What: Korean department store companies are strongly benefitting from their local customers’ appetite for luxury goods.

Why it is important: Since Korea is a market driven by fashion and beauty, the ability of international department stores company to position themselves as references is key to making sure they capture Korean customers once they are able to travel again.

Shinsegae, Lotte, and Hyundai account for the top 9 department stores in the country (the tenth one is Galleria in Seoul), and they increased their sales performed in stores by +12% during Q1 2022, especially Shinsegae (+18%). It is understood that apparel sales drove this growth.

Analysts see this healthy growth also to be related to international travel restrictions, forcing customers to spend money at home (rising prices have also been mentioned however this has not been a factor for apparel and accessories). This means that high-end players, with a proper offer in luxury brands, have made particularly well.

How Korea’s big 3 department stores are killing it right now 

PRINTABLE VERSION HERE

IADS recently held a meeting all about the cosmetics & beauty sector. Based on market research, the IADS team presented the most innovative brands from different segments of the cosmetics & beauty brand industry: skincare, makeup, haircare, fragrances, and everything in between! Check out a selection of these brands!

Skincare

Peach & Lily

The top destination for the very best curation of Korean Beauty productsand innovations from cult-favorite Korean Beauty brands. Spa-grade,toxin‑free, delightful, and accessible, K Beauty-inspired skincare with noharsh chemicals, dyes, alcohol, parabens, or sulfates.

Check out the Peach & Lily website here

Peach & Lily Instagram

Laboté

Laboté cosmetic treatments are made from medicinal plants andpharmaceutical ingredients selected for your skin through diagnosis.Treatments are certified vegan and cruelty-free. Take your skin diagnosisonline to discover your tailor-made treatment protocol.

Check out the Laboté website here

Laboté Instagram

Horace

Skincare line of natural products co-created with customers for men. Whena need is expressed, we formulate a treatment. Horace products areeffective, easy to use, good for all skin types, skin tones and hair.

Check out the Horace Website here

Horace Instagram

OUATE

Skincare line for little ones because children love to learn while having funand feel that joy that overwhelms them as they walk on the path toautonomy, OUATE transmits them the essential care gestures to take careof their fragile skin.

Check out the Ouate Website Here 

OUATE Instagram

Youth to the People

Consciously-sourced, nutrient-dense premium superfood blends and pairthem with clinical, pro-grade vegan actives, all made in California for thebenefit of skin’s health. All initiatives support non-profits and activistsworking to amplify diverse voices and increase inclusivity, build a more justworld, and save the planet.

check out the youth to the people website here 

Youth to the People Instagram

Makeup

Claropsyche

A makeup brand that seeks to saturate, liberate and inspire creatives. No Rules. Art supply inspired makeup products.

Check out the claropsyche website here

claropsyche Instagram

Dries Van Noten

Dries Van Noten clashes couture with streetwear. Refillable lipsticks, withmix-match cases in clashing top and bottom prints inspired by fashion collections.

Check out the Dries Van Noten website here 

Dries Van Noten Instagram

War Paint

A makeup line helping men feel confident in themselves using cruelty-free,vegan ingredients. Light & comfortable to wear looks natural & incrediblyeasy to apply.

Check out the War Paint website here 

War Paint Instagram

Pat McGrath Labs

The world’s most influential and in-demand makeup artist formulated andperfected her must-have collection of high-performance cosmetics,culminating in the launch of her eponymous brand.

Check out the Pat McGrath website here

Pat Mcgrath Instagram

Haircare

Pattern

Pattern - Meet your hair where it is & empower your curl pattern bynourishing your hair with affordable and effective products & safe ingredients.

Check out the Pattern website here

Pattern Instagram

Gisou

A haircare line that’s key ingredients are sustainably sourced from theMirsalehi Bee Garden by founder Negin Mirsalehi and her father. Honeyis the key to healthy, shiny, nourished hair. Rich in vitamins, minerals,amino acids and antioxidants, honey deeply nourishes and moisturizes torepair and restore dry, damaged locks.

Check out the Gisou website here 

Gisou instagram

SACHAJUAN

Haircare inspired by Scandinavian philosophies and powered by OceanSilk Technology. Simplify haircare by reducing superfluous products,ingredients, and routines.

Check out the Sachajuan website here

Sachajuan Instagram

Fragrances

Vilhelm

A fragrance line where each perfume is the culmination of a broad,creative and collaborative process, a blend of vintage and new that sparks recognition but not familiarity. It brings together around twenty fragrances conceived as olfactory stories.

Check out the Vilhelm website here

Vilhelm Instagram

D'Orsay

Fragrance line where the scents are inspired by exploring the state oflove through to carnal desire, speaking of feelings and intimacy.

Check out the D'Orsay website here

D'Orsay Instagram

Other Categories

D+ For Care

Natural, scientific, and French, designed by women for women. D+ forcare is the well-being brand for women that provides dietarysupplements for beauty, well-being, stress, sleep, slimming, menopause,menstruation, hangovers, and more.

Check out the D+ for Care website here

D+ For Care Instagram

Lightinderm

A unique deep skin regeneration system, usable at home, combining aphotobiomodulation device and capsules of serums concentrated inphoto-active ingredients. A triple stimulation: light, serum & massage toact effectively. 1 device 5 targeted programs: wrinkles and firmness,imperfections, redness, and radiance.

Check out the lightenderm here

lightinderm Instagram

Holidermie

Holidermie created products and tools to accompany active women ona daily basis so that they remain beautiful and radiant for longer, bypreserving and beautifying their skin from the inside out, bycontributing to their physical and mental well-being and by allowingthem to take care of their style even in the bathroom.

Check out the Holidermie website here 

Holidermie Instagram

Solaris Labs

Inspired by massage techniques and modalities that have been aroundfor hundreds to thousands of years they created tools that are holistic,modernized or high tech to optimize your routine and skin health.

Check out the Solaris Labs website here

Solaris Labs INSTAGRAM

PRINTABLE VERSION HERE

*Teaming up and buying together in order to reach scale economies seems like a natural step for international department stores, since the goal of these large retail organisations has always been to reach optimization in terms of procurement to maximize margins. In addition, since they are usually operating on national markets, an international collaboration seems logical.

This is the reason why international retail associations, such as the IADS, have explored the subject for years, trying to articulate a working solution for their members, be it at the material level for private labels, at the product or label level for national brands, or even by suggesting to team up to buy or create from scratch shared brands which could be seen as private labels for a group of stores.

We are reviewing in this paper a series of options drafted by the IADS dating back to 2001, in order to draw some conclusions and put them in comparison with what we know today.*

What are we talking about and why is it important in 2022?

Department stores are increasingly under the pressure of specialty retailers that have been developing internationally. Already back in 2001, as retail was becoming global, department stores' relative purchasing power was declining. The question of boosting their buying power was arising through international M&A activity, the development of synergistic formats or alliances, and through harnessing the strength of collective buying with several department stores. Post-Covid, the pressure is even stronger as brands are increasingly going directly to customers, as shown by luxury groups (LVMH, Kering) or large sports brands (Nike), to increase their margins at the expense of the retailers.

This overall situation is even more critical as competition is becoming much more aggressive, especially with the growth of e-commerce which challenges the margins that can be reached by retailers: while retail prices remain the same, customers now expect some services that were not generalized pre-Covid (such as the free delivery) which are putting pressure on the core business model. As a solution to recuperate some points of margin, department stores can work on their logistics (a notoriously difficult topic in 2021 and 2022), on their overall organization (size of the workforce, working methods and systems), adjust their business model (by monetizing their stores and digital platforms), but also by lowering their overall product and material acquisition costs.

But collaborative procurement is not just about "purchasing power". Even at a time when raw material prices are skyrocketing, most department shops compete on differentiation, style, and fashion rather than pricing. As a consequence, collaborative procurement is, first and foremost, a strategy to improve the attractiveness of the selection by elevating the status of department store-exclusive brands or collections.

To dig into the topic in a rational way, different aspects and constraints are to be taken into consideration:

• assess the issues with cultural differences and various consumer attitudes,
• review the different forms of collaborative procurement,
• review the framework and operational concerns for such a project.

Can collaborative procurement and cultural differences be reconciled?

There are 2 opposite ways to see cultural differences.

On one hand, customers are often considered too diverse to make international procurement successful and effective as tastes, styles, and sizes are too different. It is not difficult to figure out that ladies in Stuttgart will not be attracted to the same products as in Berlin, New York, or Paris. They can also have a different perception of brand names. Furthermore, customers’ rationale might also significantly differ: in one country, the price may be the most important element, whereas, in another, style is more significant. The lack of success or failure of some international retailers (Gap, Marks & Spencer or Muji for instance), when they trade outside their home country, highlights the challenge of dealing with the same concept in several countries. As a consequence, from this perspective, beyond all the operational challenges of joint procurement (quotas, price structures, import duties, sizes, etc…), the customer, who is the ultimate decision maker, does not buy in the same way, the same products, or in the same places. As a result, there might be no use in seeking collaborative buying.

On the other hand, customers are increasingly attracted to the same international brands, whether it’s Louis Vuitton, Ralph Lauren or H&M, Zara and now Shein. Such successes, especially vertical specialty retailers who hurt department stores most, prove that the same clothes can be sold all over the world. While brands are even more globalized in 2022 than in 2001, they are now succeeding in almost all countries, with harmonized image and communication channels making the brand’s perception equivalent everywhere.

