PRINTABLE VERSION HERE

Keeping markets under close watch, IADS collected innovative concepts related to key topics such as luxury experience, contemporary models, and reinvention.

Check out what luxury stores are thinking up to capture customers' attention in the third edition of the Retail Review.

![Retail Review 3 LV

Louis Vuitton, Tokyo

Inspired by reflections of water expressed through the building’s rippling exterior, the luxury retailer’s Tokyo flagship location has been completely transformed by Jun Aoki and Peter Marino. The store offers a full range of collections with upper levels dedicated to VIP clients.

More on Louis Vuitton

![RR3 Hermes

Hermès, Tokyo

As Hermès reopened one of its Paris locations, it also opened a new flagship store in Tokyo inside one of Omotesando’s most notable buildings. Upon entering, customers can peruse silk, jewellery, beauty, perfume, leather, and equestrian collections for both men and women.

more on Hermès Tokyo

Hermès, Paris

Hermès’ beautiful flagship on Rue de Sèvres in Paris has undergone a year-long renovation with its central striking feature of three huts made from ash wood, which the VIP lounge overlooks. The store has been fully reorganized to house evolving product lines, including its recently launched colour cosmetics collection.

More on Hermès Paris

Browns, London

The London store is the newest manifestation of Farfetch’s Store of the Future, blending digital and physical experiences by using an app that connects with interactive mirrors to give recommendations and provide product details.

More on Browns’ new boutique in London

![RR3 Kith 

Kith, Paris

In Paris, visitors are presented with a restored Carrara marble staircase that falls under a chandelier-adorned ceiling crafted with resin-cast Nike Air Max 1s. The space presents Sadelle’s restaurant in the courtyard and a basement level used as a rotating gallery space.

more on kith

Swarovski, Paris

Moving away from the accessibly-priced space, a crystal Willy Wonka factory concept appeals to a wider audience to showcase the brand’s shift into luxury. As customers sit on a sofa surrounded by walls of colourful jewellery, salespeople bring the products on trays for a personalised experience.

more on Swarovski

Diesel Hub, Shanghai

In an effort to converge living, dining, working, and shopping, Diesel has partnered with RTG Consulting and Muse Group to unveil a new concept for the brand called “Diesel Hub” in Shanghai. The 900 sqm retail space offers a Diesel Brave Bar that proposes food, beer, and specially developed spirits.

more on diesel

What: Jean-Marc Bellaiche details Printemps’ new strategy.

What is important: Le Printemps wants to reassess connection with tourists, especially those from China.

“Right now, the equivalent of 85% of our revenue is not operational. I’m convinced people do love physical retail and department stores. In December, and in January-February for the stores that were open, we recorded sales increases of over 50%, in some cases even doubling the previous years’ figures. Department stores, with their huge spaces, will continue to exist, but they need to transform themselves,” Jean-Marc Bellaiche said.

Le Printemps group operates 19 department store branches, the Le Printemps website, eight Citadium stores and the Place des Tendances and Made in Design websites. In the 2018-19 financial year, the group recorded a revenue of EUR 1.7 billion.

Start-up-style management techniques

On day one, in typical start-up fashion, Ballaiche set up a video-conference to which all employees were invited, something which has now become a ritual. Gradually, Bellaiche has also brought more women and younger faces into the executive committee. “My goal is for every member of the Le Printemps staff, to feel like an entrepreneur,” he said.

Despite the new approach, the issue of the store closure plan remains. But the group announced this week that encouraging sales figures along with lower rents will allow Citadium to keep 3 stores that were supposed to close.

According to the plan, the group’s remaining branches will reposition on the market within the next three to five years, with Le Printemps investing EUR 40 million to EUR 50 million annually. At the same time, store renovations will continue. Outside France, the group has put the planned Milan opening on hold but has stepped up the pace for the one in Qatar to open in 2022 ahead of the World Cup.

Recapturing the wow factor

On the clientèle side, Bellaiche is keen to reassess Le Printemps’s connection with tourists, especially those from China. “Chinese consumers are driving the luxury industry as they will soon account for 50% of the market,” he said. He wants to offer new services to these consumers, notably by forging new relationships with tour guides and operators.

As for Le Printemps’s French clientele, the goal is to appeal to younger consumers, tapping Citadium’s expertise. The group is also keen to strengthen its position in menswear, the leading category in some branches outside Paris, and attract more families. To make progress in this direction, Le Printemps has started to redefine the values that constitute its brand identity, working on themes like inclusivity and sustainability.

To attract these consumers, “we must recapture the wow factor. We must think ‘surprises’ again. This is why I’m planning to mix up the various departments’ approach,” said Bellaiche. The boundaries between home decoration, food, beauty and apparel will therefore become more fluid. The Made in Design range will be deployed more extensively at Le Printemps branches in 2021. The new strategy will also enable sporting and high-tech goods to be featured. Bellaiche also wants Le Printemps to open up to a greater number of small fashion and beauty brands.

The omnichannel challenge

Now that e-tail is booming, Le Printemps’s biggest battle will be fought on digital with an effort that includes modernising the group’s IT and technology platforms and its supply chain. “Printemps.com must mirror the range in our physical stores. It will then become a useful tool enabling shop assistants to boost the range they can offer to their customers, and generate additional sales” said Bellaiche.

Inside Printemps' transformation under Jean-Marc Bellaiche 

Printemps to Keep Three Citadium Stores It Planned to Shut

Related item:

• New Printemps CEO unveils transformation plan

What: China Department Stores Report 2020-2021 issued by the China Commerce Association for General Merchandise (CCAGM) and Fung Business Intelligence Centre (FBIC).

Why is it important: The report showed that, although some retailers like SKP in Beijing, outperform the sector, most of the surveyed department stores lack product appeal and competitiveness. They should transform and upgrade while focusing on digital and direct sales.

I. Overview of China’s retail market development

During the Chinese New Year period in 2021, key retail businesses saw dramatic growth across product categories. Sales of jewellery, apparel, communication equipment and home electronics increased 160.8%, 107.1%, 39% and 29.9% year-on-year, respectively. Some e-commerce platforms saw a 49% year-on-year increase in fitness equipment sales.

Department stores have been adding cultural and entertainment activities to their locations in recent years. They have introduced facilities for children’s entertainment, electronics and digital goods shops, cinemas, bookstores, karaoke, indoor basketball courts, etc.

The COVID-19 outbreak has further accelerated the shift to online shopping. In 2020, China’s online retail sales accounted for 24.9% of total retail sales of consumer goods, compared with 10.7% in 2015.

II. Key trends of the department store sector

2020 saw some impressive sales numbers for a number of high-end department store and mall operators. SKP (Shin Kong Place) in Beijing recorded CNY 17.7 billion (USD 2.7 billion) in sales revenue in 2020, maintaining its double-digit sales growth. Meanwhile, retail sales of Plaza 66 in Shanghai surged 60% compared to the previous year. These businesses sell a high proportion of luxury goods, benefiting from the rise in domestic luxury consumption.

Cosmetics consumption has been significantly upgraded over the past two years, with a considerable increase in demand for mid-to-high-end cosmetics. Young consumers aged 16-25, in particular, are becoming more interested in these categories.

From a digitalisation perspective, 89% of surveyed respondents have established an e-commerce business and among them, around 94.4% are selling via WeChat. Department stores have been selling online through live streaming (75%).

III. Key issues and challenges

Product appeal and product competitiveness are at the core of top-performing department stores such as Beijing SKP, Hanguang, and Hangzhou Tower. However, most of the surveyed department stores are lacking in product appeal and competitiveness, offering homogeneous products at unattractive prices. Factors contributing to the problem include brand image and brand positioning, product mix, management practices, relationships with brand owners, and price levels.

Transformation and upgrading are urgent needs. However, they are not without risks as they involve product repositioning, business optimization, renovation and reconstruction,

functional facility optimization, crossover operation. Despite the accelerated development of online business, the level of digitalization of the industry as a whole remains low.

