Articles & Reports
Can DTC brands really answer to customer needs?
Can DTC brands really answer to customer needs?
What: They should not forget about the key ‘speed, cost, and convenience’ values customers are looking for.
Why is it important: Traditional retailers have an opportunity to leverage their perceived reliability to their advantage to attract and keep customers.
At the start of 2020, DTC brands were poised to win the hearts (and wallets) of consumers – but after a year of immense uncertainty, they have not been able to successfully keep their end of the bargain. As the pandemic continues to dictate the future, online marketplaces, traditional retailers and branded manufacturers have an opportunity to leverage their perceived reliability to their advantage to attract and keep customers.
When e-commerce became the only option for many shoppers this year, brands and retailers were offered the chance to shift their operations online at a huge scale. For some, this switch was a massive success, and retailers were able to learn from the brands already excelling, to the point where 30% of Americans now see no difference in the experience between buying online from a DTC company versus a traditional retailer.
As supply chains have been heavily impacted by the e-commerce surge, customers want what they've always wanted – fast shipping, seamless experiences and a decent price point. As DTC brands fight to remain relevant and deliver on these promises, experienced branded manufacturers have been far more capable of addressing these needs.
This unpredictability have given significant advantages to companies considered the most reliable. For 57% of Americans, that title of "most reliable" fell to marketplaces like Amazon or Walmart, followed by traditional retailers. DTC brands have fallen behind with only 7% of Americans finding that DTC brands were most reliable over the past six months.
While DTC have been pushing for innovative creative sales models and influencer endorsements, these strategies may be distracting from the key value that shoppers want from the brands they frequent. So, these DTC brands should now remember the three key differentiators that shoppers are looking for: speed, cost, and convenience.
Coming out of the pandemic, we'll see that the winners will be the branded manufacturers and retailers who have the experience and capital to re-invent themselves for changing consumers. Customers will be looking for trust and stability and digitally native brands will either earn their place in the hierarchy or be left behind as yesterday's shiny objects.
NB: the article was initially sponsored by Scalefast.
The blurred lines of retail, and what comes next
Is sustainable fashion really scalable?
Is sustainable fashion really scalable?
What: how to make circularity in fashion more than a wishful thinking?
Why it is important: Full circularity in the fashion industry is not yet within reach, especially for larger companies. There are however basic steps that could be already taken.
Fashion analysts predict that within 5 years, most products will be made of recycled or upcycled materials. This is extremely optimistic given the fact that, for now, 87% of the material used in fashion production is landfilled or incinerated. The whole system has to get through a reset, however, how to do so for larger companies (it is of course easier to start a completely new brand from scratch than to transform an existing structure from head to toe)?
The article reviews an option that is not often expressed: to pre-empt the resale market in order to capture garments and recycle them. The goal is to focus on their inner components, with two options from there: recycle them, or replace them in the recuperated garment by sustainable ones.
Even if fully circular fashion is still out of reach, this kind of step allows to move in the right direction.
Is Sustainable Fashion Really Scalable
The NRF release its 2021 top 50 worldwide retailers
The NRF release its 2021 top 50 worldwide retailers
What: The traditional NRF annual ranking of the most impactful retailers in the world
Why it is important: Sales are not anymore the only criteria for this ranking, all the more in such a bumpy year as 2020 was. The NRF and Kantar decided to implement a new system highlighting new forms of retail. The result? Walmart is still number one in the world, but is now clearly challenged by digital players (Amazon, Alibaba).
In 2020, retailers were clearly separated between the one already equipped to sell by distance before the pandemic closed cities, and the others. As a result, looking only at revenue might not be enough to assess the power of global retailers now. Kantar and the NRF decided to include other metrics (omnichannel capabilities, retail alliances, marketplaces, international position) to determine the top 50 most impactful retailers in the world. The ranking assessing the notion of influence is therefore disconnected from the pure sales numbers.
Winners in the top 10 are clearly confirming that digital has become a must have in 2020, unless you are a discounter:
- Walmart remains number one with a revenue of USD 519 bn (from 510 last year)
- Amazon remains number 2 with a revenue of USD 280,52 bn (from 232.88 last year)
- Schwartz group remains number 3 with a revenue of USD 133.89 bn (from 123.25 last year)
- Aldi jumps from 8th to 4th place with USD 116.06 bn (LY 91.90)
- Ali Baba goes from 4th to 5th position but increases turnover with USD 71.99 bn (LY 56.15)
- Costco also loses a seat, from 5th to 6th, but also increases turnover from USD 149.35 bn to 163.22
- Ahold Delhaize goes from 6th to 7th seat, and increases turnover from USD 74.29 bn to 78.17 bn
- JD.com enters the top 10 with a total turnover of USD 82.86 bn
Retailers relying on physical locations only took a hit
- Carrefour goes from 7th to 8th with a decrease from USD 89.81 bn to 82.60 bn
- Ikea stays at the 9th position, with a decrease from USD 48.73 bn to 45.18 bn
- Auchan fell from 10th to 12th position, with a turnover falling from USD 60.22 bn to USD 51.27 bn.
See the whole Top 50 on the NRF website here
Digital learnings from China
Digital learnings from China
What: Lessons learnt from the USD 66 billion livestreaming market in China
Why it is important: Livestreaming is not anymore a Chinese or an Asian specificity: all markets start to test it, among which several IADS members.
Alix Partners identifies as a key explaining factor of the high share of e-commerce in the retail sector in China (21% in 2019 to be compared to 11% in the US) shoppable livestreams. This industry is estimated to be worth USD 66 billion, with a 30% increase in terms of audience between March 2019 and June 2020.
Livestreams represent a mix of entertainment and retail, with influencers or employees showcasing products that can be shopped live from the watching screen itself. 3 key success factors are identified:
- Such shows must promote interactivity between the audience and the seller,
- They can be used for launching new products, provided they always involve some creativity in the way goods are showcased and sold,
- Make sure customer data is collected into simple, central dashboards that allow to make decisions on the spot and post-event, rather than look for non-actionable good-looking metrics.
Alix Partner learning lessons from digital in China
The BoF Sustainability Index
The BoF Sustainability Index
What: introduction of the BoF Sustainability Index which tracks fashion's progress towards urgent environmental and social transformation.
Why it is important: an attempt to measure and standardize fashion brands’ progress in their commitments to operate more responsibly.
The Index is meant to benchmark the sustainability policies and practices of the fifteen largest public fashion companies by annual revenue in 2019 in the luxury, high street, and sportswear verticals. It focuses on data to note progress that has been made, identify shortcomings, and lay out a clear framework for future advancements. The Index uses 338 different metrics to assess companies’ progress towards 16 time-bound targets within six categories: transparency, emissions, water and chemicals, materials, workers’ rights, and waste.
The aim of this index is to create a transparent and trusted benchmark to track clearly defined, measurable progress towards achieving sustainability goals in the fashion industry.
BoF Sustainability Index Report
Who is the 'department store' now?
Who is the 'department store' now?
What: the pandemic accelerated our acceptance of everything from kerbside pickup to virtual fitting rooms
Why is it important: anything that customers perceive as making their life easier will be here to stay.
Surviving retailers are now experimenting with new ways of doing business. They are streaming virtual shopping events and allowing consumers to book online consultations. They are doing away with traditional cashiers and rolling out contactless payment systems. They are using their stores as warehouses that deliver packages to customers directly. Some executives and consumers are confident these new approaches will stick.
Black Friday
They don’t expect a return to the Black Friday frenzy but prepare instead for big holiday promotions to start earlier and last longer. This doesn’t mean that holiday shipping delays will disappear. Executives said slower deliveries are still likely because they expect e-commerce spending to remain elevated even as the pandemic recedes.
