What: Fung Group releases its annual report on Chinese department stores.

Why it is important: While competition intensifies, focus remains on the store experience, quality and efficiency, and differenciation. In short, the market is maturing.

The China Department Stores Report 2023-2024 by Fung Business Intelligence and CCAGM outlines key industry trends and challenges, including a focus on recovery, digitalization, store upgrades, and sustainable development. It highlights increased competition, especially in cosmetics, and challenges like reduced consumer spending and the impact of e-commerce. The report suggests strategies like enhancing core business capabilities and creating value through experiential offerings. It also recommends government actions to support the industry's healthy development. Data from 80 department store operators were analyzed for this comprehensive industry overview.

Fung' China Department Store report 2023-2024

What: The Financial Times reviews the reasons for such an abrupt fall at Farfetch and Matchesfashion

Why it is important: the disappearance of these companies does not mean that there is not a need for a multibrand environment online, simply that the perfect model remains yet to be found.

The article discusses the challenges and decline of luxury e-commerce platforms like Farfetch and Matchesfashion. It outlines the factors contributing to their struggles, including the shift in consumer preferences post-Covid, difficulties in maintaining profitability amid rising operational costs, and luxury brands' push for more control over their online presence. The narrative highlights the complex dynamics between maintaining an online luxury marketplace and the traditional luxury retail model, emphasizing the importance of innovation and adaptation in the evolving retail landscape.

The implosion of luxury e-commerce

What: Forbes reflects on the expectations placed on physical stores, and wonders if they are too high, or if retailers simply lack imagination and will.

Why it is important: yes, physical stores are important, but they need a purpose to remain relevant in today’s shopping experience.

Retailers are reevaluating the role of stores, aiming to enhance experiences for consumers, especially Gen Z, who value discovery and engagement in physical locations. The challenge lies in innovating while balancing costs and expectations. Simple additions like Radio Flyer's test racetrack show the impact of creative, low-tech solutions, while Levi's "NextGen" store in Kyoto integrates local culture and technology. However, the sustainability of these experiences and the integration of technology remain critical for maintaining relevancy and meeting high consumer expectations, suggesting every store may need to offer a unique, flagship-level experience.

Is retail expecting too much from stores or not enough?

What: the Economist reviews how logistics is a moving field in these troubled times.

Why it is important: Want resilience? Forget about just in time and start stockpiling products.

Supply chain disruptions have continued in 2023, from a collapsed bridge blocking the Port of Baltimore to earthquakes in Taiwan impacting chip production. These issues, while not as severe as the COVID-19 pandemic, serve as reminders for companies to build more resilient supply chains.

The simplest way to do this is to hold larger inventories of raw materials and finished products. However, this comes with significant costs. Higher interest rates make the short-term financing needed for these larger inventories more expensive. Limited warehouse space also means higher storage costs. Major companies now have billions more tied up in working capital compared to pre-pandemic.

This inventory buildup reflects a longer-term trend. Retailers had been able to push more inventory onto their suppliers through the 1990s and 2000s, as globalization made supply chains more efficient. But now the balance of power is shifting back, with retailers regaining control.

Retailers now have better data and insights into consumer demand, putting pressure on suppliers to deliver "on time in full" (OTIF). Manufacturers have two options to meet this - either make products in advance based on forecasts, or build excess production capacity to react quickly. Both options come with financial costs.

As inventories build up further down the supply chain, it creates a ripple effect. Channel inventory (goods sitting with distributors/retailers) is 30-110% higher than pre-pandemic in many industries. This makes retailers and distributors reluctant to order more, causing further inventory accumulation at factories.

To ease the strain, manufacturers are trying tactics like reducing product variety. Hasbro, Coca-Cola, and others are paring down their product ranges. This makes inventory management easier, though it comes with the risk of losing out on consumer trends.

Overall, the article suggests that inventory challenges and the shifting balance of power in supply chains have become a chronic condition for manufacturers. The ability to dictate terms is highly dependent on having the "hot" products that consumers demand at any given time. Maintaining the right inventory levels and production capacity remains an ongoing challenge.

Supply chains: who is the boss?

What: The rise in credit card delinquencies and a proposed cap on late payment fees pose significant risks to US department stores like Macy's, Nordstrom, and Kohl's, which heavily rely on income from profit-sharing agreements with partner banks.

Why it is important: Department stores have been facing a prolonged decline in their core retail business, and the income from credit card agreements has been a critical lifeline. With new regulations potentially capping late fees and credit card delinquencies increasing, these retailers may see a significant impact on their operating income, further challenging an already struggling sector.

US department stores are facing a precarious situation as credit card delinquencies rise and regulations propose to cap late payment fees. Despite not owning their credit card portfolios, major retailers like Macy's, Nordstrom, and Kohl's derive a significant portion of their operating income from profit-sharing agreements with banks. These agreements are lucrative due to high interest charges and late fees associated with store-branded credit cards. However, a proposed rule to cap late fees could severely impact these retailers' earnings, particularly Kohl's, which could potentially face an operating loss without credit card income. The impending changes underscore the vulnerability of a retail sector already in decline, overly dependent on credit-related income amidst faltering sales growth and increasing delinquencies.

Why US department stores have most to fear as credit card debt sours

What: This article reviews the development of fashion e-commerce over the past 20 years, detailing how early pioneers like Net-a-Porter initiated changes in how consumers purchase fashion online and the subsequent challenges and adaptations within the industry.

Why it is important: The shift to online shopping transformed the retail landscape, offering global access to luxury fashion and challenging traditional retail norms. The narrative outlines the rise and stabilization of e-commerce, the financial strains under rapid growth expectations, and the ongoing need for innovation as consumer behaviors evolve.

The article traces the inception and growth of fashion e-commerce, starting with Natalie Massenet’s innovative idea for Net-a-Porter in 2000, which combined luxury fashion with online convenience. This new model significantly impacted consumer expectations and the retail industry, prompting the rise of various e-commerce platforms. However, despite the initial success, many of these platforms now face financial difficulties due to the high costs of maintaining online operations and intense competition.

Net-a-Porter, now merged with Yoox, and other platforms like Farfetch and Matches have experienced profitability challenges, with Farfetch narrowly avoiding bankruptcy and Matches facing closure. The narrative also discusses the strategic shifts and financial maneuvers companies have made to remain viable, such as Farfetch’s various partnerships and focus shifts.

The industry's evolution from Web1 to Web3 is marked by technological advancements and changing consumer expectations, with ongoing challenges in personalization, logistics, and profitability. The article concludes by suggesting that the future of e-commerce may hinge on blending traditional retail strategies with the innovative capabilities introduced by the first online disruptors, emphasizing simplicity, focus, and customer experience.

The dawn and demise of retail disruptors: How the last 20 years changed shopping

What: Savills reports that Chinese customers are morphing into hedonists.

Why it is important: Are Chinese retailers ready? And what about international department stores eagerly waiting for Chinese customers to return?

The retail sector in China experienced a robust recovery in 2023, with strong rebounds in tourism, film attendance, and the performing arts. According to a report by Savills, Chinese consumers are now focusing more on escapism, entertainment, and relaxation amid complex economic conditions.

Box office figures reached 86% of pre-pandemic levels, indicating strong consumer demand for entertainment activities. Major cities are allocating around 16% of shopping mall space to entertainment zones, reflecting the growing trend towards dedicating more retail space to leisure.

The report also highlighted the emergence of new brands and concepts within traditional retail categories, particularly in sectors like sports and child-related spaces. Family entertainment, theaters, art instruction, and specialized sports have become key drivers of leasing demand.

Retail sales demonstrated significant rebounds across various consumer categories, with sectors like F&B and apparel showing robust growth exceeding 15%. Niche product categories, such as fishing, skiing, perfumes, and instant cameras, saw import values more than double compared to 2019.

Despite economic slowdown fears, Chinese consumers are becoming more discerning, focusing on value for money, quality, taste, and product substance over packaging. There is also a rise in founder-led brands leveraging social media and unique experiences to build consumer loyalty.

