What: despite gloomy predictions, opportunities to thrive remain.

Why it is important: willing to commit to the transformation journey is key.

If the health of the retail sector is judged by the number of Chapter 11 and liquidation announcements since 2019, it would appear the industry is facing an apocalypse. But the reality is far more nuanced and complex.

While the bar has been raised since the onset of the digital era, and even more so since the arrival of the pandemic, significant opportunities exist for retailers that are able and willing to address their most pressing challenges and opportunities. Success, however, requires a commitment to fundamental transformation. Success will require meeting the ever-increasing expectations set by retail leaders who have invested heavily in new operational capabilities, including digital, omnichannel, fulfilment and service solutions.

But consumers are still spending and there is significant opportunity for retailers in many key sectors to plan ahead, capture market share and succeed in transforming their business. HRC Advisory has identified three essential steps for retailers to transform and thrive during these uncertain times:

• Strengthen brand differentiation to become the authority in their categories.
• Go on the offensive and retool the store fleet to strengthen omnicapabilities and profitably compete against online players.
• Create greater intimacy with customers and optimize the in-store customer experience, your greatest weapon to win against the online players and other competitors.

The Outside View: What Retail Apocalypse?

What: reviewing innovation spotted in retail by Euromonitor, and confront it to the Covid-19 new requirements.

Why it is important: a set of 15 examples from 30 channels in 99 markets worldwide, on how to add value to the shopping trip.

The report is sorted into three sections:

• E-commerce, with a worldwide growth expectation of USD 1,5 trillion within the next 5 years. Euromonitor reviews the examples of Alibaba rural program, DNVB shoes brand Allbird, delivery app Màndamelo in Mexico, delivery solution Weezy in the UK, Manna last-mile delivery service in Ireland
• Retail space and design, as 35% of global consumers indicate that the most desirable feature in a store is “the ability to immediately walk out of a store with purchase executed”. Euromonitor lists Shiseido touch free consultations, Amazon One contactless solution, 24/7 Hirota micro food stores in Brazil, Storefront ability to recreate VR, Westfield outdoors shopping malls.
• Communities and engagement, as 45% of global retailers are rethinking their loyalty programs. Euromonitor reviews Burberry R message system for VIC, local digital currency in a town in the US to reward proper citizen behaviour, Naixue Tea livestreaming events for new product launches, Carlsberg proposing to own a virtual keg in Denmark, a mobile game launched by Primark in the UK.

Retail Innovation in 2020: What's Here to Stay?

What: Learning from US FMCG consumption during the lockdown.

Why it is important: although first insights tend to suggest that low price and unavailability of national brands were key drivers to increase consumption of private labels in groceries, McKinsey argues that they are key to win customer loyalty, but at the cost of a reset in the approach on how to develop a private label, at all levels. This echoes the current overhaul Galeries Lafayette is undergoing through a corporate reorganisation of their private label and a new approach in terms of product.

McKinsey reports that during the lockdown in the US, 38% of customers tried new brands, driven by 58% by the unavailability of their usual brand, and 21% by the value for money. 1 out of 5 grocery shopper bought more private-label products during the crisis than before. This can lead to thinking that such a shift is temporary, and might very well end once the crisis end, as low price is not a robust strategy. McKinsey argues that private labels in groceries can be a way to combine their original mission (lower cost, higher margin) with winning customers loyalty, provided the product value proposition is overhauled with regards to the rest of the assortment:

• This translates into carefully assessing and define the aspirations for the private label, with a sound strategy, assortment, and pricing.
• Most importantly, McKinsey mentions that communication, marketing, and packaging are of utmost importance since private labels redeployed in such a new way involve robust storytelling (note from IADS: in FMCG this is what Monoprix in France has done in a consistent way, mixing humour with product description on their packaging).
• Product development should not be cost-driven only anymore, but also include the consumer’s expectations (note from IADS: McKinsey is not mentioning in this article any sustainability tracking, however, these should be taken into account from the start by department stores)
• All of these changes are to be led by a new, made-to-measure organisation, tailor-made according to the level of development of the private label.

Turning private labels into powerhouse brands

What: a comprehensive look at all the innovations spotted by retail intelligence agency GDR, an IADS partner.

Why is it important: a series of well-explained, detailed examples of innovations across markets and segments, to foster ideas.

GDR identifies four trends shaping retail and brand strategy for the coming years:

• Sustainable nudges, considering two ways for brands to take a proactive stance on sustainability,
• Blurred boundaries: how all digital touchpoints are becoming shoppable platform.
• Future-proof format: long term tactics to help physical retail thrive
• Covid-inspired self-improvement: how tech-enhanced superhumans are becoming a reality.

If there are any examples you would like to deep dive in, let us know and we will liaise with GDR to know more.

Global Innovation Report by GDR

What: hoteliers around the word are preparing for the new normal

Why it is important: Hotels are, like department stores, designed to be at the heart of cities. They have been also hit very hard by the pandemic. Taking into account new usages and expectations from customers, they are taking steps that are literally a play book for department stores.

The New York Times has asked designers to think the hotel of the future, post Covid, in a world were efficiency and hygiene will be key. Here are the main outcomes of this reflexion:

• Contactless and touchless rom controls, very similar to what retailers are deploying (think about the magic wand app from Showfields)
• Popup dining and robotic servers – automation is also used in retail to expand the opening hours of service, such as in Seoul’s 7-Eleven, staffed during the day and operated by robots during the night
• Bringing the outdoors inside, by using nature (among others). Here, SKP-S and Galeries Lafayette Champs Elysées are already quite advanced in terms of staging,
• Design rooms for a living, which echoes the rise of multi-functional retail: making sure that retailers are meeting the demand where it is.

The future of hotel design

What: A closer look at how the buying position is evolving.

Why it is important: During the first Merchandising Meeting on 21st September 2020, all IADS directors mentioned that distance buying had been easier and was becoming more efficient than long buying trips. Looking at how the position of buyer is evolving is key, as its role within the department store remains central.

BOF explains how the buying position has evolved, from a role which was centred around creativity (the ability to curate and properly choose), with rudimentary tools (Excel spreadsheets) to a new role, enhanced by technology, where the game relies more on managing on a day to day basis the stock level and anticipate the demands. This, in a context where brands are challenging their relationship to wholesale account, if not their dependence to this network at all.

The future of buying 

What: A real estate performance study in pandemic times

Why it is important: Brookfield properties argues that luxury retail outperformed e-commerce in terms of conversion to purchase (20% vs. 3%) with lower acquisition costs.

