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125 years of history in commerce and retail, 290 stores, 14,000 employees, usually 60 million visitors per year and EUR 4.5 billion in yearly turnover (pre-pandemic): those are a few figures describing the Galeries Lafayette Group. But it is especially famous for its prestigious boulevard Haussmann flagship store. Usually relying on 200 nationalities accounting for 60% of its EUR 2 billion yearly turnover (2019 figures), the store occupies the coveted, yet challenging number one position of Paris’ department store scene.

Being number one implies being able to stay in step with customers’ expectations, attract Millennials and GenZ, as well as locals and tourists thanks to a great product offer, convenient services and memorable experience. And in 2021, after more than 200 days closed since the beginning of the pandemic, reinvention is also to be added to the list.

On 7 September, Alexandre Liot (Haussmann Store Director), Marianne Romestain (Chief Merchandising Officer) and Guillaume Gellusseau (Director of Communication and Marketing) unveiled the new “Le Grand Magasin de Tous” (translating to “a department store for all”) programme rooting in the very purpose of a department store: be a place for discovery, enjoyment and entertainment. We attended the press conference for you, and we are delighted to report back this exciting member news.

Reinvention, since 2018

In truth, reinvention started in the Haussmann store way before Covid with the “Programme Lumière” (translating to “Light Programme”) to run until its completion planned in 2024. Since 2018, the rooftop, kidswear, home, lingerie and a part of the beauty departments have been revamped to answer to a fast-evolving customer base. The historic dome has also been beautifully restored and transformed into an experience itself, thanks to a suspended gravity-defying glass walk platform (accessible from the third floor) allowing customers to get closer to it.

Digitalisation has also slowly developed: as stated during the press conference, e-commerce was only accounting for 2% of the turnover in 2019 and now reaches 25%. Such tremendous transformation basically happened in 4 months showing the company’s agility and ability to adapt. E-commerce is expected to stabilise at a 15% to 20% business share once life is back to normal. It has implied a true change in the way the store is considered: Galeries Lafayette’s management is now referring to the Haussmann store as a ‘navire phygital’ (translating to ‘phygital ship’) instead of the usual flagship store expression.

Reinvention at Galeries Lafayette is underpinned by 4 strategic objectives:

• Accelerating on local customers: despite a 60% share of international customers, Galeries Lafayette started refocusing on locals by redesigning its loyalty programme at the end of 2019.
• Remaining an unmissable Parisian attraction in a context of increased competition with the opening of La Samaritaine: on top of the expected fashion offer, the store wants to propose experiences through restaurants, cultural events and new partnerships that will be disclosed in 2022.
• Keeping its position with international shoppers: despite the absence of Asian tourists, performances with European, Middle-Eastern and American customers have been quite good considering the travel restrictions. Since the store reopened last May, the turnover achieved with these customers is “only” -20% compared to 2019.
• Benefitting from new growth engines appealing to younger generations: with the second-hand business.

These 4 objectives are very clearly reflected in the new Haussmann store propositions: a new highly attractive women’s shoe floor able to appeal to both locals and tourists, and a women’s ready-to-wear offer renewed with ‘Instabrands’ and circular fashion options, in step with Millennial’s and GenZ’s expectations.

New women’s shoe floor: the higher the heel, the closer to heaven

It’s literally true as the Haussmann women’s shoe floor moved from the basement to the fourth floor. Comparing to the previous location, the move includes new brands and extended footage, making it the biggest women’s shoe department in Europe with a 4,000 sqm surface. The large offer justifies a trip to the store and is, without a doubt, the most relevant in Paris.

Covering Luxury, Premium and Mid-range price segments (respectively accounting for 35%, 20% and 45% of the offer in 2020 (according to the information gathered during the last IADS Merchandising Meeting dedicated to Leather Goods & Shoes), the assortment now proposes 200 brands, 60 corners, 35 exclusive products and 10,000 SKUs. The shoe floor also brings innovation in the way brands are segmented and displayed. Two large lookalike multi-brand stores are available to the customers: the ‘Designer Galerie’ gathering luxury brands such as Alaïa, Balmain or Maison Margiela, and the ‘Creative Galerie’ offering “emerging” labels like Ganni, Rejina Pyo or Staud, both spaces being filled with natural light with an eye on Paris’ rooftops. A third multi-brand store has been designed to embrace the casualisation trend: the ‘Sneakers Galerie’ features a nice 20-metre luminous wall and offers all sorts of options from classic brands such as Nike and Adidas, to creative labels like Axel Arigato or Eytys..., and responsible ‘Go for Good’ labelled brands (Spring Court, Faguo, Good News, Viron...).

Circling around the base of the famous dome, the shoe department has been designed by Belgian architect Bernard Dubois. The design concept is mixing hardwood and concrete floors. Colours are evolving around earth tones, display furniture is made of concrete resin and medium wood. Impressive large resin rocks, where seats have been carved out, are giving visual rhythm to the shop floor.

The floor is completed by a Maison Michel shop-in-shop and a shoe repair/recycling station run by Veja. Customers can also buy Pierre Hermé macaroons or have a latte at EL&N, a coffee shop coming from London and naming itself “the most Instagrammable café in the world”. A concierge counter is also available as well as a Kure Bazaar mani-pedi station.

Premium and Mid-range women’s fashion: brands, brands, brands

Between 2020 and 2021, Galeries Lafayette embarked on 140 new brands, no less. As a result, a third of the brands have been renewed, bringing a much-needed offer-refresh able to appeal to younger local customers. Taking advantage of the store closures, the women’s fashion department has been revamped on the second and third floors, the ones dedicated to the Premium and Mid-range offer. In 2020, these price segments are respectively representing 30% and 20% of Galeries Lafayette’s womenswear business, the Luxury segment accounting for 50% (according to the information gathered during the last IADS Merchandising Meeting dedicated to Women’s Fashion).

Three new spaces are contributing to a clearer and more appealing brand segmentation: an Instabrands-DNVB (Digital Native Vertical Brands) space, the ‘Social Galerie’ and the ‘Creative Galerie’ (echoing its sister from the shoe floor) which will be renewing brands and offers on a regular basis. Brand corners have been revamped with new common signage, contributing to a clearer impression. The lingerie area, a new denim bar and a ‘fashion sport’ section complete the 2-storey offer.

The ‘Creative Galerie’ is a 225 sqm space nested on the second floor and gathering about 30 brands (including 15 new ones): the selection is dedicated to fashion addicts and is quite edgy. Customers can shop brands such as Stella Nova, House of Dagmar, Nanushka, Rejina Pyo, Anine Bing, The Frankie Shop… Additional new ready-to-wear brands are complementing this new space: Ganni, Laurence Bras, Proenza Schouler White Label, Valentine Gauthier, Dawei…, but also accessorie brands such as Staud for the leather goods, Annelise Michelson or Gossens for the jewellery.

On the third floor, new sections are displayed to appeal to Millennials and GenZ: the ‘Social Galerie’, and a large space dedicated to DNVBs and ‘Instabrands’ such as Songe Lab, Janne Mill or Pretty Wire. These brands are opening their first physical stores, showing once again how relevant a department store is to the development of such labels. The ‘Social Galerie’ is a unique concept where customers will find digital-native brands offering accessories, last-minute gifts and souvenirs. A famous DNVB will also launch during the next Paris Fashion Week: Skims by Kim Kardashian. Putting together these new sections surely benefited from Galeries Lafayette Champs-Elysées, the first to offer niche and Instagram brands.

(Re)store, a new venture in the responsible fashion market

Three years after launching their ‘Go For Good’ label which highlights products with a reduced impact on the environment, Galeries Lafayette is opening a large section dedicated to circular fashion on the third floor. ‘(Re)store’ is clearly designed for the younger generation and is associating vintage products through 7 different partners (Monogram, Relique, Petite Chineuse…) and eco-responsible labels, and ranges from Luxury to Mid-range price segments. Services are complementing the offer. A resale salon is available to customers: depending on the item, one of the partners will deal with the client’s pre-loved item. A collection point for donations to associations is also planned. An innovative hardware store featuring products in step with a more responsible way of life offering knitting kits, made in France accessories, organic washing products… occupies a fair share of the space. A new attractive digital-native concept, ‘Club Couleur’ (translating to ‘Colour Club’ is reviving second-hand objects (fashion, accessories and decoration) by re-colouring them.

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Such revamp is supported by a 360° omnichannel ad campaign imagined by DDB agency, photographer Lei Wei Swee, and filmmaker Jason Yan Francis: it includes social networks with a film blasting an exclusive Marc Cerrone disco music, billboards and press ads, a set of emojis, store windows... Four values are at the heart of the campaign: joy, inclusivity, energy and a youthful spirit. It is full of rhythm and colours and is supposed to speak to all customers from queens (aka older customers), cowboys (appealing to the new masculinity), innocents (kids), beauty addicts, artists (for the home lovers), educated palates (Lafayette Gourmet), trendsetters and visionaries (echoing the company’s responsible offer). The campaign is all about the enjoyment to be found in ‘Le Grand Magasin de Tous’, reminding of Galeries Lafayette’s founder whose philosophy was to gather everything and everyone under the same roof.

***

As an introduction to the press conference, Alexandre Liot was saying that “under such challenging circumstances, it’s all about dying or acting and reacting”. Clearly, Galeries Lafayette picked the second option and has set an ambitious women’s fashion revamp as a new chapter of the ‘Programme Lumière’. This new chapter is all about the Haussmann store, and after recently announcing that 11 provincial stores will become franchises, this is confirming again the company’s refocus on flagship locations.

Competition is gaining traction and the ‘phygital ship’ now has to compete with the brand new Printemps commitment to sustainability and has to be strategically poised for the return of tourists. The Asian tourism consumption in Paris is a large business but the cake is not extensible, so it’s key for the department store to be ready to win the fight against DFS-La Samaritaine. The ‘Programme Lumière’ is not fully achieved yet so we’ll see what the next moves will be. In the meantime, optimism for the future shows thanks to the addition of a new flight of escalators. Installed to better handle the customer flow and unclog circulation on the ground floor, Galeries Lafayette Haussmann is ready for hordes of customers when life is finally back to normal.

