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

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

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

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

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

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

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

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

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

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

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

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

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

GDR 82nd Global Innovation Future 

What: Global travel is back on track and the trend should be sustained, even though many uncertainties loom.

Why it is important:  China is increasingly becoming a question mark both in terms of date of reopening but also in capability to play the same engine role than in the past.

According to Visa, global travel is recovering fast, with cross-border trips reaching 78% of 2019 levels in May 2020, and long-haul trips reaching 71%. Visa bets that the trend is here to stay, even though some questions remain, due to the inflation impact and uncertainties on when Asia will fully reopen.

China remains the central pivot in finding the answer to this question with its zero-Covid policy, as well as the duration of the Russian war in Ukraine: if China, Russia, Ukraine and HK are excluded from the comparison basis, we are already back to the 2019 levels at the global level, and flows from US to Latin America, Mexico to Europe, UAE to Europe or KSA to Latin America are already exceeding 2019 levels.

Visa also warns that China is becoming an increasingly uncertain asset: due to the ageing of its population, combined with a downshift in economic growth and pressure on asset prices, it is not granted that it could become again the world engine it used to be pre-pandemic, even if it decided to drop the zero-Covid policy in a fortnight.

Global travel is recuperating, but until where and when? 

What: Developing a brand-level approach to Web3 technologies is now considered a must, but there is no template to follow so brands need to get started developing such a team.

Why it is important: Brands are beginning to formalise their approach, developing longer-term strategies that aim to interpret the brand’s ethos for a new era, which is taking Web3 into account.

How are these brands responding? Many are appointing senior executives to lead the charge, who are often forming dedicated teams — both full-time and borrowed from various areas of the business — to contribute technical skills and creative ideas. Some are establishing separate business units, while others are integrating these functions into existing digital and innovation teams.

As brands have begun making moves, strategies and terminology differ: some are metaverse-centric, some more Web3; some are at the group level, some at the brand level in marketing or innovation, and some both. The key factor? Brands are taking this seriously, combining experts from creative, marketing and social with technology, legal and finance.

Brands should do the following things to keep up with the Web3 trend:

• Designate someone to guide Web3 strategy
• Partner with experts and companies with expertise across technological and creative needs in the short-term
• Understand legally and financially how cryptocurrencies and intellectual property should be handled
• When forming a Web3 team, look for employees that are already interested in the matter within the organization to accelerate innovation.

The fashion exec’s guide to building a Web3 team

What: McKinsey proposes a new approach to the talent shortage and how to overcome it.

Why it is important:  The “relaxers” persona they identified echoes a recent conversation between IADS CEOs: what is the former employees who left with positive relationship could be convinced to come back?

According to McKinsey, the talent shortage and race to recruitments are here to stay. Even though economies are reopening and consumer demand is high, in US, there are 11,3m jobs open in May 2022, vs. 9,3m in April 2021. It is estimated that the voluntary quit rate is 25% higher than in pre-pandemic period.

This is mainly due, according to a research they made, to 3 types of behavior:

• Reshuffling: employees are quitting and moving to another industry (48%) in some kind of horizontal translation,
• Reinventing: employees are leaving traditional employment to start their own business or look for other types of work structure,
• Reassessing: people quite because the demand of their lives and they step out of the workforce.

The consulting company advises to look at winning back nontraditional workers and proposes 5 workers personae in order to provide a new angle to recruiters:

• The traditionalists: career-oriented people who care about work-life balance but are willing to make trade-offs for the sake of their jobs. These are obviously the favorites of employers, however there are not enough of them to fill all the jobs.
• The do-it-yourselfers: people who value workplace flexibility, meaningful work, and compensation. They are usually 25-45 years old and value flexibility, meaning that employers have to embrace new ways of structuring the work, such as Airbnb who abolished the idea of location-based pay.
• The caregivers: they are people who have decided to stay at home for various reasons, and who are ready to lend their time and talents to companies willing to work with their schedules.
• The idealists: students and younger part-timers who are asking for development and follow-up from employers: mentoring, work-study combination schemes, career development plan…
• The relaxers: for them, career does not come first anymore. They are usually seasoned workers and might be interested in returning to interesting positions but at their own terms (especially in terms of meaning of work).

Facing the talent shortage: are you searching in the right place?

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

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

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

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

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

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

Digital IDs: A game-changer for fashion?

What: A beneficial overview from MAD Luxury Consultancy that seeks to provide an understanding of the web3 and metaverse market predicted to reach 50 billion euros.

Why it’s important: As the landscape of retail continues to change, businesses across sectors are rushing into web3 or metaverses without understanding exactly how to optimize their strategies.

MAD consulting has released this brief covering the difference between web3 and metaverses, some background information on the evolution of these spheres, and the benefits and possibilities of creating a digital strategy using these innovations. The key takeaways for retailers?

The acceleration phase of web3 is in full swing as more influencers, celebrities, and brands create digital collaborations and projects within platforms such as Roblox or Fortnite or Decentraland. The absence of retailers would be dramatic making educating staff and customers on digital initiatives critical for success. It may sound like a goldmine for diversifying revenue, but there are some aspects to keep in mind…

What is it?

Web3 and Metaverses are not the same, meaning a retail strategy will be different depending on which you chose. Metaverses are digital worlds which can be represented in 2D, 3D, or overlayed through augmented reality technology. Some examples provided include Fortnite and Roblox which represent metaverses in a Web2 format, and Decentraland and The Sandbox which represent Web3 metaverses.

Web3 is the next generation of the internet which has been facilitated by innovations in digital hardware and software that improve speed, image capabilities, and 3D imaging. To understand the difference between the different eras of the internet, consider this explanation:

• Web 1 – THE INFORMATION ECONOMY: static, read-only content that has almost no interaction between creator and viewer, and which is driven by organizations and companies
• Web 2 – THE PLATFORM ECONOMY: shared and dynamic content that has interaction between users. Unlike web1 it is more community-based. The advent of social media is deeply tied with this phase of the internet.
• Web3 – THE OWNERSHIP ECONOMY: algorithmically driven content and services, decentralized data architecture, a user-centric and behaviour-driven environment in which individuals have more ownership over their data and information flows. This can be seen in the various kinds of NFTs that offer financial gain, membership, and access to products or services.

What are the benefits?

Luckily for retailers, web3 and metaverses have a lot of applications when considering branding and brand ethos. A key element in web3’s benefits for brands is seen in blockchain technology. Through blockchain technology, brands can take greater control of their brand assets, improve internal and external processes, optimise operations and revenue through smart-contracts, and control more of the client experience. For example, businesses that operate wholesale and are limited in their activities, like Wine & Spirits, have more potential to connect and build client relationships through NFTs and digital assets. These digital assets also have potential within the resale market. By tracking successive owners, the blockchain ensures the authenticity of the product and transaction. In addition to this, brands can receive royalties through smart-contracts that are written into the code of the NFT.