Is there a way to reconcile both points of view? While cultural differences are unavoidable, many of the same products are sold at department stores (cosmetics, lingerie, hosiery, accessories, luggage...). An analyst stated: "The killer of department stores is going to be that they all think they're distinctive, while Mango feels it can sell anyplace." Although it may be simpler to organize common procurement in a single country, the retail environment shows that customers often respond to the same brands.

In 2022 though, department stores desperately need to differentiate if they want to survive against the competition, suggesting that department store-specific products might be worth considering, even at the international level between a handful of players sharing those exclusive items.

How can collaborative procurement be achieved?

As suggested in the introduction, there are many ways to consider joint procurement, at several different levels:

• Buying private labels from one another,
• Developing brands together,
• Subcontracting together special ranges,
• Harnessing buying power by teaming up,
• Acquiring a brand and operating it collectively.

When looking at each option in detail, there are pros and cons in each of them.

Buying from one another. Private label ranges are available at most department stores and may be of some interest to others. Differentiation has to be made between umbrella brands (Manor’s or Magasin du Nord’s store) for which often even the smaller stores can reach the minimum quantities required to make the labels work, and private brands which are me-too or exclusive life-style brands (The Mash Up at Breuninger or Chester & Peck at El Palacio de Hierro for instance) generating a higher mark-up and sales per square meter, but are at the same time much more expensive to develop and market.

Among the IADS department stores’ private brands, there are a few that others could pick up. A team could be given the task of putting together a catalogue of the main private brands as some of these might have the potential if several stores were interested to become successful international brands. One challenge would be to agree on an acceptable price structure making it possible to sell profitably, as well as to overcome internal opposition, as experiences in the past showed that the various buying teams could feel threatened by such a cooperation and therefore not really willing to work together.

Developing brands together. In this model, several stores get together in a structure that develops one or several brands. In the past, the initiative called EBO (European Brands Organization) was a joint venture between five department stores with equal ownership and entirely responsible for the collection's development (this structure does not seem active anymore nowadays). The first key learning from this venture is that it worked because stake-holding department stores had a similar size and positioning. The second one is that the venture must operate independently from its shareholders and have the latitude to sell to third parties as long as they do not compete with the shareholders. But building a lifestyle fashion brand is a long process and requires a long-term commitment from all parties involved. It may be easier to create brands for less glamorous non-apparel categories.

Joint subcontracting of special ranges. This model is all about commissioning existing well or less well-known manufacturers to develop exclusive ranges for a group of department stores, possibly with a separate brand name (the “Armani for Department Stores”, for instance). Nowadays, unique collaborations with brands could be seen as the modern variant of this model as any other variant does not seem valid anymore.

Harnessing buying power. An obvious option is to pool department store purchasing power on common items which could be easily listed. This would imply the creation of a purchasing organization that would act on behalf of the department stores when negotiating. In 2022, this option might be less relevant as some brands are questioning their very presence in department stores and are increasingly trying to go direct-to-consumer, meaning that such an option would relate to smaller, and somewhat less attractive brands, questioning the economic viability of this approach. With the supply chain disruptions and the high costs relating to digital, the department stores’ focus is put on margins as they are increasingly hard to maintain. Under such circumstances, harnessing the buying power on raw materials (cashmere, cotton threads, etc…) could represent an additional option.

Brand acquisition in collaboration. The ability to jointly acquire an existing or emerging brand is also a possibility for a group of department stores, although there is no modern example of such a venture. Other retailers do proceed to brand acquisitions, such as Farfetch with the acquisition of the New Guards Group (Heron Preston, Opening Ceremony…) or the cosmetic brand Violet Grey.

Anticipating the issues in order to move forward

In 2001, the attitude of buyers regarding collaborative procurement was not the most positive: their culture and training were focused on individual achievements, and in the past, they did not collaborate easily. Twenty years later, even though mindsets and working methods have evolved, it is likely that, to be successful, the human aspect and the international articulation and roles will be a critical point to be considered.

An alternative is to develop a separate organization. Creativity would be required when it comes to quotas and custom duties impacting price structure and quantities. Ordering procedures, logistics, and impacts on manufacturing quantities should not upset the position of the initial seller of the brand. Price structures should be reasonable as both the buyer and the seller should see some benefits. However, the key question remains to know whether retailers, who currently are steering their digital transformation and looking at all the CSR-induced changes they need to consider, would have enough resources and willpower to team up on a project managed with other companies, leaving them with a limited degree of control while requiring full involvement from their end.

We believe that there are some possibilities of collaboration between department stores. After all, they individually spend huge amounts of money in product development. As a consequence, it should be possible to tap into private labels and take a few of these brands global. Processes could be designed to facilitate collaborative action, especially if developed early on. However, a key element would be that all companies teaming up together are of the same size in order to avoid any lack of balance, or they should only focus on a specific aspect of the collaboration, and not its entirety.

Credits: IADS (Dr. Christopher Knee, modern reading by Justine Fanget)

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Click here for a look into Blocher Partners 

Blocher Partners (bp) was founded 30 years ago in Germany by Jutta and Dieter Blocher. From the very beginning, their approach was transdisciplinary. Along with their client needs, they added new competencies to their practice: interior design, product design, but also marketing and communication solutions. Thanks to their recognized know-how in the development of retail spaces, they were soon labelled as retail architects. They could offer clients holistic concepts, always putting the customer in the centre of actions and the thinking process. For getting in touch with their clients in an early stage and really understanding their needs, Blocher Partners lately expanded their business by the field design strategy: early in 2022 ‘Blocher Partners sens’ was established. Erik Schimkat who leads the new entity, is an interior designer who has specialized in co-creative design research methods. These are of great importance when it comes to unveiling unseen potential and pushing ideas towards new boundaries. For this interview we had the chance to talk to both Jutta and Erik about innovation and transformation in the retail business.

Innovation and transformation

IADS - What is your understanding of innovation for retail in general? How do you translate that into architecture? Do you sense any kind of acceleration or a sense of emergency, especially with Covid?

bp Jutta - Innovation should be broken down a bit. Working for the retail industry, but also for the hospitality business or even when creating offices, we can see what companies have in common: they have to deal with uncertainty when it comes to bringing a new project to life. Innovation really lies in dealing with this permanent uncertainty, and in the ability to turn it into a suitable experience. Sustainability and digitalization are also big forces being part of the process.When it comes to innovation, we need to be brave enough to try unprecedented things. They might work for one company and not for the other: this is exactly the context in which we can provide efficient methods and offer viable solutions.

bp Erik - Companies often ask us to help them be more relevant. They are aware that it will take bravery and boldness for them to be successful in the future, but the more we move on together, the shyer they become. That's really the biggest challenge for us. Forcing us to take a step back, Covid touched on a raw nerve and critically highlighted what was not working. It allowed us to really think about spaces and usage. But we wouldn't say we felt a sense of emergency as questions were already there, Covid was acting more like a booster even accelerating the process. Finding the right solutions is just becoming increasingly complicated.

IADS - What are the limitations of architectures, if any, for modern retail? What can it do, or can’t do, to fix the issues?

bp Erik - As everything is becoming digital, architecture is not the first step of a project anymore. Since consumers can now shop online wherever, whenever they want, architecture is the possibility for a brand to ultimately be able to convey a strong brand identity. Architecture gives retailers the power to really decide where they want to be visible.

IADS - How did the sustainability concerns change your practice, especially in retail?

bp Jutta - As a company, sustainability is in our minds for many years. For instance, our HQ built 12 years ago received the DGNB certification, which was something pretty unique at that time. Since then, our design approach has always been very sustainable. It’s also been part of our clients’ mindset for many years, and even more with Covid and the overall climate situation worsening.

Does the store of the future exist?

IADS - What is your personal view of the store of the future (if such a ‘concept’ makes sense to you)? Do you want to mention any ongoing project that would relate to that vision?

bp Erik - Actually such a concept doesn't really make sense to us. Although it is especially important for us to develop visions, it would be far too specific to have a single solution for a store of the future. There are certain guidelines and trends that have to be considered when developing a retail project, but in the end, our efforts are put into finding the specific solution for a specific client and its specific target group. As a company, we try not to use the word future as it can put us immediately in the past somehow. That said, we understand why there is this need for such a notion as it would represent an easy and global answer to many questions.

IADS - Architecture and online: how do you articulate both to cope with the customer omnichannel journey?

bp Jutta - We developed a digital unit within the company over the past years, consisting of a network of experts from the digital field. The purpose of such a unit is to both provide a seamless experience to our clients, and of course to help them deliver a seamless experience to their own customer base. Once again, we work on tailored solutions which will be very different from one retailer to another. For instance, Breuninger is very much advanced when it comes to online shopping, and they have a very good digital unit we closely collaborate with. The situation might be very different with another retailer.

IADS - Retail is about people - customers -, but also and equally importantly sales teams. How do you take them into account in your projects? And in the future now that staff retention and quality of work environment are crucial to retaining talents?

bp Erik - Our methods include having all experts and stakeholders at the table when kicking off a new project. The question of the sales teams comes usually late in the process, but we consider it crucial to include them from the early stage of a project, like any other stakeholder. They have a very valuable impact on the design process because of their unique position on the shop floor, providing products and experience to the customers.  It might also be counterproductive to impose a new store design they will have to work with for years without involving them. Finally, because they feel seen and listened to, they often become ambassadors for the project

IADS - How do you manage creativity within your organisation? How are ideas generated and with what process?

bp Jutta - Our transdisciplinary approach is of some help in that matter, especially considering we need to make people work from our different locations, in Stuttgart, Mannheim, Berlin and India. We also have specific formats to develop exchange and creativity: we host something called ‘creative exchange’ where we invite external speakers on trends or innovation. We also have in-house talks bringing the whole company together. In addition, we're working on white papers, and we research ideas that we think are worth exploring. In the end, creativity works when we combine all expertise, and not only the design people as all people need to have a full understanding of what's going on.