The traditional concession model still dominates the operation of China’s department stores, and although direct sales have been identified as an important strategic direction for the sector, more than half of the surveyed department store operators stated that the proportion of direct sales business to their bottom line is less than 10%.

IV. Direction of development and transformation initiatives

Department stores will continue to revamp and upgrade. Meanwhile, omnichannel retailing and online-to-offline (O2O) integration will dominate the retail scene. 73.2% of the respondents cited “pursuing O2O integration” as the most important goal in the next 12 months, followed by “strengthening supply chain management” (58.5%). Developing on-demand delivery services will rise.

45.8% of surveyed department store operators said that they have added more experiential

elements in their stores compared to a year ago. Wangfujing Group has cooperated with international artists and creators to craft events, themed cultural curation and video content, combining technology and entertainment.

The survey reveals that 71.1% of respondents have already engaged in the direct sales business, higher than 67.1% from the previous year. Most surveyed department stores operate direct sales business in food & beverages (55.9%), cosmetics (54.2%) and apparel (45.8%). Also, around 36.1% of the respondents have launched their own private labels. Even if risky, another 26.5% plan to develop private labels in the future.

SKU management is a key area that both brands and department stores have been focusing on over the past year. They have been sharing data to identify best-selling products and target their marketing efforts towards those specific products, driving sales through the use of big data and consumer analytics.

Buying and selling on social media apps has become increasingly popular in China. Social commerce sales accounted for around 30% of the online retail market in 2020. WeChat and Douyin are the most used social platforms. Department stores have leveraged new technologies such as facial recognition, AI, robotics, and VR, to enhance the consumer experience as well as collect data for analysis to better understand customers’ needs.

China’s Department Stores Report 2020-2021

What: The rate of returns is increasing as e-commerce gains traction.

Why it is important: Retailers need to change return systems for the sake of the environment and the bottom line.

Historically, retailers wanted to make returns as easy as possible for shoppers in the name of customer service. Returns incur a cost for retailers, and at the same time, are not very sustainable. According to a survey done by AlixPartners, 71% of American consumers are more environmentally aware, with 28% stating that it impacts their buying decisions.

The problem is that customers have not made the connection yet that most of their returned products do not end up back on a shelf, but rather these items tend to be liquidated, destroyed, or sent to a landfill. In addition, there was an estimated 16 million metric tons of carbon dioxide emitted from the transportation of returns last year.

Retailers don’t want to be the first ones to act when taking away free or easy returns, but in reality, it is not a sustainable business model. Some retailers will allow consumers to keep their unwanted items, but this can result in negative brand awareness as it will end up super discounted on resale sites.

Creative returns solutions

• Give the role of returns management to a sustainability person rather than a supply chain manager.
• Highlight the financial impact that reruns have on the bottom line.
• Partner with companies like Oporto that help liquidate returned inventory through other channels.
• Increase customer awareness to the environmental impact of their purchasing decisions.

Don't make it free, don't make it easy_ How retailers can support sustainable returns 

What:  Now that markets are about to reopen, the moment to reconsider the raison d’être of a store has come

Why it is important:  Digital capabilities are empowering stores and retailers into making their brand and name richer, in terms of content. But stores do remain relevant in the “digital age”, especially department stores.

It has been now more than a year and a half that the outbreak of Covid-19 started, and its consequences, lockdowns across the world, induced long-lasting changes of customers behaviours:

• Shift to e-commerce for convenience, practicability and fear of crowds,
• Work from home, quasi total disappearance of daily commuting and international holiday travels.

This situation raises the purpose of a store: what is it for, exactly, in the digital age? More than just a distribution hub (which used to use the customer as the last-mile logistician, an approach that is over now that anyone has the possibility to have the product home-delivered), or a place to find a nice curation of products, some retailers explain that stores are now part of a bigger purpose, and contribute to their branding:

• Selfridges sees itself as a theme park, all about having fun.
• Browns sees itself as a platform for experience and connectivity that is not available online.

Self-proclaimed retail prophet Doug Stephens argues that now is the time to put the distribution of experience, not products, at the centre of brands and retailers’ strategies. For him, the store is a stage and a studio, it’s about building and broadcasting experience that is then relayed offline in the other stores, or online on the digital channels. Interestingly, Stephens precises that we are not anymore in “the retail business, but in the show business”.

This is, ironically, a quote that we heard from many CEOs in the department store business over the last decades.

What’s a store for?

What: Supply chain optimization tools bring sense to a complicated operation.

Why is it important: Demand planning software is becoming essential for businesses to be able to understand risks and respond to them quickly.

Tools like sales & operations planning (S&OP) help organizations consult with their factories to coordinate the production capacity of their production lines, among other things. Use of the tools have resulted in better forecast reliability and accuracy as well as reduced and forecast bias. Planning tools help companies increase product availability and decrease the number of back order to have a maximum capacity utilization and more efficient inventories.

S&OP and the pandemic

When COVID-19 first started spreading in China, S&OP tools were able to help companies shift their stock and speed up the supply chain in order to avoid shortages. The central communication, visibility, and control was crucial to avoid major disruptions in the global supply chain.

Integrated planning

There are still several companies that use Excel as a planning tool, which reduces their transparency to a minimum. Integrated planning tools open the visibility companies can have to their suppliers, whether it be a first, second, or third-tier supplier.

Last month, the Suez Canal was blocked leading to the disruption of many supply chains for 6 days. An end-to-end planning system provides companies with options and alternatives so businesses can make speedy decisions in times of crisis. In moments like this, time is of the essence and action plans must be implemented quickly to avoid disruptions in the supply chain.

Looking ahead

Blue Yonder, a supply chain software vendor, advises companies to ask themselves “What is going on in my supply chain right now?” While this seems like a straightforward question, it is difficult to answer for many companies. A cloud-based platform that enables petabytes of data to be quickly processed quickly makes it possible to monitor the supply chain in real time. It can also look ahead to predict future states of the supply chain using machine learning algorithms. Machine learning can predict disruptions that are coming before they happen, giving companies the ability to act in advanced.

Step to IBP

S&OP is just the first step in adopting supply chain optimizing technologies. The next step is IBP (integrated business planning), which will help companies see potential disruptions and changes in the supply chain for the next 18 months. By integrating market intelligence, leveraging CRM, improving demand sensing, and linking it to financial planning, companies can use machine learning to act on future disruptions proactively rather than reactively.

COVID-19 has solidified the importance of having an agile and resilient supply chain.

Pandemic accelerates implementation of IBP

What: A review of Doug Stephens’ book, Resurrecting Retail.

Why it is important: The book provides an actionable future vision for any business leader looking not only to survive, but thrive in a very different post-pandemic retail world.

Resurrecting Retail was released on 13 April and reveals real-time research conducted on how the pandemic has impacted every market, industry, profession, service, and category of product. The book emphasizes that the big players such as Amazon, Alibaba, JD.com, and Walmart are coming out of the crisis even stronger and are better prepared to capture more of the global economy. But how?

Stephens believes that we are past the time when the average retailer could win with an efficient supply chain and a steady flow of exciting products. With technology, a brand can leverage social and digital platforms to connect with customers in more personalized ways. Without that personal tie, it is too easy to lose customers to those giant retailers.

COVID-19 has permanently changed consumer habits as people have begun to rely on digital shopping and e-commerce making it harder to draw customers back into brick-and-mortar stores. Brands must think about purpose and personal relevance in order to win in the current marketplace. Every form of media needs to be an extension of the store evoking an emotional connection between the consumer and the brand.

How Can A Retailer Win In This Digital Age

What: McKinsey’s survey about the future of the USD 1.5 trillion wellness market.

Why is it important: McKinsey’s latest research shows that consumers care deeply about wellness and that their interest is growing. In a survey of roughly 7 500 consumers in six countries, 79% of the respondents said they believe that wellness is important, and 42% consider it a top priority. The market is estimated at more than USD 1.5 trillion, with annual growth of 5 to 10%.

