What: Coresight released its report on the trends to watch in India for 2024.

Why it is important: India is a major market both in terms of national size, but also in terms of trends shaping their customers’ behaviour… who are expected to travel the world in a massive manner and therefore have new expectations when visiting international department stores.

In 2024 and beyond, ten key trends are set to shape India’s dynamic retail sector, offering strategic opportunities for brands and retailers:

1. Expansion to Tier 2+ Cities: Retailers and mall developers will venture into Tier 2 and 3 cities, tapping into emerging consumer markets beyond metropolitan areas.
2. Retail Sector Consolidation: Larger conglomerates will dominate the retail landscape, enhancing their presence through technological efficiency and expansion beyond metro cities.
3. Year-Round Online Sales Events: E-commerce entities will organize sales and shopping events around various festivals and holidays throughout the year.
4. GenAI-Driven Personalization: Brands and retailers will use generative AI for hyper-personalization to enhance customer experiences.
5. Focus on Sustainability: Sustainability will become crucial for customer retention and loyalty, with consumers increasingly seeking eco-friendly products.
6. Immersive Shopping Technologies: Augmented and virtual reality technologies will be employed to create more engaging and immersive shopping experiences.
7. Growth in Luxury Segment: India will become a key player in global luxury retail, driven by rising domestic demand and international luxury brands establishing a local presence.
8. Rise of Video Commerce and Influencer Marketing: Brands and e-commerce platforms will increasingly use influencer marketing and video commerce, including livestreaming, to boost customer engagement and informed purchasing decisions.
9. E-Commerce Expansion Beyond Tier 3 Cities: E-commerce will reach rural markets, extending beyond Tier 3 cities with improved delivery infrastructure.
10. Intensified Private Label Competition: The growing consumer interest in private labels will lead retailers to strengthen their private-label brand positioning and explore new product categories.
    Overall, India’s retail sector is expected to undergo significant transformation and growth, driven by a mix of geographic expansion, technological innovation, and evolving consumer preferences towards sustainability and premium offerings.

The 10 retail trends to watch in India

What: Coresight has identified the 10 trends to watch in the Chinese retail space.

Why it is important: China is often a source of inspiration for e-commerce players worldwide. Any new trend in this space is worth watching.

In 2024, China's retail sales are projected to reach ¥44.2 trillion ($6.1 trillion), a 4.8% year-over-year growth, with online sales expected to hit ¥17.2 trillion ($2.4 trillion), marking a 12% increase. Coresight Research identifies 10 key trends shaping China’s retail market:

1. Meaningful Consumption: Consumers will increasingly seek purposeful purchases.
2. Offline Engagement via Pop-Up Stores and Events: Brands will use these for direct customer interaction.
3. Cross-Sector Collaborations: Brands will explore partnerships across different sectors.
4. User Retention on E-Commerce Platforms: Platforms will innovate to keep and attract customers.
5. Generative AI in E-Commerce: Companies will use AI for customization and engagement.
6. Expansion of Cross-Border E-Commerce: Brands and platforms will grow their international reach.
7. Investment in Chinese Beauty Companies: International beauty brands will invest locally.
8. Growth of China’s Pet Market: The market will see finer segmentation.
9. Demand for Second-Hand and Affordable Goods: Consumer interest in these markets will rise.
10. Luxury Market Driven by High-Net-Worth Individuals: Wealthy consumers will fuel luxury sales.
    Post-Covid-19, these trends, from leveraging generative AI to focusing on cross-sector collaborations, are redefining China's retail landscape. Brands should prioritize personalized experiences and emerging technologies, while real estate firms should focus on experiential retail spaces. Technology vendors need to innovate with AI solutions and ensure a robust infrastructure for a seamless cross-border e-commerce experience.

The 10 retail trends to watch in China

What: Retail is the ideal field of application for AI giants such as Microsoft or Google.

Why it is important: AI in retail is at the same time very much needed (for productivity reasons) and difficult to implement.

Generative AI is gaining momentum in retail, with 70% of retailers planning its implementation in 2024, as per a Google Cloud survey. Key players like Google and Microsoft are introducing AI tools for retail, focusing on areas like virtual assistants, customer service, and inventory management. Google's offerings include AI virtual assistants, tailored search tools, customer service solutions, SEO-optimized catalog enrichment, and offline AI applications. Microsoft’s suite offers personalized virtual assistants and store operations tools, integrated into Azure OpenAI Service.
Despite the enthusiasm, challenges such as AI-generated inaccuracies ("hallucinations") pose risks to customer satisfaction and brand integrity. Mitigating these involves using clean data and human oversight. The complexity of implementation may be particularly challenging for smaller retailers lacking in AI expertise.

Retail becomes a battleground for AI suppliers

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Every Baby Boomer knows the building thanks to the internationally famous cover of the Pink Floyd album, Animals. However, there are now high chances that every Gen Z and Gen Alpha also discover this iconic location, but for entirely different reasons.

Built between the ‘30s and ’50s, Battersea Power Station, located in South West London, once supplied a fifth of London’s electricity. It was decommissioned in 1983 and remained dormant for years. Finally, in 2012, the building was sold for £1.9 billion. A £5 billion investment arrived from Malaysia to start redevelopment plans (it is said to have reached £9 billion in the end). The list of investors included PNB (one of the largest banks in India), Sime Darby Property, SP Setia (both Malaysian real estate companies), and Malaysia’s Employees’ Provident Fund.

As is often the case in such commercial development, investors had to contribute to more than the mall itself and had to fund a part of the subway station, the residential scheme surrounding the shopping centre and the ‘Electric Boulevard’ construction (one of the nearby streets). Redevelopment officially began in 2014 to open on 14 October 2022 with half of the commercial units having tenants (Covid delayed the opening from 2020 to 2022).

Following the 2023 IADS General Assembly held in London in November 2023, the IADS team had a chance to visit the premises. Now that the mixed-use project is almost completed and all units have tenants, is Battersea Power Station just another shopping centre or is there more to it? Most importantly, is it viable in the long term? What can department stores learn from this one-of-a-kind venture?