The report highlights a surge of entrepreneurship in the retail sector, fueled by domestic startups, as well as a growing interest among retailers in diversifying into non-traditional locations, such as city center backstreets and side roads.

Furthermore, sustainability is gaining traction, with luxury brands leading efforts to reduce energy consumption and obtain LEED certification for retail spaces.

Chinese consumers prioritise entertainement and relaxation in retail

What: Mid-market department stores like Macy’s, Kohl’s, and Nordstrom are losing ground to online fast fashion and off-price competitors, despite efforts to innovate and downsize.

Why it is important: To survive and thrive, these department stores need a complete overhaul of their value proposition. This involves curating unique, competitively priced, and exclusive product selections that stand out from online and budget-friendly options. Given their existing physical presence, these stores have an edge if they can leverage it correctly by offering products that resonate with current consumer preferences and trends.

Mid-market American department stores are at a critical juncture, facing declining sales and competition from online giants and off-price retailers. Despite closing unprofitable locations and experimenting with new retail concepts, these traditional retailers continue to lose customers. Experts argue that mere innovation isn't enough; these stores need to fundamentally reinvent their product offerings. By focusing on unique, well-priced, and exclusive items, department stores can leverage their physical presence to offer a shopping experience that online platforms cannot replicate. However, transforming such entrenched retail giants is a monumental task, akin to "turning around the Titanic." Yet, with strategic brand partnerships, refreshed in-house labels, and a focus on a more curated and exciting product mix, there is a pathway to relevancy and success in today's retail landscape.

Innovation won’t save department stores. The right products will.

What: A detailed examination of China's department store sector, its growth drivers, challenges, and the evolving strategies of operators amidst a competitive e-commerce landscape.

Why it is important: China's retail sector is pivotal globally, influenced by its substantial middle class and shifting consumer dynamics. Understanding these trends offers insights into future global retail developments and highlights the transformative strategies necessary for traditional retail models to remain competitive.

The article outlines the current state and future prospects of China's consumer goods market, focusing on department stores. With anticipated GDP and retail sales growth, two-thirds of department store operators expect sales to increase, despite facing significant challenges from e-commerce competition. Helen Chin of Fung Business Intelligence elaborates on the transformation efforts in the sector, emphasizing digitalization, operational efficiency, and the strategic shift towards consultancy roles over mere merchandising.

Department stores are increasingly integrating community, culture, and tourism to enhance consumer engagement, exemplified by innovative projects like Chongqing's department store. Digital transformation challenges, such as system integration and scalability, remain prominent, alongside the need to quantify digital ROI.

Operational strategies include focusing on niche markets and renovating to create lifestyle centers that offer varied consumer experiences. The article also discusses backend data collaboration and the need for policy support to aid transformation towards sustainability and digital integration, highlighting innovative companies like Unifi3D, which facilitates digital transitions in retail.

Chin predicts ongoing emphasis on digitalization, sustainability, and niche targeting, underscoring the need to maintain competitiveness against e-commerce through technology integration and adapting to consumer preferences.

Retail expert on China’s department store dilemma and potential growth drivers

What: Weekly insight on US retail loyalty programs from Sujeet Naik at Coresight Research.

Why it is important: Loyalty programs are pivotal for US retailers to gather crucial consumer data, personalize marketing efforts, and increase sales. Understanding current consumer desires and trends helps retailers adapt and enhance these programs effectively.

In this week's Analyst Corner, Sujeet Naik delves into the evolving landscape of US retail loyalty programs. The discussion is anchored by findings from a recent Coresight Research survey, indicating that 57% of loyalty program members tend to spend more with the retailer after joining. This edition explores the impact of loyalty programs in gathering first-party consumer data crucial for personalization and compliance with privacy standards. The primary consumer incentives include discounts, free shipping, and earning points, but experiential rewards are becoming increasingly important for fostering long-term customer loyalty. The report also highlights emerging trends in loyalty programs, such as the integration of sustainability and the use of AI to enhance personalization and engagement. The insights provided are crucial for retailers looking to adapt to the dynamic retail environment and optimize their loyalty strategies to boost customer retention and sales.

Analyst Corner—blending monetary rewards, experiences and technology

What: An exploration of what «local » actually means in business

Why it is important: The reality is that the word can have as many understandings are there ar individuals

The article explores the complexity of defining a "local" business, highlighting the varied interpretations and expectations of consumers regarding local shopping. It discusses the economic, environmental, and community impacts of supporting local businesses, such as keeping money within the community and fostering a sense of belonging. The narrative also addresses the challenges of meeting all consumer expectations, such as sourcing locally while supporting fair trade or providing affordable options. Through examples from Bristol, UK, it illustrates the nuanced reality of operating and supporting local businesses, ultimately suggesting that being local transcends geographical boundaries to include economic and social contributions to the community.

What does ‘Local’ actually mean?

What: Retail X reviews the state of luxury and the macro trends  affecting the industry.

Why it is important: Second hand, sustainability and younger customers are on everyone’s lips.

The global luxury goods market was valued at $354.81 billion in 2023, up from $312.63 billion in 2022. The average revenue per user globally for the sector stands at $46.19 in 2023, up from $41.07 in 2022. Luxury fashion continues to be the largest single segment within luxury, accounting for around a third of total spend in 2023. Growth has been driven by a resurgence in Europe of high-end spenders returning to travel.

Asia leads in revenue generation, contributing $135.2 billion to the total. Europe has seen the largest percentage change in revenues from luxury, switching from a 5% downturn in 2022 to a 25% rise in 2023. The US generates the most revenue per shopper from luxury sales, accounting for $169 per capita. Europe comes in at $135 per shopper, way ahead of Asia at $30 per shopper. Chinese, Indian and Egyptian shoppers all predict that their luxury spending will increase over the coming year.

Millennials make up the largest single group of shoppers for luxury, accounting for 26%. Surprisingly, younger Gen Z shoppers are the second largest group of luxury spenders, accounting for 21%.

The majority of global luxury shopping took place in stores worldwide in 2023, with just 13.9% using online channels. From a revenue point of view, this is consistent by channel across all regions. Of those who shop online, 61% are doing so on mobile, with 76% of Asian shoppers using mobile, compared to 47% of Europeans. This is driven by many luxury purchases taking place during travel. However, growth in younger shoppers in China and India is seeing luxury in Asia becoming an increasingly mobile-centric affair.

Luxury has reinvented itself as a paragon of ethical and sustainable production and many shoppers are starting to increase their spend in the sector as a result. 46% of shoppers were looking to purchase sustainable luxury clothing and 28% second hand luxury clothing in 2023, marking a continuing and growing shift in how luxury is seen as an investment in sustainable living. Not only has the sector embraced sustainable practices, but consumers see buying luxury - and second-hand luxury - as a way to circumvent fast fashion while buying more unique items.

Together with young shoppers embracing luxury brands, the sector is, in 2024, in rude health. The market context section of the report highlights that luxury's post-pandemic recovry accelerates worldwide, driven by affordable luxury, sustainable shoppers and travel. Despite global economic woes, the luxury goods market worldwide has had another stellar year. While the lockdowns and curtailment of travel in 2020 hit the sector hard, it has been surprisingly quick to rebound, surpassing its pre-pandemic 2019 revenues in 2022. What's more, 2023 has seen this growth accelerate, with global luxury goods sales hitting $354.8 billion for the year.The average spend on luxury by consumers worldwide has similarly seen rapid recovery, with 2023 levels of individual spend exceeding pre-pandemic levels by almost 11%, totalling $46.20 per person.

The state of luxury in 2024

What: The Publicis Media report discusses the transformative changes and emerging opportunities in the retail media landscape during 2024.

Why it is important: This transformation is crucial as it directly impacts how brands strategize and execute advertising campaigns amid evolving consumer behaviors and technological advancements. Understanding these shifts is essential for brands to stay competitive and effectively engage with their audience in a rapidly changing market.

