What: The alternatives to cash are starting to dominate as the pandemic accelerates the importance of digital options.

Why it is important: For governments, getting rid of cash would cut costs and make it easier to crack down on tax evasion and drug trafficking. And stores could reduce cash-handling costs, reduce theft and possibly earn more if faster checkouts lead to more transactions per hour.

Since 2018, debit cards have been used more than cash in the United States. The global pandemic smothered the use of cash even more as people were worried about the spread of the virus. In Seattle and Sydney, some merchants have stopped the use of cash altogether, calling it unsanitary. But some US cities have made cashless stores illegal as it is seen as discrimination.

Although governments and business such as stores can see many positive sides to going cashless, some people are weary as it puts a lot of power into the hands of the government and banks. And in the developing world where phones and internet are not present, cash and cents are still being used to buy goods.

The End of Cash

What: A growing number of developers are seeking to rebuild both the financial system and the internet economy using blockchains- databases distributed over many computers and kept secure by cryptography.

Why it is important: The promise of De-Fi is that it could lead to a better kind of finance: a system that is quicker, cheaper, more transparent, and less reliant on powerful centralised institutions.

The ultimate goal of the blockchain is to replace intermediaries like global banks and tech platforms with software built on top of networks that direct the value they generate back to the users who own and run them. Of all digital activities, these efforts towards decentralizing finance that are most advanced.

Decentralised finance (DeFi) seeks crowdsourced control that many deem unreachable. But piece by piece a new kind of economy is being built through applications on various blockchains. Each addition makes it more likely that the whole will amount to something meaningful and powerfully disruptive.

Innovations, such as automated marketmakers, arbitrage systems, and self-stabilizing currency regimes, are already pushing the boundaries of financial technology. Can decentralized finance lay the foundations for an open digital economy?

Decentralisation offers an alternative: interoperable, transparent, often efficient systems that, by distributing control over software, guard against the concentration of power. On a blockchain, the software governs the hardware. Once a decentralised foundation to store and execute lines of code has been laid, anything can be built on top – assets or applications.

Adventures in defi-land

PRINTABLE VERSION HERE

Created 2 years ago, Pando Fashion is a French company specialised in consulting for sustainable fashion. Its co-founders Laëtitia Hugé and Stéphane Piot are helping companies every step of the way in their CSR implementation, starting with a diagnosis using certification ISO 26000, to building custom strategies and embarking all teams. Pando Fashion is working with companies such as Moncler, Louis Vuitton, Zadig & Voltaire, Besson Chaussures, IKKS, Maje, Sandro, Lemaire, Institut Français de la Mode (French Fashion Institute) and with BTB fashion platform LeNewBlack. Why Pando? It’s the name of the oldest tree in Utah in the US, and it also means transmission in Latin.

Where and how to start with CSR

*IADS - How do you advise your clients to approach customer-facing initiatives (like product and brand certifications and labels) versus operational initiatives (using more efficient light-bulbs...)?*

Pando Fashion – First of all, they have to keep in mind that many factors are considered in a product lifecycle: raw materials and factories of course, but also logistics, carbon footprint, impact of store operations (such as energy consumption, waste…). Then comes the consumer’s part of the product lifecycle: use of the product, washing habits and recycling... Each step of the product lifecycle corresponds with specific actions: from customer-facing ones with the use of labels and certifications for sustainable or recycled materials for instance, to corporate communication for company energy consumption.

*IADS - Sustainability is a lifelong project, it has to be maintained over time. When does Pando step in or step out of the process and how do you set up organizations to tackle these issues for the long-term?*

Pando Fashion – Of course, we can start at any step of the CSR journey, whether it’s from the diagnosis phase or to support a company once its strategy is set, or on specific projects. We are helping companies that are at the very beginning of their CSR project, and others that are quite advanced. Sometimes companies think they have done nothing yet, but in fact they already have set actions which we will use as levers to move forward faster: that’s also what the diagnosis phase is made for.

Ideally, we step out when the company is autonomous on the CSR topic, which means they have enough knowledge and reflexes to continue implementation or run a new project by themselves. Also, there would be no point running long missions as we are helping companies to focus on what is the right part of CSR for them.

*IADS - Sustainability starts from the supply chain. How does your firm support optimizing it and creating a greener process from the beginning to the moment the products reach the customers?*

Pando Fashion – It’s a new mindset between manufacturers and brands. First thing is to get as much traceability information as possible on all production tiers: tier 1 is for the factory making the product, tier 2 for the fabric, tier 3 for the treads, and tier 4 is for the raw material. We will work on both processes (where the product comes from, how many tiers are they) and tools (helping to follow traceability). The more tiers you have, the more difficult traceability will be.

When we are dealing with questionable products, we will advise brands on how to help manufacturers improve their process, as you don’t change suppliers overnight. Pando is also helping brands to prioritize.

For instance, in the case of a leather bag, the biggest impact comes from the leather as the tanning process is easy to improve. Then comes the metal parts: since there is not much traceability for brass and steel, we will recommend the use of alternative metals.

How to avoid greenwashing

*IADS - How do you help your clients avoid greenwashing and achieve authenticity when tackling sustainability and communicating their efforts?*

Pando Fashion – The rule is simple: first, do something, be humble and then communicate. You must have consistent results before communicating to customers. Some companies want to start communicating as soon as they have their strategy set, but that is way too early. Sometimes it’s the opposite as some are too cautious. Several levels of communication are possible: proportion of sustainable materials, of local production, etc…

It’s also very important not to overwhelm customers with too much information. Consumers are focusing on what is in front of them: the product. It bears the first level of information: the product tag informing about materials or “made in”. The second level is the retailer’s website providing more information. Another level can cover the store energy consumption question, the HR inclusivity policy: usually such information is for the corporate communication level.

*IADS - What is the biggest mistake that you see retailers making when it comes to approaching their sustainability initiatives?*

Pando Fashion – The biggest one is about the amount of communication compared to the reality and authenticity of actions. For instance, H&M used to over-communicate on their Conscious line. It was too much knowing this line was only 10% of their global offer, so they were accused of greenwashing. Even though companies such as H&M know being more sustainable is necessary, their business model and price point don’t allow them to have more than 10% of sustainable products.

On top of that, H&M and most retailers have to address all customers in their communication. Usually, we consider 10% of consumers are engaged in sustainability, they are considered activists. 60% are interested in the topic but won’t necessarily buy sustainable products, 20% don’t care and 10% are against sustainability. In that sense, the easiest way to be sustainable is to be sustainable-native.

Pain points and success stories

*IADS - From your experience, what are the pain points retailers are coming across?*

Pando Fashion – The ambassadors of sustainability are the sales associates, and they are hard to convince since they consider that sustainability equals an additional workload. When it comes to sales associates, there are different strategies. With Besson Chaussures, we trained the sales managers in each store for them to become the store go-to person for CSR questions. Considering their position in the organisation, they were ideally positioned to encourage sales associates. With Moncler, we had distance training directly with sales associates. In any case, and as for customers, it’s important not to overwhelm them with too much information but feed them with key elements that can easily be shared.

*IADS – Resources are limited for retailers when approaching CSR. How do you help organizations find and allocate the resources, within the existing teams, to execute, promote and train on CSR?*

Pando Fashion – Since they don’t have any internal knowledge, most of the brands and retailers are asking for external help at the beginning of their CSR journey. On top of helping them start the process, we are suggesting the most efficient and least time-consuming organisation. The key idea is autonomy: CSR has to become part of the company processes as for instance; digital working is. We also help customers in their research of CSR managers. When the latter are being internally promoted, we are training and coaching them.

In CSR, we work with 3 pillars: environment, social and economics. CSR is often put under the HR umbrella because of the social component. What works best, according to us, is to have a CSR global director and one manager for social questions (working with HR) and one for environmental questions (working with product and marketing). In a way, as for digital functions, CSR functions might evolve, reduce or even self-destruct, once CSR is implemented and infused in the company.

*IADS – Can you share any success stories or examples of retailers that are excelling in their efforts or approach?*

Pando Fashion – With the multi-brand luxury menswear chain Lothaire, we started the process from the values and DNA of the company to build their CSR policy. For instance, they are very much committed to services and local communities. Starting from that, we helped them build and increase their repair service and to create a second-hand shop-in-shop.

At Moncler, the training of sales associates was organised online more like a conference than as a training. It was perceived as something motivating, and absolutely not as an additional task. They really felt proud to be included in the company’s CSR strategy. As a result, the training answered many questions: CSR of course, but also motivation, communication and belonging. These are key components, especially at a time where retail staff is scarce. Such actions are also part of the employer’s brand and of its attractiveness.

Measuring ROI

*IADS – What are the KPIs you’re using to measure the impact of Pando’s actions (cost impact, share of organic materials, carbon impact…)?*

Pando Fashion – There is no definition of sustainability today so it’s up to each brand and retailer to set their own definition and to be very clear about it. Yet, the first KPI all brands are monitoring is the share of sustainable products in their offer. The ‘made in’ share is also an important KPI. Limiting the number of SKUs and increasing the share of carry-over products is also monitored: in that sense, sustainability supports margins. The share of labels and certifications used along the supply chain is another KPI. KPIs will differ depending on retailers and CSR strategies, business model and DNA. In any case, retailers should prioritise and decide the KPIs to focus on.