Consumers define wellness across 6 dimensions: health, fitness, nutrition, appearance, sleep and mindfulness. Consumers expect to increase their purchases of both wellness products and services over the next year, with a strong focus on health categories.

Customer profiles

• Wellness enthusiasts are high-income consumers who actively follow brands on social media, track new-product launches, and are excited about innovations,
• The socially responsible consumers prefer (and are willing to pay more for) brands that are environmentally sustainable and with clean/natural ingredients,
• Price-conscious consumers believe wellness products are important but compare features and benefits before purchasing to get the best deal,
• Loyalists prefer to stick with their routines and the brands they know,
• Passive participants are only marginally involved with the wellness category and don’t actively follow brands or new products.

Consumer trends

Trend 1: Natural/clean products get their day in the sun

Consumers are keen for natural/clean products in an array of areas, such as skincare, cosmetics, multivitamins, subscription food services, and sleep enhancers – particularly in Brazil and China.

Trend 2: More personalisation, please

A majority of consumers around the world say they prioritise personalisation now more than they did two or three years ago – especially in the United States, the United Kingdom, and Germany.

Trend 3: The future is digital

A majority of consumers will continue to project more growth in e-commerce than in other channels over the next years. McKinsey sees traditional channels holding for certain product categories: fortified foods, multivitamins, and skincare. Other breakout categories (such as fitness wearables) are almost entirely online native. Consumers in China report the highest share of wellness spending online, followed by those in Japan Europe, United States, and Brazil.

Trend 4: Under the influencers 

In the United States, Europe, and Japan, 10 to 15% of consumers say they follow social-media influencers and that they have already made a purchase based on their recommendation. A much higher percentage say they definitely will consider doing so in the future. In China and Brazil, the percentage of consumers who say that an influencer has driven their purchasing decisions is much higher, at 45 to 55%.

Trend 5: The rise and rise of services

Experiences are increasingly available as offerings. Consumers are shifting toward services that address physical and mental health needs (for instance, personal trainers, nutritionists, and counselling services). Services do not replace products that remain a critical part of the segment, at roughly 70% of consumer wellness spending.

Trend 6: Category lines continue to blur

With the above trends in mind, companies are considering how to play across the health and

wellness categories and channels. It’s critical to identify the areas where consumers are open to giving these companies permission to extend their brands. A majority of consumers don’t want a single solution or brand to help them with all facets of wellness.

Winning in the wellness market

The global wellness market is healthy and growing. More consumers said they were going to spend more on wellness than those who said they would spend less. The majority of consumers planning to increase their spending is large in some categories, including memory/brain enhancers, anti-aging products, beauty supplements, non-invasive cosmetic procedures, nutrition (sports nutrition, juice cleanses, nutrition coaches, fortified foods), and meditation/mindfulness offerings.

The future of the USD 15 trillion wellness market

A special report in The Economist magazine looks at what it calls the third retail revolution, the digital age, which turns the era of mass production supporting mass consumption, on its head. While store closures ravage the US (which has the world’s largest retail space per head – see IADS Exclusive: what should we do with our stores), parts of Asia are embracing e-commerce. But they are not leapfrogging physical stores but rather developing the new “omnichannel”.

In China, as well as the giants Alibaba and JD.com, Pinduoduo is working on “community group-buy” or “interactive commerce”, in which customers club together to buy products.

Others such as Shopify (LINK to forthcoming CEO meeting) are allowing brands (Direct to Consumer brands) to by-pass giants such as Amazon. Innovations are also taking place in grocery retail where profits are elusive, and consolidations taking place (Suning taking over Carrefour in China).

One of the secrets lies in customer data, thanks to which Pinduoduo again is pioneering “consumer to manufacturer” (C2M). This allows manufacturers to make specialised products directly for consumers cutting out intermediaries, with lower inventory, better margins and reduced waste.

The impact on retail employment is considerable, as the figures show less need for routine retail jobs but a significant increase in “advisory” or “stylist” jobs as well as transport and warehousing jobs.

In conclusion, the article predicts a cleaner future retail model than the one built around mass production and mass consumption, that has been dominant for 150 years. To see something of the future, we need to look at the innovations coming from e-commerce as well as those from concepts such as Showfields (LINK to upcoming New Business Models meeting presentation), for example.

The return of one-to-one commerce 

E-commerce profits may become harder to make 

The rise of the rebel brands 

Independent retailers may choose multiple sales channels 

The importance of omnichannel strategies 

How to know what customers want

Shop assistants and the retail renaissance 

Welcome to democratised retail 

What it is: we need to deconstruct jobs into tasks

Why it is important: the old-fashioned “job” is no longer relevant to the new agile company. Retail jobs are shifting too, becoming increasingly polarised between customer service stylists and fulfilment roles. The authors propose a new “operating system” for work.

Agility has become a trope in discussions about how retail is changing, especially since the covid pandemic. Now John Boudreau of the University of Southern California’s Marshall School of Business and a senior research scientist at its Center for Effective Organizations and his co-author consultant  Ravin Jesuthasan look at what this means for work in an article in MIT SMR, prefiguring their book of the same title, due out next year.

The answer is that we need to deconstruct jobs into more granular units such as tasks and deply people according to their skills in those tasks. This will lead to new forms of recruiting, rewarding and engaging workers as well as a better understanding of how automation might replace, augment or reinvent human work. They describe a work operating system which allows people the flexibility to engage in work beyond their jobs.

In all industries, including retail, we are witnessing major shifts in the tasks expected of employees  (see Article : The Retail Renaissance) as well as a need to be able to adapt in situations of uncertainty.

Work Without Jobs

What: the Mint Fashion Flash March 2021 report

Why it is important: Discover Mint’s latest monthly report, intended as a catch-all fashion flash digest showing different categories from collaborations to lifestyle.

Mint Group, an agency representing the likes of Saks Fifth Avenue, Nordstrom, David Jones or the Real Real, and partner of IADS, shares its FW21 report for Men’s Fashion.

Mint Fashion Flash

What: The American supermarket chain has achieved an unprecedented combination of cool and hard-discount.

Why is it important: The retailer’s low-tech business model is e-commerce-free, the in-store experience being the brand’s stronger asset.

Born in California, Trader Joe's has been breaking grocery retail codes for fifty years. It has been owned for more than forty years by the Albrecht family, owner of the German hard-discounter Aldi and which has just bought its alter ego Leader Price in France.

Trader Joe’s has not changed a lot in 50 years and continues to offer competitive prices and a positive customer experience. Today, the brand has 515 supermarkets, opens about 20 stores a year and accounts for about USD 15 billion in sales per year.

A low-tech company

Almost absent from online commerce, Trader Joe's didn’t suffer from the pandemic, despite competitors offering delivery or click & collect options. The queues outside the stores only got longer. This is what is obsessing retail professionals and economics professors with the Trader Joe's model: customers are ready to queue to shop and accept there are no delivery options.

The company assumes being low-tech. It collects almost no data on its customers, does not have a loyalty programme, and mainly runs its communication through a pamphlet printed with "soy-based" inks in which customers discover the best products. "The store is our brand, our products work best when they are sold as part of the in-store customer experience," explains Jon Basalone, in charge of stores. "Amazon's strategy is simple: ‘If you hate shopping, we deliver to your home’. The only way to compete with them is to make the in-store experience something entertaining," says Mark Gardiner, a former publicist who was hired for a few months at TJ's ten years ago and dedicated a book to it.

Revenue per square meter

Trader Joe's is much smaller than Walmart or Albertsons, but its revenue per square metre is unprecedented: almost twice as high as Whole Foods Market (bought by Amazon four years ago). "Trader Joe's strength is to be attractive to all categories of consumers. It's far from the 'discount punishment' model, where you accept a degraded shopping experience to access low prices, "explains Frank Rosenthal, who has taken a multitude of French executives to the U.S. to study Trader Joe's magic.

