoste Arena, the brand’s 3-storey first global flagship store, emphasises the link between fashion and sport by balancing experiential spaces (exhibition space, customisation, interactive polo carrousel), entertainment corners (photo booth, VR featuring crocodiles) and sales areas. It addresses all types of shoppers: fashion and streetwear fans, sports addicts or consumers looking for sustainability.

In September 2022, Foot Locker changed locations to open its biggest European store at number 36. The store offers a high-level shopping experience, including technology-driven experiences, original artworks and a resting space with sofas. It includes multiple QR codes for customers to scan throughout the store and a large curved LED screen for interactive quizzes and gift giveaways.

Lululemon opened a flagship store at number 38 in December 2022, a crucial step in the brand’s expansion in the French market. The flagship store features spacious fitting rooms and a "shopping suite" area for a more personalised shopping experience, aligning with the company’s omnichannel strategy. Also, the brand has formed local partnerships to organise sports classes at local gym studios.

Clearly focusing on young customer segments, JD Sports opened 1,600 square meters over 2 levels at number 118 in April 2024. Locating the store in the higher part of the avenue is an exception, as counterparts are more settled in the middle and lower parts. Adidas, already present on the avenue, decided to move its flagship store to number 88, a 3-level 3,700 square meter location, making it the largest Adidas store in Europe. Opened in May 2024, the new "Home of Sport" store highlights lifestyle collections, premium collaborations and performance products, including a "run lab" for gait analysis. The store also offers a customisation area and features various artistic collaborations. Adidas plans several marketing activations, including appearances by Zinedine Zidane and other celebrities.

After opening in the Marais, Madeleine and Saint-Germain-des-Prés areas, Salomon has opened a new flagship store on the Champs-Élysées (number 42) in June 2024, aiming to elevate its sport-style positioning. This move aligns with Amer’s strategy to transform Salomon into a lifestyle brand while maintaining its mountain sports heritage. The Champs-Élysées store focuses on Salomon's history and innovative products, aiming to blend performance with sport-style. Salomon's approach aims to cater to both markets without losing authenticity. The brand's footwear category remains central, accounting for 80% of its revenue. Salomon's strategic expansion also includes new brand ambassadors to strengthen its presence in the fashion and culture sectors.

Offering a better customer experience than before, Levi's has relocated its flagship store from number 76 to number 44. The new store, opposite Lacoste and next to Calvin Klein's flagship, spans 540 square meters. This move enhances Levi's visibility, prominently displaying its iconic denim culture from the street. The store has a fully blue aesthetic. A dedicated section honours the history of the 501 model. They attached a sales associate to it, acting as a denim ambassador to share detailed stories about the products. The Tailor Shop, offering customisation and repairs, has been expanded to include a team of 4 dedicated staff members. The store also plans to host events to engage the artistic community. Touch screens are available to assist customers. The fitting rooms have been redesigned to offer more space and better service.

Finally, after an initial success in the Saint-Germain-des-Prés district, On opened at number 65 just 2 weeks before the Olympics. With 1,500 square meters, it is not just a store but a 3-storey shrine dedicated to running and innovation, offering an experience combining performance and design, well-being and personal achievement. Also surfing on the current tennis core trend, On introduced a more complete tennis offer, referencing Roger Federer.

What to expect from the Olympics?

First, the avenue is a magnet again for brands and tourists alike. The commercial vacancy rate on the Champs-Elysées has significantly dropped. Knight Frank said it fell to 3.7%, compared to nearly 10% at the end of 2022. Despite this, rents have not significantly increased, having already peaked before the pandemic. According to a study by Cushman & Wakefield and Mytraffic, the avenue's foot traffic increased by 15% between May 2022 and June 2023 compared to May 2021 to June 2022.

Second, to make the most of the Olympics, local businesses decided they could not wait for the multimillion-euro project planned after the Olympics, turning the area into an “extraordinary garden”. Instead, 180 businesses approved a plan to give the avenue a much-needed makeover to eliminate the ugly terraces. They are now standardised and aligned to ease the flow of pedestrians. Each terrace costs €400,000, showing how businesses are expecting from the Olympics opportunity. The alignment opens up the view between Place de la Concorde and the Arc de Triomphe and allows more of the avenue’s historic facades to be seen.

On the brands’ side, they aim to benefit long-term from the return of foot traffic to the Champs-Elysées. Beginning on 26 July, the Olympics certainly impacted the avenue turnaround. "The Olympics have been a booster, but businesses are not venturing into this market for just 3 weeks of the Olympics. It's a vector for accelerating a development plan; however, the outlook is long-term," explains Antoine Salmon, head of retail at Knight Frank.

Let’s see what the future holds, but tour operators are recording a slight decrease in tourist reservations during the Olympics compared to usual. The decline is small—about 2%—but it disappoints the sector. Similarly, hotels and Airbnb locations are observing a slowdown in reservations. In other words, July is less dynamic due to the Paris 2024 Olympic Games. Tourists are cautious and avoid France, especially Paris: they fear being unable to move freely, access tourist sites, or be hindered by security measures. Additionally, the threat of terrorism, to which Asian and American tourists are sensitive, is a concern. According to estimates from the Paris tourist office, 60% of the Olympics’ tourism revenue comes from foreign visitors. Nicolas Houzé is also cautious and estimates the Olympics are "an extraordinary showcase for the city of Paris" but will complicate accessibility to the city centre. The group has anticipated a "decline in activity of about 5 to 10% over the two summer months," which they hope to recover afterwards. "This happened to our English counterparts after the London Games," he explained.

Recent openings are momentum in the transformation of the Champs-Élysées, merging luxury with sports to draw in a varied clientele. Sportswear and brands specialised in ‘sport style’ have widely settled on the avenue. With a robust, attractive and concentrated zone in the middle and lower parts of the avenue (on both sides of the avenue, from 79 with Nike to 36 with Foot Locker), these brands are well positioned and prepared for the Olympics. Also represented, luxury brands have the power to attract tourists. Champs-Elysées has always been a place for superlatives as many retailers position their largest flagship stores. Results will be measured in the long run, as the Olympics are expected to disappoint the retail sector. The Olympic's impact will be measured over the years, acting on the overall appeal of Paris. The overall economic impact of the Olympics in the Île-de-France region (Paris and suburbs) is estimated at between €6.7 and €11.1 billion over a 17-year period (2018-2034). Despite the 16 million visitors expected, this does not give any indication of the profitability of the event itself.

Credits: IADS (Christine Montard)

What: Coresight reviews what retailers and companies need to know when considering moving forward with AI

Why it is important: missteps can prove catastrophically wrong in the realms of corporate finance, customer relationship or operations if AI is deployed without being aware of the involved risks.

The global generative AI market is estimated at $79.8 billion in 2024, growing to $235.5 billion by 2028.
Pre-deployment challenges include ensuring high-quality, unbiased training data free of proprietary information. Data poisoning and intellectual property concerns are also risks.
During deployment, models face knowledge gaps after training ends and can experience drift over time, requiring monitoring and potential retraining.
Models need supervision as they cannot determine if outputs are correct or appropriate. Risks include hallucinations, toxicity, biases, and data leaks.
Post-deployment, companies must comply with regulations and corporate policies, including audit trails and privacy protections. Cybersecurity is a key concern.
For retailers, early adopters defining use cases will gain advantages. Those interacting directly with models face higher risks. Ongoing monitoring for inappropriate content is crucial to protect brand image.
The technical requirements create opportunities for vendors offering model management, monitoring, governance and cybersecurity solutions.

Coresight: being aware of the challenges and risks of using AI 

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In early July, Hudson’s Bay Company, the parent company of Saks Fifth Avenue, announced a plan to acquire Neiman Marcus for $2,65 billion. This intention seems logical in a crowded market that calls for more consolidation.

Given the radical difference between the two companies, this would have already raised some eyebrows if the news had been limited to Neiman Marcus and Saks Fifth Avenue merging. However, conversations revolved instead around Amazon and Salesforce being involved in this deal.

While the merger is under review by the Federal Trade Commission, and therefore, everything is still being determined, this planned merger raises many questions when considering the context. While the IADS does not pretend to have a crystal ball, this Exclusive aims to review everything at stake and assess the challenges and opportunities the plan opens

Introduction: mega-mergers yesterday and today, from conquest to consolidation

The last mega-merger to have taken place on the US department stores scene was when Federated Department Stores, which had bought R.H. Macy’s in 1994 (8 years after R.H. Macy’s own efforts to take over Federated), acquired The May Department Stores Company for $11 billion (equivalent to $17.2 billion in today’s currency), creating the second largest department store chain company in the country by then, with more than 1,000 stores before divestments and a $30 billion turnover (equivalent to $46.8 billion in today’s currency).

This process, in addition to creating a giant which would be renamed Macy’s Group Inc. by 2007 with 850 stores in operation, led to the erasure of many iconic and legendary retail names, such as Filene’s in Boston, Kaufmann’s and Stern’s in New York state, Burdines in Florida, The Bon Marché in Pacific Northwest, Marshall Field’s in Chicago, or Hecht’s in Baltimore, to the dismay of many American customers. As of June 2024, Macy’s Inc. operates under various names, including Macy’s, Bluemercury, Bloomingdale’s and others, a total of 521 stores, and achieved a total of $23.69 billion turnover the past full year, a far cry from its peak in 2015 at $28.11 billion. In 2024, the NRF ranked Macy’s Inc. 22nd in their top 100 US retailers and did not even bother including the company in the Top 50 Most Influential Retailers Worldwide list.

The 2024 merger between Saks Fifth Avenue and Neiman Marcus, with the latter's absorption into a new company called Saks Global for a total of $2.65 billion and a consolidated turnover of $10 billion (behind Macy’s’ $23 billion and Nordstrom’s $14 billion), would not reshape the US retail landscape in such dramatic proportions, as the market has considerably changed since then. Many experts even wonder if this move will allow the new company to thrive in a market that has become hostile to department stores (it is worth remembering that Neiman Marcus rejected a Saks Fifth Avenue takeover bid in December 2023 for $3 billion, only to accept an offer for half a billion less six months after). They also have questions about the role of Amazon and Salesforce in it, as they both took a minority stake.

For now, the official post-merger announcement message is simple: no store closures, no rebranding. The whole purpose of this merger is to generate growth by encouraging vendors to sell more merchandise and customers to have more opportunities to purchase. But how realistic is that?

Branding, positioning, business model: where are the synergies?

Any retailer with a minimal understanding of the US retail market probably had the same reaction upon hearing of the merger project: there is a visible gap between Neiman Marcus Group, including its Bergdorf Goodman stores, globally acclaimed for its high level of services and focus on high-end repeat customers, and Saks Fifth Avenue, which has a much more diversified customer base.

In the past, the Federated example showed that mega-mergers encouraged branding harmonisation to generate scale economies when marketing the retailer’s name. This is why it led to replacing several historical names with Macy’s or Bloomingdale’s nameplates. However, times were different, and the US retail market was not as homogenised as it is now, with only a few names left, each displaying a more or less differentiated set of values to end customers. For that reason, a retailer’s name unification does not seem, for now, to be a potential road for the merging parties (even more that Neiman Marcus would have a lot to lose in such a move, probably more than Saks Fifth Avenue).

Let’s look at the opposite option: Neiman Marcus and Bergdorf Goodman represent the epitome of luxury retail in the US, in both US customers’ and international brands’ eyes. There would be no point for Saks Fifth Avenue to elevate itself and compete with such names, which suggests that a natural route would be for Neiman Marcus to consolidate its positioning on “hard” luxury, while Saks could trade slightly down. A downside of such a strategy would be that this could put Saks Fifth Avenue in an even more frontal competition with Nordstrom and Bloomingdale’s, which both have many locations in malls where Saks Fifth Avenue is already located.

From a pure retail name perspective, no option is more desirable than the other. However, the differentiation road seems the more probable. While this is great for US customers (and international brands), the nature of the differentiation and the ability to avoid unintended consequences remain to be seen.