Brookfield properties operates 19% of luxury real estate in the US, with 830 million shopper visits last year, including Ala Moana mall in Hawai. During pandemic, the real estate operator focused first on setting up the adequate social distance measures, before analysing new trends in consumption patterns. Since 62% of customers buying through Buy Online Pick up In Store (BOPIS) were planning to keep this habit after shopping malls reopened, Brookfield Properties deployed a curb side pick-up programme across 115 shopping centres. They also ease and facilitate via technological support the way retailers can accommodate customers: appointment reservation process, contactless payment solutions, ship from store.

Due to the rise in digital advertising costs (+255% in 4 years), they see physical retail as a good way to acquire customers at a lower cost than digitally. This is how Brookfield properties explains that DNVBs such as Warby Parker, Wayfar, B8ta are opening with them, as well as Amazon which deployed 33% of its Amazon 4-star boutique range in Brookfield properties locations.

NEXT IN RETAIL: REIMAGINING THE FUTURE OF THE INDUSTRY

What: The Mint Group store report for this month

Why it is important: Discover a 360 panorama of what is going on in Europe fashion capital

Mint Group, an agency representing the likes of Saks Fifth Avenue, Nordstrom, David Jones or the RealReal, has teamed up with IADS and is sharing on an exclusive basis with IADS members its store report from November 2020.

Mint store report - november 2020

What: Asia’s multi-brand boutiques are thriving thanks to local shoppers.

Why it is important: Relationship to locals is key in the absence of tourists.

Across global markets, the pandemic has proven a boon for leading e-commerce marketplaces and a fatal blow for many offline-reliant department stores. Between these two extremes sit smaller businesses like multi-brand boutiques, many of which are working hard to reach consumers in a post-pandemic world.

While e-commerce giants remain the big winners in the year of the pandemic, multi-brand boutiques like Seoul’s Addicted, Hong Kong’s Kapok and Tokyo’s Restir are putting the worst behind them thanks to local support — a necessity, given that the three cities have yet to welcome tourists back to their streets.

Where People Are Shopping Again

What: Where is Macy’s going? It is continuing to close stores.

Why it is important: Macy’s, like many stores, has suffered during the pandemic. Will it recover and what form will that recovery take?

Analysts are speculating that Macy’s will survive the pandemic but will it manage to reach previous levels. Even before covid, Macy’s was achieving net profit margins of only 2.3%, down from 4.4% the previous year, which itself was down from 6.3% the year before that. In the meantime, the company has added more lease and debt obligations. While Macy’s does have an online presence, its offer does not distinguish it significantly from others. So, should we invest in Macy’s?

where will Macy’s be in 5 years

What: imagining a future with less retail but truly meeting the demand where it lies

Why it is important: IADS CEOs asked a very similar question during the 61st General Assembly when they ask IADS to think on new business models and how to cope with retail sqm. Many initiatives on the market show that thinking retail differently is an option. The real question IADS will have to tackle is to know whether this option can be as profitable as traditional brick & mortar is.

Strategic intelligence company GDR, partner of IADS, argues that physical retail needs to re-engineer itself to survive. They are compiling a detailed list of examples, from Amazon to John Lewis, via Best Buy, 7-Eleven, Auchan, Starbuck or Nike. All those companies have repurposed stores, by transforming them in houses, warehouses for e-commerce, co-working spaces, or literally all of this at the same time. Most importantly, they rethink the role of a store in an urban context and environment, by proposing a holistic, multi-functional approach to customers who are, at the end, given meaning and reasons to come in store.

The rise of multi-functional retail

What: an overview of what successful US malls actions in the pandemic

Why it is important: retail, and by extension physical retail, has been hit hard by the covid crisis. It is important to notice when a few players manage to play their cards right and still be relevant in critical times.

BoF identified still-bustling malls that are outperforming their peers in terms of traffic recovery: Highland Park Village in Dallas, Bal Harbour Shops in Miami, Fashion Island in Newport Beach, Calif. and Oakbrook Center in the Chicago area. The article looks at four particular actions that make the malls’ revival in time of crisis:

• The mall as its own fashion brand: people don’t just come to shop, people come to be somewhere safe, in a open-air area where they can meet up and spend time with friends
• Pursue brands: keep offering relevant and exclusive brands and retailers to drive more customers in
• Reimagining the food court: give more space to restaurants so that they can manage ‘social distancing’, bet on international chefs, and it will eventually bring people in for experience
• Keep tenants happy: by organising privileged moments with them, and by financing initiatives that eventually profit both the mall and the retailers

What makes a mall work in 2020

What: another call for malls to adapt to new retail realities.

Why it is important: by looking back at the original inspirations for U.S. malls, the solution to their issues seems not so far away.

When Victor Gruen, an Austrian immigrant built the first mall in the U.S., in Detroit in 1954,  he had a clear vision. For him, malls were to be “neighbourhood centres located off a main road, with a single building of pleasant and modest design, addressing local communities”. His references were the Galleria Vittorio Emanuele II in Milan. This old vision is quite disconnected with what U.S. malls are today, however the Financial Times argues that looking back at Gruen’s vision could provide some perspective on how to adapt to the modern retail world.

Shopping malls need to travel back to the future

PRINTABLE VERSION HERE

Keeping markets under a close watch, IADS detects innovative concepts related to key topics such as experience, new models, digital, and curation.

In the first selection from our Retail Review series discover:

![Exclu Retail Review #1 adidas

adidas Home of Originals, London

A smaller store focusing on the Originals line, aiming at Gen Zs.

More on adidas Home of Originals

![Exclu Retail Review #1 mac innovation lab

MAC Innovation Lab, New York City

A digital playground putting community at the centre, through omnichannel and digital experience.

more on MAC Innovation Lab

![Exclu Retail Review #1 levis

Levi’s NextGen, Palo Alto

A new concept for Millennials with live product customisation, personal styling, and pandemic-proof processes.

more on Levi’s NextGen

![Exclu Retail Review #1 naked retail

Naked Retail, New York City

A physical space to showcase invited DNVBs on a popup basis, with a strong focus on curation.

more on Naked Retail

![Exclu Retail Review #1 the realreal

The RealReal, Chicago

See how to mix resale, proximity, F&B, and design in one place and make it work with a pre-existing digital business.

more on The RealReal

![Exclu Retail Review #1 showfields

Showfields, New York City

"The most interesting store in the world" houses a mix of curated DNVBs and labels in a most theatrical environment.

more on showfields

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What:

How an old-fashioned retailer can continue to dominate in the age of e-commerce.

Why is it important:

Walmart’s approach and latest moves should inspire department stores.

Founded by Sam Walton in 1962, Walmart now operates 11,496 stores in 27 countries under 56 different names, with 66% of its sales coming from operations in the U.S. It is the world's largest company by revenue, with $514 billion (€437 bn) in 2019 and the largest private employer in the world with 2.2 million employees. To give an idea of the size of this company, the total size of the department store market in the world (listed companies only) is estimated, according to sources, between €450 billion and €550 billion.