Credits: IADS (Christine Montard)

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Several aspects of retail supply chains have been revisited during the Covid pandemic. Retailers have been dealing with the crisis using different fulfilment strategies which integrate online and physical stores more than ever. Some of these will probably last into the future, or at least have an impact on future retail models. Many of these new ways to serve customers are in fact supply chain questions which are becoming an increasingly important part of the retail business.

Fulfilment from stores: an additional role for the store

In the US, Target had been developing a “click-and-mortar” model well before the pandemic hit. It was fulfilling orders from stores, in part thanks to its acquisition of Shipt in 2017. This company provided on-demand grocery delivery allowing customers to shop online and have their orders delivered from their local stores. Target now offers delivery to home from as little as one hour by using their 1900 stores. In the second quarter of 2020, Target e-commerce sales doubled compared to the previous year, and 80% of e-commerce orders are now fulfilled from stores. Most importantly, the average unit fulfilment cost has been cut by 30%. Same day pick-up and drive-up options which don’t require packaging and delivery are now Target’s most profitable fulfilment options.

However, fulfilment from operating stores may require using store personnel which is also more expensive than warehouse staff (especially given the recent minimum wage increases announced by some of the large retailers) and, in the long run, than a robotic warehouse picking system. Even if these issues can be solved, the problem remains of what a large-scale fulfilment operation from an working store would do to the stock and indeed the attractivity of that store. And delivery services require a lot of space. As previously noted, SM in the Philippines has been integrating a “call to deliver” system in its stores which accounts for over 15% of sales.

The trick here is to use data-driven inventory allocation to compensate. A central warehouse able to sort items into packages intended for particular store aisles, allowing store staff to unpack directly onto the fixture, bypasses the backroom of the store. Deliveries to stores may be sorted in trucks so that unpacking follows a predetermined order.

Dark stores: a micro-DC close to customers

However, “classical” online sales requiring a box, a shipping label and a carrier pickup are also growing, and this type of operation uses a lot more space than the same-day options. To overcome the limitations of using operating stores for online orders, some retailers have been looking at abandoned sites in malls to use for order fulfilment. Others have been converting their own stores to “micro-distribution centres”. Indeed, these sites labelled “dark stores” are often better situated closer to customers than the traditional warehouse or DC operations.

The design of such buildings, often with several floors is not necessarily suited to high density deliveries. Although parking is sometimes available, at least for sites in malls, there is only one entry for incoming goods rather than the double inbound and outbound channels needed for quick turnaround fulfilment. Certain laws govern traffic and deliveries in populated areas, at night for example, which is not a problem for warehouses or industrial locations, but may be for more central dark stores.

Whatever the problems, it remains that having centres closer to customers could mean transferring the job of pick-up and delivery to consumers which would create considerable savings. It also opens up the possibility of allowing customers to return goods themselves instead of packing them up and taking them to a delivery office. Some companies like Tesco in the UK or Walmart in the US have been experimenting with dark stores for some time. Other companies are increasingly interested in the idea, such as El Corte Ingles in Spain for example.

Paradoxically, retailers without stores appear now to be considering a presence in retail stores as well as micro-distribution or dark stores. If, as it has been suggested, vacant Sears or JC Penney stores in the US were to be used as dark stores by online players for delivery and returns, it is only a short step to offering customers a little more during their journey and beginning to return the store back to its original purpose.

Returns management: shift some logistics to the customer

The NRF estimates that total returns by customers to retailers doubled in 2020 to 10.6% of total retail sales. This will include returns to e-commerce operations with a return rate estimated at over 25%. We can safely assume that, since apparel and shoes have the highest return rate, department store returns will be higher than that. A return is not only a failed sale, and one which has incurred selling costs, but also an operation which generates its own additional costs through reverse logistics. This reverse logistics process is one which is a prime target for refinement.

In this vein, even before Covid, Amazon partnered with Kohl’s to integrate the department store into its reverse logistics process thus supporting Amazon’s optimised returns while bringing an estimated 2 million extra customers into the Kohl’s stores. That the process creates increased revenue to stationary stores has not been ignored by retailers, some of which such as Magasin du Nord in Copenhagen, have set up a click and collect counter and storeroom on the ground floor to serve customers from a range of other retailers.

This vision of stores as a sales and logistics platform would appear to be a significant advantage held by store-based retailers. It allows them to place inventory close to customers in a situation where e-commerce is growing fast and the costs of fulfilment are taking off. Amazon’s fulfilment costs grew in 2020 by 45%, outpacing their online sales growth (estimated at 37%).

Thus, in effect, stores or dark stores are shifting some of the logistics costs of fulfilment and returns to the customer.

In-store retail: the rule of resilience and the hybrid store

Of course, even if e-commerce has been growing tremendously, most department stores are maintaining in-store retail as their core concentration. Some have been forced to close down, under the pressure of a sharp rise in the cost of shipping, substantial decreases in customer footfall, supply chain disruptions that proved too much for legacy planning and inventory management tools, and inbound inventory delays. According to Advanced Supply Chain survey, up to 92% of retailers have experienced inventory management issues. What some have described as the “supply chain strain” is not only the result of the Covid pandemic. The leaner the supply chain, the greater the strain it is put under by any disruption at all, such as the recent Suez canal incident.

It has become increasingly clear that, in a situation of uncertainty, just-in-time does not work. Many retailers are eschewing the once-popular lean model and thinking about a “just-in-case” model (see FT Just in time planning). Instead, they are broadening warehouse footprints to localise inventory for improved availability to their customers. Only a quarter believe that just-in-time inventory management is still relevant in the post-Covid environment. All gazes are turning towards the question of how to build resilient supply chains. Many are recognising also that investment in cutting-edge digital solutions to improve inventory management and visibility is part of the process of bolstering supply chains.

Furthermore, uncertainty and lower footfall has resulted in a new interest in local retail. Any method is welcome which will help provide shoppers with more reasons to visit a store. Diversifying ranges to attract and retain customers may transform stores into a model closer to the convenience store or the US drugstore, albeit with one dominant category. The desire to increase footfall might well bring operators in other retail sectors to serve consumer needs outside of their specialty.

As early as 2013, Forbes reported Macy’s pulling goods from stores and developing algorithms in order to limit out of stocks at store level, and achieve faster delivery as well as buy online pick up in store. In a strangely prescient piece, given the developments at John Lewis and Marks & Spencer for example, it also mentioned condensing the selling area and allocating more space to the backroom.

Imagine a store in which the selling area has been shrunk and converted to more of a showroom with interactive experiences; the rest of the store serving as a separate zone in which pickers would assemble a customer’s purchases; and digital technology would allow shoppers to select and pay for products on display. The resulting order might then be delivered to a kerbside collection point for the customer to pick up without having to wait in a checkout queue. Such a hybrid, traditional plus dark store, would answer many customers’ desire for a store experience without risk while allowing retailers to be flexible with both conventional and e-commerce formats as required. It would also serve as a collect and return point for online customers.

Logistics has become a customer issue

Many of the questions raised by omnichannel, and which have been put under the spotlight by the Covid pandemic, are in fact logistics questions. The recent customer expectations we are struggling to fulfil are in fact issues for supply chain and logistics: fulfilment from stores; dark stores; buy-online-pickup-in- store; click-and-collect; buy-online-return-in-store. All these are trends dominating the current retail scene and which have been accelerated by Covid. They are all heavily dependent on efficient and adaptable supply chains, and they all place logistics under consumer scrutiny. In the same way that steam and electricity transformed manufacturing, so digitisation is having an equally important impact on supply chains. As it matures, digitisation will be increasingly used to fulfil customer expectations in terms of time and availability, as well as offer a profitable and resilient fulfilment solution to retailers.

Credits: IADS (Dr Christopher Knee)

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Keeping markets under close watch, IADS collected spectacular store concepts from retailers around the world. This collection of stores offers jaw-dropping displays that will draw customers from near and far.

Check out how retailers are using surprise effects and creativity to fundamentally challenge traditional retail concepts to create desirable experiences and spectacles.

Apple, Los Angeles

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Louis Vuitton, New York City

The French fashion house opened the doors to a temporary men’s pop-up in the SoHo neighbourhood. The space, featuring a spectacular color palette, hosts a product selection from the artistic director, Virgil Abloh. The installation is part of a series of men’s global fashion events named ‘Louis Vuitton: Walk in the Park’.

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Gentle Monster, Seoul

The new Gentle Monster store in Seoul, Korea does not conform to the typical template of eyewear stores. At the entrance, an army of androids welcomes customers and directs them to screens with hyper-real images. The space also features a giant metallic spider that is independently animated.

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ENG, Shanghai

ENG is setting up a second concept store in Shanghai. Featuring a futuristic spaceship interior and buzzy atmosphere, the store has proven to be a hit with Chinese Gen Z customers. With a palette of silver, white, and electric blue, the shop floor displays holographic projections and vending machines where products can be purchased.

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Fendi, New York City

Fendi has opened a flagship in NYC at 57th and Madison Ave. The highlight of the store is a jaw-dropping sphere suspended from the centre of the second floor. The location also offers a VIP room and a lounge that can be closed off by ivory curtains. Every aspect of the store is dripping with luxurious attention to detail.

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Luxemporium, China

Luxemporium is expanding to second-tier cities with its store concept in Changsha. The store is themed ‘Parallel World’ and features various sections boasting futuristic aesthetics with metals playing a dominant role in the design. Lights and shadows are used throughout the store to give different effects, such as a sunset.

more on LUXEMPORIUM CHINA 

What: Tal Zvi Nathanael, C.E.O. and founder of the innovative Showfields retailer is interviewed in Global Retail News.