Some malls will be back, with a new look
They do expect malls will make a comeback once the virus is under control even though a quarter of the US malls will close by 2023, according to Deborah Weinswig, chief executive of retail and technology research and advisory firm Coresight Research.
To survive, US malls need to make dramatic changes and borrow from what works elsewhere. Mall owners should invest in theme parks and other attractions to woo shoppers as in China where malls have become studios for live-stream shopping and other events.
Retailers will rely less on discounts
Discounting became less prevalent during the pandemic. Now some big retailers are more and more relying on data to sell more items at full price by personalizing promotions rather than offering broad deals to everyone. Macy’s, for instance, is tailoring its promotions based on a customer’s location and buying habits. “Showing the right products to the right people at the right time helps you discount less,” said John Strain, Gap’s chief digital and technology officer.
A store is no longer a store
Stores morphed into Amazon-style fulfilment centres during the pandemic as retailers looked for places to pack online orders. One reason that won’t change once the economy reopens: It is cheaper. Target said it costs on average 40% less to ship orders that it fulfils from its stores, compared with the expense of shipping from its warehouses.
Major chains closed about 8,700 stores in 2020 after shuttering 9,800 in 2019, according to Coresight. Retailers will continue to purge underperforming locations while negotiating lower rents from landlords to make the remaining spaces more viable.
Kerbside business
Picking up everything a store’s kerbside became a regular habit for many consumers. Now there is no going back, retail executives and shoppers said. For consumers, it is about convenience.
Target estimates that it costs an average of 90% less when shoppers pick up their orders kerbside or in stores, compared with shipping from a warehouse. There is a downside though. Retailers lose out on impulse purchases when shoppers don’t come into stores. So expect to see more upselling kerbside, said Renee Harwood, a retail adviser to RingCentral Inc. When the employee delivers a package to the customer’s car, “he or she might say: ‘We have a matching jacket for that, would you like to see it?’”
Shopping will become a virtual reality
As e-commerce proliferates, the barriers separating physical and online shopping experiences will blur. Chains are adding virtual fitting rooms, hosting live-stream shopping events and allowing shoppers to make virtual appointments with sales associates and stylists.
Customers that want to surround themselves with a community when the shop can turn to Instagram and TikTok. More than one in three shoppers made a purchase on social media in the past year.
Covid-19 Rewrote the Rules of Shopping. What Is Next
Tech is everywhere, but the important questions are somewhere else
Tech is everywhere, but the important questions are somewhere else
What: A thought on the impact of tech in retail
Why it is important: Benedict Evans emphasizes the fact that tech will not change retail, some fundamentals will remain the same for all retailers, we are just too early in the process to have the full picture.
Benedict Evans releases every week a newsletter on Tech and its involvement in any sector or activity, including retail. This week, he reviews the music, books, cinema and TV industries, and how they were disrupted by tech, to try to anticipate what will happen in the retail sector. Interestingly, his take is that, once the dust settles, people will realize, as it has been the case for these industries with their own problematics, that questions that matter will be retail questions, not tech questions. In his own words, ‘doing online properly is both necessary and hard, but your success will be determined by retailing questions’. Walmart grew thanks to trucks and cars but was not build by car people from Detroit. In the same manner, retailers will be the ones re-inventing retail in the future, not Silicon Valley.
Stores still matter when it comes to online groceries
Stores still matter when it comes to online groceries
What: J Sainsbury plans to close its London online fulfilment centre
Why it is important: what will happen to grocery boosted sales when the world goes back to normal?
Even as grocery sales soared, J Sainsbury, the UK’s second largest grocer, plans to close its London online fulfilment centre and redeploy most of the 650 employees to supermarkets.
As economies reopen, grocers face renewed competition from restaurants. Consultants Bain predict that US supermarkets could give back half of the 10% total sales growth they experienced in 2020. “The boundary is blurring between grocery and food service. What matters is not the market share in groceries but in food. Covid has given groceries a few years of reprieve and boosted sales. But when the world goes back to normal, how do they keep that surge?” asks Marc-André Kamel, leader of Bain’s global retail group.
This puts the onus on supermarkets to make their revenue more profitable. Grocery is a low-margin business and the dynamics online are even worse because customers don’t pay the full cost of picking and delivery. Bain estimates companies lose between 7 and 15% on every order, depending of their fulfilment system.
The most cost-effective method involves smaller, automated warehouses, often attached to a store. That explains Sainsbury’s plans to cut delivery distances and share staff and inventory costs. This strategy is at play in China, where Alibaba’s Freshippo builds physical grocery stores that are optimised for delivery. In the US, Walmart is testing ways to use its stores to compete better with Amazon. Even the UK’s Ocado, which pioneered automated delivery warehouses, now opens “mini” and “micro” fulfilment centres that could fit inside an existing store.
On the delivery end, some chains are trying to drive down costs by outsourcing to third-party shoppers via apps such as Instacart. Others urge customers to order goods online and pick them up kerbside.
But none of this addresses the other challenge of online shopping. Apps cannot replicate a physical visitor’s ability to scan a shelf, make substitutions and, crucially, discover things they didn’t know they wanted. That makes shoppers unhappy: only 13 to 16% who tried online grocery in France, Italy and Germany last year were “very satisfied”, a McKinsey survey found.
It also limits grocers’ ability to attract the promotional spending and rebates from suppliers that are a key part of supermarket economics. Here lies the opportunity. Online shopping generates far more specific data about who is buying what than loyalty cards. This can be used to reshape supplier relationships and improve stock management for stores as well as warehouses. Neil Saunders of research firm GlobalData estimates that 20% of items generate 80% of sales. Localised data could save space and cut food waste, making it easier to earn rebates, promote items and offer samples.
Stores still matter when it comes to online groceries
Exemplifying the physical stores new roles
Exemplifying the physical stores new roles
What: a comprehensive review of the various new roles physical stores hold today in the Covid-19 world
Why it is important: a compilation by GDR UK with a wide variety of examples which allow having clear, concrete ideas in mind.
GDR UK, a, intelligence company based in the UK dedicated to retail trends, is, just like IADS, a true advocate of the continued relevance of physical stores, provided they adapt to the new customers’ usages and behaviours. They recently released 2 articles gathering a wide variety of examples of stores, already operating, which take on their new roles.
When it comes to e-commerce, stores can come as an ideal complement, helping with various elements such as brand expression, or logistics. They can serve as:
- Showrooms for customers, as shown by MAC in NY, or Farfetch’s Community Galleries,
- On-demand fulfilment centres, as illustrated by IADS members, Lush, Walmart,
- Dark stores, especially in groceries (Whole Food, Amazon, Cajoo).
Interestingly, many digital innovations were also developed to emphasize the notion of physical space, as illustrated by shoppable real-life stores, such as Dior in Paris, Ikea in China.
Going further, stores are also reinventing themselves, to provide an improved experience to customers, justifying that they come to the premises:
- Either by proposing never seen before, not available online experiences, such as H&M with the Loop recycling machine, or Freitag’s personalisation workshops,
- Or by rethinking the purpose of the physical store itself, such as Starbucks transforming itself into a half-café, half-shared office.
The goal is to make sure the physical space is convenient and understood as a community centre, where customers can come as citizens and vice versa.
Discover all examples with links in the 2 links below.
The C-Series 6 How Covid-19 is changing the role of physical stores
C-Series 7 How Covid-19 is changing the role of physical stores, Part 2
The new breed of retailers’ private labels
The new breed of retailers’ private labels
What: Private labels were unexpectedly fortified by the Covid-19 crisis.