The difference between the two companies' business models is also stark: while Saks Fifth Avenue operates most of its locations with a concession business model, Neiman Marcus and Bergdorf Goodman remain principally a wholesale operation. This has profound consequences as managing brand relationships and proposing the proper product selections to customers are radically different in a wholesale model, as many department store companies who have travelled the road from wholesale to concession: it takes years to become a merchant, and that savoir-faire can evaporate quickly.

This is not something to be taken lightly as it is probable that the centre of gravity of the newly created company, Saks Global, will probably be geared more towards New York, where Saks Fifth Avenue is located, rather than in Dallas, home of Neiman Marcus. It is striking that, within the announced nominations (Marc Metrick, CEO of Saks.Com, becomes CEO of Saks Global, Ian Putman, CEO of HBC Properties and Investments, becomes CEO of Saks Global Properties and Management, and Robert Baker becomes chairman of Saks Global), no mention is made of anyone from Neiman Marcus, including Geoffroy Van Raemdonck, the CEO.

Corporate culture is fickle and conditions future success. In another industry, aviation, it is probable that Boeing’s 2001 decision to relocate its headquarters to Chicago following its merger with Mc Donnell Douglas initiated a chain reaction leading to the current situation where the founding values of the plane manufacturer have evaporated.

Optimists write that, given Neiman Marcus’ ability to provide high levels of individualised services to high-end customers, this could be the opportunity for Saks Fifth Avenue to improve significantly its level of service, in particular online (which could be a factor explaining the presence of Amazon and Salesforce at the dealing table). However, this is easier said than done.

Is it about real estate…

The Hudson Bay Company and Saks Fifth Avenue are two particular groups in the retail world, as they decided in 2021 to spin off their e-commerce division and separate this business from the store operations. Consequently, Hudson Bay Group created The Bay, the company's e-commerce arm, and kept the stores being managed by Hudson’s Bay. Similarly, Saks Fifth Avenue created Saks.com, a separate business from the store operations, taken care of by SFA, in charge of 39 Saks Fifth Avenue stores and 95 Saks Off Price ones. This arrangement is unique because, in both cases, the online company oversees the general merchandising for all channels, including stores. In other words, the companies in charge of stores sell products selected and supplied by the online company. When this strategy was launched, many saw an approach aiming at maximising the value of real estate to offload it at some stage and focus on e-commerce.

Neiman Marcus, by contrast, is a genuine brick-and-mortar company, with 36 Neiman Marcus stores, 2 Bergdorf Goodmans and 5 Last Call discount stores. While it filed for bankruptcy in 2020 due to the consequences of the COVID-19 pandemic, Neiman Marcus Group came back as a Phoenix with new investors and a renewed success in terms of sales volumes and brand attractivity as early as 2022, thanks to a strict focus on top spenders and in-store services. This does not mean that the group remained idle online, as Neiman Marcus owned the mytheresa.com luxury e-commerce website until spinning it off in 2021 and filing for IPO in New York, with a $3 billion total shares value on the first day of trading. Since then, mytheresa.com has thrived in a context where other luxury pure players, such as Matches.com and Farfetch, went through significant difficulties.

It is expected that the new company, Saks Global, thanks to its tech minority stakeholders, will be able to create an innovative online shopping platform. However, a subsidiary managing the $7bn worth of real estate assets will also be set up. This suggests that the overall strategy will follow what HBC and Saks Fifth Avenue did a few years ago.

After all, there are already eight malls where both Saks Fifth Avenue and Neiman Marcus have a store each: Houston Galleria, Boca Raton, Bal Harbour, Troy, Michigan, St Louis, Las Vegas and Tyson’s Galleria. Offloading a location from some of these coveted malls (Bal Harbour, anyone?), knowing that Neiman Marcus stores are usually more extensive and more productive than Saks Fifth Avenue ones, might be an excellent opportunity to rack in a few dollars.

Interestingly, Hudson Bay will remain separate from Saks Global.

…or the money…

Both Saks Fifth Avenue and Neiman Marcus are privately owned. Saks Fifth Avenue belongs to Hudson’s Bay, which was taken private in 2019 by CEO and President James Baker for $1.5 billion (a third of its 2015 valuation), just seven years after being taken public by the same Baker. The activity has been challenging, which explains why James Bakers has been regularly offloading valuable assets, such as the Lord & Taylor building on 5th Avenue in New York, sold to WeWork in 2017 for $850m, with a 30% premium on its value by then.

However, things did not get brighter for Saks Fifth Avenue, especially its subsidiary in charge of buying, Saks.com, which brands recently accused of delaying payments, as the company was looking for additional borrowing capability. Estée Lauder Group placed Saks on credit hold for all its brands, including Tom Ford Beauty, Jo Malone and La Mer, as recently as last year.

Consequently, some brands might not be so happy to trade with a larger entity related to what recently worried them. It also does not come as a surprise that in Marc Metrick’s letter announcing the merger project, he mentioned that “absolutely no funds that otherwise support operations or vendor payables were used for the financing or associated costs of this transaction. It is our and SFA’s priority to fulfil our obligations to our partners. In the coming weeks, we plan to provide an update on the financial position for Saks and SFA from now through transaction closing.” He probably anticipated some embarrassing questions on whether the deal also aimed to clean off pending debts from the parent companies.

…or the tech?

In fact, everyone is scratching their heads about how Amazon and Salesforce will leverage their minority investment in the new entity and whether this is the dawn of a new way of approaching retail.

Having tech investors is a boon for a US department store company.

Unlike many of their European and Asian counterparts, which massively invested in the physical experience provided in their stores either during or immediately after the pandemic to remain relevant, US department stores failed to significantly reinvent themselves at scale in the past years in terms of experience, processes, merchandising and in-store services. As such, significant investments are needed, and not only in the flagship stores, to make sure the stores are attractive enough to lure in customers who are otherwise conveniently shopping for prices from home, thanks to many e-commerce options.

In addition, an increasing number of brands, especially in the luxury segment, are investing in direct distribution capabilities to eliminate a third party that is, in their eyes, no longer able to convey the level of experience they aim for.

Having tech investors allows, therefore, department stores to convince their stakeholders that the needed efforts will be carried out in no time to regain the lost ground. Given the fact that in recent months, the luxury e-commerce market has effectively imploded amid rampant discounting and astronomical costs of distribution, an Amazon-powered Saks Global would make sense: Amazon, with its vast scale and expertise in reconceptualising the online shopping experience, would be a significant boon to that effort. Every expert is, therefore, making predictions on the new areas of attention: AI, logistics, mass customisation and customer service.

It is, therefore, striking to listen to Marc Metrick when he evokes the “next day” or the low-hanging fruits he attends to pick with the merger: warehouse and fulfilment operations consolidation, scale economies by centralisation on customer services, and finding commonalities in terms of technology. In other words, the traditional retail playbook.

So, what’s really in store for Amazon?

Some analysts wonder if Amazon is not simply amplifying its range of investments, like a VC, after having burnt its fingers itself on new ventures (groceries, self-checkout…). This is not the first time that Amazon has inked a deal with a retailer, as in 2019, it issued a warrant to purchase 1.7m of Kohl’s in exchange for the right to allow Kohl’s customers to return Amazon products in the stores. However, the size and what is at stake is different. With Saks, Amazon focuses on the luxury customer, characterised by superior buying power, less price sensitivity, and more advanced tech acceptance.

In other words, for Amazon, the deal brings the possibility of entering a higher-end market than the one it currently thrives on without dealing with brands that have been so far in their vast majority reluctant to engage with it. Thanks to this partnership, Amazon might have access, in addition to high-margin goods, to fashion customers. It is out of place to consider that products sold on Saks/Neiman platforms would also end up in the Amazon marketplace, knowing that, for now, luxury brands would not be ready to drop their visibility at Neiman Marcus? After all, Amazon has, so far, not managed to break the luxury frontier, being blocked at the aspirational luxury step with brands such as Clinique, Kiehl’s or Coach.

Interestingly, there is nothing to be found about Salesforce’s involvement in the press so far.

*The merger between Saks Fifth Avenue and Neiman Marcus represents a significant shift in the landscape of luxury retail in the United States. Unlike the dramatic consolidations of the past, this merger is taking place in a much more competitive market. Integrating two distinct brands with different customer bases and business models will be complex and fraught with challenges and opportunities.

One of the most intriguing aspects of this merger is Amazon and Salesforce's involvement as minority stakeholders. Their participation signals a potential transformation in luxury retail operations, particularly in technology and e-commerce. Amazon's logistics and customer experience expertise, combined with Salesforce's strengths in customer relationship management and AI, could provide Saks Global with the tools needed to innovate and adapt to the rapidly changing retail environment. However, this is purely hypothetical for now.

However, the success of this merger will depend on Saks Global's ability to navigate several key issues. First, the company must manage the cultural integration between Neiman Marcus's highly personalised service model and Saks Fifth Avenue's more diverse customer base. Second, it must balance the need for maintaining distinct brand identities with the potential benefits of operational synergies. Third, the company must address the concerns of luxury brands wary of Amazon's involvement in the high-end market*

Credits: IADS (Selvane Mohandas du Ménil)

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*Day after day, retail analysts remind us that the in-store shopping experience needs to be reinvented to appeal to the younger, tech-savvy generations and lure them into brick-and-mortar stores. Indeed, innovative projects are sprouting worldwide, each pushing the boundaries of what a retail space represents by introducing fresh and novel concepts.

However, creating a compelling physical retail experience is merely half the battle. Many endeavours have tried and failed, not due to a lack of ingenuity but simply because their ability to communicate and highlight their inventiveness effectively was lacking. In the US, customers struggled to appreciate Showfields beyond the much-touted slide fully. Pioneering concepts like b8ta in Manhattan (now closed) or WOW in Madrid presented too many ideas simultaneously, making it arduous to convey their essence engagingly to customers.

Let's examine two prominent large-scale projects that have successfully reinvented the retail experience in recent years: K11 Musea in Hong Kong and The Hyundai in Seoul. Both aimed to revolutionize shopping for younger generations, but how did they manage to articulate and bring to life their innovative concepts effectively?*

Korea: presentation of the Hyundai Department Stores company

Hyundai, originally a construction company founded in 1947 during the post-WWII boom, swiftly adapted and diversified its operations. It ventured into foreign markets in 1965, established Hyundai Motor in 1967, and Hyundai Heavy Industries, a shipbuilding company, in 1973. The Hyundai Corporation, a trading arm, was created three years later, and Hyundai Electronics was founded in 1977, showcasing its rapid expansion and ability to adapt to changing times.

In parallel, a retail company, Keumgang Development Industries, was formed in 1971 to operate the commercial constructions built by Hyundai. It started to build its own mall units in 1977 with the Ulsan Center (now known as the Hyundai Department Store Ulsan Dong-gu) and the Apgujeong-dong shopping center in 1979. The first department store to be open under the name Hyundai was Apgujeong, south of Seoul, in 1985 (still operating today). The department store business then separated from the Hyundai Group in 1999 and became Hyundai Department Stores Co. in 2000.

Hyundai's strategic moves have been instrumental in its growth. It made a significant entry into the Chinese market in 2011 and further expanded its portfolio by acquiring Handsome, a fashion and beauty provider, in 2012. The company's foray into e-commerce with the launch of thehyundai.com in 2016 and the Hyundai Department Store Duty Free business unit the same year, demonstrates its forward-thinking approach and adaptability to changing consumer trends.

Today, Hyundai operates 14 department stores, including two "The Hyundai" locations (in Seoul and Daegu) and eight outlets. The company generated KRW 4,208 billion (approximately €2.8 billion) in revenue for 2023, down from KRW 5,014 billion (€3.38 billion) in 2022. The division reported a loss of €27 million in 2023 compared to a profit of €125 million in 2022.

The Hyundai Seoul

The Hyundai Seoul, a landmark in the city, opened its doors in 2021 with a unique focus on attracting Gen Y and Gen Z. This strategic move aimed to rejuvenate the traditional department store clientele in a country where all companies are vying for their attention. In 2020, Hyundai’s competitor Lotte performed 47% of their sales with customers aged less than 40, highlighting the importance of this target demographic.