Clients gain value through the reinforcement of social status, style, creativity, scarcity, and if retailers chose to incorporate it, loyalty. Developing rewards systems with NFTs can help target customers and create a closer relationship between them and the brand. By creating levels of membership, protecting waiting lists and event attendance, targeting potential clients through the other digital assets they own and having token-gated websites, brands can reinforce a VIP status for high-value clients.

What not to do?

The first thing to remember is not to panic. There has yet to be a dominant metaverse and interoperability across platforms is still in development. MAD’s report highlights the likelihood that the current metaverses established by brands today will be superseded in the next three years. The technology for AR and VR is still in its ‘gimmick stage.’ Permanence at this early stage is impossible. Retailers are encouraged to incorporate brand values and missions through thoughtful experimentation.

Another tip is to avoid internal dissonance and gaps between the creative standards of digital leaders. This can be avoided by creating an internal web3 team and seeking industry professional advice while ensuring strong communication within the organization. It is important that retailers and brands keep in mind that success in other departments does not transfer over into this new field.

Gaming culture is deeply intertwined with web3 advancements and understanding this can help ensure a successful campaign. Like video games, brands and businesses have their own story, characters, and world that digital technologies can bring to life delivering the most immersive experience yet. Ultimately, with both a digital and virtual presence, brands can reach the customer at all points with entertainment, convenience, utility, and community.

Web3 and Metaverses are the future of omnichannel retail

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

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

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

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

Tech adoption slow despite positives

What: Sustainability has become increasingly interconnected with luxury offerings for Chinese customers, who are becoming more and more concerned about sustainability issues.

Why it is important:  A shift in consumer priorities is significantly reflected in the willingness to pay extra for environmentally-friendly features.

While some critics contend that this is more about ‘greenwashing’ rather than a genuine concern for the environment, the business case for sustainability is changing how labels create value.

Jing Daily recently completed a survey of data that concluded although environmental activism in China is tame compared to other nations, mainlanders appear to care more than many of their global peers.

This shift in consumer priorities is significantly reflected in the willingness to pay extra for environmentally friendly features. This will vary according to spending power and product category. EY reports that a higher percentage of high-income Chinese consumers are willing to pay between 11 and 30 percent premium for buying an electric vehicle compared to US consumers.

Sustainability means different things to different people. This can be broadly attributed to how consumers are affected personally. For instance, according to Ipsos, air pollution was the leading environmental concern for Chinese respondents with 45 percent (versus 24 percent for US respondents).

Many families visit play areas in shopping malls because it is deemed safer than playing outdoors. Sustainability is not only a driver of financial performance but also creativity and innovation, as younger consumers in China and around the world redefine what luxury means. However, authenticity and thus transparency will be key to implementing an effective green strategy, especially in the mainland.

A strong brand reputation is more important than ever. Most luxury players, with their strong credibility, have the advantage of possessing excellent reputations. Combined with actual transparent sustainable green business practices, this is an appealing formula.

How Chinese consumers decode the meaning of sustainability — and why it matters for luxury.

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

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

These areas of innovation include:

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

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

Innovations for the C-Suite to accelerate sustainability

Check out the review of Stockmann in pictures here 

PRINTABLE VERSION HERE

Introduction

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

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

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

This first part is dedicated to Stockmann in Finland.*

Company history: a former real estate magnate turned tenant of its own previous properties

A former member of IADS (1950 – 2020), Stockmann was founded in 1862 in Helsinki by Georg Franz Stockmann and is credited for having introduced revolving doors, soda fountains and escalators in Finland. The company grew to the point of adding, aside from a significant store fleet in Finland, stores in Tallinn (Estonia), Riga (Latvia), and 4 stores in Moscow and one in St Petersburg at the peak of its history. However, business was challenging, and Stockmann separated its retail operations from real estate in 2014 and started selling under a lease-back scheme its assets in 2015. Divestment in Moscow was achieved in 2016 (operations started there in 1989) and in St Petersburg in 2019. Difficulties accelerated during the Covid-19 pandemic, forcing the company to apply for corporate restructuring in 2020, to sell off Tallinn and Riga properties in 2021, and the Helsinki flagship property in Q1 2022 for €400m.

Today, the company operates 5 stores in Finland in addition to Riga and Tallinn, all of them under a lease agreement in buildings that used to be the company’s properties. Stockmann conglomerate also owns and operates Lindex, a Swedish fashion chain representing 475 stores in 16 countries, which has fared so far much better than the department store division.

For the department store division, full-year sales in 2021 represented €291m (of which €226m was achieved in Finland, growing +3%, the rest being achieved in the Baltic states), with an operating result of €11.6m vs. a loss of €-48.2m in 2020 during the pandemic. Q1 2022 grew +27% vs. 2021 to €196m and operating profits to €9.8m from a loss of €-27.6m in the same period last year.

A new CEO, Mr Jari Latvanen, joined the company in August 2019 with the mission to help the company to exit the difficult situation at the time. After an all-time-low in 2020 leading to the near bankruptcy of the company, the sale of the property helped the company clear off debts in a record time and revert to a near-healthy situation, in spite of a new customer structure (in 2019, 20% of the business was done with Chinese and Russian customers, two groups which have both totally disappeared and replaced by locals).

Visiting the Helsinki flagship, the largest department store in the Nordic countries

The historical store spans over 50,000 sqm and 8 floors. Due to the fact that it is constituted of two different buildings, navigation can be somehow tricky as there are intermediary floors on the ground floor, and +1, +2 and +3 levels. As a consequence, for some categories such as women’s and men’s fashion, the offer is fragmented in different spaces, making product discovery difficult.

The basement is at the same time a service area, a recreational space and an event zone:

• A pharmacy is accessible from the parking space before entering the store,
• A deli, several restaurants and a bar are available. One of the restaurants is managed by a local chef offering set menus for lunch, helping business customers to come back into the store after having lost the habit during the pandemic (stores were never forced to close in Finland, Sweden or Norway, however the stay-at-home instructions and remote working were implemented),
• The event space, for instance used for Christmas, was used at the time of visit for “Stocklet”, a smart way to liquidate stocks while avoiding cluttering the regular selling areas. It is all about efficiency: products are gathered by size and customers are invited to hunt for a good deal (no inspirational trick here).

The ground floor is dedicated to cosmetics and accessories in addition to a small flower stand.

• For the cosmetics, the usual international suspects are all present, in the spectacular atrium (all brands have their own concept) and also includes related products (Dyson) and services (hair bar, nail bar). It is notable to remark that local brands are also present in abundance and a lot of space is dedicated to them.
• The women’s accessories zone is the most appealing one in the store (and most differentiated), as it has been refurbished very recently. All windows have been open and let natural light come in, with plants and trees giving a feeling of nature (they are changed according to the season), and low rise furniture giving full sight of the space. International brand names are cleverly mentioned on the floorplan, but this can be somehow deceptive as in reality, the products are simply put on small tables just like any other generic area, while one would have expected to find a shop in shop (the only shop-in-shop on this floor so far is Longchamp with its own cash desk, the rest is operated in wholesale. Overall, 5% of the business is made in concessions, with Dior Cosmétiques, Longchamp, Hugo Boss and the brands on the 6th floor).