Why it is important: Following the meeting we held on Private Labels in January 2021, some of the lessons learnt and pieces of advice displayed by Alix Partners echo our conclusion.
Given the fact that, usually, private labels sell in store, 2020 should have seen their share of business decreasing significantly in a newly digital world. However, Alix Partners points out the fact that digitalisation goes along with knowing the customer better, which, for some retailers, allowed them to not only optimise their private label business, but increase it.
It is worth reminding that private labels can represent a significant portion of the business: USD 2 billion for Target (with 4 brands), a fourth of the turnover for Costco, or more than EUR 300 million for El Corte Inglés.
Alix Partners identifies 3 key success factors for the private label business:
- Customers insights should be injected into all steps of product development processes. This should be eased by the access retailers have to their own customers’ data through their various payment and loyalty schemes,
- Make sure the assortment completes in the best way possible the national brands offer,
- Define the operating model according to the targets: maybe historical processes (especially in production) might have become outdated when compared to the actual objectives of the brand
How far can Shopify move from being a tool to becoming a network?
How far can Shopify move from being a tool to becoming a network?
What: Shopify success illustrates 3 trends in tech and ecommerce
Why it is important: can Shopify story inspire department stores to build a different selling approach?
Shopify’s 2020 results report that consumers spent a total of USD 120 billion on its platform, almost exactly double the figure from 2019. This is an impressive story of the recent acceleration of ecommerce, but it’s interesting because it illustrates three important trends in tech and ecommerce.
1: “No-one can compete with Amazon”
Shopify isn’t competing directly, but it challenges Amazon at a very basic point of leverage by doing something different, but relevant. In markets with strong network effects or winner-takes-most effects, it’s very hard to displace a new incumbent directly, but pretty common to address an underlying customer need in another way. So, Amazon thinks about Shopify, because they change what the businesses might be, and offer your customers a different way to solve their problem.
2: “Wasn’t this already solved?”
Shopify found a way to solve things that an engineer would have told you were already solved. Part of today’s explosion of ecommerce is that these businesses come from people who are product people and not technologists. Shopify unlocks ecommerce for far more people, and there are a lot more opportunities to take a ‘solved’ problem and make it more accessible, and so reach 10x more people. Now a lot of people are trying to make something that’s easier again - a step easier than Shopify, Squarespace or Wix.
On the other hand, half of the Shopify story is actually big companies - Heinz, or Unilever. Why are they on Shopify? Mostly because they want to go direct.
3: Going direct
Shopify is riding a wave of both consumers and brands becoming ready to go direct. We have an explosion of new consumer ‘direct’ brands using the internet as their first channel. In parallel, there are giant consumer brands that have always been B2B businesses and that are now want trying to go direct as well, partly to compete with those new brands and partly to create some tension against Amazon and Walmart.
That meets a wave of new companies building tools to power ecommerce. Part of the story is that anyone can use the same tools now, meaning that giant companies, perhaps, can get access to the same tools as startups.
For most of these companies, selling online isn’t ‘technology’ - it’s retailing, but with a new channel that needs new tools. The tools have to be good but most of the questions are retail and brand questions. The interesting question for Shopify is how far it can move from being a tool to becoming a network, and to become part of retail. And so (to close the loop), the idea that all of this will be swallowed by Amazon makes about as much sense as the idea that all physical retail would get swallowed by Walmart, not because of software but because of retail. So perhaps software isn’t eating retail - retail is eating software.
Will post-pandemic retail be online or offline?
Will post-pandemic retail be online or offline?
What: Some retail executives believe offline sales will slowly start to surge again.
Why is it important: In the third quarter of 2020, online sales in China increased by 27% , while offline sales declined by 4%.
Not everyone believes that this consumer shift will push online shopping ahead of offline over the long run. In fact, some retail executives believe offline sales will slowly start to surge again. Therefore, consumption patterns in 2021 will change again, and new opportunities and movements will shape the collective identity.
Online
CNBC reports that Alibaba and JD.com set new records during the 2020 Singles Day shopping event by hitting around USD 115 billion in sales online. Companies that want to take advantage of the O2O trend should invest in visual recognition algorithms, AR-powered gamification software to boost customer loyalty and engagement, artificial intelligence (AI) chatbots that respond to customer inquiries, and data analytics systems to assist with personalized purchasing recommendations.
Physical
Luxury buyers expect businesses to integrate more health and safety measures. Agile retailers have responded to this shift by incorporating innovative technologies, such as contactless kerbside pickup, indoor positioning system technology, AI-enabled, smart-shopping carts, and radio frequency identification (RFID) technology, which helps with product tagging.
However, the vast majority of offline retailers still need to adopt efficient, consumer-centric services, such as buying-online-and-picking-up-in-store (BOPIS) services, partnerships with super-apps, like WeChat and Alipay, and technologies that boost the omnichannel experience across all platforms.
Alibaba-owned department store Intime and Japanese multinational personal care company Shiseido are training their sales consultants to use livestreaming, boosting their in-store marketing efforts. “We need to merge online and offline to get people to buy more,” said Shiseido’s CEO, Masahiko Uotani, in an interview.
Showroom models
For many businesses, the showroom model has been perfectly suited for the post-COVID-19 environment. Pop-up stores bring in higher engagement, are 80% less expensive than traditional stores on average, and represent a safer option than conventional stores.
Unsurprisingly, China is already using new technologies to enhance the showroom model and promote pop-up shopping experiences. “This match made in heaven between Chinese consumer culture and the pop-up phenomenon is one of the reasons why pop-up stores have been on the rise in China,” said Storefront CMO Stephanie Kidder. “In fact, the compound annual growth rate of pop-up retailing has exceeded 100% since 2015, and estimations tell us that by 2020, over 3 000 pop-up stores will have been launched in China.”
Will Post-Pandemic Retail Be Online Or Offline
Mint FW21 Women’s Fashion report
Mint FW21 Women’s Fashion report
What: Mint report for the Women’s FW21 season
Why it is important: Discover Mint’s analysis of trends seen on the (often digital) runway for this unusual FW21 season.
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.
Thoughts on Amazon’s private labels business
Thoughts on Amazon’s private labels business
What: A new take on Amazon’s private labels business by a Tech specialist
Why it is important: Ben Evans wonders why Amazon’s private labels business is demonized: this activity is simply a staple in the retail business, and Amazon is not even the best at it.
Benedict Evans releases every week a newsletter on Tech and its involvement in any sector or activity, including retail. This week, he explores the reasons why Amazon is criticised for its private label business, all the more that this has been a basic activity from retailers since the beginning. He reminds that the job consists of knowing what customers want, or miss, and supply them with specially designed products at the right price.
Be it Amazon or a brick & mortar retailer, the job has been the same for the last 130 years. Interestingly, private labels represent only 1-2% of total turnover at Amazon, a lower share than other retailers, which leads Benedict Evans to wonder if Amazon is actually scrutinized according to different standards than other retailers, simply because it is currently disrupting the market, the same way department stores, Target, Macy’s or Sears did in their own times.
US department stores are at a crossroads
US department stores are at a crossroads
What: A post-pandemic playbook for department stores.
Why is it important: While winning online, stores will have to become entertainment destinations, using technology and localisation to their advantage.