The report outlines the dynamic shifts in consumer behavior influenced by macroeconomic factors such as rising living costs and global uncertainties. It highlights the significant impact of technological advances like generative AI and the shift towards a cookieless digital environment on the advertising industry. The piece emphasizes the importance of adapting to these changes, especially with upcoming major events like EURO 2024, the Paris Summer Olympics, and the UK General Election providing unique opportunities for brand exposure. Key challenges for brands include mastering the use of first-party data without infringing on consumer privacy, leveraging new in-store media technologies, and accommodating the influx of non-endemic advertisers. The article suggests that navigating these challenges successfully can lead to substantial growth for brands that are agile and strategic in their approach to the evolving retail media landscape.

The retail media revolution

What: ThredUp 2024 report provides valuable insight about the second hand market.

Why it is important: The market is growing, more customers are joining, but no player is profitable.

The secondhand apparel market is seeing significant growth, with 52% of consumers shopping for secondhand apparel in 2023, a number that rises to 65% among Gen Z and Millennials. Consumers are investing nearly half of their apparel budget in secondhand items, and 25% have resold apparel themselves. The importance of resale value when purchasing apparel is recognized by 47% of consumers. Branded retail resale grew by 31% in 2023 with brands like H&M and J.Crew launching their programs. The global secondhand apparel market is projected to reach USD 350 billion by 2028, growing three times faster than the overall global apparel market.

ThredUp resale report 2024

Printable version here

The IADS is at a crossroads when it comes to helping its members, by addressing their most operational questions and helping them to address current and future challenges. Being sustainable is certainly a critical one and it requires means, energy and time, which is even more difficult in crisis moments. The IADS invited Andrea Baldo, CEO of the Danish responsible brand GANNI, to share his views on the best ways to make true impacts and maintain a responsible vision.

Shareholders are usually not happy to reduce profits to fund sustainable changes, customers ask for sustainable products but are not ready to pay the price for them, and businesses are not happy to see governments talking about taxing people to fund the green transition. However, Baldo argues that this is the responsibility of CEOs to address the future, even if this means making sure investors are aligned on this vision too. For him, becoming sustainable in the future is much more important than digital transformation. He explains how CEOs can fight sustainability systemic issues by taking risks, choosing realistic actions over hollow claims and always favouring adaptation and innovation.

Fighting a systemic issue: ESG credibility and taking risks

First of all, for Andrea Baldo, the fashion industry cannot become a sustainable industry as it is in essence consuming the planet’s resources. True sustainability will only be achieved with significant technological advancement. Second of all, when it comes to acting more responsibly, very little development happened in 10 years (between the 2009 COP meeting and the Copenhagen Fashion Summit in 2019). Illustrating this fact, organic cotton only represents 1% of the global production, which shows how slow progress is.

This issue is systemic. On one hand, CEOs of fashion companies have to generate return on investments for their shareholders who are not always in favour of the development of more responsible products as this is equivalent to reducing profits. On another hand, the fashion industry asks consumers to pay 25% to 30% higher prices for sustainable products to help companies in their transition towards more responsible operations. Finally, people and companies are also voters who might refuse to vote for candidates advocating for additional taxes funding sustainability efforts.

Besides being responsible for their company strategy, culture and people, CEOs can choose to drive change, knowing that this is adding responsibilities on their shoulders. This means taking the risk of disagreeing with shareholders. But the good news is investors are increasingly looking at ESG credibility when considering investments. This has been the case at GANNI when Baldo was looking for investors for the company.

Still, despite great results in the past years, how to maintain the company vision when the growth rate decreased from 2-digit to 1-digit in one year? Tactically, being B Corp-certified does help as it forces shareholders to accept change, look at the impact on the planet, keep it as a strategic priority and pursue the company vision. In that regard, GANNI has a second responsibility board that helps prevent shareholders from back-peddling.

Being responsible rather than sustainable: the path to true transformation?

Embracing responsibility as part of the company culture means accepting that it is impossible to be sustainable. So, rather than claiming a ‘make believe’ sustainability, GANNI focuses on innovation, transparency and creating visibility for stakeholders and consumers through various honest and rather small initiatives such as:

• Using recycled materials for store props (rugs made of fabric waste for instance),
• Having a team dedicated to scouting fabric innovations,
• Recycling coffee waste to grow mushrooms.

These examples show a realistic path on the journey to becoming a more responsible version of the company in a very honest and transparent way. Consistency is also a key value at GANNI. When they decided to discontinue leather as a decision truly reducing the accessories and shoe businesses’ carbon footprint, they showed consistency by not offering beef at their cafeteria or not paying for expenses involving beef consumption anymore. This is a matter of adding credibility to the company's actions.

Even though some initiatives might look minor, not only the big projects are impactful in changing the culture and being more responsible: smaller initiatives (which are most of the time zero-cost) bring change and are necessary to drive transformation within and outside of the company.

GANNI also explored rental and second-hand models with varying results: while they didn’t find the key to success for rental, second-hand is already profitable for them. Finally, in terms of marketing, they opened a second Instagram account called GANNI Lab to highlight responsible efforts and to provide consumers with more information than the ones they find on the label.

Equivalent to digitalisation, sustainability has become a synonym for transformation and Baldo mentioned similarities in changing consumer behaviour and uncertain returns on investment. Circling back on the low share of organic cotton in the fashion industry, Baldo stressed the need for an improved supply chain, especially on the production side so that suppliers are paid more, allowing them to develop technical innovations and increase the usage of responsible materials.

Adaptation to markets and innovation: the keys to maintaining the vision

With an advanced contemporary positioning competing both with affordable luxury (Jacquemus, Acne Studios) and premium brands such as Sandro and Maje, 40% of GANNI’s customer base is 25 to 35 years old. 16 to 25-year-old customers account for 30%. Those groups usually declare they are interested in sustainability efforts.

In terms of territories, the brand has a strong presence in various European countries and the US, and it entered the Chinese market before COVID-19. After 2 years of presence in China, GANNI realized customers were primarily interested in their “scandi-cool” style and that was their entry point into the brand. They were also susceptible to the notion of woman empowerment. The responsibility credentials were coming at the bottom of the list. Actually, while the notion of sustainability appeals to communities in the West (we are all in the same boat and need to change our behaviour collectively), it is more of a personal choice in China (with the mindset of ‘I do it for myself and to feel better’), plus the notion of wellness is closely connected. For that reason, for instance, the alternative responsible materials required a lot of explanation to make sure customers understood them and liked them.

In Japan, the situation was different. It appears that when they entered the market, there were already a significant number of local players doing what GANNI was doing. However, they were not communicating these efforts as transparently as GANNI did, which is why many Japanese customers liked the relationship the brand proposed to create with them.

Evolving materials is also a key step towards responsibility. Discontinuing the use of leather is the number one priority and GANNI won’t use leather any longer from 2024. This is no easy task as challenges exist in that area. Non-leather materials are still perceived as cheap or plastic-like.

Andrea Baldo's insights offer a compelling vision for the future of sustainability in the fashion industry. Baldo's approach, as demonstrated by GANNI, emphasizes the importance of CEOs in taking risks to drive change, even in the face of shareholder resistance and market challenges. His focus on ESG credibility, embracing responsibility over hollow sustainability claims, and integrating innovative and transparent practices showcase a realistic path towards transformation. According to Baldo, sustainability is not about solving every big topic but taking a step-by-step approach: this could be done both by making sure shareholders are aware of what is at stake, but also by collaborating with other companies in frameworks such as what the IADS is.

GANNI's initiatives, from using recycled materials to discontinuing leather, and exploring rental and second-hand models, reflect a commitment to a more responsible business model. This approach is not just about environmental impact, but also about adapting to different market sensibilities and consumer behaviours, acknowledging the diverse perceptions of sustainability across cultures.

About Ganni

Based in Copenhagen, GANNI has developed exponentially over recent years thanks to a unique Scandinavian sense of style. Acting responsibly is seen as a moral obligation at the company which is on a journey to minimise its social and environmental impact. In 2020, they launched the GANNI Gameplan setting 44 tangible goals to be reached by 2023 across four main pillars: People, Planet, Product and Prosperity. The company is B Corp certified and has been elected one of the Time 100 most influential companies in 2023.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

IADS recently held a meeting on the home and decor sector. Based on market research, NellyRodi and The Style Pulse presented the most innovative brands from different segments in home and decor including furniture, tableware, decor, home appliances and electronics.

