What: a reflexion on the future of business travel once the pandemic is over.

Why it is important: virtual gatherings have become the norm for almost a year now, which might have long-term consequences on travels. Because even if the vaccines work and travels are opened again, some bigger issues such as sustainability and cost-cutting to salvage companies might tarnish the restart of the flying business

Travel has suffered since the beginning of the pandemic and the future is still blurry for the sector, even with the hopes brought by the vaccine. The reduction of international travels have had serious consequences on retail (both travel retail and “tourism retail”) and it also had consequence on corporate travels. Now it is a whole industry that need to rethink its strategy.

FT looks at the state of business travel in the future, based on its situation pre-covid and taking into account the health and financial risks linked to the current crisis.

Business travel: ‘We don’t know how many people will choose to fly’

What: Business of Fashion predictions for online shopping in 2021.

Why it is important: some of these predictions might be inspirations for department stores.

BoF predicts the following trends for online shopping:

• Live customer service is here to stay: During the pandemic, brands and retailers used their store staff to cater to the needs of customers by distance. Once things return to normal, it will be difficult to lose the personal, extremely efficient and human relationship and revert to bots. We believe at IADS that this will be a trend equally applicable to department stores,
• Deliveries in hours, not in days: BoF predicts that customers will be happy to pay more to get the product delivered within hours. We do not share this point of view, given the recent studies on the topic.
• Deployment of fit tech: scanners are to be deployed to help to provide the right size of the product considered by the customer. Although this might look a bit ‘gadget’, retail consultant Doug Stephens goes beyond by thinking that this will be a very efficient data acquisition tool for retailers.
• Commerce and content, together: shoppable posts, videos where you can purchase the products, immersive brand environment as shown by Balenciaga or Gucci: more than ever, shoppable content will go beyond simple advertising.
• Gaming as a marketing frontier; which is probably a point related only to brands,
• Transformation of online stores: it is to be expected to see a convergence between the physical experience and the online display, to extend “experience” to e-commerce too, which is very far from being the case today.

The Future of Online Shopping 

What: the possible merge of two trends that could create a new way to purchase and consume

Why it is important: retail needs to reinvent in order to stay relevant, and a way to make a business successful could be through “rundle”: a recurring revenue bundle

The term was coined after “recurring revenue” and ”bundle”, by Stern School of Business professor Scott Galloway. Three types of bundles have proven valuable on the long run:

• A bundle of different products increases its value through the perceived discount
• A pack including a less popular product is a way to get rid of worst sellers
• A pack including a new product is a way to have customers try while mitigating risks

Coupling this approach with a recurring revenue model is efficient, thanks to the perceived low monthly fee (liberating customers from the urge to use the rundle at its maximum).

Weaving these two concepts together, the rundle is born - a recurring revenue bundle. Galloway believes that brands will build and even partner with others to build these lucrative bundles by combining services and charging a recurring subscription.

The rise of the rundle: A new trend for subscription-based services

What: The Economist argues that the pace of innovation and practicability makes China the new example, and future, for retailers.

Why it is important: The very reasons explaining The Economist’s position are currently being scrutinized by Chinese Authorities.

The Economist argues that with its size, and ability to blend e-commerce, social media and practicability, China probably represents the future of e-commerce. While in the West businesses are siloed (there is no one-business-fits all like what Alibaba represents, with a range of products and services from instant noodles delivery to financial services), China has developed digital ecosystems that are now copied in other countries (Grab and Sea in South-East Asia, Jio in India, Mercado Libre in Latin America).

Moreover, the fact that China is now going through a regulation process implies that the model is mature and ready to be exported. However, one point which is not covered in this piece is the fact that the regulation process is also examining the monopolistic approach induced by such strategies, as shown by the recent crackdown on Alibaba and its relationship with InTime.

The great mall of China - Why retailers everywhere should look to China

What: a review of the new technologies that might dominate retail this year

Why it is important: with the lockdowns that forced many stores to shut their doors for long period of time, digital was the life-line to ensure the survival of retail. Surely once the pandemic is over, the digital tool will remain key for retailers and brands

Vogue Business reviews several of the technologies that emerged, or were boosted, by the current crisis and predicts how they could rule over retail this new year. The article looks at the new role of physical stores now that e-commerce has skyrocketed. It also reviews the digital tool that will support a brand or a store, such as shoppable videos, virtual and AR stores, and multi-brand e-commerce platforms. Blockchain should also have its moment in a sector deeply relying on digital activities.

2021 fashion-tech predictions

What:  The well-known turnover rent is generalising in the UK as a response to the difficulties of the retailers across the board.

Why it is important: The crucial question raised between the lines is how to take into account the online sales related to click & collect.

Due to the difficulties on the market, and a considerable decrease of traffic (when stores are allowed to stay open), there is a generalisation in the UK of the turnover rent practice, i.e. aligning the rent on the actual performance of the store and getting rid of any fixed part. Retail Gazette reports that 82% of UK retailers are looking to modify their current lease with this new approach. However, as we have already reported, there is a strong incentive for landlords to include online sales performed with a brick & mortar component, such as click & collect.

Is turnover rent the new future for retail

Related item:

• A new rent model under consideration in UK Malls

What: DTC brands joining multi-brand retailers and marketplaces to reach out to more consumers

Why it is important: originally the main purpose of a Direct-to-Consumer business model was to cut every intermediary between the brand and its customers. Now these brands are rethinking their approach and are entering marketplaces (physical and digital) in order to reach out to more customers. The concept of multi-brand was actually invented by department stores over a century ago

BoF explores the new ways of doing DTC retail and explains how the role of the multi-brand marketplaces remain the same: a convenient space where you can find many brands and items in one place. The idea is not new, as recalled above department stores were the first ones to offer multi-brand spaces, but the technology is. Now the marketplaces are digital (think Amazon) and event big retailers such as department stores are investing in digital and developing their e-commerce to reach out to the new consumers.

One big way Direct-to-Consumer retail is changing

What: The WSJ reports that Amazon and Walmart prefer refunding customers without returning products than getting them back.

Why it is important: another proof that e-commerce profitability formula is to be found.

E-commerce returns jumped in 2020 by 70%, and more than half of the increase was due to higher e-commerce sale (the Journal of Marketing Research already mentioned that free shipping and special operations usually led to an increase in returns, due to customers’ disappearance of guilt and responsibility). In December, an article from CBRE already pointed out that the cost of logistics due to return was to significantly increase.

According to experts, processing online returns can cost USD 10 to USD 20, which led Amazon and Walmart to favour refunds over physical returns of products. This has more consequences than just profitability: scammers took note and this leads to an increase of frauds.

Amazon, Walmart Tell Consumers to Skip Returns of Unwanted Items 

What: A contribution reflecting on the stores’ transformation, with a customer-first approach.

Why it is important: Store as a hub are models followed by Target, Walmart and Nordstrom already. Some of their key learnings could be interesting for other department stores.