*IADS – What are the most important KPIs retailers should use to measure the ROI of their sustainability efforts?*

Pando Fashion – The most important today is the share of sustainable products in the offer. It’s also the easiest message to convey to customers, especially with all the labels that can be confusing to shoppers.

Issues with labels

*IADS – There are many labels (BCorp, Amfori, GOTS, etc...) that are very confusing. On top of that, retailers are starting their own labels. What are your thoughts on the over-complication and multiplication of sustainability labels? Does this really help consumers or is this something that retailers are doing to showcase their efforts?*

Pando Fashion – As long as we won’t have a global and single label, it will be very difficult to facilitate communication with customers. Yet, labels are of some help to customers as they are speaking to 70% of consumers (the 10% activists and the 60% open to CSR questions). We advise brands to focus on 6 or 7 labels, not more: among them are GOTS (Global Organic Textile Standard) and OCS (Organic Content Standard) for organic raw materials, GRS (Global Recycled Standard) and RCS (Recycled Claim Standard) for material recycling, RWS (Responsible Wool Standard) for animal welfare and LWG (Leather Working group) for responsible leather.

As for labels such as Galeries Lafayette’s Go For Good and Printemps’ Unis Vers Le Beau, they are helping the consumer in the end. It’s a good initiative since we don’t have a global label yet. For sure those labels have weaknesses as they cannot be perfect, but they are transparent: you can go on the corporate websites and have reliable information about the rules and criteria used. Of course, such labels might become useless when a global label will exist.

*IADS – Do you think any particular label or certification will outlast the others as the main one that retailers should obtain?*

Pando Fashion – The strongest is GOTS especially because of its traceability rules. GRS really secures authentic recycled materials. When it comes to animal welfare in wool production, RWS is the best. In any case, in order to facilitate communication and be pedagogic, retailers should explain in a few words what are the labels and why they are good.

*IADS – What are the main topics/issues that your firm is focusing on in the next 2 years?*

Pando Fashion – In the next 2 years, Pando Fashion will work more on the customer’s autonomy. To that end, we will give access to more information on our website to transform it into a platform. All companies have to enter the CSR topic. Right now, it’s still considered as an added value. In 2 years, it will be a standard so retailers should act fast. The sooner the better!

Contact: Stéphane Piot

stephanepiot@pandofashion.com

+33 6 63 78 12 19

Credits: IADS (Christine Montard)

What: Visa’s take on the current and coming situation of global retail.

Why it is important: The situation is not as bleak as it seem: the current top 5 destination does not represent the future, and short/medium haul travels are already back to 2/3 of their 2019 levels. Visa expects the situation to return to normal sooner than what metrics currently show. However, the report does not make any mention of the Omicron variant.

Visa is taking stock on the global travel market, which by then was expected to reach 280m travellers within 2025, while it actually fell to 55m in S1 2021. Visa expects however that the return to previous expectations could be sooner than what current metrics show. It seems that as soon as the vaccination processes in various countries, as well as the reopening of borders, come into effect, the rebound is stronger than anticipated. Short and medium-haul trips are already at 2/3 of their 2019 levels.

However, the map of popular destinations has shifted: while Paris, London, Barcelona, Istanbul and Amsterdam represented the top 5 destinations in 2019, in 2021 the top 5 was made of Istanbul, Antalya, Dubai, Balearic Islands and Paris. Visa expects that these travel patterns, due to global restrictions, are temporary and that does not represent a glimpse of the new “travel normal”.

What: Benedict Evans, a tech analyst, shares his understanding and views on a broad range of topics, all linked to the evolution of tech.

Why it is important: Web3 or Metaverse are not as technical as they sound, as they could literally disrupt whole industries, including retail.

Benedict Evans often has an iconoclast view on how to analyse news and what is going on as a whole on markets, through self-speaking slides with interesting numbers. This year’s report makes no exception, and we suggest you review the following slides:

• Slides 37 - 40, about digital transformation, cloud expansion, resistance of old paradigms and the rise of “hyperscalers” which echoes what is taking place in retail,
• Slides 60 - 68, about the rise of e-commerce, but also its national specificity, with markets not evolving at the same pace, and how to look at it (the question is not who buys something online, but how, and how products are delivered), with the example of Amazon vs. Walmart, and Shopify,
• Slides 70 - 75, about the change’s digital brings to commerce as a whole and how brands operate and sell, including the spectacular rise of Shein.

Ben Evans systematically asks the same question: are we talking about tech as an end that changes the market, or as a new tool which allows to do things differently without altering the fundamentals (for instance, in his view, Amazon is a new iteration of a department store).

Benedict Evans’ presentation for 2022 

printable version here

Keeping markets under close watch, IADS collected creative disruption concepts from retailers around the world. This series of stores offers astonishing displays that will give customers a whole new view of today’s physical stores.

Check out how retailers are using creativity, technological innovation and modern thinking to upgrade customer’s shopping experience.

Anya Hindmarch, London

Anya Hindmarch‘s audacious opening of five separate establishments creates the illusion of a small village in London‘s chic Chelsea shopping neighborhood. The innovative cluster of spaces is anchored by Anya Café, a stylish place to sit and have a bite or a drink. ‘The Village’ is set up as an evolving retail concept, and as such the cluster of spaces will see regular tweaks aligned with Anya Hindmarch‘s creative scope as time goes by.

MORE ON Anya Hindmarch, London

Choosebase, Tokyo

Seibu’s new Choosebase store tackles the OMO trend (online merges offline). Through the use of QR codes, the customer’s chosen products are virtually placed in baskets to be picked up at the exit of the store, removing shopping carts to enhance the Instagram-worthy experience.

MORE ON choosebase, Tokyo

Haus, South Korea & China

Haus is Gentle Monster’s new innovative and disruptive step in upping the ante to develop shopping experiences. The concept incorporates the experiential creativity and vision of Gentle Monster, while encompassing sensual artisan cosmetic brand Tamburins and fantasy-inspired dessert restaurant Nudake. The spaces are infused with contemporary art pieces including a wall art installation covered in tree branches which aims to express the intersection of luxury and rawness.

More on Haus, South Korea & China

Harmay, China

Harmay, known for creating design-led retail spaces, has opened impressive experiential stores in Shanghai and Beijing. The company’s turnover is largely based on online sales, but it uses the physical stores as an e-commerce fulfillment site. On top of typical beauty products, the stores extend the offer by selling fruits and tech products.

More on Harmay, China

![cannabis 1

SuperMarket, Toronto

The latest outpost of Toronto's Stackt Market is ‘SuperMarket’, a cannabis store with a playful design. The new store is located in a shipping container and features an interior design aesthetic that is inspired by a traditional neighbourhood grocery store: retro elements are infused with a palette of popping colours, giving a slight cartoon impression.

more on SuperMarket, Toronto

![Figure Eight

Figure Eight, NYC

Figure Eight is a 100% sustainable popup in downtown Manhattan that is all about green and vegan goods, not to mention women’s empowerment and climate action charity. The luminous boutique offers a beautiful selection of sustainable brands and during the tenure of the pop-up founders aim to offset 100% of its carbon emission and water consumption, verified by a certification body.

more on Figure Eight, NYC

What: The new GDR report dedicated to innovative thinking.

Why it is important: This season, they discuss about New Retail (omnichannel on steroids), metaverse and local fulfilment.

GDR, a UK-based IADS partner, regularly spots retail concepts and trends across the world. They have recently launched the GDR Assembly, a curated panel of specialist innovators and thinkers. This time, they gathered Mei Chen, head of fashion and luxury from Ali Baba, Andrew Ku, CEO of Unmateriality, and Jason Soar, CEO of Thinkthru, to discuss new retail, metaverse and local fulfilment.

• New Retail is a term coined by Alibaba to deeply mingle online and offline, i.e. omnichannel taken at the next level, through seamless integration. Concretely, this translates into stock unification (no more distinction online and offline), use of livestreaming to created a connection (often thanks to KOLs) and massively invest in AR and gamification.
• The Metaverse, a term very much in fashion these days, is a virtual world where everybody can have another life, another economy and another personality. This is a strong nod as well to New Retail, as this involves AR, omnichannel experience, but also goes further, with virtual showrooms and stores, and virtual products for avatars. Retailers are encouraged to address metaverse by seeing it as a new brand platform enabling them to capture more customers and create brand equity.
• Local fulfilment is all about quick commerce, seen as the contrary of a supermarket. It is all about using automation & omnichannel fulfilment techniques to make sure that the product arrives in the hands of the right customer, at the right moment (day and night), extremely quickly.

The GDR Assembly Report Vol. 2

What: The Green Pea Manifesto, detailing their strategy to respect the planet.

Why it is important: This documents is designed to be both a windows for final customers and suppliers, but also for the company’s management and employees itself, allowing them to remain aligned on the same set of rules and share the same vision.

Green Pea has placed sustainability at the center of its own business model. As a consequence, they have decided to write a simple set of 10 rules that are not only a behavioral declaration or a set of commitments, but more importantly, a self-constraining set of guidelines for their present and future actions. Explaining where they go and how, this document allows to have a deeper understanding of Green Pea’s strategy and how they have integrated CSR at the core of their model.