Why it is important: Many department stores want a flexible and hybrid retail, but that move requires many specific talents they don’t have in-house. By partnering with “The Magic Box”, a new pop up programme, they accelerate their ability to innovate.

Showfields started in 2019, and currently has 2 stores in New York and Miami. Occupying nearly 1,500 sq.m of sales area across 2 floors, each shop has an area dedicated to art, F&B, a bar and a modular event space, and hosts about 80 brands. New brands which had never been on public offer before are also curated. The assortment is constantly changing, with a theme change every 6 months. In June 2021, the Showfields.com platform, which is a multi-vendor marketplace, was launched.

What is your turnover?

TZN: We do not disclose numbers but I can tell you that Showfields has been profitable since day one. We have a staff of 70. The majority are for marketing, designers and IT engineers.

How does your commercial agreements with brands work?

TZN: Our business model was devised to allow a low barrier of entry for both DTC brands that were considering brick and mortar as well as brands looking for space to experiment with new concepts. Brands pay a monthly membership fee to appear at Showfields (in our physical stores, shop-in-shops and on our website). Brands can rent a space from USD 2,000 to USD 12,000 per month, for about 10-25 SKUs. The fee is not proportional to turnover as Showfields does not apply variable rents. The most important aspect for us is to remain independent in our choices. When we list a new brand, we prefer to ask ourselves: “Will it be really innovative for our customers?” rather than “Which brand will sell the most”?

Data is at the very heart of your business model. Can you explain this?

TZNl: Like any retailer, Showfields collects a lot of data, and we share it with brands as part of their membership. Brands know how many visitors entered the store, what are the associated email addresses, etc. We give them the exact same K.P.I.’s as those that they gather on a website. Our data includes street to store conversions, inside store traffic, impressions, engagement, sales, e-mail (C.R.M.) and experience interactions.

What is the potential of retail media?

TZN: Retail media used to be off a retailers’ radars, but that’s changing as margins erode. Online retailers are more advanced in this area. But all retailers should have to look at Amazon’s and Walmart’s strategies to understand the value potential of data. Thanks to this data, retailers allow brands to build and offer a tailored experience for customers. Retail media explains, in part, the rush to open digital marketplaces that we are seeing in Europe, already far more advanced than in the U.S.A.

There are many silos to break through amongst retailers, brands and media agencies. What is the next frontier in this area?

TZN: For me, the goal is to have an offer that is as personalised offline as it is online. The next frontier will be when retailers offer a fully integrated media platform by giving visitors a different in-store experience that changes as matching profiles develop.

Why did you create Showfields?

TZN: Many stores were no longer capturing the customer’s attention. At the same time, the cost of entry into brick and mortar is prohibitive to brands. DTC brands eager to open a pop-store in Soho (for instance) would have to pay at least USD 100,000. At Showfields, costs are 10 times lower. Our goal is to remove the barriers to entry so that brands can make inroads into physical retail.

What about Showfields’ expansion?

TZN: By the end of 2021, we will open a 3rd store in the U.S.A. as well as 1 in Asia. In addition, we are launching a pop-up program called “The Magic Box”. We aim to set up ‘shop-in-shops’ for shopping centres, department stores and hotels. The model says that retailers don’t buy the inventory. We act as a partner, not as a tenant.

Showfields in Global Retail News

What: The Economist review a book providing tips on remote management, which aims to be practical and down to earth

Why it is important:  The true nature of work and human relationship does not change between face to face meetings and virtual ones. Going virtual does not have to involve the gamification or yield to an increased surveillance as we have seen in recent examples, as workers remain workers, and should not be infantilized with gimmicks and other tricks.

The Economist reviews Leading at a distance, a book written by consultants from Spencer Stuart, which provides guidance on how to manage remote workers. The authors are convinced that remote working can compete equally with face-to-face work, however, some rules are to be followed to avoid gimmicks and wrong postures:

• Building rapport is all about finding the right balance between regular communication to show the manager’s presence without the employee feeling that she/he is being monitored,
• Emails are useful tools but do not convey nuances, in which case virtual meetings are much better,
• Virtual meetings should be either 20 or 50 mn, not the usual 30, and should aim at only one goal out of the following four: solve problems, make decisions, gain support, build relationship.

The Economist has a critical approach towards the book, stating that some of the tips are offbeats (for instance, displaying one’s interior as a background screen to create proximity). For the magazine, the most important, in a probable future where work will be hybrid (a few days at home, a few days at the office), is to avoid gimmicks, as workers are not game-show contestants.

How to lead from afar The Economist

What: Department stores face challenges ahead as mall traffic dies down.

Why it is important: Department stores must carefully consider location, partnerships, and target audience in order to survive the evolutions of the business model.

According to Coresight Research’s weekly consumer surveys of the U.S. market, recent positive trends in physical store and mall traffic are reversing. There has also been an uptick in avoidance of shopping centres and malls.

However, department stores are one of few places to compare functionality, style, fit and other tangible features of multiple brands under one roof. This is a value proposition based on experiences that Gen Z shoppers, among others, view as important. Individual brands cannot compete with the reach of the department store network. It is also a place for up-and-coming brands to fight amongst be seen and go head-to-head with recognized competition.

To survive, department stores must do three things: focus on their strengths and define their target audience, reduce their store footprint to focus on location quality, and reset relationships with digitally native brands to drive traffic.

As customer expectations transform, the department stores that will survive will be able to reinvent themselves and adjust to the evolving and changing conditions that the format constantly faces.

 New Clouds on the Horizon for Malls Following a Strong Second Quarter Coresight Research

The demise of the department store? Not so fast

What: Department stores are investing in private label brands, e-commerce offerings and product collaborations to capture younger consumers. So far, initial results of these efforts have been promising.

Why it is important: As e-commerce has boomed and given way to the rise of digitally-native, players like Shein or Boohoo, department stores have struggled to find a place in the shopping habits of younger consumers.

After realizing that young people are not shopping at their stores, Nordstrom launched a task force to develop a long-term Gen-Z strategy. The planned changes include a new ambassador programme, a new website landing page, a private label rethink and a series of exclusive collaborations with brands like Billabong and Wrangler.

A number of other department stores, including Macy’s and Fred Segal, are similarly sharpening their focus on Gen-Z through the debut of new private label brands, reimagined e-commerce sites and product collaborations.

To attract new consumers, Fred Segal built out its online store’s navigation tools, doubled down on email marketing and experimented with livestream shopping on Instagram. The company also began showcasing curated looks across its digital channels, which have been a driving force for bringing in new consumers.

This month Nordstrom introduced an additional landing page targeted to younger consumers, re-organising the site to highlight a range of products for them to find easily with one click. The company is also launching an ambassador programme, offering styling and content creation with virtual monthly meetings.

Doubling down on their private labels, Nordstrom and Macy’s both announced the creation of new lines and revamped categories. The former overhauled its juniors-focused BP private line this year, while the latter is planning to launch several private brands over the next year with a focus on everyday basics, starting with its And Now This line, which debuted in July.

Nordstrom and Macy’s are banking that the middle ground offering between luxury and fast fashion — quality products at an accessible price point — will stand out to consumers and keep them coming back. But competing with players like Shein, which routinely drops thousands of new, inexpensive items per day, is a difficult game. The promise of higher quality only is likely not enough to wean them off fast fashion’s low prices and speedy delivery.

Additionally, Fred Segal and Nordstrom both reassessed pricing based on shifts it observed in consumer behaviour. The changes made at Fred Segal resulted in a much higher sell-through and demand for accessible emerging designers.

Nordstrom went so far as to buy a stake in Topshop and its sister brands in July. Fred Segal is acquiring and reviving shuttered labels such as Camp Beverly Hills to sell exclusively in hopes of mining Gen-Z’s love of nostalgia: the line was a success for the company, with 25% of inventory sold on the first day.

Can Department Stores Win Over Gen-Z

What:  The Economist draws some lessons from the current picture of the US Retail market

Why it is important:  Amazon did not kill the industry as announced, far from it.

Vaccines, stimulus cheques and optimism allowed American consumers to get back into shops (virtual and offline), even though August is slightly lower than July 21 due to fears related to the Delta Variant.

The Economist takes some distance to look at the bigger picture and the learnings so far:

• E-commerce significantly rose, as predicted: from 14% of total business in 2018 to 20%,
• However, Amazon did not annihilate the rest of US retailers as many prophets of doom announced during the height of the pandemic, often under the “retail apocalypse” reference.

Contrary to plainly taking hits, US retailers adapted to the new reality, helping them to collectively look in better shape (their total market value, excluding Amazon, exceeds by 88% the same 2018 number). This transformation took place alongside 3 axes:

• The biggest retailers embraced digital, such as Walmart which announced that e-commerce now represents in 2021 13% of its total sales (USD 75 bn),
• Some retailers also opted to collaborate with digital-only alternatives to Amazon, such as Shopify, Etsi or Instacart,
• Brands also decided to take back control of their distribution, according to the DTC model.

The Economist concludes that in order to face disruption, market players need to experiment and invest, citing the Walmart example which had many false starts and raised its capital spending by 40%.

How American retailers have adapted to the Amazon effect

What: Pre-orders are gaining momentum – and advance images of influencers wearing digital versions of the season’s new fashion may hold the key to effective marketing.

Why it is important: Adopting pre-order requires having buzzy products as well as a frictionless supply chain and clear communication to avoid returns and cancellations.

A new campaign by Farfetch features influencers wearing luxury items that are not existing in the physical world. They’re digital versions of styles that can be pre-ordered — a new model introduced by Farfetch in August to get products to customers faster.

While Farfetch isn’t the first luxury retailer to see an opportunity with pre-order, it’s the first to link the process of digital clothing to very prompt production. Many of the brands launching pre-order are doing so for the first time through Farfetch, says Jamie Freed, Farfetch's global vice president of private client.

On-demand fashion is on the rise. Reservations are available to Net-a-Porter’s high net worth clients via its personal shopping team. In February, cult UK retailer LN-CC began working with brands such as Di Petsa to produce on-demand pieces. Brands such as Telfar already offer pre-order directly to their customers.