The first floor is dedicated to men’s fashion on several sub-levels, including some kind of mezzanine. This is not helping to embrace the whole offer at once. According to the CEO himself, the men’s business has considerably evolved and it is now almost impossible to find a formal offer in the store, as Finns (known to be extremely formal) are not looking for these products anymore.

The second floor is dedicated to women’s fashion and is better lit, more engaging and spacious than the men’s section. All brands are displayed with their own concepts on murals, which makes them more outstanding. 3 elements were worth being noted:

• Fitting rooms are surprisingly uninviting. At the time of the visit (morning), a rack with unsold items was displayed in front of them, not precisely an encouragement to buy, in addition to the cabins themselves, which are rather disconnected from the overall feeling of the floor,
• Customers also have the occasion to shop in dedicated lounges, which have been recently opened along with the revamping of the private shopping activity. Such spaces are significantly more attractive.
• On the side, a “Relove” café has been open, astutely mixing racks of second-hand items with a café, giving a charming boudoir feeling to the space, which was crowded (unlike the rest of the floor) at the time of the visit.

The third floor is dedicated to contemporary fashion, sportswear and, curiously, lingerie, which is displayed just near men’s garments and women’s sportswear coats and shoes. Lingerie space execution is poor.

The fourth floor is dedicated to home accessories including the Casa Stockmann private label. Overall, private labels cover home and fashion RTW and accessories. For fashion, private labels (an activity which is made easier for Stockmann thanks to Lindex production capabilities) represent 15% of the business, including at the same time an inspirational offer and lines designed to complete missing prices and functions.

The fifth floor mixes Stockmann’s own operations with kids RTW, sneakers and toys (the space is supposed to be redesigned in the coming months), spaces leased to Halti, a Finnish outdoor brand, and Isku, a furniture brand. Transitions from space to space are abrupt. Recycling spaces (garments, electronics) are available on this floor only, which is not particularly handy.

The sixth and seventh floors are hybrid spaces:

• On the sixth floor, customers can find every service they might need: a bridal salon, a hairdresser, a perfume shop (not clear if operated by Stockmann or not), a medical and dental clinic, a dry cleaner, and a Solaris optical shop. This zone is not as appealing as the rest of the store and looks like a mall more than a part of the department store. Last but not least, a lounge is available, closed at the time of the visit and looking like an old-fashion gentlemen’s smoking lounge.
• The seventh floor is dedicated to services, but is not accessible from all lifts or staircases. There, customers can come to pick up products or have their purchases delivered through partners, but the overall feeling is that the zone is not inviting and a significant amount of space is empty. A champagne bar and a terrace complete the floor.

What to remember?

The store is getting ready for tourists to come back: it is clear that the Helsinki store is good at addressing tourists, information is provided in English (including promotional audio messages), in a clear way, and a strong push is set on local brands. However, the consequences of the Covid times were still felt at the time of the visit, with the tourist information desk on the ground floor only open from noon to 6 pm, and some specific cash desks curiously closed (such as the one near the flower stand). In addition, salespersons are still managing sales through central cash desks (no mobile payment) which, given the structure of the store, can be troublesome if someone has to go a few steps up or down to pay.

A smart approach to second-hand and outlet: the “Relove” café is a clever move: Stockmann teams up with local socialites and influencers to sell their wardrobe, creating a one-of-a-kind effect designed to attract a younger crowd to the store. It works, as there is a significantly different demographic in the Relove space compared to the rest of the Women’s fashion floor. Also, the way the outlet is presented, in the basement, helps to keep the display coherence and cleanliness in the rest of the store.

In spite of uninviting dedicated spaces, it is all about superior customer service: with the exception of the private shopping lounges, the customer service physical spaces are disappointing in the store (a feat that the CEO is aware of). However, Stockmann has implemented a new tool to cater for the needs of its Mystockmann loyal customers (1.3m out of a total of 5.5m Finnish citizens, with an active rate of 50%, generating 73% of the business) to replace the Net Promoter Score: the Emotional Value Index (EVI), which has been co-developed with a local Finnish start-up. This system gathers in real-time actual wordings from customers, evaluates their satisfaction, and gives the tools for the relevant teams to address their issues or receive their congratulations.

Conclusion

*Where is Stockmann going? Even though renting its store locations could be dangerous, this option allowed them to recuperate from a very difficult financial situation. The changes in the store feeling, customer approach and online services are truly perceptible and make a real difference from what the store used to be in the past (the accessories zone on the ground floor, now well-lit, is inviting and open on the outside, but was in the past used to sell rugs, for instance).

The IADS only visited the Helsinki store and it seems that it is getting more and more well-equipped and ready to welcome customers in large quantities, be them tourists (increasingly growing) or local customers, who have already increased their average shopping basket, just like in the rest of Northern Europe. We only wonder if operating a store fleet of 5 stores in Finland and 2 overseas is still relevant as it might not allow the company to fully focus on becoming a destination name in three capital cities, at a moment when competing companies from other countries in the same zone, such as NK and Steen&Strom, are also reconsidering their strategy and revamping their offer, taking a more luxurious and international fashion way than what Stockmann seems to be doing at the time.*

Credits: IADS (Selvane Mohandas du Ménil)

Check out the Retail Review in pictures here 

pRINTABLE LINK HERE

Introduction

*Taking the opportunity of the kick-off celebrations of Vanderveen’s 125th anniversary in Assen, the IADS visited three Dutch department stores at the end of April 2022: De Bijenkorf and Peek & Cloppenburg in Amsterdam, and Vanderveen in Assen.

In the Netherlands, the department store business is mainly led by De Bijenkorf, running seven locations throughout the country. Peek & Cloppenburg (accounting for approximately 75 stores in Germany and now owning Magasin du Nord), runs 4 stores in the Netherlands. Finally, Vanderveen has a single location in Assen and is still run by the Vanderveen founding family.

Differences are huge between these three businesses. Each targeting specific customer groups, they offer a particular take on department stores, from international luxury to mass-market and ultra-local purpose. A review in pictures is also available to the IADS members.*

De Bijenkorf, the international luxury department store

Founded in 1870 in Amsterdam, De Bijenkorf was once a member of the IADS. Since 2011 the department store is owned by the Selfridges Group. In 2013, De Bijenkorf launched its "premium experience" strategy, investing more than 200 million euros in five years: the goal was to transform the business to reach a higher international standard in terms of brands, services and shopping experience. Five stores were closed to only focus on those able to convey the premium message. De Bijenkorf now has stores in Amstelveen, Amsterdam, The Hague, Eindhoven, Maastricht, Rotterdam and Utrecht. The e-commerce branch opened in 2009 to serve The Netherlands and has developed in Europe with French, German, Austrian and Belgian websites, heavily communicating on social media to catch the local consumers’ attention.