In the future, department stores will have to recapture the entertainment approach they once had, retail consultant Andrew Smith of Think Uncommon thinks. He points to Showfields, a retail startup launched in 2019 that acts as a showcase for smaller, mostly direct-to-consumer brands. Showfields offers space to create mini stores-within-a-store in an environment built around entertainment and theatrics. When bricks-and-mortar retail reopened after shutdowns, Showfields responded by introducing a Magic Wand app, which combined in-person contactless shopping with an enriched online experience and the chance to book an interactive tour.
Camp is another retail concept: it’s a toy store aiming at the whole family, which not only sells products but also holds workshops, and refreshes its product assortment along with themes, much as Showfields does.
Among department stores, Smith cites Nordstrom Local stores as an example of a goal that isn’t solely about revenue on the sales floor: these 3 000 sqm sites focus on services like personal stylists, pop-up displays of brand collaborations and an omnichannel returns centre that accepts packages from both Nordstrom and its rivals. Bigger brands should also embrace service-focused, smaller format sites: since retail vacancies are expected to rise, it’s the ideal time to affordably experiment with new formats like that.
Speciality boutique Intermix has seen success with another approach. It has created “days out” for regular customers, where women are invited to come with a few friends to a suite at a local luxury hotel. The experience isn’t just about shopping: there are lunch and spa treatments, while a sales associate will showcase an edited assortment of new items to try on and purchase.
By far the biggest, error among bricks-and-mortar retailers has been their attempts to mimic the online experience. “A store that just puts up a bunch of screens and thinks that makes it feel more digital? That’s exactly not the reason you walk in,” says Yamner Green of The Yes shopping app, “It’s only when you make them completely different that you start to win.” Moreover, technology isn’t innately innovative; rather, it can enhance the in-person experience when smartly deployed.
Pre-bankruptcy, Neiman Marcus planned to streamline clienteling by swapping sales associates for a cutting-edge CRM platform, a fundamental misunderstanding of how to deploy tech in a revenue-boosting way. But the right partnership with startups can help a retailer expand into new areas. Hero, which works with Intermix, allows retailers to replace centralised customer service centres with in-store associates who can video-chat with buyers. Sweden-based Bambuser is another notable startup. It focuses entirely on video shopping, whether via live events or one on one with a personal shopper; the average add to cart click rate is 20%.
These services aim to better coordinate online and in-store services, so they can work together more seamlessly, allowing each to emphasise their strengths. It’s a cautionary reminder for Saks as it separates its two channels into rival businesses, a move that Think Uncommon’s Andrew Smith believes is risky at best.
NB: Showfields will be a guest speaker at IADS “New Business Models” Cross-Functional meeting on 26 April 2021.
Post-pandemic playbook - Reviving US department stores
Related items:
- Instore experience: the case of Showfields
- Saks stores and e-commerce to split into separate companies
- Nordstrom launches livestream shopping programme
Who is the 'department store' now?
Who is the 'department store' now?
What: Target has become a department store in the traditional sense of the term
Why is it important: Big boxes and discounters have stolen share from department stores for years and now Target is stealing their merchandising playbook too
Target is reportedly to take over Macy’s space at the Water Tower Place shopping centre in Chicago. Before Macy's, that store was a Marshall Field's and some Chicagoans have never forgiven Macy's for its takeover of their beloved retailer. Now, the idea of replacing Macy's with a Target is creating buzz and controversy. And for some, urban Targets meet the needs of today's urbanites, the way the original wave of Chicago department stores, like Marshall Field, did in the 20th century. If Target was to take over Macy’s, it would be an illustration of how Target has usurped the traditional department store.
"Target has become a place where consumers go to discover new things," GlobalData Managing Director Neil Saunders said. "This used to be at the heart of what department stores were, merchants which brought a world of interesting products within easy reach of consumers." In their heyday, department stores were true emporiums, with varied merchandise. As they gave up sales in many categories, those departments usually filled up with more apparel, a highly lucrative market that now has its own problems.
Now many of the players that have taken share from department stores are adopting tactics from those old retailers such as carving up their spaces to facilitate browsing, taking down partitions, introducing vignettes, well place little breaks, etc... The retailer this month said it's dedicating a part of a USD 4 billion plan to remodel more stores. As part of a USD 7 billion overhaul of its stores and private labels launched four years ago, Target has disrupted its aisles to exhibit home goods and apparel so that shopping is easy and pleasant.
Pop-ups from third-party brands have also appeared not just back into department stores, but also at specialty big-boxes like Target. In recent months, were announced dedicated spaces for Apple, Ulta, Levi's or DTC like Casper. Disney has announced the closure of 60 stores in North America but has ramped up its shop-in-shop locations, including at Target.
As department store consolidation continued through the late 20th century and into the 21st, many department stores' private labels disappeared. Now mass merchants have discovered the power of private brands, which differentiate their merchandise from names that might be found anywhere and provide fatter margins.
Target has excelled at this. Steady introductions in the last five years have appeared throughout its assortment, from commodities like food and consumer products to more discretionary items like home goods, luggage and apparel. They've been lucrative: The company's new activewear line notched USD 1 billion in sales in its first year and is the 10th billion-dollar private brand in its portfolio.
"We saw this with J.C. Penney which, despite having the phenomenally successful Sephora shop-in-shop concept, failed to reignite its core business," Saunders said. "Sephora certainly drove traffic to JCP stores, but very few of those consumers were big spenders at J.C. Penney itself. In contrast, Target has a very strong underlying business so its partnerships are really icing on the cake. It is all very well having other brands and concepts come in, but retailers should also be innovating themselves. Target does, but many others do not."
Who's the 'department store' now
Rethinking the sales teams’ roles
Rethinking the sales teams’ roles
What: A “co-branded” training between Target and Apple to guarantee the right level of service
Why it is important: Target is opening 17 Apple locations in its stores and does not want to take any risk on the level of service provided: 8 customers out of 10 would switch merchants due to poor service, according to Business News Daily.
This is the reason why they provide special trainings to employees, in partnership with Apple. The author argues that this kind of partnership in training, while increasing the value of knowledge transferred to sales team, also increases chances of sales conversion and employee retention. He goes further by suggesting that trainings should not be brand-specific, taking example on Trader Joe’s, which trains its staff to perform all store tasks without specializing on one aspect. As a consequence, employees feel committed and involved.
This approach will be much needed in the future, as customers tend to be more and more informed thanks to the Internet, and expect more specialised interactions with employees who, on the other hand, will also be expected to be multitasking.
Target, The 'Apple Experience' And Training
Make sure hybrid work is productive work
Make sure hybrid work is productive work
What: MIT article by London Business School’s Lynda Gratton on how we can be productive working in and out of the office
Why it is important: Answers worries about how we may lose productivity, creativity, and engagement in the new work structure.
We are often experimenting with new working patterns caused by the pandemic: distance working and office working. It is causing a lot of confusion with leaders designing hybrid ways of collaborating that have few precedents. How much flexibility should there be? What strategies are most effective? The author lays out a view of hybrid workplaces and describes four emerging principles: use office space to amplify cooperation; make working from home a source of energy; take advantage of asynchronous time to boost focus; and use synchronised time for tasks that require coordination.
Mit four principles to ensure hybrid work is productive work
First “Swappable Department Store” coming to New York City
First “Swappable Department Store” coming to New York City
What: Global Fashion Exchange to host a swapping exchange at Walker Hotel in TriBeCa
Why is it important: the event encourages swapping as a sustainable consumption behavior by incorporating new tech and a trendy venue
Global Fashion Exchange (GFX) is partnering with Walker Hotel in its newly opened TriBeCa location for its “SwapAteria” experience running April 22 to 30.
The experience is open to guests as well as the public to encourage swapping as a sustainable consumption behavior, a practice that is typically declassed to informal methods.