Nineteen cents a banana

Trader Joe's banana price is unchanged since 2000 (19 cents). The key to the equation: more than 80% of its offer is sold under its brand name. The brand sources itself from a myriad of manufacturers around the world, negotiating ultra-competitive prices in exchange for the promise of volumes.

To optimize its costs, Trader Joe's also has a limited offer: it offers around 4 000 references when competitors can display 50 000. Each store is between 750 and 1 100 sqm, compared to 3 500 sqm for a Whole Foods Market. The customer must be able to shop in fifteen minutes while having that sense of local grocery.

An army of teammates and cashiers

Unlike the European hard-discount, the stores have a lot of teammates and cashiers. They choose people who are naturally extroverted. Restocking is done in real-time to encourage customers and employees to exchange. There is no automatic cash register, but two crew members organising the queue. Trader Joe’s pays better than most other supermarkets and offers good health insurance that attracts seniors in particular.

Trader Joe's, l'américain qui gentrifie le hard-discount 

What: Fashion brands are caught in international politics games

Why it is important:  The Xinjiang incident is not affecting only brands: worldwide retailers should also watch the developments of this affair.

Following sanctions imposed by western countries on Chinese officials as a response to the alleged use of forced labour in Xinjiang, Chinese customers inflicted a retaliatory response to western brands, among which the most affected was H&M. The response was swift and damaging: the brand was removed from social media including the geo-localisation of its stores, some of which were closed by force. Other brands were engulfed in the backslash, and therefore, most of them toned down on the topics of forced labour and Xinjiang.

The only brands that remained out of this movement were the ones who had not communicated on this topic previously, or which were not particularly transparent on the issue. As a consequence, observers fear that it might encourage brands to lower the voice on forced labour and more generally on sustainability, as soon as it can strike potentially damaging political nerves. It is also feared that, on the mid-range, brands find themselves in an impossible situation, with Western customers asking for transparency that can not be provided without potentially affecting sales on their most lucrative market for the time being, China.

Is that a brands-only problem? Western retailers should watch out the development of this topic with great care:

• Their private labels are subject to the same expectations of transparency from their local, Western, customers, and any move might jeopardize their supply chain badly,
• China has demonstrated with this move that they were ready to hit hard on the economic aspect as soon as politics needed it. It raises questions on the behaviour of Chinese customers once borders open up again, in case a retailer displeases them by its own declarations or commitment to local customers, now that any message on social media or Internet has a worldwide resonance.

Fashion, Xinjiang and the perils of supply chain transparency

What: GDR’s head of strategy explores how NFTs can help retailers and brands imagine the next potential developments of the ‘token’ economy.

Why it's important: NFTs and crypto-tokens could become a key weapon in every brands’ arsenal as digital and physical worlds converge.

NFTs (Non-Fungible Tokens) are an application of blockchain technology where each crypto token is unique. Because of this, NFTs can be used to prove ownership or authenticity of a virtual object like a digital artwork. NFTs contain information about the product’s past and present. They keep a dynamic track of ownership and usage, and the record is transparent and accessible to all.

NFTs now: they’re great at creating excitement and PR

There is a lot of excitement around using the tech to sell digital art. Well-off digital art patrons can purchase 6-figure crypto-art pieces. Gucci released a Gucci Ghost gif, bought for USD 3,600 back in February that is up for sale with a new price tag of USD 16,000. Since November 2017, there has been a total of USD 174 million spent on NFTs. It may be hard to imagine the real long-term applications for NFT, but many believe that the new ‘token’ economy is a revolution that is ready to have an impact on retail.

Fashion brands are leading the way

NFTs have allowed fashion studio RTFKT to offer viral sneaker designs, memes, and collectable exclusives offered to gamers which they can wear in games and virtual worlds. With NFTs, RTFKT can offer unique and exclusive digital products to each customer, allowing them to justify the five-figure price tags.

NFTs have also broken into the virtual home space. Argentinian designer Andrés Reisinger recently sold ten pieces of virtual furniture on Nifty Gateway, a digital design marketplace, where the most expensive piece sold for almost USD 70,000.

Nike has used NFTs to link physical objects as a way to prove authenticity and fight against counterfeits. Nike’s CryptoKick blockchain-enabled system will be used to track ownership of the physical shoe and give owners a digital replica to be used in virtual worlds which are stored in a digital locker.

NTFs application are virtually unlimited. So what’s holding us back?

Tokens, like NFTs, reduce friction in transactions and offer a quicker analysis of market conditions providing greater transparency and decentralization. There is also a higher level of customization for digital products and services.

What is holding us back?

• No common network or agreed upon platform
• A variety of cryptocurrencies and tokens that exist
• No regulation and legal frameworks in place yet

NFTs tomorrow: an opportunity to reinvent your retail experience

Once we get over these obstacles, NFTs’ applications are virtually unlimited. The retail experience could be reimagined around decentralization and transparency. Currently, NFTs and cryptocurrencies are already the lifeblood of virtual worlds, like Decentraland, where you can buy virtual real estate and even create a business hiring real humans to work in your virtual business.

Decentraland will soon open museums to display NFT artwork. The next move will be into retail and virtual shops. Decentraland will be hiring real human shopping assistants to sell NFT-backed jackets, shoes, and accessories. The metaverse world is becoming more human. Eventually, our lives will be completely intertwined between physical and meta.

Embracing the digital future

The possibilities for future innovation as digital and physical worlds continue to merge are almost limitless. The first-mover advantage is paramount so brands and retailers should move fast if they think the transparency and exclusivity offered by NFTs can elevate their brand proposition. Brands and retailers can leverage NFTs to create exclusive limited editions, provide GenZers and gamers with virtual replicas of iconic physical products, invest early in metaverse real-estate, and offer customers the opportunity to pay with crypto in both worlds.

NFTs: what do they mean for retailers and brands?

What: the effect of the pandemic on retail real estate.

Why it is important: Apart from closing down for insolvency, retailers have been reducing the number of their stores as Covid has accelerated the trend towards online.

This Forbes article looks at retail real estate investment yields as well as leases and associated costs. Apparel retailers and department stores, in particular, felt the brunt of the Covid-19 pandemic, with analysts predicting 20% less retail real estate by 2025. As traditional brick-and-mortar businesses burn through cash reserves and consumers opt for e-commerce, many retail properties will remain vacant in the first half of 2021.

The future of retail real estate

What: A review of the major areas where retailers are forced to innovate in the coming months and years.

Why it is important:  WWD identifies 3 areas: social and digital marketing and sales processes, omnichannel capabilities and, interestingly, sustainability. We also believe at IADS that our role is to expose our members to innovative solutions in each of these topics, which is the reason why we will be creating a new channel dedicated to this topic in the future.

In the past, innovation used to be a topic on the desk of every CEO, but not considered as critical for surviving. After all, despite various disruptive announcements and new practices coming from the likes of Amazon or Apple, the playbook and business model en vogue in retail was working well, and for some IADS members, 2019 was even a record year in terms of numbers.

The pandemic radically changed that situation: now, retailers find themselves in a situation of “innovate, or die”, for numerous reasons.

The most obvious reason, after a year of lockdowns all around the world, is obviously the need to reach customers wherever they are, and not assume they will be coming to the store. This implies muscling up the communication capabilities - digital marketing, social media of course – and, in parallel, the selling processes themselves – livestreaming, social commerce -. The need for innovation is even more urgent that all players have now the possibility to improve, thanks to newcomers from the tech world who came up with new solutions, far cheaper than the investments such moves needed in the part (such as Shopify for e-commerce, for instance).

Also, technological innovations will also allow retailers to stay in the omnichannel course, once situation is back to a semi-normal. Customers are now expecting some services and interactions with stores and retailers, and take them for granted: offline/online services such as Buy Online, Pick Up in Store and what it implies in terms of stock unification and logistics, or product data enrichment (facilitated by the use of technologies such as QR codes) and what it implies in terms of product search capabilities.

Finally, another area where innovation is going to be impactful is the sustainability topic. This subject has been left on the side of the road at the peak of the pandemic, but is poised to make a come back once things settle down and customers are back in stores. Optimizing operations to be not only more economically efficient but also sustainably viable will then be not only a differentiating point but a basic expectation from customers.