Located on Dam Square, the Amsterdam flagship store takes cues from Selfridges. The ground floor is organized according to a common layout and product offer, gathering beauty on one side (including a beauty salon), and luxury accessories concessions on the other side. There was quite a lot of traffic at the time of the visit (weekday around 6 pm) and customers were queuing at Saint Laurent, Dior, and Louis Vuitton. In addition to its shop-in-shop, the latter currently has a RTW pop-up store at the very center of the floor. It didn’t seem to attract customers despite its perfect execution: it lacks the intimacy to try RTW on. Overall, with its white columns and marble, De Bijenkorf’s ground floor resembles a smaller version of Selfridges’ Oxford Street.

The upper floors are organized around a large air shaft acting as a well of light and spanning across the height of the building from the first floor to the fourth floor. The first floor is dedicated to men’s fashion, shoes, and underwear. A coffee shop complements the offer. The floor was quite busy thanks to the important surface dedicated to sneakers. The overall impression is good, and the circulation is easy.

The second floor is dedicated to women’s fashion. The section dedicated to luxury brands is airy and filled with natural light, but the offer seems scarce despite the appeal of big players such as Balenciaga and Gucci. Brand spaces are not personalized, they are more soft corners, using all the same fixtures. A Christian Louboutin shop-in-shop completes the luxury offer. The rest of the floor is dedicated to more affordable and classic fashion with a premium price point, and mixes with local brands: packed with merchandise, the look & feel is old.

The more you go up, the older the store looks, and the less traffic there is, hence the less one feels like shopping. The third floor is gathering women’s shoes, various accessories, lingerie, hosiery, and socks, along with bed and bath linens as well as tableware and kitchenware. Despite visible efforts, the shoe section is not very appealing. Once again, the look & feel is a bit old due to a beige floor, the harsh lighting, and large alleys lacking intimacy, reminding us of the 80’. As for the men’s shoe section, the space dedicated to sneakers is big.

The product offer on the fourth floor is gathering many categories: luggage (with not many products to be bought), home accessories, books, kids wear, toys and a quite important sportswear section. A small section is also dedicated to tech goods and looks brand new.

The fifth floor offers a terrace and a restaurant. It’s also the place to find the click & collect. When it comes to such a crucial service, the IADS advocates for appealing spaces located on the upper floors. Despite being on the top floor, it’s probably too high a trip considering the space is nothing more than a long counter with a small sitting area.

De Bijenkorf in Amsterdam is the company’s flagship store. The store is overall a bit disappointing besides the Selfridges look & feel on the ground floor, but minus the experiential feeling one can have in the Oxford Street location.

Peek & Cloppenburg, a high-street positioning

The first Peek & Cloppenburg store opened in 1901 in Dusseldorf. Since the 70s, the company expanded abroad, with its first two locations in Utrecht and Anvers. The expansion continued into the 90s until now with locations in Austria, Switzerland, Poland, Croatia, Slovakia, Slovenia, Hungary, Romania, Latvia, Lithuania and Bulgaria. In 2021, the company acquired Magasin du Nord. They also run four online stores: Germany, Netherlands, Austria, and Poland.

Also located on Dam Square and facing De Bijenkorf, the store spans four small floors, and only offers women’s fashion, men’s fashion, and a few accessories. The store was not busy at all at the time of the visit. The look & feel is closer to a C&A store than a true department store. The store is packed with merchandise. For women, the product offer is weirdly mixing sportswear and occasion wear, local and international brands. Overall, the store doesn’t offer any interesting features besides a more upbeat section located in the basement: gathering younger men and women’s products from brands such as Adidas, G-Star Raw, Tommy Jeans, and Champion, more efforts are shown when it comes to music, fixtures and visual merchandising.

Vanderveen, catering to the local community

Vanderveen was founded in Assen in 1897. From the very beginning, it was ambitioning to become a department store. Today, Vanderveen is still 100% owned and run by the founding family which is very much involved in sales, operations, and management. The store covers 17,500 sqm of sales floor space and is one of the top three largest department stores in the Netherlands.

The product offer, rather mass-market oriented, is amazingly broad. The ground floor gathers women’s fashion, men’s fashion, shoes, and leather goods (including large sneakers and denim shop-in-shops) as well as kids wear, cosmetics & beauty, jewelry, bed & bath linens, an impressive arts & crafts and stationery goods store, a souvenir shop, and a grocery section including a butcher stand and offering tables to eat or have coffee.

Across the other floors, customers can find literally everything, from a large music section completed by a stage hosting live music on a regular basis, baby apparel and equipment, toys, a gaming store, DIY & home improvement products, an Intersport store, pet supplies & small pets, an impressive bike & repair store, a computer & repair store, tableware, cookware & kitchenware departments, furniture, a hardwood floors store, made-to-order services for kitchen furniture and curtains, an art store (pieces to buy or to rent), a WWF store, a beauty salon, an art gallery, a salon hosting talks, a book store, a wellness center and two restaurants (one of opening on a large kids playground). Many shop-in-shops are local brands run under a concession model.

What makes Vanderveen unique compared to the usual department stores is twofold. Firstly, the endless product offer: seeing it, one understands that Assen people (the city accounts for 65,000 residents) don’t have many choices other than shopping there. Besides, the product diversity clearly addresses all generations: in a way, the product profusion is rooting back to the very origin of department stores. Secondly, Vanderveen doesn’t have an online store. Considering it only accounts for a single very local store, the need for e-commerce is small, and developing this channel would unlikely be profitable. The strategy is really to cater to local customers who are coming from roughly 100 km around. In that perspective, the store also appeals to German customers: open every Sunday, Vanderveen represents an opportunity to shop knowing that German department stores can only open their doors four Sundays per year.

Conclusion

When it comes to retail, the Netherlands is not a major scene. Still, some interesting points are worth keeping in mind. Despite efforts to reach international standards in terms of product offer, services, and experiences, De Bijenkorf kind of fails as the offer is not really bringing any differentiation while services and an experiential feeling are nowhere to be found. The Amsterdam Peek & Cloppenburg’s location doesn’t really feel like a department store, with a terrible look & feel. Vanderveen, an outsider considering its single location and absence of e-commerce, offers an interesting perspective on how to be an anchor and relevantly serve local communities.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

Introduction

*Lacoste (part of MF Brands Group, owner of Manor) has 1,100 stores in 98 countries but didn’t have any flagship stores until 19 May 2022 when they opened their first one on Paris’ Avenue des Champs-Elysées, which can seem surprising for a company which topped the €2bn sales as early as 2016.

Dubbed “Lacoste Arena”, the brand new 3-storey store displays on 1,600 sqm no less than 9,500 products, from footwear to ready-to-wear for men, women and kids. The store is all about showing and emphasizing the link between fashion and sport, by balancing experiential spaces, entertainment corners and sales areas, to address all types of shoppers: fashion and streetwear fans, sport addicts or consumers looking for sustainability.