Check out our selection of these brands and the pictures by clicking the button below!

FURNITURE

FRAMA

FRAMA is a multi-disciplinary design brand that creates lifestyle objects to inspire the senses and encourage mindful living. With an emphasis on natural materials, simple geometries, and uncompromising quality, FRAMA’s work connects the imaginative with the practical, resulting in a uniquely warm and honest aesthetic.

Check out the Frama website here

CHECK OUT Frama's INSTAGRAM

DOOQ

Born in Portugal, Dooq is a design company dedicated to creating designs that stimulate the senses, and are inspired by the unexpected meeting of opposite things.They seek to find balance in things that are contrasting, creating pieces where feminine meets masculine, small meets large, soft meets solid and past meets the present allowing the new to blossom.

Check out the Dooq website here

check out the Dooq instagram here

POTIRON

Potiron Paris offers a blend of iconic and trendy decor products for every budget, including furniture, lighting, and decorative items. Emphasizing creativity, quality, and affordability, the brand now has an internal design studio to create unique, fashionable collections, making stylish interiors accessible to all.

Check out the Potiron website here

check out the Potiron instagram here

TABLEWARE

PINOLI GLASS

Pinoli Glass crafts unique, unconventional designs that elevate any home, celebrating life's beauty and unpredictability. Their pieces, embodying a "go with the flow" philosophy, provide an escape into extraordinary with every sunlight reflection.

Check out the PINOLI glass Website Here 

check out the pinoli glass instagram here

KNINDUSTRIE

KnIndustrie’s tools are conceived to serve food with practicality and elegance. On the table, KnIndustrie’s products become the center of conviviality, the protagonist of every experience dedicated to the presentation and use of food, where the functional element of the kitchen enters the “table space” with elegance, at the service of guests.

check out the KNINDUSTRIE website here 

check out the KnINDUSTRIE instagram here

AYA & IDA

AYA&IDA, established in 2018, is a Danish family business focused on reducing plastic waste by offering stylish, functional alternatives to disposable products. Named after the founders' daughters, their range

includes drinking bottles, food containers, and lunch boxes, promoting sustainable living and responsible consumption for a better future.

check out the Aya & IDA website here 

check out the Aya & Ida instagram here

DECOR

MAISON DEUX

Maison Deux is a Dutch design studio created to design fun, minimalist products that last for generations. We are a standalone design brand offering a range of durable rugs and rugs with playful, high quality designs, without compromising on quality and durability, while maintaining our social contribution.

Check out the Maison Deux website here

Check out the Maison Deux instagram here

WL CERAMICS

WL CERAMICS crafts porcelain with dedication, rooted in the historic porcelain capital, Jingdezhen, China. Since 1993, this family-operated business has been producing decorative porcelain, specializing in large, wheel-thrown pieces like vases and ceramic furniture. They collaborate with clients, architects, and designers to create custom designs, while also offering their own collection that can be personalized to meet individual preferences.

Check out the WL Ceramics website here 

check out the WL Ceramics instagram here

SHNEID STUDIO

Schneid Studio merges sustainability with timeless design, creating a wide array of products such as bowls, vases, benches, cups, wall hooks, and lamps. Rooted in a profound respect for nature, their work is characterized by ethical practices, collaborations with local artisans, and the use of naturally sourced materials. Their collection, inspired by traditional architecture, art, and poetry, showcases a balance between muted and vibrant designs, all embodying a contemporary yet enduring aesthetic.

check out the SHNEID STUDIO website here

check out the Shneid studio instagram here

DESIGN BY US

Design by Us blends fashion, fantasy, and humor to create distinctive lighting and interior designs. Challenging traditional design perceptions, they draw bold inspiration from the fashion industry to craft unique, recognizable pieces. With a commitment to creativity and an entrepreneurial spirit, their work is a playful exploration of forms, colors, and expressions that defy easy categorization.

check out the Design by us website here

check out the Design by us instagram here

HENRY DEAN

Henry Dean specializes in unique, handcrafted decorative glass objects, including vases, bowls, plates, and candleholders, focusing on recycled materials and in-house designs inspired by nature. Their commitment to artisanal craftsmanship and sustainability is evident in each distinct, mouth-blown piece that reflects a blend of traditional techniques and modern aesthetics.

Check out the HENRY DEAN website here

Check out the henry dean instagram here 

HOME APPLIANCES

CREATE

Create specializes in offering a broad array of affordable, quality home design appliances, from chef-grade kitchen gadgets to advanced cleaning tools, enhancing daily life with ease and efficiency. Emphasizing continual updates to include the latest functional, high-tech, and retro appliances, Create is dedicated to meeting the ever-changing needs of customers, ensuring a blend of modern convenience and classic style in every home.

Check out the create website here 

CHECK OUT THE create instagram here

AARKE

Aarke elevates daily routines with premium home essentials designed to improve water quality through innovative design and sustainable materials. Their commitment to meticulous engineering and quality ensures every product, from carbonators to water purifiers, enhances both function and aesthetics in the home.

Check out the Aarke website here

CHECK OUT THE Aarke INSTAGRAM HERE

ELECTRONICS

GINGKO

Gingko Design specializes in creating elegant and sustainable home and gift products, recognized for their innovative designs with international awards. Their range, inspired by the longevity and beauty of the gingko biloba tree, includes lighting, accessories, and timepieces, blending modern technology with a practical, aesthetic approach.

Check out the Gingko website here

check out the Gingko instagram here

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Michael G Jacobides is a strategy professor at London Business School as well as the Lead Advisor of Evolution Ltd, a boutique advisory firm helping clients adjust to a shifting context. A leading expert on business ecosystems, value migration and how firms navigate shifting, digital environments, he is Academic Advisor to the BCG’s Henderson Institute and has recently been a Visiting Scholar at the New York Fed and Visiting Fellow at Cambridge. . During the IADS 64th General Assembly held in 2023, Jacobides addressed IADS member CEOs to discuss the reinvention of retail and department stores, the foundations and evolution of ecosystems, and how these can be harnessed by retail businesses.

Harnessing the ecosystem advantage to reinvent retail

Defining an ecosystem as “a collaborative structure of interdependent firms delivering an integrated customer value proposition”, the concept provides a crucial lens for comprehending the evolving landscape of retail. Department stores, as integral components of these ecosystems, face new challenges stemming from shifts in consumer behaviour. These challenges prompt a closer examination of how department stores can effectively navigate and harness the advantages presented by dynamic business ecosystems.

Department stores: then and now:

The rise of the department store defined modern retail as we know it today. It changed the retail ecosystem from prices that were determined by negotiations between the clerk and customers to fixed prices. Department stores were the natural business ecosystem orchestrators in retail and consumer goods. Department stores did two things:

• They created superadditivity (the total value created by the platforms is greater than the sum of the values created by its parts), meaning that putting multiple items together in the same place makes other items more valuable just by being in close proximity to each other.
• Secondly, department stores offered customers experiences that were unmatched by any individual brand or manufacturer thanks to economies of scale and experiential displays that drive customers to spend more.

However, the 21st century has proven to be challenging for department stores. This has resulted in a sector-wide decline. Physical stores are starting to lose their superadditivity advantage to online marketplaces. According to BCG, the expected channel share for the 2023 holiday share of wallet shifted a lot with online marketplaces representing 30%, mass market retail representing 21%, and department stores representing 12%. This wallet share has been spread out among the different generations with department stores expected to perform well only among Baby Boomers. On the other hand, GenZ and Millennials are more drawn to off-price or discount offers, direct-from-brand, and specialty retail. And GenX is split between online marketplaces, mass-market retail, and direct-from-brand. This means that department stores’ Baby Boomer clients are getting to the age where they either die or stop spending money as they no longer bring in an income.