At Retail, Innovation in High Gear

What:  Reviewing omnichannel and the costs associated to such a strategy which went from nice to have to must have in one year.

Why it is important:  Stores remain central in the omnichannel set up as they allow saving costs. However, they will also need to transform to bring in something else than shelves filled with products.

Customers used to be in the past acting as unpaid labour for retail industry, by taking care themselves of the ‘last mile’, driving to the store, purchasing products from shelves and going home. Following the pandemic, this era is now over, as most customers grew accustomed to order digitally and either get the product delivered at home, or, at minimum, be available by pick up at the store.

The Retail Industry Leaders Association and McKinsey remind that pick up orders grew by 103% in 2020, while online sales supported by physical stores rose to 37% from 32% in 2019. The problem is that being able to fulfil digital orders (either from a warehouse or from a store) has a cost, which was in the past supported by customers: software costs, logistics, workforce, costs of shipping and returns, seriously indenting profits.

Ironically, these costs explain why stores will remain central for retailers in the future, as they are still a cost-saving point of product returns, especially in the case they manage to trigger a new purchase while customers are present (this is exactly the reasoning made by Magasin du Nord when they decided to expand their pickup service points surface, leading to 15% additional purchases made by customers coming in to pick up goods and parcels).

The omnichannel age is here — and it's expensive

What: Gen Zers regard online shopping as an experience and have high expectations for it.

Why is it important: In order to capture the increasing e-commerce wallet share of Gen Zs, brands will need to make their digital experiences seamless.

Younger customers value good digital shopping experiences and will quickly move on from brands if the experience is poor. 38% of GenZers said that they will allow a brand one second chance to fix a mistake before switching to a rival. Over one-third of young shoppers have abandoned a purchase or posted a negative review because of a poor digital shopping experience.

Nearly two-thirds (64%) of Gen Z said they want to keep buying almost everything online, which could have ramifications for brands and their direct-to-consumer and e-commerce strategies. As these customers reach adulthood and gain shopping power, they are demanding instant gratification from their digital experiences. Retailers and brands need to make a good and lasting impression on Gen Zers, or risk losing them to competitors.

Gen Z also expects fast service with 80% saying retailers that can deliver in fewer than 24 hours are more appealing. They also expect free shipping and personalized suggestions on products based on their shopping history.

Brands could lose fickle Gen Zers over poor digital experiences

What: British larger retailers are looking to venture into the sector with smaller store formats.

Why is it important: Convenience now accounting for 22% of the UK retail grocery market and shopping convenience stores online could only be a growth opportunity.

There are many national operators in the UK, such as the Co-op, McColl’s, Waitrose, M&S Food, Tesco, Sainsburys and Spar, which each have convenience store formats and stock a wide range of products. In recent times, major supermarkets such as Asda and Iceland expressed interest in venturing out into smaller store formats.

Despite established retailers trying convenience store formats, Brits are choosing to support their independent and local retailers rather than established chains: almost two-thirds of Brits have been shopping locally in the last 12 months. This growing trend is set to outlive the pandemic, with 91% saying they will continue shopping locally to support smaller and independent retailers even after all restrictions end. The share of non-affiliated independent convenience stores in the UK accounted for 40% of the market last year.

“The convenience market had been growing robustly prior to the pandemic, and the impact of Covid-19 on societal trends has served to reinforce that growth, with convenience now accounting for a 22% of the UK retail grocery market. Furthermore, customers have become increasingly used to shopping convenience stores online. We see this online last-mile delivery as an incremental growth opportunity, which is why we struck a partnership with Uber Eats last year to offer home delivery from over 400 of our stores”, McColl’s said.

As changing shopper habits and the pandemic have altered the UK retail landscape, the function of convenience stores has expanded beyond just a quick stop for a newspaper and bottled beverages or snacks. By evolving to offer a diverse range of products and services, convenience stores have become a viable alternative for consumers to purchase essential everyday items.

Consumers nowadays may be increasingly surprised to find such a range on offer at their local corner shop, but it could be a taste of things to come. Local entrepreneurs are continuing to step up their fight against the encroachment of Tesco, Sainsbury’s, Waitrose and M&S into a market once dominated by independents.

PRINTABLE VERSION HERE

What: A certification with strict environmental and social criteria for operations along the entire textile supply chain.

Why is it important: The recognition of the GOTS certification across consumers and business channels has grown incrementally year over year and has a direct impact on purchasing and partnership decisions.

Textiles have proven to be an important good in the past year as COVID-19 has called upon many industries to shift their supply chains to answer the increasing demand for masks and medical supplies needed around the world. To continue the sustainability series, we will explore one specific certification that addresses organic textile production: the GOTS certification. As consumer interests in the transparency of the supply chain connected to their fashion brands continue to rise, department stores need to promote their GOTS products and partnerships and ensure that there are sufficient organic products available for these environmentally aware consumers.

What it is

The GOTS (Global Organic Textile Standard) is the world’s leading textile processing standard for organic fibers. The standards were developed by the certifying bodies IVN (International Association Natural Textile Industry), JOCA (Japan Organic Cotton Association), Soil Association, and OTA (Organic Trade Association). GOTS enables textile manufacturers to qualify their organic fabrics and garments with one certificate accepted in all major world markets. This is an important step towards the harmonization and transparency of textile labels.

A GOTS certification is an assurance that the product meets the global standards for the processing and manufacturing of organic textiles. The standard covers the entire post-harvest processing including spinning, knitting, weaving, dyeing, and manufacturing of apparel and home textiles made with certified organic cotton and wool and includes both social and environmental criteria. GOTS is a key certification to ensure the authenticity of organic fiber and its safety.

How it works

GOTS sets the standard by creating requirements for the production of organic textiles to make sure every step of the supply chain is covered from harvesting and sewing to packaging. The requirements are based on environmental and social criteria to guarantee that the textile is produced in an eco-friendly manner. It also certifies that laborers and workers are protected and treated with fair trade norms during the process.

Some of the key features of GOTS is that it prohibits the use of harmful chemicals in the production of organic textiles, it covers the entire production process from plant growth to packaging materials, and the textile must have 70% organic fiber at minimum. If chemicals are used, they must adhere to strict environmental and toxicological guidelines. All textiles must meet a certain level of criteria and quality to be certified and the product is tested and appraised at every stage of the process by an experienced certifier. All processors and textile manufacturers are expected to meet strict social criteria to ensure fair trade practices and safe working environments. Yearly audits and surprise checks are conducted to verify that there is a continuance of correct practices.

GOTS is not the only standard that exists in the cotton and textile space. The OCS (Organic Content Standard) is used to verify organically grown raw materials from farms to the final product to increase organic agriculture production. OCS has seen record growth with a 48% increase of certified facilities in 2019. Another noteworthy certification is Oeko-Tex which qualifies that textiles are free of harmful chemicals and safe for human use. While GOTS only covers organic textiles, Oeko-Tex includes certifications associated with organic and non-organic textiles.

Why is it important

Until 2003, the sale of organic cotton items in the United States relied predominantly on e-commerce, mail order catalogues, natural and health food stores, and small specialized eco-textiles shops or boutiques. Today, department stores like Nordstrom and brand stores like American Apparel, Levi’s, Nike, and Timberland also have organic cotton items for sale.

The trend of using organic cotton has expanded a lot from the United States to Europe in the past few years. Typically, brands have found that outsourcing their eco-textile and organic cotton items to Turkey, China, India, and Pakistan can reduce costs and increase economic efficiency. American Apparel, on the other hand, uses GOTS-certified cotton to process sweatshop-free t-shirts made 100% in the United States in downtown Los Angeles. The company’s turnover has increased 50% per year since 2002 and the brand has expanded to Europe through its success.