In each room known as a “swap closet,” there will be curated vintage collections and second-hand items from brands such as Gypsy Sport, Maison Murasaki, The Canvas, Now for Tomorrow, Carmen Gama, and Carolina Bedoya: Make Aneew, among others. But just because items have already had a first or even second life, does not mean that the value of the goods will be at risk. Many retailers know the value of the products they possess and hope to get their money’s worth in the exchange.
The activation is powered by a real-time tracking system called the SwapChain, a blockchain-enabled data source in collaboration between tech platform Lablaco and GFX that shows the history of each garment featured in the closets. SwapChain has allowed swapping to become more concrete and opened it up to be the potential next step after retail.
First “Swappable Department Store” coming to New York City
Business Case #5: Macy’s & Nordstrom abandon new concepts
Business Case #5: Macy’s & Nordstrom abandon new concepts
Two significant US department store groups, Macy’s and Nordstrom, acquired small innovative formats, respectively Story and Jeffrey, and abandoned them in 2020, perhaps not entirely because of the Covid pandemic. What explains their failure to use these opportunities, and what lessons can be learnt by department stores searching for a new lease of life?
Even before the pandemic,
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involving substantial cost savings, the closing of over 125 stores and the cutting of up to 4000 jobs. CEO Jeff Genette said: “We know we will be a smaller company in the foreseeable future”. These measures went hand in hand with a new strategy called “new North Star” meant to turn around the country’s largest department store group. Among those leaving the company since the pandemic is
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, who arrived when
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in 2018 and created a post just for her called “brand experience officer”. At the time the move seemed to usher in an era of reinvention for the department store group, together with the investment in start-up b8ta.
The same year 2020 saw
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, which Nordstrom had acquired in 2005. Jeffrey’s success, particularly in the Meatpacking District which contributed in no small part to the gentrification of that area of Manhattan, was seen at the time as an effort on the part of the upscale department store to renew itself and help modernise its fashion appeal. After the Nordstrom acquisition, Kalinsky worked in a variety of executive roles at the department store company while still running Jeffrey in New York, Atlanta and Palo Alto. It has now been announced that the stand-alone stores would also close (as well as 16 full-line department stores).
Two examples of well-established department stores acquiring successful and innovative concepts, as well as acquiring the founders’ expertise, in an avowed effort to rejuvenate the department store concept, then abandoning the project (admittedly in a covid year) with little to show for it. Why does it appear to be so difficult for a traditional department store to learn from a radically different but very successful retail format?
Who is Jeffrey?
The Nordstrom connection with Jeffrey is perhaps the least surprising of the two: indeed, department stores, especially higher-end ones, are expected to offer curated assortments, the latest in new fashion brands. This was exactly what Jeffrey Kalinsky had built his reputation on for many years before Nordstrom got interested. In a similar vein, the Maria Luisa space in the Printemps department store in Paris was intended to offer customers the same fashion know-how and selection that the boutique founded in the 1980s became known for. If viewed as a shop-in-shop offering a specific assortment, then Jeffrey and Maria Luisa could conceivably exist simply as another outlet for the concept alongside the boutiques. An example of such a strategy would be that of 10 Corso Como which was looking for expansion possibilities and trialled openings in department stores such as SKP or Lotte and is able to retain independence and flexibility.
However, this was clearly not the case with Jeffrey at Nordstrom since he joined the company and served in several roles, ostensibly to train or influence existing buyers to up the game of the company as a whole in terms of brands and assortment at the very least. He maintained his credibility not by opening a concept in the store but by continuing to operate the Jeffrey stores separately.
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. For several years, this category has been underperforming in department stores. It was perhaps to strengthen this category that the store took on the Jeffrey fashion icon. It should be remembered also that Nordstrom had been planning to open in New York for some time, where Jeffrey had made such a splash among the fashionistas. The Jeffrey image could do no harm to the Nordstrom brand. It was the apparel offer in the full-line stores which needed attention, since the Nordstrom Rack outlets have been performing better.
A good Story
The Story connection with Macy’s is more recent since it was acquired in 2018. Story was a single store operation which attracted much media attention since its launch in 2011. The founder was frequently invited to explain the concept, a constantly changing store and offer according to the “story” of the moment like a gallery whose aim is just as much to sell experience as it is to sell products. The narrative-driven retail concept shop is intended to bring to life an editorial approach around themes such as colour, for example.
Here again, the image advantage derived from this acquisition by Macy’s placed the latter firmly in the camp of department stores seeking to “reinvent” themselves. It also invited founder Rachel Shechtman to join Macy’s as “brand experience officer” signalling its commitment to bringing a fresh perspective to the department store and to retail. Macy’s had been in need of a fresh approach for some time since its uniqueness had been diluted and indeed drowned by its size and standardised model. The promise of Story was expertise in experience; collaboration with a number of other brands; working with small businesses and authentic products with special stories; and running a dynamic event schedule. All more like a magazine editorial role than a classic retailer. Once again, this was touted not as a shop-in-shop, but as a starting point for a major overhaul.
Goodbye Jeffrey, it’s the end of the Story
Whether the formats in question were appropriate to carry the future hopes of large department store groups is, of course, debatable. What is clear is that both department stores were probably seduced by the dynamic impact Jeffrey and Story were having on customers, the media and indeed consultants and retail commentators. Small concepts, linked to strong personalities will behave in certain ways: they will be agile and flexible, they will have minimal organisation structure, they will be subject to the whim and creativity of the founders, they will test and make mistakes, and sometimes they will be totally unsuitable for growth.
Acquiring the founder with the concept does not solve the problem. In fact, the chance of a new concept founder fitting into a large classic organisation structure is arguably quite low. Start-up founders hired by department stores have often left, frustrated at the immobility and slowness of the department stores’ structure as well as their incapacity to cut across the internal siloes.
Scaling is also a significant obstacle to success. In both cases (Story operated one store, Jeffrey three) the shift from operating on a small scale, selecting the assortment or the theme, signing collaborations and managing marketing, to making a difference in very large structures, is an almost insurmountable challenge, unless the expected impact is very clearly articulated and organised. The influence of
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was diffuse, and
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in large classical department stores.
To buy or not to buy…
As was discussed in the IADS Exclusive: Dealing with Disruption, a radical innovation in any business requires commitment and investment, sometimes at the expense of the established business. The onboarding of Jeffrey resulted apparently in no more than a star consultant let loose in the buying department; the ideals of Story were transformed into rather inadequate and sad gift shops. According to Doug Stephens who apparently had advised Macy’s to acquire Story, “Macy's squandered a golden opportunity to reinvent — not just the Macy's experience but the entire revenue model of department stores generally… but instead of taking a whole Macy's store and moving it over to the Story business model ... they chose instead to treat it as a bauble, a fanciful little concept inside the same horribly boring Macy's store”. Strong words indeed. It is certainly the case that
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with these acquisitions but as one commentator has written, was it perhaps “
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”.
These two cases raise an important question: how should department stores think about their revival and innovation in general? Acquisitions of small concepts or start-ups may help with the importing of skills and know-how. There is no doubt for example that the acquisition of the UK arm of buy.com helped John Lewis develop its own online business. But this was approached as a tool for the job and within a year, buy.com had been disbanded and totally absorbed into the mainstream business. Almost the same thing happened at Walmart when it acquired jet.com in 2016 for over $3bn and folded it into walmart.com to help it compete with Amazon. Current online Walmart development would appear to confirm the success of that move. On the other hand, with its acquisition of Bonobos, it was clear that Walmart was buying a brand alongside many others (Bonobos founder who joined Walmart has coincidentally left the company in 2020).