What is Battersea Power Station anyway?

First of all, it’s big. This is the most expensive property deal ever done in the UK, and its dimensions are, even by any continental European standards, unprecedented. Also, it’s way more than a shopping centre as the overall project encompasses:

• A 4-storey shopping centre with a retail space accounting for 289,283 sq. ft., 100 shops including 2 car dealerships and a fine art gallery.
• Grocery with a Marks & Spencer supermarket, a gourmet store and several bakeries.
• Pop-up stores: at the time of the visit Peloton bikes, The Alkemistry jewellery and Creed fragrances had pop-up locations.
• Hospitality with around 40 cafes, bars and restaurants from burger to occasion (including a Gordon Ramsay restaurant and pet-friendly places).
• Entertainment with a 9-hole golf course, virtual reality experience, a theatre, 2 movie theatres, a ping-pong salon, a permanent exhibition space and a lift to go to the top of one chimney to benefit from a 360° view of London (£15.90 for an adult).
• Expensive housing (a 3-bedroom penthouse apartment was sold for £ 6 million). The residential spaces built around are by Frank Gehry and Fosters + Partners, and this comes at a price. Some say the area is the new Chelsea, and Tatler Magazine dubbed it the new Belgravia (considered the richest area in London).
• Services with an optician and a hairdresser.
• Wellness with 3 sports options: cycling, boot camp and a 24,000 sq. ft fitness studio (to open in 2024).
• A hotel designed by famous Spanish designer Jaime Hayon with a rooftop pool (approx. £500 per room).
• A working space offering coworking, ready-to-use flex-office options (open 24/7) and a convention centre.
• A dedicated well-connected subway station.
• Nature with Battersea Park close by.
• An underground car park with 300 spaces.
• Office spaces which include Apple UK HQ relocated to the top level of Battersea Power Station, the US Embassy relocated to the area and 200,000 sq. ft of office space (to be completed end of 2023).

The brutalist building itself is worth the visit. Overall, the quality of refurbishment is state-of-the-art and the level of execution of the whole concept is excellent. The architectural features are understated to emphasize the historic architecture. The remaining pieces of power production are beautifully restored and magnified. Every store has the same illuminated rectangular sign outside with the retailer’s logo in black, so they are easily identifiable to visitors. The design gives consistency and elegance to the brands’ signages. The shopping centre surroundings offer cute, paved alleys with free-standing stores (such as Zara for instance) and beautiful contemporary architecture.

What are the results so far?

What about traffic? According to Forbes, 11 million visitors came to Battersea Power Station in the first year. New residential space and the companies relocating to the area should help provide regular returning customers. But a year after the opening, with such expensive prices, apartments are far from sold out even though more workers should flock to the neighbourhood thanks to the office spaces opening at the end of 2023. All the amenities have been designed to transform the whole location into a destination that attracts tourists and one-time visitors.

The mall itself intends to cater to all kinds of people, needs, cravings and wallets with a rather unusual brand mix. One can find high-street brands such as a 48,000 sq. ft Zara store, Mango and Uniqlo units, but entry-price retailers such as Primark and H&M are nowhere to be seen. Most of the stores are premium such as Lacoste, Theory, Gant and Ralph Lauren. Upscale watches are part of the mix with IWC Schaffhausen, Breitling, Hublot, Rolex at Watches of Switzerland, Tag Heuer and Omega, as well as a Cartier store. The first impression (and lasting) is that the mall is more high-end than the usual mix of high street retailers that can normally be found in shopping centres. In that regard, retailers such as Primark and H&M and restaurants such as McDonald's are missing to truly cater to all. It was probably done according to the developers' plan so that there is not too big of a gap between entry-price retailers and Cartier.

With post-Covid tourism resuming, the mall has benefitted from American and Middle Eastern tourists since its opening. Battersea Power Station also bets on Chinese travellers as the number of upscale watch brand options clearly shows. But what about their spending power at a time when the Chinese economy is challenged and the British government discontinued tax-free shopping? So far, the ones visiting London are spending way less than before the pandemic: according to the New West End Company (representing stores and hotels in the area), in September 2023, Chinese visitor numbers were just 2% below 2019 levels, but their spending was down 58%. It’s unclear if those tourists have been taking a subway trip to the neighbourhood.

At a normal pace, the area should cater to a balanced mix of local, newly located and tourist shoppers. But will locals shop there, especially with inflation hitting hard the British economy? So far, only 20% of the first year’s traffic came from South West London. Also, at the time of the visit (on a weekday afternoon), traffic was extremely slow, and tourists were nowhere to be seen.

What can department stores learn?

Battersea Power Station did not open without questions over the viability of what is ultimately another enclosed mall. The project developers certainly played by the retail trends playbook: a mix of shopping, hospitality and experience, pushing the mixed-use trend to its farthest.

In some ways, Battersea Power Station can be considered inspired by some department store for all (also as the brand mix ranges from mid-range to luxury). It’s something that many operators want to be, but few truly manage. But what works for department stores doesn’t necessarily work for malls: customers are used to seeing luxury beauty and accessory brands on many department store ground floors, they might be afraid of the luxury watch stores and their security guards who are the first ones visitors see when arriving from the Battersea Power Station subway station. A Chanel beauty corner on a department ground floor can be appealing to all customers, but a security guard in front of a Rolex store is a different story.

When it comes to store concepts, some retailers are at their best. Nike opened a community store that can transform into a place to exercise with activities twice a week, yoga sessions and various sports activities. The Body Shop opened a store entirely made of recycled materials favouring loose goods.  A unique place, a unique shop: Zara opened its biggest British unit with a very high-end ‘look & feel’ and many digital options such as fitting room e-reservation, self-checkout and online pickup. It is truly reminiscent of a department store, with true corners to highlight certain ranges (sports, lingerie, home, etc). In that regard, Zara is a retailer to monitor; they are playing the department store concept by the book, they multiply interesting collaborations and, more importantly, venture into more categories (home, cosmetics, fragrances, and recently hair care).