Green Pea Manifesto and White Paper

What: Gusto Luxe draws the 6 key trends going on in the Chinese market when it comes to Luxury.

Why it is important:  Half of the Luxury market will rely on China by 2025. It is therefore highly probable that luxury brands will integrate China at the core of their product and communication strategies, which might by ricochet impact the rest of the world and non-Chinese retailers.

Gusto Luxe, a consulting company based in China helping luxury brand addressing this particular market, shares its view on the development of the Chinese luxury market, which will become the world’s largest luxury  market by 2025. Specific mechanisms currently at work, such as the borders closure due to the Covid-19 pandemic or the “common prosperity” policy, might not make this particular market easily readable, which is the reason why Gusto Luxe aims at providing a few keys to understand it:

• Health is the new wealth, and this was even further accelerated by the pandemic. As a consequence, this should favor specialized brands, or the ones creating dedicated collection for sportswear, including winter sports, as this is the new rage in China,
• Since borders are going to remain closed until the end of 2022, it is expected that local tourism is going to boom, leading to a hunger of experiences and discovery. This should favour outdoor, as well as new stores in unusual locations,
• The Chinese pride is also expected to increase. Authentic content creation will be key.
• The Chinese market is also very advanced compared to other ones; livestreaming, KOLs including virtual ones, NFTs… all should be part of luxury brands strategies in the country
• The goal of sharing prosperity will also open up new opportunities for brands, especially for the ones catering for the mid-part of the desired “olive-shaped” society,
• Purpose will remain central to the younger buyers as well.

Key trends in luxury in china

What: Experts consider that the Saks and HBC split move, which were not understood at the time, might become the norm on the market.

Why it is important: This is a financially-backed approach which could reflect the lack of faith in stores on the long-range, but would also propel the e-commerce part of the business into a new territory, where giant companies are already operating.

Retail Dive looks at the reasons why some US department stores decided to split their e-commerce activities from their overall business, and why this could become at the same time a general trend, but also a dangerous action to carry for the other companies.

Saks 5th Avenue and the Hudson Bay Company have already taken the jump, mainly, according to Retail Dive, more for financial reasons than operational ones.

Since March, Saks Fifth Avenue split into Saks.com and SFA with a fleet of 40 stores. Such a move required to designed 150 transition agreements and 150 operating agreements to govern the new relationship between the 2 sister companies. This led into significant communication difficulties between them, creating frictions and issues.

However, in spite of that, the move allowed to pocket a significant amount of cash in the case of Saks, USD 500m from new investors in Saks.com, and more might be coming in if the valuation of USD 6b when going public became real. The catch is that Saks.com keeps the merchandising, buying and marketing capabilities, as well as IP, which are rented to SFA, while SFA rents its BOPÏS, return and alterations capabilities. In other words, the e-commerce company has the full power and might spell doom for stores in the mid to long range.

Analysts think that Macy’s and Kohl’s might be next. However, not all think that this might be the best move ever for department stores, which, with such a split, might trade a difficult market to another one, much more competitive.

Why are department stores a target for e-commerce spinoffs?

What: The 12th report from World Retail Congress, a long-time partner of IADS.

Why it is important: This report also lists the awarded companies at the London Summit which took place last September. 2 IADS members were awarded: El Corte Inglés (Community Champion Award), and SM Supermalls, part of the SM Group (Customer Experience Gamechanger).

The 12th issue of the WRC is addressing the after-effects of the pandemic for the retail world, especially the issues caused by the end of the lockdowns on supply chains and customers’ mood, now that the initial euphoria is somehow calming. The new world is highly unpredictable, and this is why this report highlights the most important issues faced by retailers in their category or region:

• Logistic issues, leading to goods planned to arrive after the holiday season and therefore having to be discounted, are hardened by the staff shortage experienced in all countries. Consequently, it is expected that private labels and nearshoring will be highly favoured in the coming months (however, with consequences on prices as nearshoring has a cost),
• The pandemic has unlocked two strong trends: the need for store digitization, and sustainability, according to customers’ own terms. Gone are the days when retailers were the only one dictating the terms: now customers are expecting retailers to fully adapt to their own needs and demands, especially when it comes to how they shop.
• Uncertainty is fuelled by the surge of Covid variants and the impossibility to eradicate it, which boosts customers’ lack of confidence, regionally and temporarily. This leads to the fact that Online buying is here to stay, including for the older customers. Therefore, physical stores are not anymore competitors to online but must be re-engineered in complements to this channel. Furthermore, this fuels a circle: the pandemic leads customers to shop online, and then they realize that this is convenient, leading to a sustained demand for such convenience.
• When it comes to sustainability, it is all about communicating clearly to customers eco-labelling, certifications, and partnerships, to make sure that efforts made by retailers are clearly understood and perceived.

Due to the permanent uncertainty, the business planning process has changed:

• In the past, inputs were defined by historical performances, topline financial targets and broad industry outlook. Now, retailers must look at performances during similar disruptive periods, real time input from internal and external sources.
• Outputs were planned according to top-down targets. Now bottom-up targets based on granular inputs are used.
• Planning was made seasonally and is now revised monthly.
• Excel was the norm, and has been complemented with new tools (Microsoft BI, Tableau…) allowing to track in real-time, simplify, understand, and make decisions.

WRC report issue 12

What: MIT Sloan management review argues that the current supply chain crisis has nothing to do with Just In Time management techniques.

Why it is important: Many IADS members are feeling the pinch, however none is in the situation to have sur-stocked products and being forced to discount them ahead of the season to save space.

MIT Sloan reviews the causes and consequences of the current supply chain crisis, which is impacting retail in a significant manner, as analysts consider that it will disrupt the normal holiday season discount pattern.

Due to the pandemic, customer demand shifted significantly across categories. This lead to prices increases but no relief regarding shortages, due to external factors:

• For instance, shipping companies were not able to cope with demand once lockdowns were lifted, with many ships blocked outside ports waiting for their turn, leading to a global shortage of containers, therefore increasing their prices).
• Another example from the automotive industry: car sales plummeted during lockdowns, while high tech products, also consuming chips, skyrocketed. Once customers went back to car dealers, the demand could not be met due to chip shortage, even leading to an increased demand on second-hand cars.

The situation has been worsened by hoarding (both from customers and companies) which created stress and tension on parts of the supply chain elements. In addition, demand increased thanks to various governmental incentives across the globe, initially designed to support families, who in turn spent the money into their consumption.

MIT Sloan Management Review argues that this supply chain crunch is unrelated to Just In Time methodology, as many media outlets tend to claim, by pointing out the following elements:

• JIT is not about reducing costs, but about improving quality (by avoiding waste of time and anticipated production),
• JIT is all about flexibility, meaning that it is a much more resilient and adaptative system than others,
• JIT avoids deep inventories and the associated liability (as we see in the US with retailers buying stocks long ahead the holiday season, and forced to sell them at a discount rate to clear space, also disrupting the customer pattern at the same time).

The example of Toyota is brought on the table, as the car maker has been navigating much better than others in the industry thanks to the JIT methodology application, even though the duration of this crisis also ended up impacting the company.

MIT Sloan management review anticipates that the crisis might last until Q2 2022, unless further shortages are indirectly created by new government-led incentive operations.

What everyone gets wrong about the supply chain crisis

What: A visual roadmap designed by Gartner helping to assess all pending emerging technologies priority and importance for large corporate companies

Why it is important: Following the CEO exchange during the General Assembly, the notion of being aware of the “next next” technology and being able to start addressing it while also managing the current priorities was widely discussed. The main issue remains the arbitrations in terms of priorities, according to realism, means and risks. This roadmap can be an interesting and simple tool for IT teams to start addressing priorities.

Gartner has compiled data and information from 437 IT professionals coming from large organisations to assess 111 emerging technologies, sorted by theme: network, computer infrastructure and platform services, storage and database, IT automation, digital workplace, and Security. Key takeaways from this information collection are:

• IT leaders witness a significant acceleration on the adoption of new technologies, thanks to adequate investments. These investments are helping, among other challenges, the talent shortage, which is growing increasingly painful,
• Self-service delivery technologies and cloud technologies are the most important ones to consider according to the IT professionals,
• Another topic of concern is infrastructure security, especially when it comes to endpoint devices,
• Optimization of investments is central to the topic, leading to plateauing demand for new digital workplaces, automation related technologies and storage/database.

Gartner Identifies Key Emerging Technologies Spurring Innovation Through Trust, Growth and Change

What: Companies with high pricing power are highly considered by financial analysts in periods when production or sourcing are difficult.

Why it is important: Department Stores might be affected by increased wholesale prices unilaterally applied by their partners and might have to also go a stress test when it comes to increasing their own retail prices as a consequence to maintain margins.

The Economist reports that, recently, major retailers and companies increased their retail prices in order to maintain their margins intact even though the cost of production (raw material, manpower) is increasing. For instance, McDonald’s has increased its retail prices in the US by 6%, and so did PepsiCo, Procter & Gamble, or Hilton. The most important is that this retail price hike was passed on customers without impact on the final demand, nor generated any backslash. This ability to maintain margins is, unsurprisingly, quite appreciated by Wall Street analysts.