IADS - Could you please tell us more about ‘Blocher Partners Sens’ new division? How are workshops and methods like LSP (Lego Serious Play) unique to understanding the client’s needs and developing an adequate project?

bp Erik - Blocher Partners Sens comes in at a very early stage of a project to work in a co-creative process with the client. Using different perspectives and methods, we are trying to find the best solution for the client. Everyone involved in the process is on the same page and the overall method ensures that everyone is taken into account. For example, the Lego Serious Play method allows everyone to have a voice, no one is louder or quieter. Everyone can come up with something creative (even when people are not part of the creative field) enabling them to have a valuable impact on the project. It starts with a perfect briefing in the early stage to really know what we have to work on, and the problems to be solved to reach a successful outcome.

We also use more creative methods allowing us to keep an eye on the overall project and make sure we are still on the right track compared to what was decided in the beginning. Blocher Partners Sens is also about communicating with all the project’s stakeholders, and about conveying the message of change. An evaluation is made after the project to assess what was good and what can be improved. It’s increasingly important in retail considering spaces are not set for years anymore.

Department stores and retailers

IADS - What is the role of a department store in 2022? How do you see its articulation with the city? In your view, is the European department store part of the 1% of public buildings (like a church, a city hall, a landmark...) or something else?

bp Jutta - It’s both, and something else! Department stores are city marketplaces where people can go without having a specific goal. Knowing that something is happening there is a good enough reason to go. The new KaDeWe flagship store in Berlin embodies this vision. The idea of public buildings fits with the idea of the department store: like a church or a landmark, it's a place where people find experiences.

In regard to this idea, Breuninger’s champagne bar is a very good example, as people don’t go there having shopping in mind, but for the experience. The EmiLu hotel we worked on in Stuttgart is another great example. The breakfast room, empty hence spooky most of the time, is open for everybody to have brunch until 4 pm. The place has been crowded since then. It shows that with more creativity, the hotel had a bigger chance to be in part of the city and become the “talk of the town”. This initiative also has a strong impact on the appeal of the hotel itself, as a place to stay.

IADS - How do we make sure that department stores will continue to be part of people’s lives? How is an architecture practice of some help?

bp Jutta - Whereas some became only ‘product portfolio’ over the years, department stores should go back to being places for experiences and discovery, their essence from the very beginning. Thanks to their size, locations and product offer, they have a true competitive advantage for experiences and discovery and a bigger chance to succeed when compared to other retailers. The challenge is more to make them understand the potential they have here.

Department stores can benefit from their great architecture (for some of them), from their restaurant offer making them a great place to meet friends. They offer a physical experience, and we are all craving for experiences.

IADS - Looking back: what did Blocher Partners learn with the various projects you ran with department stores? How working with department stores is different from other projects?

bp Erik - Department stores are very different as a lot of stakeholders are involved, adding complexity to uncertainty. On the other hand, they have more expertise, hence much more possibilities when it comes to what can be achieved. In the end, it might be more intense than working with smaller companies, but the results are often much more holistic experiences.

Contact:

Annette Willige

Head of Business Development

Tel: +49 711 224 82-452

Mobile: +49 152 54511169

Annette.Willige@blocherpartners.com

Credits: IADS (Christine Montard)

Check out the retail review in pictures here

PRINTABALE LINK HERE

*The IADS visited Dubai in early March for a joint meeting with the International University of Monaco and the American University in Dubai, who will be collaborating with the Association on Private Labels-related research topics. The IADS took the occasion to visit the Dubai Mall and the Mall of the Emirates to review the department store scene in Dubai, we have included pictures for your review.

Most of the department stores available in Dubai are operated through franchised agreements. Is there anything new in their approach, has any decoupling taken place, or, on the contrary, did the Covid-19 episode tighten the links with the mother companies? And to what extent does their service offering reflect the evolution of the market? We have tried to draw some conclusions from our visit in addition to the pictures that are available separately.*

Introduction: overview of the visited malls

The Dubai Mall, which opened in 2008, is the second-largest mall in the world, with half a million square meters surface spread over 4 floors and 1,200+ stores. Its many attractions (an aquarium and underwater zoo, a VR Park, cinemas and children’s activities, Bloomingdale’s, Debenhams and Galeries Lafayette department stores) made the mall a Dubai touristic attraction. It is operated by Emaar Properties, a public joint-stock company whose logo is ubiquitous on Dubai towers. Emaar Properties is primarily a real estate building company, involved in the building of the Burj Khalifa and the Dubai Fountain in Dubai, but also in other projects in Egypt, India, KSA, Syria, Turkey and Pakistan. It initiated mall management operations after completing the Dubai Mall.

The Mall of the Emirates, opened in 2005, is smaller, with 223.000 commercial square meters dedicated to 630+ boutiques, including Harvey Nichols, Debenhams and Level Shoes department stores or equivalents. It made the headlines upon completion with the opening of the world’s largest indoor ski slope and is owned by the Majid Al Futtaim Group, which specialises in mall management, retail, leisure, entertainment and hospitality.

When asked about the two malls, it is common to hear long-term Dubai residents mentioning that the Dubai Mall is great for a weekend excursion, but they usually do not see it as a staple destination for everyday purchases (due to the traffic and dimensions of the space). As a consequence, the Mall of the Emirates stands more as an option for a human-sized everyday shopping destination, even though it is probably suffering more than the Dubai Mall of the competition created by the new malls opened in other parts of the city since then. The Mall of the Emirates, which can not compete with Dubai Mall in terms of the number of attractions, also tries to provide a sense of luxury to local customers in terms of communication, overall feeling and atmosphere.

However, at the time of visit, the sentiment was that the Mall of the Emirates was feeling worn out when compared to the Dubai Mall, where everything, public premises, service spaces, and even mall attendants’ level of knowledge, felt in better shape and more looked after. This was exactly the contrary when entering stores, as levels of attention provided by retail staff in the Mall of Emirates was incomparable with the ones in Dubai Mall where no attention was given to visitors, reinforcing local customers’ opinion.

Debenhams (franchise operated by Alshaya Group) – Dubai Mall and Mall of the Emirates

Debenhams, the British department store chain founded in 1778, went into liquidation in December 2020 and closed down all 101 stores in the United Kingdom within June 2021. The brand was acquired by Boohoo in January 2021.

However, this did not impact Debenhams’ partner in the Middle East, Kuwaiti group Alshaya, which started the partnership as early as 1997. Alshaya has since the bankruptcy announcement made a deal to retain the franchise rights with Boohoo, and operates a total of 23 in-mall stores in Kuwait, KSA, UAE, Bahrain, Egypt, Oman and Qatar, in various formats. In Dubai, there are 6 locations: 3 department stores (Mall of the Emirates, Dubai Mall, City Centre) and 3 Debenhams cosmetics stores.

IADS visited the two Dubai Mall and Mall of the Emirates locations. The feeling was rather different from one location to another, and paradoxically, the Dubai Mall location felt more worn than the Mall of the Emirates One, probably because of its smaller dimensions.

Debenhams Dubai Mall 

The store extends on one floor with very few windows and a rather classical store planning: cosmetic space at the entrance (a black generic concept with logos), then RTW (M, W, kids) and other categories.

In-store fixtures include brands-separating walls in the central section of the RTW area, giving a somehow suffocating feeling, reinforced by the very dense visual merchandising, with overcrowded racks. As a consequence, it gave a ‘bazaar’ feeling, reinforced by ubiquitous price reduction signs. At the time of visit, the location was empty with staff busy unboxing products and not paying attention to visitors.

Debenhams Mall of the Emirates

The store spans over 3 floors and gives a much more positive feeling than the Dubai Mall location, at least on the ground floor (cosmetics with brand concept corners, lingerie and accessories). Staff is omnipresent, welcoming and eager to help visitors. Lighting and the feeling of space are refreshing and give a very positive impression.

The 2 other floors are dedicated to fashion: Women’s on the 1F and Mens, Kids and Home on the 2F. Women’s fashion was overloaded with products and dense VM, however, this did not seem to deter customers from buying (Debenhams is popular in Dubai for middle-income families looking for bargains and low prices). On the upper floor, the feeling, especially in the home section, was clear and nice. In both 1F and 2F, staff was non-existent or not interested in helping or even saluting customers.

No specific services were mentioned or advertised at cash desks in both locations. The Debenhams website for the Middle East, announced by Alshaya for early 2022, is still not active at the time of writing.

Galeries Lafayette (franchise operated by Admic) – Dubai Mall

Galeries Lafayette and BHV department stores in the Middle East are managed by Admic, a Lebanese company founded in 1996. Galeries Lafayette in Dubai Mall, spanning over 21,500 square metres and 3 floors, opened in 2009 and is easy to find thanks to the mall’s public signs as a significant anchor.