Walmart has stuck over the decades to the same model created by Walton -operate with the lowest costs and sell at the cheapest prices- and the company has set up a massive network of rural and suburban supercentres across the U.S. Some 90% of Americans now live within ten miles of one of their stores, and nearly four out of five of them actually shopped at Walmart last year.

But the low prices and broad range that have differentiated Walmart so far seem less of an advantage nowadays as Amazon competes not only on price and range, but also mainly on convenience. Amazon and Walmart have lately been increasingly competing for the same customers, but Walmart’s main differentiator online, however, may be its stores.

No one in the U.S. took a greater advantage of the lockdown than big-box retailers and Walmart has been a pandemic winner with U.S. e-commerce sales which have almost doubled (+97%) and drove a 6% year-on-year increase, to $140 billion.  Amid the Covid carnage, Walmart generated a net income of $6.48 billion in the three months to the end of July, up from $3.61 billion in the same period one year earlier.

While those strong numbers contrast to the weakness of department stores and clothing chains, Walmart seem finally to have figured out how to compete against Amazon, and how to keep thriving in the age of e-commerce, thanks to a full omnichannel approach, a push in fashion, and a striking attempt to integrate a content-oriented social media platform.

Moving fast to a fully omnichannel model

Merging store and online structures

Walmart announced in February 2020 that they will gradually merge their digital and in-store buying teams into a single merchandising organisation, which will be divided into apparel, consumables, entertainment, food, hardlines and home. The company has long operated with different e-commerce and store teams, originally split between Arkansas (Bentonville) and California, and has recently started to slowly integrate the two. Last year the retailer already combined its online and store supply chains and finance teams.

While the change seems in the first place as the occasion for Walmart to reduce the siloed effect of conflict between the units, to streamline costs and to increase profits of its e-commerce business, it could also become an important part of the company’s strategy to build on the success of its online grocery business to beat rival Amazon. Most of the company’s 4 700 U.S. locations now offer a service that lets shoppers buy online and pickup orders at store parking lots. Around 1 600 stores offer online grocery delivery, and Walmart executives say they want to expand those online services to include more profitable nongrocery items, which would make them more profitable.

The move to unify buying across different channels shows that companies are still learning how to best manage those channels on the backend, and Walmart recently revealed they will soon bring together their grocery and general merchandise apps for the back-office organisation to better reflect the customer's view of Walmart.

One big step towards omnichannel: Walmart+

In another much anticipated attempt to compete with Amazon, and presented as a way for the customers "to keep more time on their calendars and money in their pockets", Walmart finally introduced Walmart+ in September. Available to customers across the U.S. for $98 a year (or $12.95 a month), the newest membership option offers same-day free delivery for thousands of grocery and household items, an improved in-store experience through the app, as well as fuel discounts at nearly 2 000 gas stations. The service is cheaper than the $119 charged by Amazon for Prime but Walmart+ has a $35 minimum order while Prime has none.

A late comer to digital, Walmart basically gave a 20-year head start to Amazon which had 112 million Prime members in the U.S. before the pandemic (153 million expected in 2022), with sales from e-commerce that are about 110 billion of online sales (compared to 38 billion expected by Walmart for online sales this year). But the first reports pointed out that 36 million Americans (11%) have already subscribed to the $98-a-year programme in less than a month, and a survey from UBS shows that 57% of Walmart shoppers indicated they were "very likely" or "fairly likely" to sign up for Walmart+. Another one from Digital Commerce 360 shows that roughly 48% of consumers who shop online at least weekly say they are "somewhat or very likely" to join Walmart+.

Walmart sales have soared during the pandemic and a big driver of those sales are groceries, which customers can either order online and collect from the Walmart parking lot, or now have delivered directly to their home for time-saving convenience with Walmart+. At the end of September, Walmart also announced that they will roll out a new concept to 200 stores this year and to 1 000 others next year. Introduced by the company as aiming to "help customers better navigate the omni-shopping experience", the remodelled store design is actually mostly meant to encourage customers to download and use the Walmart app to navigate in stores for a complete omnichannel experience.

IADS note: by making online shopping converge with their physical locations, Walmart is transforming their stores, long viewed as expensive and outdated assets, into local distribution hubs that are now powering digital and in-person shopping alike, and which represent a critical advantage over Amazon. With their prime inner-city locations and strong client base of locals, department stores have precious assets they can fully activate to become prominent local providers of goods and services. An omnichannel approach would also be the opportunity for them to streamline the backend of channels, for a unified and simplified organisational structure.

Expanding to upscale apparel and beyond to a digital market place

The next fashion destination?

"Through our ongoing strategy of expanding our assortment for our customers, we’ve shown that we’re serious about establishing Walmart as a fashion destination."

Although Walmart was eclipsed in the segment early this year by Amazon for the first time (more than 70% of U.S. apparel shoppers bought clothing or footwear on Amazon over the past 12 months, +10% over last year), it remains the second most likely place U.S. consumers visit for apparel and footwear. And the retail giant has built over the past years a solid offer of fashion brands through partnership, acquisition, and expansion, that reveal the company’s ambitious goal to become a prominent fashion destination.

In recent years, Walmart bought several online apparel favourites, including Eloquii, Moosejaw, ModCloth (resold in the meantime) and Bonobos. In 2019, Walmart has brought the Scoop brand back as a private fashion apparel line. This year it teamed up with resale site ThredUp and, most recently, launched "Free Assembly," a men's and women's apparel brand developed by J. Crew and Bonobos alum Dwight Fenton. All of Walmart's acquired brands are private labels now.

While specialty retailers and department stores were closed during the pandemic, Walmart, designated as an essential retailer, reportedly saw positive trends in apparel sales. Department stores were already losing foot traffic to big-box retailers before the pandemic. Apparel brands are less able to choose where they sell and might sell at supermarkets. Walmart has now an enriched offer of more upscale private labels. For those reasons, it is possible that full-price apparel buyers are now buying from Walmart on the occasion of their grocery shopping trip as they favour locations that sell necessities. And there is a probability they keep the same buying habit once the pandemic is over, to the detriment of department stores.

Accelerating as a marketplace with Shopify

In June, Walmart announced they were joining forces with Shopify, the all-in-one commerce platform used by more than 1 million businesses worldwide, to open the Walmart Marketplace to their sellers. Walmart launched its marketplace site in 2009, but the progress was slow as the retailer was then mainly focused on its main brick-and-mortar business, and took time to identify the risk arising with Amazon. It started to change when Doug McMillon was appointed CEO in 2014, and then accelerated when Walmart acquired online start-up Jet.com in 2016 and put the start-up’s founder Marc Lore in charge of Walmart’s U.S. e-commerce division.