Conclusion: Time will tell

The redevelopment of Battersea Power Station is a significant project in London with economic and social impact, creating jobs, housing, and business opportunities. The moving of Apple UK and the US embassy in the premises (or close) shows the effort put in to ensure the right mix between working, living, shopping and entertainment (which could be the definition of what a neighbourhood should be).

The brand mix remains a key question. Will wealthy local consumers and tourists cross the river to come and buy an expensive watch there rather than enjoy a shopping experience in a flagship store in the city centre where shopping options are endless? Will average Londoners enjoy visiting the shopping centre knowing there might be very few shopping options for them? Only time will tell.

Credits: IADS (Christine Montard)

What: Paul Sims, Primark’s CTO, shares his impressions on the 2024 edition of the NRF event.

Why it is important: Apart from AI (which should be used to provide full answers in search results), he saw that RFID and inventory tracking, as well as loyalty schemes, were some hot topics in the aisles of the fair.

Paul Sims’ key takeaways from #nrf2024 highlight significant trends and insights in the retail industry:

1. Commerce Evolution: Terms like multichannel, omnichannel, and connected commerce all point to the evolving nature of retail, ultimately converging into simply 'commerce' or 'retail'.

1. AI in Retail: Shelley Bransten's statement "You can't spell Retail without AI" underscores the growing importance of AI in retail, despite its cheesiness.

1. Automation and Robotics: The increasing presence of robots (like pizza and fries-cooking bots) raises questions about the implications for human-centric aspects of retail.

1. Fabric as the New Mesh: A shift in the retail tech vernacular, possibly indicating new technological trends or frameworks.

1. Search Evolution: The transformation of search functions to provide contextual, conversational answers rather than just results.

1. Loyalty Scheme Changes: A move from traditional points/discounts to personalized services, utilizing AI for more customized customer experiences.

1. Empowering Retail Workers: Leveraging AI and data in real time to enhance customer interactions and streamline operations.

1. Composable Tech Expansion: The growth of composable technology, including in supply chain and demand planning, challenging traditional players in these sectors.

1. AI and Data Dependency: Highlighting the critical need for robust data to effectively utilize AI in retail.

1. RFID Technology: The prevalence of RFID at NRF indicates its importance in inventory management and loss prevention.

1. Rise of Citizen Data Scientists: Similar to citizen developers, this trend reflects the democratization of data analysis and tech development.

1. “Just Walk Out” Technology: Evolving from traditional self-checkout systems, indicating a move towards more seamless shopping experiences.

1. Demand for Transparency and Sustainability: These elements are now fundamental expectations in the retail industry.

NRF 2024: Key takeaways from an expert CTO 

What:  The NRF released a guideline of principles for the retail sector when using AI.

Why it is important: As AI is a rapidly growing technology that is being used by almost all retail players and businesses, the NRF has provided a guidelines for the use of artificial intelligence (AI) in the retail sector, aiming to ensure strong governance, prevent discrimination, promote transparency, and encourage ongoing oversight and review of AI applications.

The NRF Center for Digital Risk & Innovation has published principles for the use of artificial intelligence (AI) in the retail sector. These principles include:

• Governance and Risk Management: Retailers should develop strong internal governance practices for AI tools and capabilities, involving various stakeholders across the company. This includes risk management, oversight, and security throughout the lifecycle of AI applications.

• Customer Engagement and Trust: Retailers should develop and deploy AI applications in a manner consistent with applicable laws and regulations. Ongoing oversight and review of AI-enabled capabilities should be conducted to ensure compliance. Guidelines for employee use of generative AI tools should be provided, including warnings about inadvertently exposing trade secrets and non-public information.

• Workforce Applications and Use: Retailers should engage in ongoing oversight and review of AI applications that impact employees or support business needs.

• Business Partner Accountability: Retailers should establish clear guidelines and expectations for business partners providing AI tools and services. Integration of AI governance into third-party risk management activities and transparency about vendors’ AI governance is encouraged.

These principles aim to ensure effective governance of AI, support customer trust, prevent discrimination, and facilitate beneficial use of AI technologies in the retail sector. Retailers can tailor these principles to support their internal AI governance and strategic planning. NRF plans to update these principles periodically based on stakeholder input and changes in AI use within the retail sector.

Principles for the use of AI in the retail sector

What: The private label business is a source of profitability and customer loyalty.

Why it is important: Poaching executives is not enough, it requires an impeccable sense of timing, vision and strategy.

Retailers seeking a turnaround often focus on operational efficiency and merchandise improvements, with a particular emphasis on developing private labels. This strategy has been key for major retailers like Macy’s, J.C. Penney, and Kohl’s to grow sales and attract new customers. Target stands out as a successful model in this area, boasting nearly 50 private brands across various categories, with several generating over $1 billion in annual sales.

Target's success in private label merchandising has led competitors like Macy’s and Bed Bath & Beyond to recruit talent from Target’s team. Macy’s has directly hired and contracted with Target’s private brand designers, while Bed Bath & Beyond hired Target’s chief merchant Mark Tritton. However, Bed Bath & Beyond's experience shows that simply adopting Target's approach does not guarantee success, as it went bankrupt last year.

Private labels offer higher margins and competitive advantages, with around a third of sales at Target and 28% at Costco coming from their private brands. However, creating a successful private label requires a comprehensive approach, including sourcing, branding, consumer testing, and effective visual merchandising.

Macy’s, for example, has focused on private brands as part of its Polaris turnaround plan, aiming for them to contribute a quarter of its sales. The retailer's recent launch of the On 34th label, developed by former Target merchants, is an ambitious attempt at establishing a lifestyle brand. However, patience and potential adjustments are necessary for such efforts to yield results.