The contributor attributes Target’s recent growth to the fact that it pivoted to a store as a hub model, leading to a +21% growth YoY on Q3 2020, spread evenly between digital and physical stores. This model turns out to be profitable, as 75% of digital orders are fulfilled from stores and 2/3 of customers come to collect them. Other examples are Best Buy (kerbside pickup allowed to retain 81% of previous year’s sales in spite of the fact that all stores were closed this year), or Williams Sonoma.

Why Retail Key To Survival May Be A Hub Model Where The Consumer Is The Pilot

What: The 1 million euros question: how profitable could it be to focus on regions instead of capital cities?

Why it is important: BoF focuses on luxury houses, however, department stores do also have to find an answer to this question to make the most of their regional networks.

Selfridges CEO already mentioned her renewed interest for local customers at a moment when no tourists are allowed to come to London. We see the same trend across Europe, out of bare necessity. In China, Bain states that 50% of luxury customers are in second or lower tier cities.

In parallel, luxury houses tend to internalise their distribution by stepping away from department stores, independently on how luxurious their capital cities flagships are.

BoF cites the example of Flannel as a strategy to make the most of regional demand, thanks to its coverage of the rest of the UK, in order to diversify its sources of growth while at the same time fuel the loyalty of younger customers not living in London.

How Big Is Luxury’s Opportunity Outside of Capital Cities

Related item:

• Space produtivity meeting.

What: The Mint Group store report for December.

Why it is important: discover a 360 panorama of what was in place for Christmas in Paris, London, Milan and Seoul.

Mint Group, an agency representing the likes of Saks Fifth Avenue, Nordstrom, David Jones or the RealReal, and partner of the IADS, shares its Christmas report from December 2020. The title? “A quiet season”.

MINT - Christmas 2020

What: The monthly Visa report about US consumer spending.

Why it is important: In spite of the situation and end of local stimulus help, a record year.

Visa reports an increase of +8,5% on holiday spending (November and December, both offline and online) in the US, record growth in a decade. The strongest categories were sporting goods and book stores (+14,9%) and grocery and liquor stores (+9,6%). Overall, consumer spending slowed down as the Federal support started to exhaust in November (-1,3%) mostly affecting services spendings (-4,9%) while goods are still resisting for now (+6,9%).

Visa Monthly Consumer Monitor 2021

What: A systematic way of analysing the value of sustainability investments.

Why is it important: We too often see sustainability measures as a cost and therefore something that can be cut back in tough times. A new tool offers the possibility of measuring the return on sustainability investments.

Too many companies (and CFOs) see sustainability as a cost rather than as a source of value. The authors have developed the Return on Sustainability Investment (ROSI) analytic tool to measure the financial returns on sustainability activities. Companies should:

1. Identify their current sustainability strategies,
2. Identify related changes in operational or management practices,
3. Determine the resulting benefits,
4. Quantify the benefits, and
5. Calculate the monetary value.

The savings and growth thus revealed can reach hundreds of millions of dollars, according to the authors. At present when budgets are under examination, this tool can help companies improve finances through sustainability investments that create value.

 How to talk to your CFO about sustainability

Related items:

• Sustainability series #1: the cost of being good
• Sustainability series #2: The Higg Index

PRINTABLE VERSION HERE

What: The number one certifying body of France, and a standard that ensures that a range of products are ecologically produced and sourced.

Why is it important: The certification can be internationally recognized across various sections of department stores from apparel to cosmetics.

As more and more sustainability certifications and labels enter the textile and cosmetics industries, the worldwide adoption and recognition of these standards can become easily blurred or even lost. So, why not turn to the label that started it all? Ecocert was the first certification body to develop standards for natural and organic products and has created a globally recognized standard to provide certified environmentally-friendly products.

What it is

The Ecocert organization was established in 1991 and is a control and certification body that is approved by the French Institut National de l'Origine et de la Qualité (National Institute for Origin and Quality), and accredited by the Comité Français d’Accréditation (the French Committee for Accreditation; COFRAC). It is France’s number one certifying body and has been a reference for 30 years for the certification of ecological products. The brand is widely recognized by consumers and has an international presence in major producing countries.

Ecocert is acknowledged for its expertise in matters related to the environment and to sustainable development. The organization is a global leader in certification in organic farming and organic cosmetics and relies on an international network of 30 branches with more than 800 employees operating in over 110 countries. Ecocert is also a recognized player in the certification of environmental management systems and fair trade and sets demanding standards to encourage economic players across all sectors to adopt more responsible practices. Its range of expertise also covers environmental consulting and applies a rigorous environmental policy to all of its activities.

Ecocert supports more than 1,000 companies in their certification process and has dedicated offices worldwide to be able to service their customers regionally in North America, South America, Africa, Europe, and Asia. With 60% of Ecocert’s workforce internationally located, the organization can work closely with regional regulations and standards to be able to offer recognized certifications for the various locations. For example, in order to sell, label, or represent organic products in the United States, your products must be certified by a USDA (United States Department of Agriculture) accredited certification agency, such as Ecocert.

While France’s institutions created the origin of the standard, Ecocert adapts its standards to meet country-specific qualifications and labels. As each country defines its levels of transparency and material associations with labels, Ecocert partners with local associations such as the USDA to communicate and certify. In 2020, Ecocert acquired “Des Enjeux et des Hommes”, a leading CSR (Corporate Social Responsibility) strategy and change management consultancy business in France that will enhance the company's ability to work internationally by helping companies transition to sustainable models within their ecosystem.

There are 197 Ecocert-certified clients in the United States and 1,162 in Europe ranging from recognized supermarkets like Naturalia to internationally known cosmetics brands like L'Oréal. Not all items produced by these organizations are Ecocert certified, but they do share a level of commitment to environmentally friendly and socially conscious practices. As Ecocert regulates the end-to-end product cycle and beyond, the certification can be obtained by all players in the textile, cosmetics, or eco-product sectors from farmers, to producers, and even to brands.

How it works

Ecocert’s Greenlife business, which attributed to 18.9% of the organization’s turnover in 2019,  regulates textiles, cosmetics, detergents, and home perfumes to confirm that they comply with the specifications for cultivation, packaging, quality, origin procedures, and traceability. The standard requires the use of ingredients derived from renewable resources that are manufactured by environmentally friendly processes. There must be no GMOs, parabens, phenoxyethanol, nanoparticles, silicon, polyethylene glycol, synthetic perfumes, dyes, or animal-derived ingredients (unless naturally produced like milk or honey). Also, all packaging must be biodegradable or recyclable.

Within the Greenlife business, Ecocert’s Ecological Recycled Textile Standard (ERTS) label promotes production practices and conditions in the clothing and textile industry that respect the environment and people. It outlines the minimum environmental and social requirements necessary to define the ecological status by covering the product’s design stages, raw material production, manufacturing up to completion, distribution, use, and end of life of the finished product.

To be labeled under the ERTS, the finished product should be made partially or entirely of natural fibers, synthetic fibers, regenerated cellulose fibers, mineral fibers, fibers from renewable materials, or recycled natural or man-made fibers. The finished product must be made up of 50% natural materials or materials from renewable or recycled materials to have an Ecocert label of “Made with X% sustainable material” and contain 70% minimum for the “Ecological textile” or “Ecological & recycled textile” label.