The Hyundai aims to offer a "creative space filled with global content," from luxury flagship stores to those targeting younger generations, and features Korea’s largest food court so far. It is also the first eco-friendly department store in Korea, boasting indoor lawns, trees, and flowers. Its location in Yeouido, Seoul’s financial center, is key: the store is close to a very affluent residential zone and the Han river parc, meaning a consistent traffic flow both during weekdays and weekends.

As a new brand from the group , The Hyundai is design-conscious and thought to be highly Instagrammable from basement to top floor. Following the first iteration in Seoul, a new store under The Hyundai name was opened in Daegu, and a project is planned in Gwangju. The Hyundai became the fastest store in Korea to reach 1 trillion won in just three years, reflecting its appeal to younger customers and foreigners—showing an 800% growth in sales among 20-30-year-old foreigners between 2022 and 2023, with 100 million visitors in just two years.

The store, which dimensions and structure recall those of a mall, spans 89,000 square meters with 600 shops over 12 floors, including four for parking. Its interior was designed by Canadian studio Burdifilek, with each floor having a distinct theme centred around the atrium. It is the largest store in Seoul, and 49% of its space is dedicated to rest areas, specially designed to be Instagrammable. The building includes 90 restaurants and a museum.

The structure is a mixture of traditional store planning and innovations:

• The second basement, arguably the busiest by far at the time of visit, is dedicated to trendy Korean brands, clearly appealing to the taste of the younger generation, quite enthusiastic with the brand offer witnessing the energy that could be felt there,
• The first basement is the largest food court in Korea, including a food truck park,
• The ground floor, quite classic, offers luxury items, cosmetics and perfume, highlighted by a 12-meter-high waterfall garden with benches to listen to the sound of water, completed with a BeClean wellness beauty store. The store is accessible through five entrances independently from the car park accesses,
• The first floor is a neutral gallery-like space dedicated to international designers brands,
• The second floor, dedicated to international fashion brands and with an overall bolder design, is, just like the first floor, mixing men’s and women’s in terms of customer journey and discovery,
• The third floor is dedicated to sportswear, outdoor, lifestyle and homeware,
• The fourth floor, dubbed the “indoor garden” is spectacular, as it has been designed as a real-size garden with grass, flowers, and trees. On this floor, customers can find children's clothing and activities, home appliances, a playground for adults, Play in the Box, and the Blue Bottle café, which is an incentive for customers to spend time and enjoy the garden,
• The fifth floor gathers restaurants (80 dining options are available, from low-end to exclusive SMT, which terrace overlooks Seoul), service desks including the tax refund, CH 1985, a cultural space aiming at millennials and Gen Z, Uncommon store, a fully automated store, and exhibition halls, dedicated to collaborations with museums such as the Musée d’Art Moderne de Paris at the time of visit.

For more, the IADS reviewed in detail the store structure in October 2022.

How The Hyundai Seoul highlights innovation

What stands out is the level of attention that has been given to details in services:

• The Food Court features self-order kiosks throughout, all accessible and usable by foreigners (even if they do not have a Korean phone number) and an open area for handwashing and face checking.
• The "Play in the Box", a cultural space for adults, is designed for taking photos in a self-studio setting while being pampered with food and beverage options. It is possible to rent a space and spend time with friends there.
• On the 6th floor, to ease the customer’s life when booking a restaurant (and ensuring that they spend their time in the store rather than in a waiting area), machines calculate queues and send alerts in cafés, restaurants, and stores. That way, customers can do something else while waiting for their table.
• Lockers and rentals for baby carts, portable chargers, bikes, and luggage storage are available on three floors. Kids and babies are especially pampered: the Petit Lounge is a comfortable space for one person and a baby (and allows the spouse to go shopping).
• Various related services, including a garment repair shop, bag and shoe repair shop, and green dry cleaning support sustainability claims support sustainability claims.

But what is really striking is the apparent ease with which crucial information is passed on to customers, especially foreign ones. The floor guide is an example of clarity, focusing on must-see places. Everything is QR-coded: store location, shopping news, smart waiting and table ordering, local parking information, and even how to get free beverages on each floor.

Going further, Instagrammable places (the Waterfall, the Sound Forest) are clearly indicated as such, as are experience places (food, culture). Traffic is funnelled, so it is impossible to miss anything and be disappointed.

Similarly, the paper guide highlights 3 to 5 places on each floor. They can be:

• A branded location (Liquides perfume bar, Oera, Bamford, Andersson Bell, Innometsa, Tino5 FGS, Klattermusen, Arket, Smooth & Leather, Nike Rise),
• A branded experience (Barberino’s barber, Blue Bottle Coffee, Eataly, Sooty), a category (Shoe library, Archetype, Wine works),
• A concept (Sculpt Store, IAMSHIP, Platform place, Tom Greyhound, CH 1985, Uncommon store, 22 Food truck piazza, Peer),
• An immersive experience or service (Studio Petit, Play in the Box, Sounds Forest, ALT.1).

While it is not clear how this works and how this is pushed (and monetized) to brands, the guide is extremely clear and is a great example of efficient trade marketing.

Finally, services such as immediate tax refunds and gift certificates are clearly explained and detailed. Recently, Hyundai inked a partnership with The Mall Group in Thailand (an IADS member) to provide visiting Thai customers with additional perks, including a loyal membership enrollment, and no doubt that many accept such an enrollment.

Hong Kong: presentation of K11

Established in 2008 by Adrian Cheng, the K11 Group, part of the New World Development, introduced a unique concept dubbed “Cultural Commerce”, which aims to integrate Art, People, and Nature to create a diverse ecosystem. Cheng, a prominent Hong Kong entrepreneur, also serves as CEO of New World Development, executive director of Chow Tai Fook, and owner of Rosewood Hong Kong Hotel.

The first K11 location opened in Tsim Sha Tsui, Hong Kong, in 2009, followed by expansions into Shanghai, Guangzhou, Shenyang, and Wuhan. In 2010, Cheng founded the K11 Art Foundation to support Chinese artists. His vision of merging art with retail aimed to transform the shopping experience into an artistic journey, targeting the millennial shift towards experiential rather than transactional engagements. As such, K11 Group seeks to democratise art, support young artists, and conserve Chinese artisanship while integrating sustainability and technology.

After research indicated a shift in demand from older generations to millennials, the concept evolved with K11 Artmall in 2013, blending retail and gallery spaces. It was further expanded with K11 MUSEA in 2019 at Victoria Dockside and K11 ECOAST in mainland China in 2022.

Today, out of the total 29 retail locations in Hong Kong and China, there are 7 K11 Art Mall locations, including 6 in China (Shanghai, Wuhan, Tianjin, Shenyang, Guangzhou, Beiling), one in Hong Kong, and the K11 Musea. The group reported a total revenue (Hong Kong and China combined) of HK$ 4,995m (Hong Kong representing 62% of this revenue) and a result of HK$ 3,193m in FY 2023 (note: K11 is not a retailer per se, but a mall operator, which is why revenue is 100% based on rent). In China, a new project, K11 Ecoast, is planned to open in Shenzhen in 2024. The group plans to operate 38 projects (not all under the K11 Art Mall brand name, as the group also operates smaller units), and a mega project in Hong Kong, 11 Skies, is currently being built.

K11 Musea

In 2017, Cheng spearheaded the $2.6 billion redevelopment of the Victoria Dockside, a site owned by New World since the 1970s. This redevelopment introduced several new ventures, including K11 ARTUS, a luxury waterside residence, K11 ATELIER, a Grade A office building, and Rosewood Hong Kong, a luxury hotel. K11 MUSEA, a pioneering 280,000 sqm museum-retail complex on the Victoria Dockside waterfront in Tsim Sha Tsui, then completed it.

Since its opening in 2019, this landmark, after ten years in the making, developed with contributions from over 100 international architects, artists, and designers, has aimed to provide an immersive "journey of imagination" for its visitors. Inspired by "A Muse by the Sea," this complex pays tribute to Hong Kong's rich history and cosmopolitan culture, occupying a historic site once known as Holt’s Wharf, a pivotal logistics hub.

The design of K11 MUSEA responds to research identifying Asian millennials as "Super Consumers," a demographic expected to wield $6 trillion in purchasing power. Catering to their sophistication and demand for exclusivity, K11 MUSEA positions itself as an aspirational global destination merging art, culture, and commerce.

Additionally, K11 MUSEA is committed to sustainable development, achieving green building pre-certifications such as LEED (Gold) and Hong Kong's BEAM Plus (Silver). Its eco-friendly design, from Kohn Pedersen Fox and James Corner Field Operations, collaborating with OMA and Hong Kong-based LAAB and AB Concept, features a large living wall, natural materials, rainwater harvesting, and a seawater-cooled, oil-free HVAC chiller system, underscoring the importance of ecological considerations.

To attract local and international visitors, the mall comprises 250 retailers, 70 restaurants, 40 artist installations, and several educational activities for kids and adults, including new to Asia names such as Fortnum & Mason or the MoMA design store.

The ground floor is dedicated to luxury brands in a stunning environment with a giant staircase in the atrium decorated with copper-coloured panels and large windows opening on a promenade overlooking Hong Kong Bay, decorated with giant pieces of art,

The first floor is a mix of retail space and exhibition and is featured in the former location of the Intercontinental Hotel, from which some elements, such as the ceiling, have been kept. The rest of the floors are also mixing experiences, such as a giant slide on 3 floors or a 12-theatre cinema, a rooftop garden with a selection of plants, and kid’s activities such as a 10-meter-high slide on the roof near the kid’s Donut playground. In fact, it is rather difficult to describe this mall floor by floor, as many different activities are intricated. For instance, a jewellery school also acting as a museum is what could be assimilated into the high jewellery section, except for the fact that this section is not as precisely defined as one might expect, and other jewellery stores are disseminated in the rest of the store. It is, in fact, all about surprising the eye and senses by bringing unexpected solicitations permanently when visiting the space. Consequently, it is also possible to feel some frustration not understanding the mall in its entirety and not making the most of the visit.

How K11 emphasizes innovation

Just like The Hyundai Seoul, public information made available to foreign customers is all about the vast offer of services and facilities made available: a nursery room, disabled facilities, mobile phone charger, ticketing, free Wi-Fi Internet access, water dispensers on different floors providing free and clean drinking water that complies with top international quality standards.

The mall also advertises its “Nature Discovery Park” on the 8th level and its “Happy Mega Slide”, a 3-levels-high slide in the kid’s area. Interestingly, everything is monetized: while the slide is free (but needs to be booked, at the frustration of some visitors), the kids playground requires a ticket to be used, and visitors can also purchase tour tickets to discover the species in the garden, learn more about the architecture of the building, and discover art and art history through themed-visits of the space.

It is, however, also notable when compared to The Hyundai, that the information provided during the visit does not allow the visitor in a hurry to be sure of having seen every single feature the mall has to offer, which might be a reason for a second visit. Attention to detail is extremely high: for instance, the buttons used to call the lifts are very smartly integrated into architectural books on shelves, encouraging customers to read about the architectural features of the building while waiting. However, this detail, for instance, might also confuse other customers when looking for the calling button.

*The examples of The Hyundai in Seoul and K11 Musea in Hong Kong showcase two distinct yet effective approaches to communicating retail innovation to younger demographics.

The Hyundai adopts a highly guided and didactic customer journey, ensuring visitors do not miss any pioneering features and services. Every detail is clearly explained, from Instagrammable experiences to seamless digital integrations, creating anticipation and allowing monetization opportunities for highlighted brands. This meticulous curation leaves little to chance, maximizing engagement.

In contrast, K11 Musea banks on an element of surprise and discovery. While key facilities are prominently advertised, the tremendous scale and artistic interweaving leave some delightful gems to be organically uncovered during the visit. This air of mystery fosters a sense of exploration that encourages repeat visits to unravel all the secrets this innovative mall holds.

Whichever philosophy they embrace, the success of these projects lies in their dedication to effectively communicating their avant-garde concepts. As the retail landscape continues evolving, stores looking to captivate modern customers must prioritize clearly articulating their unique value propositions and savvily marketing the novelties that set them apart.