Adopting pre-order enables retailers to collate useful data to adjust seasonal buys, which can also lead to higher sell-throughs and less unsold inventory, says Farfetch’s Freed. Items pre-ordered from Farfetch are being shipped approximately four weeks after purchase.

The biggest challenge will be to incentivise shoppers to buy, as there’s so much inventory  available right now. There’s not a huge incentive for customers to pre-order unless it’s something you really want or it’s something that might sell out quickly. In that’s sense, it’s said that Farfetch’s pre-order offering will feature the hottest styles.

One issue with the pre-order model is the potential rate of returns and cancels. The same returns policy for regular items applies to pre-ordered goods, but Freed hopes that digital clienteling can help avoid high returns. The key is to provide customers with plenty of details about the product (videos, information, dimensions) and maintain communication.

As the products for pre-order don’t yet exist, Farfetch worked with fashion tech company DressX to render digital pieces on its models and with Threedium to digitally render accessories. The luxury industry is watching the Farfetch venture with interest as digital fashion becomes part of the business model.

How to make fashion pre-orders work

What: Local label Holzweiler has introduced a new retail concept in Oslobukta, the city's new creative hub, while more than USD 33 million was invested to revamp Oslo's luxury department store Steen & Strøm.

Why it is important: While Norway is coming out of the pandemic with one of the most robust economies in the world, Steen & Strøm result so far is double-digit growth in terms of both visitors and turnover since stores were allowed to reopen in Oslo last May.

Local consumers are shopping confidently, international shoppers are slowly but surely returning, and there’s an array of new developments across Oslo, from new museums to the new arts and culture center Oslobukta. This has created a newfound appetite for luxury fashion, still a relatively new market for Norway — and both local and international labels are reaping the rewards.

There are major retail developments: Promenaden has pumped more than USD 33 million into revamping Oslo’s luxury department store Steen & Strøm, bringing major international beauty and fashion names into the country for the first time and aspiring to “own luxury” in Norway. At the same time, some of the city’s independent labels are seeing impressive growth against the odds, and grabbing international attention.

The family-run brand Holzweiler is one such name. Despite the pandemic, the label managed to grow both its e-commerce and wholesale business by 176 and 49%, respectively. The label also caught the attention of global retailers like Net-a-porter, Harrods, Selfridges and Browns while continuing to develop its presence at home since shining a spotlight on Oslo remains a priority.

That’s why the label is investing back into its hometown with Holzweiler Platz, a new retail concept and “dream project” for founders Andreas and Susanne Holzweiler. It’s slated to open in September. The new space blends food, art and fashion with a new restaurant dubbed Café Platz, yearly artist collaborations, and a striking design concept all about curved lines, open space and Scandi minimalism.

The ambitious revamp of department store Steen & Strøm, which happens to be the longest-operating department store in the world, is also helping make the city’s luxury retail scene more vibrant and turn Oslo into an important destination for luxury brands. Real-estate manager Promenaden has invested in the store to create a new beauty hall; new entrance onto Karl Johans gate, the city’s busiest shopping street, and launch brands and concepts that have been missing in Norway — and Scandinavia as a whole.

The ambitious redevelopment project includes a new interior layout to improve the store’s flow; a French luxury corner; the first men’s grooming space in Norway; the first Dior Beauty boutique in the Nordics, and new tech features to enable customers to try on makeup digitally in the beauty hall. There are also continuing efforts to broaden the retailer’s brand mix and help bring major fashion names to the Norwegian market, as local customers have developed a stronger appetite for international labels.

Norway Builds Its Luxury Retail Scene 

What: Saks Fifth Avenue parent HBC is teaming up with WeWork to launch coworking spaces under a new business dubbed "SaksWorks."

Why it is important:  Following the pandemic, offering coworking onsite can monetize retail space and create an ecosystem around stores with a captive audience.

Saks Fifth Avenue owner Hudson’s Bay Co will convert parts of some department stores into co-working spaces managed by WeWork as many employees are negotiating remote-work policies. The new coworking venture will open in five locations around New York, including the Saks Fifth Avenue New York headquarters. The first stores are expected to debut in September.

The coworking initiative brings upmarket facilities such as "stylish work and meeting spaces, artisanal cafés with fresh food and drinks, restaurant space, retail, fitness studios, and scheduled events for members" to coworking spaces geared at urban and suburban regions.

SaksWorks already has 2,000 paying members pre-launch. “A lot of companies today are providing stipends for employees who work remotely to join a workspace, because they need to get out of the home.” Given that one recent McKinsey report estimated that 20% of the workforce might work from home three to five days a week, too, it's a market that appears ripe for the right provider. Sites will close at 5pm, allowing them to be rented for events in the evening. Five companies have already signed up for its Workplace Clubhouse programme.

Wework To Operate Co-Working Spaces in Some Saks Fifth Avenue Stores

HBC partners with WeWork to launch SaksWorks coworking spaces

Office meets retail

What:  An overall reflexion from the FT on retailing fashion in 2021.

Why it is important:  Stores keep an edge over internet as they are able to convey experience, emotion and service in a way that is not possible online. The magic formula remains however to be found.

The pandemic led to significant changes in terms of fashion retailing, the most important being the increase of digital sales (from 12% in 2019 in 23% in 2020). Luxury can be bought online, and in quantity. As a consequence, stores need to adapt and provide reasons for customers to come rather than logging it on the brands’ websites.

The Financial Times reviews la Samaritaine, Selfridges, Lane Crawford and other retailers whose business is tourist-related. All players agree on saying that regaining favours from the local customer is the new goal, however they remain divided on how it should be achieved, be it through only emotion and experience, such as in La Samaritaine, or with the help of tech, visible or not, such as in Burberry or Browns/Farfetch.

Re-engineering the fashion retail experience 

What: Climatic catastrophes are increasing, affecting all industries across the world.

Why it is important: Making the most of data and adapting local offer could be an opportunity for retailers to adapt to an ever changing situation by selling the right products at the right moments in the right stores.

2021 is the latest illustration of climate changes, with a number of extreme weather situations, from floodings to drought and hurricanes. In the US only, climate-related catastrophes cost the US USD 2 trillion in damages since 1980.

This is obviously impacting all economic fields, among which retailers. Most of them are now committed into sustainability programmes, but are also using data to understand how customers react to weather, helping them to sell the right product at the right moment.

It is believed that such strategies can increase productivity by 2 to 6%.

Retail Weather Realities

What:  The pandemic has deeply changed the role of sales associates in retail stores (especially in luxury)

Why it is important:  Their new role is not just a matter of them adapting to new demands: it is all about the company changing and evolving towards a new vision. In other words, the sales associates role’s transformation should only be an echo of the broader notion of purpose the retailer develops.

It is commonplace now to say that the role of sales associates in stores have expanded since the beginning of the Covid-19 pandemic: everyone now has a personal shopper, who acts at the same time as a service provider, an expert on the product, and a bridge with online sales channels when needed.

According to Doug Stephens, a consultant, sales associates are here to provide what customers can not find online: experience and expertise. They can be reached via Whatsapp, emails, texts, calls (the best illustration being the Call to Deliver initiative from SM), and are expected to collect data as well as being super charismatic.

This has a cost in terms of pressure on teams and ability to staff stores, leading to a necessary reevaluation of the situation: new outfits (more comfortable uniforms), new compensation package, as well as new metrics, such as digital purchase intent, percentage of online orders fulfilled by the store, returns, and not stick to old world ones such as sales density, footfall, etc…

However, such an upgrade also requires having the right tech to make the most of these new teams.

Within IADS members, Magasin du Nord is currently leading a real-time experience by stripping sales associates from their role to cash in purchases, and dedicate them to services and advice.

The Long View by Vogue Business Luxury’s new sales professionals 

pRINTABLE VERSION HERE

What: Generation Z shoppers are not easy to win over and have a long list of demands for retailers and brands.

Why it is important: Gen Zers are the influencers that can impact the buying decisions of the generations before them. Retailers need to constantly understand and adapt to the needs of younger generations to stay relevant.

Introduction: Generation Z shoppers are a completely new beast for the retail industry to market and capture. They are digital natives that have little patience for errors and value their personal brand above all else. Although they can be tough to appeal to, they are easily won over through loyalty programs and perks. Taking the right steps to impress these young shoppers will be vital for brands and retailers to stay relevant.

Meet Generation Z

Move over Millennials, retailers and brands are setting their sights towards a new buyer persona: Gen Z shoppers. People labeled as Gen Z were born from 1996 and after. While these shoppers are still young, they are known as the “influencers” which means they have an impact on what Millennials and Gen Xers buy. This does not mean that Millennials are irrelevant, but rather Gen Z can be leveraged as trend setters. Before the pandemic, Forbes reported that Generation Z had a purchasing power of USD 143 billion.

IBM and NRF conducted a survey of 15,600 Gen Zers from 16 countries examining their shopping habits and values. Some trends that Gen Zers expect from retailers are accurate inventory information, value for their money, a wide assortment of choices, innovation and technology that enhance encounters, and individualized shopping experiences.

As seen in Figure 1 below, choice, availability, convenience and value have major impacts on where Gen Zers shop. While GenZ does not practice brand loyalty just yet, research suggests that as they get older they will start to become more loyal, so brands need to try and make a lasting impression while they are in this discovery stage.

![1 

Surprisingly, Gen Zers prefer to shop in the physical store compared to online. This does not mean that they don’t also use digital shopping channels, but they expect unique and personalized experiences online and in stores through the perfect marriage of digital and physical channels. TX Youth Energy Centre in Shanghai creates the ultimate experience by combining fashion, street culture, and clubbing under a single roof to “become a cultural landmark for youth.”

Reaching Gen Z on social platforms

Connecting with Gen Z on social media allows brands to interact directly with these young consumers while also capturing key data points about their preferences. These data points can then be leveraged to suggest personalized and unique product suggestions to Gen Z shoppers, which they also see as an important service that brands should offer.