The company’s marketplace site, which already offers more than 75 million products, grew at a faster pace than Walmart’s overall web business in Q1, and third-party sales are more profitable. The new collaboration with Shopify is Walmart’s latest attempt to expand the scale and profitability of its $21.5 billion U.S. e-commerce business, which is now gaining substantial ground on market leader Amazon.com.

According to Jeff Clementz, VP of Walmart Marketplace, there are many Shopify sellers who were already on Walmart.com, but the company has not penetrated their base to the extent possible and he sees there a tremendous opportunity. For Satish Kanwar, Shopify’s vice president of product, few companies in the world match the sheer size and scale of Walmart, and the deal opens the door for small and medium-sized businesses to access the 120 million customers who visit Walmart.com every month. The partnership sounds like a win-win deal for both parties, and a fast and easy way for Walmart to keep expanding its online presence and visibility.

IADS note: Walmart has been using its unique scale and deep anchoring in American households to keep expanding both its offer and presence, in-store and online. The brick-and-mortar suburban mass merchandiser is turning into an omnichannel platform that sells a broader range of products and services to a broader audience. Is every Walmart supercentre then not about to become a department store? And what if department stores were then getting back to basics – providing selected essentials to locals – to have their regular clients back and then grow a new community of customers?

Looking far ahead with TikTok

In August, labelling social media app TikTok as a threat to the privacy of Americans users, President Trump ordered Chinese parent company ByteDance to divest its U.S. business. After weeks of political drama and while the details are still under discussion, Oracle and Walmart will partner to take a controlling minority stake in a new U.S. company that will operate TikTok (with respectively a 12.5% and 7.5% stake). Rather unexpectedly, that move from the retailer gives hints about its ambition to shift Walmart’s model and renew its approach to retail.

Introduced as a way to "provide Walmart with an important way for us to expand our reach and serve omnichannel customers as well as grow our third-party marketplace, fulfilment and advertising businesses", the plan is in the first place a way for the retailer to approach a much younger audience, but it is also a unique opportunity to engage directly with a community of content creators.

ByteDance actually began testing e-commerce features on Douyin (the app’s Chinese version) in 2018 and has recently rolled out a "Shop Now" button on TikTok that redirects users to shopping sites. Walmart could of course use data from the millions of users to sell products to the TikTok audience, but they could more broadly engage with the users while they are creating content or sharing viral videos, and integrate advertising directly into the user generated content. And that possibility puts it ahead of rival Amazon.

Takeaways from the Walmart case

"Our e-commerce strategy has always been about growth, testing and learning, and most importantly: giving our customers what they want, when and how they want it."

Although the strength of Walmart’s domestic business should not offset some difficulties overseas (the company has just sold ASDA supermarkets in the UK), the retail giant seems to finally have found the way to gain back some of the ground lost to Amazon and to reinvent itself for the future. Most of that critical shift from an old-fashioned model has been made possible by a constant test and learn approach, ongoing experimentation and tests that are all driven by a unique customer-centered approach.

But Walmart’s major push into digital is only part of the company’s strategy to engage more often with more customers. Experiential marketing through their locations remains a critical part of the company’s relationship with their core client base. Before the pandemic, the retail giant used parking lot space as "town centers" and for musical events for instance. It has recently partnered with the Tribeca Film Festival to repurpose 160 car parks as drive-in movie venues, and will now be hosting more than 140 football and Halloween contact-free family-friendly events outside stores through the Holiday Season.

Interestingly, Walmart keeps the store and its community at the core of their renewed omnichannel approach. Department stores generally operate on a different scale and with a different business model, but we should consider how much local remains critical to global operators. And we may have here a unique opportunity to take advantage of our own model to reshape the many ways we can engage with our client base. No matter if it is in store or online, a tight relationship with our customers remains the best way to learn what they want, when and how they want it.

"People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information"- Sam Walton.

Credits: IADS (Renaud Pillon)

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What

The current Covid-19 pandemic crisis has been a real challenge for retail. The management of this crisis has highlighted the usefulness of having an agile structure, a simplified business model, and a solid e-commerce platform. It also requires specific tools. Do department stores have what it takes? Is it really a challenge for the industry as a whole, or, more “traditionally”, for companies?

Why is it important

While reviewing the actions taken on the market, it appears that some are moving in the right direction. It is not only a matter of weathering the storm, but also of preparing the future: in every crisis lies an opportunity to showcase a company’s character, its commitment to its brand promise and its institutional values, in other words, all the components of a company’s culture.

Could do better

If there is one thing which the Covid-19 pandemic has taught retail, it is that we, and many other sectors, were on the whole unprepared to manage external risks. Even LVMH, a notoriously risk-averse, scenario-planning giant, was caught totally off-guard by a total closure of all its stores worldwide, as candidly explained by Ian Rogers last month.  Retail was hit hard (although not as hard as hospitality and restaurants, sports, arts and entertainment) and department stores particularly so. In the language of risk management, “external risks”, unlike “preventable risks”, or “strategy risks”, cannot be reduced or avoided since they lie largely outside the company’s control (see HBR, 2012). The financial crisis of 2008-2009, the 2010 Iceland Eyjafjellajokull volcano eruption, various hurricanes, earthquakes are examples from the past just as solar flares, effects of climate change, or cyber-enabled information warfare may be examples of what the future holds. All of these have had or would have effects on our businesses, just as Covid-19 has dramatically reduced the activity of department stores, sometimes indeed dealing a fatal blow. Every one of these events has been mentioned or discussed and warnings published. For example, the possibility of a viral pandemic was raised up to 30 years ago (see National Geographic, April 2020, which mentions not only AIDS but also Sars, Mers, and Ebola, the last three of which remained fairly regional).

Can we do crisis management?

However, all these factors do not mean that we cannot alleviate the effects of such a crisis in the future. Most of our companies will probably (hopefully) have risk management tools in place such as check lists, hazard analysis, assessment tools, “what if”, scenario analysis, such as Magasin du Nord which was exploring scenarios for stores and staff before the lockdown. However, three elements are specific to a crisis as opposed to a general risk: a) a threat to the organisation, b) the element of surprise, and c) a short decision time; and crisis management is the process by which an organisation deals with a disruptive and unexpected event that threatens to harm the organisation or its stakeholders.

In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats before, during, and after they have occurred. It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start. Three tools are often mentioned in this regard: stress tests such as those conducted by banks (as occurred after the recent financial crisis); scenario planning which selects drivers which have most impact on the company as often used by oil companies (well documented for Shell by Arie de Geus in The Living Company); and war-gaming, most appropriate to prepare for disruptions such as tech or competitors (HBR, 2012). Another component of crisis management is business continuity planning and its associated training. Crisis management requires supreme flexibility and agility since it involves keeping the business running at the same time as fixing problems.

