What: Curbside pickups are a way for Walmart to compete with Amazon.

Why is it important: even though the margin made by Walmart on curbside pickups is lower than normal shopping, it is still positive, versus a negative one on e-commerce for now. In addition, it is riding on maintained customer’s appetite for physical shopping, even though it is made differently.

Curbside pickups are not described in this article as a band-aid to go through the trouble. The US Sephora CEO is quoted mentioning that some customers, who did not use technology before, learned how to shop differently, without questioning the fact of going shopping. Curbside pickups might be seen handier, or quicker, but in any case, they are still worth the trip. This is the reason why major US retailers are increasing their workforce on that channel, such as Walmart, with 74,000 people across 3,000 stores, from a team of 1,000 dedicated to pickup 5 years ago. This raises new questions about margin management, workforce steering, and how to make sure that employees feel valued to the maximum, in a job that could feel like ‘robots’.

Customers still like to shop in person, even if they get only to the Curb

What: local initiatives to boost brick-and-mortar retail

Why is it important: the situation has forced retailers to think hyperlocal

Local retail seems to be the answer to face the decline of sales after the pandemic. Brick-and-mortar retailers address to their local clientele through diverse initiatives and unexpected partnerships.

The key to brick-and-mortar during the pandemic? Neighbourhood retail

Related item:

• IADS Exclusive - The rebirth of local retail

Women’s Wear Daily looks at how brands and retailers like Ralph Lauren, Vuitton, Macy’s and Nordstrom are dealing with Covid and preparing for the future through consolidating seasons, streamlining store numbers and shortening supply chains.

Crisis management: Being ready for the next one

PRINTABLE VERSION HERE

Self-proclaimed "the most interesting store in the world", Showfields opened a 1300sqm, four-storey space in New York City’s NoHo neighborhood in December 2018. In this new concept, a mix of curated DNVB and brick and mortar brands are housed in a most theatrical environment. It is a place for online brands, such as Nuria (beauty), Wet (swimsuit) and Paneros (clothing) to get a glimpse at physical retail and get a new customer baseline.

The store allows for offline and online worlds to collide as customers can both touch the products and use touchscreens to explore additional items or make purchases.

What makes Showfields different from other retailers, which function somehow similarly: curated brands and rotating assortments, like Joyce (HK), Galeries Lafayette Champs-Elysées (Paris) or Neighborhood Goods, Dover Street Market (US) and SKP-S (Beijing)? Or like b8ta (US), which also houses Direct-To-Consumer brands for their first dive in physical retail? The answer: theatre.

It is immersive

At Showfields brands get to showcase their products in a totally immersive décor. Where multi-brand stores install a brand next to the other, Showfields goes deeper as each brand corner features an environment relevant to its items. Think bathtub and mirrors for beauty products, and sofas and beds for quilts and pillows. Brands configure their space online via a six-step process; it will then be fitted out and staffed by Showfields. All the tech comes as part of the deal, including mobile POS and data sensors which provide real-time data to each brand inside the store, using heat mapping to show what products customers are touching, picking up and lingering in front of. Brands can rent a space on a monthly basis, with a four-month commitment minimum. Note that Showfields does not make money out of product sales, only on renting spaces.

But Showfields is not alone on that segment since other retailers worldwide also offer immersive experience to the customers. Korean eyewear brand Gentle Monster is very well known for its physical locations which vary a lot from one place to another. Each time it offers an immersive experience in a meticulous décor inspired by the environment and the city the store it is located in.

American designer Blaine Holvorson does the same with his Madeworn brand. His Los Angeles showroom, accessible upon appointment, is divided into three spaces staging three decors, three stories.

More recently, winter clothes brand Canada Goose opened The Journey: a Canada Goose experience in Toronto. The inventory-free concept store pushes the boundaries of e-commerce and retail. The top feature is the Cold Room, where products can be tested in temperature set at -12 degrees Celsius, while being surrounded by floor-to-ceiling Arctic landscapes and real snow. However, you cannot purchase merchandise in the store, you will have to order them online (via instore screens).

Some brands, with a specific immersive décor, manage to recreate the experience offered in their standalone store in a department store corner -for instance French cosmetics brand L’Officine Buly with its apothecary counters or American label Urban Outfitters with brass pipes and furniture- but not all brands’ corners in department stores are immersive, contrary to House of Showfields as the full store offers complete immersion.