In Europe, Germany and Switzerland are the top two markets for organic cotton textiles. The French market for fair trade products is also growing rapidly. With the involvement of large brands and retailers, the number of points of sale for organic cotton and GOTS-certified items has exponentially increased and can be found in regular sale channels like department stores and supermarkets.

The concept of organic cotton is successfully being marketed to brands and retailers in the fashion industry as being part of their policies for CSR (corporate social responsibility). The involvement of large fashion brands and retailers that are using organic cotton has generated a lot of attention from other parts of the textile industry, from designers and the media. This has further strengthened the interest of consumers in organic cotton textiles and clothing as well as their willingness to purchase.

Limits and Criticism

In 2019, 40,645 metric tons of organic cotton were sourced from Xinjiang, China, a province with allegations of forced labor, prison labor, child labor, and serious human rights infringements. The region produces one-sixth of the world’s global organic cotton. Credible reports of forced labor involving the Uyghur and the Kazakh ethnic groups in China have caused some countries, such as the United States, to ban the import of both raw cotton and goods containing cotton from the province.

There are eight GOTS-certified facilities in Xinjiang, yet GOTS has failed to comment on the implications or impacts of this revelation of harsh labor environments on the future of these facilities or their certification. GOTS’ silence around the issue is a bit alarming as China has the fifth-largest amount of GOTS-certified facilities in the world.

As the region produces such a large portion of the world’s cotton, the traceability of the cotton from Xinjiang can become easily blurred as it moves through various supply chains and gets mixed with other textiles around the world. Traceability can be a difficult topic, but GOTS was ranked best in the “Traceability of Clothing with Textile Seals” by the German consumer product testing organization Stiftung Warentest. They concluded that GOTS offered full transparency and traceability while complying with strict social and ecological criteria through all stages of production.

GOTS: The latest fashion trend

GOTS-certified textiles have created quite the buzz in the fashion industry from consumer demands. The Organic Industry Survey conducted by Organic Report reveals that savvy customers seek out companies of integrity through the achievement of GOTS certification.  It seems to have become the standard that the market expects on a global scale. In 2019 alone, the number of GOTS-certified facilities grew globally by 35% from 5,760 to 7,765 located in 70 different countries. The growth has been seen in both production and consuming regions.

Retailers do not need to be GOTS certified unless they are involved with a business-to-business trade activity where they sell to other retailers or they repack and relabel the GOTS products. The benefits of certification include streamlined processes when adding a product to the certification or getting label approvals throughout the year, a license number that will help keep trade secrets confidential, and access and membership to the GOTS public database which receives over 2,000 hits a week in the United States.

Though retailers and department stores do not need to be GOTS certified, it is important that they are transparent about their affiliation, if claimed. While the GOTS logo can be used on websites or labeling, retailers need to make sure not to give the impression that all products are GOTS certified. If the GOTS logo is used in general to show that GOTS goods are sold among others, each GOTS product must show the logo with its license number, label grade, and certifier reference. The GOTS organization audits and investigates any unauthorized or misleading use of the trademark and will take legal or public action if needed to safeguard the credibility of the program and labeling system.

With COVID-19 increasing the demand for masks and medical gowns to be manufactured, being GOTS certified has helped some United States companies win state and federal contracts because of their proven traceability systems. This raises a few interesting questions to think about. Does this mean that GOTS certification can bring a competitive advantage not only with consumers but also in the business-to-business world? Can affiliation with GOTS certification open doors to other business opportunities?  On the consumer side, should department stores ensure that there is a certain percentage of GOTS-certified merchandise offered to meet the rising customer demands?

Credits: IADS (Mary Jane Shea)

Read Also: Textile Exchange Organic Cotton Market Report 2020

Read Also: GOTS label guidelines

The IADS attended the following Vitra Session on 11 March 2021 which considered the pros and cons of working from home or returning to the office at a time when even large companies are polarised on the issue, some abandoning physical offices altogether while others put in place incentives to lure employees back to the office. What we at IADS have called “hybrid working”, Vitra label “distributed work” and make the point that if this model represents the future, then it needs serious reflection, innovative organisation and clear communication.

Vitra Session, 11 March 2021 on “distributed work”

What: A one-and-a-half-hour event by Vitra about “distributed work”, working from home, remote work, shifts in office work …

Why it is important: All companies are having to adapt to new work patterns and expectations as a result of covid.

Distributed work

Approaches to remote work appear to be quite varied: at one extreme, companies are encouraging employees to work from home and are actively reducing their office space; at the other extreme, companies are insisting that employees return to the office as soon as possible. Arguments exist to defend either position, but the consensus would appear to favour a “hybrid” version, with elements of remote and office work.

Only 10% of New Yorkers are apparently back in their offices so employers are using nurseries, free cab rides etc. to entice people back.

The problem with hybrid work is that it may come with some inequalities which leave some people out. Some categories of workers have no choice.

For Vitra, the work environment will influence us, whether this is at the office or at home. Therefore, it is important to take the challenges of hybrid work seriously and find pragmatic solutions. For example, planning the week ahead can be more important than it used to be. Also the facilities at work and at home need to be carefully thought out. Trust is easier maintain face-to-face and may erode at a distance.

There is a paradigm shift: we need to value people for their work and not for the time they spend doing it. It also requires a shift in leadership to give the right tone which employees will follow.

A tripartite discussion between Antje van Dewitz, CEO of Vaude, Professor Gianpiero Petriglieri of INSEAD, and Nora Fehlman from Vitra came to the conclusion that distributed work requires a clear an specific set of rules. In general, offices have not been designed for collaboration. Tools used at work today have changed. Whereas existing teams may work satisfactorily at a distance, interdisciplinary work is more complicated: silos need to be broken down which means the office dynamic needs changing.

The manager plays a key role, perhaps more so than the architecture or the environment of work. But distributed work represents an opportunity to be clear on the advantages of work from home and the advantages of work in the office. It has also opened people up to digital transformation. For example, going home at 5pm does not mean that work stops at 5pm.

Several changes will probably remain after covid:

• Communication is key. It should be regular. This will last after a return to “normal”.
• The importance of the role model, in particular in leadership.
• Consciously orchestrating work patters, such as harmonising home and work balance.

The authors of The Decision Book, Mikael Krogerus and Roman Tschaeppeler explored what has changed in decision making with covid. When we have no access to comparable data and the impact of a decision is important, then we make what they call “hard choices” which have no definitive answer. In a remote setting with little contact with others, we are alone and those decisions become harder. While the consideration of risk is fairly well-known, under conditions of uncertainty we confront situations known as “black swans” such as Pearl Harbour or 9/11.

read also: leading teams digitally

Gill Parker and Colin Macgadie of BDG architecture and design used their experience to explore some of the lessons of covid for the creativity of a dispersed team. Lessons involve:

• More listening
• Less travel although face-to-face remains indispensable
• Fluid and flexible teams, a characteristic which may last after the pandemic

read also: can a dispersed team be creative?

Professor Gianpiero Petriglieri of INSEAD drew lessons from the session as a whole:

• Retention of employees and loyalty is not a question of rewards or money but, importantly, it is the promise of learning. Can this be retained in a remote context?
• We need to keep a broad focus on productivity and learning. This requires people to remain connected.

read also: Cultivating culture without the office ground

Vitra offered its own perspective through an e-paper on distributed work

read also: The e-paper about the future of shared spaces 

PRINTABLE VERSION HERE

Department stores today rarely offer books, music, films and other “cultural” goods. These have reverted to specialists, chains and online retailers. However, the chains have consolidated and are doing less well; and the digital retailers appear to have peaked, while smaller, local booksellers are gaining in popularity. Is it possible that department stores could once again find a place for these goods in their local offer which has gained in popularity during the covid pandemic?

In the beginning was the word

One of the earliest US department stores, Marshall Field’s in Chicago, was famous for its customer service (“give the lady what she wants”), its revolving credit and for the use of escalators. But in terms of assortment, it was notable among other things for its legendary book department which introduced the idea of “book signing”. Its book department is now long gone (the store trades as Macy’s) as indeed book departments in so many department stores have disappeared.