For legacy retailers and contemporary brands alike, there are lessons to be learned from The Hyundai and K11 Musea's masterful translations of innovative ambitions into tangible, memorable experiences that resonate with the sophistication and expectations of younger spenders. Transparent, simple and didactic communication is key to transforming curiosity into footfall and spending. Going forward, it’s the retailers who masterfully translate innovative ambitions into tangible, buzz-worthy experiences that get people talking, which will emerge victorious in this unforgiving retail arena.*

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Credits: IADS (Selvane Mohandas du Ménil)

What: McKinsey reviews the state of tech in 2024 and its various deployments in several industries

Why it is important: companies invest more in applied AI than in generative AI so far.

The McKinsey Technology Trends Outlook 2024 identifies sustained growth and strategic shifts in the technology sector despite economic headwinds. The report focuses on 15 technology trends, highlighting the expansive rise of generative AI (gen AI) and electrification & renewables as leaders in innovation, investment, and industry application.

Gen AI, in particular, has seen a 700% increase in interest from 2022 to 2023, with large language models (LLMs) expanding their 'context windows' from 100,000 to two million tokens, significantly enhancing their complexity and utility across various data modalities. This surge in capability has driven a similar leap in investments and has seen these technologies being incorporated into enterprise applications ranging from customer service to advanced computing systems.

On the other hand, electrification and renewables continue to attract attention and funding, outpacing other technologies in investments and interest scores, underscoring their importance in the current economic landscape driven by decarbonization efforts and energy security needs.

Despite a downturn in technology equity investments in 2023, falling by 30-40% to around $570 billion, the sector's innovation pace has not slowed, particularly within AI and machine learning domains. The report notes a significant talent demand across the technological landscape, with a notable skills gap persisting despite an overall 8% increase in job postings from 2021 to 2023.

The 2024 McKinsey Tech report

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In the last few months, brands have been rushing to open stores on Avenue des Champs-Elysées, hoping to catch a chunk of tourist wallets, especially the ones coming for the 2024 Olympics. Sports brands are no exception and tend to settle in retail spaces in the avenue’s central and lower sections. England-based retailer JD Sports chose another option and opened its new global flagship store in the avenue's upper section (number 118), across the street from the Louis Vuitton flagship store and not far away from Saint Laurent and Cartier. While the store was opened by Brazilian soccer legend and Nike brand ambassador Ronaldinho in April 2024, the group said it will be “continuing its run as the globally recognised king of the high street. JD’s new store offers the brand's latest innovations in digital technology and merchandising and will provide visitors access to all the hottest brands and latest launches.”

JD Sports was founded in 1981 in Bury, in the North West of England, with one shop, John David Sports. The JD group now accounts for more than 3,300 stores worldwide, including 100 in France and 29 JD Sports stores in the Paris region only. In terms of sales, JD Sports claimed in March 2024 to outperform a challenging market with a 4% like-for-like sales growth in the financial year ending 3 February 2024, reaching £10.5 billion, with an 8% organic growth. The profit before tax is expected to reach £915 million.

The retailer’s new flagship store aims to provide an immersive shopping experience to customers and establish itself as one of the sports champions on Champs-Elysées. Who will be the customers visiting the store? What will they find there to differentiate themselves in the crowded area?

Who is the store made for: JD Sports’ young customer base

According to GlobalData UK, JD Sports’ shopper base predominantly comprises male shoppers (61.3%) due to the retailer’s focus on sportswear and lifestyle brands. JD Sports caters to various customers, from sports enthusiasts and sportswear fans to trendy comfort-wear seekers. While they have been able to attract customers from all income groups, JD Sports aims to appeal to a wide range of customers, especially those between the ages of 13 and 35 who are interested in sportswear and streetwear:

• In 2021, Millennial and Gen Z customers made up 51.6% of JD Sports' UK shopper base: 22% were aged between 18 and 24, compared to 11% for its competitor, Sports Direct.
• 38% were from 40 to 59 years old, compared to 41% for Sports Direct customers.

These shares show that JD Sports cracked the code to attract the younger generation: they embrace all the youth culture codes, not just sportswear. With memorable slogans, eye-catching imagery, and partnerships with well-known athletes and celebrities, the brand’s advertising campaigns and social media channels are clearly focusing on this young demographic. During the store visit, the campaign was about ‘Nouvelle Ere’, translated to ‘New Wave’ as a slogan. Through this five-country campaign (UK, Germany, France, Spain and The Netherlands), JD Sports aims to “cultivate emerging talent from key regions” across the brand’s music, sport, community and youth culture pillars.

JD Sports is considered strong both offline and online as it succeeded in becoming an omnichannel retailer that offers a seamless journey to its young customer base, who live with their phones in hand. They show a great understanding of these customers by focusing on trends, backed up by solid data and insights.

What does the store look like: sportswear retail codes and GenZ flare

The store spans 1,500 sqm. The two-storey store window features mannequins and dynamic screens on the first floor, while sneakers wall displays serve as windows visible from the outside on the ground floor. The leading brands sold in the store have their logos on the ground floor windows: Under Armour, The North Face, EA7, On, Puma, Fila, Reebok, Supply & Demand, Ugg, Crocs, Nike, Adidas, Lacoste, New Balance, Asics, Vans, Converse, Juicy Couture, Hoodrich, Columbia, and McKenzie. Not all brands, such as Fred Perry and Tommy Hilfiger, are mentioned on the windows.

Progressing from the entrance to the back of the floor, the ground floor is mainly dedicated to sneakers and articulates as follows:

• Men’s shoes (90% sneakers),
• Women’s shoes (90% sneakers),
• Socks, caps and lifestyle shoes (Birkenstock, Crocs, for example),
• Cash desks and 3 fitting rooms (which were closed at the time of the visit),
• The back of the floor is split into 2 parts: a soccer section (mainly offering team jerseys) and a teen and kids shoe section.

Not surprisingly, the ground floor was crowded with young customers. Quite empty at the time of the visit, the first floor is dedicated to textiles and displays a product offer well-balanced between sports, streetwear and lifestyle clothes:

• For women, the product offer is mainly oriented towards tracksuits, leggings and athleisure wear, balanced with lifestyle brands such as Juicy Couture.
• For men, the offer seems more streetwear-oriented than performance-oriented. It concentrates on daily-wear branded T-shirts, NBA shirts, and bathing suits. For example, The North Face equally offers technical and lifestyle products.
• A similar balanced offer is available for kids and teens.
• 2 fitting rooms and cash desks are also available on this floor.

With various stone and metal types, JD Sports’ store concept is mainly black and grey, the usual colour codes sports retailers use. Touches of yellow are used to catch the customer's attention, especially for direction purposes. The lighting is only made with neon. To cater to the younger generations (at the time of the visit, most store customers were under 20 years old), the concept includes many screens (on the walls and ceilings) promoting the retailer ad campaigns and customer app and the brands they carry. These screens bring additional touches of colour, making the store more appealing. The screens on the ceilings also serve as transitions between sections. The music, pop and rap hits, is loud.

Store services and key features

The sales staff is very young, reflecting the customer base. They are well-trained, smiling, and systematically greet customers from the store entrance and throughout the journey. They wear uniforms: black JD Sports-labelled t-shirts and cargo pants, as well as yellow badge and phone holders, matching the store concept and making them very visible. During the opening month, the store included features like sneaker customisation and clothing embroidery, showcasing JD Sports' commitment to a personalised shopping experience.

All shoe sections are equipped with small TV screens hanging from the ceiling. When customers ask to try a pair of sneakers, sales associates can scan a QR code on products. Depending on the item's availability, the screen informs the sales associate that the required pair is ready to pick up at a specific counter (each item has a picture, reference, store section and requested size). This allows the sales staff to be fully dedicated to customer service instead of going back and forth in the stock room. Despite the many customers in the store, there were not many to try shoes on. It shows the store might be more of an occasion to socialise and browse products for the younger generation than to shop.

BOPIS options are available in the store. On both floors, through a specific ordering kiosk, customers can access the entire product catalogue, order and pay for their order to be delivered to the store of their choice or at home, and retrieve these orders, as well as click-and-collect orders, at the cash desks. At the time of the visit, customers were not using these kiosks.

There are very few fitting rooms in the store. At the time of the visit, only 2 were open, on the first floor, where ready-to-wear is located and where the traffic was relatively low compared to the busy ground floor. This shows again how the young generations use physical stores for experience and inspiration and e-commerce for ordering. Similarly, the cash desks were not busy with customers.

Finally, the soccer section on the ground floor offers a free FIFA Nintendo PS5 game console for small groups.

Sportswear fans know JD Sports’ “Undisputed King of Trainers” slogan. So will Champs-Elysées. The prestigious avenue is getting ready for the Olympics and will be packed with sports brands. Nike has been there since 2020 with its 4,300 sqm House of Innovation. Adidas' flagship store is currently relocated (and should be improved) from the lower to the mid-section of the avenue, with a 2,800 sqm space. On and Salomon are currently under construction. Lululemon opened last year, and Lacoste has a 1,600 sqm flagship store since 2022. How will JD Sports make a difference in this crowded area? JD Sports’ new location is in the more luxury-oriented part of the avenue compared to the other sports brands settled in the lower part with which they compete. As location can make a difference, in good or in bad, JD Sports is the second multi-brand sports retailer on the avenue, after Foot Locker, located in the lower part of the avenue. With a wider choice of sneaker options and a store designed for teens, JD Sports seems poised to attract more younger customers.

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Credits: IADS (Christine Montard)

What: The Top 100 NRF ranking shows an overall stabilisation

Why it is important: Convenience, diversification, digitalization are the common traits of the post-pandemic winners.

The National Retail Federation, analyzed by Kantar, identifies a "big trend" in its Top 100 Retailers list: the stabilization of pandemic-era spending patterns. In the 2023 rankings, the top 20 retailers remained mostly unchanged, with slight shifts such as CVS and Target swapping positions, demonstrating the resilience and financial muscle of these leading companies. Walmart continues to dominate with USD 533 billion in U.S. sales, while even the 20th ranked 7-Eleven garnered USD 27.88 billion. Only five of the top 20 experienced minimal losses.

The top performers continue to leverage mergers and acquisitions for growth. For instance, Overstock.com saw a dramatic 135.1% sales increase after acquiring Bed Bath & Beyond's online operations, marking the highest growth rate on the list. Meanwhile, Dick’s Sporting Goods and Walmart also reported growth, the latter even after divesting several subsidiaries.

Significant movements in the grocery sector include the Kroger and Albertsons merger still pending legal approval, with both companies experiencing modest sales increases. Other grocers like Publix and H.E. Butt Grocery showed notable growth, reflecting strong sector performance despite rising food costs, which David Marcotte of Kantar does not attribute solely to inflation.

On a broader scale, the retail landscape shows signs of post-pandemic adaptation, with shifts towards more convenience and digital integration. Marcotte highlights that strategic adjustments are crucial as consumer behaviors evolve, particularly in sectors like convenience stores and consumer electronics, which are experiencing cyclical challenges. Sprouts Farmers Market and Harbor Freight Tools exemplify aggressive expansion strategies, significantly increasing their store counts.

The top three retailers—Walmart, Amazon, and Costco—demonstrate strategic consistency and diversification, including Walmart's push into financial services and Amazon's continued investment in innovative projects. These companies set benchmarks for navigating retail dynamics effectively, emphasizing the importance of adaptation and strategic planning in maintaining industry leadership.

NRF releases its annual top 100 ranking

What: 87% of companies are deploying AI project for testing purpose

Why it is important: Only 36% are clear about where this could lead and pilot according to a vision

The widespread adoption of AI across industries is evident with 87% of companies now piloting or deploying generative AI, and significant investments averaging $5 million annually, escalating up to $18 million for larger enterprises. Despite the quick proliferation of AI, challenges in implementation that align with profit generation remain prevalent. Yet, companies report a satisfactory outcome in 75% of AI use cases, a slight decline from previous records but still indicative of sustained positive performance without falling into the typical hype cycle downturns.

However, only 36% of firms have a strong vision for AI utilization, with technology companies showing greater readiness and superior outcomes compared to their non-tech counterparts. There is a noted increase in concerns about technological readiness, with a 10% rise in firms citing inadequate tech platforms as a major barrier to faster AI adoption, overtaking issues like lack of expertise and data readiness.