The Economist identifies the characteristics of companies which enjoy this possibility to increase prices without being impacted by customer demand: they are usually dominant in their market, significant in terms of company size and market share, and usually in consumer staples, communications services, and IT (and no, for instance, energy, financial and material companies). Interestingly, UBS also identified that, usually, companies with high pricing power generate low ROI in ‘normal times’ but produce high returns in tension moments such as the one we are currently going through.

However, so far, these observations have been made on a limited period of time. No one really knows how the market and situation would evolve in the case the current situation drags on indefinitely.

Pricing power is highly prized on Wall Street 

What: McKinsey reflects on how to organise sustainability with business performance and profitability in mind.

Why it is important: Companies can make money or earn a few productivity points if sustainability is addressed properly, which is still seldom the case. It is still seen as a side area including a significant amount of reporting, and not enough addressed as an actionable component of the business per se.

Even though sustainability is an increasingly important topic, most of the companies remain ill-equipped in terms of organisation and how to treat it as a material business issues (away from investors relation, PR and CSR).

Instead of having reporting and relationship coordination capabilities, McKinsey argues that organisations should empower executives and hold them responsible on the impact created.

This implies making clear choices on the topics inserted in the sustainability umbrella: new low-carbon businesses, green products, environmental and social compliance…. McKinsey then suggests 4 approaches :

1) Design according to sustainability topics, not sustainability overall. Sustainability is a catchphrase that can include many elements. Topics that matter in sustainability should be the ones important for the business or where the company is positioned to make a difference. In order to assess this, the evergreen materiality assessment method can be helpful to design a short list of priority topics. Also, when it comes to reporting sustainability work at the topic level, McKinsey suggests that a modular organisational design is better than one holistic, central organisation. For instance, some business units might be better equipped to follow and report a specific topic than HQ.

2) Give your central sustainability team the decision rights to execute changes. Large teams are not a prerequisite to be successful. What is key is to make sure that the teams in charge have the mandate to incubate new ideas and integrate them within the company. This involves the possibility to engage the board of directors on topics, to hold others accountable, enlist the needed leaders and define the agenda.

3) Find the structure that best fits sustainability agenda and the organisation as a whole. There is no ideal structure when it comes to sustainability.

McKinsey identifies general patterns:

• Large central team with few business-unit resources,
• Lean central team with decisions rights and many business-unit resources,
• Central teams that deploy agile or SWAT teams to business units.

4) Prioritize the design of processes and governance rather than reporting lines, that account for sustainability’s complexity and dynamic nature. It is critical to think about redesigning sustainability -related processes and governance early on, according to some guiding principles:

• Central teams should be empowered to make decisions on topics that individual business units can’t resolve on their own. If they can’t neither, the topic should go up to the C-Level,
• Set aside a pool of capital allocations dedicated to sustainability initiatives, as they have different risk-return profiles and uncertainty than other investments,
• Develop specific metrics taking on the good business practices: setting measurable targets (both financial and non financial), establishing incentives, and set up performances review.

organizing for sustainability success where and how leaders can start

What: The luxury department store company plans to win shoppers with redesigned stores thanks to a USD 200 million investment in enhancing services, faster shipping and digitised personal shopping.

Why it is important: The idea behind the Neiman Marcus strategy is to invest into its existing luxury customer base by offering perks like faster shipping, digitised personal shopping and premium retail spaces, assuming luxury brands will stick with the department store at a time when they want to cut out wholesalers entirely.

Nearly a year after exiting bankruptcy, Neiman Marcus Group is investing USD 500 million into a growth strategy that includes direct-selling technology and building a faster logistics network.

USD 200 million will be invested in store renovations to build out lounges, coffee bars and alteration services. In a post-Covid world, the company is betting that in-store services and amenities will further foster customer loyalty.

With shoppers returning to stores post-Covid, Neiman Marcus has seen an uptick in sales.  They grew 6% compared to 2019 during the company’s fourth quarter, which ended in July. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) in its fourth quarter grew to about USD 100 million, more than twice what the company earned in 2019, it said. E-commerce sales in fiscal year 2021, which ended in July, hit USD 1.2 billion, with digital sales representing 35% of the company’s total revenue.

To further develop the business, Neiman Marcus has been refreshing its product assortment. Neiman Marcus has been investing in its supply chain, including updating the technology in its Pennsylvania and Texas fulfilment centres so that it can offer same-day or two-day delivery to customers.

A challenge remains though. Some luxury brands are tightening distribution to cut out wholesalers like Neiman Marcus entirely. A landing page for Gucci from Neiman Marcus’ website in 2019 touted handbags, shoes, clothes and even kidswear from the brand. Today, the same page lists seven stores where Gucci merchandise is available and links to sunglasses, jewellery, and fragrance available online. Neiman Marcus is “currently working with Gucci on evolving our online approach and new partnership model in a way that supports both of our strategies.”

Inside Neiman Marcus’ Post-Bankruptcy Playbook 

What: Retail Dive reviews Target’s private label business’ reasons for success.

Why it is important: Private labels are a powerful method to generate incremental sales by capitalizing on the retailer’s name. It will also be a strong differentiator in the future, meaning that the days of private labels as ‘cheap’ options with low prices might be gone, in favour of strong, desirable brands at the right price and quality.

Target introduced its range of private labels back in 1995, in food first, and then expanded into home, healthcare, apparel and electronics. As of today, Target manages 48 private labels, and 10 of them are worth a billion dollars. The strategy pursued is all about upgrading quality and brand perception, and this is a path now followed by other US retailers. Walmart, for instance, teams up with fashion designers to introduce desirability in its lines. Macy’s is trying to target millennials (we reported it here). Bed Bath & Beyond is also entering in the kitchenware business (we reported it here).

However, analysts point out that private label business is closely linked to the retailer’s brand equity. Target’s approach was favoured by its proximity with its customers (through its 2,000 stores in the US), helping them to touch & feel quite easily its products. The retailer also benefits from a “cheap-chic” perception others might not have. This strategy is pretty like what French urban supermarket chain Monoprix is doing.

Target shaped private labels into powerhouse brands. Now others want to do the same.

What: Korn Ferry addresses the strategic steps for an efficient CSR approach implementation within organisations.

Why it is important: It is all about making an impact with the entire organisation and being able to measure it, rather than declarations and a siloed CSR department.

Korn Ferry looks at the ideal steps to be taken by organisations to actually catalyse ESG and sustainability strategies from within, and turn intent into impact. Korn Ferry identifies 3 common derailers that, so far, have disrupted such efforts:

• Legacy and weight of traditions,
• Silos, as sustainability can not be just allocated to an ESG department, but embedded into the corporate culture,
• Short-term hit, favoured by shareholders’ expectation of fast ROI.

Korn Ferry advocates for a materiality assessment in order to identify where to focus efforts and investments when auditing the organisation. Once this is done, 5 steps are suggested:

• Align leaders on the purpose and material issues, and publicly voice the intent. It can not be treated as a side-venture, but woven in the fabric of the business strategy. This goes through the full onboarding of the entire leading team,
• Understand and quantify the downside risks and upside opportunities, and set targets that can be measured,
• Generate a compelling story supporting a simple, understandable strategy that will also allow the whole company to be part of this adventure,
• Introduce experimentation to find out what needs to change in the leadership, working methods, organisation, talent and culture,
• Evaluate what works and scale it across the entire organisation.

Five factors to ensure a successful strategy

What: Coresight looks at the top 10 trends which are shaping up the Luxury industry today.

Why it is important:  Wholesale partners are becoming less attractive to luxury brands in the Direct to Consumer working frame that has been developed during the pandemic. The creation of communities and the ability to engage them is a new race that might help wholesalers (department stores) to remain in the game in the future.

Coresight determines the top 10 trends for global luxury in 2021:

• Sustainability will become essential
• Brands will turn to localized strategies to replace dependence on travelers
• Digital storefronts will be prioritized
• Store fleets will come under close scrutiny
• To capitalize on shoppers’ shift to online, more brands will internalize operations
• Brands will turn away from the wholesale channel
• Accessories and jewelry will be given greater prominence in brands offerings
• Brands will seek to take control of the resale of their secondhand products
• Marketing strategies will use smaller-scale influencers and geninfluencers
• China will become the dominant luxury market

When it comes to the shift away from wholesale partners, Coresight considers that the long store closures imposed by the Covid-19 pandemic allowed brands to strengthen their Direct-to-consumer capabilities. This will be even further accelerated by online marketplaces such as TMall Luxury Pavilion or JD.Com which make the management of the digital e-stores easier than managing wholesale accounts. This movement away from wholesale partners will be growing as soon as brands manage to transform their social media presence, from the current megaphone model to a medium allowing them to create and engage communities directly without having to rely on wholesale partners.

Key Luxury Trends Coresight Research Analysis Coresight Research

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*Private label development is in full swing for some retailers, especially for the big-box ones in the United States, reflecting a successful business model that Millennials are also favouring. The penetration of private labels amongst Millennials is 1-2 points higher than prior generations and continues to grow.