The IADS had the opportunity to enjoy a private tour of the store. Besides the expected (and now necessary) experiential features, what are the key store highlights? Is this flagship a fair example of what the store of the future could be? How is CSR included? You can also dive in deep by having a look at the store review in pictures here.*

The Lacoste Paris Flagship Store in Photos

The Lacoste’s store portfolio includes with this store a new and unprecedented format

Paris’ Lacoste Arena is the first of a list of a new breed of stores in ‘flagship cities’: after Paris, London is set to open by the beginning of 2023, and more undisclosed locations will follow. For locations other than ‘flagship cities’ (‘key cities’ in the brand’s jargon), stores will be upgraded.

In addition, pop-up locations will open depending on market opportunities, specific collections, and seasonality, always with the ambition to blend in with the local atmosphere and culture. The Lacoste Country Club, which opened in May 2021 in Los Angeles’ Melrose, is a fair example of this strategy. This summer, a pop-up store will serve vacationers in Ibiza, and another one is planned to open in Berlin.

Visiting the Lacoste Arena: it’s all about mixing sport and fashion, and experience

First of all, the store has been fully designed by Lacoste’s in-house architectural team in Paris. Only some of the light wood furniture created by architectural practice Ciguë for Lacoste’s regular stores has been used, the rest is new and unprecedented, taking cue from tennis courts with the usage of concrete and white and green wire fence.

In line with Lacoste’s global strategy, this new format highlights the brand’s full product range (beyond the polo shirt) and increases the focus on women’s categories: although Lacoste is a men’s dominant business, one of the goals is to grow the women’s revenue.

*Ground Floor*

As for the store layout itself, the entrance features a large open window with concrete bleachers resembling tennis courts. Showing the brand’s ambition to blend fashion and sport, categories are mixed on the ground floor first area. It features both women’s and men’s most fashionable collections, capsules and product drops, as well as a large wall dedicated to footwear. A special capsule collection by artistic director Louise Trotter celebrating the Champs-Elysées and a small event area (for DJ sets and special sneakers personalization by artists) are completing this section.

The rest of the ground floor is dedicated to sports practice and more technical products with 3 rather small areas (tennis, golf and fitness/training).

Finally, a large cash desk is here to process sales, and a large service counter is dedicated to click & collect.

*First Floor*

A large staircase leads to the first floor which offers a ‘lifestyle’ feeling with women’s, men’s and kids ready-to-wear as well as handbags. The will to mix fashion and sports results in intertwined products (track suits and men’s suits for instance) with a result that can be sometimes a bit confusing.

The floor key areas are:

• A large space dedicated to both product customisation and ‘Durable Elegance’ (Lacoste’s sustainable claim),
• An impressive interactive carousel displaying polo shirts coming along with the usual polo shirt colour wall. Regular collaborations with influencers oriented toward the polo shirt will complete this offer: called Lacoste By, the first one is onboarding Lucas Omiri.

Overall, the store is quite packed with merchandise but feels airy and well lit. In addition to the large cash desk on the ground floor, mobile payment stations are available to ease the payment process for the best-selling products.

The store also features a basement, described below.

Customer experience: QR codes, crocodile fun and customization

The store clearly ambitions to renew the Lacoste customer journey through interactive and immersive experiences:

• Throughout the store, QR codes allow customers to access AR experiences staging crocodiles, Lacoste’s famous signature. At the store entrance, a QR code transforms a large wall (stating the sentence ‘crocodile spoken here’ in several languages) into a water pond with a crocodile inviting customers to visit the store. When entering the sports section on the first floor, another QR code allows customers to meet again with the Lacoste crocodile wandering the shop floor. Of course, images can be posted on Instagram, and it’s fun, well-done, but one can wonder what  the real added value of such a feature is. Customers are now expecting that kind of entertainment but what is the real ROI for the brand? Is there more to it than shoppers’ posts on Instagram?
• The tennis, golf and fitness sections display an immersive and interactive tennis court floor with balls bouncing under customers’ feet. A sound system also airs a tennis match atmosphere with referee comments such as “game, set, match”. No phone is needed here: one just has to walk to play with the tennis balls.
• Dressing rooms are worth mentioning as they also represent an experience: they look like stadium locker rooms and offer a fun infinity mirroring effect.

QR codes are also used to enhance the customer journey with a more efficient and business-driven digital-embedded shopping feature:

• In the sneakers area, the ’Scan and try me’ service allows customers to scan the product QR code, choose their colour and size (for up to 3 pairs), add the selected products to their try list, and hit the ‘bring them to me’ button. Sales associates will then swiftly get the products. It’s worth noting that all products are equipped with RFID technology to maximize inventory capabilities.
• Other QR codes are also available to register to the brand’s loyalty program, the ‘Club Lacoste’.

Some features are here to increase the fun and personalize the experience:

• The first floor has a photo booth where one can have their picture taken with the crocodile logo of their choice. The picture will be added to the ‘Croco Wall’ displayed at the floor entrance and illustrated as part of the Lacoste community and diversity.
• The customisation area is big, visible and allows customers to choose among a wide variety of Lacoste’s signatures and crocodiles to be sewn on polo shirts in addition to their initials. Sneakers and bags can also be personalized the same way all day, every day and in real-time.
• On the first floor, Lacoste’s hero product takes the lion’s share: in addition to the polo shirt wall (rather small for a flagship store), some of them are displayed on an interactive carousel showing the variety of the offer: customers can select their favourite shirt on a screen and the carousel will bring it in front of them. It’s a beautiful and fun installation which hopefully can translate in sales.

Finally, on the 200 sqm basement, Lacoste Arena offers what they call the Guestroom, a space that will be open to different types of guests and events. For the time being, and since the store occupies what was once an historical French movie theatre, the space highlights the history of its founder, mirrored with René Lacoste’s. The space also hosts historical pieces (such as René Lacoste’s jacket) and some of the most spectacular Lacoste pieces such as a polo shirt made of ceramics. In the future, the Guestroom will welcome artists or young entrepreneurs. Considering the square meter cost on Champs-Elysées, one can wonder how long it will take to Lacoste to transform the basement into a sales space…

The store is also a poster advertisement for Lacoste’s CSR efforts

As illustrated in the 2022 IADS Operation meeting dedicated to CSR, retailers know how hard it is to both decide on the best CSR strategy for the business and ultimately what to show to customers. Lacoste is no exception. The brand dedicates a large area to show its sustainability efforts on the first floor. The ‘Durable Elegance’ space features a very beautiful display exclusively made of cotton rubbish as well as their 3 more responsibly-made polo shirts.

In this space, customers can also bring back old Lacoste items, to be recycled into tote bags or hangers. The area is meant to evolve according to Lacoste’s sustainability progress. Although the space is large and beautiful, it doesn’t show a lot despite a strong intention.

In terms of inclusivity, the mannequins on the first floor have been designed by morphing some of the company’s employees’ faces and bodies. The result is kind of great as it shows more realistic body figures in a beautiful way. The Croco Wall is also meant to show the diversity of the brand community.