Repeat the crisis or something different?

It is of course very likely that the next big event will be a repeat (or a continuation) of a Covid-19 outbreak. According to WWD, August 2020, Covid-19 has companies of all sorts such as John Lewis in the UK looking hard at their operations and their reason for being, a self-examination that could help prepare them for other shocks down the line. Fashion seasons are being consolidated (see Virgil Abloh at Louis Vuitton men’s “seasonless” collections, Saint Laurent and Gucci exiting the fashion calendars), underperforming stores are being closed (see Nordstrom which is closing 16 of its 116 full-line stores including three Jeffery boutiques), and Macy’s has abandoned the innovations by Rachel Schechtman the founder of Story, the concept shop it acquired in 2018 in order to concentrate on existing operations.

One of the weak points of fashion retail and brands was undoubtedly their supply chains. These have been running longer and longer, reaching Asia for many, with very little excess capacity. But whatever the crisis, the key remains “how to anticipate your customers’ reaction to unanticipated events” (Barbara Kahn, Wharton). This is also a key statement we learnt at the IADS Merchandising Meeting of 21 September, 2020. (See takeaways report circulated recently.)

Resilient, simple and convenient

When supply chains are fairly dependable, then such a fragile structure can be maintained and even achieve a degree of success in terms of lowering costs. With a return to uncertainty (already anticipated before the outbreak of Covid-19), a tight just-in-time supply chain lost out to a more resilient model. According to Roger L. Martin (When more is not better, 2020), the machine metaphor to achieve maximum efficiency through the efficient engineering of each component part is no longer appropriate. What is needed is something more like a natural system designed for complexity, adaptability and integrative thinking. Crises cannot be avoided, but some structures are better suited to deal with crisis than others. We believe the following three elements are necessary to weather any crisis including the current pandemic:

a) Resilience: as we have argued before in “The curse of efficiency”, resilience which Roger Martin calls “slack”, is a characteristic of future success. He is backed up by Margaret Heffernan (Uncharted, 2020) and Zeynep Ton of MIT who has studied retailers such as Mercadona, Trader Joe’s and Costco. Resilience requires systematically gathering and sharing critical information to anticipate change; building flexible structures and processes; maximising value by deciding which activities can be outsourced and which should be kept in-house; and the willingness to interrogate reality and overhaul the company identity (see MIT Sloan, Fall, 2020).

b) Simplification: department stores are already complex structures with a long history of different models being superimposed upon one another and, most importantly, a siloed structure making it almost impossible to cross the boundaries between functional empires. Yves Morieux of BCG has argued persuasively in favour of eliminating complicatedness and the old-fashioned KPIs which, according to him, are “poor proxies” for reality. This is what Manor for instance went through during the lockdown, and noted that it allowed greater flexibility in action. Such conclusions led to a company-wide transformative plan announced in August 2020, focusing on a simplification of the company as a whole.

c) Accelerate e-commerce: underlying e-commerce is the central requirement of convenience for the customers, even in the luxury world. Furthermore, it has become the only channel to conduct retail when stores are shut, at the same time that questions are being posed about overstoring and excessive square metres per head of population.

![IADS Exclusive - Navigating the Covid crisis graph

From Ben Evans, 2020

The US is a particularly obvious example of this.

Falabella of Chile, while operating many formats, is also clear that it defines itself as “a digital company with stores”. That part of the business is undergoing acceleration.

In the meantime, the digitalisation of physical stores is also taking place: self- checkout, remote or mobile payment systems etc. For instance, Apple Express has been noted as a “post-pandemic” store model and many of our members have already implemented similar measures.

How to use the opportunity

As a sub-chapter of risk management, crisis management has tools which we need to put in place to minimise the damage of a repeat Covid-19 episode or any of the other crises which may or may not hit us at any moment. Perhaps one of the most urgent measures which need to be taken by department stores concerns their structure which too often belongs to a past “industrial” machine-based model, and which needs to shift to something more agile, or perhaps more “organic”. Certainly, the efforts in that direction by Breuninger in “delayering” the company to increase empowerment and agility is a move in the right direction. Similarly, Falabella’s “flattening” plans, combined, interestingly with a measure of automation, as well as Manor’s re-organisation, show that department stores are tackling some big questions which should carry them forward. The accelerated development of e-commerce has sometimes been a catalyst to these changes.

The IADS Academy 2020 has been working on some of these related issues and will be part of the creation of a White Paper on Covid-19.

Credits: IADS (Dr Christopher Knee)

PRINTABLE VERSION HERE

What:

• The world leader of home furnishings has managed to become global yet still creative, agile and local
• The original vision of the founder remains what holds the company together and drives performance

Why is it important:

With a total number of stores worldwide that has increased from 345 to 433 from 2013 to 2019 (+ 25,5%) and a global revenue that has steadily risen from 28 to 41 billion euros (+ 46%) over the same period of time, the Ikea group has managed to drive expansion and performance by innovating and adapting its distribution format locally while still offering a unique range of products worldwide. The company is providing a striking example of how to consistently grow and thrive by sticking to core values.

Opening its first store in Sweden in 1958 before it started to expand abroad in the 60s, the privately-owned brand now operates in 52 countries, and while sales grew 6.5% in FY19, it has been coping with customers moving to digital and some customers slowly but steadily turning away from the company’s iconic suburban big blue boxes.

And while the latest IADS merchandising meeting emphasised strong performance in the home category at most of our members (see report), and while the value of the furniture market worldwide is expected to grow from 510 billion USD (2019) to 650 billion USD in 2027, there might be lessons to learn from how the “Flatpack Empire” has bet on innovation, adaptability and a strong culture to secure its growth in size and sales.

Innovating always

Envisioning tomorrow: Space10

Ikea is about to celebrate the 5th anniversary of Space10, a research and design Lab on a mission to help the company create and innovate. Based in Copenhagen, the project is an independent research studio, created by and for Ikea to “inform, challenge and inspire” the brand. Relevant to Geoffrey Moore’s “Incubation Zone” (see related IADS article: Responding to Disruption), the venture brings together a team of 30 experts and creatives to research and design innovative solutions through a collaborative approach.

As an interface for “prospection towards more sustainable and circular societies and lifestyles”, Space10 initiates exhibitions, talks, debates and runs residencies. It drives projects and experiments in the fields of technology, design, energy, food or mobility and works on reports and publications such as “Life without energy”, “The Digital in architecture” or “Spaces on wheels” among a variety of many other issues from many different research fields.

Latest technologies such as VR and AI have been exploited to find new ways for the consumers to dream up their new bedroom, to design a chair or to see the effect of a light in a room before deciding on it. Rugs and baskets have been produced using rice straw waste from the Indian farming sector, allowing farmers from the northern region to avoid burning left over crops and contributing to air pollution.