The store is also extremely visible from afar, especially because of the ubiquitous branding visible from the atrium. It also emphasizes that the store’s main logos are not updated, clashing with the current “Time the time to smile” campaign on the windows with the new Galeries Lafayette logo introduced in 2017. This can be confusing for customers, especially the ones already familiar with the French locations or website, and who might be surprised to see an old-school logo on the building (shopping bags display the new logo).

The ground floor is dedicated to luxury accessories and international brands (LV, Gucci, Dior, Marc Jacobs, Valentino…) in peripheral sections, and low-rise corners with brands’ concepts dedicated to cosmetics in the centre, giving overall visibility, and a feeling of luxury and space.

On the first floor, dedicated to fashion (M, W) with flexible walls which can be moved to change brands or sections, there is a mix of local and international brands’ shop in shops fitted with their own concepts (Missoni, Ba&h…). It is therefore really possible to have 2 different feelings, one being that local brands are overrepresented, and the other one being that GL displays its savoir-faire in terms of fashion merchandising. The dressy space (an important market in the Middle East) is represented by Etoile La Boutique, a retailer specialized in evening gowns, and an extremely good-looking and inviting wedding dresses space at the entrance. The shoe space on the same floor is somehow less efficient as it is difficult to see the products. The Men’s section is also equipped in a flexible generic concept, with the exception of a few brands (Pal Zileri, Hugo Boss, Hackett, Polo Ralph Lauren).

The second floor is dedicated to kids, home and gourmet. The whole floor is in low rise concept, independently of the category, to make the gourmet space visible and accessible, which further emphasizes the logo mix-up (pre-2017, post-2017) in the Gourmet section.

Cash desks are all located in peripheral locations, forcing sales associates to ask customers to follow them to finalize sales, which seems surprising to ask of demanding Middle Eastern customers. At cash desks, no specific services are mentioned or advertised.

Bloomingdale’s (Dubai Mall) and Harvey Nichols (Mall of Emirates) (franchises operated by Al Tayer)

Al Tayer is a UAE-based conglomerate founded in 1979, operating in automotive, retail, hospitality, services and entertainment in the Middle East. It opened the largest Harvey Nichols store outside of the UK in 2006 in Mall of the Emirates, and the first Bloomingdale’s store outside of the US in 2010 in Dubai Mall.

Bloomingdale’s in Dubai Mall

Bloomingdale’s Dubai extends into 2 sections: a 3 floor department store dedicated to fashion, over 14,600 square metres, and a home store on the lower ground over 5,400 square metres (not visited). Like Galeries Lafayette, located in the opposite side of the Dubai Mall, it is extremely visible and accessible through an appropriate signage.

The ground floor is dedicated to cosmetics in the central section, and luxury accessories and shoes (but also a Gucci store with all categories) in a “drum”, with direct access to the valet parking. The size, level of attention and energy in the Cosmetics section suggests that this is where the turnover is made. Sunglasses and custom jewellery are also presented in this section but are hardly visible and not really appealing. In the “drum”, all brands are displayed in their own concept, with the exception of a generic space in the central Accessories and Shoes section where some brands are repeated (Saint Laurent, Valentino, Balenciaga).

On the first floor dedicated to Women’s fashion, only Gucci, Moncler and Keepsake have their own concepts, the rest of the brands are presented in generic sections on specific racks (which are different from the Men’s section ones). The dressy and luxury section is not specifically outstanding in terms of visual differentiation when compared to the rest of the floor, and the personal shopper’s entrance is not appealing. What is striking is a combination of smart initiatives (the Chanel fragrance chariot in a strategic location near the escalators) and the lack of services, including seating areas.

The second floor dedicated to Men’s and Kid’s is visually different, and most brands have their own concept. The personal section is appealing, with a barber, a fragrance section, and many seating spaces where to spend time. Men’s shoes are presented in a generic section and there is also a contemporary space, poorly accessible and not engaging due to the way the space is structured. The Kids section is experiential and festive, with a specific ambience and non-brand-dedicated staff.

At no point during the visit were services or Covid-related instructions mentioned. Also, the Visual Merchandising was somehow confusing and did not help to make products visible. This is all the more curious that the VM at Harvey Nichols is extremely efficient, and an executive at Al Tayer explained to us that both stores were managed by separate teams.

Harvey Nichols Mall of the Emirates

Harvey Nichols extends on 3 levels at a corner of the Luxury avenue. Signage in the mall and overall visibility is probably less efficient than for Bloomingdale’s in Dubai Mall.

The ground floor is dedicated to Accessories, Shoes and Beauty and all brands are displayed in their own concept. Visual Merchandising is extremely efficient and the space is one of the best seen during the visit.

The first floor, dedicated to Women’s fashion, is clear, welcoming and spacious. The play on colour in the atrium is similar to what Saks Fifth Avenue has done in New York, and the multi-brand space is commercially efficient. Visual Merchandising is exemplary.

The second floor, dedicated to Men’s and Kids, displays shop in shops in peripheral and central sections, with a very good display of shoes. Some questions are raised by the brand zoning (e.g. Gucci kids near Kenzo adults).

Harvey Nichols was one of the most appealing locations visited during this trip. It is (justifiably) seen as a reference by brands when trying to enter the Dubai market.

Level Shoes (original concept from Chalhoub Group) – Dubai Mall

Chalhoub Group, founded in 1955 and specialized in fashion and luxury retail operations in the Middle East, has launched Level Shoes in 2012 in the Dubai Mall over 9,600 square metres. It is not really a department store nor a shoe shop, but a “shoes & accessories district” and Chalhoub Group refurbished it in early 2020 in a spectacular fashion.

All international brands are presented either in their own-concept shop in shops in peripheral sections or in luxurious generic areas in the centre. The overall feeling is not far from a large and luxurious department store, with many welcoming seating areas, popup zones, and dedicated salespersons (attached to each brand).

Level Shoes is the only space visited where Click & Collect is advertised and proposed with appropriate signage. When IADS discussed this Click & Collect topic (or its lack of in most of the visited locations) with the Dubai Mall General Manager, he mentioned that this was the kind of service that the Dubai Mall was willing to develop at its own level, and a new section is currently being developed to welcome and accommodate customers coming to retrieve their click & collect purchases in a Dubai Mall premise, and not in each shop.

*Is Dubai still worth a retail trip? Yes, to see to what extent the need for services and retailer brand differentiation is not the same from one region to another. The most striking point during the visit was the fact that many brands were over-represented due to the multiplication of points of sales: in Dubai Mall only, Saint Laurent is represented in the Bloomingdales Accessories section (shop in shop + generic), in the Bloomingdales WRTW section (racks + double shoes/accessories exposure), in the Bloomingdales MRTW section (racks + additional shoe section), in the Level Shoes area (shop in shop) in addition to the brand’s own retail store, leading to a total of 7 locations for this mall only. Is it enough for local retailers to stand out with an international offer that can be available somewhere else?

Our conversation with the Dubai Mall General Manager suggests that they anticipate that the need for services and additional care, that is spreading in the rest of the world, is growing and that they might be looking to be part of the solution. Department Stores might want to follow what they do when it comes to Click & Collect and, above all, how they articulate it in terms of business model with brands, as this might come as an inspiration.*

Credits: IADS (Selvane Mohandas du Ménil)

What: The HBR takes stock of the key learnings made during the Covid-19 peak when it came to organisations and their resilience, and defines the key criteria to look at to maintain this resilience and agility in the future.

Why it is important: None of the 4 pillars they identified is new, and Covid, just like for digital, was a leap forward in terms of working methodology and organisation. Companies were not adapting, they were forced to jump in the future of work.

The HBR has made a review of all successful practices that were set up and tested during the wake of the pandemic, which was an extremely stressful moment for teams having to deal with uncertainty. This reflects also the works the IADS has made in November 2020 in its first White Paper, Global pandemic, local department stores.

Moving forward, the HBR identified 4 essential ways to build adaptable teams, making sure that the resilience will be set as an embedded feature into organisations:

• Collaborate through inclusion: it is all about going beyond silos and use the richness of virtual, remote and hybrid teamwork. This can lead to corporate innovation: Google or AT&T sourced new ideas within employee networks. The Dow Chemical Company used digital virtual tools to communicate with small customers who did not have contacts with the company before. Now, it generates 80% more leads.
• Lead through agile management: the norm is now to launch new product lines (such as General Motors) or processes (such as Delta) in weeks rather than in weeks or years. This requires giving teams a clarity of mission as well as adequate resources to be self-sufficient, self-organised and self-managed. Target has developed a Target Dojo, a resource centre where employees are expected to spend a fifth of their time to learn new agile methods.
• Promote team resilience: this goes through the use of specific indicators: psychological safety, positive intent, fast and frequent check-ins, generosity, gratitude and empathy. Resilience is also sustained by the possibility given to all team members without exception to express and voice their ideas.
• Develop active foresight: as the IADS also advocates in its White Paper, it is all about making sure that companies are prepared by addressing challenges and foreseeing them through strategic planification and scenarios.

How to help teams coping with ever-changing and uncertain contexts 

What: Resale has evolved from being a side business in fashion to a golden opportunity that can’t be seized fast enough.

Why it is important: Retailers and brands are partnering with or launching resale platforms to contribute to circularity and reduce fashion’s environmental impact. Brands also benefit from launching their own platforms or partnerships because they can control the customer relationship and can claim revenue generated by products they’ve already produced.

While giving new life to old garments is one way to deal with clothing waste, brands will need to also reduce the number of goods they produce to actually reduce their total environmental footprint. The impact of the resale model will depend on if and when brands use it to help address larger issues ingrained in the industry such as harmful manufacturing practices and industry-wide overproduction.