These book departments were often paired with music (vinyls, cassettes, CDs) and films (VHS, DVDs) which have undergone such a revolution, both technological and commercial, that they quickly became the exclusive domain of specialist retailers which have now more or less completely gone digital.

But what happened to books? Department stores were the victims first of the growth of specialised

https://www.iads.org/files/pmedia/public/r6675_9_booksellers_that_have_closed_for_good_across_the_years_business_insider.pdf

r6675_9_booksellers_that_have_closed_for_good_across_the_years_business_insider.pdf

. These included in the US, Bookstop (1982) acquired by Barnes and Noble; Borders Books (1971) taken over by Kmart and eventually liquidated in 2011; Crown Books (1977) liquidated in 2001; Waldenbooks (1962) merged by Kmart with Borders and liquidated in 2011; B Dalton founded by Dayton Hudson department stores (1966) acquired by Barnes and Noble in 1987 and operated until liquidation of the last 50 stores in 2109.

In the UK, a similar growth and consolidation movement was taking place with Dillon’s, Ottakar’s, Books Etc (part of Borders), and the 115-year-old Foyles gradually becoming part of Waterstone’s.

“You’ve got mail”

This growth of book chains was portrayed in the 1998 movie You’ve got Mail about the giant book chain threatening the local bookstore business. According to Experian, the number of UK bookshops fell between 2005 and 2012 from 4000 to 1878.

However, neither of the two book giants Barnes and Noble nor Waterstones is currently finding life easy, not least because of the entry onto the market of Amazon, starting slowly in 1994 to digitise the book business first through online selling of paper books, then through digital book sales.

While the sale of e-books was growing, that of physical books continued to fall, for example from from

https://www.iads.org/files/pmedia/public/r6677_9_rise_of_e-books_results_in_50_of_bookshops_closing_down___the_drum.pdf

r6677_9_rise_of_e-books_results_in_50_of_bookshops_closing_down___the_drum.pdf

. However, others claim that the decline of bookshops has now significantly slowed, and furthermore, that the number of independent bookshops grew by 35%

https://www.iads.org/files/pmedia/public/r6676_9_why_the_number_of_independent_bookstore...pdf

r6676_9_why_the_number_of_independent_bookstore...pdf

.  E-book sales have recently been fairly static and subscription services modelled on Netflix or Pandora have struggled while the resilience of paper books have proved a boon to independent booksellers

https://www.iads.org/files/pmedia/public/r6678_9_the_plot_twist__e-book_sales_slip_and_...pdf

r6678_9_the_plot_twist__e-book_sales_slip_and_...pdf

. E-book titles have been declining generally, including for example Italy where they fell by 5.4% in 2019 after falls of 17.2% and 15.9% the two previous years.

The rebirth of independents

Waterstones, which appeared to be in deep trouble ten years ago, is reinventing itself under James Daunt of the ex-independent bookshop on Marylebone High Street in London, Daunt’s bookshop (now part of Waterstones). Elliott Management, Waterstone’s owner, agreed in 2019 to buy US Barnes and Noble in a $ 683 m deal. James Daunt will move to New York and attempt to work his magic on the 627 US stores at the same time as continuing to lead Waterstones. He claims that in the book trade, Amazon has probably reached the peak of its influence and that there are limits to the online experience.

One of his strategies at Waterstones’ 280 shops has been to devolve power to local managers particularly over purchasing. This contributes to a more efficient management of stock, reducing the costs and time involved in handling returns, books bulk ordered by head office with little regard for differences in regional reading habits.

One of the competitors which Barnes and Noble will be facing is, of course, Amazon itself whose 20 or so shops around the country are benefitting from the data that Amazon collects on the market. Publishers on their side are suffering under the brutal negotiating techniques of Amazon which is threatening publishing as it has already music and films. On the other hand, of course Amazon has opened the world of books and enabled publishers to reach a wider market.

The local offer for the local department store

Notable bookshops around the world include Daunt’s in London or Lello in Porto representing an almost caricatural but striking model of traditional bookshop architecture; The Strand in New York with its reported “18 miles of books” and its passion for everything written including banned books; Shakespeare and Co in Paris, the archetypal writers bookshop with its rich history of famous patrons (which is suffering badly during the current pandemic); Livreria Cultura in Sao Paolo serving as a spacious and comfortable meeting place in modern design style; Starfield in Seoul with its truly breath-taking height of bookshelves. All of these demonstrate the importance of branding, each one immediately recognisable in ways that the chains cannot match with their “cookie-cutter” formats, however innovative they may seem at first.

They also all know their customers and have made deliberate choices. A more recent version of this is the local focus of the kiosk formats emerging in Barcelona which cater to local customers and offer targeted press, magazines, coffee, and some seating.

Some department stores have not abandoned books. Indeed, Harrods entrusted its book department to Waterstones for 20 years until 2011 (when it switched to WHSmith). De Bijenkorf in Amsterdam has handed its book department over to AKO, part of Audex, in their words a partner who is able to target the Bijenkorf customer. In a similar vein, Manor in Switzerland has recently signed a partnership with French international Fnac group to provide books, audio, video and electronics. Fnac has the same deal in Andorra with Pyrenées department store. Printemps in Paris has a collaboration with the emblematic Gibert bookstore. The BHV store in Paris offers a book selection which is tailored to its customers, as does the Bon Marche. KaDeWe has a selection of books and art on the fifth floor, Selfridges offers a selection, while Ludwig Beck in Munich still offers books alongside its famous and very substantial music department.

Whether or not these examples are profitable, they may nevertheless constitute efforts at generating traffic, which department stores are sorely in need of currently. They might achieve this through the local appeal of their offer, through the theatrical experience they generate, and through the contribution to the value of the retail brand, just as the book department at Marshall Field did in its early days in Chicago.

So what about department stores

If, as seems to be the case, there is a continuing market for physical books (and perhaps other cultural goods), department stores might consider regenerating their offer to customers in some form or other.

The offer might be centred around convenience (guides, reference books, magazines…) which is what Harrods appears to be opting for with WHSmith rather than Waterstones; or it could consist of inviting a local notable shop to open a branch in the store just as so many have invited fashionable restaurant formats into the store.

This raises the question of whether the culture offer should be own-run, an arguably costly solution, or whether it could be entrusted to a specialist as has been the case in Bijenkorf.

Whatever is decided, a book or cultural goods offer opens the potential of a collateral offer of stationery, writing, cards which can all be personalised, and which potentially may be more profitable.

Some department stores see books and more as part of a “gift” offer such as the Galeries Lafayette “System Bookstore”, the design department at Rinascente, or local museum shops, for example. Some books are published quite explicitly as gifts or coffee-table books, and books in general as gifts are traditionally seen as less personal than jewellery, but they say more about the giver. Amazon has a category explicitly allowing purchasers to send books as gifts.

Finally, books and indeed other cultural goods need not be grouped in a specific department but may be scattered around the store to create a lifestyle feel, just as Selfridges may sell cookery books in one of its restaurants, or fashion books in various departments.

Credits: IADS (Dr Christopher Knee)

PRINTABLE VERSION HERE

What: A global non-profit business association promoting open and sustainable trade.

Why is it important: The association empowers members with a network of producers and suppliers that are aware of the concerns department stores face and can simplify retail supply chain operations through audit standards.

In today’s world, organizations are held accountable not only by the government but even more so by consumers. It is becoming necessary for businesses, especially the fashion industry, to become transparent about the impacts that their supply chain has on workers and the environment and that they take responsibility for instances that happen in each part of the operation. Many businesses have turned to audits such as Amfori to create a channel of ethical transparency for all stakeholders.

What it is

Amfori was founded in 1977 as the Foreign Trade Association (FTA) to represent the foreign trade interests of European retailers, brands, and importers to European and international institutions.

Over the last 40 years, the company has rebranded and expanded its scope to social and environmental responsibilities to assure that goods sourced worldwide are coming from supply chains that respect workers and the environment. Amfori provides companies with a system to improve their social compliance within their supply chain on a global scale.