According to the GlobalWebIndex, people from the ages of 16 to 24 spend an average of seven hours per day online with three hours dedicated exclusively to social media channels. Classic social media platforms like Twitter, Snapchat, and Facebook have seen reduced traffic as more popular platforms like TikTok or online gaming platforms like Fortnite grow in popularity. This is another reason brands will need to constantly evolve to stay current with what is important and trending with these younger shoppers.

Gen Z has completely reinvented social media marketing and brands need to adapt and reconsider the platforms that are being used to reach younger audiences. Falabella has launched Falabella Play, a new multiplatform channel with interviews, music, and live broadcasts. The channel is transmitted on YouTube, TikTok, Instagram, Facebook, and Twitch to be able to reach their younger community of shoppers. Falabella Play has featured interviews with influencers and music artists, unboxings of products, and offers fashion trend videos.

Social media has become a place where e-commerce, entertainment, and social are fusing into one thanks to Gen Zers. Poshmark recently teamed up with Snapchat to offer Poshmark Mini, a social shopping experience in the app where shoppers can browse curated products without leaving the app, in hopes to introduce the resale platform to the Gen Z audience. This is a great example of a retailer meeting Gen Z shoppers in the formats they are using on a daily basis.

A Gen Z approved strategy

Gen Zers could be the secret to keeping physical stores relevant in this growing digital and omnichannel age. According to a survey conducted by A.T. Kearney, Gen Z considers shopping in stores as “retail therapy.” But in order to give this generation with high expectations and short attention spans what they expect, department stores need to consider communication methods, service offerings, and rewards carefully.

Communication needs to be authentic, concise, and include up-to-date lingo that Gen Zers respond well to. Social media and digital platforms should be a key area to target this consumer group to meet them on the channels that they actively use daily, with options to shop directly through these channels. Being transparent as possible around sustainability and other initiatives will also help Gen Zers feel more comfortable supporting a brand. For example, H&M has completely revamped their inclusion and diversity statements and promises “ to share [their] progress and achievements, as well as the challenges ahead.”

Service offerings like free shipping go a long way with Gen Zers as they search for value. Retailers need to harness the power of data collected through various channels to be able to propose unique and personalized products to Gen Z shoppers. Any technology that is adopted needs to be intentional and must enhance the shopping experience, otherwise Gen Zers will have no patience for it. Many retailers like Macy’s, Gap, and Neiman Marcus are offering flexibility through Buy Now, Pay Later payment services which attract younger customers. While technology is a place to pique Gen Z’s interests, physical stores should be prioritized as a place where they can enjoy picture worthy experiences.

Rewards are very important to Gen Z shoppers. As they value individuality, loyalty programs that offer curated freebies, make suggestions based on past purchases and searches, and remember their birthdays are sure to keep these shoppers coming back for more. H&M’s Membership Program offers customers points for each dollar spent, a welcome gift for signing up, exclusive discounts, free online returns, insider shopping events, and birthday offers. This loyalty program is a perfect blend of transactional benefits (coupons) and community-driven experiences.

Tactics to capture and retain Gen Z buyers

Generation Z grew up in an age of rapid improvement. They are digital natives that have a growing knowledge about data and how algorithms work on targeted campaigns, making them an even harder target to catch. Retailers and brands must take the right approach when coming after these shoppers to ensure that messaging is clear and authentic while also creating a personalized and unique experience across all channels. Understanding this generation’s influence on the consumer market and implementing a marketing strategy with them in mind is vital to survival in this digital and omnichannel age.

As Generation Z continues shuffling through trends, brands and retailers should keep a few things in mind. It is important to stay in touch with the younger generation and understand how to be able to reach them whether that be pertaining to channels they use or issues they care about. Agility and understanding is key to ensure marketing efforts are not lost. But just as Gen Zers value authenticity, it is important for brands to remain true to their missions and values and not sacrifice these things for the sake of relevance. As Generation Z starts to enter the workforce, their spending power will only increase with time, but understanding how your brand can uniquely capture some of their wallet share is important before investing in new tactics and channels.

Credits: IADS (Mary Jane Shea)

What:  An opinion against BNPL solutions based on their potential social impact

Why it is important:  at a moment when CSR is getting an important topic, retailers should also take into considerations their present actions, which might backfire in the future.

Instant gratification through shopping has become the norm for many customers now that the world has become digital, and Buy Now Pay Later solutions are making this evolution more easy than ever. We already reported through an IADS Exclusive these solutions here. These solutions allow customers to access money to fund their purchases. The issue with this system is that one can not talk about credit or loan, as it is completely unregulated, and, according to the article, could be rather called “get-now, pay-later” money (or bad debt).

According to the article, the value of transactions funded by such a system in Australia and New Zealand alone grew by +90% between 2017 and 2019, before the Covid-19 pandemic started. It seems that users are usually lower-income customers, which is an issue on the long term.

Although BNPL solutions are critical for retailers as it significantly contributes to their sales, the article argues that retail companies should get the control back, by not letting fintechs access the data, and be closer to their customers. This implies, somehow, resisting the lullaby of the BNPL Eldorado and taking care of the clients by not luring them into being in excess debt.

BNPL

What: This case study examines how brands can conquer the last mile and identifies the four factors that enable this section of the supply chain: inventory management, order distribution, delivery and customer service.

Why is it important: Using RIFD to visualise inventory, optimising fulfilment using warehouses or inner city micro centres (probably both), choosing the right mode of transport considering that carriers increased their prices and that the return process is expected to be as easy as the initial delivery, and ultimately, guaranteeing a smooth customer experience are the top priorities to organise the last mile delivery.

It’s actually one of the most complicated elements of online retail. It requires meticulous inventory management to track down products and find the most efficient and cost-effective way to deliver them to customers, while also providing a service that’s as speedy and convenient as possible.

E-commerce giants like Amazon and China’s Alibaba and JD.com operate massive, sophisticated logistics operations with economies of scale and cutting-edge technologies that allow them to bring down the costs of these services and undercut rivals. These behemoths have set consumer expectations high with offerings of free shipping and next-day delivery. Most fashion retailers in western markets are years behind, and catching up will be a costly and formidable process.

Consumers have increased their digital spend, their expectations of online service have also grown. Meanwhile the resources that facilitate a seamless last-mile service are tighter than ever: Available warehouse space is scarce, especially in key distribution zones near ports and major cities. Carriers are stretched thin and pass along rising costs to brand clients in the form of surcharges and shipping delays.

And consumers have little sympathy. Shoppers today expect their purchases to arrive faster, the costs of shipping waived, and for their returns to be free, too — especially when Amazon makes it look so easy. In an increasingly competitive retail environment, acing the last mile offers more than a competitive edge; it’s a vital act of survival.

Fashion's LastMile Opportunity

PRINTABLE VERSION HERE

*What:  Our visit and review of one of the most important Tech fairs in Europe

Why it is important:  4 interesting start-ups that we spotted for our members, with some potential for immediate retail applications.*

*Viva Technology (aka Vivatech) is a French fair dedicated to new technology, launched in 2016, and seen as the French response to the tech hype from California and the CES in Las Vegas. With the permanent support of the French President, Emmanuel Macron, who promotes the “start-up nation”, this tech fair became in 4 editions a rendezvous of choice, where all tech moguls from the world gave speeches (Mark Zuckerberg, Jack Ma, Satya Nadella from Microsoft), but also world leaders such as Justin Trudeau or John Kerry, and world figures (Usain Bolt, Bernard Arnault).

The 2021 edition was, due to the Covid-19 context, unique as it was one of the first mass-scale events to be held in Europe, organized in a hybrid way, with both a physical fair with live events, echoed by an online platform to maximize visibility. In terms of numbers, this meant 26,000 physical visitors and 114,000 users on the platform (to give a sense of comparison, the first edition welcomed in 2016 45,000 visitors, and the last pre-pandemic one in 2019 attracted 124,000 people).

We decided to attend this edition as we believe the IADS should help its members detect innovative approaches and solutions wherever they are, in complement to their own efforts. Also, it was a way for us to catch a glimpse of where “retail tech” stands.*

A quick overview of the key messages from top speakers

To say the least, this edition of the fair was politically charged.

Emmanuel Macron used Vivatech as a political platform to highlight the progress of the tech industry in France, both in terms of number of companies, jobs created or funding. He was echoed in that stance by Mirakl (a French company specialized in marketplace technology, working with a few IADS members and Hudson’s Bay and which we reported here), which discussed financing and going public.

Macron also pleaded for European cooperation in terms of start-up support, through the Scale-up Europe initiative, and for a closer control of what GAFA does. Tim Cook from Apple replied that the European proposed big tech mandate could affect the security of the Apple products system.

However, some other leaders decided to focus on tech itself, by giving some perspectives on the evolution of the industry.

Mark Zuckerberg from Facebook chose to promote his convictions about the appearance of a “meta-universe” where, through VR and 3D technologies, it will become possible to virtually produce, sell and buy items (i.e. instead of selling a TV, it will be possible to produce and broadcast the content directly to the audience, making the TV an obsolete product). Klarna (a buy-now-pay-later solution that we reported in our Exclusive article as well as here and here) ranted against banks, which are, according to the company, overcharging customers while its solution perfectly suits its 18M customers and 250,000 retail partners needs. Finally, Google made a spectacular announcement by confirming that it had inked a deal with LVMH to manage the group’s cloud capability (i.e. use its AI capability to help LVMH on topics such as CRM and customers’ knowledge, logistics and supply chain processes).

Interestingly, however, a macro view of the fair and the start-ups presenting their solution tended to show that retail tech was rather underrepresented, compared to other sectors of innovation such as transportation (autonomous vehicles, flying cars, shared fleets), health (improved capabilities of the iphone on that topic, among others), HR and video conferencing (AI to manage employees, systems to meet virtually), or finance. Even the LVMH booth was somehow lacking retail-dedicated start-ups: out of the 12 presented, we spotted only one company that could be interesting for our members, the other ones being more adapted to brands than retailers (tactile packaging, in store display proposals (see the one we have spotted below), live-shopping solutions for brands, data analysis dedicated to grey market and second hand, or new materials).