Why is it important

Though clothing and textile products tend to make up the majority of department store inventory, there are also dedicated sections, and even full floors, to other items such as cosmetics and home goods. The Ecocert label goes beyond textiles and is also reputable for efforts in cosmetics.

The COSMOS (COSMetic Organic and Natural Standard) was formed by Ecocert and four other organic and natural cosmetics companies from across Europe including France, Germany, Italy, and the U.K. to standardize beauty certification on a global level. This label guarantees that a product is certified by five international organizations and makes use of the principles in the Ecocert standard.

With Ecocert’s network, range of sectors, and international recognition, it could be the best label for department stores offering a variety of goods to ensure a uniform label throughout the establishment that consumers can recognize across the various offerings. Ecocert has affiliations worldwide which gives the label a broader impact and recognition among consumers.

Limits and Criticism

On the other hand, as Ecocert offers such a wide variety of labels and services, it can bring confusion as to what the label actually means. Consumers have struggled with differentiating between natural and organic products within the label. The launch of COSMOS was meant to provide a uniform standard for natural and organic personal care products, however, critics argue that it has just added to the confusion because now it associates products with five separate labels rather than the individualized labels that once distinguished natural, organic, or made with organic products. Critics of the Ecocert label believe that there should be a uniform logo with a simple and effective message that can be understood across various countries and regions.

Such confusion has led Ecocert to release various clarifications between Ecocert and the COSMOS labels. In a document released by Ecocert, the group warns about three misleading provisions encompassing natural ingredient certification, the use of petrochemical substances, and the calculation of natural and organic origin indexes that may lead to fallacious information about the product. Ecocert has understood the complicated nature of having various labels and associations and is working on creating a clearer message so consumers do not feel deceived.

Ecocert: the one-stop-shop

A lot of natural and organic standards have been introduced around the globe in recent years, but they typically are only adopted on a national level. While noteworthy standards exist in countries like Brazil and Australia, most of the world looks to the United States and Europe in regards to which standards are the most trustworthy. Labels in North America appear to be more fixed while Europe is home to many different certifying bodies and organizations with similar causes. This can make it difficult to compare the labels and objectives internationally.

A recent trend coming from this has been the attempts to form regional and international groupings based on the harmonization of various national standards. COSMOS is an example of one of these international harmonization efforts that bring together Ecocert Greenlife, COSMEBIO, BDIH (Association of German Industries and Trading Firms), ICEA (Environmental and Ethical Certification Institute), and Soil Association. Though the collective approach brings some confusion, the outcome has brought the unification of expertise across countries with an overall objective to use materials that are safe for the environment and human health.

Overall, labeling and certification have become increasingly complex, so becoming Ecocert certified can be an enticing way to wrap many different labels under one umbrella. Ecocert as a whole covers a wide range of items beyond clothing which could be found in department stores. It can be seen as one universal label that is globally recognized by consumers shopping in various sections of the department store.

Credits: IADS (Mary Jane Shea)

PRINTABLE VERSION HERE

What: NFTs are an application of blockchain that is entering and changing the fashion industry as we know it.

Why it is important: Brands such as LVMH and Nike are leading the way, innovatively implementing NFTs into their business models for the long run.

The global pandemic has accelerated trends, especially in terms of technology and transparency.  Although many buzzwords are being thrown around, it is not very easy to understand how blockchain technologies, cryptocurrencies, and NFTs (non-fungible tokens) could impact the way businesses offer their products to consumers. The big question that arises now is do we need to act fast, or can we ride out this latest tech wave until it passes? In order to answer that, we first need to understand what exactly the technology offers and what opportunities have arisen since its inception.

What are NFTs?

NFTs (Non-Fungible Tokens) are an application of blockchain technology that is said to be the future. A blockchain is an open and distributed ledger that captures transaction data between two parties in a permanent and verifiable way without using a central point of authority. In the example of a supply chain, the blockchain would capture all information pertaining to each stakeholder from a raw material supplier to producer to wholesaler to retailer. At each stage of the journey, a new block of information is created and cannot be altered. Blockchain enables the existence of cryptocurrencies and other mediums of exchange, like NFTs.

NFTs are individual tokens that are part of the Ethereum blockchain. What makes them different from cryptocurrency is that its tokens contain extra information, including ownership history, allowing art, music, and videos to be sold in the form of JPGS, MP3s, videos, GIFs, and more. Because they hold value, they can be bought and sold just like any other types of art with the price being largely dictated by demand.

Just like a physical piece of art, there can be copies of the original item put up for sale by the creator, but the original will hold the most value on the market. Although downloading these digital items for free can be easily done, the value of ownership lies in the information held in the Ethereum blockchain. Each item is unique and cannot be copied, which is what makes NFTs so valuable.

NFTs are making waves as in-game purchases across different video games that can be bought and sold by players, and include assets like unique swords, skins, clothes, or avatars. This has opened up the NFT world with new players entering the NFT marketplace every day. The big leap is to take this concept from tech circles to more mainstream consumer audiences, gaining acceptance among brands and influencers.

What’s in it for retailers?

Retailers and brands have tried to enter the market with the hope of understanding how they can turn the trend into a marketing opportunity. NFT use cases are still in their infancy, especially for fashion. Their entirely digital nature puts them at odds with fashion being historically all about physical products. Currently, NFTs in fashion are art rather than utilities, but this is shifting quickly. The present-day application of NFTs of GIFs and digital clothing to be used in virtual realms might not be the right fit for fashion brands. Future implications of using the technology to track and authenticate high-end luxury goods are more likely to have long-term benefits in the fashion and retail space.

Nike is among the companies dabbling with NFTs, but they have taken its application a step further. Nike is using NFTs as a patent for its footwear through its NFT, Cryptokick, which removes the barriers between the physical and digital world. The NFT of the shoe is linked to its physical counterpart. When a customer buys a physical shoe, a digital version of the shoe will be made available in their “virtual locker” and can be used in video games, thus extending Nike’s brand in the virtual realm. If the owner of the shoe were to sell their physical shoe, the sale would be mirrored in the digital realm as well. This application of NFTs is novel as it gives retailers additional avenues to connect with their customers.

LVMH has also understood the future implications of the information that blockchain technology can provide for luxury goods. The idea has brought together competitors in the space such as Prada Group and Cartier, among others, to develop a blockchain platform created specifically for the luxury industry to verify and authenticate goods. The result is the nonprofit Aura Blockchain Consortium, built by Consensys and Microsoft, which is open to any luxury brand to track and trace products with a unique digital identity based on an NFT. Brands pay licensing fees and a fixed fee per product, but they also get full access and control over their data (brand and client data are kept private) and contribute to the blockchain governance and strategy.

This application of the NFT technology has also been implemented by Arianee, an open-sourced traceability solutions provider which closed USD 9.5 million in seed funding in March 2021. The platform’s technology establishes digital passports of products to authenticate and track them throughout the supply chain, using NFTs to ascertain the online value of goods. While Aura was built to allow brands to control their processes and data without a third party, Arianee focuses more on transparency and engaging customers after a sale or resale. The platform attaches digital IDs to its timepieces and uses them to offer special promotions to owners while allowing the customer’s identity to remain anonymous. The Consortium also has a non-profit association, including Richemont, Ba&Sh, Breitling, Audemars Piguet, Verlan, Satoshi studio, and Manufacture Royale.