Redefining the role department stores should play in the 21st-century retail environment

Redefining the role of department stores in the current day retail environment requires an understanding of the business ecosystem. It is important to tackle ways that a department store can evolve as an ecosystem as the productive generation shifts from Baby Boomers to newer generations. These can be understood by asking a couple of questions.

The first question to address is: How can department stores collaborate with and complement (as opposed to compete with or substitute) the emerging digital retail ecosystems? They need to use physical locations as a lever to redefine the double value proposition user experience for influencers, brands, and shoppers by connecting the physical and digital worlds. For example, influencers offer live-stream shopping, which is experience-rich but lacks physical touch. Department stores can become complementors to online influencers and offer them things like iconic physical locations to stream from and interactions with fans, for example, Harrods offers a special room where customers can enjoy a beautiful setting with mirrors, lamps and screens allowing them to follow livestreamed masterclasses done by influencers from across the planet, and try the products on the spot at the same time.

Department stores can also fill the gaps by providing access to a wider subscriber base, new experiences, and increased reasons to visit (a possibility that not all brands are fully aware of). Taking on partnerships like these will create new revenue streams and advance and reposition brands in ways that can benefit all involved.

The second question to address is: How can department stores create a hub for reinvention of the retail experience without breaking the bank? They can leverage favourable economics of having central locations and high reputation as an anchor and bring complementors to fund the development of experiments in a controlled way. Deciding boundaries for criteria for innovation inside and outside the ecosystem is crucial for maximizing benefits and minimizing downsides. For example, European energy provider, Enel, is using its installed base of 3 million lamp posts as an anchor point to expand product offerings and get partners on board by promoting smart city initiatives to develop its value. It is also interesting to note that by doing so, they also expand their base of possible partners, as in addition to private businesses, local authorities were happy to team up as they know some of the new services or features could benefit their voting base.

But does this mean that you need to have a cool and sexy brand in order to be successful in complemented services? Jacobides explains that it is not necessary, or even sufficient enough. Virgin is an example of a brand that has tried it and failed with their attempt to expand their mobile business into banking, finally taking a toll on both businesses. It is not only about having a cool brand, but you must also have something in terms of the value-add to the customers. WeWork is a good example of an ecosystem that lacked brand recognition that failed recently due to greed and not due to the failure of the idea. In fact, a strong brand is actually a reflection that you are doing something that people and consumers like. But you can also reinvent your brand in order to access a very different class of customers. Mercedes-Benz has done this by connecting with rappers in the United States to make their cars go from being seen as nothing special to the type of cars used by rappers in the music industry, appealing to a younger customer base.

Engaging and empowering legacy companies

Legacy businesses such as department stores are grounded in traditional ecosystems which might seem more difficult to reinvent and think outside of the box. To propel these entities forward, achieving organizational alignment becomes imperative for successful innovation. Deliberate attention is required to determine where innovation resides within the organizational structure, as this placement significantly influences its perception.

The innovation process design itself should be strategic and forward-thinking, taking into account the intricate dynamics among various departments and teams. When individuals feel integrated into something novel and inspiring, their receptivity to change is heightened. A straightforward narrative and a well-articulated rationale behind the proposed changes can cultivate a positive atmosphere, fostering enthusiasm and openness within the team.

Conclusion: Navigating business ecosystems for department store reinvention

In the ever-changing retail landscape, department stores face the imperative of reinvention, guided by insights from business ecosystems. Department stores, once retail pioneers, grapple with 21st-century challenges posed by shifting consumer behaviours and the fast emergence of online marketplaces, Jacobides explains. The posed questions — how to collaborate with digital ecosystems and create innovative hubs — signal a new era of adaptability and value proposition redefinition.

The cautionary tales of failed ventures drive home an important point: real success goes beyond just having a cool brand; it's about consistently giving customers something valuable and dynamic. Mercedes-Benz's brand reinvention, resonating with the music industry, can serve as inspiration for department stores seeking to connect with a discerning, younger clientele.

Engaging and empowering legacy companies calls for a deep commitment to organizational alignment and innovative thinking. Unveiling potential within traditional ecosystems requires a meticulous approach to innovation's placement and a forward-thinking design acknowledging team dynamics. The atmosphere fostered within these organizations becomes the catalyst for successful innovation.

In conclusion, the future of retail businesses hinges on the strategic navigation of business ecosystems, collaboration with emerging trends, and relentless innovation. By embracing these principles, department stores secure their survival and position themselves as pioneers in a continually evolving retail narrative. This transformative era invites exploration, reinvention, and enduring success.

Credits: IADS (Mary Jane Shea)

What: The Financial Times reviews the growing population of Indian VICs, a future source of income for department stores of the world.

Why it is important: One shall expect a very different set of values and ways of consuming from the Chinese customers.

The Economist highlights the growing number of dollar millionaires in India, which has been expanding at an annual rate of 8.5% between 2012 and 2022, outpacing average GDP growth of 5.6%. This growth is expected to continue, with wealth managers predicting a 15-20% per year expansion in the number of dollar millionaires. The new rich in India are characterized by their geographic diversification, with a significant increase in investors from small cities, and a younger median age compared to the previous generation of wealthy Indians. The new rich are also more likely to be first-generation businessmen or salaried professionals with strong middle-class values. They are more comfortable with capital markets and take more risks in investment and consumption, with a growing interest in foreign holidays, luxury brands, and high-end goods. However, there are also risks to this growth, including political, regulatory, or tax changes, and the potential for the wealthy to flee the country due to concerns about pollution and the quality of life. Overall, the Economist suggests that India's new rich are a dynamic and influential group that is shaping the country's economic and social landscape.

Understanding the new eldorado: crazy rich Indians

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Sephora is one of the largest distributors of LVMH perfumes and cosmetics, which generated 7.7 billion euros in turnover in 2022 with 3,000 stores in 35 countries. After the recent launch of the retailers’ new concept dubbed ‘Store of the Future’ in Singapore, London, Shanghai and Wuhan, Sephora reopened the Paris Champs-Elysées store at the end of October 2023 after 6.5 months of renovations. As the second biggest Sephora (behind Dubai and ahead of New York’s Soho store) and considering its prime location, this refurbishment is strategic to the brand. Also, Sephora will be an official partner of the Olympic torch relay during the Paris 2024 Olympic and Paralympic Games. The perspective of such a major event called for the “reinvention of] the prestige beauty flagship experience”, as [Guillaume Motte, the retailer’s President and CEO puts it.

It is the first major remodelling of the 1,200 sqm location since it opened in 1996. Back then, Chafik Studio (a guest speaker at the IADS in 2022) designed the store with what was already a true and unprecedented customer-centric vision. The renovation budget is a well-kept secret, but it is the largest investment from Sephora Europe.

Before the renovation, the store accounted for 12 million visitors per year (10,000 daily, compared to 20,000 for the Eiffel Tower), with a quarter coming from outside France. The store sells a product every 15 seconds. In total, 200 people work at the flagship, with 50 to 60 people per day. This does not include the hundred or so brand ambassadors working daily.

The IADS visited the store to see what it has to offer. The store concept has evolved and is more relevant. The store offers a clear segmentation, personalised services and digital features, only if they are considered essential to customers.

Store concept: less black, more light, and the introduction of wood

The new store concept is more livable and a bit breathier than the previous black-and-white one. Considering the one-of-a-kind location, the flagship’s design inspiration is coming from Paris. The walls at the entrance are mimicking the limestone used on Parisian buildings. The Champs-Élysées avenue itself is also a source of inspiration with a large 2.6-metre-wide central white marble paved path that runs straight through the store. Also, the store is filled with light thanks to a 90-metre long glass illuminated ceiling, which can be adjusted to give a natural light feeling (very much needed in this low-ceiling buzzy space).

Sephora’s signature black-and-white stripes are still present, but more subtly on columns. Overall, complementing the white colour, the black colour is less present and used on the floor on each side of the white-paved path and for the lower part of the storage cabinets. The signature red carpet has been kept but only at the store entrance. The store is supposed to be less noisy than before thanks to some specific textures on the walls, as well as the use of wood, which adds a warm and wellness-like feeling to the skincare area. Also, the round-shaped embossed matte white walls contrast with the black elements. Finally, and for the first time in a Sephora, there are large green plants. All the furniture has been redesigned to be more compact without reducing the number of products on display. As a result, the store is easier to navigate.