Our top 4 selection for department stores

Here are the companies we spotted for our members during the fair:

1- A versatile tool for central HQ functions and marketing campaigns: Pitchy

• A seemingly simple tool, however with potential applications that go beyond the use cases displayed on stage.
• Pitchy is an AI-powered online video editor, that allows the making of high-quality videos quickly, simply and without any particular skills. They can be used online, on websites, but also on social media or in 1 to 1 communication. In terms of practicality, think “PowerPoint applied to video conception”. See how it works by clicking here.
• Why do we think this is important?   A simple and versatile tool, that can be used at the HQ level on many topics (training, motivational or informational messages) but also on the sales floor when it comes to presenting a new product efficiently to inform customers, just with a phone, or by marketing departments to tease their next campaigns.

Contact: Jimmy Moe, International Sales Manager, jmoe@pitchy.io 

https://www.pitchy.io

Learn more about Pitchy here

2- A marketplace system, for real stores and offline promotions: Achille

• A reverse approach to marketplaces in order to promote real stores to local customers and let them have access to the best deals, offline.
• Achille is a device-driven solution that applies the principle of marketplace (in terms of choice, offer and access to products) to real stores. The advantages for retailers are that Achille works exactly in the same way as a virtual marketplace, however is a great complement in terms of local business solution at a limited cost of operation. You can watch their demo video by clicking here.
• Why do we think this is important? A simple tool that comes as an extra software layer, thus not requiring heavy IT integration, which also provides a solution for our members who have a large regional network and want to make sure they cover all their types of customers, including the less connected ones.

To be noted:  The IADS already showed to its members a similar solution, UK-based, during the Store Operations meeting in 2017: Nearst, founded by Nick Brackenbury

Contact: Fabrice Moncault, founder, fabrice@achille.shop

https://www.achille.shop

learn more about achille here 

3- A circular packaging system: Hipli

• An interesting initiative, supported by LVMH, which provides to brands and retailers the possibility to guarantee a 100% sustainable delivery process thanks to circular packaging,
• Hipli has developed reusable packaging (envelopes, covers) that is shipped back free of charge by the customer upon receipt of the product. Hipli washes the packaging, prepares it again and reinjects it in the process. Packaging elements can be branded, and the solution is already 100% working in France, currently being expanded in Europe. The system works as a “Packaging as a service”
• Why do we think this is important? Hipli provides an easy to implement and non-industrially committing solution to members to move forward in their sustainability initiatives. For now, they have only inked deals with brands, but there is no reason why retailers should not be interested either. It is also a very visible step, that can provide significant PR coverage (contrary to other initiatives that, even though they are needed and useful, might be less visible and interesting for the general public).

Contact: Lysianne Coquin, cofounder, lysianne.coquin@hipli.Fr

<https://hipli.fr/en/>

learn more about hipli here 

4- A spectacular solution for windows, instore displays, but also live streaming: Fosfor

• The WOW effect in windows and on the sales floor, with a wide variety of animations in 3D that either represent the products on display or complement them with additional information. In addition to this, a solution for live streaming IADS members that could contribute to animate stores from the network while having the live session in the flagship.
• A series of state-of-the art screens and display technologies allowing jaw-dropping interactions with products (click here to see the video of their Totem Holix solution, applied to Kenzo). But more importantly, a camera and screening system allowing streaming in real time a 3-D, life sized picture of the speaker, in a clear and natural manner (click here to see the video of they Crystalman solution) . With the appropriate system, the speaker, wherever he/she is based, can interact with the audience watching the screen.
• Why do we think this is important? Live streaming sessions are now crucial for our members’ businesses, but can be expensive, all the more so if they involve a celebrity or an influencer. In addition, they tend to address only an online audience. We see this technological solution as a way to maximize the investment by being able to show the streaming in other stores, therefore creating occasions for drive-to-store events addressing the local clientele.

Contact: Cédric Besacier, cofounder, cedric@agence-fosfor.fr 

https://www.agence-fosfor.fr

learn more about fosfor here 

Going further: IADS launches the “innovation channel” exclusively for its members

We believe that it is key that your Association gets more involved with the notion of innovation and transformation, be it digital or in other fields of application. This is the reason why, in the coming weeks, we will be launching new initiatives:

• Opportunities to discover start-ups that we think can be interesting for your innovation departments (with the guarantee of the IADS integrity as we do not have financial involvement in these ventures),
• More exposure on the subject of innovation through new content, developed in partnership with players from the tech industry,
• Interviews with innovative thinkers to discuss organisation of transformation and more.

Of course, we also welcome your suggestions! How would you like to be exposed to innovation? How could you contribute to this IADS innovation channel initiative? Do not hesitate to share with us your ideas!

Credits: IADS (Selvane Mohandas)

PRINTABLE VERSION HERE

It's here!

Suspense was on almost until the D-day. The long-awaited reopening of iconic Parisian department store, La Samaritaine, is finally here after sixteen years out of business and a total investment estimated between EUR 750 million and EUR 1 billion.

Closed in 2005 for safety reasons, the initial renovation plan was aiming for a reopening in 2010. Renovation plans were only unveiled in 2012, with, at the time, a target opening date set for 2016. After some blockages from local authorities (before and during the course of the renovation), works didn’t begin until the end of 2014 and, later on, the opening was announced for April 2020. But due to the Covid pandemic, the opening was postponed to June 2021, although the precise date changed several times while getting closer to the date. After many changes and an official pre-opening event with French President Emmanuel Macron, La Samaritaine Paris Pont-Neuf – finally – opens its doors on 23 June. Luxury takes time as Bernard Arnault always says.

A little bit of history

La Samaritaine was founded in 1870 by Etienne Cognacq and his wife ‎Marie-Louise Jaÿ. Both came from modest families, he was a hawker and she was a sales person at Le Bon Marché. Believing in innovative selling methods (fixed prices, clear price information, possibility to try on garments, easy in-store circulation …), the couple is a remarkable example of the social climbing that was linked to the rise of department stores at the end of the 19th century. Growing through the years, they ended up with a four-building store completed in 1932.

Having acquired Le Bon Marché in 1984, LVMH bought La Samaritaine in 2000 with the ambition to transform them in modern and trendy department stores, on both sides of the Seine River. However, the approach for La Samaritaine significantly differed from le Bon Marché (which is a LVMH entity), as it would be managed by DFS, the Hong Kong-based tax-free shopping division of LVMH.

(Chinese) tourists vs. locals

A first Duty Free Shoppers store opened in Hong Kong airport in 1960. In 1972, the company launched its first DFS Gallerias in Honolulu and Hong Kong. In 2013, DFS announced their intention to expand outside of Asia, by looking for a few European locations (France, Italy, Switzerland). The strategy was to rely on DFS’ brand awareness among Mainland Chinese shoppers and company’s understanding of Asian consumers to capture their spending when travelling to Europe. For DFS, at the time, “Chinese customers will continue to account for more than half of our revenue in several years to come”. In 2016 they opened their first European duty-free business in Venice, combining luxury and curated local products. While it still remains unclear if it is successful or not, DFS claims it has been attracting 3 million visitors in the first year. La Samaritaine is their second European outpost.

For LVMH, tourists (especially Chinese ones) were supposed to account for half of the department store’s customers. In 2019 alone, nearly 1 million Chinese tourists visited Paris, spending over EUR 1 billion in tourism revenue. The average amount spent in stores is EUR 1,128 per day and per person. In that sense, department stores are an important crossing point for such spending (Galeries Lafayette is the second place to be visited after the Eiffel Tower and the retailer now has a dedicated store across from the flagship Boulevard Haussmann, just for Chinese tourists). Before the pandemic, and comparing La Samaritaine with the results of the Galeries Lafayette’s Haussmann branch in Paris, French trade magazine LSA estimated that the revamped department store’s annual revenue could potentially exceed EUR 500 million. For comparison, Le Bon Marché turnover is estimated to EUR 550 million, with 50% more retail space than La Samaritaine. But Le Bon Marché is not known for attracting that many Chinese tourists.

Needless to mention that Covid changed the game and La Samaritaine has, at least for now, to rely on Parisian, French, and hopefully European customers. For the time being, the opening marketing campaign is very much French-oriented (if not to say Parisian) and features the real store employees, using a very French and girly tone.

But Bernard Arnault has a long-term perspective on DFS’ new venture and the current situation is not making much of a difference to him: “In the short term, there are very few tourists. […]. The question is not whether things will return to normal or not. Clearly, they will return to normal. The question is when? We don’t know, and everything depends on that. But we’ve waited 15 years, an extra year won’t make much difference.”

So, La Samaritaine’s strategy towards Chinese customers has not changed despite Covid crisis, and DFS will just have to wait for them to come back. In that sense, just looking at the store loyalty program says a lot. Using a QR code, you can get your digital card directly and instantly while in the store: what you get is not a Samaritaine card, but a Loyal T Card by DFS and an email from them, informing you about “What’s happening In Hong Kong This Month”… To say the least, it will be confusing for Parisian customers who don’t know anything about DFS. In itself, the loyalty programme includes the usual: exclusive offers, free alterations, exchange without receipt, free delivery from EUR 200, and reward points coming with each purchase.

A closer look at the store

The original state-of-the-art “Art Nouveau” and “Art Deco” architecture and decor are amazingly restored and completed by a new and controversial Rue de Rivoli wavy glass facade by Japanese architecture agency Sanaa, which was also in charge of the department store project. Depending on the store sections, interior design was handled by Yabu Pushelberg, Agence De Création Malherbe Paris and Studio Ciguë.