A 2020 report by McKinsey and the Global Fashion Agenda found that for fashion to meet climate goals, resale — along with repair and recycling — needs to account for a much bigger slice of the industry. Also, the resale model is not perfect as there will be many items that are not going to be resold, therefore brands need to be honest about the flaws and challenges of such programs.

Resale sustainability: What’s real and what’s false

What: Sustainability used to be disconnected from important business decisions, but now there is an increased focus on environmental, social, and governance issues (ESG) that the current C-Suite does not know how to address. This is where the Chief Sustainability Officer (CSO) comes in.

Why it is important: A well-established CSO can make a real impact by connecting the dots on ESG and supercharging the sustainability transformation. The role of the CSO will undoubtedly grow as organizations continue to put ESG at the heart of their business.

More CSOs have been appointed in 2021 than in the previous 5 years combined. As companies continue to focus on ESG initiatives, the role of the CSO will undoubtedly grow. ESG issues are dominating the discussions of how businesses remain relevant in the years ahead and are being driven by all stakeholders. Governments will start enforcing laws and regulations that will be mandatory for businesses to comply with, consumers are changing their behavior and demanding more sustainable products, and employees are looking to work for employers who share their values and understand the fragility of society. Companies will need to take all these demands into account, and the role of the CSO is meant to address exactly this.

The evolving role of the CSO has revealed key trends:

• The role has been prioritized as a piece of the heart of the business rather than back-office compliance. ESG issues touch upon the entire business, therefore the CSO must be able to deal with this complexity.
• ESG needs to be a key topic for the board and executive agenda. Having the CSO connected to the CEO helps educate and upskill the executive team on ESG issues.
• ESG needs to be embedded into the entire organization. As companies embrace sustainability into their strategy and operations, expertise and knowledge around ESG must spread through the organization.
• There is a growing importance of ESG reporting as there are increased investor expectations around ESG and companies’ willingness to showcase their progress.

The CSO role is complicated as it is intertwined in each aspect of the business. The CSO needs to thoroughly understand the business, especially how sustainability and profitability are complementary or contradictory. They also must be able to identify shifts in the industry landscape and spot related value-creation opportunities for new products and services.

As the CSO role is tied to all areas of the business, eventually other parts of the organization will gain their own sustainability expertise. Although we are far from this, the role of the CSO could eventually become redundant as each piece of the organization will eventually put ESG at the heart of all decision-making.

Empowered Chief Sustainability Officers: The key to remaining credible and competitive

What: A reflection on what became of the 500+ former Borders stores in the US.

Why it is important: Their different fate show that modern retail has evolved into something more heterogeneous: from medical facilities to studios, supermarkets or fashion stores, there is no more a single way (or a winning one) to do retail, but a multiplicity of formats, that department stores are also experiencing on their own (see the efforts led by John Lewis to repurpose its stores).

Borders used to be a bookstore chain, bigger than Barnes& Noble, that closed all of its approximately 500 locations following its bankruptcy in 2011.

Interestingly, Borders was probably ahead of its time by then, as it viewed its stores as “third spaces” with cafés, free wifi, lounges, a unique architectural approach making each of its stores a destination per se, and a curation adapted to the community where it was located. In terms of offer, it combined the discounting approach of Walmart with the browsing ability of the local library.

Experts consider that the chain failed due to a number of reasons: it sticked to CDs and DVDs although this was a diminishing market, it outsourced its e-commerce operations to Amazon and the stores were too big and facing harsh competition from Barnes & Noble.

The article focuses on what’s left of the real estate footprint of the company: 20% were transformed into local supermarket,  16% were purchased by category killers, 12% are vacant, 10% became clothing or fashion stores, 10% were divided into smaller spaces. To the surprise of the journalist, more than 20% were transformed into different spaces: studios, gyms, medical facilities, coworking spaces.

What’s in for former stores after their retail life? 

What: The first in-person WRC to take place since the last edition in Amsterdam (May 2019).

Why it is important: After 2 online editions, many retailers were glad to gather together for in-person conferences, in order to share experiences on the challenges they encountered and how they faced them (it was a fight for survival for most of them). However, the key learnings from the online editions were well absorbed, with a more interactive way of leading the show.

Interestingly, there were many exclusive studies presented by either retailers or consulting companies which are presented here. The motto of this session was “rebuilding a better retail”.

The 2022 WRC edition was built on 6 pillars, 4 of which are reported here:

• “Our planet” (report), and what is takes for sustainability to really take place in retail. The report, co-developed with the BCG, makes it clear: sustainability is possible but complex and hard, and will require efforts. So far, the report shows that most retailers are achieving opportunistic initiatives in CSR but do not harness sustainability as a competitive advantage. 70% of retailers agree that sustainability is a priority, but only 57% believe that they have invested enough in the past 3-5 years. Most of companies have pursued quick wins so far, but it is now time for harder efforts. This implies embedding sustainability (through a properly restructured and re-incentivized organisation) and using data. The BCG identifies 9 key principles:

• Sustainability needs to be an explicit CEO priority, with bold goals and clear narrative, which are embodied into flagship programs (few but at scale),
• Sustainability must be embedded into organisations through a proper end-to-end integration, helping to capture value and embracing digital,
• This requires a business model innovation, new collaborations and also new methods to finance these operations.

For the BCG, it is all about small steps and successive quick wins in order to drive a real movement and generate value for individuals and the industry.

• “Our society”, and the role of retail in a broader context,
• “Our economy”  and the contribution of retail into workforce reskilling, employment growth and participation to countries prosperity,
• “Our business” (report) with the new rules for business that have been identified in the past 2 years. The report, co-developed with OC&C, mentions that digitisation is coming in waves (it is not a singular effect and requires retailers to evolve continuously), with a tipping point expected for 2025. Winning strategies however remain the same: driving flexibility into the cost based, leverage fixed cost investments by adding scale, use digital amplification to reinforce the proposition, and invest in digital engagement to ensure customer stickiness.
• “Our consumer” (report), his/her new motivations and behaviour. The report, co-developed with Railsbank, identifies a few new personas:

• The digital arrivals, who discovered e-commerce and online with the pandemic, and realize that this suits their needs,
• The subscribers, who find handy to receive at home a selection of products according to their needs in exchange of a monthly fee,
• The ethical consumers, from Alphas to Generation Z, including also millennials and boomers, all concerned with the planet and the impact of their own consumption.
• The thrill seekers, all about demanding greater interactions and enjoyment from shopping, through playfulness and gamification. Their search is not only online but also physical, after having endured lockdowns for the past 2 years.

These new profiles of course have an impact on how stores should be organised (both offline and online), how CSR strategies should be set up, as well as what kind of product should be selected and sold.

• “Our plan for change” (report) and how dynamic leadership, empowerment of people and willingness to embrace partnerships can help retail to grow into a resilient industry prepared for the upcoming challenges. The report, co-developed with Deloitte, emphasizes how the notion of time has shifted for both retailers and consumers during the pandemic, leading into new practices in recruitment, employment, customer retention, and the notion of purpose in parallel to sustainability.

WORLD RETAIL CONGRESS 2022 - "Our Business" Report

WORLD RETAIL CONGRESS 2022 - "Our Consumer" Report

TEST LINK

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 6 trends : The NFT conundrum, The Metaverse landgrab, The Mature Store Age, Unapolletically Analogue, Open for Business and Re-economy. We have made a selection of interesting cases for a retailer’s point of view below:

• The NFT Conumdrum: GDR argues that the current NFT craze in the press is a smokescreen distracting many from their true potential when it comes to using NFT to foster customer loyalty and engagement:

+ Use them to create a members club, as shown by Flyfish Club (which will open in NY in 2023 only to holders of the company’s NFTs), the Adidas club, or, to some extent the Gourmet NDFT which pays chefs every time their recipe is bought (what about having department stores selling exclusive recipes from their top restaurants?),

+ Link them to subscriptions services or increased product experience: holders of bored Breakfast Club receive a free monthly coffee bag, while holders of Blockbar NFTs have access to a unique bottle of whiskey, and Valdé Beauty gives access to a VIP community,

+ Make NFTs a physical product: Samsung TVs now allow to buy, trade and display their NFTs, Selfridges reportedly sells NFTs over the counter, while there are mystery NFTs sold in machine dispensers in NY.

• The Metaverse landgrab: Retail is moving to the metaverse and brands are buying virtual land to build stores: Carrefour (Sandbox), B8ta (with employees’ avatars in the virtual store), Ralph Lauren (selling digital clothing and virtual coffee), Nike (Roblox), Procter & Gamble, Samsung (which reinvents its NY flagship store), CVS…
• The Mature Store Age: GDR reports that now, the era of retail innovation and tests has come to a tipping point and technology has matured and scaled. This is the reason why we start to see increasingly complex and fulfilling shopping environments:

+ E-commerce giants going physical, such as Amazon first fashion store with a seamless shopping experience, or JD.Com making the most of its logistics capabilities in physical retail, or Cisco’s store of the future

+ Brands are also upping the game in their flagships, such as Nike mixing metaverse elements with its physical flagships, Marks& Spencer using AR to provide customers with additional information, Starbuck partnership with Amazon, Fenty offering an AR-powered body scan of each customer to proposed tailor-fit products.