Usually considered as a margin enhancer, a great tool to recruit customers, a way to develop loyalty thanks to attractive price points, or an asset to emphasize the store brand message, private labels can meet tremendous success for retailers such as Target. But for others, they struggle to reach profitability.

To stay relevant these days, private labels not only have to offer an excellent product implying a great deal of research and creativity, but also differentiate from competitors, and even outdo national brands. As retail consultant Stacey Widlitz sums it up when discussing Target’s success in launching private labels: “They’ve basically been going around saying, ‘Who does it best and who does it worst?. Let’s replicate what the winners are doing and take on the losers and do it better.’” Is it really that simple?

Private labels currently represent an average of 6-7% of the IADS members’ turnover (data from IADS Merchandising meeting dedicated to private labels, January 2021). This part of their business has been reorganised in the past years and months raising critical questions: do department stores still need private labels, are they still good at this historical part of their business?*

The price appeal

It’s a well-known fact that price is a key component when it comes to private labels. It’s even the first idea that comes to mind, especially in the food area. With Covid, such products have recently grown even bigger due to newly price-conscious consumers finding themselves with less money. According to a McKinsey study from November 2020, when consumers are asked why they switched to private labels, more than 45% said price was the primary reason.

A Nielsen study from 2018 also states that 67% of customers think that private labels are extremely good value for money. This high percentage reflects the fact that own brands are not about being the cheapest they can be, but more about being cheaper than national brands (and filling a void on the market), whatever their price points are. As for department stores, they have no interest in trying to be the cheapest: they would put themselves in direct competition with Amazon Basics own label, a competition that we know is lost before even beginning…

So, should department stores continue using private labels to offer an entry price point to customers? Does a relevant product offer have to come with a low-price positioning? With its ‘Monoprix Gourmet’ brand, Monoprix (the French urban “variety” store) shows that the key factor is not about being the cheapest, but about being cheaper. Relying on upscale urbanites willing to pay more for quality food, the retailer developed a range of 700 gourmet products. There were no such products in supermarkets: ‘Monoprix Gourmet’ filled a void and became extremely popular with rather expensive products.

The Monoprix Gourmet example shows that a cheaper price point works if it comes with a strong dose of creativity, in all possible ways: in that case, it comes with strong consumer needs analysis and a great deal of research and testing with many potential food suppliers. It may be obvious to retailers that the price point is not enough, but it remains difficult to be creative enough to find the sweet spot giving a product range its needed added value and competitive edge.

Right now, Target is probably the best retailer when it comes to both being able to offer cheaper prices while having a "’cheap chic’ image and changing the cheap and low-quality perception that store-owned brands have had for many years.”  In 2021, the US big-box behemoth accounts for 48 private brands. Ten of them are worth one USD billion dollars.

In the department store business, Le Bon Marché also achieved a significant performance, yet at a very small scale, with its menswear brand Balthazar: while being cheaper than national brands, it’s also recognized for its quality and designs. Through the years and the eyes of the consumers, it even became a ‘true’ brand and is not just considered as a private label anymore.

A 2020 survey by Numerator (a US data and tech company evolving in the market research industry) also shows how decision-making factors in choosing brands are shifting when it comes to price. It is still key, but its importance greatly decreases with ‘modern’ consumers (the price factor drops from 87% for ‘traditional’ buyers to 69% for ‘modern’ buyers), with quality and product claim gaining more importance instead.

Creating loyalty and additional sources of revenue

Good pricing brings loyalty, that’s for sure. In that sense, private labels remain a great way to recruit and retain customers. Very recently, own brands benefited from the unavailability of some products during Covid. According to McKinsey, 40% of customers switching brands will likely continue purchasing the new brand once Covid is over. With products usually being good value for money, the short-term switching behaviour can obviously transform into long-term customer loyalty. Considering customers are more and more unfaithful to brands and retailers, and costs of customer acquisition are sky-rocketing, having a solid and loyal customer base is more crucial than ever.

When it comes to the loyalty factor, Galeries Lafayette is an interesting example. According to company private labels management, they are benefiting from a very strong loyal customer base thanks to their women’s ready-to-wear considered as qualitative, affordable, timeless, colourful and easy to ‘mix and match’ with customer’s wardrobes. The Galeries Lafayette brand relies on recurring customers favouring the store brand over national brands. This great success built itself throughout the years /nbsp]meaning the customer base has now to be rejuvenated.

The loyalty effect is also interesting when it comes to gathering key data about consumers’ shopping habits (demographics, products, price, cross-selling…). It’s even more important in department stores where the concession operating model is widespread, and consequently the relating data is owned by brands. Having a direct relationship with customers that are buying different items and brands, department stores are benefiting from a true competitive advantage when compared to national brands. Not only can the data help private labels to become more appealing to customers, but the richness and depth of this data makes it a great asset to be valued and sold to national brands and partners. Especially at a time when department stores are evolving their business model to find additional sources of revenue.

Loyalty has some limits though. In 2001, Le Bon Marché tried a ‘spin-off’ Balthazar store in Boulogne, a Parisian wealthy suburb where a fair part of the store customers actually live. It wasn’t a success, and it closed a few years later, but the experience remains of some interest as an attempt to try to make a private brand live outside of its native ecosystem.

A tool to differentiate from competitors

Amit Philip, SVP and chief strategy officer at TreeHouse Foods (producing private label packaged foods in the United States), believes that “you can get national brands in any store but retailers establish unique brand and value propositions that are only available in their banners. The more sophisticated retailers even have price tiers within their private brand portfolios. Historically private label was seen as perhaps a cheaper, lower quality option and the standard was to try to match national brands. Today, retailers are looking to exceed national brand standards and create new and higher value propositions.”

El Palacio de Hierro is an example of a department store digging into the unique brand and value proposition as they are developing more and more brands coming with different price points. In ready-to-wear for instance, brands are ranging from the Entry price point with Catamaran (designed for the 17-28 y-o with a EUR 27 average price is), Mid-range with Epsilon (designed for the 30-45 y-o with a EUR 45 average price) to Premium price point with Chester & Peck (designed for the 35-55 y-o with a EUR 93 average price).

Creating such a high-value proposition to differentiate from competitors, and succeed, depends a lot on research and creativity. Among pure players, Asos is a good example when looking at their ‘Asos Curve’ private label. When national brands were still lagging behind in terms of inclusivity, Asos was ahead of its competitors in terms of trends and filled a void on the GenZ fashion market.

Visual identity has also become an asset to the private label business. Monoprix is again a fair example of innovation in that area. The “Monoprix” brand covers basic needs with more than 2,000 products. As there is no excitement in buying eggs or detergent, Monoprix draws attention to such products thanks to a strong brand image using bright colours and an unprecedented factor: the fun. While own brands packaging usually imitate national brand looks, the French retailer uses bold colour-block designs and funny quotes, transforming boring products into eye-catching ones. When this new packaging launched, customers were even talking about the funny jokes found on cans of beans. Such packaging came with an ad campaign that drastically reinforced customer loyalty to the label.

Attracting customers, but also brands

With enhanced private brands, comes new perspectives in terms of advertising. Promoting a price point is replaced by promoting the product itself: its claim, quality, and difference. In that case, private brands can become a great tool to advertise the store image itself, and to leverage social media to reach more customers. Also think about the importance recently taken by the unboxing trend on Instagram: it has been adding new and supplementary visibility for brands and products.

When thinking about private labels, collaborating with other brands is also something to consider to promote the store image itself, gain new customers and create excitement on social media. Once again, Monoprix is succeeding when launching collaborations with designers or brands, this year with edgy fashion designer Vincent Darré or interior designer India Mahdavi. In such cases, direct revenue is not the point as very few products are produced and sold in the end. But they have proven to be a great way to draw customers attention and reinforce the store image.

Post pandemic, even the most endangered retailers are willing to use collaborations as part of their private label strategy. The last example to date comes from bankrupt and relaunched JC Penney partnering with the infamous Juicy Couture brand, also resurrecting from the dead. It’s a smart move though, considering Juicy Couture is still a famous and impactful name able to draw shoppers attention. The brand is considered a pioneer when it comes to athleisure, a trend that is not predicted to end soon.

Ultimately, private labels collaborating with selected brands can become instrumental to attract new customer groups. At a time when some brands are adopting more and more direct-to-consumer business models (as we know it’s the case with major luxury brands, Nike, Adidas…), private labels could be a key part of an attractive product offer, assuming they have developed a great value proposition.

Another option to be considered is to develop new private labels, especially in the fashion area, using a brand licensing model or even by buying brands and relaunching them exclusively under the department store umbrella. Still, caution is in order in that case. Even a powerful retailer like Walmart faced difficulties when acquiring brands. In 2017-18, the retailer bought a bunch of direct-to-consumer ready-to-wear brands. At that time, comments on the buy-out were harsh on social media, customers worrying about Walmart lowering the quality of such brands. In 2019, the retailer even sold one of these brands, bought 2 years earlier.

A way to prove commitment to CSR questions

For many retailers, private labels are now a way to benchmark sustainability progress and prove ‘transparency’ to customers. For instance, Macy's private brand uses the Higg Index Environment Module but also its Facility Social and Labour’s to gauge the environmental and social performance of manufacturing facilities. Audits in factories supplying the private labels are conducted every 18 months. Hudson’s Bay has enforced a Supplier Code of Conduct applying to all vendors producing private labels (based on the United Nations Human Rights Declaration, the Amfori Business Social Compliance Initiative, to name a few).