The whole project occupies 2 buildings out of the 4 original ones, represents 70,000 square-metres splitting in different parts, and will employ 3,000 people. Non-retail parts are offering offices, 96 social housing apartments and a childcare centre. For the business parts: a LVMH Cheval Blanc 5-star luxury hotel (72 rooms, some with private pools, scheduled to open on 7 September 2021), and 20,000 square-metres dedicated to the department store itself including 12 food vendors (before closing the selling surface was 30,000 square-metres). As a comparison, Le Bon Marché surface is 30,000 square-metres, BHV is 38,000 and Galeries Lafayette Haussmann is 70,000.

The relatively small surface implies choices and, as it was originally designed for an international customer base, the store is exclusively dedicated to fashion and beauty. As opposed to competitors, local customers won’t find kid’s wear, nor homeware or groceries. In terms of taste, feeling and brand mix, La Samaritaine is meant to be about lifestyle, discovery and experience, “at the intersection of Avenue Montaigne and Le Marais […] where they can treat themselves to a luxury purchase and sip an espresso made by an expert barista”, according to Eléonore de Boysson, DFS’ President for EMEA.

More than 600 luxury and premium brands (including 40 exclusive ones) can be found under the renovated store, mixing big names and independent labels in all departments. Basically, the store splits in 2 sections: a luxury one (Pont-Neuf side, throughout the 6 floors) using materials such as state-of-the-art mosaics, light wood and gold finishing, and a streetwear one (throughout the basement, ground and first floors) featuring graffiti, concrete and raw materials. The latter is shrewdly located on the “high-street” Rue de Rivoli side (an Oxford Street Parisian version) to attract Millennials and Gen Z customers.

Wandering through the floors

From the main entrance on Rue de La Monnaie, the ground floor is dedicated to leather goods and accessories such as sunglasses and costume jewellery. The organisation is quite the usual with concession stands all along the walls, smaller stands and multibrand areas displayed in the middle. A relatively small part of the floor is dedicated to “La Boutique de Loulou”, an elevated gift shop, gathering 1,500 small objects, tech objects, stationery, books, souvenirs, accessories... Being self-service, metallic baskets are available to customers to easily shop. On the Rue de Rivoli side, the ground floor offers a young take on women’s and men’s fashion with a “Designers Lab”. Also, on this side of the store, and for the next 5 months to come, famous contemporary art gallery Perrotin has a 200 square-metre pop up store offering cultural goods such as art books, artists’ limited editions, goodies and decorative objects. It’s worth mentioning that La Samaritaine boasts about highlighting French creative talents in the “Factory”, a space for free expression.

The first floor is dedicated to luxury and contemporary women’s fashion, mixing concession stands and multibrand areas. When strolling towards the Rue de Rivoli side, the floor is transitioning to a genderless streetwear, outdoor and athleisure area complemented by a Shinzo Paris sneakers shop-in-shop.

From Tiffany to Cartier, the second floor is entirely dedicated to jewellery and watches and should appeal to Chinese customers when they are back. The third floor is for men’s fashion. The fourth floor is for women’s shoes displayed in a boudoir style. It’s worth mentioning that there is no men’s shoes section per se, but only a sneakers wall on the men’s floor in addition to the offer available at Shinzo’s shop-in-shop.

The fifth floor is beautiful in itself with legendary Art Nouveau peacock frescos, from which the store communication takes its origin. It’s also the place for Voyage restaurant and lounge coming along with an event space. Unfortunately, no rooftop, terrasse or spectacular views for the restaurant, such spaces being all taken over by Cheval Blanc hotel. Anyhow, food is an important part of the store, coming as a possible answer to the customer’s current cravings for experience. The 12 food vendors available in the store are all exclusive concepts and are ranging from coffee to pastry shop and classic restaurants. Street Caviar run by Prunier and located on the Rivoli side, is certainly the most interesting one as it offers EUR 15 caviar sandwiches.

Last but not least, the beauty department, unusually located in the basement, is the store’s main asset. Representing 3,400 square-metres and supposedly is the largest in Continental Europe, it should be a key driver for traffic and sales, for both tourists and locals. Two-hundred brands have been curated including 50 sustainable ones, plus niche and exclusive ones. They split in 2 different ways, a young and trendy self-service, and a more institutional space with concession stands. Interestingly and quite new, the majority of the beauty assistants are from La Samaritaine staff, not from brands. While all staff members are trained to be able to serve any customer need, customers can also shop by themselves as if at Sephora, thanks to baskets made available throughout the entire department. Services complement the beauty offer with a brow bar, a spa (Spa des Cing Mondes with hammam, sauna, and massage) and Studio de Beauté (run by Kure Bazar including nail bar, hairdressing and barbershop). Perfume is also emphasized with both an engraving station and one-of-a-kind editions ranging from EUR 3,000 to 300,000.

At your service

Besides “L’Appartement” VIP lounge available on the women’s fashion floor, La Samariatine offers personalised, and sometimes, new services. To be booked at the “Conciergerie”, personal shopping is developed through different options: directly in the store or in “L’Appartement” VIP lounge, but also at your home. In that case, a stylist will come to your place and show you ways to combine your pieces with new ones. La “Conciergerie” is also supposed to help any customer willing to book a museum ticket, a restaurant or a show. “Make my day” is a new service evolving around the idea of leisure and pushing customers to spend more time in the store. Offering them a “Samaritaine immersion”, the experience ranges from 2 hours 30 minutes (including 3 culinary experiences and an hour with a member of the Rue de Rivoli team) to a full day pampering with manicure, brow, makeup and hair styling sessions, lunch at Voyage restaurant, 3 hours with a personal stylist and a photo shoot.

Hands-free shopping is available for customers to gather all purchases in one place and to pay for everything in a single transaction. A tax refund service is developed so that all store staff know how to proceed, making the refund seamless for an immediate refund in cash, credit card or by “Wallet Alipay”.

As a conclusion, the IADS perspective

Times are difficult for multibrand retail and especially for department stores, competing to retain customers in store while being forced to develop their e-commerce and digital capabilities. Especially in Paris, retail suffered greatly with “Gilets Jaunes” social movement in 2018, massive strikes in 2019 and Covid in 2020. Meanwhile, Galeries Lafayette Champs-Elysees opened in March 2019 with results “below expectations,” (after the first six months) company Chief Executive Officer Nicolas Houzé told BoF. More recently, Qatari-owned department store Printemps changed its management team and announced a new strategy.

So La Samaritaine is not a safe bet yet. While nobody knows when tourism will resume and allow the department store to fulfil its strategy, here is what we can keep in mind further to the opening:

• In a general way, La Samaritaine is not a store made for locals and Parisians will understand that in a minute, the loyalty program says everything about that.
• It might also be hard to attract big local spenders to this “high-street” Paris neighbourhood. Rue de Rivoli has never been their favourite and has recently transformed to a pedestrian way. For sure, people will visit this beautiful store and, while unable to splurge on a EUR 2,000 Loewe bag, will probably indulge with a EUR 15 caviar sandwich. That’s not a lot of money at the end of the day, and it remains to be seen if they will come back for a second sandwich.
• There is no e-commerce and attached necessary delivery and click & collect services available.
• On the other hand, the beauty department is a real asset and could guarantee strong sales among locals, assuming they will be aware it exists.
• Food options are a lot considering the total footage. They are disseminated throughout the store, sometimes in debatable places, but will probably attract people looking for fun alternatives during their office lunch hours.

If Paris is still very much impacted by Covid, the city positions itself for a rebound. La Samaritaine will be part of it anyway, as well as IADS member Galeries Lafayette Haussmann that just completed the renovation of its historic and stunning “coupole” dome. On the cultural side and under global corporation umbrellas, art foundations (among them the Pinault one located very close to La Samaritaine) recently opened adding new and noteworthy attractions to a city now expecting life to go back to normal.

a closer look at la samaritaine

Credits: IADS (Christine Montard)

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Omnichannel department stores have two big advantages over pure players, including Amazon: they know their products, and they have stores. Department stores need to capitalise on these by using their human potential to the full with product knowledge, and by tailoring stores to the behaviour of digital customers.

Know the product

We have all experienced recommendations by Amazon for books which can be, to say the least, puzzling. They seem to bear no connection to previous purchases, interests or even searches. Ben Evans makes the provocative point that Amazon does not really know what it sells. The key for Evans is that Amazon operates with a logistics-based business model. That is, it deals with relatively uniform packages on an infinitely long shelf. The system can describe the products, but usually using only information from the suppliers, and incorporate that limited information in its presentation and description, and in its recommendations. All categories of goods are treated in the same way as long as they can be fitted into a box on an infinitely long shelf. “Products are a number, a size and a weight” (see Ben Evans). And anyway 60% of what Amazon sells is not sold by Amazon.

Recommendations use a model based on the history of the user and the behaviour of similar users. Even on sites which are personalised to each customer, AI is able to provide recommendations which are increasingly subtle and feel close to serendipity from the customer perspective.

a)    Content-based filtering relies on using as much customer data as possible. A recommendation like “products similar to this” is an example.

b)    Collaborative filtering collects information from many other users to derive suggestions for a particular customer. A typical recommendation in this case may suggest items which go well with one another.

c)    Knowledge-based systems are more appropriate when there exists less prior knowledge because, for example, items are infrequently purchased, and data is lacking.

The challenges faced by recommendation systems are sparsity of data; latent associations (when labelling or description is imperfect); and scalability (when data sets widen and become overwhelmed by the multiplicity of products and clients). An interesting example is Netflix which integrates the history of what members have watched with product tags by employees who understand the content, and finally pulls these parts together with a proprietary machine learning algorithm.

Now it is clear that while Amazon has no sparsity of data, it does nevertheless have problems with product knowledge (and perhaps also scalability). This accounts for its sometimes bizarre, recommendations which appear to have no reason other than a word in common in the suppliers’ descriptions.