Thanks again to Space10’s research, the iconic pork-and-beef meatball served in Ikea stores across the globe (1 billion sold last year) now has a 100% plant-based sister version that was launched in August in European stores and which actually has a 96% smaller carbon footprint.

But the forward-thinking approach also comes along with a focus by the client-centred brand’s in-house R&D department on market trends and constant investments in adapting the offer to the consumer’s evolving expectations and habits.

Constantly adapting the offer and model

Introduced as a “response to consumer research exploring how to meet customers’ needs in ways that contribute to a circular economy”, Ikea announced in 2019 that they would test furniture leasing in 30 markets during 2020, starting in Switzerland. As we now lease cars or designer dresses, we will be offered the opportunity to lease office furniture or kitchen cabinets from the leading home furnishings retailer.

The new offer is very likely to meet a growing demand for temporary use services and is straight in line with Ikea’s sustainability goals, but the subscription model is also a way for the firm to build new revenue streams and keep customers coming back as the profits actually plunged 40% in 2018.

In another attempt to help reach the company’s goal to become a fully circular business by 2030, Ikea has announced in September they will open their first second-hand store in Sweden later this year, where only refurbished furniture and home furnishings will be offered. That new store is a pilot project that will be regularly re-evaluated and will be supplied with damaged items from nearby Ikea branches that have been restored. It will be located in Retuna, the world's first second-hand shopping centre.

As another illustration of the same push to relentlessly innovate, respond to new demands, and reach a broader audience of customers, Ikea France lately teamed up with Voltalia to offer a simple and accessible self-assembly solar panel solution. It has also partnered with Asus to launch gaming furniture, and even used a computer-generated influencer for a new advertising campaign in Japan.

>> IADS note: Offering the same narrow range on every market (with a yearly renewal rate of 20-30%), IKEA must create new products all the time to keep the client coming back. Inventiveness is part of the brand’s DNA and a strong communication tool. Department stores all have their own history of being innovative and constantly activating the “new” effect, and we see how much projects like Galeries Lafayette Champs-Elysées or SKP-S can consistently renew the approach of the business model, create excitement again for the visitor and strengthen the brand.

Constantly exploring new paths and able to quickly adapt its products and services offer, Ikea has initiated over the past few years an unprecedented diversification in the distribution’s architecture and channels.

Shifting to a multiformat and omnichannel distribution model

After decades of developing mainly the same iconic model of big out-of-town and self-service stores all around the world, the biggest furniture retailer is now starting to move towards a different multi-offer distribution model with new city-center smaller stores, malls, and a new multichannel approach.

From the suburban big box to the inner-city store

In May 2019, IKEA opened its first ever inner-city store in France (Ikea’s 3rd worldwide market after Germany and the U.S., and before the U.K. and China). Located in the heart of Paris, the 400 square metre new store spreads over two levels, employs 140 members of staff and offers only a selection of the brand’s items in a much smaller scale space that is curated like a showroom. Items that cannot be taken from the store can be ordered online and delivered at home. The highly experiential retail space also features a café and offers themed workshops.

While located in the city center, with more than 2 million people living within a 20-minute public transport radius, and significantly smaller in size, the new store nevertheless retains the long-standing store model of the regular big box, only with less items on display and no warehouse attached, but the customer here also remains part of the distribution chain with a self-service checkout.

Quickly followed by other attempts to explore the market of smaller city stores in Moscow, New York and other cities in the U.S., the Paris Madeleine store quickly proved a success, with 1.3 million people visiting in the first 4 months, and sales levels running just below those of a warehouse six times the size. But besides this latest attempt, Ikea has also been exploring the shopping mall option and keeps building bigger blue boxes.

Exploring the malls while still developing the standard box model

Ikea has recently made significant investments in malls in San Francisco (6X6 Mall) and London (Hammersmith’s Kings Mall) as more and more retail spaces are becoming vacant after the tenants had to shut down.

The retailer is proving its ability to keep exploring new prospects and investing in different environments while sticking to a distribution model now developed in different formats of store. Ikea appears to want to redefine malls as gathering places and to focus on the customer’s experience. The strategy underlines for department stores the remaining strong potential of a local place where the customer may live a more engaging experience with brands.

However, exploring new tracks and adding alternative store types to the long-standing suburban warehouse does not mean that the company is giving up. Ikea is still opening mostly new big-box stores this year, and has actually announced the opening next year of its biggest store ever in the Philippines. Located in the SM Mall of Asia in the Manila Bay Area, the upcoming Ikea Pasay City store will spread across a huge 65,000 square metres, when the average store size was still 35,000 square metres back in 2010.

Slowly but surely moving to omnichannel

Ikea has been surprisingly slow to move to online shopping, but while the number of visits to ikea.com worldwide has jumped from 700 million in 2010 to 2.8 billion in 2019, and online sales have grown by 46% in 2019 (11% of total retail sales), the company is now actively using technology to put the best practices of omnichannel to work.

With the help of augmented reality and most probably thanks to the Space10 tech research, the IKEA Place app helps you visualise and plan where to put pieces of furniture in your house, and with the help of your smartphone, you can imagine how a piece of furniture would look and feel in the ambience of your room.

The company also claims to be moving forward with omnichannel for its ongoing strategic expansion in India, where it plans to open 25 stores in 9 cities by 2025, and expects online sales to be a strong growth driver in this new market.

>> IADS note: Ikea took time to finally start moving from its unique store model to local diversification, and to start implementing an omnichannel approach, but that says a lot about how much the company remains ultimately consistent with its model and values, even if it may take more time. Department stores can explore many different business approaches at the moment, but they should favour the ones that match their long-term vision of what their department store should be and what their business should become.

The values, model and organisational structure working together

A unique vision and strong values grounded in Swedish culture

Since the earliest developments of his company back in 1943, the late founder Ingvar Kamprad infused Ikea with unique company values that derived from his strong vision for business with a social ambition to “create a better everyday life for the majority of people”.

Once asked about the company’s unique culture, Anders Dahlvig (CEO of Ikea from 1999 to 2009) basically outlined a combination of simplicity in behaviour, capacity of delegating and accepting responsibility, daring to be different, striving to meet reality and cost-consciousness.

He emphasised that those values were strongly connected to the Swedish values which foster a humble attitude and encourage simplicity, as well as to the well-known characteristics of people from Småland, the rural region in Sweden Kamprad was from: frugal, humble and hard-working.

According to Dahlvig, this unique vision of the company has remained one of its biggest strengths, and is basically “the soul that has kept the organisation together”. And that vision has been the foundation on which the company was able to build a model of cost-obsessed integrated organisation that can grow and thrive while remaining fully committed to its core values.