Store organisation: clear segmentation, personalisation and… brands

Rather than featuring the usual list of product categories, the store directory at the entrance is service-oriented: makeup services, skincare services, hair services, fragrance discovery, brow bar by Benefit, face glow bar by Seasonly, personalised engraving, click & collect, gift wrapping and immediate tax-refund. The directory also mentions the private lounge and the fact that all products are on demand upon request to beauty advisors.

Right after the directory and on the left side stands The Corner, a huge shop-in-shop space which will be devoted to individual brands, with the first one being Dior. Then the category and brand experience rolls out up to the back of the store with a clear segmentation: fragrance, makeup and care.

The store is a big narrow rectangle: it gives a great perspective, but it requires visual stops. This is why the Beauty Hub (already existing in other stores but much bigger here) is located in the middle of the store and considered a kind of ‘Arc de Triomphe’ to the paved path. This space is used to advise customers and to organise events. It is modular and can be managed and animated by Sephora or monetised to other brands. At the time of the opening, a new brand was planned every day, with makeup and skincare brands mostly taking over the hub. Appealing to the younger customers, there is an area showcasing the brands that are ‘Hot on Social Media’, plus ‘The Next Big Thing’ gondola and the ‘Gift Hub’ for gift wrapping. The retailer’s private label collection has its own department, and there’s an area for hair care. A unit dedicated to Dyson hairdryers and GHD straighteners is a new store service. Contrary to the London store, there is no Lip Bar, a category significantly growing post-pandemic.

The store emphasises personalised services with a large number of beauty counters which are monetised to brands. The beauty hub accounts for 16 seated counters where customers can benefit from personalised services depending on the brand: skincare consultations, face massages or makeup services to help consumers achieve the look they want, etc. The Brow Bar offers Benefit masterclasses. The skincare accounts for 8 seated counters. At the time of the visit, some were managed by Clarins (a simple brand sticker is put on mirrors making the brand rotation easier). The hair section has 4 seated counters where customers can book 30-minute hair appointments. The Gift Hub offers personalised gift packaging but also individualised voice messages, scents, and gift boxes. Finally, a private lounge is accessible to Gold customers (the highest level in Sephora's loyalty programme). It is also monetised, as brands can use it for product launches or specific services: at the time of the visit, Guerlain was offering made-to-measure care services.

Is the Champs-Elysées store the store concept for future renovation projects? “Our new stores, such as the Champs-Élysées flagship, as our first London store and our newly renovated stores in Shanghai, Singapore and Wuhan, are sources of inspiration for our future renovations, as they illustrate our strategy and the experience we want to provide to our customers,” Motte said. “But there is no ‘template. Each of them must be meaningful locally and resonate with local communities.”

Finally, Sephora is well known for its power in attracting key, hot new brands and making them exclusive (an issue our members are very familiar with). The brand assortment accounts for 309 brands. There is a handful of exclusive brands including Prada Beauty, Valentino Beauty, Glow Recipe, Maison François Kurkdjian and Penhaligons, which will only be available at the flagship and on Sephora’s French website. This shows efforts in developing the premium and niche fragrances business, which is significantly growing at the moment.

Digital features and payment options emphasize efficiency and loyalty

Click & collect is available in the store. A smaller specific entrance on the left-hand side of the main entrance (already existing before the renovation) is dedicated to click & collect orders and is accessible from the main entrance as well. Also at the entrance, is a selfie-friendly multicolor light box.

A large screen is on display at the right side of the entrance, communicating promotions and events. In the end, fewer screens are animating the different spaces than before, with no use of augmented or virtual reality and no mention of metaverse or Web3. For now, the digital tools are considered gadgets by Sephora and efforts are being put into giving customers a real-life experience. In the future, Sephora might integrate more digital tools, but they will be placed in the hands of the beauty advisors and not in self-service.

The checkout area is located at the end of the central alley. Sephora has completely overhauled its checkout management and now has 4 different flows for customers to access a cash desk. Gold customers have dedicated checkout access. Other customers can choose between a traditional checkout, accessible via a single queue to optimise the customer flow or a self-service checkout, the latter being permanently supervised by advisors to limit shrinkage and help customers during the operation. The display dedicated to miniature and impulse products has been optimised for the checkout waiting line. Finally, cash points are also discreetly scattered around the store for payment by credit card on the sales floor. In 2024, to facilitate payments, Sephora plans on deploying a payment tool directly on beauty advisors’ PDAs using the Tap to Pay Apple technology.

The extensive renovation of Sephora's Champs-Elysées flagship store marks a significant milestone in the company's ongoing evolution and is a testament to the brand's approach to customer-centricity and customer experience. The emphasis on personalisation is a strategic move that addresses the evolving desires of today's consumers. The store's layout doubles down on offering a variety of personalised services such as makeup, skincare, haircare and fragrance discovery, catering to individual customer needs in a more tailored manner. The store is more ‘breathable’ than before, thanks to the optimisation of the displays, the introduction of more light, as well as natural elements like wood and plants.

Credits: IADS (Christine Montard)

What: Coresight reviews how retail still needs to get the basics right.

Why it is important: retailers are facing the necessity to evolve and reinvent themselves, but, prior to this, they need to make sure their operations are efficient.

This report by Coresight Research examines the key challenges that retailers face with in-store operations and inefficiencies around out-of-stocks, pricing errors, promotional execution, planogram compliance, and inventory allocation/assortment planning. Based on a survey of 150 U.S. retailers, the report finds that:

1) Over 90% of retailers experience significant challenges across these areas, resulting in an average 4.5% revenue loss.

2) The biggest obstacles are product pricing errors, lack of real-time inventory visibility, misplaced items, and overstocking/understocking.

3) Around 40% of retailers lose at least 6% in gross sales due to these inefficiencies. Over 70% lose more than 5% operating margin.

4) Around half of retailers are investing in store intelligence technologies like AI/data analytics, automated inventory tracking, price optimization to address these issues. More plan to invest soon.

The report highlights the billion-dollar sales opportunity for retailers by solving in-store operational challenges. It underscores the urgency for leveraging technologies to enhance efficiency, reduce losses, optimize pricing/promotions, and deliver superior customer experience to gain a competitive edge in today's dynamic retail landscape.

The state of in-store retailing: opportunities to redefine operations

What:  Vogue Business looks at the new EU sustainability policies, and how it is affecting the fashion world.

Why it is important:  The fashion world will be dealing with a whole new set of regulation that could come with serious implications for an industry unaccustomed to navigating policy.

For over a decade the EU has been focusing on aligning economic activities with the urgent need to address climate change and other environmental and social issues. Numerous initiatives have been launched targeting various aspects of planetary health, but the fashion industry has largely been overlooked until recently. Fashion has not been a priority on policymakers' agendas, nor has it actively sought inclusion. However, as new regulations are introduced, many of which will impact fashion operations, the industry faces challenges in complying due to a lack of guidance.

Several significant bills are already on the radar of fashion brands and retailers, including bans on forced labor, directives on waste management, and corporate sustainability due diligence. However, there are additional regulations addressing issues such as deforestation and carbon footprint, which will also significantly affect the fashion industry.

The regulatory landscape is undergoing profound changes, signaling that the fashion industry cannot continue operating as it does currently. The lack of close monitoring of legislative developments by the fashion sector, combined with insufficient involvement from policymakers, has created a situation where many businesses may struggle to comply. It's predicted that up to 75% of existing fashion industry players could disappear within the next three to five years due to an inability to meet regulatory requirements.

While some predict a dramatic impact on the fashion industry due to upcoming regulations, others believe the situation might not be as severe, although there is widespread agreement on the significant shift and unprecedented stakes involved.

The EU’s policy wheels are in motion, and fashion has a lot of catching up to do

What: The American department store is facing decline, contrasting with the thriving nature of European counterparts.