Department stores are not bad at innovation as the small Bloomies format or the Nordstrom Local shops testify. Even acquisitions can benefit a department store business as the
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now being moved into Nordstrom stores illustrates. But this has not been taken on with the hope of transforming the business model of the company. For the moment, the two stores remain much as they were with
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probably assured after yet more cost savings, while
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and relying increasingly on its off-price chain.
Perhaps with department stores, business model innovation or new formats need to be developed in-house. Otherwise, an acquisition should serve as a tool for a specific task.
Credits: IADS (Dr Christopher Knee)
Business case #4: Debenhams and Topshop buyouts
Business case #4: Debenhams and Topshop buyouts
Who doesn’t remember a trip to Oxford Street to check on the competition or just feel the consumption frenzy? Well, the Oxford Street and the high street we used to know will not be the same anymore. Debenhams and Topshop collapses are a brutal reminder of department stores and clothing chains struggle, private equity mismanagement, lack of strategy and then Covid-19 dramatically speeding up the process. Even though the brick-and-mortar shutdowns trend is global and rampant, we might find ourselves at a turning point, especially in the United Kingdom, with Boohoo and Asos buying bits of Debenhams and Topshop.
What has happened to the famous British retailers? What are Boohoo and Asos’s buying strategies aiming at? Are Debenhams and Topshop buyouts specific business cases? Is there a new pattern to be observed?
The high street fiasco
Debenhams and Topshop have been sharing history for a long time. They were both part of the Burton Group in the 1980s and 1990s. Their economic issues go back to before Covid-19 hit the world and the UK last year and they are collapsing at the exact same time.
Founded in 1778, Debenhams was once one of the largest retailers in the UK.
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when a private equity consortium (CVC, Texas Pacific and Merrill Lynch) acquired the department store for GBP 600 million. Three years later, the company returned to the stock market for GBP 1,2 billion. The consortium also took out more than GBP 1 billion from selling the company’s real estate and leasing it back. At that point, Debenhams was loaded with heavy debt and tied to very expensive leases. It was too late to remodel the strategy and there was not enough money left for investments such as the much-needed digital ones. Even recruiting Sergio Bucher coming from Amazon was no help. Reducing the store portfolio could also have been a smart, if not a lifesaving move: but while online shopping was expanding, Debenhams was still opening stores in 2017. Moving forward, it went from bad to worse until 1 December 2020, when Debenhams went into administration.
What about Topshop? When Debenhams exited the Burton Group, the remaining part of it became Arcadia Group and was acquired by Sir Philip Green’s family. Arcadia Group’s brand portfolio (Topshop, Topman, Miss Selfridge, HIIT, Dorothy Perkins, Evans and Burton) used to be led by Topshop for more than a decade, with years of thriving business, top models and billion dividends. At that time, there were still plenty of seats left at the digital table, but
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to force Topshop into the online-shopping era and failed to position the brand as one of its leaders. The Nordstrom deal was also probably too little to allow Topshop to really break into the US market. In the meantime, Topshop product offer diluted as competition became fierce, with both brick-and-mortar retailers and online players. In 2018, Sir Philip was also caught up in abusive sexual behaviour scandals, adding more mistrust towards him. Finally, on 30 November 2020, the group entered administration, just 24 hours before Debenhams did.
Get a move on
Going deeper into Boohoo and Asos’ moves, what do we know so far? They are both wunderkind British-born e-tailers chasing Millennials and Gen Z consumers for more than 15 years. Boohoo was first to acquire companies with Karen Millen and Coast in August 2019, then with Oasis and Warehouse in June 2020. In January 2021,
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for GBP 55 million (USD 75.4 million): website, private label brands and customer data. As of now, the website still attracts 300 million visitors a year. Boohoo also bought four fashion private labels that are appealing to the older generation (Maine, Mantaray, Principles and Faith). Thanks to Debenhams’ strong position on the cosmetics and perfume market, Boohoo is acquiring the 1.4 million Beauty Club members. The deal does not include the 130 brick-and-mortar stores and the 12 000 jobs involved. Premium locations such as Oxford Street, the ones that were fought for not that long ago, are not considered. A few days later, Boohoo acquired Burton, Dorothy Perkins and Wallis, all “mature brands” and the last remains of Arcadia Group. It’s a GBP 25.2 million (USD 34.7 million) deal and, once more, it does not include the 216 stores and the countless jobs involved. While only 10% of Debenhams’ customers are also buying from Boohoo, this demonstrates a strong will to grow outside of its existing 20-something business and to target new segments of the market such as cosmetics or older male and female clientele. The company said it’s a “significant opportunity to grow Boohoo's market share across a broader demographic”.
Asos, on a larger scale than Boohoo, aims to become the world’s number one destination for young fashion addicts thanks to its huge, varied and inclusive product offer. The company’s latest move will certainly serve that mission and will strengthen its strategy. As an existing wholesale partner to the brands,
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and sister brands Topman, Miss Selfridge and HIIT for GBP 295 million (USD 411 million). In 2020, Asos increased its sales by 19%, growing from GBP 2.7 billion to GBP 3.17 billion and could count on 22.2 million active customers. Asos said in a statement: “The Board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its customer base.” An Exane BNP Paribas survey states that 40% of Topshop’s shoppers are also buying from Asos. Like Boohoo, Asos does not include Topshop’s 168 stores and 13 000 retail jobs in the deal.
While Boohoo is moving into markets outside of its current core business, Asos is strengthening its position in order to take the lead in its segment. While these are different strategies, both companies will grow their online footprint in the very near future.
Is it to say that Topshop or Debenhams stores will all permanently disappear? It remains to be seen, but one can guess that these digital brands in the making will find themselves in need of a physical approach to the business at some point (as other e-tailers have done). Whether it’s to have a brand billboard, a service touchpoint, a community hub or offer immersive entertainment to customers, stores should remain a key part of the business. Asos’ CEO Nick Beighton hasn’t ruled out the idea of taking over Topshop’s Oxford Street crown jewel “if it becomes financially attractive and we can find a partner to work with on that, never say never”.
Are we all British?
Unfortunately, Brexit will have a major impact on such decisions. What will be the point of running stores when visitors from abroad might not consider UK as a shopping destination any longer? In fact, there is no more tax refund for foreign tourists from 1 January 2021. In 2019, they spent GBP 3 billion on fashion and luxury goods in the UK. “We are now the only country in Europe offering no VAT rebate, so why would tourists not go to Paris instead?” says Paul Barnes, the CEO of Association of International Retail.
Going further, is there a specific British pattern to be observed? What makes Debenhams and Arcadia bankruptcies and acquisitions specific? While the European economy was declining, it was no secret there were too many department stores and clothing chain options on the British high street. Besides and more importantly, British online consumption was increasing rapidly, thanks to (among others) Asos and Boohoo. According to an Office for National Statistics study, British online monthly consumption went from GBP 854 million in January 2016 to GBP 1.386 billion in January 2020. For the month of November 2020, just when both Debenhams and Arcadia were going into administration, ecommerce hit a record GBP 3.250 billion turnover, accounting for 36% of British total retail sales for the month. In this turmoil, winners are the ecommerce moguls for sure, but what is unprecedented is to witness their breaking and entering the British department stores scene.
While British retail and department stores might suffer more than others in the near future, we assume that the ones that are (and will be) surviving through numerous crises, are the ones adjusting to online demand, streamlining their operations and adapting their store portfolio.