AI survey: according to Bain, AI is everywhere but priorities are shifting

What: McKinsey encourages companies to review the way they assess their new talents’ value

Why it is important: In a world where flexibility is key, recruiters need to based their judgement on skills and ability to evolve, rather than labels or diplomas.

Labor markets in advanced economies have been tightening continuously since 2010, further exacerbated by demographic shifts like aging populations and decelerating birth rates. Despite some loosening from their 2022 peaks, these labor markets are tighter than any point in the last two decades, indicating a structural, rather than pandemic-induced, trend. As populations age and workforce growth slows, without substantial increases in labor productivity or workforce expansion through higher participation rates and immigration, these economies could struggle to achieve significant economic growth.

Job vacancies have increased particularly in sectors with traditionally low or stagnant productivity, such as healthcare, hospitality, and construction. This uneven distribution implies that without strategic interventions, labor shortages will persist in sectors unable to enhance productivity. The economic impact is considerable, with GDP potentially 0.5% to 1.5% higher in 2023 had labor demands been met. Strategies for addressing these challenges include enhancing productivity through technology, retraining workers, and expanding the labor pool through immigration and increased participation, especially among groups like women and older workers.

McKinsey: for your future hires, judge on skills, not diplomas

What: Tracking technology in the wellness industry is evolving and may soon significantly impact the beauty industry by providing hyper-personalized skincare and beauty products based on biometric data.

Why It Is Important: As consumers increasingly seek scientifically supported wellness routines, the beauty industry can leverage biometric tracking to offer personalized products, thus enhancing customer satisfaction and potentially driving sales. However, it also raises concerns about data privacy, mental health implications, and the potential for obsessive health monitoring.

The wellness industry, valued at over a trillion dollars, is rapidly evolving with a focus on biometric tracking technologies that provide real-time data on various health parameters. This shift is likely to influence the beauty industry, enabling brands to offer personalized skincare and beauty products based on individual biometric data. Companies like Apple, Oura, and Garmin are leading this trend, making wellness tracking devices popular. Experts predict that beauty products will soon be tailored based on data from menstrual cycles, gut and skin microbiomes, and sleep patterns. However, concerns about data privacy, mental health, and the potential for obsessive monitoring need to be addressed. Brands must adopt holistic approaches and robust data protection measures to ensure consumer trust and well-being. The integration of wellness tracking in beauty promises a more personalized and effective approach to skincare and beauty routines.

Tracking has reshaped the wellness industry. Are beauty brands next?

What: While AI takes much of the light, retail media is still a paer of the business that retailers should look at.

Why it is important: Macy’s generated 160m$ of revenue from scratch in just 2 years.

Retail media is rapidly growing, with the UK market estimated at £4 billion in 2024. Successful implementation requires the right technology, dedicated teams, and board alignment.

Brands emphasize collaboration between commercial and marketing teams. PepsiCo's full-funnel approach integrating in-store and digital activations showed 65% higher revenue lifts.

Retail media could more than double grocery retailers' margins from 1.7% to 4.3% long-term. In-store opportunities are emerging through smart carts, screens, and other technologies to capture data and enable targeted messaging.

Challenges remain around data standardization and attribution. Brands seek partnerships with retailers to influence capabilities.

Long-term, major retailers could potentially pivot to become media/tech companies, using retail primarily as a data source. However, this carries risks of shifting focus away from serving shoppers.

Overall, retail media offers significant margin potential, especially in grocery, but requires overcoming obstacles in standardization and in-store implementation.

Coresight: a Retail Media Report

What: Alix Partners argues that retailers should review their approach to supply chain, again.

Why it is important: the world is highly uncertain, again.

In the current, rapidly evolving retail environment, the complexity of supply chain management is heightened by factors like omnichannel retailing, changing customer preferences, and global disruptions. Traditional "one-size-fits-all," cost-focused supply chains with regional distribution are becoming insufficient. Advanced retailers are adopting segmented product flow strategies to improve inventory turns, reduce operational touches, minimize network size, and cut costs while boosting service levels.
Retailers must address several critical aspects when strategizing their supply chains: the assortment dictates inventory needs based on product characteristics, handling, seasonality, and lifecycle; customer service expectations influence inventory placement and last-mile delivery optimization; supplier reliability affects inventory flow and operational smoothness; and internal capabilities, including technology, infrastructure, and expertise, determine strategic direction, whether towards faster delivery, cost reduction, or sustainability.
Challenges such as the need for speedy delivery, high operational costs, inventory and capacity issues, and ensuring inventory availability demand innovative solutions. Techniques like DC bypass, vendor direct delivery, forward-deploying inventory, enhanced cross-docking, and multi-echelon inventory strategies are vital. Additionally, using regional distribution centers and specialized stocking sites can help manage costs and improve inventory availability. This approach requires a departure from traditional models to a more dynamic, analytics-driven strategy focusing on detailed master data management, robust analytics, and precise operations planning to navigate ongoing market disruptions effectively.

Time to abandon the “one-size-fits-all” regional supply chain

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The rise of department stores in the mid-19th century marked the beginning of a commercial revolution that shaped retail and consumer culture as we know it. The world's first department store, Au Bon Marché, founded by Aristide Boucicaut in 1852, introduced groundbreaking commercial innovations and created a capitalist business model that birthed unique and effective marketing techniques still commonly used by retailers today.

The IADS had the opportunity to visit the “Birth of Department Stores” exhibit on display from the 10th of April to the 13th of October 2024 at the Musée des Arts Décoratifs in Paris. The exhibition's second part (IADS is a partner) will be presented at the Cité de l'Architecture et du Patrimoine from November 2024 to April 2025. It will place the emergence of department stores in a broader context, looking at the history of these institutions over time and in an international context.

Such excitement around the topic of department stores called for a piece on their history, reminding us why we love this model so much. From the seven hundred pieces on display, ranging from posters to clothing and toys to furniture, the exhibit allows visitors to understand the evolution of commerce and department stores from 1852 onwards. The long history of department stores underscores their lasting impact on both the commercial landscape and societal norms, prompting reflection on future innovations that will define the next era of retail.

We connect in the below piece the most recent initiatives spotted around the planet to their origins, and try to see if modern department stores remain true to their original groundbreaking role.

Department Stores started a commercial revolution

The exhibit outlines the rise of department stores in Paris, France, where the first-ever department store was born, becoming the new template of modernity and consumerism in the 19th century.

The rise of department stores in the mid-19th century started a commercial revolution that fundamentally transformed retail and consumer culture. Au Bon Marché’s Aristide Boucicaut laid the foundations of modern commerce with major commercial innovations like the invention of sales, fixed prices and seasonal exhibitions, children as a new commercial segment, and even mail-order sales.

Each of these innovations answered a specific question. Seasonal sales solved the question of extra inventory and were an occasion to attract less affluent customers willing to shop at Le Bon Marché despite limited means. Exhibitions helped maintain customer interest throughout the year and reduced slow periods. By organising events for products like household linens and fashion accessories, department stores could sustain a steady flow of customers. The use of free advertising calendars given to customers and posters by prominent illustrators further enhanced the appeal and visibility of the store, creating a culture of regular shopping events that encouraged consumerism.

Including children's sections in department stores marked a significant shift in retail strategy. As societal views on childhood evolved, children became a new commercial target and an additional way to attract female customers. Stores began offering a variety of children's clothing and toys, reflecting the growing importance of children in the family unit. Since then, department stores always maintained kidswear and toy sections, sometimes making them a strength in their business, as is the case at Manor, especially with toys. Despite ongoing challenges with kids-related products, department stores continue to find ways to represent this segment, showing the importance of an extensive product offer catering to their primary customers, women. Department stores show great agility in mitigating the impact of kids' product slowdown. For example, in May 2024, Galeries Lafayette Haussmann partnered with US famous retailer FAO Schwarz: the company took over the existing toys department to create a 620 sq. meter new toy area featuring iconic elements like toy soldiers and a giant piano. Differently, Boyner has embraced this trend with their new "Dynamic Teen store" at Boyner İstinyePark in Istanbul, which focuses on sports and entertainment for Gen Z and Gen Alpha. Department stores can create lifelong customers by introducing children to shopping alongside their mothers, appealing to them as teenagers, and retaining them as young adults.

Mail-order sales were another revolutionary aspect introduced by department stores. Boucicaut's colourful catalogues helped Au Bon Marché reach people outside of Paris, making its products available to more customers. American retailers like Sears and Montgomery Ward in Chicago later perfected this model. Unlike the earlier French mail-order businesses, which targeted niche markets or elite customers, Ward's model was designed for the general public, particularly those in rural areas. He issued the first general merchandise catalogue in 1872, which was simple and easy to use, listing 163 items on a single sheet of paper. Ward also introduced innovative product return practices with the "satisfaction guaranteed or your money back" policy in 1875, which built customer trust and loyalty. This innovation was significant in the United States, where distance had previously made it hard for people to access various products. Department stores were indeed at the forefront of distance ordering and delivering customers to their homes.

Today, this foundation has transformed into e-commerce. Even though some department stores were late in the digital commerce race, the COVID-19 pandemic forced them to transform rapidly. They now offer options such as ordering in-store for home delivery and same-day delivery services that cater to the demand for instant gratification. Omnichannel strategies like "Buy Online, Pick Up In-Store" (BOPIS) blend the convenience of online shopping with the immediacy of in-store pickup. At the same time, integrated approaches ensure seamless transitions between online and offline experiences. By constantly observing their customers and sticking to their needs, these innovations provide convenience and satisfaction, prompting us to wonder what new innovations will define the next era of retail.

By putting women at the centre, department stores started a social revolution

Department stores played a significant role in the liberation and emancipation of women, transforming public spaces and social norms during the late 19th and early 20th centuries. These establishments offered women a socially acceptable venue to step outside their homes, facilitating a new form of public participation that was previously limited or entirely restricted.

Historically, women's presence in public spaces was heavily regulated and often frowned upon unless a man accompanied them. Middle-class women, in particular, faced societal scrutiny if seen unaccompanied in public, as this was associated with scandalous behaviour. The emergence of department stores began to change this dynamic. These retail palaces were designed to be inviting and luxurious, featuring elaborate displays, comfortable lounges, and various departments catering specifically to women's needs and desires. The store wasn’t just about shopping; it was about creating a space where women could socialise, explore, enjoy cultural events and assert their presence in the public realm without needing male accompaniment. Department stores' architectural design and marketing strategies were crucial in promoting this new public role for women. Stores like Le Bon Marché in Paris and Macy’s in New York were true social hubs.

Department stores also played a pivotal role in employing women, marking a significant step towards economic independence for women. Positions such as saleswomen allowed women to work outside their homes in a respectable environment, breaking away from traditional roles confined to domestic, agriculture and/or factory work. Despite extremely difficult working conditions and a highly patriarchal culture, this employment provided financial independence and fostered a sense of self-agency and personal growth. Like men, women could also occupy management positions. Overall, cities became more attractive as they transformed into job centres, another aspect of the social revolution department stores were part of.

In essence, department stores acted as catalysts for social change. They gave women unprecedented freedom to explore public spaces independently, engage in economic activities, and participate in the booming consumer culture. This newfound public presence was a first step towards gender equality, challenging and gradually altering the misogynistic norms that confined women to private, domestic spheres. So, the rise of department stores was a commercial revolution and a social one.

From shopping palaces to modern consumption and cultural landmarks

The department store in the late 19th century stood as a monument to the new bourgeoisie class and used its members' entrepreneurial drive to accelerate growth and create a profitable business model. The middle class of that time fed off of the material world; the wide variety of garments and surplus of goods catered to the bourgeoisie, who would flock to put themselves on display at these stores.

Department stores became the symbol of modernity, not only through their innovative architecture but also by pioneering a new commercial system that laid the groundwork for contemporary marketing. Large, vibrant advertising posters were on display at the exhibit, showcasing elegant dresses that embodied the desired lifestyle of the time — depicting scenes like women strolling on beaches and in city streets while dressed in their finest attire. Making department stores visible outside of their premises was crucial: for the first time in history, these ads showed the act of shopping driven by desire rather than necessity, creating what was later called consumption.