Conclusion

*With a polo shirt sold every 3 minutes since the opening, the store has seen 80,000 visitors in less than 3 weeks making its opening a success so far. It shows the brand renewed ambitions to appeal to both local and tourist shoppers, to both sports addicts and fashion enthusiasts. It will also serve as a place to experiment with new features and imagine how they could improve, evolve and maybe translate into other locations.

Also, although e-commerce has been very strong, the company’s investment in the store reflects its continued belief in physical retail. In addition, by mixing an extensive product offer, with experiences, entertainment and cultural exhibitions, Lacoste Arena offers its own version of what the store of the future could be, just like the 10,000 sqm new Dior flagship store which also recently opened avenue Montaigne. While the store intends to address all consumer groups, the brand also wants to make sure to reach out to the GenZ thanks to the streetwear products and AR fun crocodile features. In any case, this new store should be added to a refreshed list of new retail locations in Paris for any IADS member coming to France for a market visit.*

Lacoste Arena

50 avenue des Champs-Elysées

75008 Paris

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

During the World Retail Congress in Rome in early April 2022, the IADS had the opportunity to be part of the panel interviewing retail veteran Ron Johnson. This IADS Exclusive issue is a transcript of the interview and fits perfectly into our Innovative Thinkers series, launched last September. Listening to Ron Johnson, his past experiences, questions and successes, casts a new light on some of the ideas that he pushed forward in some of his tenures, especially at JC Penney, at the light of what happened during the pandemic. Also, he shares an interesting retrospective vision of his own career and how he contributed to changing the way retail works, either through successful initiatives, but most often, in his own words, with “things that did not work”.

Introduction: who is Ron Johnson?

Ron Johnson, 64, joined Target after attending Stanford University, the Harvard Business School and after his initial experience at Mervyn’s. He spent 15 years at Target, being credited, among others, for having launched the Michael Grave private label as the Vice-President of Merchandising, which proved popular to the young and trendy crowd (contributing to transforming Target into the “Tar-Jay” destination store chain prized by fashionable and chic customers).

He then joined Apple in 2000 as the Senior Vice President for Retail, leading the development of a new breed of stores, first built as full-size mock-ups in a Cupertino warehouse and then rolled out across the US and beyond. According to the New York Times, he contributed to transforming the shopping experience “from the boring computer sales floor to a sleek playroom filled with gadgets”. He also achieved record growth, exceeding $1 bn sales within 2 years of the Apple Store’s existence, and opened 400 stores within 12 years.

Those two early and visible successes helped him secure the top job at JC Penney in 2011, where he led a total transformation of the company in order to radically reinvent it: a new brand identity, stop relying on heavy discounting and couponing and replace it with the “full but fair pricing”, reinvention of stores into shopping experiences with bazaar-like experience and cafés doting the shopping alleys, and reducing the focus on private labels (50% of the sales at the time) among others. This vision failed to convince customers and Ron Johnson was ousted 18 months after, with a -25% sales decrease (a $4.3 bn decrease in value) and a stock falling from $32 to $16.

Johnson then founded Enjoy, a retail start-up specialized in reinventing the shopping experience by focusing on the last mile, with the ambition of “bringing the store into the home” and mingling the convenience of online shopping with the confidence of buying from a trained salesperson.

Interestingly, his sting at JC Penny led (and still does after the pandemic) many experts and analysts to wonder if he wasn’t ahead of the curb with his vision of having stores as town-centre-like places of interaction and experience.

Question from Rob Hornby, MD EMEA, Alix Partners: How should retailers behave in a permanently disrupted world?

Ron Johnson: “History shows that there has always been someone ready to disrupt someone else. This time, the disruption becomes permanent because customers are inherently always looking for the next big thing and technology empowers them like never before. They have the control and can know everything before retailers!

As a consequence, the only challenge in retail, but a really big one, is to keep things rolling and figure out at the same time what is going to be the next big thing (ideally, before anyone else does). For instance, in the apparel industry, 50% of the product value goes into the last mile, which is the reason why I founded Enjoy in 2012.”

Question from Chip Berg, CEO, Levi’s: What were your biggest issues and top learning experiences at JC Penney?

R.J: “JC Penney has been retrospectively quite a demanding experience, and I learnt more from things that did not work, than from successful moves. At the time, we had a pretty compelling vision (reinvent the physical space, integrate new partners through a shop-in-shop approach, provide everyday value but not at a permanently discounted price, and find a way to interact with new customers). If you look at what is happening now, then you know that we were right at the time.

And yet… even though our strategy was right, you need as a CEO and a leader to take the time to onboard and motivate the teams, and make sure everyone embraces the change. I wanted them to change almost immediately and instinctively, which I know now is not possible without taking the appropriate steps. Also, I wanted to go fast, and bold, which was probably the biggest mistake. The total transformation and turnaround of a company founded in 1902 (and customers! and teams!) in 4 years was too ambitious. Everything takes time and each company has its own timeline that needs to be respected.

As an example, at Apple, in the beginning, nobody came into our stores. We did not give up because we believed in what we were doing, we had convictions, but this takes time. I should have remembered that at JC Penny rather than going fast and bold like that.”

Question from Walter Robb, former co-CEO, Whole Foods Market: How to promote as a leader the change in corporate culture?

R.J: “First, leaders need to have a clear purpose in mind. Second, this purpose needs to be communicated clearly with the teams, by making sure that everyone is working and exchanging together. And finally, you need to make sure that both you as a leader and the company itself are part of a community and are connected to the rest of the world.

I will never forget what Steve Jobs used to tell me: “if you can not communicate any idea in less than 4 words you have lost the audience”. Core values need to be expressed simply, in a memorable and compelling way, to make sure people are embarking on your adventure.”

Question from Selvane Mohandas du Ménil, MD, IADS: At JC Penney you were defending the physical store. At Enjoy, you tell us that stores are places of learning about products, not selling them.

What’s in this vision for department stores and how can they make a decent margin out of it?

R.J: “When a customer orders something online, the value lies in the last mile, which is why I founded Enjoy. I truly believe that there is a great outcome for premium products with an improved delivery process. This could be the best retail experience ever, and all this, from your home, which I see as the final frontier.

Department stores are big stores, the biggest ones in physical retail. But big stores do not make sense anymore if you rely only on selling products, when you can order something by the piece and be delivered at home (with hopefully great experience).

I still believe in experience, and for stores it means all about being a destination per se. Look at Apple stores, Selfridges, La Samaritaine: it is all about the place, people and experience, and not so much about products.

For me, we will always have stores, but only good ones: gone are the days of mediocre retail. In the future, retail will be offering only 2 types of experiences:

• Super fast and convenient (online),
• Great experience (offline).

There will be no middle ground.

Question from Kimberly Carney, CEO, Fashwire: as a successful retailer, what are the lessons you learnt in life that you can share with us?

R.J: “I am not successful! Years when things were going great can be counted on one hand! During most years of my career, I have been busy building, trying to get back on track, or transforming something.

At Target, we were having trouble and in the end, I only had had 2 great years out of 15! At Apple, we were not great at the beginning: stores were not big enough, not attractive, not making money…  JC Penney was not a great experience, as we all know. The company was bleeding money.