One of the many learnings in Debenhams and Topshop’s disasters is also about differentiation, hence branding. Both -as brands- were once magnets to customers. They were attracting them thanks to the values, difference, uniqueness or zeitgeist they were claiming to carry. Whatever you name it, it has been lost at some point of the journey.
The branding question is more than ever a critical question for department stores. It will infuse all of the challenges ahead whether it’s about enhancing and transforming customer experience, growing digital capabilities or providing products appealing to an ever-evolving shopper.
Credits: IADS (Christine Montard)
Remote working: what can department stores learn from the great RW experiment?
Remote working: what can department stores learn from the great RW experiment?
Companies have been exploring the possibilities of remote working for many years. In fact, remote work has even, in some cases, been implemented then abandoned. Department stores have been forced into remote work by the current pandemic. Or at least some of the department store functions have been. Is this likely to become a permanent feature of our retail businesses? If so, what might it look like in more detail? Remote working has raised major issues for HR departments, as well as for management. If the practice becomes widespread, remote work will also have implications for city life and consumer spending more broadly, and therefore on department store customers.
A breath of clean air blowing through the cities
The silence and clean air of recent lockdowns in major cities have been partly due to a significant number of employees working from home.
With the coming of a (hopefully) viable vaccine, is it likely that remote work will continue? According to McKinsey international surveys of different jobs, some 20% of the workforce could work as effectively from home as from the office, 3 to 5 days a week. This would mean
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. Research from S&P Global Market Intelligence claims that 80% of organisations have implemented or expanded work from home policies and 67% expected these measures to stay in place permanently or for the long term (Candezent, Covid-19 and the retail industry, December 2020).
The effect on urban economics, transport, and consumer spending would be significant. Before Covid, around 5-7% of the workforce worked from home. A shift to 20% would, for example, lower the number of commuters with consequences for transport, petrol/gas sales, auto sales, restaurants and retail. Figures for office vacancy in the US would shift from 16.8% currently to 19.4% in 2021 and 20.2% in 2022. As an example, the sports retailer REI has already decided to sell its new headquarters in Washington before even moving in. It has decided instead
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across Seattle. (Washington Post) Some argue that
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on politics also.
The battle for the office
There are two extreme views of office work:
a) It is a place of pressure, constant interruptions, sometimes harassment, and often low productivity; against which home working is seen as autonomous, happy and in many cases more productive.
b) The office is a place of human contact, creativity, cooperation, empathy and an equaliser. Home working in contrast is an unwelcome and unmanageable merger of public and private, to the detriment of both, added to which it has none of the facilities which make office work efficient.
Some companies have tried and rejected distance working. For example, Yahoo abandoned it in 2013, citing the damage to company culture. IBM abandoned it the same year. Facebook has recently signed a new lease on a big office in Manhattan; and Bloomberg is reportedly offering an extra £ 55 a day to get its workers back to its building in London.
On the other hand, like REI mentioned above, Pinterest has paid out $ 90 m to end a new lease obligation on office space in San Francisco to create "a more distributed workforce". (see The Economist articles:
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and
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).
The classic office is pretty much a relic of the 19th Century, designed for control and surveillance, and dominated by the clock and the time employees sell to their companies. Changes in the office have broadly been limited to a choice between separate offices or open space. And the choice has been largely dictated by economic and cost factors rather than by efficiency or effectiveness criteria. (The same can be said of "hot desking".) Whatever happens, it is clear that the "office" as it exists today is in need of serious reform; and this means more than just ping pong tables, bean bags and unlimited fruit juice. Arguably, even ApplePark and Googleplex, which are used to lure talent to their office worlds, are merely more sophisticated versions of the same thing (see for example, the novel The Circle by Dave Eggers, and the movie). The Vitra CEO illustrated this view at a conference attended by IADS last September, by opposing cost & control-focused companies (where the work environment is not that important) to creativity-focused companies (where she sees an opportunity for her design company to improve the workspace).
The great divide at work
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(mixing both remote work and physical presence)**. It is the case not only that some industries are more suited to remote work than others, or that some companies have decided one way or another for strategic reasons, but that different functions may be able to adopt distant practices more easily than others within the same industry or company.
Amid a great deal of uncertainty and differences of opinion, it remains that within retail, and department stores in particular, there is clearly a face-to-face function involved in selling which has to remain mostly physical (even though an increasing number of sales jobs are being advertised as remote – see <https://www.flexjobs.com/jobs/telecommuting-jobs-at-neiman_marcus>) or Container Store (repeatedly voted one of the "best places to work"). The fact that many surveys consider retail to be one of the least likely industries to shift to remote work is undoubtedly because the figures are skewed by smaller independent retailers. Chains and indeed department stores
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.
Other jobs in retail that require physical presence may include fulfilment, and warehouse tasks. It was suggested by the last IADS Academy, that the finance function in department stores is probably the one that could most easily be carried out at a distance. In fact, according to
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amenable to distance working, retail would include elements at both extremes such as handling data at the remote end of the continuum, and handling goods at the other end where physical presence is necessary. The
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has been highlighted by the current pandemic. And the future of this group
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.
However, such a situation divides a workforce, for example into those who work from home, all the time or perhaps several days a week, and those who make a regular commute to the office or the warehouse or the store. It means, within a retail company, a division between those who commute and those who don’t; those who are under classic physical supervision, those who are monitored digitally and those who have more autonomy. For the present it also means between those who are exposed to the virus and those who are not. At both Walmart and Amazon, warehouse and DC workers
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. This is the kind of challenge faced by HR and management in our companies.
Big challenges for department stores
There are many challenges for companies which shift into the "hybrid-remote" world.
- Hybrid workforce: as illustrated above, some groups of employees will not have the option of working from home. This may create resentments over what may be perceived as a perk for some but not others even if they see their company saving on real estate and office equipment and utilities while remote employees are picking up extra costs for these items themselves. (Several companies including Twitter and Slack are
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after
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.)
- Shift in work culture: there is no doubt that remote working is a very different experience from daily presence in an office. A company or team culture needs to be built digitally as many companies have experienced when hiring and onboarding virtually during a lockdown. Not only does this require a different type of leadership, but it also requires every employee to build a "digital identity", in the same way that employees construct a physical identity in face-to-face contact in an office.
- Management, communication and autonomy: employees are likely no longer to be paid on the basis of the time they spend in the company but on the tasks they accomplish. It is perfectly legitimate to take a break to get lunch for the kids while working from home as long as the job gets done. Performance evaluation and compensation therefore need to take this on board. Also, the whole set of skills which were appropriate for communication in an office may no longer be so at a distance. Informal communication needs to be created anew. Communication through meetings takes place both synchronously and asynchronously, in particular if meetings are conducted online and with distant geographies.
https://www.iads.org/files/pmedia/public/r6487_9_steven_furnell_home_working_and_cyber_security.pdf
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.
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https://www.iads.org/files/pmedia/public/r6483_9_the_great_dispersion_galloway.pdf
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?
Conclusion: get ready for a hybrid work future
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In general, it would appear that once employees are engaged with the idea,
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. However, department stores need to be able to cater for both sides and be prepared to go hybrid. Just as we have had to integrate different channels selling to our customers, we may need to learn how to integrate remote and present workforces to produce a seamless working environment which answers the demands of the future company.
Credits: IADS (Dr Christopher Knee)
Sustainability series #3: The B Corp Certification
Sustainability series #3: The B Corp Certification
What: A third-party certification emphasising transparency and accountability.
Why it is important: Its approach includes all stakeholders, which makes it a "fashionable" certification when advertised to the public.