NFTs are hot…. and so is their impact on the climate.

The resale industry, especially as consumers become more environmentally aware, has boomed in the past few years with 62% of consumers saying that they are willing to purchase second-hand luxury goods. According to Statista, the luxury resale market was valued at around EUR 28 billion in 2020, seeing a 65% increase over the past 5 years.

Establishing an industry-wide blockchain system would bring the needed governance and oversight to secondhand fashion. Resale’s rise has spurred more brands to get involved in the space with Stella McCartney, Gucci, and Alexander McQueen all partnering on second-hand marketplace initiatives. This is a major shift in the luxury market that has been put off for a long time in fear of the impact that resale could have on brand value. This means that the stakes have been raised for brands and platforms to be able to verify the authenticity of resold items. Consistent blockchain use could eventually allow consumers to track the raw materials that their items have come from, ensuring it did not come from a labor camp, for example. This would give consumers the transparency that the fashion sector has not been able to easily provide, to understand the product's total sustainable impact from energy to worker’s rights.

On the other hand, minting NFTs requires a lot of energy consumption. Ethereum has been working on shifting to a less carbon-intensive form of security called proof-of-stake, but it is still in the works with no clear deadline. Some alternative blockchain marketplaces are already using proof-of-stake, but these are less established and potentially less permanent. The Guardian estimated that the sale of 303 editions of Earth, an NFT produced by the musician and artist Grimes, “used the same electrical power as the average EU resident would in 33 years, and produced 70 tons of CO2 emissions.” With impacts like these, the fashion industry needs to consider all implications when choosing their digital platform and understanding their overall digital footprint.

Cashing out on crypto

At the moment, only about 1% of luxury consumers use cryptocurrencies, according to data from Forrester. Although it is not going to be a mainstream payment instrument, it should not be ignored. Cryptocurrencies can be used by brands as a way to connect with and reward their customers. Lolli is a marketplace that allows shoppers to earn up to 30 per cent back in Bitcoin from purchases that they make at participating retailers. Lolli currently works with over 1,000 retailers including Nike, Sephora, Ulta, Bloomingdale’s, Saks, and StockX.

Plutus, which advertises itself as ‘better than a bank’, is a decentralized fintech firm that has partnered with Nike. Customers that shopped at Nike via Plutus received back 10% of the value of the sneakers bought in Bitcoin. Plutus has around 25,000 users, with most being under the age of 35. This shows that millennials and Gen Z have a different view on life regarding sustainability and governance, with trends related to these topics to continue gaining traction.

In this regard, should retailers and brands start accepting cryptocurrencies as a method of payment?  It could be a great strategy in terms of how they can take advantage of existing disposable income. It is basically like introducing a new asset class. Companies like Microsoft and Tesla are already allowing customers to pay in Bitcoin. Microsoft directly converts the Bitcoin payments to fiat currency, while Tesla is betting on NFTs and retains the cryptocurrency. But, there are some risks as cryptocurrencies are speculative assets that are volatile and can potentially be lost.

For the moment, cryptocurrencies exist outside of the traditional global financial system and aren’t considered legal tender like cash issued by governments. But China has become the first country to create its own digital currency controlled by its central bank. The digital yuan is going to be positioned for international use and will be untethered to the global financial system where the U.S. dollar reigns king. This project has caused the United States to make the digitization of the dollar a high-priority consideration. With regulated sectors looking to introduce digitized currencies, NFTs could be a natural addition to the markets of tomorrow.

But wait, there is more

As NFTs originally gained popularity in gaming worlds, there is still a large community and marketplace for this type of use case. As the application of NFTs is virtually unlimited, the retail experience could be fully reimagined. There are already virtual worlds, like Decentraland, where you can buy virtual real estate and even create a business with a virtual storefront where you hire real humans to interact with customers.

Decentraland, also powered by the Ethereum blockchain, is set to open museums where people can display their NFTs, with the next move into retail and virtual shops. This will allow companies to buy virtual real estate to set up virtual storefronts where merchandise could be sold. This virtual store would be yet another channel that brands could reach their target audience and extend their image.

Virtual real-estate is yet another application of NFTs whose future implications, if any, are hard to comprehend. Virtual lands could bring in additional possibilities of what can be done using the land in the future like building art studios, doing advertisements, or renting it out for others to build on. As of February 2021, there have already been 116,943 transactions in virtual land totalling USD 40,814,665 on Decentraland.  There are users building casinos with big retailers that are exploring possibilities to open shops in virtual land. As many stores are starting to offer virtual reality shopping, virtual stores could be the final piece that brings together the physical and virtual shopping experiences.

NFTs: powering the future of commerce?

NFTs are still in their infancy, but there is no doubt that they have already made a big impact in financial sectors with implications in the fashion industry. NFTs reduce friction in transactions and offer greater transparency and decentralization. The issues that remain with NFTs are that there is no single common network or agreed upon platform, there are various cryptocurrencies and tokens that exist in the space, and there are no regulations or legal frameworks in place yet. But all of this will be sorted out in due time as countries, like China, connect digital currencies to their central banks.

Just because there remain a few things that need to be worked out, NFTs still have the potential to be a valuable extension of a brand as they can connect and extend a consumer’s physical experience to the virtual one. Luxury houses especially need to stay alert so as not to miss the chance to connect with consumers on this new channel, as seen with LVMH’s Aura platform. Whether or not NFTs are here to stay, they have certainly piqued the interest of the rich, and there is money to be made and opportunities to be developed. The high prices of sales indicate that it is a real part of the future of art, fashion, and collectables in general. But, this does not mean that NFTs are a one-size-fits-all for retail or the fashion industry.

For the younger generation, cryptocurrency seems like a brave new world that they are excited about exploring. But before launching a full NFT summer collection, brands and retailers need to understand their current customer base and the customers they want to attract. Diving too deep into NFTs and cryptocurrencies too quickly could scare away loyal paying customers. Although this technology should definitely not be brushed under the rug as something that will pass with time, implementing and adopting it into a brand strategy should be done with a lot of thought and consideration. The risks just might outweigh the opportunities.

With this in mind, how should NFTs be approached by brands and retailers? Although future applications will arise, issuing NFTs that are linked to physical products to extend their value is currently the most strategic application of NFTs facing the fashion world. This allows brands to maintain visibility of their products, even as they go through the resale market.  Blockchain technology also has the ability to grant royalties to the original creators of NFTs for each transaction in the secondhand market. This provides an additional revenue stream for brands that are normally uncapturable. As the application of NFTs is still being discovered and experimented with, retailers and brands would be wise to partner with those who understand its capabilities whether that be to hire someone internally to manage the integration, join a consortium like Aura, or offer products on marketplaces like Lolli that offer consumers rewards in cryptocurrencies.