What it takes to build a private label

What: McKinsey identified 10 key takeaways from Davos leaders meeting.

Why it is important: if there are 4 takeaways to remember: speed of transformation is crucial, sustainability is not an option, generative AI is just the beginning and, most importantly, international cooperation is not contrary to competition.

Davos 2024 revealed key insights for global business leaders, reflecting cautious optimism despite ongoing challenges. Here are the 10 key takeaways from the 54th Annual Meeting of the World Economic Forum:

1. Speed and Performance: Fast-moving companies report significantly higher operational resilience, financial performance, growth, and innovation compared to slower peers.
2. Coopetition: Balancing cooperation with competition can advance shared interests, even when overall alignment is lacking.
3. Generative AI Revolution: Gen AI is set to transform various functions like sales, marketing, and software development, unlocking substantial economic value across multiple sectors.
4. Sustainability as Imperative: Despite complexities, taking bold action in the net-zero economy can accelerate value creation and position companies ahead of competitors.
5. Women’s Health and Economy: Addressing the women’s health gap could significantly boost global economic prosperity.
6. Comprehensive Transformation: Success in transformation relies on four elements: will, skill, rigor, and scope, crucial for outpacing competition in a disruptive environment.
7. Talent Alignment: Many organizations fail to match top talent with critical roles. Skills-based hiring could access new talent pools.
8. Effective CEO Leadership: The best CEOs leave their organizations better than they found them, creating distinctive value without succumbing to complacency.
9. Diversity and Performance: The business case for diversity grows stronger, crucial for maintaining financial performance amidst a rapidly changing business environment.
10. India’s Rising Potential: India's rapid transformation and growth in technology, talent, healthcare, and other areas are critical to watch in 2024 and beyond.

These takeaways emphasize the importance of agility, collaboration, technological adoption, sustainability, diversity, and strategic leadership in navigating the complexities of the current global business landscape.

10 Davos key takeaways retailers should know

What: The annual NRF report on returns shows that the phenomenon is amplifying.

Why it is important: US customers are increasingly resorting to frauds such as “bracketing” (ordering many sizes and keeping only one) and “wardrobing” (wear a product once and send it back).

In 2023, US retailers faced $743 billion in merchandise returns, representing 14.5% of total sales. Online purchases had a higher return rate at 17.6%, compared to 10.02% for physical store returns. Retailers are actively seeking ways to reduce these figures, particularly to combat return fraud, which accounted for $101 billion in losses. For every $100 in returns, $13.70 is lost to fraud.

Efforts to minimize losses include detailed product descriptions online, strict receipt requirements, and policy changes to limit return flexibility. Nearly half of the retailers reported experiencing 'wardrobing' (returns of used, non-defective items), and a significant number faced returns of stolen merchandise or items bought with fraudulent methods.

Retailers are also contending with a new category in online returns: claims and appeasements for issues like missed or damaged deliveries, a rapidly growing area for return fraud. The holiday season, a peak sales time, sees a slight increase in return rates, with a notable portion of these returns expected to be fraudulent.

The NRF issues its 2023 report on returns and frauds in the US

What: Forrester’s research shows that free delivery is more important than speed of delivery for e-commerce consumers.

Why this is important: It can give an edge to department stores that make them still relevant in front of larger operators.

A Forrester report suggests that while same-day and next-day delivery options are costly for retailers and not highly valued by most consumers, free shipping remains a key factor for online shoppers. Nearly half of consumers are indifferent to same-day delivery, and many prefer in-store shopping for groceries. Instead, options like buy online, pick up in store, curbside, and drive-thru pickups are seen as more appealing and cost-effective. Despite this, major retailers like Target, Walmart, and Amazon continue to invest in same-day delivery, with Amazon achieving its fastest Prime delivery speeds due to investments in regional operations and same-day delivery facilities. Overall delivery times have decreased, partly due to a variety of carriers and reduced pandemic-related barriers.

Free shipping is more important to shoppers than same-day delivery

What: Raconteur reviews the evolution of advertising on TV and ponders if it is still an valid option for brands.

Why it is important: Department stores use TV as a part of their marketing mix. But are they using it in the right way?

The advertising landscape in broadcast television is undergoing a significant shift. High costs for prime time slots on major networks are leading marketers to question the return on investment, especially with the rise of streaming services and declining traditional TV viewership in the UK.

Pendragon, and automotive retailer, emphasizes the continued relevance of TV advertising as part of a diverse marketing mix. The CMO argues for a strategic use of TV ads, necessitating a clear understanding of sales baselines and the synergies of adding targeted TV to the mix. She highlights the undeniable impact of targeted TV advertising, especially during live events, and suggests using a combination of Video on Demand (VOD) and live streaming for more strategic and affordable targeting. She notes that an omnichannel approach, leveraging dual-screen behavior of consumers, can enhance the effectiveness of TV campaigns, as demonstrated by CarStore's campaign leading to a significant uplift in online enquiries.

Magnite, and ad platfom, points to the evolving TV viewing habits, with a shift towards streaming TV and free ad-supported TV (FASTs). The CMO argues that the digital nature of streaming TV offers more relevant, efficient, and personalized advertising opportunities. The flexibility and control provided by programmatic execution in streaming campaigns are seen as advantageous, suggesting that while TV advertising is not endangered, it is certainly evolving beyond traditional formats.

Both perspectives highlight the need for advertisers to adapt their strategies to align with changing consumer behaviors and the opportunities presented by streaming and digital platforms, while still recognizing the value of traditional TV advertising when used creatively and strategically.

Is TV advertising still worth the cost?

What: The Chinese luxury market is projected to grow at a mid-single-digit rate in 2024, driven by offshore retail and the resurgence of professional daigou (surrogate shoppers), as reported by Bain & Company.

Why it is important: This growth signifies a rebound from previous slowdowns and highlights the evolving dynamics of luxury consumption in China, which is crucial for global luxury brands due to the significant market share held by Chinese consumers.