Nordstrom is also an interesting business case. They reorganised their private labels by reducing them from 40 to 12, but they are growing the business anyway, thanks to an embodiment of the CSR topics. In 2020, 64% of “Nordstrom Made” product volume was produced in factories using the Higg Index Facility Environmental Module. They also tackle body inclusivity questions by appealing to different age groups, communities and body shapes: for instance, they launched Henna and Hijabs x Nordstrom, designed for the modern Muslim woman, and Nordstrom x Christina Martinez to celebrate Latinx heritage.

A department store is a house of brands. Even though they cannot take responsibility for partners' ways of producing, department stores could become accountable, if not already, for having brands considered not sustainable or responsible enough by customers. Developing sustainable private labels is a way for them to have more control over the CSR issues. In that perspective, Magasin du Nord’s main priority is to improve the entire private labels’ value chain to ultimately be able to market its products as honest, authentic and sustainable. In general, IADS members are very ambitious and target 100% of sustainable offer: by 2024 for Galeries Lafayette and Magasin du Nord, and by 2025 for Breuninger and El Corte Inglés (data from IADS Merchandising meeting dedicated to private labels, January 2021).

*In theory, there are many reasons why department stores should continue developing private labels: offering an interesting price point, filling a void on the market, attracting new shoppers, developing loyalty, differentiating from competitors, anticipating potential national brand withdrawals. Own brands are also supposed to increase retailers’ margins. But the situation for department stores’ is contrasted when it comes to profitability as we know some are struggling. And also, are they still really attracting customers, even after some internal reassessments, or changes in organisation and offer? Considering the challenges ahead, IADS members’ CEOs have decided this year’s IADS Academy will be dedicated to the private labels topic.

Furthermore, there is no ‘one size fits all’ when it comes to private labels, which makes it an even more challenging business. IADS members are not following the same trend in terms of development. For instance, El Palacio de Hierro tries to multiply the number of its own brands (having a different name for each of them), while others like El Corte Inglés or Magasin du Nord reduced the number of brands.

In any case, this part of the business remains a challenge as consumers’ expectations won’t lower. On top of that, private brands have to find their way online. Creativity, research, imagination will surely be key to meeting all expectations. A unique value proposition based on sustainability seems to be the best tool available right now.*

Credits: IADS (Christine Montard)

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If the pandemic wasn’t hard enough already on retailers, it also accelerated topics such as sustainability. Consumers have become more aware and educated on CSR related topics while they were stuck at home with more time to think about their environmental impacts - especially as this relates to retail. This has created increased importance for retailers to ramp up their sustainability initiatives as well as communicate them.

A snapshot of sustainability before and after a global pandemic

Before the “first wave” of the pandemic in March 2020, IADS polled its members about their overall vision and approach to sustainability and its structure. We had 5 members complete the questionnaire (Breuninger, El Corte Inglés, Manor, Sogo, and The SM Store). The survey asked members to define their sustainability vision, how they communicated internally and externally at the time, as well as clarify its organisation and programmes.

After the first couple of waves of the virus, which had interrupted business for department stores across the world, IADS performed another survey to check in on our members to better understand what main areas of sustainability have accelerated by July 2021. Six members participated in the survey including Beco, Breuninger, Magasin du Nord, Manor, Sogo, and The SM Store. From this survey, we wanted to understand what our members were focusing on in these unprecedented times, how they were communicating with customers, what pain points they have specifically faced, and what has changed organizationally due to sustainability’s heightened importance in the past year.

Enhancing communication and avoiding greenwashing

In the first survey, conducted in March 2020, members cited various ways that they approached the communication of sustainability efforts and protocols:

• Some used internal tactics by either creating a dedicated website page or promoting sustainable products through their own logo. Manor for instance would add a ‘Manor Respect’ tag on physical products and on the website to indicate sustainable products.
• Breuninger shared that they communicate initiatives and spearhead projects through an employee app which allows them to easily store guidelines and share progress on projects and initiatives.
• Other mediums mentioned used to share sustainability involvement included social media, marketing campaigns, and store displays.

During the second survey, conducted in July 2021, a new and major challenge of communication was to avoid greenwashing, but this is easier said than done. IADS members have shared their approach to ensuring that their messaging is not construed:

• Hard facts: Sogo certifies that the contents of the messages to customers are factual without ambiguities and supported by relevant certifications. Manor focuses on only hard facts communication.
• Cooperation: SM works with their suppliers and consigners so that the messaging is more seamless across all external partners and they make sure that the eco-friendliness of the products are communicated consistently across their different channels.
• Tone of the communication: Magasin believes that being consistently honest and authentic will eventually win over any sceptic as it is hard to argue with a proven track record.

Evolving organizations

Organizationally, most of the respondents shared in the first survey conducted in March 2020 that they have cross-functional committees with representatives from different parts of the organization, thus ensuring cooperation and information sharing across divisions. These committees typically have a link to the C-suite. Sogo, for example, has an ESG Committee which is headed by the Executive Director and comprises members from all major departments. This committee is in charge of formulating ESG strategies, sustainability reporting, stakeholder engagement, materiality assessment, monitoring the performance of initiatives, and the promotion of ESG issues internally and externally.

By the time the second survey was conducted in July 2021, IADS members had recognized that CSR topics require dedicated resources to be able to carry out and monitor initiatives:

• Beefing up the CSR team: Breuninger has hired more people in the corporate responsibility unit as well as in the buying department to meet the growing needs. Manor will be reinforcing the sustainability department by one headcount.
• Doubling down on the pre-pandemic committee approach: The SM Store created a sustainability steering committee made up of executives from different functions to ensure a singular message. Magasin du Nord does not have a dedicated CSR team, but members from the marketing and HR teams have been used as project managers to address changes, implement training, and manage external contacts. Sogo has not had any changes and continues to support its ESG Committee.
• Looking for external support: Beco has decided to start a sustainability programme and has hired a company to help them go through the initial steps.

Introduction of new pain points

When conducting the first survey (March 2021), IADS did not know to what extent sustainability topics would progress in the coming years, but through the second survey (July 2021), conducted 15 months later, the Association witnessed the face that CSR topics have become top of mind for many of our members. The global pandemic has accelerated the awareness of consumers as well as the importance of making a stance regarding overall impacts for businesses. But this heightened awareness has also introduced new pain points for retailers.

When posed the question about what major sustainability pain points members are being faced with, they all had different answers:

• For Breuninger, they find that the multiplication of labels is difficult to grasp as well as setting up green logistics, green packaging, and a sustainable supply chain.
• Sogo expressed that it is difficult to set medium-term goals and targets as well as raise the awareness of employees regarding ESG issues.
• Manor shared that they are struggling with having enough resources to implement all the initiatives around sustainability. On a similar note, Magasin du Nord stated that sustainable options do not highlight themselves and that it takes extra resources in stores and online to arrange and label these items. They also mentioned that educating customers on more sustainable options is not simple.
• Finally, SM shared that the pandemic as a whole led to a disruption of their sustainability rollout.

Programmes and initiatives

IADS members have rallied their troops to be able to step up to the new demand that sustainability has imposed. There has been a lot of progress made in terms of programmes and initiatives, especially ones that were fast-tracked due to the pandemic. From members who are taking their first steps to tackle CSR topics to those that have extended resources to meet growing demands, all members have some very exciting and noteworthy activities they have been working on since the beginning of the pandemic. Almost all members were focused on reducing overall waste, especially in the form of offering alternatives to the use of plastic and paper bags at the point of sale. These programmes have matured and progressed quite a bit in the past year.

Breuninger has replaced plastic bags with reusable ones and added a green option for online sales to remove any additional packaging. They also revised their guidelines for sustainable articles, prepared a responsible sourcing policy, and prepared an animal welfare policy targeting future goals. The retailer has also introduced digital receipts through their mobile app to reduce overall paper waste in stores.

Magasin du Nord has focused on their own brands to achieve the best certificates and higher composition of sustainable materials. They also are committed to using more sustainable packaging without compromising durability and strength. And they are focused on reducing food waste and getting more out of less when it comes to electricity and other resources in general. They have also partnered with a popular second-hand store (Time’s Up Vintage).

Manor has stopped offering free bags in store, started a hanger recycling program, and implemented reusable containers for internal deliveries. They also rolled out their partnership with Too Good To Go (a mobile application that connects customers to restaurants and stores that have unsold food surplus) nationally as well as launched the rebranding of their sustainable label and reinforced it with internal guidelines and training.

SM Investments Corporation sealed its commitment as a supporter of the Task Force on Climate-related Financial Disclosures (TCFD) in a strong bid to ensure its businesses meet global sustainability targets.

Sogo has decided to focus their marketing on digital mediums rather than physical ones. They have also created an emergency response team to devise strategies around virus preventative measures, ensured that food waste is composted or turned into animal food, organized charitable events and donated face-masks and gel, and pushed the use of the Sogo Rewards Mobile App to reduce the use of physical gift certificates.