Also, department stores developed techniques based on the notion that customers are not merely buyers but visitors who have come to experience the grandeur of the store. Usually featuring unique and innovative architecture and located at the heart of cities, these stores transformed shopping into a leisurely activity akin to attending the theatre, portraying department stores as attractions first and shopping destinations second. Nowadays, retailers are increasingly curating experiences to attract and retain consumers. Despite changes in the retail landscape, they continue to employ strategies that emphasise their role as destinations, leveraging stunning architecture and interactive displays to create engaging environments.

Historically, department stores have been architectural marvels designed to impress and entice visitors, contributing to reshaping city centres. This tradition continues as modern department stores often feature innovative and beautiful designs that draw people in, creating a sense of wonder and luxury. For example, this is the case at the Hyundai Seoul, which has a large atrium filled with trees, and Birmingham's stunning Selfridges store building. In addition, window displays and in-store pop-ups remain central to the department store experience. These visually captivating presentations are designed to inspire desire and imagination, transforming shopping into an event. Interactive elements, such as live demonstrations, themed displays, and experiential zones, enhance this immersive experience, as is the case at SKP-S. Over time, they expanded their influence and revenue potential thanks to new ventures outside their original premises. Most expanded to secondary cities, with stores becoming the new city centre landmarks.

Department stores emerged as cultural landmarks, blending innovative architecture and immersive shopping experiences to attract and retain consumers. Today, they continue to adapt to modern retail challenges by integrating digital advancements and maintaining their status as cultural and social hubs. The focus on creating a memorable experience as a primary marketing strategy ensures that department stores remain relevant and enticing to a new age of consumers. They encourage repeat visits and customer loyalty by offering a unique environment that combines shopping with entertainment and leisure. In the modern landscape, where department stores compete alongside e-tailers, positioning themselves as cultural and social hubs is more than ever pertinent to maintaining their appeal. The development of the department store from the early days of Le Bon Marché in Paris to today’s global retail giants shows their resilience and ability to adapt, innovate, and thrive in the dynamic industry. Reflecting on the rich history and impact of department stores on society, it is apparent that their evolution over time has shaped not only the retail sector but also cultural norms, paving the way for future innovations in commerce and retail. Their story is one of continuous change, a testament to their foundational role in the commercial and social fabric of society.

Credits: IADS (Katie Clark & Morghan Pollard)

What: Bain & Altagamma release their yearly predictions on how the luxury industry is doing

Why it is important: Polarisation everywhere, market contractions, mildly positive or negative results according to the location… customers are fickle and luxury brands are navigating at sight.

The personal luxury goods market is experiencing mild growth in 2024, with polarized performance across regions and brands. Q1 2024 shows a slowdown, particularly in China and the US, while Europe remains resilient and Japan flourishes. Brand polarization is significant, with top performers continuing to thrive while others struggle.
Key trends include a shift towards experiential luxury, pressure on profitability, and changing consumption patterns. Brands are focusing on top customers while also broadening their audience reach. Price elevation strategies are reaching their limits, leading to longer markdown seasons.
Geographically, the US faces ongoing uncertainties, China struggles with structural and social issues, and Japan benefits from tourism. Europe shows resilience with local consumption in key markets.
Category-wise, jewelry and bags are outperforming, while ready-to-wear suffers. Beauty and small luxuries are rising as affordable indulgences.
Looking ahead, 2024 full-year growth is projected at 0-4% in a realistic scenario. Key challenges for brands include maintaining reach across audiences, nurturing value propositions across price points, delivering experiences, and fueling consumer love beyond desirability.

Bain & Altagamma report on Luxury - Q1 2024

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After years of speculation, Dover Street Market, the renowned fashion concept store founded by Rei Kawakubo of Comme des Garçons and husband Adrian Joffe, finally opened a new location in Paris. Located in the Marais area, the new store is the 7th location to open over the last 20 years after Tokyo, London, Beijing, New York, Los Angeles and Singapore (not to mention Dover Street Market Parfums opened in Paris in October 2019). Kawakubo and Joffe After took over the building in 2019, but soon after, they decided to wait until the pandemic was over and tourism normalised to open the store. From 2021 to 2023, the gorgeous 17th-century Hôtel de Coulanges (once the house of French writer Madame de Sevigné) temporarily housed a non-profit cultural hub (“le 35-37”, after the street number the building is located at) hosting art exhibitions, fashion shows, temporary fashion markets and art performances. All these events supported the anticipation and excitement around the space opening and secured a break on taxes and rent. After this long delay, the much-anticipated store finally opened to consumers on Friday, 24 May 2024. What can one expect from this latest Dover Street Market family addition? Paris is seen as the fashion capital, but will the store succeed in the long run?

Dover Street Market's Paris location: a unique ecosystem approach

The store spans 1,100 sqm on 3 floors and is centred around a courtyard accessible from the street (rue des Francs-Bourgeois). The store occupies the ground and first floors of the building and parts of the basement. Kawakubo designed the store and said she wanted its design to be a statement in itself, focusing not on selling garments (clothes are not visible from the street, for example) “but rather a space in which shoppers can immerse themselves.” Considering the historical nature of the building, the store is a succession of rooms (some are relatively small). The retail space is genuinely immersive, if not too much of a labyrinth, making it easy to miss parts of the store. The customer journey starts on the ground floor. Then, the staff recommends continuing in the basement on the first floor before ending up in another part of the ground floor.

When exiting the store, customers can seamlessly access other experiential parts immediately accessible through the next-door entrance. More of an ecosystem than a store, Dover Street Market also includes a Rose Bakery coffee shop (as is the case in the other retailer’s locations) with a terrace and 2 different basements (-1 and -2 floors) offering 2 exhibition spaces, making the store a genuinely experiential destination. At the time of the opening, one of the exhibitions was about the Bovan label, and the other showed pictures of the long-time collaboration between Comme des Garçons and photograph Paolo Roversi. That’s not all there is. Not accessible to the customers, the upper floors house the Dover Street Market’s brand development team, offices and various spaces to host events and showrooms for the roaster of brands supported by the company (and sold in the store).

What about the store concept? In many parts of the store, the interior design takes cues from the big white curved furniture and counters that one can find in the Tokyo Aoyama Comme des Garçons store. In other parts (especially in the basement), racks and displays are made of industrial steel poles and tubes, highlighted by coloured neon lights. Very few colours are used besides white, with a baby blue or a light pink wall here and there. Floors alternate raw concrete and old hardwood pavement. The natural light floods almost all parts of the store. Overall, this store does not include the kind of impressive props usually punctuating the other Dover Street Markets locations (such as the gigantic pillar covered in knitwear in the NYC store or the gigantic bugs in the Tokyo store). However, the retailer’s identity is visible. The staff is plenty and reflects the store style.

The challenges and opportunities of independent fashion

Unlike their other locations, Dover Street Market Paris almost exclusively focuses on independent fashion labels under the wholesale business model and does not include global luxury brand concessions. Even though the store business model might consist of consignment deals, this business model makes a big difference in terms of investments and operations. According to CEO Adrian Joffe, small independent designer brands' biggest challenge is the lack of a platform to showcase their work (especially after Matches Fashion collapse). As such, Dover Street Market is an excellent window for these labels.

Brands and products are mixed, with no visible gender, category, or price logic for a customer journey starting on the ground floor, continuing in the basement, on the first floor, before ending up in another part of the ground floor. The result of this unusual mix creates a diverse and refreshing shopping experience. The store houses many brands (the lists below are not exhaustive):

• Ground floor: Comme des Garçons is the first brand upon store entrance. Many of its sub-labels are available (Play, Black, Shirt, Homme Plus, Homme Deux, Girl…) and are to be found on each floor. Other brands are Melitta Baumeister, Junya Watanabe, Noir Kei Ninomiya, Vaquera.
• Basement: Erl, Jacquemus, Online Ceramics , Bovan, Rassvet, Loutre, MM6, Zomer, Kidill, Kartik Research, Human Made, Westfall.
• First floor: Meta Campagna Collective, Bottega Venetta men mixed with Random Identities and Prada men, Walter van Beirendonck, Objet Trouvé, Doublet, Willy Chavarria, Charles Jeffrey Loverboy, JW Anderson, Rick Owens, Lido, Simone Rocha, The Shepherd, Undercover, Bottega Venetta women, Miu Miu and Prada women, Marine Serre, Ponte, Cecilie Bahnsen, Duran Lantink, Sacai, Molly Goddard, Junya Watanabe Man, Jah Jah, Kiko Kostadinov, Eckhaus Latta. The first floor also has a room dedicated to sneakers, which will probably be a key source of revenue.
• Second part of the ground floor: Nicolo Pasqualetti, Wales Bonner, Marc Jacobs, Craig Green, Hed Mayner.

There are almost no brands from the LVMH group (aside from JW Anderson and Marc Jacobs selections) and the Kering group. Among the big global brands, only a short assortment of Prada, Miu Miu, and Bottega Venetta offer luxury products.

This radical approach is indeed a risky bet on independent fashion. Even though prices are not low, the store cannot rely on high-priced Louis Vuitton, Loewe or jewellery products as in other Dover Street Market locations.

Will it work?

Considering the traffic, choosing a location in the Marais seems a safe bet, but it doesn’t come without risks for a retailer like Dover Street Market. The Marais’ reputation is to be a stylish and trendy area. Still, it is now more of another outlet for blockbuster fashion and beauty brands such as Sandro, Maje, Diptyque or Kiehl’s, to name a few, than an area for edgy and independent fashion to thrive. Also, despite tourists flooding the streets and relatively wealthy people living there, luxury brands failed to establish themselves in the neighbourhood, showing the Marais is not the right area for them. Dover Street Market customers are usually luxury fans, so will they be convinced by the assortment?

As said, independent fashion is another risky bet. Once they see how it works, Dover Street Market is said to discontinue around 20 brands from the next buying season to focus on the most successful ones, as it seems obvious that not all of the countless labels will find their audience. On the other hand, Paris misses a concept store like Colette. There is undoubtedly a vacant spot here for Dover Street Market to cater to the Paris fashion crowd. Also, these labels are offering more accessible price points (t-shirts start at €100), so it will be an opportunity for customers to buy a chunk of hype at a low cost.

Professional press and Paris fashion people have gushed about the success of the opening. According to BoF, traffic on the first day was 2,500 people with a 20% conversion rate, generating €75,000 (including Rose Bakery turnover) for a €40,000 budget. The average basket was €150, which seems relatively small for a store like Dover Street Market. Figures on the second trading day (the first Saturday of opening) were not disclosed. The store targets €12 million in revenue in the first full year of trading and aims to reach profitability in the second year at around €15 million. BoF mentioned that previous locations needed 3 to 5 years to break even.

The opening of Dover Street Market in Paris marks a significant addition to the retailer’s global footprint, introducing an immersive retail experience in the historic Marais district. This new location, designed by Rei Kawakubo, emphasizes an ecosystem approach rather than a traditional store layout, incorporating art exhibitions, a Rose Bakery coffee shop, and spaces dedicated to brand development and events. By focusing primarily on independent fashion labels and avoiding reliance on major luxury brands, Dover Street Market Paris offers a distinctive and diverse shopping experience different from other high-end boutiques and department stores in the city. Despite the fashion market challenges and the inherent risks of promoting small designer brands, the initial response has been promising. The store has seen significant foot traffic and sales, reflecting its potential to fill the void left by previous concept stores like Colette. Dover Street Market could become a hub for fashion enthusiasts seeking niche brands and an alternative shopping experience underlined by a true sense of community.

Credits: IADS (Christine Montard)

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The IADS was thrilled to attend the 2024 Viva Technology conference last May in Paris, eagerly seeking out key trends and exciting startups that could bring value to our members. VivaTech 2024 broke new ground with record-breaking attendance of 165,000 visitors, a 10% increase over last year. The event buzzed with energy, attracting 13,500 startups from over 25 business sectors and over 2,000 investors. One hundred twenty countries were represented, solidifying VivaTech’s central position on the global tech panorama.

At VivaTech 2024, the interaction between startups and tech champions highlighted a significant trend in the tech industry. The event not only emphasised established tech companies' dominance but also showcased the boundless innovative potential of startups.