The Bain report anticipates a solid double-digit rebound in China's luxury market in 2024, though it hasn't fully recovered to 2021 levels. The market saw a 12% growth in 2023, with Chinese consumers making up 22-24% of global luxury consumption. Key growth areas include fashion goods, lifestyle, jewelry, and beauty, with the Hainan duty-free market expanding by 25%. The report identifies offshore retail and the return of daigou as major growth drivers. Price differences between Europe, Asia, and mainland China encourage Chinese shoppers to spend abroad or rely on daigou services, which offer significantly lower prices. Luxury brands are advised to manage their wholesale channels and implement global pricing strategies to maintain consumption within mainland China. By 2030, excluding daigou sales, mainland China is expected to account for 24-26% of global luxury sales.

Chinese luxury market to see ‘solid double-digit rebound’

What: Christopher Knee, an Honorary Adviser at the International Association of Department Stores, argues against the notion that the department store business model is inherently flawed. Instead, he points to real estate owners' detrimental impact on these retail institutions, as seen in notable cases like Jelmoli and Globus in Zurich.

Why it is important: This perspective shifts the blame from the retail model itself to the practices of real estate investors who leverage department store properties for their gain. Knee highlights instances where department stores suffered not because of their operational model but due to the financial strategies and high rents imposed by property owners. This situation has been particularly pronounced in the UK with the collapse of Debenhams, BHS, and House of Fraser, among others.

Christopher Knee's letter to the Financial Times challenges the narrative of department stores' decline due to outdated business models. He provides examples from Zurich and the UK where real estate strategies, rather than retail mismanagement, led to the downfall of historic department stores. Knee's insights call for a reevaluation of the challenges facing department stores, emphasizing the need to distinguish between retail failures and the consequences of real estate exploitation.

Letter: Blame real estate owners for the woes of department stores

What: The IADS attended the annual Federation of International Retail Association (FIRA) gathering, a body of which the IADS is a member.

Why is it important: This article provides a comprehensive analysis of the retail industry's performance in 2023 and outlines the challenges and trends for 2024. It includes insights from various international retail associations and experts, focusing on consumer behavior, sustainability, digitalization, labor issues, and the impact of AI and geopolitical factors.

The insights are crucial for understanding the evolving landscape of the retail sector, highlighting the industry's response to changing consumer habits, the increasing role of retailers in the carbon economy, and the need for high-level skills in the face of technological advancements. It also emphasizes the importance of international cooperation in addressing these challenges.

FIRA’s retail industry insights: challenges and innovations in 2024

FIRA Presentations

Check out FIRA's guest speaker presentations below!

IADS' presntation at FIRA 2024

China's Retail industry - Kevin Peng

China Retail Unveiled - Deborah Weinswig

EU policies on Digital commerce - Luca Cassetti

What: A paper reviews how department stores could be repurposed in education centres in the heart of cities.

Why it is important: Without being as radical since this hypothesis carries the demise of department stores, having schools on the premises could be an interesting idea.

Dame Sharon White, head of John Lewis, has proposed a royal commission to address the decline in high street shops, highlighting over 6,000 UK store closures in the past five years due to factors like online consumerism, the pandemic, Brexit, and economic shifts. Given this context, innovative uses for the empty spaces left by department stores are being explored, particularly in further education.

A RIBA-led initiative has proposed repurposing department stores as educational hubs, particularly for further education. This concept is designed to cater to a diverse range of learners, including 16-19-year-olds and adult learners. The idea is to integrate these large, centrally-located spaces into the community as learning centers that provide accessible education and training opportunities.

Using Kendals in Manchester as a case study, the plan involves transforming these department stores into multi-storey learning environments. The ReStorED concept features curriculum areas that act as interactive 'shop windows', with facilities like theatres, studios, and digital spaces. This approach aims to create a mature learning environment conducive to training, re-skilling, and up-skilling, particularly for adult learners who might be hesitant to enter a traditional college campus.

The design focuses on experiential learning, connecting different curriculum areas to encourage interdisciplinary interaction, and includes features like climbing walls and indoor green spaces. Emphasis is placed on sustainable architecture, such as achieving Passive House standards and repurposing existing structures to reduce carbon footprint. Internally, flexible learning spaces are created using adaptable materials like Oriented Strand Board (OSB), and the exterior includes recreational spaces with renewable energy sources, sensory gardens, and allotments.

This venture challenges conventional norms around urban regeneration and the use of high street spaces, suggesting a transformation of traditional educational environments and integrating them into the revitalized town center landscape.

Could department stores have a new future by being educational centres?

What: The Financial Times argues that Farfetch’s woes are intrinsic to the luxury business.

Why this is important: One fundamental truth is that luxury brands are looking to increase their control on the sale of their products, and this means that business models that are successful in other industries simply do not work in luxury.

While platform companies like Uber and Airbnb have achieved significant market values through their digital platforms connecting buyers and sellers, Farfetch, aspiring to be the "Uber of luxury," faced challenges. Initially valued at $24bn, Farfetch's equity was eventually wiped out in a $500mn deal with Korean e-tailer Coupang and Greenoaks Capital Partners. The difficulty lay in the nature of the luxury goods market, which is dominated by a few major brands, unlike more fragmented markets like ride-sharing or short-term rentals.

Farfetch hosted thousands of brands, but a 2020 Bernstein analysis revealed that most were minor, with nearly 70% of them offering fewer than 50 products on the platform. Major brands like Nike and Adidas were likely driving most of Farfetch's traffic. The concentrated market structure of luxury goods gave more power to suppliers, many of whom preferred direct sales to customers, limiting their engagement with middlemen like Farfetch.

After Coupang's intervention, Farfetch remains operational but faces an unclear path to profitability. Its options include drastic cost-cutting or focusing on emerging brands, which might not have the same customer draw or willingness to pay. There's no evident solution for revamping Farfetch's challenged business model.

Why luxury goods just isn’t a platform business

What: The HBR reviews what happened in 2023 for what regards sustainability.