Beyond those that completed the survey, IADS members have been incorporating new programmes that are worth noting for inspiration.

El Corte Inglés is involved in a wide range of CSR projects touching on logistics, merchandise and energy consumption. They partnered with Llewo, a company specialized in social and eco-sustainable logistics management: they will work together to evolve and grow the last-mile delivery from a sustainable and social point of view. The Spanish retailer also joined the Sustainable Apparel Coalition (which is responsible for the Higg Index), an international alliance for sustainable production within the footwear and clothing industries. In terms of commodities, El Corte Inglés reduced its electricity consumption by 25% in just five years and uses renewable energy sources to run its business in Spain and Portugal.

Since its Go For Good programme launched, Galeries Lafayette opened (Re)store, a new women’s fashion space. The section features second-hand labels and circular fashion brands, ranging from affordable clothing to luxury handbags. This month, they opened a Pangaia (loungewear brand) carbon-neutral pop-up store: they nailed both a hot and sustainable brand as well as being able to operate responsibly.

Falabella is also very much involved in CSR questions. They committed to supplying 240 stores in Chile and Peru with 100% renewable energy by 2022. On top of that, 34 stores in Chile, Colombia and Peru received the international certification in Leadership in Energy and Environmental Design (LEED), a distinction granted by the U.S. Green Building Council (USGBC), an organization that aims to promote sustainable construction and development.

Measuring progress

The conducted surveys reveal that there has been an increased awareness and importance put on topics revolving around CSR. Some members have even noted that CSR efforts have a direct correlation to business activity and performance. The survey revealed that sustainability programmes and investment in these types of efforts will continue to accelerate. With the increased activity, there will also be more focused working groups formed cross-functionally and even additional headcounts brought in to help manage the new initiatives.

As members are implementing new programmes and investing money in sustainability efforts, it is important to understand what happens next. How are initiatives measured and how do they know if the time and investment were worth it? All members mention that they define relevant KPIs to quantitatively track predefined targets as well as gather feedback from stakeholders, including customers. Some of these KPIs are:

• Energy consumption per operating area
• Amount of food waste recycled
• Fewer paper mailings based on a specific year
• Percentage of CO2 reduction
• Percentage of turnover of sustainable goods (private label or other brands)
• Percentage of reduction of packaging, waste, and plastic
• Measuring the composition of sustainable materials in each product sub-category
• Tracking customer feedback and brand awareness (El Corte Inglés uses Reptrak as a way to measure reputation, brand, and ESG performance)

IADS also conducted research on the efforts and initiatives of American players such as Amazon, Walmart, HBC Group, and Macy’s Group which all have a robust offering of CSR communications. Comparatively, and as IADS members are quite heterogeneous, some members are in line with the American retail giants, while others are just getting started. This is normal as the prioritization of these efforts heavily depends on the markets they serve as well as customer demands.

Overall IADS members are ramping up their CSR projects and teams and have seen an accelerated demand for such initiatives in the past year. Sustainability programmes used to be ‘nice to have’, but they are now becoming crucial among retail organisations. As commitments to responsibility are made, it is important to follow through and share results through defined KPIs and transparency at each step of the journey. IADS members have found that facts-based communication (sharing KPIs and progress) is a key way to avoid greenwashing and include the customer in the brand’s sustainability journey.

Credits: IADS (Mary Jane Shea)

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*IADS has reported how IADS members accelerated on the sustainable front since the beginning of the pandemic in 2020 (see our latest report on IADS members’ initiatives here). They transformed their organisations from within (with dedicated committees benefitting from increased powers, and often in direct liaison with the C-suite) and communicated initiatives and changes in a crystal-clear manner to the final customer. This also translated into pain points as all these initiatives require resources, which can be overwhelming given the number of certifications and labels, and can also, sometimes seem too far-fetched compared to the immediate challenges posed by the state of the business. In other words: just like digital transformation, sustainable adaptation is costly, takes time and energy, and requires organisational re-engineering.

This is the reason why we decided to look at “Green Pea”, a new type of sustainable business, the first self-proclaimed 100% sustainable department store in the world, and which reverses the problem. Green Pea tries to bring an answer to the following question: how to build a profitable business that takes for granted the sustainable approach?

We looked at the key learnings from this business case and tried to isolate the most interesting ones for IADS members.*

Context

Green Pea has been founded by the Farinetti family, who also founded Eataly back in 2007.

At the time, the reasoning for Eataly was simple: Italy as a concept was a strong brand recognized worldwide, and the Italian cuisine was also universally recognized. Eataly therefore capitalized on the possibility to enjoy fresh food direct from the producer, that could be either bought or eaten on the premises, combined with ideas, images and clichés customers might have about Italy as a country and a way of life. The first Eataly opened in 2007 in the city of Turin, on 12,000 sqm (for comparison, the Milan store measures 5,000 sqm and the Rome one, 10,000 sqm).

Today, Eataly represents 42 stores in 16 countries, operated either directly (including in joint-venture) or through partners. The first market for the company is the US, which, with 8 stores, represents 65% of the total turnover (estimated as a whole around € 690 – 720 M pre-pandemic). To have an idea in terms of turnover, the historical Turin store achieves € 32 M a year on 12,000 sqm, to be compared with € 75M in New York (5,000 sqm) or € 44 M in Chicago (6.300 sqm).

Based on this success of an “all Italian plates and ingredients” formula, the Farinetti family then decided to capitalize on the “Eataly of things” with a focus on what the country is reputed for: food, fashion, design. And in the same manner as Eataly, which is all about local, proximity and “slow food” (a novel positioning back in 2007 for a supermarket), this new project should also tackle sustainability in retail in a new manner.

The claim

Green Pea is the first “green” retail park in the world, opened in December 2020 in Turin, in the same building that hosts the Eataly store, on 15,000 sqm and 5 floors (it is not clear what the Green Pea founders mean when talking about a “retail park” as the format resembles very much a department store one). It aims to answer a seemingly unsolvable question: “should we stop consuming to preserve the planet?”. Green Pea aims to show that it is possible to responsibly consume by setting sustainability as a non-negotiable prerequisite and make it desirable by surfing on the “Italian” aspect of its offer and approach.

The whole company has implemented sustainability at the core of its business model, by setting up a self-imposed Manifesto in 10 points that provides clear and strict guidelines on how the business should be conducted, from day-to-day operations to strategic vision. For instance, Green Pea affirms that in order to efficiently contribute to society, a department store should address new categories beyond selling fashion goods and other “traditional” categories, to prove that it is possible to live in a sustainable manner at no additional cost. This is why Green Pea sells energy (100% clean), transportation (e-cars, e-bikes…), in addition to furniture, design, cosmetics and fashion.

To exemplify the level of detail, the Manifesto states, in the furniture category for instance, that sold items should not (of course) compromise on design and quality, but also abide by strict self-imposed rules (such as limiting formaldehyde emissions, using wood coming from renewable sources and biodegradable and recyclable plastics). The company also commits to planting a tree for each piece of furniture sold, to help consumers recycle or return their pieces when not needed anymore, and to show suppliers’ information about the manufacturing process in total transparency and clarity.

Even though the Italian aspect of the business (fashion, design) is clearly visible, the most striking in this Manifesto is probably the strict methodology applied in every operational and sourcing aspect, as well as the clear communication in simple words about it. It is clear that the main focus is to ensure that customers do not associate sustainable options with high prices.

In parallel, and this also transpires during the visit, the “Eataly of things” aspect somehow misses the point as the Italian-focused offer somehow distracts from the fact that entering Green Pea is all about deciding, as a customer, to have a new approach to consumption.

How does it translate in reality?

First of all, the building itself has been fully built with recycled material (wood, metal, glass) which can all have a second life in case the building has to close. In other words, the architecture can be fully taken to pieces and used to build another structure. The structure is classified Nearly Zero Energy Building (A3) thanks to the materials used, but also the approach to energy:

• Photovoltaic panels (which are integrated into the decor, in the form of giant flowers) and wind turbines provide near to 90% of the energy needed for the lighting of the building.
• It also uses the energy generated by the footfall itself, in a quite literal manner: in all floors, piezoelectric zones use the energy diffused by the steps to also produce electricity.
• Heat pumps installed in the foundations of the building provide heating of both the building (88% of the need) and water (87% of the need), which is also kept circular thanks to a closed-circuit allowing the building to be free from external water supply (it also recycles the rains).
• Within the building, 2,000 trees and plants are also grown, which contribute to purifying the air while also setting up a nice setting for customers.

However, a green building is not enough to make a sustainable strategy. This is why Green Pea founders have spent 2 years prior to the opening to assemble a 100% sustainable product offer that goes beyond the usual categories found in other department stores (fashion, design), totaling more than 100 brands and partners in this adventure.

A department store, really?

The approach taken might seem counter-intuitive for any person familiar with department store structures, with a disturbing floor plan:

• Ground floor: museum, energy and transportation goods
• First floor: home, furniture and design goods
• Second floor: fashion
• Third floor: beauty, books and restaurant
• Fourth floor: members club, sauna, swimming pool and recreation surface.