While the pandemic is increasingly emphasising the idea that shareholder capitalism seems no longer adapted to the challenges companies have to face, there is no consensus yet on what should replace the "profits first" approach. But the growing influence of the triple bottom line (profit, people, and the planet) in corporate governance and the need for companies to take all stakeholders into account has led to the emergence of a new certification, called "B Corporation".
What it is
B Corp is a private third-party certification, assessing corporate companies' social and environmental performances. It requires businesses to “meet high standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose” (the 'B' stands for "beneficial"). B Corporations are verified and certified by B Lab, a global non-profit organisation with offices across the world, in Americas, Europe and Oceania.
B Lab assesses the way companies create value for all stakeholders: employees, local communities, and the environment. The organisation was founded in 2006 by Stanford University alumni and businessmen Jay Coen Gilbert and Bart Houlahan, and former investment banker Andrew Kassoy. In addition to awarding the B Corp Certification, B Lab’s initiatives include administration of the B Impact Assessment tool (the platform used by companies to perform self-assessments), management of B Corp consultants, as well as institutional advocacy.
The first B Corporations were certified in 2007. Since then, more than 100 000 companies have reportedly signed up for the B Corp assessment, with now nearly 3,700 B Certified Corporations in more than 70 countries across 150 different industries and sectors, including brands such as Patagonia, Allbirds, or Brazilian cosmetics Natura.
How it works
Beyond product or service-level certifications, B Corp measures a company’s global social and environmental performance. It assesses the impact of its business model and operations on the company’s workers, community, customers, and environment. Any company can apply to B Corp Certification, through the B Impact Assessment, B Lab’s extensive and thorough application process.
Becoming a Certified B Corp is a demanding process, needing a minimum verified score. The assessment process evaluates and scores business impact on governance, workers, community, and the environment, through 200 questions exploring a wide array of topics such as the standards used within the company, the ownership spread of corporate capital, diversity among employees or energy saving processes. It also aims to evaluate whether the applying company has a formal process to share financial information with employees, if it has ensured that its social or environmental mission will be maintained over time, or if it monitors and records its waste production. It takes 80 points out of 200 to pass the certification, and the results of the impact report of successful companies is made public.
Certification is open to any business older than twelve months, with a 3-step process: online self-assessment with a 10% selection rate, verification by B Corp and payment of a fee of between UDS 500 and 50 000 depending on the company annual revenue. B Corporations must re-certify every three years and they can also drop the certification along the way if the standard requirements no longer suit their strategy or threaten their short-term shareholder profitability.
Why it is important
With the increasing importance for businesses to set up a model that differentiates them from competitors, being identified as a B Corporation is a way for a company to publicly claim special concerns about environmental and social performance over profits. In 2016, the Harvard Business Review pointed out that claiming unconventional corporate identity such as being a B Corp helped firms communicate their values and identity to customers, especially the younger ones. With such a certification, smaller businesses can prove they are authentic advocates of stakeholders’ benefits, next to bigger established operators with more means to show their CSR efforts.
At a structural level, and comparable to the Higg Index scoring, the B Corp certification helps a company gauge its social and environmental performance compared to competitors. It is a convenient tool for a business to identify potential points of improvement and to draw a roadmap to more sustainable business practices. It is also a way to benefit from both the B Lab and other B Corporations’ advice. Unlike with the Higg Index though, B Impact Assessment score is disclosed publicly, and every B Corp’s Impact Report is available to anyone on the B Lab platform (example here with Patagonia). Transparency and accountability have been originally part of the standard, and B Corporations are required to embed stakeholder governance principle in their statutes. The B-certified company must modify its governing bylaws to allow directors to “consider stakeholders besides shareholders in company decision-making”, legally committing itself to maintaining a balance between people, the planet and profit in the decision-making.
Standing for a more conscious approach to business is becoming increasingly good for business which explains a growing interest from companies regarding B Corp certification. The consumer’s fast-growing demand for more positive business practices has been accelerated by this year’s pandemic, and the B Certification potential as a leverage for growth is now reinforcing interest in the standard, especially from the fashion industry. In September, WWD foresaw that “B Corps may become Fashion next A-list”, underlining that, despite just 150 companies so far in the B Corp community worldwide, around 1 000 fashion companies have signed up to the B Impact Assessment since March 2020. In August, Vogue Business confirmed that the pandemic pushed fashion brands to consider B Corp status, “a little-publicised sustainability certification that is growing in importance and impact amid a lack of trust in social and environmental guidelines".
Limits and criticism
Despite the fast-growing community of B Corporations, certified members point out their difficulty to express to customers the complexity of the B Corporation certification. Moreover, there is a lack of visibility and understanding of the label among consumers. According to Vogue Business, the certified brands often have to explain B Corp to consumers for the first time, especially on new markets, implying that the standard’s main benefits might still be more B-to-B than B-to-C.
According to WWD, detractors say B Corp Certification is one among many other sustainability initiatives, with a lack of government oversight and little accountability beyond what is owed to shareholders. They also complain that B Corp standards are not legally secured, that neither the board nor the corporation are liable for damages if a company fails to meet them, and that the changes in the company bylaws remain secret.
Although B Lab is a not-for-profit organisation, The Conversation revealed in 2019 it raised over USD 32 million since 2006, with much of its funding coming from major foundations and organisations such as Prudential, Deloitte LLP, the Rockefeller Foundation, or the U.S. Agency for International Development. In 2017, B Lab received about USD 6 million in certification fees, and USD 5.6 million in donations. The article also pointed out that its board members primarily came from the business sector, with the organisation paying USD 6 million in salaries and compensation. The B Lab lobbying activities in the U.S. towards making benefit governance mandatory most probably has a substantial cost, but financial connexions to the private sector and governmental agencies can raise questions about the organisation’s own agenda, especially when it comes to transforming the global economy.
An ambitious target
While the shift from old-school shareholder capitalism to a more balanced model between purpose and profit is underway, the rise of alternative forms of organisations requires to swiftly re-consider how we do business, to initiate positive changes and make sure customers know the values we stand for.
B Corp is not perfect, but the certification comes with a level of transparency and accountability that is still missing in the Higg Index. It is emerging as a useful toolkit for any business, big or small, from any industry, to continuously improve its sustainability performance and to clearly identify itself as willing to be part of a positive change in business practice. However, the very small number of retailers who are so far listed with B Corp raises questions about its relevance for the retail industry (Allbirds, Patagonia and Eileen Fisher stand out more as exceptions), as well as its heavy bias towards the US.
Also, B Corp Certification’s standards remain notably hard to reach, and every candidate might not be able to qualify. It is certainly becoming one of the third-party certifications to have, but it is a hard one, and with just 10% of the applicants passing the assessment, the label may remain out of reach to most.
Credits: IADS (Renaud Pillon)
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Covid-19 has and will continue to redefine urban dynamics: people, who used to come to cities for economic and social opportunities, will probably tend to gather in city centres for pleasure of social interactions. This evolution, due to the digitisation of every day life and the successive lockdown waves, goes hand in hand with an older reflexion led by mayors on how to create the city centre of the future (see our articles on 15-minute city, the impact of new flows on urban organisation, and the reflection on capital cities vs. regional cities). This impacts the future of business: when the London mayor thinks about making Oxford street fully pedestrian, and in Paris to turn the Champs Elysées into a giant garden, this means that retailers have also to adapt.
Moreover, older traffic patterns are disrupted:
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- There will be fewer employees and workers coming to the city on a daily basis (more and more will opt, if possible, for a balance between work from home and office gathering).
As a consequence, multi-format thinking (such as what Galeries Lafayette has done in Le Marais area) becomes key.
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