Why it is important: While everything is not exactly rosy, things are progressing and sustainability will increasingly have to be on every retail leader’s mind.

The year's major sustainability developments are summarized as follows:

1. Anti-ESG Movement's Impact on Companies: There was a significant backlash against ESG (Environmental, Social, and Governance) principles, particularly in the U.S. This movement, challenging "liberal values," caused controversies for companies like M&Ms, Target, and Disney, leading some to adopt "greenhushing" or reducing public discussions on sustainability. Despite this, ESG remained a crucial focus for businesses and investors.

1. China's Leadership in the Clean Economy: Remarkable progress was made globally in clean technology investments, with over $1 trillion spent, surpassing fossil fuels. China played a pivotal role, potentially peaking in gasoline demand and carbon emissions, significantly investing in solar energy, and collaborating with the U.S. on renewables. However, China's continued development of coal plants and global trends toward conservative, fossil fuel-friendly policies posed challenges.

1. Rising Regulations for Sustainability Reporting: New regulations in the EU and other regions demanded more comprehensive reporting from companies on carbon emissions and other sustainability metrics. These regulations created significant workload and complexity for businesses but are critical for transparency and accountability in sustainability efforts.

Other notable trends included advancements in "hard to abate" sectors like steel and aluminum towards lower carbon emissions, increased scrutiny of companies' policy positions versus their sustainability goals, insurance industry's response to climate change impacts, growing consumer influence on sustainability, engagement of Gen Z in sustainability discussions, efforts to quantify the value of nature, and the challenge of ensuring living wages in supply chains.

Overall, these developments signified both progress and resistance in the journey towards a more sustainable, equitable economy and society.

2023: A strange, tumultuous year in sustainability

What: The CEO of Linkedin writes in the HBR about his views on how to deal with talent management.

Why it is important: AI has the possibility to automate vast areas of work, and it is CEOs and leaders responsibility to anticipate and help the workforce to upskill.

In recent years, business leaders have faced significant changes, such as fluctuating hiring trends, evolving remote work strategies, and shifts in job types and generational preferences. However, the rise of Artificial Intelligence (AI) is poised to bring an even more profound transformation to workplaces across various sectors.

The CEO of LinkedIn highlights the urgency of adapting to these changes, particularly in the realm of talent management, to avoid falling behind. Three major shifts are emphasized:

1. Redefining Jobs: Jobs are increasingly being viewed not just by titles but as a collection of skills and tasks. This perspective helps in identifying which tasks are more susceptible to automation and which require human skills like communication and collaboration. Companies like Unilever are already implementing this approach, offering flexible career paths based on skills rather than fixed job titles.

2. Prioritizing Workforce Learning: The skills required for jobs are rapidly evolving due to AI advancements. LinkedIn data shows a significant change in the skills needed for jobs, necessitating a continuous learning approach. Companies like IBM and Genpact have successfully implemented programs focused on reskilling and upskilling their workforce to stay relevant and competitive.

3. Leveraging AI for Human Collaboration: AI is seen as a tool to enhance productivity and reduce mundane tasks, allowing employees to focus more on human-centric aspects of work. This shift enables professionals to concentrate on innovation, strategy, and human interaction, with AI handling repetitive tasks.

The article concludes by drawing parallels between the advent of the internet and the current AI revolution. Just as the internet ultimately created more jobs and opportunities, AI is expected to redefine how we work and live. The challenge and opportunity lie in reshaping work systems to be more equal, dynamic, and transparent, potentially unlocking unprecedented levels of economic opportunity and growth.

Talent management in the age of AI

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*What: IADS recently held a meeting gathering CIOs/CTOs where they shared challenges and strategies in 2023. Also, IADS partner, RetailHub was part of the meeting and invited three innovative companies to share their mission and vision.

Why it is important: The presentations highlighted the possibilities offered by AI-powered and Cloud-based solutions, from reducing return rates and cutting costs related to fit and sizing problems to real-time in-store retail media and search engine optimisation.*

3D Look: Bespoke try-on platform at your fingertips

Winner of the LVMH Innovation Award in 2019, 3DLook delivers an AI- and 3D-powered body measuring technology for better fit experiences.

3D Look helps brands and retailers increase revenue and cut costs related to product return, fit and sizing problems. The company’s patented technology allows users to upload photos of themselves as well as measurements so that the computer can create a 3D body avatar with over 80 points of measurement in under 30 seconds. The platform also enables consumers to make informed purchasing decisions by offering size recommendations and a virtual try-on process.

By simplifying sizing, the tool also simplifies sizing when customers are in-store as they can scan at home and then buy in-store. At a time when personalisation is critical for customer engagement and loyalty, knowing customers' body shape and measurements is key. For salespeople, it is also less time guessing size and more time focused on sales and customer service. Additional services are included: appointment scheduling, sending scanning links to customers at home to create a more sales-centric in-store fitting experience and body scanning for store associates' uniforms.

Results announced by the company are interesting: 80% of online shoppers using it choose the recommended size. 45% of shoppers who did not order a size recommended by 3D Look requested an exchange based on the initial 3D Look recommendation.

Why do we think this is important?

A simple tool that can greatly reduce or even eliminate costs related to fit and sizing will be able to transform the relationship with customers. Retailers and brands could also see a rise in revenue through the platform’s styling recommendations as well as the building of customer trust and satisfaction.

Learn more about 3D Look here

Advertima: Real-time in-store retail media solution

Advertima’s solution upgrades and enhances in-store retail media signage which gives an advantage to the advertiser and the retailer and creates a more relevant advertising platform for shoppers. They intend to play a big role in the Retail Media revolution with their real-time performance measurements./nbsp]

The company utilises Computer Vision and AI technology to transform physical stores into a performance media channel. Customers can be segmented instantly in-store and their movements will be tracked which will feed the funnel metrics of the shop and compute predictive reaches and segments. Relevant images are displayed according to the consumer’s identified interests. Advertima offers pilots of their solution in order for the solution to be tested. The system is able to comply with privacy regulations.