As the global pandemic has led consumers to demand transparency from all industries, especially related to sustainability and supply chains, this kind of technology is exactly what is needed to bring some light to areas that have historically been blurred. The discovery of NFT use cases is far from over as this technology offers benefits both to brands and their consumers. Although some applications of NFTs will fade, others seem to be here to stay.

Credits: IADS (Mary Jane Shea)

PRINTABLE VERSION HERE

What: A standard industry approach to measuring and evaluating sustainability impacts.

Why it is important: Both an opportunity and a threat, its soon-to-be open database can make it a potential game changer.

While every brand and retailer today is trying to figure out how to stay in the sustainability game, we have seen in the first IADS Exclusive article dedicated to sustainability that there are many different ways to become more sustainable. However, for a company to develop its own sustainability programme is becoming increasingly complex and expensive, and common initiatives like the Higg Index seem to be a silver bullet.

The Higg Index - playfully named after the Higgs Boson elementary particle - is an indicator-based assessment tool for apparel and footwear products that aims to create a single industry approach to measuring environmental and social sustainability throughout the supply chain. Launched in 2011, it was developed by the Sustainable Apparel Coalition (SAC), a non-profit organization founded by a group of apparel brands, retailers, the U.S. Environmental Protection Agency and other non-profit entities.

The Sustainable Apparel Coalition (SAC)

The SAC started in 2010 from an unexpected partnership between Walmart and Patagonia. The two companies joined forces with the mission to rally peers and competitors from across the apparel, footwear and textile sector, and develop an index to measure the sustainability performance of their products. A dozen leading apparel companies and retailers (including Target, Gap, Kohl’s, Levi’s, Nike, JCPenney, and H&M) joined the project, and the SAC rolled out a first version of the Higg Index in 2012, further developed in December 2013. This new index was actually a spin-off of an already existing tool, the Eco Index from the Outdoor Industry Association (OIA), supplemented by the Nike Considered Index, a design tool and database analysing the environmental impact of materials.

Today, the SAC represents more than 250 members across the industry, from 35 different countries, including Amazon, de Bijenkorf, Farfetch, Inditex, Kering, Macy’s, Nordstrom and the Selfridges Group, and there are nearly 20 000 active users of the Higg Index. The SAC also collaborates with organisations like the OIA and the Sustainable Trade Initiative, and small or medium business that are not members but Higg Index customers. Last year, Higg Co. spun off from the SAC as a for-profit technology company responsible for hosting the Higg Index, and the SAC is still the main manager of the standards and methodology for the Higg Index.

How it works and why it is important

The Higg tools includes different modules for products, facilities and brands. The product tools help brands, retailers and manufacturers to understand the environmental footprint of a material or product by assessing its potential impact on global warming, water pollution, water scarcity, fossil fuel depletion and chemistry. The facility modules inform manufacturers, brands, and retailers about the environmental and social performance of their individual facilities. The Brand & Retail Module (BRM) enables businesses of all sizes to measure the environmental and social impacts of their value chain, from materials sourcing to a product’s end of use.

![the higg index chart

The Index asks practice-based qualitative questions about the brand and facility practices, looking at the entire supply chain, to gauge sustainability performance, drive improvement and help the user standardise how they measure and assess environmental and social impact of apparel and footwear products across the supply chain. It is a learning tool that shows what to focus on, and both collecting and measuring data can help support supply chain optimisation. The new user may start with a high score (the lower the better), but the Index’s section-by-section comparison allows the brand to demonstrate to the C-level management how far behind they are compared to leading peers, and where to initiate swift changes and significant improvements.

Another upside we can expect from a standardised approach might also be for the company to save money by cutting down its need to spend on audits or consultants. Some Higg users report measurable financial benefits from asking all of their main suppliers to complete the same Higg facility module, and suppliers selling to many brands can then avoid dealing with as many different audit processes, and the amount of paperwork that comes with it.

Transparency and independent verification

According to new insights from sustainability-focused transparency platform Compare Ethics, only 20% of shoppers trust brand sustainability claims. Transparency increasingly becomes key and the best way to respond to that distrust is to open up comparable and credible data that anyone can look at.

So far, data and scores have only been shared among the SAC members and Higg users, but Jason Kibbey, CEO of Higg Co., announced in October 2020 that the Higg Index would finally enter the public domain next year. The plan is that anyone, be it a consumer, a regulator or an NGO will have access to the Higg Index’s new Open Data Portal, which is being “designed to fast-track apparel industry transparency globally, empowering consumers and third-parties to validate brands’ sustainability claims”.

However, despite the product page tool scheduled to launch in 2021, brands will only be required to publicly disclose all of their sustainability performance data in the portal by 2025. Questioned on the occasion of the announcement by the WWD about the timeframe for the requirement, Kibbey pointed out that there is basically a long way for brands to go to have all of the process to be complete: “First, they have to have their entire supply chain not just identified, but measured.” Besides the supply chain mapping itself, he underlines that integrating foot printing into all of the processes takes time. Probably a lot, and that also means a cost.

Additionally, we can expect that most of the companies might not be confident to release information that has not been independently verified. They might be reluctant to share improvements with everyone until a complete system of third-party verification has been set up. Also, the push to full transparency may not be fast enough to offset recurrent issues about Higg’s methodology and reported bias.

Limits and criticism

In July, a report published by the Institute for Multi Stakeholder Initiative Integrity, titled “Not fit for purpose”, surveyed several multi-stakeholder initiatives and put the Higg Index under accusation for failing to focus on workers’ rights and to provide measurable transparency.

In August, researchers at the University of California, Berkeley released a report that questions the validity of sustainability tools to transform the industry. The four-year study, which focused on the Higg Index (its Facility Environment Module in particular) and had access to the SACs complete data set, acknowledged how the “Higg Index has laid an important foundation for factory measurement” but concluded that “its effectiveness in driving real action has been limited by slow progress on transparency and a lack of incentives between buyers and factories”, adding “the SAC and the industry need to include public transparency and meaningful incentives to drive greater changes”.

Central product of the Higg tools, the Higg MSI (Materials Sustainability Index) has also been under growing scrutiny, with reported criticism saying that the methodology is biased. Lately, critics came from natural and animal fibres representatives including the International Wool Textile Organisation, the International Council of Tanners and the International Sericultural Commission (silk). The groups have challenged the MSI ’s aggregated material score on the efficiency of its scientific methodology, pointing out some “huge inconsistencies” and “an inherent bias against natural producers”. Additionally, wool groups like The Woolmark Company echoed concerns with the methodology omitting microplastics and other factors in circularity.

In November, the SAC eventually announced that it would retire the criticized aggregated single score used in the MSI, effective January 2021. “Our decision to move up the planned retirement of the MSI single score reflects not only our intended evolution of our focus from materials to the product level, but also to address some of the concerns among materials stakeholders”, said Amina Razvi, SAC executive director, in a statement.

Trying to bring together all the areas for sustainability improvements into a single score makes the Higg a unique and very ambitious undertaking. It is also a very difficult exercise with a subjective part in it, and the single approach might still have a long way to better fit the variety of different interests among the industry. In the meantime, the Higg suite of tools keeps a test-and-learn approach and is continuously updating an adapting to better meet the need for a full transparency in the supply chain.