Why it is important: This decline marks a significant shift in retail culture and business models, highlighting the need for American department stores to adapt. The comparison with Europe suggests that strategies around product selection and sales frequency could be key areas for revitalization, potentially saving this traditional retail format from further endangerment.

The op-ed by Megan McArdle draws attention to the endangered status of American department stores, a sentiment echoed by personal reflections on the vibrant department store scene in Europe. The writer reminisces about the past prominence of department stores in the Washington area and notes the stark contrast in foot traffic and product selection between American and European stores today. European department stores, with their broader product ranges and less frequent sales, seem to maintain a vitality that their American counterparts have lost. This observation raises questions about the business strategies of American department stores, particularly their reliance on constant sales, and suggests a need for a reevaluation of how these stores engage with consumers and manage their product offerings. The comparison implies that adopting aspects of the European model could help rejuvenate the American department store sector.

Save an endangered species: The American department store

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The International Association of Department Stores (IADS) had the opportunity to visit Thailand in 2023, providing a chance to review the myriad of innovations that are consistently emerging in this specific retail market. Thailand, particularly Bangkok with its state-of-the-art stores like The Mall Group's Emquartier, is renowned for an exceptional focus on customer service and offers valuable insights and lessons for European retailers.

In an era where customer loyalty is increasingly crucial for department stores, the approach of Central Group in Thailand stood out. They have established a business unit with its own profit and loss accountability, solely dedicated to cultivating customer loyalty. This initiative extends well beyond the confines of their own operations, presenting intriguing elements that could be of interest to external observers.

Therefore, we explore in this article Central Group's business strategies, focusing on their main flagship stores - Central @ CentralWorld and Central Chidlom. These establishments are integral parts of a larger ecosystem where loyalty is not just a concept but a tangible, profitable asset. This strategy enhances Central Group’s engagement with its customers and strengthens its relationships with brand business partners.

Introduction to Central Group

Just like many other retail giants, such as IADS’ Thai member The Mall Group,  Central Group's origins are surprisingly humble. The journey began in 1925 when Tiang Chirathivat, hailing from Hainan Island, established a modest shop on the outskirts of Bangkok, specializing in basket sales. Recognizing the potential in Thailand, he soon partnered with his son, Samrit, to open a more centrally-located store near the present-day Mandarin Oriental hotel in Bangkok. There, they expanded their offerings to include books, magazines, and a variety of general merchandise.

In 1956, they made a significant leap by opening Thailand's first and largest department store at that time in Wang Burapa in central Bangkok (this location has since closed). Central Chidlom, the first full-scale department store in Thailand, opened in 1974, encompassing 11,000 square meters. Originally a four-floor establishment, it was rebuilt after a 1995 fire and reopened in 1998 with seven floors.

Central Group has mirrored global corporate strategies by understanding the importance of real estate control. This led to the establishment of the ‘Central Pattana’ subsidiary in 1980, focused on development. Their inaugural mixed-use project, featuring retail, private apartments, offices, and hotels, opened in 1982 on 31,000 square meters in Ladprao. At the time, it was Thailand's largest shopping mall, including a department store that remains the most successful in the Central Retail network to this day.

Expansion and scaling up were achieved through acquisitions (like Robinsons in 1995), diversification (such as Tops supermarkets and Powerbuy in 1996, and the Park Hyatt hotel in 2017), and international growth (with La Rinascente in 2011, Illum in 2013, KaDeWe group in 2015, Globus in 2020, and Selfridges group in 2022). This growth occurred alongside typical retail group developments: the launch of ‘The 1’ loyalty programme in 2006, the introduction of an e-commerce channel in 2013, and the opening of flagship locations like the Central department store in Central World (opened in 1990 as Zen department store, with the real estate acquired in 2002) and the Central Embassy mall in 2014, which includes a direct connection to the Central Chidlom department store and the Park Hyatt hotel.

Today, Central is a conglomerate composed of three direct business units: Central Retail, Central Pattana, and Central Plaza Hotel. It owns The 1, Central Insurances, Grab Thailand, KaDeWe, Illum, and Globus. Operating in over 3,700 locations and with branches across more than 7 million square meters of retail and commercial spaces, including 84 department stores, the group is supported by 80,000 employees and serves 30 million loyal members.

Visiting Central @ CentralWorld

CentralWorld, Thailand's ninth-largest shopping complex, encompasses not only 550,000 sqm of retail space but also houses a hotel and an office. Previously known as the World Trade Center, it was acquired by Central in 2002, strategically positioned to complement the nearby luxury Siam Paragon mall. CentralWorld, which targets the middle-class demographic, underwent significant changes, including the transformation of its Central department store. This store, formerly named ZEN, was completely revamped following a fire in 2019.

Notably, CentralWorld was home to the Japanese department store Isetan until 2020. This influence is evident in the food court, which exudes a distinct Japanese ambiance.

The Central department store spans seven floors, covering 50,000 square meters, and serves as a model for new store concepts across the nation. A unique aspect is the integration of sustainability messaging with fragrances throughout the store, enhancing the shopping experience with pleasant scents.

The ground floor is dedicated to beauty and fashion, featuring accessible luxury brands such as Sandro, Maje, Vivienne Westwood, Veja, Etude House, and Sunay. The layout includes red carpet walkways and well-presented brand signage, creating an upscale atmosphere. This floor is also a hub for temporary installations, like the prominent Seiko watches stand observed during the visit.

The first floor showcases women's shoes, jewelry, and designer clothing, with brands like Paul Frank, Steve Madden, and Nine West, also available in the Siam Paragon mall. Unique features of this floor include a second-hand stand, Komehyo, in partnership with a Japanese company, and a dedicated space for Thai fashion designers.

On the second floor, shoppers can find women's accessories and ready-to-wear items from Marks & Spencer, which includes a small food section. However, the lack of windows on this floor limits natural light, making some areas, like the lingerie section, feel crowded and enclosed.

The third floor is dominated by sportswear, divided into brand-specific areas, suggesting a concession-like operation. It also features denim, luggage, gifts, and a Muji store.

Men's casual and formal wear, along with watches, are located on the fourth floor. This level is spaciously designed to showcase both local and international brands such as Wrangler and Polo. Additionally, it houses a barber shop and cafes near piano displays, offering a unique blend of services.

Children's products are the focus of the fifth floor, where the loyalty programme is prominently advertised. This area includes child-friendly facilities like arcade games (that were not operational during the visit). Facilities are very interesting: baby changing rooms and kid’s toilets are extremely well designed and user-friendly, in addition to smartly-presented reminders of all the F&B offering available in the store. In comparison, it was very strange to see that the cash desks were rather difficult to find, and not particularly tourist friendly.

The sixth floor is dedicated to home decor, offering full-priced merchandise in a spacious and inviting environment. This floor features a food court designed to mimic Bangkok's street dining ambiance, strategically located near the cash registers. The ventilation system effectively prevents food scents from permeating the floor. This level also emphasizes the group's sustainable practices, through material explanation and encouragement to eco-friendly gestures.

The last floor houses an outlet for home and decor items. The layout is clean and well-organized but lacks decoration. Given the view from the windows, it is also very surprising that this space is not used for other purposes that could make the most of its potential.

Each floor of the Central @ Central World department store is seamlessly connected to the mall, with entrances opening onto promotional stands offering discounts on products relevant to each floor's category.

Visiting Central Chidlom

Central Chidlom, a venerable establishment in the company’s network, predates its high-performing counterpart, Ladprao, by eight years, having opened its doors in 1974. This iconic store encompasses seven floors, which, at the time of our visit, were undergoing extensive renovations planned to last two years.

The ground floor is dedicated to cosmetics (including Buly) and accessible luxury items, including brands such as DKNY, Calvin Klein and Longchamp. The accessories section exudes a luxurious ambiance, contrasting with the rest of the floor which presents standard brands commonly found in other retail locations.