+ Unapologetically analogue:  retail is also about experience, calling out for all senses:

• Fragrances (Aesop sensorium),
• Food (lab-themed coffee shop, Primark partnership with Greggs, Hy-Vee liquor store),
• Apparel and shoes (Esquivel slow-fashion experience, Foot Locker family playground store),
• Hi-Fi (Bang & Olufsen trial focused pop-up in London),
• Emotions and mental health (Selfridges Superself).
• Open for business : how to emphasize diversity and fight against discriminations? It is all about helping customers (especially the impaired one) with the right tech tools, promote charities, cater for specific needs, or represent the diversity of customers through a revisited brand and product offer. The examples mostly include brands.

Re-conomy or how to source for customers’ desire for sustainability through products, services and packaging that tap into the idea of repair, upcycling, zero waste or carbon capture (the examples include mostly brands)

• Brands: the Converse lab which promotes reuse over purchase, Arc’teryx with its Rebird service centre, zero-waste hospitality and retail concepts,
• Stores: French store YesYes helping customers to repair their electronic devices, Ikea launching sustainable living zones in the UK,
• Sustainable services: purchase in bulk, environment-friendly delivery services.

If there is any example you would like to deep dive in, please let us know and we will liaise with GDR to know more.

GDR 81st Global Innovation Future 

What: A piece from McKinsey about creating the ideal context of hybrid working for all.

Why it is important: Department stores usually have a diverse workforce, and the needs of all employees have to be taken into account to make sure they remain desirable in their future recruitments.

Hybrid and flexible forms of working, boosted by the pandemic-related lockdowns, are here to stay, in spite of what employers would like: 4 out of 5 employees would like such methods to continue in the future. However, hybrid work does not mean the same for all employees, and can contribute to amplifying the differences between all of them. Not so many companies have mastered this challenge so far. What makes the picture worse is that usually, the most underrepresented types of employees favour most flexible ways of working: disabled, non binary or LGBQ+ employees (the reason why they prefer being able to spend time out of the office is understandable). Cherry on the cake, 71% of employees would leave their job if flexible working options were not available anymore.

However, it is difficult to fully adapt working conditions to each employee (workplace of one). McKinsey identifies some recipes to help implementing an acceptable context for all employees:

• Work-life support (demonstrate appreciation for employees non work demands, responsibilities and interests),
• Team building (foster trust, collaboration between members who see each other as human being before colleagues),
• Mutual respect (genuine concern for the well-being of all employees).

Making hybrid work fit with inclusive management

What: The Economist reviews the consequences on local communities when Amazon decides to set up a fulfilment centre nearby.

Why it is important: All IADS members are investing in new warehousing and deliveries facilities. Dealing with local communities is key to secure their support and avoid any PR catastrophe.

The Economist reviews the impact of the creation of an Amazon warehouse and logistical centre in Birmingham, Alabama.

Amazon is already the 2nd biggest private employer in the US, just after Walmart, with 1.1m employees and plans to hire 125,000 more to staff the 400 fulfilment centres planned within 2024. Birmingham, once buoyant with steel factories, is the perfect example of ideal location for Amazon, with an available local workforce looking for jobs and the possibility to negotiate tax exemptions.

Reviewing the impacts of the opening of such fulfilment centres in the US, the Economist highlights that in the short-term, average wages in the county decreased by -10%. Any increase decided by Amazon have however a spill over effect and force all employers in the region to raise wages. In the long term, some studies show that such centres tend to reduce poverty and favour an increase of household income.

Another parallel effect is that the incentives granted by municipalities to Amazon to lure the company into investing in their cities rather than other imply that there is no benefit on a higher level for the community, as this does not imply a significantly higher income for the townhall. Critics tend to throw oil on the fire by mentioning that these incentives are not needed, given the fact that Amazon decides to set up a warehouse according to a geographical point of view including a review of the logistical infrastructures, and that cities could very well secure Amazon’s investments without giving too much away.

The impact of e-commerce warehouses on local economies 

What: Coresight offers a synthetic view of its key learnings at the WRC.

Why it is important: Sustainability and Values are two topics that were also strongly promoted at the NRF Big Show in January 2022, along with the Metaverse opportunities.

Coresight takes stock of the 3 days of conferences that took place in Rome during the World Retail Congress at the beginning of April, 3 years after its latest edition in 2019. The intelligence company draws conclusions on 5 topics: Metaverse, Values, Sustainability, Consumer and Macro vision.

Metaverse: for Coresight, retailers should jump in the pool with a test and learn mentality. Given the fact that it is highly probable that Gen Z will be the first metaverse-friendly generation, this is a compelling opportunity for luxury brands, including Metaverse-born ones (such as Cult & Rain). However, virtual IP protection will be vital to avoid any legal issue.

Values: many key retailers stressed out the necessity of playing an ethical role in the community they serve, as shown by Ron Johnson or Walter Robb. For them, understanding their purpose makes money happen, not vice versa. Whole Foods for instance achieved its success through adopting a stakeholder philosophy, listening to customers, team members and the environment, and maintaining high quality standards. For Robb, the role of company leadership is to support team members, who support customers.

Sustainability: from a niche and European-centric topic, sustainability has now become global, also spanning all generations. At Levi’s, sustainability is a strategic imperative and involves many innovative processes to reach the goals. Ahold Delhaize also shared their actions in this field.

Consumer: new consumer personas are identified: Digital Arrivals (who appreciate and expect convenience), Subscribers (looking for subscription models across the board), Ethical consumers (aligning their purchases with their environmental and social values), and Thrill Seekers (usually young, digitally native customers expecting retailers to serve them in all capacities).

Macro: global GDP will decline in 2022 as a consequence of the Russia – Ukraine war and its consequences on oil, food and raw material prices.

Lessons from the World Retail Congress 

What: The membership model is attracting new interest for its potential to unlock sustainability solutions as well as commercial advantages.

Why is it important: Subscription-based business models are attracting interest to drive deeper engagement with customers and tackle tricky sustainability challenges. Memberships could help dissociate fashion brands’ sales from production growth, enable more recycling and reduce waste.

Brands like outerwear startup Early Majority and On Running are experimenting with the business model. On Running introduced a subscription service last September in anticipation of the launch of its first recyclable shoe this summer. The brand is betting consumers will shell out USD 30 a month for a shoe subscription, just like they do for Spotify.

Once the new shoe drops in June, members of the brand’s Cyclon service will be able to trade their pair in for a replacement every six months. The goal is to solve a pain point that has plagued efforts to make fashion more circular: the friction associated with getting back old products so they can be recycled.

At present only a handful of sustainability-focused brands are experimenting with new subscription models, but how they perform over the coming months will serve as a valuable case study for others in the sector.

Can memberships solve fashion’s sustainability challenges?

What: Returns are too costly for retailers, in addition to being environmentally unsustainable.

Why it is important: All IADS members are facing the same issues, and some options explored in the article could be worth being given a shot.

Retailers are doing their utmost to please their customers and giving them what they want, even if this means losing money when it comes to processing product returns. However, what is great for the customer might be harming both the environment and retailer’s bottom line, which is why the Robin Report advocates for a recalibration, especially in these times when logistics are getting more expensive.

On average in the US, the cost of shipping a product is $10, meaning that logistics are a whole in case of a return will cost $20. As a consequence (and this is already what large retailers such as Amazon are doing) for products costing less than $20, it is often better for the retailer to leave the product to the customer or to ask for local destruction rather than returning it.

In addition, return rates are rising, a mechanical consequence of the increase of e-commerce (from 18.1% in 2020 to 20.8% in 2021).

In order to mitigate the cost, The Robin Report looks into several options:

• Ask customers to receive multiple orders into one package for a discount,
• Incentivize slower shipping methods, and charge different prices for faster delivery options,
• Issue a waiting period on returns, or set price minimums to earn free shipping,
• Encourage pickups or returns in store,
• Offer free shipping only to high value customers,
• Offer free shipping or free return, but not both.

The Robin Report believes that, by being transparent to the customer and explaining what is at stake (both economically and environmentally ) this could actually become an asset for the retailer, which would then be recognized as socially and environmentally committed.

Is free shipping dead? 

What: A review of the business model which is dominating the US fast fashion market.

Why it is important: Shein is a key player on a growing market, which is also threatening department stores. Knowing the base of their business model and its limitations can be helpful to design an alternative product proposal.

Coresight reviews the Shein business model and compares it with Boohoo and Asos to draw some conclusions.

Shein represented a turnover of USD 15.7bn in 2021 (most of this revenue having been performed in the US), with a growth of +57%, which outpaced Asos (+19.8%, USD 5.4bn turnover) and Boohoo (+28.1%, USD 1.9 bn turnover). All 3 players target Gen 2 customers by using influencers and celebs on social media channels (Shein is the 7th most-shopped retailer or apparel platform, capturing 22% of all 18-29 years old customers).

Thanks to its business model, the cost of business failure due to colours or fabrics remains lower for Shein (6,000 new items are launched every day), than for Asos (1.500 new items every week) or Boohoo (500 new items every week).

Coresight predicts that Shein’s advance in the US is going to consolidate in 2022, but also identifies the following challenges:

• A competitive disadvantage when it comes to delivery leadtime to final customers (12 days vs. 1-2 days for its competitors),
• Questions about the sustainability of its business model, even though its customers do not seem to be concerned so far.