Why do we think this is important?

Retail Media is quickly gaining momentum in the industry as a prime form of advertising to consumers and is playing a critical role in the success of retail businesses. But so far, retail media solutions are mostly implemented online. By bringing the success factors of online channels to in-store, Advertima offers a solution to advertise in-store in a personalised way. Advertima’s live customer segmentation and instant performance metrics can give retailers an edge in the competitive business of audience targeting.

Learn more about Advertima here 

RetailTune: The drive-to-store platform solution

RetailTune is a Cloud SaaS platform which gathers all the tools needed for a local digital marketing strategy. The platform helps brands boost their visibility and catch users’ purchase intentions. It’s a well-known fact that users act very fast after conducting local searches, transforming to online and in-store traffic. According to Google, 76% of users who click on “get directions” on their smartphones visit the store within 24 hours. Besides, 28% of local searches translate into purchases. RetailTune aims to drive the pages of its clients to be on the first page of the Google search.  The company uses dynamic store locators and refines the GBP (Google Business Profile) of its clients to represent accurate data. During the consumer’s search phase, RetailTune makes sure the user has all the information to reach the store such as addresses, opening hours, services, promotions, photos, reviews and product availability.

Actual shopping centre case studies showed the following results: doubled views of the store locator, more than YoY doubled direct access to the store locator, individual landing pages of the tenants rank in the first positions on the first page of Google Search, store locator of the shopping centre ranks first in proximity searches on Google, +20% YoY increase in GBP  listing views and +42% increase in calls from GBP listing.

RetailTune works with many brands such as Gap, Pinko, Kiko, Liu.Jo and department stores such as OVS and Coin.

Why do we think this is important?

Search engine optimisation has become an absolute necessity for all companies as it helps to improve online visibility which leads to store traffic, more sales, and improved brand awareness. Effective search engine optimisation strategies enhance the overall customer journey, increase incremental sales and contribute to long-term success.

learn more about retailtune here 

RetailHub: IADS members’ one-stop innovation shop

Following the meeting roundup, these 3 solutions were in line with what CIO and CTOs were dealing with. Department stores’ CIOs and CTOs face an increased complexity whether it’s about choosing and setting the best platforms, systems and solutions able to increase efficiency and enhance customer experience. Innovation is really at stake as companies need to improve their organisation to generate more ideas able to make a difference. This is why the IADS has struck partnerships with solutions, such as RetailHub, that can help members find the right technology and solutions for their business needs. IADS members benefit by gaining access to RetailHub’s ecosystem of carefully curated solutions and getting connected with experts who can help them bring on the right technologies. Want to learn more about our partnership exclusively for IADS members? Contact us at iads@iads.org to get your free access.

What: The post-pandemic travel surge was a boon, but is also coming to an end.

Why it is important: as department stores know very well, adapting the offer and reverting to fundamentals is key. Brands are also adapting.

Amid changing travel trends and economic uncertainties, fashion and lifestyle brands are adapting their strategies to remain relevant and cater to consumer needs. Initially capitalizing on the surge in travel post-2020, these brands showcased vacation-centric products and marketing. However, as travel demand slows due to factors like increased expenses and shifting consumer priorities, these brands are shifting focus.

Brands previously focused on travel and resort wear are now emphasizing the versatility and everyday use of their products. They are adapting their offerings to suit more local, low-key travel and daily life scenarios, highlighting the adaptability of vacation wear for various settings. For example, they are focusing on products that can transition from beachwear to office or evening wear, appealing to a broader range of uses and settings.

Price sensitivity is another key factor, with brands introducing entry-level price points and versatile, evergreen products to attract cost-conscious consumers. This approach caters to those seeking value in their purchases, balancing aspirational items with more affordable, timeless pieces.

Brands are also planning conservatively, ready to adjust their product lines based on consumer demand and market trends. This nimble approach involves scaling back on trend-driven, seasonal products in favor of classic styles that have more enduring appeal. The goal is to maintain brand integrity and profitability, avoiding excess inventory and heavy discounting that could erode brand value.

Overall, the focus is on flexibility, both in product design and business strategy, to navigate the shifting landscape of consumer preferences and economic challenges.

What happens when the travel boom ends?

What: Liontree has collated a series of metrics to understand the dynamics of the 2023 Black Friday edition.

Why it is important: more retailers joined the game, more discounts were granted to more customers: is that sustainable on the long range?

Overview of Black Friday Performance: US and Global Insights

1. Survey Methodologies and Data Sources

Various methodologies were employed to gather Black Friday data. Adobe analyzed over 1 trillion visits to US retail sites, focusing on online retail and excluding in-store purchases. Salesforce's approach included data from 1.5 billion+ shoppers, notably covering 29 of the top 30 US online retailers. Square and AfterPay examined millions of global transactions, while the National Retail Foundation conducted a survey among 3,498 US adults.

1. Thanksgiving Weekend Shopping Surge

The Thanksgiving weekend set new records with 200.4 million consumers shopping, surpassing the previous year's 196.7 million. Global sales during this period increased by 6% y/y, hitting $298 billion. In the US, there was a 7.8% y/y growth in online spending, reaching $38.1 billion, and a 5% y/y increase in sales, totaling $70.8 billion. Black Friday and Cyber Monday saw significant spikes in online sales and traffic, with paid search being the primary driver of these sales.

1. Discounting Strategies and Consumer Behavior

Retailers globally offered average online discount rates of 27%, with the US rates slightly higher at 29%. Categories like makeup, apparel, and skincare saw the highest discounts. Interestingly, the average discount rate increased to -22% from -21% in 2022. Despite the increase in online shopping, the gap between in-store and online shoppers widened, with more consumers opting for online purchases. Black Friday remained the most popular day for both in-store and online shopping, but in-store shopping on the following Saturday saw a decline.