Conclusion: an opportunity or a risk?

Regardless how fair the scepticism and criticism, the outstanding potential of the Higg collaborative tool to unite the complex segments of the apparel and footwear industry remains. It is at the same time a unique opportunity for every operator to improve their sustainability performance along the supply chain, and for all of the industry to fast-track transparency globally.

However, there might also be a risk for brands in offering more transparency, and the Higg data and metrics entering the public domain next year could be a tipping point. Older Higg users and front runners will put their lower score and better rating forward to outperform, but what about the ones left on the back seat in the back row? Isn’t there a risk of widening the gap between smaller and bigger businesses? Between the ones that are still late with digitalisation and the ones that are way ahead? Also, the Higg initiative started from a not-for-profit coalition and is now being developed and marketed by a for-profit technology company which sells products to clients. Isn’t there a major risk for the sustainability and transparency gap to get even wider, this time between the top clients and the others?

Credits: IADS (Renaud Pillon)

PRINTABLE VERSION HERE

Frasers Group, ex Sports-Direct group, is a UK-based retail group led by CEO Mike Ashley. It has been expanding its fashion and luxury portfolio over the past few years, trying to shift away from the sports tag toward a luxury brand. It starts in 2017 with the acquisition of Flannels, then with the buyout of then-bankrupt British department store chain House of Fraser in 2018 with the ambition to elevate it to the luxury market. With several additional buyout and acquisitions –Frasers Group also has stakes in Mulberry and Hugo Boss since 2020– the group appears to be trying to establish itself as a lifestyle and luxury retailer.

What retail model is the group following and is it viable? United Kingdom is living dark days as both the pandemic and the Brexit are putting huge pressure on the country’s economy, and the retail sector has not been spared.

I. THE GROUP

Sports Direct was launched by Mike Ashley in 1982, as a sports and ski shop. The business was a success and by 1990 he had opened 100 stores across the United Kingdom. It was in the late 90s that Ashley started to acquire brands, often from financially struggling companies. Sports Direct continued to grow as a brand and a retailing company, and even expanded internationally with about 100 stores in Europe and acquisitions in the U.S. After acquiring House of Fraser, the company was rebranded Frasers in December 2019.

The Group is currently structured across five business segments:

• UK Sports Retail, with notably Sports Direct and DW Sports (sports and gym business)
• Premium Lifestyle, with House of Fraser and Flannels among others
• European Retail, includes operations in European local markets
• Rest of World Retail, includes physical stores in the U.S. and online stores in Asia
• Wholesale & Licensing, for the brands it owns or has shares in

Frasers Group’s annual financial report, issued last September for the period running from 29 April 2019 to 26 April 2020, shows an increase in revenue and stable EBITDA (for a year which included 5 weeks of lockdown). UK Sports Retail was the best performing segments, with a GBP 2,187.3 million* revenue.

However, the real impact of the current crisis on the results will more likely show in the half-year report to be released later this month.

Diving deeper into its most notable businesses

a. House of Fraser

![house of fraser

House of Fraser London

The British department store has been through quite extraordinary changes throughout its history. HoF was established in Scotland in 1849 as a drapery shop. The business rapidly expanding and diversified, buying brands and opening branches throughout the country. The company went public in 1948 and even acquired the Harrods group in late 50s. It was acquired by the Al Fayed family in the 80s, then went public again before being bought by an Icelandic bank in 2006 and to be sold to Chinese Sanpower group in 2014. It finally was acquired by Mike Ashley’s Sport Direct group in 2018 as it collapsed into administration.

Ashley rescued HoF with the ambition to elevate the department store to luxury, turning it into the ”Harrods of the high street” in Mike Ashley’s words. But House of Fraser was in bad shape when Sports Direct (now Frasers Group) bought it, and turning it around seems to be more difficult than expected: a year after the buyout, the group said: "If we had the gift of hindsight we might have made a different decision in August 2018.”

Ashley had the ambition to rebrand the 150 year-old department store into “Frasers” and redesign the stores, but not much has been done since August 2018. The Covid crisis was another setback.

The former House of Fraser store at Meadowhall shopping centre in Sheffield will be the first to experience the rebranding and to become Frasers, with a more premium lifestyle offer. The plan, released in January 2020, was to open in two phases. Frasers department store is supposed to open this winter 2020 and Flannels is to open in Spring 2021, within the Frasers store. But the pandemic and the new restrictions and lockdowns across UK seem to have delayed the project.

Recent news this summer announced that House of Fraser store located at the Westfield London White City shopping centre will turn approximately two third of its surface into a co-working space.

One can wonder where that leaves the department store and, if after the bankruptcies, the buyouts and the plans, it can survive. Competition is fierce in the United Kingdom, with many formats of department stores on a small territory. Plus the crisis has put the market under huge difficulties and pressure.

b. Sports Direct

![sports direct portsmouth

Sports Direct Portsmouth

Sports Direct was a small store before becoming a big retailing group it is today. And the original sports concept Sports Directs still exists and operates stores. Last month the group unveiled a new Sports Direct concept-store in Portsmouth, with a new multi brand format [all brands are owned by Frasers Group].

The store not only carries the traditional sports brands like Under Armour, adidas, Asics and more, but also incorporates retail space for Flannels and British retailer USC. The USC streetwear and fashion section brings brands such as Champion, Levis, or Lacoste, while Flannels houses designer labels. The two-storey, 4 645sqm store also includes retail floorspace for Evans Cycles, specialising in bicycles, and Game, a destination for gaming offering an extensive range of games, consoles, phones, PC components and more. The Portsmouth store is the first to feature Sports Direct’s inclusive mannequins (like Nike did in its Paris House of Innovation) and a sustainability feature wall highlighting the current range of eco-friendly products on offer.

With this new format, Frasers Group takes a step away from the traditional sports store, presenting its customers with a wider offer that goes beyond just sports and that extends to fashion and lifestyle. It is a smart move in these times of pandemic, when casual, comfortable clothing are is in demand, and when the fashionable sweatpants are trending (see IADS Exclusive article: Adapting to new consuming habits).

With this concept, Mike Ashley once again confirms his will to turn his business into a luxury lifestyle reference. “Head of elevation” for Frasers Group Michael Murray said: “Our next-generation stores offer customers the biggest brands in sportswear, sports equipment and fashion, all under one roof […] This is a major part of Sports Direct’s brand elevation strategy that will see a huge investment in a number of new stores, while upgrading and improving existing ones across the UK.”

The new Sports Direct format is being upgraded to a lifestyle destination to cater to sports lovers but also to a more fashionable crowd. We can wonder if this concept will survive long-term when somewhat similar business Citadium, owned by Printemps, just announced it would be closing stores in France in an attempt to reduce cost structure.

II. THE OPPORTUNITIES

a. Flannels

Flannels London

Flannels started in 1976 as a menswear store in northern England. It was acquired by Frasers Group in 2017, which has since turned the brand into a curated luxury designer clothing and accessories store for men and women. Nowadays Flannels counts almost 40 locations.