Key themes included artificial intelligence, retail, climate technology, and mobility solutions. Despite the prominence of major corporations, the event still celebrated start-ups. VivaTech 2024 facilitated connections between startups, investors, and corporate partners, promoting an ecosystem where emerging companies could flourish alongside tech champions. This balance indicates that while tech champions are undeniably powerful, the startup dream is far from over. Startups continue to be essential drivers of innovations, especially in niche markets and emerging technology sectors. Our non-exhaustive review below highlights the most relevant retail trends we spotted this year for our members.

Tech champions vs. startups: is this the dawn of realpolitik in tech?

While having traditionally communicated on the startup ecosystem to promote a certain mindset in technology, this year, VivaTech concentrated on "tech champions", referring to companies that play a crucial role in shaping the technology sectors in their respective countries.

These companies have the economic power and capacity to promote innovation, attract talent, create jobs, and boost investment and exports. They can dominate their domestic markets and grab a significant share of global markets. Their size can even sometimes surpass country economies: if Nvidia, a chipmaker, was a country, it would be the 12th largest economy in the world after Mexico.

Tech champions are crucial for the growth of digital economies, as they create other similar enterprises, put significant resources into innovation ecosystems, and integrate new products at a global scale. They also provide practical exit opportunities to startup entrepreneurs and invest heavily in research and development. Overall, some believe that developing tech champions is crucial for the growth and competitiveness of digital economies, and countries must adopt the right policies and strategies to support their emergence.

It is notable, however, that not all players share this vision. Many, such as Meta's tech scientist Yann LeCun, are also calling for more control over these companies.

Many startups can potentially become tech champions, especially if they demonstrate innovative solutions, vigorous growth, and strategic approaches to scaling. Tech champions are companies that play a pivotal role in the global technology industry, driving innovation, attracting talent, creating jobs, and boosting investment and exports. Startups can achieve this status by following strategic approaches and developing necessary economies of scale and scope.

AI in retail goes beyond chatbots and copywriting.

AI continued to reign and dominate the event this year as companies showcased new and more concrete AI-powered use cases from fashion, beauty products, and payment systems. Below is a subjective curated selection of some of the most inspiring and exciting start-ups we spotted at VivaTech:

• Lowe’s Lowebot (retail): Lowebot is a prototype exploring how Autonomous Retail Service Robot (ARSR) technology can improve and enhance in-store service within a large-scale retail environment. It is designed to help customers with more straightforward needs navigate throughout the store and guide them to the product they are looking for, allowing them to get in and out quickly with exactly what they need. On a sales associate level, Lowebot is designed to enhance the employees’ ability to serve customers by addressing simple questions, focusing on more complex queries and delivering trusted project advice. Additionally, Lowebots allows for the streamlined processes and facilitation of real-time inventory and patterns across the enterprise.
• imki (fashion): Augmented and creative AI for luxury and fashion; a creative process with tailor-made, specialised, secure, and responsible solutions. They offer their clients specialised “business” AI bots, the bots having explicitly been trained, and they guarantee accuracy, precision, and efficiency. AI bots are adapted to the clients, driven by their brand DNA. They integrate their codes, the foundation of the brand, and their identifying product attributes. When brands integrate imki into their process, they reduce the time from the first creative explorations to the design phase and then to the product realisation. As a result, the product is brought to the market faster, reducing the risk of unsold, overstocked, and wasteful products.
• xydrobe (fashion): xydrobe collaborates with luxury brands to create narratives for customers. Their platform offers brands a unique opportunity to weave their stories into immersive virtual worlds, engaging the audience on a deeper level. Physical meets virtual, whether through the one-person xydrobe Pod or multi-person VR cinema, delivering one-of-a-kind experiences.
• Scentronics (fragrances): Scentronics was created on the belief that the era of mass perfumery is over. People no longer want to smell the same under the “rule” of brands. By breaking the traditional supplier-brand-retailer model to create and distribute scents, they bring actual value to consumers. Scentronics is the first AI-driven public scent creation platform. The customers' personal data (such as likes, dislikes, what makes them happy or sad) is collected via an intuitive web app, applied to the matching scent, and one’s perfume is made. These machines are currently found in over 45 countries, and the number is growing. They have three different scale models, each holding several ingredients, and can make a certain number of samples or bottles per hour, depending on the scale model.
• Lunu (payment systems): parallel to the product category innovations, we also spotted this startup that offers payment terminals to support a wide range of cryptocurrencies and wallets, making such transactions as easy as using a credit card.

Case study: AI and robotics are transforming inventory management

As every retailer knows, keeping inventory track has become more complicated given the amount of stock to move online and offline.

AI algorithms allow more accurate and data-driven decision-making processes. They optimise stock levels by analysing vast amounts of data, ensuring the right products are available at the right time. This reduces the risk of stockouts and overstocking, improving customer satisfaction and profitability.

AI-powered systems use historical sales data, market trends, and external factors to predict demand accurately. This enables retailers to make informed decisions about inventory replenishment, avoiding overstocking and costly markdowns, referred to as predictive demand forecasting. It also automates tasks such as updating inventory levels, reordering products, and predicting demands. Automating inventory management minimises human error and ensures optimal inventory levels, reducing the need for manual intervention.

AI and robotics automate inventory tracking, reducing the time and effort required for manual counting and coding. This improves accuracy and efficiency in inventory management.

These AI algorithms analyse customer preferences and purchase patterns to offer personalised inventory management, ensuring the right products are stocked at the right place and time. AI and robotics are integrated with supply chain operations to optimise inventory distribution across various locations, reducing transportation costs and improving overall operational efficiency.

AI-powered systems monitor inventory levels and sales data to prevent discrepancies and identify issues, ensuring products are consistently available for customers. Some of the top start-ups we found that are revolutionising supply chains with AI and robotics are:

• Trax: Provides in-store solutions using computer vision, machine learning, and hardware like cameras and autonomous robots to gather real-time data about shelf availability.
• Standard Cognition: Develops AI-powered checkout systems that allow customers to grab what they want without needing to go to a cashier.
• Trigo: Develops AI-based automated retail checkout systems, which can be seen in many different types of retail and service establishments with varying degrees of complexity. The common thread is the empowerment of customers, enabling them to complete transactions at their own pace.
• Sentient: Develops AI solutions for website experimentation and e-commerce recommendations that can transform customer experiences and increase conversions.
• Bossa Nova: This company produces robots for retail stores that scan shelves to help employees restock and track where items are located.
• Everseen: Uses computer vision to prevent theft at self-checkout counters.
• AiFi: develops store automation systems using AI and robotics. Its camera-first frictionless checkout experience allows shoppers to anonymously purchase items in-store without having to wait in line, stop to scan, or pay.

AI was not the only topic to take the stage, as sustainability remains an area for innovation

Sustainability remains a hot topic, and the event highlighted green technologies and sustainable solutions to reduce the environmental impact of digital technology. This included innovations in transportation, logistics, and energy efficiency.

CNN International gave a masterclass on how CNN is adapting its approach to sustainable storytelling.

Producing commercials can be unsustainable due to all the work and travel that goes into creating them. CNN started Create, an award-winning brand studio that works with a broad range of global brands to bring their stores to life, to the team space, TV, digital, and social.

Retail businesses can follow CNN Create’s lead by integrating sustainability into their operations, from transportation and material use to waste management and energy consumption. By doing so, they can significantly reduce their environmental impact and appeal to the growing market of eco-conscious consumers.

Create examines six critical areas: transport, material, disposal, fuel, and space. To reduce air travel emissions, Create sends smaller crews and uses local/remote crews. Where possible, Create will aim to use electric and hybrid vehicles.

As for material, Create will encourage all relevant parties of their productions to cut meat from catering and restrict the use of plastics. Regarding disposal, Create will follow the AdGreen ‘waste hierarchy’ of “Reduce, Reuse, Recycle, Recover, and Dispose” to aim for higher reuse and recycling rates. As for fuel, Create will use electric vehicles where possible and opt for petrol instead of diesel. Lastly, Create will explore energy-saving solutions and find ways to ensure that space can be powered by renewable energy.

Create continues its mission to obtain carbon-neutral certification for global film productions and events and has joined Ad Net Zero to help reach this goal. They place sustainability stories at the centre of campaigns and ensure all films and events are produced with our carbon footprint in front of our minds.

VivaTechnology 2024 demonstrated the enduring significance of startups in driving innovation, even as tech champions continue to dominate the industry landscape. The event highlighted the complementary roles of both entities: tech champions with their extensive resources and global reach, and startups with their agility and innovative prowess. Key themes such as AI in retail, sustainability, and the evolving realpolitik of tech underscored the potential for synergistic growth. By fostering connections between startups, investors, and corporate partners, VivaTech 2024 reinforced the idea that the startup dream remains vibrant and essential. As startups and established companies navigate this dynamic ecosystem, their collaboration and competition will continue to propel technological advancements and economic growth.

Credits: IADS (Elisabetta Falco Beccalli)

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Brand differentiation through a strong and relevant positioning is commonplace. The leading brands are built-in with clear added value and customer promise, meaning that the best-in-class are often pre-empting a whole category in the minds of customers. For example, Louis Vuitton is linked to “the art of travel” (a phrase which encapsulates its origins as a trunk manufacturer, its positioning as a luxury brand, and connotes an idea of freedom of movement), Nike relates to sports and performance, and Emirates Airline with the notion of travelling in style. This is true as well for branded retailers: Apple’s appeal is all about uncompromising quality high-tech lifestyle, Zara about high fashion at affordable prices, and The Gap about quality apparel at the right price.

For brands and branded retailers, such differentiation in the minds of customers is achieved through heavy marketing investments, allowing them to establish a clear positioning which is at the core of their business.

Third-party retailers, such as department stores, are in a different position, especially for the larger ones. For a long time, they were seen by both businesses and customers as “houses of brands” and, as such, able to talk to anyone, proposing “everything under the same roof” (JCPenney was promising in 2006 “It’s all inside. For all the sides of you”, and well before that, Harrods’ motto was “all things for all people, everywhere” in Latin). For that reason, they were positioning themselves as being a crossroads (in Paris, well-known slogans like “everything can be found at La Samaritaine” and “there is always something going on at Le Bon Marché”), places of constant discovery (Manor’s slogan is “Special Everyday”, Isetan Shinjuku’s promise in the 1960s was “everyday is new. Isetan is for fashion”), or pre-empted the authoritative position of being the leading fashion destination (Harvey Nichols slogan in the 1950s was “London’s leading fashion house”, Peek & Cloppenburg was “House of Fashion” in 2000, and Dillard’s “the style of your life” in 2009). The notion of price was also important: in 2001 Arnotts was promising to be “the heart of style and value” while John Lewis has long committed to “never knowingly undersell”.

However, a brand promise based on being the place to be, at the edge of fashion, or at the best price, is quite difficult to sustain in the digital age when the Internet precisely allows the creation of massive digital marketplaces, giving access to the most obscure fashion in a millisecond, and always with the possibility to compare prices with retailers across the planet.

Some department stores have resisted thanks to their historical advantage: Harrods or KaDeWe’s reputation about luxury is universal (KaDeWe’s slogan in 2004 was “the fine art of first-class shopping”) while Galeries Lafayette is recognized as a place where fashion is much more than a mere promise, by giving access to every trend from across the planet.

But what happens when the goal is to pre-empt a new market, far from the historical moneymakers that luxury, fashion, cosmetics, or home categories have represented for department stores?

Last September, for the first time, IADS member Boyner, in Turkey, hostedtheir “Boyner Dynamic” event: 3 days of outdoor activities and gatherings to establish Boyner as the leading lifestyle destination in the country. The catch? Nothing was to be sold. It was all about gathering people together and animating a community. Let’s review it.

Boyner’s strategic goals are to capitalize on a perfect trifecta of changes, with the country, customers and market changing

We reviewed Boyner’s history in an IADS Exclusive earlier in 2022. What came up clearly about the situation the company found itself in was that a change was needed due to macroeconomic shifts in the country:

• The country’s population is younger than in Europe, but ageing: the median age is 33.5 years old (to be compared with 28.3 years old in 2007), with half of the population aged less than 30 years old.
• This population is urban (77% live in cities), connected to the Internet (95.5% of the 15-24 years old and 80.8% of the 25-74 years old) and healthy: life expectancy in Turkey is 77.31 years (the same as in Europe), 9 years more than in 2000, and a whopping 20 years more than in 1980 (while, in Europe, life expectancy was above 70 years in 1980).