Amfori membership has grown in the past decade from 23 members in 2004 to over 2,451 in 2020. It has a combined annual turnover of over $1.5 trillion, making Amfori the largest social compliance initiative.

Vision 2030

In 2017, when Amfori celebrated its 40th anniversary, the association launched Vision 2030 which is a strategy to address the challenges that technological advancements and changes in political thinking could bring for sustainable trade. Vision 2030 is centered around 5 objectives: build the organization to be fit for the future, support the members through insight, expertise, and influence, inspire action around the world, grow high-performing people to become the leaders of a sustainable tomorrow, and prosper by contributing to the SDGs (Sustainable Development Goals) to increase human prosperity for all.

Through the guidance of the United Nations’ SDGs, the association hopes to make a social, environmental, and economic impact. Amfori promotes compliance and improvements within global supply chains leading to important discussions about social issues. The organization supports companies by increasing the supply chain visibility which helps address pressing environmental changes. Amfori’s objectives protect and improve international trade interests which is crucial to sustainable development, inclusive economic growth, and human prosperity.

How it works

The association offers three different products: Amfori BSCI, Amfori BEPI, and Amfori Advocacy. Through these product lines, Amfori hopes to enable businesses to succeed by providing world-class services and tools that allow them to trade openly and sustainably while helping shape the right policy environment for open and sustainable trade to flourish.

The Amfori BSCI (Business Social Compliance Initiative) platform provides a single place for all supply chain performance information which helps members make decisions about suppliers and measure improvements.  It aims to improve social performance in the increasingly complex global supply chains. An audit to ensure compliance involves a thorough on-site assessment of supplier facilities by professional social auditors which are executed every two years. Though Amfori BSCI does not provide a formal certificate, the factory profiles and audit results are kept in a database that members can use to make decisions on which suppliers to use.

The Amfori BEPI (Business Environmental Performance Initiative) platform provides data on environmental performance in supplying factories and farms worldwide. BEPI provides a practical framework that can support all product sectors in all countries to reduce their environmental impact, business risks, and costs through improved environmental practices. While no certification is awarded, the BEPI process is designed to give members a fair representation of their international supply chain performance and allow producers to improve their performance. With the help of a professional environmental consultant, the producer is coached on the production areas that need to be improved.

The Amfori Advocacy offering helps members shape a political, legal, and social landscape where they can drive equitable trade and advance human prosperity. The advocacy team works with a range of stakeholders to ensure trade is responsible, sustainable, and benefits everyone involved. Advocacy helps members satisfy customers’ expectations while helping them maintain their competitive edge. The service provides members with a network of local representatives, country-specific information, political, social, and legal insights, and expertise to be able to make informed decisions.

Why is it important

Amfori provides department stores with a database of producers and suppliers that accept and assume principles of ethical commitment. When the supply chain for retail is coming from various countries with differing labor laws and operational regulations, it can be hard to perform the proper due diligence of each region while meeting the demands of the consumer. Through Amfori, department stores can feel at ease by choosing to partner with providers that are connected through the same responsible vision towards the future of retail.

Amfori is attempting to address the chaos and unnecessary duplication of auditing efforts by providing a common code of conduct and a single implementation system. This will enable all companies that source products from various regions to collectively solve complex labor problems in the retail supply chain. As Amfori compliance is recognized by all participants, manufacturers do not need to repeat the inspection thus reducing workload and management overhead.

Amfori has a better understanding of the issues that department stores face and has even backed the Fashion Industry Charter Communique. This initiative is focused on driving the fashion industry to net-zero Greenhouse Gas Emissions by 2050. The Communique calls for cross-sector collaboration within the fashion industry and focuses on the role policy environments play in accelerating climate action both in fashion production and consumption countries. Members recognize that current business models are insufficient and support the adoption of systematic changes to achieve the goals of the Paris Agreement. The members are trying to make the fashion industry a model for other sectors to follow. Any company that is professionally engaged in the fashion sector can sign the letter of commitment to join in on the initiative.

Limits and Criticism

In September 2019, the Clean Clothes Campaign criticized the social audit industry in a report alleging that it prioritizes brands’ reputations and profits and fails to meet its mission of protecting workers’ safety and improving working conditions in global garment supply chains. The organization claims that there were auditing failures in the deadly 2012 Ali Enterprises factory fire in Pakistan and the 2013 Rana Plaza factory collapse in Bangladesh. In both situations, there were Amfori audits done by the testing service provider, TÜV Rheinland, that deemed the facilities safe just weeks or months before the incidents. In the report, German retailer, Adler, confirms that Amfori BSCI members rely on the database to make supplier decisions and that Adler had accepted products from a factory in Rana Plaza because the factory was able to prove BSCI compliance.

Though TÜV Rheinland remains on the approved list of Amfori’s audit vendors, in Amfori’s 2020 Year in Review report, they announced the Audit Assurance Programme as a priority in 2021, which is meant to implement trust and quality back into the audits.

The best choice for European department stores

Amfori’s members come from 45 different countries with 89% of the members having their headquarters in Europe. The majority of the members are importers which represent 66% of the members, with brands and retailers following at 19% and 11% respectively. The two major sectors of members are general merchandising and garment and textiles. Therefore, Amfori can benefit department stores in Europe by sharing best practices and market knowledge around sustainability and social responsibility.

Amfori has also helped members navigate the global pandemic by releasing a report called “Responsible Purchasing Practices in times of COVID-19” to help guide its members through the tough situations that lie ahead.

Though the Amfori audit may not replace other certifications, it reduces the chaos associated with sustainability standards by connecting the garment industry. Through its various members, initiatives, and involvement, Amfori might be the best option for European department stores to focus their efforts concerning sustainability standards.

Credits: IADS (Mary Jane Shea)

What: McKinsey’s survey about grocery consumption in France, UK, Germany, Italy and Spain

Why is it important: During the pandemic, consumers changed the way they shopped for groceries and some of these new habits will stick

After a surge in online buying, a muted return to stores

Not everyone has liked their online grocery shopping experience and even the most satisfied European customers say they view online grocery shopping as a temporary measure and plan to return to physical stores. The availability of delivery slots—so that consumers can order and receive groceries when they need them—will be critical to staying competitive.

With so much time at home, a focus on health—but also fun

Cooking and buying fresh products have been prevalent behaviours during the COVID-19 pandemic. Up to 85% in some countries report that a focus on healthy foods is a “very important” consideration in their weekly grocery shopping. The shift is particularly pronounced among (but not limited to) younger consumers.

The offerings from retailers and CPG companies will need to evolve as well. That might mean helping customers find inspiration for healthy and fun meals that they can make from scratch.

Value critical for price-sensitive consumers

About 25% of survey respondents report that their personal finances have been negatively affected by the COVID-19 crisis. At the same time, consumers are expected to further reduce their spending on all categories except groceries—where they expected to spend more, with a net intent of +4%.

Price will continue to take priority over proximity when choosing a store, especially in households facing economic pressure. We may thus see a shake-up among grocery players as they battle for consumer loyalty. For retailers, that means that now is a critical time to invest in retaining their newly gained customers.

Gains by big brands—may not stick

COVID-19 pandemic has revived some large brands. In the first months of lockdowns, surveyed consumers in most European countries said they preferred well-known brands versus trying new, smaller brands. Availability was clearly a major reason as large CPG companies were able to keep up with demand, while smaller players struggled to make products available.

Over time, small brands are expected to return to their previous growth trajectory. Our survey results show that brand authenticity and provenance are increasingly important to consumers, and that will likely benefit the small brands.

A stronger sense of purpose

While healthy food is still the main priority for surveyed consumers’ grocery shopping, they are also conscious of the values and purpose of the brands they are buying. Early evidence suggests that the importance of social responsibility has accelerated for consumers. Survey respondents report strong intent to support local stores and brands that demonstrate care and concern for their staff and that use and promote sustainable solutions.

How European shoppers will buy groceries in the next normal