The idea that you are successful is dangerous, as it leads to complacency. Of course, we all want to be successful but this takes time! As far as I am concerned, I have learnt more from adversity than not.

I’d rather answer your question with 2 statements:

• Nothing works as well as you hope the first time,
• Even if this is the case, stick to your idea. Success is a lot of hard work.

Question from Marie Driscoll, MD, Coresight Research: what is your vision for 2030 in terms of the relationship between brands and customers?

R.J: “Ha! In 10 years things can change a lot. In the US, we will probably have fewer stores, as many malls will close. But it does not mean that the quality will decrease, on the contrary: fewer shops, but better. All stores will be placing a great deal of attention on presentation, product curation, and improved experience, always based on the reinvention of the relationship with employees.

On the customer side, we will probably own fewer products, but better ones. We will care more for the fewer things we will own.

As I said, I do not believe there will be a middle ground for mediocre or average retail. We will be choosing on an everyday basis between pure convenience and great experiences. But not mixing both options together.”

Credits: IADS (Selvane Mohandas du Ménil)

What: Walmart’s difficulties in China are illustrating how the western approach to business is decoupling from the Chinese market realities.

Why it is important: Walmart has divested in many countries but holds tight to China (10% of China’s total retail sales in the country, 360 active stores, 36 Sam’s Club stores) in order to preserve its supply chain for global operations.

Walmart opened its first store in China in 1996, in Shenzhen, near Hong Kong. However, in spite of this early market access, the company has never found ways to grow fast enough to outcome the competition, and its store count is in constant decline since the peak in 2018. According to the Wall Street Journal, the reasons are multiple and illustrate how difficult it is for Western companies to perform in China:

• Uncertainties created by the growing role of Chinese politics in the economy,
• The difficult relationship between China and the US,
• The need to deal with the local sensitivity of customers.

In spite of these difficulties, Walmart has kept the country as part of its global operations even at a moment when it has divested in UK, Brazil and Japan. The reason is that their retail footprint in China is actually linked to their production capability in the country, which in turn guarantees the company access to low-priced items it needs to sell. The company dropped to the 4th largest operator of hypermarkets in China this year, from second-largest a decade ago, and customers are not appealed anymore by the prospect of going to hypermarkets to buy groceries when they have so many convenient options online.

Walmart does not operate its own e-commerce platform and has made a partnership with JD.com (which also operates on its own hypermarkets).

Why Walmart is struggling in China 

What:  A contribution on how to minimize the return rate online and maximize instore returns.

Why it is important: It is all about using tech as a tool, to dynamically incentivize and disincentivize specific behaviors, while at the same time contributing to the organization efficiency, profitability and sustainability.

The Covid-19 pandemic has changed customers’ behavior, and they are now much more prone to ordering online… but this also increases return rates: in 2021, the NRF calculated that the return rate averaged 16,6% of total sales, going up to 20,8% for online businesses – this represents a total cost of $218 bn in goods only.

The lost revenue obviously adds to the cost of shipping, restocking, and this situation is a call for action for retailers:

• Should all items be available for delivery, or some of them should be only available for pick-up in store? Studies show that there are significant discrepancies in terms of return rates according to the category,
• Should some items be charging more to be shipped, either to make sure they are shipped with the needed extra packaging if we are talking about fragile items, or, in certain cases, to discourage customers (for instance, to discourage the purchase of multiple sizes of shoes to keep only the one that fits)?

The contributor reminds that instore returns do favor interaction and potentially new purchases, which is why they should be favored: 15% of shoppers made an additional purchase when completing an in-store return for products purchased online, and 19% made an additional purchase while coming to pick-up a product bought online.

According to the Robin Report, the focus should be on the right usage of data to encourage profitable behavior (by  proposing for instance incentives to pick-up in stores with additional discounts or commitment on the time of availability of the products), or incentivizing the return of products bought online, in stores.

Will BOPIS and BORIS replace delivery? 

What:  As the Competition and Markets Authority (CMA) is set to name and shame fashion’s greenwashing offenders, brands might be forced to either rethink their ‘sustainable’ vocabulary or make systemic changes in the fashion industry’s business models.

Why it is important: Greenwashing is a major issue that UK’s CMA is pushing to build more legislation around, and shame retailers that are guilty of misleading consumers publicly. There is an overall push to make sure that sustainability is not only about misleading marketing.

The word ‘sustainability’ has been so overused and broadly defined that it has completely lost its meaning. As consumers and regulators are starting to ask more questions about what sustainability really means, the word ‘transparency’ is now starting to be the next leading greenwashing word, with many more to come.

This trend is exactly what the CMA is trying to avoid. Last month, the government published its response to reforming competition and consumer policy, including the intention to give the CMA the power to enforce legislation directly. The CMA would be able to impose a penalty of up to 10% of global annual turnover on brands that breach such laws.

Can the fashion industry really become more sustainable?

What: A contribution on the reasons why wholesale is crucial in the brand ecosystem, especially for smaller ones.

Why it is important: It is cyclical: every two years analysts predict the death of wholesale based on the fact that one of the top 10 luxury brand decides to reduce its wholesale presence, only to then realize that the wholesale apocalypse will not take place and wholesale operators, among which department stores, remain central in the business model.

When large brands have the privilege to open dedicated boutiques to display their universe, digital brands and smaller ones have in common the fact that they might lack the needed resources to do so. This is the reason why partners are key to give them a substantial physical presence.

Department stores, among others, help champion small and local brands by giving them a visible presence. Similarly, wholesale digital platforms are key to provide them the online visibility that might be otherwise out of reach, for lack of investment capabilities.

Why wholesale is critical to small brands 

What: The Economist wonders to what extent Inditex is equipped to face the next challenges approaching.

Why it is important: Identified challenging factors are inflation, Shein, Chinese and Russian markets evolution. Not a word for the western customers’ increasing hunger for CSR.

Inditex (owner of Zara) is fully enjoying the revenge shopping spree that customers are currently experiencing in the wake of the pandemic, with sales up 36% year on year to €7.2bn  and profit 80%. Stores are more than compensating the small online sales dip, and China has reopened, boosting sales as well.

However The Economist points outs that there are some questions on the durability of such a situation: Russia and China are becoming difficult markets, Shein represents a fierce competition, and inflation will inevitably lead to increasing retail prices as a reflect of the material prices hike.

But in the eyes of the newspaper, Inditex seems to be best placed than other fast fashion players, since 2/3 of its production is made in the Mediterranean sea (H&M produces 80% of its collections in Asia). This might help being resilient, agile and, in the end, able to face Shein’s next moves.

Fast Fashion is in party mode… for how long? 

What: Now that stores are open again, e-commerce does not seem to be poised to achieve what was predicted a year ago.

Why it is important: Many IADS leaders saw this coming and remained confident in their ability to bounce back thanks to their stores, even though they have made heavy investments in their digital capabilities to be on par with pure players.