Starting with a museum to educate customers about the need to care for the planet and how to behave sustainably seemed crucial for the founders. This is why the first things seen at the entrance are the structure and construction details of the building, explained and dissected in simple and amusing ways, to entertain and educate both adults and children. It shows how the building saves energy and water. This is the first touchpoint of a customer journey mixing discovery with education as all floors also contribute to sharing knowledge by explaining how materials are produced and how they impact the planet compared to non-sustainable options.

Also on the ground floor, the founders wanted to address the most basic customers’ needs: energy, money and communication. This is the reason why they have offered green energy suppliers (Enel X, Iren…), new and second-hand cell phone sellers (TIM, Samsung…), green banking players (UniCredit, Mastercard…), green & perchloroethylene-free laundry, and an electric vehicle manufacturer (Stellantis, which displays all the e-cars produced by the brands pertaining to the consortium, including Jeep, Chrysler, Peugeot) a significant retail and showroom space, to educate and sell.

At this point it is key to note that during the visit, the CEO stressed his two main goals were:

• To contribute to making the sustainability topic an everyday cultural one (i.e. knowledge should help customers to address this topic with more confidence, and help them make enlightened decisions). This translates into a large amount of information made available across the ground floor (but also in the other ones), as well as tips and behavioural advice to make an impact in the everyday life, streamed in the Green Pea app, downloadable for free.
• To propose only sustainable options that do not cost more than non-sustainable ones. This means that prices are always clearly displayed and explained, including their margin components, to help customers to make arbitrations.

These two aspects are a constant when visiting the upper floors.

On the home & furnishing floor, for instance, customers can have a fully equipped, 100% sustainable kitchen, ready to be set up, for as low as € 3,500 VAT included. Green Pea worked with manufacturers on materials to reach this impressive retail price (which also helped Green Pea launch its own private label, Green Pea Casa). Of course, the range of products offered also includes more luxurious brands, leading to higher prices (from Whirlpool to FontanaArte, including also Guzzini or KitchenAid). All across the floor, customers are informed of the nature of the components and materials, where they come from and to what extent they impact the environment, as well as a comparison with non-sustainable options.

The fashion floor displays 65 brands in corner or shop in shop formats, of which 70% are operated by the brands themselves. This includes local brands (Esemplare, Antidoto 45, Giampaolo, PT Torino) or larger ones such as EcoAlf, K-way, Timberland, Superga, Kappa, Sebago, Borbonese, Napajiri or Patagonia. All staff are paid by the brands and trained by Green Pea. The RTW section continues on the third floor as a small section of the beauty floor is dedicated to luxury and fashion, with exclusive shop in shops (specific to Green Pea) from Cucinelli, Herno, Zegna and Sease. Both floors (fashion and beauty/luxe) also propose tailor-made experiences, be them via personalization ateliers (from specific details to the production of the whole garment if needed) for fashion items, or via individually formulated cosmetics according to each one’s skin, exclusively developed on site with Alkemy Spa.

When it comes to the food offer (located at the cosmetics floor), the pricing range is also quite wide, from a bar with entry price point snacks (using all Eataly ingredients and suppliers) to a Michelin-starred restaurant.

Finally, the rooftop is dedicated to the member’s club, including a restaurant, a terrace, a sauna and an infinity pool. To be a member of the club costs 300 euros a year and gives full access to the location (to be noted: the regular customer loyalty card, which does not offer access to the club but the same benefits otherwise, from anticipated sales, points and special promotions, only costs 50 euros a year).

What can we learn from this model?

Green Pea is all about being “green” without being suspected of greenwashing. Having a fully sustainable building and displaying only sustainable brands is of course impressive and nice but does not fully support the “first sustainable retail park” claim of the retailer as these initiatives can be also spotted elsewhere in the world. This is the reason why the educational part of the customer journey is key, as it helps the retailer to achieve 3 goals:

• Contribute to expanding the general public’s basic knowledge on materials, practices and behaviors.
• Show in quite a literal manner the initiatives they have taken.
• Promote the selection of brands they have made.

This focus on information is key, as it differentiates them quite a lot from other retailers who promote certifications, initiatives and labels, but who do not really contribute to educating customers on a broader level and, from there, influence culture as a whole. In other words, they are using their physical retail space to create and pre-empt content on sustainability.

This is completed by a specific approach when building the assortment and selling it:

• All salespeople are paid by the brands but fully trained, on a regular manner, by Green Pea on sustainable topics (they are given information to be able to stand a conversation addressing their brand of course, but also the rest of the assortment, Green Pea’s approach and even broader conversations).
• The price range is adapted and answers concerns customers might have about having to pay more to have the same products, but made sustainably.
• By proposing a paid loyalty program (a strategy the IADS is very much supportive of), they astutely create a club of “those who know vs. those who don’t”, therefore creating some kind of social curiosity and interest for sustainable topics, through a membership giving access to an exclusive location at a reasonable price.

Binding all these elements together helps Green Pea to be credible when they claim to be the place to be (and to shop) when it comes to sustainability. However, is this enough to make a business? Many questions are raised when looking more in detail at the model.

First, in terms of traffic, it is of course extremely probable that a 100% sustainable “shopping temple” is attractive to many customers, at least to see what it means. But how is it possible to make sure they come back twice or more? The ground floor, with its utilitarian offer (green energy, finance and communication), is, without a doubt, interesting but raises questions that are more about the customers’ lifestyle than the simple joy to go shopping. Is that amusing for them in the long run? Moreover, one might wonder to what extent a ground floor with such an offer (including a museum to educate customers) could be reproduced elsewhere in the world, in a more competitive context than this specific part of the city of Turin.

This leads to another crucial question, the business potential of the store. When asked about the profitability of the model, Green Pea’s CEO answers that the store has not been built with sustainability seen as a perk, but as a key constitutive element. As a consequence, the brands’ margin model remains the same as for a ‘normal’ business, as sustainability does not create a specific economic advantage or handicap. For him, it is just the way to see things today.

However, it is not really possible to know how well this concept can perform yet. For one thing, it opened in December 2020, in between lockdown episodes, in Turin, which is a smaller city than Milan or Rome. Therefore, KPIs are not relevant for now. Secondly, during the visit, it seemed that the Italian approach of things was too diffused to be as impactful as in Eataly (plus: does it make sense in the same way?). As a consequence, this side of the marketing approach might be less impactful than simply relying 100% on the “first sustainable retail business model”. At the same time, relying 100% on the first “sustainable business model” might limit the number of brands that can be part of the concept, leading to questions on the maximum profitability of the model: can it be comparable to what we know in other department stores? What do you do for instance when Louis Vuitton or Chanel do not fit with the commitments made in the Manifesto? And is the “first sustainable retail business model” enough to become a long-lasting attraction for customers that can get easily bored, and who might not enjoy being reminded of serious things every time they take a trip to the store?

So far, even though the whole Green Pea concept consolidates a series of new approaches and proposals to the customer in the same way that Eataly did back in 2007, it seems that it is still in the laboratory stage, not in terms of maturity of the concept (which is already quite convincing), but in terms of realism of the economic equation. The ingredients that made the success of Eataly (local, circularity, Italian identity) might not be enough to be transferred as such in the Green Pea retail concept, at least outside of Italy.

Credits: IADS (Selvane Mohandas)

What: Accenture released a research report on RFID and its growth within retail.

Why it is important: RFID takes a long time to pilot and implement, but research reveals that RFID technology is enabling omnichannel services and driving value.

The bi-annual study conducted by Accenture reveals that the use of RFID in North American retail is booming with 93% of store chains saying that they are using RFID. In 2020, more retailers are investing in RFID technology as e-commerce continues to fuel adoption. RFID is a major factor to contributing to real-time supply chain visibility, which is needed to support processes like store fulfillment and BOPIS.

Accenture says the research also found that retailers that have engaged with suppliers on source tagging are seeing a higher ROI (16% higher) than those that have not.

Despite the mostly good news on the adoption front, the report notes many retailers still don’t make it past the pilot stage. Such companies report that their greatest struggles and roadblocks are quantifying the value of RFID, identifying the right suppliers and partners, and having the ability to train employees.

RFID in Retail

What: An ode to a somehow forgotten perk of physical commerce: its capability to create bonds.

Why it is important: Building communities is strategic today, as what is done in the physical world reverberates on what happens online, especially when it comes to loyalty to a store and its e-commerce offer.

Inside Retail pleads for a return of the social side of shopping, which has been somehow forgotten on the way of its evolution, as all retailers focused on functionality and transactions over the possibility to engage with friends, families and communities. It is all about engaging customers around shared values and interests.

The example of the new REI store in New Hampshire for instance shows a new approach, by being located not where customers live and work, but where they go for leisure. As such, it allows the outdoor products retailer to supply customers with what they need at the right moment, plus also contribute to the animation of the site that they visit, by facilitating tours and activities.

Inside Retail also mentions the Australian example of WeMake in Sydney: a creative studio, built as a workshop where everyone can build objects. The specificity of this workshop is its location, under a mall, and the fact that any retailer from the mall can use it at their guise, even for commercial animations with their customers. It is all about proposing new experiences and building bonds between customers and brands. As Inside Retail puts it, “the successful retailers will be the ones that can create the social experience and keep it real”.

Why it's time to bring back the social side of shopping