The first floor is dedicated to women's ready-to-wear clothing, accessories and jewelry, including a local Thai fashion section called Thai Thai, a Marks & Spencer store, and mid-range brands such as Tara Jarmon, Maje and Sandro (which are displayed in the “luxury” section in Central @ Central World). Additional amenities on this floor include a click-and-collect area, a dedicated cash desk for The 1 loyalty programme members, and direct access to the Central Embassy mall.

The second floor is a dynamic space focused on denim, sports apparel, and watches, where cleverly designed columns demarcate the various sections.

The third floor is dedicated to men's fashion, including luxury, as well as a Supersports section (a company owned by the group). The men's fashion area is well-executed with a classic style, though the brands are predominantly mainstream.

The fourth floor focuses on tech, home decor and furnishings, but not only. Amidst ongoing restructuring, this floor also accommodates hair care and high-end jewelry salons, as well as a mattress display. Despite a somewhat disjointed layout, the atmosphere retains a luxurious feel, and the expansive electro-domestic space invites browsing.

The fifth floor, dedicated to children, offers an immersive experience surpassing that of CentralWorld. It includes a changing room, a breastfeeding area, and personalized cash desks for each section. During our visit, lingerie and swimwear sections were being added due to the ongoing restructuring.

Finally, the sixth floor caters predominantly to tourists, featuring a Muji store and customer services. It also houses a food court, reminiscent of CentralWorld but with a more organized and compact layout. Muji occupies half of the space, with the food court taking up a third, and the remaining area dedicated to tourist items, luggage, and customer services. A lounge is available, although its signage is inconspicuous, making it challenging to locate without prior knowledge.

Interestingly, and surprisingly for any European customer, neither Chidlom or CentralWorld department stores featured visible anti-theft systems on the products sold at the time of visit, which suggests either total lack of it, or massive use of RFID tagging to prevent fraud.

Central’s vision: be the “central of life”

When examining the mission of Central as presented on their website, their objective is manifestly defined: they strive to be the 'central of life.' This goal is to be at the forefront of people’s everyday experiences through a comprehensive ecosystem encompassing physical stores (as exemplified by two case studies), an online shopping platform, and superior customer service. A critical component in materializing this vision is their loyalty programme The 1, which offers a fascinating subject for analysis.

Predominantly, The 1 is unique to Thailand and has not yet expanded internationally. While each European department store operates its own loyalty scheme, sub-programs do exist to acknowledge Central Thailand's customers in affiliated stores like Selfridges.

Since its inception in 2006, The 1 has diversified beyond conventional retail, encompassing food specialty stores, hotels, banks, and offices. A significant milestone was the launch of a dedicated app in 2020, followed by the introduction of a top-tier membership category in 2021 and an extension into the restaurant sector in 2022. Importantly, The 1 is designed to be a profit center, which is why the whole programme needs to be profitable.

Presently, the programme has garnered over 20 million members (with 8 million active annually) and circulates more than 10 billion points across various partners, including notable brands like Toyota, Adidas, and even hospitals or gas stations. The points system is designed with location-specific variability; for instance, Marc Jacobs purchases accrue different points based on whether they occur in a Central Department Store or an offsite franchise.

The primary strategy for profitability focuses on partnerships rather than solely on Central’s in-house businesses, such as Central or Robinson Department Stores. Regarding total sales volume generated through the program's ecosystem, approximately half derives from external partners, with the majority of the remaining points being utilized internally.

The 1's privileged class signifies a premium tier for members who spend over THB250,000 annually (approximately €6,500). This group, consisting of about eighty thousand members, contributes significantly to the loyalty scheme's revenue, generating about one-fifth of the overall sales. This segment predominantly utilizes partnership credit cards and dedicated apps, which facilitate customer engagement through inspiring content, serving as platforms for offer discovery without necessarily concluding transactions.

Demographic analysis reveals that the program's user base mainly comprises Generation Y (45%) and X (35%), with a notable presence of Generation Z (11%). Predominantly female (62%) and residing primarily in the Greater Bangkok area, the programme evidently caters to an affluent clientele. Advanced CRM techniques enable customer segmentation and identification through various models, such as life stages or lookalike propensities.

Consent management is centralized under The 1 programme, which also plays a pivotal role in enabling cross-channel acquisitions between business units. The programme also tracks the types of credit cards used in transactions, including those from private banking, thereby providing valuable customer insights through comprehensive dashboards available to brands. Current initiatives include developing retail media programs for advertisers, aiming to automate processes both online and offline, albeit with limited traffic numbers. When comparing their vision of retail media to, for instance, the US models, they do not sell to advertisers a quantity, but rather the quality of the audience.

The top 20% of customers enjoy a 95% retention rate, with an annual spending growth of 8%. On average, members engage with around 4.8 product categories within the scheme. The offers encompass access to data, insights, rewards, and engagement solutions, maintaining a flexible approach that can be adapted internally to meet specific needs. Future plans include fully internalizing and white-labeling strategies, though there is no provision for training on how to best utilize these services, leading to varying success rates across different businesses like Central Department Store (burn rate: 200%) compared to Starbucks (<100%).

Looking ahead, key questions revolve around the potential applications of blockchain technology and Web3 for managing point currency supply-demand and real-time yield, coupled with the objective of simplifying the user experience to enhance clarity and ease of use for consumers.

Conclusion: Centralizing Life in the Digital Era

Central Group has realized exponential growth since its origins nearly a century ago as a humble Bangkok shop. Strategic expansions into real estate, hospitality, and online channels have enabled the diversified conglomerate to embed itself at the epicenter of daily living for Thailand's rising middle class.

Led by generations of the Chirathivat family, each evolution has built upon learnings from the last. As founding patriarch Tiang Chirathivat once wisely pronounced, "Progress lies not in enhancing what is, but in advancing toward what will be."

Indeed, Central Group has consistently looked ahead, cementing its positioning through acquisitions of prestigious brands and loyalty ecosystem cultivation via The 1 program. With over 20 million engaged members and partnerships spanning hospitals to gas stations, Central cannot be dethroned as Thailand's predominant retail centrality nexus.

What is interesting with The 1 is that they offer an alternative to all loyalty systems as they are currently designed either in the West or in the East, by mixing the need for profitability with a strong concern about customer privacy and rights. As a consequence, The 1 is an ecosystem that goes beyond Central Group’s own boundaries and becomes an asset as strategic as the other business units which are historical components of the group.

As the next generation pioneers ever-more immersive customer experiences through experiential stores, decentralized Web3 platforms and virtual reality, the company may realize the ultimate manifestation of its vision – “pioneering innovations that centralize life”.

Credits: IADS (Selvane Mohandas du Menil)

What: Veronica Servantez, Senior Vice President of Marketing at BigCommerce, discusses significant shifts in shopping behaviors post-pandemic and highlights the critical importance of a seamless and personalized customer experience in the evolving fashion industry landscape.

Why it is important: The discussion underscores the permanent changes in consumer expectations and behaviors brought about by the pandemic, emphasizing the hybrid model of online and offline shopping as the new norm. Servantez's insights shed light on the necessity for retailers to adapt by offering frictionless online shopping experiences, flexible payment options, and personalized interactions to meet the heightened expectations of today's sophisticated shoppers.

In a post-pandemic retail environment, consumers exhibit a preference for a hybrid shopping model, combining the convenience of online shopping with the tactile experience of in-store purchases. Veronica Servantez from BigCommerce, in a session at the WWD Wear House, pointed out that while consumers are returning to physical stores, their expectations for an enjoyable online brand experience have significantly increased. Key to meeting these expectations are strategies to remove friction from the shopping process, such as implementing one-click checkout systems, offering flexible payment solutions like buy now, pay later, ensuring easy returns and exchanges, and providing personalized product recommendations. The evolution of omnichannel retailing, particularly the rise of social commerce driven predominantly by fashion and apparel, further demonstrates the necessity for brands to engage customers where they spend their time, especially on social media platforms. These insights are crucial for retailers aiming to thrive in the modern fashion industry by enhancing customer satisfaction and loyalty through tailored, efficient shopping experiences.

How to navigate the post-pandemic retail landscape