All comments during and just after the peak of the pandemic converged into saying that e-commerce had gone through a 10 years acceleration and that e-retailers were the future. This week, Amazon share price has fallen back to pre-pandemic level, shares of Zoom video conferences are also back to where they were before Covid, and Shopify is a third lower than before the crisis.

According to the columnists, online shoppers have been more than happy to get back to the store, and this translates in a decrease of the multiples financial analysts are ready to grant to tech shares. The situation is worsened by the supply chain crisis, which is putting the margins of all operators, including e-commerce retailers (who have to sustain heavy delivery costs) under considerable stress.

Pandemic dividends are distant memories for ecommerce

What: An opinion piece on the reasons why second-hand goes hand in hand with physical retail.

Why it is important: Many IADS members and other department stores are embracing the trend by opening second hand spaces, and this is bringing in a new clientele, often younger. The key questions are 1/ how to convert that clientele into buying something else in the store 2/ how to make the second-hand space profitable.

The second hand market is estimated to reach $82bn by 2026, doubling in size, meaning that resale will grow sixteen time faster than the retail clothing sector.

To accommodate such a growth, some second hand players are opening physical locations, such as Fashionphile which opened a 6,000 sqm location in New York, after having opened a 3,000 sqm one in California.

Forbes argues that this is a must-do for second hand players: it makes the life of sellers easier by doing the picture and referencing job for them, and, for the buyers, it is more cost-effective compared to shipping the items. Some dedicated players are partnering with retailers to come with a keys-in-hands solution, but some others, like Ikea, dedicate whole retail units to physical resale. In both cases, it seems that such ventures are bringing in an appreciable amount of traffic.

Why physical retail is essential to second hand 

What: In spite of having invented the format, the hypermarket model is not as competitive as it used to be in the US.

Why it is important: Hypermarkets are facing the same kind of leaner, smaller and more local competition than department stores. Anything happening there might be a lesson to learn for the department store format too, especially when food is part of the offer.

The US are the cradle of the supermarket business model, and the industry is extremely efficient there, with the ability to work on low margins when compared to the rest of the world. However, their efficiency is now at stake, as customers are under pressure to support increasing retail prices now that grocers are not able to buffer the food price hikes. It was estimated in 2017 that the cost of eating healthily is 67% more expensive in the US than in the UK. Today, Americans spend more than Europeans in food, end eat less healthily cheaper food. The size of the hypermarkets is also bigger, meaning more references, but also more waste and costs, leading to a lower sales per square meter ratio than in the UK. Add to this an outdated process (with people employed to bag groceries for the customer, a nice tradition but which is costly), the lack of a national champions (in Europe, hypermarket chains have more power to negotiate prices with suppliers due to their size), and the cocktail becomes explosive.

The Economist points out that with the increasing competition (Aldi from Germany and its smaller stores, Amazon and the notion of dark stores and “Fresh” supermarkets) might lead to a structural reformation of the US industry.

Why Americans are poorly served by their grocery stores 

What: Over 1.2m subscription payments have been canceled since 2021, half a million of those due to consumers feeling the financial pinch.

Why it is important: Worldwide streaming subscriptions surpassed 1bn (a 26% increase) during the pandemic, a trend attributed to people wanting at-home entertainment.

Similar hikes were seen across other subscription services, from productivity software to razor blades and meal kits. ING research found the average household in Europe spends EUR 130 a month on subscription-based products and services.

However, the cost of living has increased and has caused consumers to evaluate how many subscriptions they’ve built up. Rising inflation and energy prices has impacted the nature of the cancellations, for instance, many have been canceling what could be called “surplus subscriptions” or luxury entertainment.

Surges in cancellations aren’t always what they seem, it is likely caused by spontaneous customer decisions.

“I call them the lost, the confused, and the angry… I think the angry group cancelled on Monday when they’ve seen the price hike. By Friday, they are calling back to re-subscribe to their service when they realise they want to watch the latest series release,” she says.

Consumers are being pickier but subscriptions should continue to boom.

To help big and small subscription companies to survive, it’s important to make sure they are keeping a focus on customer retention, not only acquisition, to stay in the game.

Is the pandemic boom of the subscription economy over? 

What:  A piece on how seemingly unimportant places are in fact lost opportunities for retailers.

Why it is important: Why do you think that customers are happy to pay to access the Egyptian hall traditional toilets in Harrods?

The journalist states that he had always been struck in the past by the lack of attention given to commodities in public spaces, including the toilets. Both for physical and social reasons, he calculated that women would need a space dedicated to their toilets 1,75 larger than the one dedicated to men’s, which is not the case.

More than just being concerned by their wellness, for him, this is creating at the same time frustrated female customers and lost opportunities: for instance, when looking at the female restrooms in a movie theatre, he noticed that many men were waiting their for their date, and left alone with themselves, whereas they could be confronted to displays of products or specific experience at the same time.

He also states that poorly-executed toilets can, sometimes, create a feeling of disconnection with the atmosphere the store is trying to convey, while they could also serve as showroom for specific products and appliances.

At the IADS we also believe that these often overlooked spaces could be improved and convey experience or excitement for customers, and a new revenue stream for retailers. After having toured many department stores in Europe in Q2 2022, there is ground for improvement.

Hidden opportunities: have you been to the toilet recently? 

What: Although CEOs understand that climate action is important, they have a hard time knowing what actions to prioritize and how to identify and seize new opportunities created by the global neet-zero push.

Why it is important: Companies are increasingly making climate commitments, but this is no longer enough. Recent global events have shifted the prioritization of initiatives and pushed companies to raise their ambitions.

Some of these factors include:

• Energy crisis: The war between Russia and Ukraine has led to new threats and increased energy shortages. There needs to be an acceleration of investments in efficiency and non-fossil energy.
• Net-zero ambitions are accelerating: There is a demand for green technologies and renewable energy to power them.
• There is an increase in green investments: This creates a major opportunity for companies to access new funding sources and striking innovative partnerships.
• The first-mover advantage window is closing: Lack of action will only increase the scale of emissions reductions required down the road and raise the risk of impacts from global warming. Those that don’t start now will be behind.

Unfortunately, too many industrial companies today are underestimating the speed with which this change is likely to occur. Many compare the business case for green products with the business case for their existing base business under current market conditions and determine that green markets are not yet attractive enough to warrant big investments. But the logic inherent in such an assessment is flawed: companies are assuming the base case is here to stay, when in fact it may soon start to erode. And they insufficiently anticipate the sudden shift in demand likely to happen in the next few years.

Scope 3 emissions are the next critical and challenging topics to tackle in the net-zero journey. Many companies have made progress in tracking and managing emissions from their own operations (Scope 1 and Scope 2 emissions). But they face increasing pressure on all fronts to measure and slash their Scope 3 emissions—the carbon released along the value chain, including by suppliers and customers. Now is the time for companies to gain a clear picture of their entire emissions footprint, create a plan to reduce those emissions, and rapidly turn that plan into action.

The climate actions companies should take today