A big move for Frasers Group was the opening of Flannels flagship store in London in September 2019, that shows off what Mike Ashley initially envisioned to be the future of high-end department store House of Fraser. The store can be considered as a sort of luxury department store for younger customers. The store spans four floors and houses a curated mix of men’s and women’s luxury designer clothing and accessories, featuring catwalk collections to the latest streetwear drops, from emerging designers and luxury’s biggest names such as Balenciaga, Off-White, Balmain or Canada Goose. The store offers different services and experiences such as customisation, personal shopping service, and click-and-collect. The building has no windows and features big interactive digital screens. As Gen Zs are extra connected and digital savvy, it is just another way to reach out to them.

The bold and most surprising move was to open a luxury retailer on Oxford Street, known for its high street offer with outposts from retailers such as Primark, Zara, and Topshop to name a few. We can speculate that Flannels does not cater for the needs of the traditional luxury shopper, and its strategy is to reach out to a broader clientele.

Indeed, the store has many outposts on secondary markets, where the competition in the luxury field is less intense and where it is easier to reach out to younger customers with this type of concepts, compared to the London crowd. Establishing itself on secondary markets is also interesting financially speaking, as rents are lower and as the local public need to be addressed directly -not everybody can travel to London or Paris anymore to get their hands on fashion. Most recently in October 2020, a Flannels store opened in Birmingham, and the group announced the opening of more outposts.

Champs-Elysées concept store

Still in Paris, Printemps opened Le Market corner, which caters to Millennials and features designer clothing.

What is also striking about Flannels is that, despite being a quite small business within the full group operations, Ashley is betting on it and helping it grow by implementing it inside other concepts, such as he did with HoF and Sports Direct. House of Fraser giving space to Flannels is a demonstration of the retailer’s will to differentiate its offer in order to cater to a younger crowd, but within the department store -like Rinascente did in Milan with its Annex store, where a curated offer caters to Millennials and Gen Zs.

![2020 ARTICLE Frasers Group

Flannels Birmingham

b. GAME

GAME started in 1992 as a gaming and electronics store. The company expanded, and even extended operations internationally. After experiencing changes in ownership and financial issues, it filed for bankruptcy in 2012 before being bought by OpCapita. It went public and was listed on the London Stock Exchange in 2014. Frasers Group (then called Sports Direct) started invested in the brand in 2017 and eventually completed the acquisition of the brand this year, inheriting 256 destination-for-gaming stores.

Following the takeover, stores were closed and others opened as part of the Group’s strategy to move the GAME stores into the new elevated stores -in the newest Sports Direct in Portsmouth and in London’s House of Fraser. It is one of the group’s biggest brand in terms of number of stores (242), especially compared to Flannels (37 locations) and HoF (48 locations).

It is interesting that Mike Ashley decided to invest in the gaming sector, as it is becoming the latest way to do fashion, often referred to as the Gamification of Fashion. That fact that people are spending more time at home this year across the globe has accelerated digital trends, and it will force changes in how business will be done during and after this crisis. Online gaming is on the verge of entering a new phase where it could have big implications for the fashion industry. Indeed, several brands lately have been using gaming to showcase their fashion work, especially since the Covid break-out. Balenciaga announced it would release a video game called Afterworld: The Age of Tomorrow in which it will present its Fall 2021 collection. Several brands have partnered with Nintendo’s Animal Crossing (including Valentino and Highsnobiety, and extending to the Getty Museum and even fast-food chain KFC) to showcase their work.

III. THE RISKS

a. House of Fraser

As explained above, House of Fraser has had quite a history. Mike Ashley purchased it as it was already declining, with the ambition to turn it around and elevate it. However, such work will require a huge investment. So far, the group’s Premium Lifestyle business segment (the one HoF is attached to) is not the best performing one: GBP 732.9 million* versus GBP 2,187.3 million* for the UK Sports Retail’s segment.

Therefore, we may wonder if Ashley will make the necessary investments to upgrade it, especially in these uncertain times. Frasers Group’s rival retail group Arcadia fell into administration on 30th November, which had consequences on its long-term landlord, Debenhams, which is set to enter liquidation after failing to exit bankruptcy. These closings are another blow in the UK retail sector and we can’t help but fear that House of Fraser will suffer the same fate.

b. International business

Another concern lies within the group’s international businesses (Europe and World). European Retail accounts for GBP 599.8 million* and Rest of the world Retail for GBP 215.9 million*. What will happen to these businesses, especially the European operations, once Brexit will definitely be official and implemented on 1 January 2021? This will surely change a lot of thing in terms of revenues. Expect an increase in shipping costs for importing and exporting goods, new taxes and less flexibility among many new regulations and setbacks. For instance, John Lewis has already announced that it would stop selling and shipping items internationally effective this month, as the costs are too high.

c. JD Sport

Frasers Group biggest rival is JD Sport in UK. The British sports-fashion retail company posted a GBP 6,110.8 million** revenue in its latest financial report for the period running from 2 February 2019 to 1 February 2020. Frasers saw a group revenue of GBP 3,957.4 million* for the year ( April 2019 to April 2020). Obviously these results will significantly change and next year’s revenue will likely be impacted by the pandemic that forced stores to close for several months.

JD Sport was close to resembling Frasers Group as it was well-placed to acquire bankrupt chain Debenhams, therefore also becoming the owner of a department store. However the group pulled out of Debenhams takeover, leaving the chain with no other choice than to enter into liquidation. The fact that Arcadia group filed for bankruptcy significantly impacted JD Sport’s decision, as it was the largest concession holder at Debenhams.

Conclusion: Frasers Group, a viable business model?

Mike Ashley is aggressively entering the luxury scene, elevating its current portfolio and investing in brands. Rumours are that his group might eventually buy Mulberry. He made a bid to acquire bankrupt UK department store chain Debenhams but was kicked out of the race after failing to match the price tag demanded by the group’s advisers. The Same thing happen when he bid for Woollen Mill Group’s owned Jaeger early November. Now it has offered to rescue the Arcadia group for GBP 50 million. Qualified as a "lifeline" loan, it was rejected by Arcadia’s owner Philip Green.

Yet, between investing in luxury, elevating existing businesses and expanding its acquisitions, the global strategy of the group remains opaque. With its brands portfolio, and instead of opening several multi brand spaces under multiple labels (Flannels, Sports Direct, …), the group could just use House of Fraser to house all of its concepts, optimising the synergy between the brands and saving the department store at the same time -or at least try.

After all, given the collapse of Arcadia, some opportunities might open up for Mike Ashley. The question is: is he going to use them to invest in his existing businesses, or to invest in buyouts?

Credits: IADS (Louise Ancora)

**source: Frasers Group yearly financial report

** source: JD Sports yearly financial report*

What: A new approach to store network optimisation.

Why it is important: Tomorrow will mean fewer stores but better stores.

With store inventories and real estate costs weighing heavily on their cost base, fashion retailers have been in a race to capture e-commerce spend as consumers’ uptake of the channel skyrocketed during the pandemic. But omnichannel won’t resolve a bigger issue that most global store footprints are no longer the right size, shape or scope for the times in which we live. Store network optimisation now needs a major rethink too and some commercial real estate experts have begun to encourage retail clients to examine their global store portfolio as though it doesn’t already exist.