Coresight also tries to draw some lessons from their model, that could be useful for other companies:

• Instead of relying on one source of customer data, the goal is to analyse a variety of sources, to understand customer psychology and propose a unique experience,
• Automation at scale is key to sustainable personalization in fast fashion,
• Artificial intelligence comes as a complemente to human judgment.

Shein multi billion business 

What: The NRF VP of CSR and sustainability’s interview for Earth Day.

Why it is important: Customers are increasingly aware that every business decision has real-world impacts and they expect retailers not only to be prepared, but also very active… even though this is uncharted territory and each retailer is trying to make do with what they have.

For the Earth Day and in preparation for the upcoming Supply Chain 360 Expo, the NRF decided to interview Scot Case, VP of CSR and Sustainability for the Federation.

For him, there is no really one definition of sustainability on the market as he remarks that it greatly varies on who is defining it, and with 4.2 million retailers in the US, that can create confusion. This is why he prefers to stick to a simple definition: “sustainability for the retail community is about creating net positive environmental, social and community benefits”. This allows to have a rather simple way of measurement, just like how companies assess their profits, even though this does not wipe out the complexity of calculating the hidden costs of any purchase made by customers.

Consumers care: 70% of them expect retailers to commit and provide information about the products they sell, and this proportion goes higher within the younger generations.

What is retail sustainability and why should you care? 

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What: The Netflix share decrease might not be only contextual, but the reflect of a broader downwards trend.

Why it is important: Subscription services and paying loyalty programmes might be the first initiatives to be hard hit if customer behaviour changes were spreading across the economy as suggested by the Financial Times.

Netflix saw its share price drop more than 35% after it reported a fall in subscriber numbers for the first time in a decade. Many analysts think that this is a sign that the subscription economy might be in for a contraction in the coming months or year.

For them, inflation puts pressure on consumers, who in turn evaluate their least valued purchases and get rid of non-essential spending. Such a reasoning is fuelled with the decrease in sales in fast fashion brands (Asos, H&M), food delivery, services and other industries.

However, customers are still able to make clear choices: for instance, the travel industry does not see any signs of slump so far, however all economic players remain on their guards watching the inflation numbers going high and wondering what it might mean in terms of new customer behaviour.

Great cancellation spreads beyond Netflix 

What: As top luxury brands pull back from wholesale, e-tailers are adding online concessions to their business models rather than losing access to Gucci loafers and Balenciaga hoodies.

Why is it important: Big luxury brands have long embraced “shop-in-shop” concessions on department store floors, which allow them to control product assortment and pricing while benefiting from the customer traffic and upmarket adjacencies offered by department stores. In a bid to control discounting, several top brands are imposing a similar model on e-tailers as the labels pull back from online wholesale or eliminate online wholesale completely.

Gucci and Moncler for example are moving to a concession model with luxury e-commerce sites as they end their exposure to wholesale.

The shift has added another layer of complexity to the multi-brand luxury e-commerce market, with fierce competition, high customer acquisition costs, and logistical challenges making it increasingly difficult to turn a profit.

Commissions on e-concession sales are lower than e-tailers' wholesale mark-ups thus sites must sell more products to reach the same revenue. Still, concessions can reduce inventory risk and allow sites to tap deeper product availability through a brand’s stocks.

E-tailers are working to roll out concessions while maintaining a role in product curation and fulfillment. Mytheresa for example, known for its tightly curated edit of brands, rolled out what it calls a “curated platform model” for six brands, including Moncler and Gucci, during the Autumn/Winter 2022 season. As with a traditional concession, the brand retains ownership of the inventory that it sells on the Mytheresa platform. What’s different is that Mytheresa’s buyers still curate the selection of items it sells, and market the products and ship them from the Mytheresa warehouse as they would under a wholesale structure. From the customer’s point of view, the experience of shopping at the e-commerce site remains unchanged.

For wholesale businesses, making the shift to an e-concessions model can be a significant undertaking that requires ample time and investment. In the case of Kering, the end of online wholesale might prove advantageous for the handful of players who manage to forge an e-concession partnership, as fewer online competitors are likely to be selling popular items. With the brands carefully controlling prices, retailers won’t have to worry about rival websites offering the same product for less.

The pivot to e-concessions is reshaping online luxury

What: The fact that modern consumers have the desire to purchase ethically is undebatable. Whether they can currently afford to put the money and time into conscious consumerism, however, is a more contentious topic.

Why it is important: For consumers that are still recovering from the pandemic, affordable goods are seen as more important than sustainable goods, thus diminishing retailers’ ability to roll out sustainable initiatives. This has led to huge physical expansions of discounters such as Dollar General and Big Lots.  To win big with new-age customers, retailers will need to find the right balance between affordability and sustainability.

Companies like Dollar General and Amazon – brands that compete based on convenience and put sustainability as an afterthought – have seen a lot of success. But this seems counterintuitive to the ethos of shoppers today who claim to be more socially and environmentally conscious.

A recent Forrester survey found that 2/3 of e-commerce shoppers in China, France, and the UK were concerned about the impact of climate change, yet only a little over half of US e-commerce consumers shared the same sentiment. The same study found that 2/3 of US online consumers want online retailers to be more transparent about their business practices, but many retailers are still in the dark about the full impact of their supply chain.

But as the US economy is still rebounding from Covid, many consumers have a gap between what they want to buy and what they can afford, thus making discount retailers more interesting. As consumers are expecting low prices, there is an added barrier to retailers’ ability to roll out sustainability initiatives.

The grey economy (informal economy) refers to any transaction that takes place outside of traditional retail sales. The advantages of the grey economy are that customers get direct insight into where goods are created, and they are able to directly interface with the individual providing services. Traditional retailers need to provide a bit of revolutionary energy that eco-minded consumers crave to find that perfect mix of affordability and sustainability.

Discounting, sustainability, and the grey economy: A reconciliation

What: A sustainability in retail study produced by the Boston Consulting Group (BCG) found that the retail industry needs to work harder and faster to make a meaningful impact to deliver on climate change commitments.

Why it is important: This study was conducted to reveal that there is a widespread understanding that ‘winning in sustainability is a competitive advantage. However, there seems to be a disconnect between the goals of the retailers and the progress itself.

While 60% of the firms believed their company’s goals were bold and differentiated, more than half had still not set any sustainability KPIs across their businesses to measure progress.

Only a select number of companies have reached the level where they can claim that sustainability is a core company strategy. However, some of the companies are at the “sustainability basics” level which means they are only doing enough to comply with the regulations required and meet the minimum expectations of investors and other stakeholders.

The survey did find that 90% of the survey respondents that are involved in sustainability believe collaboration is key to achieving their goals and targets.

Retailers are lagging on sustainability goals

What:  A new piece on the repurpose of former retail spaces.

Why it is important:  From Asia to the US, the question is important as it impacts the socio-economic environment. But department stores do not have to close to have a new sense of purpose for their own spaces. Reinvention can come from within.

Inside Retail reviews the fate of Isetan, the Japanese department store, which closed its location in Central World mall in Bangkok, Thailand, in 2020, after the expiry of its lease and 30 years of operation. Central Pattana, the mall’s owner, is planning to redeploy the space into an “urban lifestyle destination” however the project has been delayed from 2021 to 2023.

Similarly to the article about Borders’ in the US, the journalist focuses on the happening of former retail locations once they are closed. For Inside Retail, the consolidation of department stores was a period of “great terror” for mall owners, as the former were key traffic drivers to the latter. However, with time, this terror transformed into an opportunity best summarized by “what can you do with a vacant six-level department store space in one of the best locations in the city?”

For Inside retail, the solution lies into a cocktail of options: gym, retail specialy, food hall, supermarkets, events & performances spaces, schools, flexible workspaces.

From great terror to great opportunity: the rebirth of Isetan 

To view our photos of the Printemps revamp click here

Printable version here

Introduction

*Paris has gone through significant retail upgrades in the past 2 years, with the opening of La Samaritaine in June 2021 and the general stores and branding overhaul at Galeries Lafayette in September 2021.

In the meantime, the global events that have been unfolding one after another are blurring the visibility when it comes to getting back to normal touristic flows, a situation that has forced all major players in Paris to rethink their approach almost in real-time.

Apart from launching “7ème Ciel”, which is a second-hand and circular fashion initiative (quite different both in terms of spirit and business model when compared to Re-Store from Galeries Lafayette), Printemps has remained silent since the arrival of Jean-Marc Bellaïche, the new CEO, in March 2021 and the subsequent store closure plan in French regions that was announced.

This is the reason why the relaunch of Printemps is significant, both in terms of brand identity, customer approach and new services offered. We have visited the new Haussmann stores and reviewed the novelties for you, drawing some comments from our visit in addition to the pictures that are available separately.*

The Printemps situation in a nutshell

Printemps, founded in 1865, currently operates 29 stores, 20 with the Printemps brand (16 in direct and 4 in Franchise) and 9 with the Citadium brand, after having closed respectively 4 Printemps stores and 3 Citadium stores in 2020-2021. The group achieved a turnover of €1.5 bn in 2021, a far cry from the estimated €1.7 bn turnover from 2019 but increasing +38% compared to 2020. The CEO mentions that the 2021 turnover is -12% on comparable days (i.e. on the days when Printemps was opened in 2021) compared with 2019, which gives an idea of the tourists’ absence impact. In 2019 70m customers visited the Printemps stores, 20m of them in Haussmann only.