Convenience and automation vs experience and interaction

The Amazon model privileges price, speed, convenience and automation, and managed from the outset to dominate a category, books, known for content, browsing, experience and human interaction. In so doing, it changed the category itself. The large impersonal chains such as Barnes & Noble or Waterstones which had put so many small local bookshops out of business, found themselves in their turn struggling against the apparently unstoppable might of Amazon.

However, customers fought back by patronising what was left of the small independents, and the chains used the best features of the independents to transform themselves and win back market share from Amazon. Book retailing is thus polarising between an efficient commodity system on the one hand, and a local community experience on the other. Both apparently growing (for example, independents are now growing again from a low of 1650 across the US in 2009 to 2470 in 2018).

According to the Financial Times, James Daunt, originally founder of Daunt Books of Marylebone High Street in London, has successfully rescued the Waterstone’s chain in the UK from the Amazon juggernaut by transforming it into a chain of local stores. Since then, Waterstones has acquired the US giant Barnes & Noble, and Daunt has the (daunting) task of doing the same in the US with analysts and investors betting against him.

The ideas developed in his own shop including catering to local customers in a club-like atmosphere rather than developing a single and replicable store matrix, and recommending books which he and his staff had actually read rather than two-for-one offers, was extended to a vast chain. The market was with him since the current trend appears, for example, to be favouring books as objects against the e-book fashion which has plateaued at 15% in the US.

The model has also been surprisingly viable since the returns to publishers fell from 25% to 5%. And the publishers appear happy to hand over a degree of control to intelligent booksellers. The model relies on engaged staff but as Daunt puts it, “you need fewer people, but the compact is you invest a decent amount in others. You get into a virtuous cycle, and you end up with a well-run, happy bookshop”.

Thus, the advantage of the Daunt strategy over Amazon relies on catering to local customers, using that knowledge to offer a better deal to suppliers (publishers), and, importantly, knowing the product sufficiently well to marry the two. Arguably these qualities are at least in part at the centre of the very DNA of department stores which have historically tailored their offer to their customers, provided useful conditions to brands and suppliers, and once again importantly curated and studied their assortment so as to be able to offer advice and recommendations.

Adapt the stores

These elements rely to a large extent on having a physical presence as well as an online one since the stores provide the local touch and the human product knowledge. This is the second advantage which department stores have over pure online players.

Recent circumstances have transformed retail, in particular regarding online business: in 2019, less than a third of US retailers had implemented a digital strategy. The transformation wrought by the covid pandemic saw retailers implementing omnichannel experiments such as kerbside pickup, same day home delivery, or buy online pick up in store. For example, the share of retailers offering kerbside pickup had jumped to 44% by the end of summer 2020. Some of these were, of course, catering to the convenience market, customers who did not want to shop physically but who appreciated the speed and return advantages of a physical pick-up point. But others were more complex.

This buy online pick up in store (BOPIS) service is the one chosen by Ketzenberg and Akturk in a recent HBR article. They found in a large-scale survey that retailers offering BOPIS actually stole business from their competitors who did not. They were not only increasing their store traffic but also gaining in sales of the higher-priced, more profitable items since customer fear was alleviated by the possibility of effortless return in store.

BOPIS also meant that customers avoided the shipping costs and had visibility into the availability of the product, thus avoiding a wasted trip. While on that pick-up trip, some 85% of customers made additional unplanned in-store purchases. It should be remembered that BOPIS is one of the least costly and more profitable omnichannel services for retailers.

This approach clearly argues against abandoning the advantages of in-store shopping. However, how many stores are catering specifically to their online customers in store? What would it mean to organise a store around the idea that the customer is a “digital” customer, who has perhaps made a purchase online which they are picking up in store? Would the store look different from the current one designed around store-based purchase if it were catering to the online shopper primarily and as a pick-up point?

Staff and stores, past and future

The omnichannel challenge is not a new one. Sears of the US started life as a catalogue retailer in the 19th century and diversified into stores from 1925 until the store business overtook the catalogues. Sears is often compared to Amazon because of the breadth of its assortment. However, its mail order business model was quite different in spite of it also being “distance selling”. Indeed, Sears deliveries rested on the US Postal Service initiating rural free delivery in 1896 and parcel post in 1913, rather than on its own delivery capacity. Both the catalogue and the stores demonstrated considerable product knowledge with the early Chicago stores selling hunting goods, farm tractors and tombstones. The Sears buying offices, already large in Chicago, expanded their fashion competences in New York City when the stores opened. Also Sears developed its own brands (such as Kenmore and Craftsman) which have been a major asset of the group and have enjoyed a long and profitable life.

Thus, from an early date, omnichannel department stores (even those coming out of the mail order world) have had significant knowledge of the products they sell. This constitutes an advantage over some other retail formats today in that they are product specialists, or what are sometimes called “merchants”. Significantly, Amazon has always disputed its label as a retailer and described itself from the beginning as a tech company: “Amazon is a tech company, we just happen to do retail… really well.”

Department stores are notable also for having landmark stores which can provide additional service and experience. In spite of, as Kate Ancketill puts it, e-commerce having “deleveraged” the physical store, forward-looking retailers are opening stores, albeit newly designed stores, intended to act as support to the online business.

In conclusion, therefore, to exploit these two advantages to the full today would mean rekindling and significantly developing the product knowledge offer through staff, both selling and buying, as well as thinking of the store as a support to the online business rather than as a traditional selling machine.

Credits: IADS (Dr Christopher Knee)

What:  Euromonitor’s new expectations regarding recovery.

Why it is important:  Driven by the US and China, growth should be back earlier than previously expected. Europe is nevertheless expected to be lagging behind in terms of timing.

Euromonitor anticipates that, after revision, the global GDP growth might be the fasted in more than 40 years, at +5.8%, followed by a 4.5% growth in 2022. This upgrade, compared with previous estimates, is mainly driven by advanced economies in general, and the US in particular, thanks to its vaccine deployment and fiscal stimulus measures. In developing economies, China, Mexico and Turkey are also expected to achieve more than initially forecasted.

Euromonitor places itself in a forecast that is in between the most optimistic scenario (planning a 10% GDP growth in 2022 and a 15% in 2023, both compared to 2019) and the less pessimistic one (GDP growth not reaching 10% in 2023), while the most pessimistic scenario plans a positive growth in 2023 only. All scenarios are based on potential new regional outburst of the pandemic (a global lockdown such as the one experience in 2020 is considered as highly unlikely).

Regarding the general situation country by country:

• The US is expected to exceed 2019 levels by Q2 2021 and GDP to increase by +6.7%, followed by +4.3% in 2022. Thanks to the vaccination levels, people’s movement in retail and recreation are now just -3% compared to prepandemic period.
• China grew by +18.3% during Q1 2021 compared with 2020, with industrial index growing by +24.5% and exports by +38.7%. GDP is expected to grow by +8.6 in 2021, and government is setting up regulations to avoid unsustainable growth.
• Japan is expected to grow by +3% in 2021, and by +2.3% in 2022. Fiscal incentives decided by the government are facing slow vaccination roll out and questions about the success, or not, of the Tokyo Olympic Games.
• Europe is expected to grow by +3.9% in 2021 and 2022, -3% compared to its prepandemic forecast. Recovery is slowed down by disparity of situations and counter measures in member countries. Nevertheless, a strong recovery is expected to take place in the second half of 2021.
• The UK contracted by a record -9.9% in 2020 and forecasts for 2021 are +5.5% and +5.2% in 2022, based on the success of the vaccine roll out.

Overall, Euromonitor considers that many risks are decreasing, among which:

• Vaccination pessimism
• China – US all out trade war
• Eurozone recession.

Global Economic Forecasts

What: Pride Month is an important message sent to customers, who reward retailers’ commitments by increased loyalty

Why it is important:  Beware of rainbow washing, as the backslash can be hitting hard

During Pride Month (June) all retailers, stores and companies are using the rainbow-coloured flag to signal their commitment to the LGBTQ cause (for El Palacio de Hierro, which did it for the first time in 2021, this translated into higher sales for customers). However, customers are expecting more than passive support, and more than during just a month.

Given their buying power (USD 4 trillion in the world and 1 in the US), retailers should listen to their messages: 66% of LGBTQ customers and 30% of non-LGBTQ customers say their decision to shop is impacted by brand or retailer donations.

Alix Partner advises of the following steps to make sure the approach is taken in the right direction:

• LGBTQ marketing should be seamless in the general strategy, with true authenticity. This implies using actual individuals, instead of actors, in marketing campaigns,
• Run focus groups to understand the customer, to make sure products and usages are fully understood,
• Aim at the long term: once in the year celebration does not drive sustainable impact. Also, having openly LGBTQ employees in senior roles is key to sustain the strategy.

Pride Month Alix Partners

What: An overview of the 2020 and Q1 2021 retail outlook in the GCC

Al Futtaim, owner of the Mall of Emirates in Dubai, released its first ever report on the state of the retail economy in the region. 2020 finished with a total decrease of -12% compared to 2019, but only -2% in December 2020 compared with 2019, which shows the rapid recovery which took place as soon as October 2020. Initial results from Q1 2021 seem to confirm that the rebound is under way.

However, the market has been considerably modified since 2019, due to the consequences of the pandemic (leading to lockdowns and restrictions, which were overall less strict in the region than in other parts of the world):

• E-commerce has doubled in share between 2019 and 2020, and represents now 25% of electronic sales, 7% to 9% of fashion sales, and 8% of groceries,
• Customers are more cautious with their spending, due to concerns related to their jobs, especially in a region where international tourism accounts for a significant share of the GDP (and represents 25% of the total retail business),
• Stores remain central to the experience of customers, who use them as points of interactions along their buying journey, in conjunction with digital channels.

Among other interesting KPIs mentioned in the report, Dubai residential rental level is, in Q1 2021, down by -20% compared to the previous market low in 2010. This is due to the increase of demand for villas including outside space, as well as the departure during the pandemic of many expats living in the region.

Economic recovery is expected to take place between 2021 and 2022, if there are no further waves of Covid taking place.

State of the UAE