A differentiating business model

Offering well-designed, quality, functional, and sustainable home furnishing at a low price for the middle classes involved for the company in developing an efficiency-driven business model that differentiates it from its competitors.

In an essay (The Ikea Edge, McGraw Hill, 2012) sharing lessons and insights from his 26-year experience growing as an employee up to the job of CEO at Ikea, Dahlvig explains the company’s successful business model: differentiation through control of the value chain. Based on his experience, while many in the retail sectors split brand and retail to operate either one or the other, leading to very little differentiation between their offers, the key to profitability for him is differentiation through vertical integration.

According to Dahlvig, Ikea spent the first 30 years developing its business model before the company started expanding abroad. The main reasons of this long period of time are the stability of the home furnishing retail sector – with few developments in both the industry and the competition - and mostly the company’s very conservative financing policy which also explains why growth has been mainly organic.

Legendary cost-consciousness and agile decision-making process

The combination of the founder’s original vision with the company’s values and business model - which involves a unique range of products for all the markets - has set up a highly effective cost-obsessed vertically integrated organisation where the decision-making process remains short thanks to a horizontal management model that keeps the group agile.

The company’s vision and related goal to deliver good design, function and good quality for a very low price, has forged Ikea’s legendary cost consciousness. The firm has always been obsessed with aggressive sales prices and constant cost reductions: the internal goal is apparently to always have price tags that are at least 20% below the competition on comparable products, while the control and coordination of the whole value chain allows the company to always keep the costs at the lowest point.

But vertical integration also makes Ikea a “complex company” according to Dahlvig, and the company has grown until the late 90s guided by its strong original entrepreneurial spirit, which came along with little coordination, small overhead structure and different functions working on separate agendas.

His main challenge as the CEO has been to transform Ikea so it could keep growing and prospering at the same time. He brought the company back together with a common agenda and moved its way of thinking from a functional method to a process-oriented way of working. That has also been the occasion to redesign the supply process and to improve the retailing initiative in order to use the full advantages of a big organisation while keeping those of a small and agile company.

Key in Ikea’s successful operating, while the firm has managed to set up an optimised organisational structure that can now fully support cooperation across core functions globally, it also still has a very horizontal management structure, with limited hierarchy and decisional levels. Dahlvig points out how he, as a CEO, has refused intermediary regional levels and always favoured a system with fewer managers and larger spans of control and decision instead.

According to him, this flat management model gives more liberty to people reporting to fewer managers, which also involves everyone needing to be on the same page with common objectives and values. But with that freedom comes the space to keep an entrepreneurial approach and come up with initiatives that move the company on.

>> IADS note: The flat management model, with a limited number of hierarchy levels, is key for Ikea to make swift decisions, rapid changes, and engage prompt implementation when needed. The combination of cross-functional cooperation and horizontal management could be kept in mind as a way for department stores to shorten, facilitate and speed up their decision-making process, for more agility.

Perspective

Global, yet still relentlessly inventive and adaptable to local markets, Ikea has managed to become the world’s biggest home furnishing retailer, and to keep growing and performing while continuously sticking to its differentiating Swedish character and original core values. And the company has managed to transform those values into a business model, an organizational structure, and a transversal and quick-decision-making management pattern.

While the firm itself actually rests on a very complex corporate structure made of several corporations owned by non-for-profit foundations registered in different countries, the company has successfully managed to transform its values into efficiency, inventiveness, agility and, most basically, a stunning simplicity for a global retailer of that size.

In the light of what Ikea has been doing, department stores should continue to focus on their culture and values to navigate through uncertainty and keep the company together. El Corte Inglés and El Palacio de Hiero, in different ways, have built very strong staff loyalty value around their company over the years. Magasin du Nord has developed a light, lean and close management team that works very efficiently together towards a common goal. Breuninger has staff members who can reportedly be recognised at a thousand metres as their personality is very much in line with the company core values. The current effort by Manor to restructure their team is most probably relevant to that same push to strengthen a team through commitment to a shared culture.

Each member of IADS has their very own history, culture and values, and those stand as the most precious asset on which to capitalise to ensure continuity and design the future of department stores.

Credits: IADS (Renaud Pillon)

What: understanding the mechanisms of Chinese surrogate shoppers.

Why it is important: The Daigou business has fuelled many luxury brands’ growth in recent years, both at the retail and wholesale businesses. It is also a system implemented in some international department stores. BOF focuses here on the Korean channel, which also gives perspective on the future of this practice.

“Daigou” is a Chinese term referring to surrogate shoppers, playing on the price gap between Mainland China and the rest of the world: they purchase products outside the country and sell them to local customers at a price that appears like a bargain for Chinese customers. According to the China Electronic Commerce Research Center, the business, once buoyant, now plateaus at €5,05bn and is largely fuelled through the duty-free stores in Korea – up to 60% of their business.

Although procurement can be challenging – controls, import duties, commissions due to intermediaries such as the travel agencies – the high volumes allow price negotiation, translated into a 30 to 40% margin in the Daigou’s pocket for Korean brands and 20 to 40% for international brands, which are then sold via Chinese e-commerce platforms.

Although Covid-19 has significantly impacted this business, with a drop of Chinese tourists in Korea of -77% and -96,6% in February and March, the business is recovering, with boosts from Korean duty-free shops who offer complimentary shipping to Hong Kong for orders exceeding €8,400 ($10,000). In spite of that, the channel will probably suffer in the mid-term future, with China planning to give the possibility to Chinese shoppers returning from abroad to buy locally at duty-free shops in the “arrival shop”.

Luxury’s Daigou Economy, Explained

How can we make sure we can move quickly in the face of disruption and change whether it is society, technology, competition, regulation, labour markets, or indeed a pandemic. MIT Sloan Management Review makes four suggestions for action based on lessons from Netflix, Amazon and others.

Plotting Strategy in a Dynamic World

French management school HEC organized on 1st of October an exclusive talk with Ian Rogers, Head of Digital for LVMH. IADS reports the highlights of this exclusive conversation for which no recording was allowed.

What

LVMH CDO answering HEC alumni questions, brining key insights on 2 topics:

• How LVMH addressed its digital transformation (at a moment when some of our members are doing the same)
• Evaluate how IADS members can gear their relationship with the luxury group in the future

Why is it important for IADS members

• Going digital is not a technological step but shall be considered as a deeply transformational organization change, led by the CEO to address his/her vision. The right organization does not have a digital leader, the right organization is digital, with appropriate KPIs and incentives redesigned and applied to the whole organization. Create a digital silo to suppress previously existing silos is a dangerous temptation: what prevails is the CEO vision on what should be the customer experience. To note: time is crucial, as there is a premium to whom starts the earliest, as this allows to make mistakes and test many options.
• Innovation shall address a limited number of topics. At LVMH there are 4 pillars:

o    Omnichannel commerce transformation

o    Clienteling and remote selling (including data ownership)

o    Data and artificial intelligence in pricing, collectioning and store merchandising

o    Chinese ecosystem

• In the future, LVMH plans to reap all the margin possible by establishing a direct relationship with customers, and will only keep relationships with wholesalers enjoying 2 competitive advantages: a faithful and dedicated customer base, and a true added value in terms of customer experience. This is where at IADS we believe Department Stores have a winning card in their sleeves.