The goal of the Printemps brand, offer and services revamp is to regain local customers (2/3 of the customer base, with locals already growing in 2021 +10% vs. 2019 overall and +15% in Haussmann) and attract US, Middle East and European customers, through new customer journeys, starting with “less retail, more F&B and entertainment”.

The revamp took place on the 19th of March, the Spring day, with a “Tout commence au Printemps” catchphrase, playing on the meaning of Printemps (Spring in French, which means that the slogan is akin to “Everything starts at Printemps”). This allows the company to play on the concept of renewal, which is quite catchy these days when customers are tired of the Covid-19 related restrictions and are also looking to escape the gloomy news of the war in Ukraine. It is also an efficient way to emphasize all the “first times”, both in terms of advertising messages (my first emotion, my first shopping spree…) but also present Printemps as an innovative company which led the way in many aspects of modern retail (for memory, Printemps was a founding member of the IADS in 1928). In a nutshell, Printemps presented their new initiative as a moult, to complete the springy message.

A new in-store experience

The company has decided to review its logo (a stylized P which also evokes a heart), colour code (green, white and gold) as well as its tagline (everything starts at Printemps). The new advertising campaign is quite dynamic and transmits a lot of positive energy.

The in-store execution is quite effective, both in terms of signage and the use of the green colour, vivid and visible from afar, which is dotted across the floors, be it via the in-store displays, elements of décor, but also the products developed in collaboration with brands. At the entrance of the store, the information desk has been decluttered and is quite welcoming. The staff has been well briefed, 100% of them saying hello to all customers and showing enthusiasm even 1 week after the re-opening, which suggests that sales and traffic were extremely sluggish prior to this welcome rebranding and upgrade.

10 new permanent concepts have been introduced across the 3 buildings (Women’s, Men’s, Kids and Home) mixing retail, experience, leisure and F&B, also making the most of the building specificities:

• In the Women’s store: La Coupole (6F), a spectacular animation area mixing a 6-months long pop-up zone with a restaurant, Ready Up (4F), an area dedicated to promising students in fashion and design, Hors Saison (3F), a space where clothing from former seasons are sold at a discounted price, and L’Endroit (2F), a comfy designers’ multi-brand space replacing the former Maria Luisa concept store,
• In the Men’s store: a new “Café vert” area (GF), mixing coffee and plants, and an experiential shop-in-shop operated by Au Vieux Campeur (-1F), an iconic Parisian outdoor retailer,
• In the Kids and Home store, L’Appartement de Made in Design (2F), a co-op space selling design items in a home-like environment, and a new retail concept on the Beauty lower floor.

What’s new in the Women’s Store

La Coupole Plage on the 6th floor: this place makes the most of the Art Deco cupola, which housed a brasserie in the past and its name makes a reference to “Paris Plage”, the townhall yearly initiative which transforms the Seine riverbank into beaches.

The F&B area has been quite reduced and pushed on the edges, which also allows emphasis on the presence of terraces (4 terraces which can each accommodate 6 customers) while providing a sense of exclusivity and luxury. The restaurant is managed by a Chef, who co-develops with a food personality a new menu every 6 months. For the first iteration, a food critic who recently published a recipe book has been invited.

The freed space has been dedicated to an experiential retail zone, which is supposed to change every 6 months. For now, the whole area is dedicated to swimwear in a very immersive environment which is quite well executed.

Also, the whole area easily communicates with “7ème Ciel” on the 7th floor, the second-hand space that was opened in September 2021. This zone also opens on the rooftop of the store, with a food truck-like F&B offer, giving a feeling of lightness and joy that was catalysed by the sunny weather. Even though La Coupole takes time to be reached, either via escalators or lifts, it is well indicated across the store, and impossible to miss. It might be more effective in terms of traffic generation than the brasserie, at least in terms of traffic spreading across the day.

Ready-up! On the 4th floor and directly in front of an escalator, this space is the result of a partnership with Campus Mode (a structure federating fashion schools in Paris) and is dedicated to fashion students. There, they have the possibility to take part in conferences, explain their work, expose their pieces and sell them with 3-months long popups. 19 talents will be promoted for a period of 3 months, with 3 to 4 participants per session lasting 15 days.

During the visit on a Sunday, the space was not especially welcoming to customers, as students gathered to congratulate themselves, creating de facto a world where it was difficult to enter if not invited. Also, the very interest of the products can be questioned, as well as the business efficiency of such an initiative.

Hors Saison: this clever initiative on the 3rd floor aims at selling former seasons stocks on 200 sqm in a beautiful space, and singing the tune of social responsibility and care for the environment, instead of appealing to customers with low prices. Brands represented there range from APC to Victoria Beckham, and prices can go as low as -60%.

The space is beautiful and appealing, however, its location and structure make it less inviting than other initiatives. During the visit, there were no customers and sales staff were clearly desperate to have anyone coming in.

L’Endroit on the 2nd floor: replacing the former fashion multi-brand store Maria Luisa, this space emphasizes a selection of edgy designers in an apartment-like setup, where photographers are invited to display their works.

Salespersons are extremely well trained and efficient, as several sales were concluded during the visit. They know the products and brands (which is not the case in other parts of the store) and also mentioned that they were extremely happy since the rebranding of the store, as this immediately translated into an increase in terms of customer flow and purchases. Printemps CEO mentioned that traffic jumped +20% during the week of the reopening.

In the women’s building, the ground floor also displays a new selection of gifts and “easy” products, called Le Joli Cadeau, but which is not referenced as a new concept per se. This space was formerly dedicated to a multi-brand premium leather goods area.

What’s new in the Men’s Store

Le Café Vert on the ground floor, open as early as 8 am (before the store opens), aims to become a rendezvous point with a healthy and qualitative offer, enhanced by plants dotted all across the space, appealing to the need for nature that everyone experienced during the various lockdowns.

The café is operated by Brûlerie Belleville, a local Parisian coffee roaster, but the space will be also offering an aperitivo time at the end of the day, and the décor is set up with Kaki (a hydroculture plant specialist), knowing that all plants on display can be purchased by customers.

Au Vieux Campeur on the lower floor is truly a premiere, as this is the first time that this iconic Rive Gauche retailer makes a partnership and expands outside of its own stores. Au Vieux Campeur has been founded in 1941 and is known by every Parisian who had to purchase anything related to outdoor activities in the past (think a high-end Decathlon staffed by proud specialists). The store is 400 sqm wide, highly immersive and is organised by the universe: climbing (with a 6 meters high climbing wall, very visible from the ground floor, that can be used by customers), trekking, sailing and a library. Testing surfaces for shoes are also available. Dedicated Au Vieux Campeur salespersons also allow customers who might not find what they are looking for in the store, to the entire Au Vieux Campeur catalogue via a marketplace system.

What’s new in the Kids and Home Store

Many new beauty initiatives are available on the lower ground floor:

• Beauty food: a holistic cosmetics zone part of L’Officine (a space dedicated to dermo-cosmetics) where food complements are sold in addition to cosmetic routines by specialized (and exclusive) brands such as Agapem (period alleviating treatment), Apnee (collagen in powder), So Much (emotions regulating coffee) or Dijo (infusions with intestinal ingredients).
• Partnership with Kisskissbankbank (a crowdfunding initiative), which enables Printemps to contribute to the development of new brands, through a contest with an independent jury selecting 3 new brands which will be promoted by being introduced to the “Green market” area in Le Printemps.
• Large areas dedicated to manicure, pedicure, brows, as well as a large space gathering hair products and salon: such services were already available before the revamp but were not gathered in a single place. This organisation makes the offer powerful and efficient.
• Face 2 Une: a spa developed with the Face 2 Une beauty tech brand, proposing no gender services through manual massages and machines.

L’appartement with Made in Design on the second floor: Made in Design (owned by Printemps) is an online design retailer, often curating a selection of brands but also developing its own products. L’Appartement is an initiative where selected designers are invited to make a selection in the Made in Design catalogue and create a physical and immersive point of sales for Made in Design, while also bringing a new experience to Printemps.

And the Metaverse?

Printemps has also developed a phygital initiative, with an immersive virtual store accessible from their website showing a selection of products as well as exclusive collaborations (overall, the e-commerce store has increased its offer by +31% vs. 2019). In the event of the purchase of an exclusive product, customers will enter a contest to earn an NFT, which will, in turn, give access to another contest where the winner (1 out of 30 NFT winners) will receive the original piece of art from the artist who has designed the atrium and the 7ème Ciel art tunnel in the Haussmann store.

Interestingly, there is also an initiative with DressX in the form of a pop-up on the ground floor, which allows customers to buy virtual dresses for their Instagram or other social media pictures. However, after checking in person the offer, the pop-up does not offer anything more than what can be purchased online directly.

For customers who are not into such subtleties, 500 exclusive pieces have been developed with brands ranging from Loewe and Sandro to Logan and Lacoste, displayed in a spectacularly redesigned Atrium at the centre of the Women’s floor. However, during the visit, sales staff were not really inviting and busier making comments about customers who had left the space than taking care of those present.

What to think about this revamp? Execution is excellent and the feeling of renewal across the 3 stores is clearly there. Printemps is upping its game and getting back into the Parisian fight for local customers, after a period when it was lagging behind. They have based their whole campaign on the promise of permanent non-retail animations (conferences, workshops, DJ sets, etc…) which could translate into an effective traffic-driving strategy if properly conducted. The main question is therefore to know if Printemps will be able to maintain the momentum on the long-range and keep teams mobilized?

Credits: IADS (Selvane Mohandas du Ménil)