As such, the average Turkish customers know trends and are well informed about brands. In parallel, the notions of nature, environment and health have become much more important than in the past.

In parallel, Boyner underwent some significant changes, as we reported in our previous paper: it transformed from being a manufacturer-turned-retailer in the 1950s to a branded distribution group, active in many verticals, and heavily relying on its private labels, appealing to the middle class.

This strategy worked until a few years ago, and 2020 represented an inflexion in the strategy with the release of a new store concept acting as the visible part of a new company approach to the market. Sensing that customers were evolving and starting to ask for something else, especially the younger ones, Boyner decided to pivot in the following areas:

• They decided to become a “lifestyle multi-brand destination”, combining private labels and international brands, selected, curated and presented in a way which appealed to and made sense for the new generation of customers,
• Anchoring the stores in their neighbouring communities was also key, as price was not seen as a sufficient differentiation point anymore. Sustainability and wellness were identified as key differentiation points, in tune with customers’ new preoccupations.
• Proposing a set of new innovative digital services, including state-of-the-art apps and a 90-minutes delivery service, Boyner Now, to easily blend into customers’ lives while at the same time facilitating the data harvest.

As a consequence, new stores were opened which reflected exactly this: vibrant locations with a different approach according to the neighbourhood (the first iteration, Cadde, located in the Asian part of Istanbul, has a different look & feel from the latest unit to have opened, in the posh Istinye Park location), but all promoting the notion of a sustainable lifestyle, good for the planet and oneself (this was also a very astute way to differentiate from the other large retail company in the country, Beymen, a former entity of Boyner, which is fully focused on trendy fashion and luxury).

However, Boyner’s top management also realized that new stores, and money invested in marketing campaigns, were a necessary, but not sufficient, condition for success: they had to find ways to change the Turkish customers’ perception of them (especially the younger ones), not an easy feat knowing that the company, and the brand name, have been around for 70 years. This is how they came up with the idea of the Boyner Dynamic Fest.

What was the Boyner Dynamic Fest?

Last September, Boyner organized a festival over a sunny weekend, in Istanbul’s largest open-air park, to “celebrate its passion for active life”. More specifically, this meant that Boyner organized a multi-faceted event designed to entertain its customers and celebrate a sporty lifestyle:

• The first day opened with a morning run, and participants were then invited to take part in dance workshops, workout routines, yoga sessions and other communal activities over the weekend which were striking in terms of the level of participation from many different generations of people,
• It was also possible to practice sports, thanks to a basketball court, a soccer field, gym machines and bikes in the open air,
• Nutritionists and life coaches were also animating workshops to explain more about the work-life balance, and Boyner completed this approach by inviting Turkish Olympic athletes on stage to share their experience with the crowd,
• A kid’s zone was organized where children could play, spend energy, practice face painting, or design wooden shoes.
• The 2 days were also peppered with concerts and public performances from Turkish singers and celebrities.

The event also aimed at communicating on the topics of sustainability. For this reason, participants were invited to step for charities: 1.3m steps were given to 11 non-governmental organizations in the domains of health, sport, and education. Also, the whole event was designed to be waste-free: rubbish was collected and recycled (7,000 plastic bottles and 4.5 tons of garbage were recycled), including the decor (500m2 of vinyl was upcycled) and raw material (6 tons of water used during the event were used in agricultural irrigation after the event, and 3,600 nails used in the festival were removed and reused).

All in all, the event looked like a very pleasant festival, which ticked all the boxes in terms of encouraging a healthy, green, and responsible lifestyle, but mixing it with enjoyable experiences and learning. As the Boyner CEO put it after the event, “We feel responsible for social goods on issues that affect everyone, such as the good life, and we always take steps that we combine with experience”.

What was so special about the Boyner Dynamic Fest?

From a participant’s point of view, this event looked like a very cool and enjoyable weekend full of activities that could be practiced in open-air, with family and friends. The fact that entrance was free of charge probably also helped.

However, a closer look at how the event was built showed some interesting features.

First, while the event entrance was free, participants had to register through a dedicated platform, independent from the existing Boyner ecosystem (the Boyner Dynamic Fest was advertised on a regional basis independently from the retail platforms). All in all, the event attracted a crowd of 6,000 people, which means that this event was a good deal in terms of customer data acquisition and the ability to contact them, even if they are not customers yet, in the future.

Also, another interesting point is that many brands took part in the event. In a dedicated area, a village of brands was built, with names such as Adidas, ASICS, DC, Jack&Jones, Levi’s, MACFit, Merrell, Puma, Skechers and Under Armour. Boyner astutely convinced this specific set of brands, which is perfectly aligned with the healthy and sporty purpose of this event, to take part in the festival. It should be noted that not only were brands not paid nor given perks to take part in this event, but they also had to pay for the set-up of their tents and product displays. The fact that this festival was a completely unprecedented initiative probably helped convince them, but Boyner’s argument was more striking: it was, for those brands, a great way to be associated with a retailer striving hard to be recognized as the champion of lifestyle, sport, and health in Turkey.

And this went through one of the most striking aspects of this whole festival: nothing was for sale.

It was all about customer education and experience and giving them the possibility to discover brands and products in a relaxed, no-strings-attached environment. The fact that no transaction was involved probably helped people ask questions about products and services without the fear of being lured into purchasing something at the end.

Boyner also made a good deal in terms of content, since all brands were more than happy to bring with them their own stories and customer-oriented content, adding to the richness of the event.

The fact that the whole event was free, without even making a product out of participants, made it quite interesting in terms of approach. Boyner dedicated a significant amount of time, energy, people and money to organizing an event that was not designed to directly contribute to its P&L. It was instead seen as a marketing investment, but designed in such a way that its free and generous aspect would encourage the crowd to participate even more and, ultimately, associate Boyner with the values that were championed during this event.

Some consumer brands already have such an approach of making marketing investments without any hope of ROI, just to pre-empt a specific positioning or customer perception. This is exactly what the President of Coca-Cola explained during the IADS CEO call in January: the company was directly investing in consumer marketing even though they do not have any B to C activity in Europe, as they rely only on the activity of their distributor (their bottler). They see these investments as “holistic”:

• They allow placing the brand close to the customer,
• They make their partners successful.

If, in this case, such “disinterested” investments are understandable, they are less common on retailers’ side: after all, department stores have always insisted brands should invest in trade marketing to promote their names to the final customer, even though this also contributed to the department store to being perceived as the exclusive place to find them.

Boyner’s initiative of financing their brand equity without any ROI expectation is uncommon at this stage but is also part of a larger trend where department stores have to invest in their brand perception to make sure they stay relevant to their audience or attract a new one. For instance, when Magasin du Nord invested to open a popup in Malmö, Sweden (where they do not have any activities), the purpose was not so much to generate sales but to create brand equity. Brand equity’s efficiency was proven when Breuninger renamed the recently acquired Konen store in Munich with its name, sales soared even though the upgrade works had not started yet.

Department stores cannot rely only on their featured brands’ marketing efforts to differentiate themselves through selection and curation, they need to stand for the values they aim to promote. In this perspective, the Boyner Dynamic Fest is a great example of a genuinely disinterested operation, included in a broader marketing scheme, which contributes to building brand equity, one brick at a time.

Credits: IADS (Selvane Mohandas du Ménil)

What: Luxury e-commerce companies like Mytheresa, Ssense, and Moda Operandi are staying afloat by focusing on specific consumer bases, curating their product assortments, and maintaining retail fundamentals, despite the challenging market conditions.

Why it is important: The success strategies of these luxury e-tailers highlight the importance of targeting a defined audience, prioritizing profitability over aggressive growth, and emphasizing customer experience.

In a challenging luxury e-commerce market, Mytheresa, Ssense, and Moda Operandi are surviving by honing in on specific consumer segments, curating their product offerings, and excelling in retail fundamentals. These companies avoid competing on price, instead focusing on exclusivity, superior service, and targeted marketing. Mytheresa continues to see sales growth by engaging high-end clients with exclusive events and products. Ssense caters to Gen-Z with emerging designers and creative content, while Moda Operandi attracts runway enthusiasts with virtual trunk shows. Despite their successes, these strategies could limit scalability and raise questions about the market's capacity to sustain multiple players. The luxury sector faces slower growth and higher customer-acquisition costs, challenging e-tailers to maintain their value propositions. As the market evolves, the focus on unit economics and operational efficiency will be crucial for long-term resilience.

Navigating travel retail’s post-pandemic revival

What: Japan's luxury market is experiencing a significant sales spike driven by international tourists capitalizing on a weak yen, resilient domestic spending, and retail upgrades.

Why it is important: This boom underscores the dynamic nature of the luxury market in Japan, highlighting the influence of favorable exchange rates, the importance of local consumer resilience, and the strategic responses of luxury brands to evolving market conditions.

Japan's luxury market has seen a substantial increase in sales, fueled by a combination of international tourists taking advantage of a weak yen and strong domestic spending, particularly among wealthier Gen X consumers. International tourists, especially from China, South Korea, the US, and Australia, have contributed to record-high duty-free sales in Japanese department stores. Luxury brands like Hermès, Tiffany & Co., and Balenciaga are expanding their presence in Japan, driven by the surge in demand. The favorable exchange rates have made Japan an attractive shopping destination, encouraging significant spending on luxury goods. Additionally, Japanese locals continue to support the luxury market despite economic challenges, showcasing the market's resilience. The future growth of Japan's luxury market will depend on brands' ability to remain relevant to local consumers, capture younger generations, and adapt to changing consumer trends and economic conditions.

What’s behind Japan’s luxury boom?

What: An opinion piece on the relevance of travel retail

Why it is important: we are at the dawn of pre-pandemic record-breaking levels in international tourism, however, the nature of the business may have changed.

The travel retail industry has faced significant challenges, particularly with a 70% decline in activity due to Covid-19. Recovery is slow, with expectations to return to pre-pandemic levels only by next year. Despite the convenience of domestic and international e-commerce, travel retail offers unique, experience-driven opportunities that brands are leveraging to enhance consumer engagement.

Travel retail encounters a unique contradiction: airports provide ample dwell time, promoting aimless browsing, yet the window for actual shopping is limited by factors like check-in and immigration processes, which can disengage potential buyers. This tension creates a hyper-competitive environment during the critical 'golden hour' where attention to retail fundamentals and staff effectiveness becomes crucial. Staff play a pivotal role in converting interest into sales, particularly with diverse international customers.

To capitalize on its unique position, travel retail must innovate and adapt to the tech-savacity of modern consumers. Emphasizing pre-trip engagement through digital strategies like personalized emails, social media ads, and mobile notifications can enhance the chances of conversion. Ultimately, success in travel retail hinges on understanding and integrating into the shopper’s journey, creating memorable experiences and investing in skilled staff to navigate the complexities of this unique market.

Is travel retail still relevant?

What: A new wave of independent boutiques is carving out a path for success by prioritizing brick-and-mortar offerings, curating unique assortments, and betting on emerging labels amid the struggles of department stores and online giants.

Why it is important: This shift in the retail landscape opens up opportunities for small, specialty stores to thrive by focusing on local communities, unique in-store experiences, and personalized service, challenging the dominance of larger, more impersonal retail models.

As department stores and e-commerce giants face challenges, a new generation of independent boutiques is emerging, creating a healthier, more sustainable model for luxury retail. These specialty stores, like ESSX, The Webster, Dover Street Market, and Café Forgot, prioritize in-person shopping experiences and unique, curated assortments. They often opt out of competing in the online retail space, focusing instead on providing a distinctive and intimate shopping experience that cannot be replicated online. By taking risks on emerging designers and catering to local tastes, these boutiques offer something different from the monotony of larger retailers. The trend highlights a shift towards more personalized, community-focused retail, where smaller stores can thrive by staying true to their strengths and serving their niche markets effectively.

The stores defining a new era of multi-brand retail