1. Cyber Monday Outshines Black Friday in Spend Growth

Cyber Monday's year-over-year growth in online spending outpaced Black Friday, with a 9.6% increase compared to Black Friday's 7.5%. Discounts reached record highs on Cyber Monday, especially in electronics, with discounts peaking at -31% off the listed price.

1. Future Trends and Inflation Impact

Looking ahead, the season-to-date consumer spend has grown by 7.3%, reaching $109.3 billion online. The full US holiday season online spend is expected to grow by 4.8% y/y. Despite the ongoing discounts, e-commerce prices have fallen for over a year, indicating that the increase in consumer spend is driven by new demand rather than just higher prices.

1. Mobile Shopping and BNPL Popularity

Mobile shopping has overtaken desktop, with 59% of online sales made through smartphones on Thanksgiving. The use of mobile wallets in the US also saw a significant increase. Additionally, Buy Now Pay Later (BNPL) options grew in popularity, with an 8% y/y increase in overall orders and a record high on Cyber Monday.

Black Friday 2023 KPIs: more volumes, more discounts

What: Coresight reviews Shein’s metrics prior to its IPO.

Why it is important: Unless a major regulation changes, Shein is poised to remain a major threat to department stores involved in fashion.

Shein is the leading fast-fashion retailer globally with estimated revenues of $23 billion in 2022 and 18% share of the global fast-fashion market. Coresight expects Shein to gain more share through 2027. 13% of surveyed US apparel shoppers had purchased from Shein in the 3 months prior to September 2023, making it the 7th most shopped apparel retailer. 18% of 18-29 year olds surveyed shopped at Shein. Shein ships to over 150 countries and has over 6,000 supplier factories, mainly in China. It targets Gen Z consumers. Shein is expanding into new categories like home and beauty and has opened its first permanent offline store. New North American distribution centers will aid its rapid fulfillment model. As a fast-fashion disruptor, Shein poses an intense threat to incumbent value/discount apparel retailers in Western markets who have lagged in e-commerce. Sustained rapid growth for Shein could steal market share from legacy fast-fashion players like H&M and Inditex as well as offline-skewed discount retailers.

Report: Shein in Numbers as It Files for a US IPO

What: Coresight explores six low-hanging fruits in AI implementation.

Why it is important: the hype is great, but as shown by the 2024 Academy topic, making choices in implementing AI is not that easy.

Coresight focuses on strategies for brands and retailers to leverage generative AI to innovate and grow in the competitive retail sector:

1. Market Potential: The generative AI software market is projected to grow significantly, from $5.7 billion in 2023 to $74.8 billion by 2027.

1. Implementation Steps: Companies should follow specific steps including setting objectives, choosing between buying or building solutions, organizing data, selecting and training AI models, creating content, and reviewing it.

1. Enhancing Product Descriptions and Designs: Generative AI can speed up the creation of product descriptions and designs, improving efficiency and resonating better with target audiences.

1. Personalised Digital Marketing: Utilizing generative AI for personalized marketing campaigns helps in forming deeper customer relationships and maintaining brand consistency.

1. Improved Customer Communications: The use of generative AI in customer service, like chatbots and natural-language interactions, enhances customer satisfaction and accessibility.

1. Data-Driven Decision Making: Generative AI enables retailers to extract valuable insights from diverse data sources quickly and in compliance with privacy standards, aiding in more informed decision-making.

1. Boosting Employee Productivity: By automating routine tasks and providing AI-driven training, generative AI can increase workforce efficiency, allowing employees to focus on more valuable tasks.

1. Optimising Product Development: Generative AI aids in the product development process by facilitating rapid design iterations, integrating various data, and streamlining analysis.

1. Competitive Advantage: Brands that effectively integrate AI into their strategy, like Coca-Cola and Levi’s, gain a significant competitive edge. Retailers who lack a clear AI and data strategy risk falling behind.

Coresight Research emphasizes the transformative potential of generative AI in retail, offering opportunities for enhanced efficiency, customer engagement, and business growth. The technology's ability to process and create content using human language without coding is particularly noted as a key advantage in the competitive retail landscape.

Six quick wins in AI for retailers

What: A non-exhaustive list of the challenges CEOs will face in 2024.

Why it is important: it ranges from the most futuristic (AI) to the most mundane (pay rises).

Rise of AI and Geopolitical Challenges: 2024 is unlikely to offer a major turning point with challenges like the rise of AI impacting employment and complex geopolitics, including the Russia-Ukraine conflict, affecting the economy and causing inflation.

• AI's Role in Business: Business leaders, like those from Depop and Bupa, see AI as more than an efficiency tool, with potential to enhance user experience and assist in areas like healthcare diagnostics. Upskilling staff in AI is becoming a priority.

• Human Oversight in AI: Importance of human supervision in AI, especially in media and content creation, to avoid issues like deepfakes.

• Approach to Pay Rises: Amidst cost-of-living crises, businesses need to balance pay rises with operational costs. A pragmatic, proportionate approach is suggested, focusing on lower earners first.

• Political Stance of Businesses: Companies advised to comment only on relevant issues, avoiding alienation of certain groups. Real-life actions, like Bupa's support for Ukrainian refugees, are preferred over performative gestures.

• Importance of ESG: Strong ESG (Environmental, Social, Governance) credentials are increasingly important to consumers, especially Gen-Z. Businesses need genuine commitment to ESG strategies, not just as an add-on.

• Diversity and Inclusion in Workplaces: Progress in diversity and inclusion is crucial for attracting and retaining talent. Companies should view diversity as an opportunity.

• Resilient and Progressive Leadership: Success in 2024 hinges on leaders' ability to keep people within and outside the organization happy, openness to feedback, willingness to learn, and thoughtful decision-making about public statements and actions.

• Navigating Tough Times: Despite difficulties, success in 2024 is possible with careful scrutiny of costs and decisions, and a focus on long-term value.

2024 leadership trends – understanding AI and coping with perma-crisis