Full IADS report - Digitalization according to LVMH and key learnings

What:  A co-ed article on dynamic geo retail pricing.

Why is it important: Even though this article is simply reminding the interest of such an approach to pricing, this is a topic we believe at IADS is key and could be providing strong benefits in terms of margin coherence for its members having at the same time flagship in Tier 1 cities and regions.

The example of the Covid-19 pandemic showed that, in a moment when consumer behavior is fragmenting per region or zone, the ability to adjust prices in real-time according to the region is becoming key. Revionics SVP is showing the example of retailers able to react according to the local data they collect and adjust in real-time prices, promotions, and marketing to customers. This is already a strategy enforced by e-commerce players: they are able to adjust the price according to the location you are connecting from. This should be therefore an incentive for retailers to follow the same strategy and be able to be dynamically responsive.

Zone Pricing Takes on a Bigger Role During the Pandemic

Business of Fashion assembled a month ago a series of business cases to generate some insights about how retail will look like in the future. Interestingly enough, the fashion-specialized media focused its business cases on connected businesses (DNVB, online retailers..) as if brick and mortar was not able to bring in lessons as well.

The example of Warby Parker shows that DNVBs are faced with increasing competition and costs of advertising online. The combination of both lured such brands into going brick and mortar quite early, allowing them to fully express their universe and values IRL. Business of Fashion mentions that, in the case of Warby Parker, more than 70% of customers browsed the brand website before entering the brand store. One might wonder however if such an behaviour is not applicable to all transactions nowadays, and if DNVBs are not, after all, just another commercial iteration instead of being promoted as a species per se.

The corollary importance of having to do physical retail ‘whatever happens and whoever you are’, is backed by the following sections of the report. When exploring the London based, Farfetch owned, Brown’s multibrand, BoF quotes futurist Doug Stephens, in saying “it’s not ‘here’s our online, here’s our offline’, it’s about creating a platform that allows the consumer to activate whatever parts of this experience as they choose”. In other words, put a final end to the dichotomy between brick and mortar sales and e-commerce, and consider everything as a brand touchpoint. Why is this so important in the case of department stores, who are lagging behing when it comes to going digital, and what sense can they make out of this? According to the Business of Fashion analysis grid, there are 4 key stores utilities to be considered:  product engagement, loyalty development, brand awareness spreading and experience. Let’s read them with department stores’ issues in mind:

• “The store as a service touchpoint”, i.e. how do you convince the customer to buy in a given location a product that is also available online or in other locations? By staging exclusivity and bringing additional services to customers he/she might not find online. VIP programs are here for that, and they are also available online. Therefore, the only element that can not be automatized online is the personal relationship, and this is where department stores have an edge: their staff ability to connect and create bonds with customers. This is the reason why Galeries Lafayette conducted an ambitious transformation program when they opened Champs Elysées and decided to replace sales staff by style advisors.
• “The store as a brand billboard”, i.e. how to introduce the customer to new brands and universes.  BOF argues, and we support this view, that in that mission, the existing KPIs are no longer relevant. To know the efficiency of a store in customer acquisition, sales per sqm are no longer relevant and new KPIs need to be set up, such as Store Media Value, Repear Purchase Rate or Cost per Acquisition. In parallel, carrying permanent excitement and novelty is key, as we have seen recently with Neighborhood Goods or Showfields. One may wonder however how to translate this into actual sales and value (their actual turnover is not public).
• “The store as a community hub”: BoF mentions Sephora, which is indeed quite good at being a hub connecting boutiques, web platforms, social medias, in a worldwide synch’ed way. However, according to us, there are many more relevant examples on how to serve a purpose and integrate into a local community: Neighborhood goods, Monoprix Montparnasse. What is at stake in reality is the core activity of department stores:  how to locate again department stores at the centre of their customers’ lives? One of the answers could be by making sure that customers always have a good reason to come back. One would also need to acknowledge that, often, this good reason is not commercial, and adjust accordingly.
• “The store as an immersive entertainment”: IADS members are already aware of this part, with SKP-S, Galeries Lafayette Champs Elysées or Breuninger’s B-Place. Business of Fashion reminds however that, as soon as a toe is dipped into excitement of experience, this needs to be taken seriously, as customers will always expect the “next big thing” and, in any retail organization, this can not be done at the expenses of customer service. As they correctly mention, “you can have all the entertainment you want, but none of it matters if the basics aren’t there”.

To conclude, the striking part in this report about the future of retail is that none of its components, nor its conclusions, are contrary to what department stores are today in their core, or their actions. This might be a reassuring reading to take home the fact that nothing in this report invalidates the role of department stores tomorrow. This is all the more notable in a media actively promoting the notion of “retail apocalypse”.

Read the full report below

Tapping in the future of physical retail

What: A data sharing example from the pharmaceutical world.

Why is it important: In order to find an answer to the Covid-19 pandemic, 10 pharmaceutical companies used machine learning to analyse each other data, in order to find faster a cheaper vaccine. At a moment when IADS is promoting the idea of resuming the Statistical Exchange, under a new form, this article argues that the future goes with data sharing, but not at all costs. Security and coherence of the data, especially, is key.

Through the example of the Covid-19 pandemic, Garner argues that “there should be more collaborative data unless there is a vetted reason not to do so”. In short, move from the “don’t share data unless” mindset to the “must share data unless”. Gartner predicts that within 2023, organizations promoting data sharing will outperform their peers on KPIs.  What is key anyways, according to the article, is not that much the access to data itself, but the trust implemented between participants to the data-sharing program. Blockchain and other technologies are here to guarantee the quality of the data used and therefore maximize its value.

Gartner reminds us that transiting to such a model implies, of course, a significant change in the organizations’ and managers’ mindsets.

Data Sharing Is a Business Necessity to Accelerate Digital Business

Every company believes it is customer-centric. However, most of them are product- and service-centric first, focusing on how to enhance their offerings (e.g., adding services to gas stations) rather than putting themselves in their customers’ shoe. In this article, Sunil Gupta, from the Harvard Business School, describes three ways companies can come up with truly innovative ideas by thinking about customers first.

Are you really innovating around your customers’ needs?