But whatever happens next, the key to building a successful physical retail portfolio will hinge not only on sophisticated and seamless digital integration for ultra-connected consumers, but on the ability of brand leaders to seize the moment in terms of location, format and next-generation strategies that generate good return on investment.

The Retail Footprint of the Future

What: The fifth edition of the report co-produced by Business of Fashion and McKinsey.

Why it is important: In addition to exploring scenarios and interviewing experts, this report is based on a worldwide interview of fashion executives from various horizons, opening up new questions or confirming trends within the industry.

McKinsey evaluates that in 2020, fashion companies will see their profit crumble from +4% last year to -90%. This is in relation to two scenarios, ‘earlier recovery’ and ‘later recovery’, which, at best, foresees a return to 2019 levels of activities within Q3 2022. The report does not detect nor indicates trends that were not already visible last year, however, they are all very significantly accelerated by the pandemic:

• The virus is here to stay until international vaccines have played their part, leading to a global recession, itself lowering the global demand for consumer goods (estimated from 0% to -15% in worst-case scenarios),
• A rush to digital as many brands will have to reassess their retail footprint in the light of actual profitability (interestingly, some players are also questioning the ROI KPIs of their stores and how to consider them as part of their marketing set up), due to the foreseeable scarcity of tourists in the near future, and the need to manage the fear of local customers when it comes to gathering in physical spaces,
• Structural changes affecting the way the industry works: reducing or optimizing the size of the collections, reviewing relationships to suppliers and partners (including by ensuring the fairness of treatment), and learning how to work differently in a very volatile context. On top of that, scaling circularity as a way to promote sustainability will be on the top agenda of many leaders from the industry.

All the elements identified in the report were already spotted and described in our White Paper, released at the beginning of November.

The state of fashion 2021

What: interesting perspectives on the 2020 learnings and what to expect in 2021

Why it is important: confronting and balancing learnings with future expectations.

RetailDive reviews the successful 2020 pivotal actions in retail and confronts them with 2021 expectations and trends:

• As also shown in ourWhite Paper the key to success during lockdowns was to place the customer at the centre of the stage, and organise the sales model around it (store, e-commerce, digital activations…). This implied leveraging the sales staffs, by showing empathy, care and flexibility, enabling them to fully focus on customers without worrying too much on the context. For full efficiency, organisations had to be simpler, flattened, and favouring initiatives. For 2021, it is expected that these organisational changes are further implemented and here to stay.
• E-commerce and its corollaries, inventory and supply chain management, were a lifeline for retailers this year. New technologies are also here to stay in 2021, but not always for the front office: back office must also be considered. Also, a major topic to be embraced by retailers is how to get rid of the discrepancies between the various systems they might use: this will be a roadblock in a very near future.
• Working in a different mode and using new tools: in 2020, collaboration and information sharing was key for successful organisations to disseminate new skills within their teams. In 2021, it is highly probable that this skill-sharing will still be the norm, but also involve skill management, to make sure each and every organisation can use the right know-how at the right moment in the right place, be it one of the stores or online.

The world of retail in 2020 and looking toward the future 

What: How to predict consumer demand in an unpredictable world.

Why it is important: Managers should keep modelling, but in a different way.

The pandemic has shattered the demand forecasts that guide retailers in figuring out how much to order, where to stock inventory, and how much to advertise or discount. Uncertainty persists and we are seeing deeper changes in consumer attitudes and behaviours. Compounding these challenges, managers tend to revert to their gut instincts, which makes forecast accuracy worse by further confusing noisy data with bias. According to the HBR, rather than abandon modelling, they should model in a different way. They should find out alternative data sets, tap local knowledge, embrace ensemble modelling, and relentlessly test simple different approaches.

Predicting Consumer Demand in an Unpredictable World

What: What to do with the too-many retail-dedicated square feet in the UK?

Why it is important: the reflection is far from being specific to the UK and relates to our Cross Functional meeting addressing “space productivity” (28th Jan 21)

In 2020 so far, more than 15,000 stores have closed in the UK. The reason is that these stores missed the fact that audience now prevails over location: when the right customer moves, brands and retailers need to move as well.

As a consequence, the question of what to do with the closed retail unit is raised, with the certainty that all conversions will not be successful.

Financial Times points out that the changing role of physical retail will probably reduce the revenue per square foot, with a consequence on landlords’ productivity as well.

Retail crisis is the mother of urban centre reinvention

What:  a survey based on 500 interviews of store associates.

Why it is important:  the numbers are validating the assumptions we made in our White Paper

The Covid-19 pandemic has created 3 factors of stress for any worker in retail:

• It has increased pressure on businesses, therefore increasing anxiety of their employees
• It has been challenging each and every employee’s loyalty: safety or job first?
• It required from every team member higher flexibility in order to adapt to unprecedented conditions

It deeply impacted the retail job’s perception:

• 18% think that stores will not exist in five years’ time (within the positions, 37% of regional manager thought so),
• 40% think retail is a poor career choice (top reason: abuse from customers),
• 75% think that their job became more complex since Coronavirus crisis hit (top problems: the new safety measures, both for customers and staff),
• 24% of workers feel insecure in their jobs (in sub-categories, 35% of workers in Fashion, 41% of workers in department stores).

However, there are also very positive outcomes:

• 66% feel recognized by their leaders,
• 79% are convinced that their employers care about their wellbeing,
• 87% believe diversity and inclusion are taken seriously at their business.

The notion of treating employees in a brand new way, both more inclusive, more directly and with a broader sense of responsibility, is a topic we explored in our White Paper, including the future of work when it comes to adapting to new retail formats and concepts.

Interestingly, when it comes to technology if 51% believe they have access to the right technology for their job when they project their future needs, 23% think tech will help in-stock availability and ordering, 18% in-store messaging and communication, 18% in training and learning, 14,4% in communication with head office, which also backs our White Paper conclusion on the adequate technology to be used in the back office to improve processes and efficiency.

86% of the respondent think the store of the future will incorporate more tech, 76% that it will offer more personalised services, and 72% that it will focus on the experience.

The report also explores the future of the store associate:

• He or she will be supported, aided and assisted by tech,
• True products specialists, who know what they talk about, will be needed, in order to offer a counter-proposal to online. It is probable that, with fewer staff and the emergence of specialists, the hierarchy will be flattened, and increase the level of expertise needed,
• True consultants able to have different roles, in a world where the store will be a platform: give advice, Livestream, sell to shoppers online, fulfil distant orders.

Retail and future of work report 

What: 20 000 to 25 000 stores are likely to shut in the U.S. this year.

Why it is important: Companies will need to make tough choices to improve their ROI.

Many retailers have embarked on strategic reviews of their store networks and launched initiatives to improve the productivity of remaining stores, leveraging digitisation, automation and more flexible working practices. They are both cutting staff costs to align with lower turnover and training staff across diverse skill sets. These kinds of decisions are often accompanied by budget and capital reallocations across channels to better reflect revenue potential. Digital is often the beneficiary.

The Year Ahead: Rethinking Retail ROI