Last summer the retailer launched House of Showfields, a 30-minute sensory theater production featuring six brands and designed for customers to touch, smell and taste the products. The experience, and the whole store for that matter, is not staffed with salespeople, but with actual actors who are trained to tell the story of the brands. Customers get caught in a brand’s story, without feeling pushed to buy. What’s more theatrical than that? Yet, it is reported that L’Officine Buly also staff its stores with actors instead of salesperson, to give even more storytelling to the brand.

The opening of the House of Showfields show draw a 33% gross in traffic, and a 50% sales increase (as of last fall).

It is “instagrammable”

Another asset that comes with having an immersive space is that, in a time where social media account for a big part of people’s exchange, it makes the place highly instagrammable. Influencers are the new fashion models and brands ambassadors, and the new generation of customers Gen Z are fond of short video media Tik Tok, pictures platform Instagram and other social networks.

Once again Showfields is not the only retailer to offer unforgettable pictures for your social accounts. Beauty brand Glossier, who’s brand identity already shows well in its product recognisable packaging (imitating paint tubes or coloured in a pink blush), showcases its items in clean, immersive decors. For example the Los Angeles store imagines a drive through the desert and even replicates Arizona’s Antelope Canyon in a separate room.

Museum of Ice Cream (MOIC) started as a colourful, pop-up museum playground highly instagrammable. It even had an actual pool of ice cream sprinkle, where Beyonce and Jay-Z took a dive. The experience eventually turned into a brand and opened an ice cream store in NYC, The Pint Shop,  just as much as intagrammable as their itinerant museum.

It is exclusive

The House of Showfields could relate to the notion of ‘incubators’ has it bets on lesser-known DNVBs that need physical exposure to gain customers. In the light of the recent demonstrations across the U.S.A., the store has dedicated an entire section to Black-owned business brands. Adding to all that the fact that items are showcased within a time-limited frame, it makes them all new each time you come back, exclusive, and desirable.

In that, Neighborhood Goods is similar has its offer regularly rotates, and varies from one store to another, reinforcing the sentiment of exclusivity.

Many retailers have understood the importance of exclusivity and already take advantage of that, especially department stores which host pop-ups and collaborations, with items made exclusively for the store event; through exhibitions at Le Bon Marché (ex: Los Angeles Rive Gauche, Let’s Go Logo) or collab at Selfridges (ex: The Co.Lab in partnership with Highsnobiety)

The difference with Showfields is that it is an exclusive show all year-round. Department stores with all-year dedicated pop-up spaces can offer a similar level of exclusivity.

It is a gallery

Imagined kind of like a museum, customers wander from one brand to another and discover a new universe each time. At the end of the journey, they step into The Lab, which is like the gift shop at the exit of an exhibition or a tourist attraction. All items previously experienced in the store can be purchased in The Lab. We can make a parallel with furniture giant Ikea, which also offers an immersive experience where you wonder inside the store, passing from rooms to rooms to finally pick up items at the end of the visit. A formula that seems to be working as the turnover of the group has only been increasing since 2004 (from EUR 12,9bn in 2004 to EUR 38,8bn in 2018 according to Statista).

In the end, Showfields does not force any purchase on customers, but offers actual experience to have people coming back and eventually buying items. Bringing people inside through events in hope to turn their visit into a shopping trip. Isn’t it what Selfridges is doing with its instore movie theatre? Or what IADS member Galeries Lafayette did with a glass walkway in its Haussmann flagship to attract instagrammers? Or any other department stores with dining experiences or beauty services for that matter? Not to mention the Dubai’s Mall of the Emirates that offers access to a ski slope inside a mall.

So what’s more to Showfields?

As demonstrated above, Showfields is not completely revolutionising retail as we know it. Other brands and other retailers offer similar experiences and features in their locations. The retailer features a large assortment to reach out to a variety of customer range: from dog food to beauty products and digital items, it is a store for anybody.

But the real strength of House of Showfields can be that it is all at the same time: it is a store, it is a gallery, it is an experience, it is instagrammable, it is digitally enabled. Plus, there is a slide to go down from the third to second floor.

We can compare the attraction of Showfields to the one of Story when it first opened in NYC. But now that the concept has been bought by Macy’s and that founder Rachel Shechtman has left, it has somehow lost its appeal. Will Showfields experience the same decline and what will be left of it once/if the novelty has passed?

Showfields is funded by several ventures, and, as of this date, turnover information has not been released.

How about experiential retail in the Covid-19 era

How a store, that is all about the immersive physical experience, deals with the Covid-19 pandemic when people are reluctant to spend much time outside of their safe environment? As a response to the health measures, House of Showfields launched an App called ‘Magic Wand’. While inside the store, customers use their phone to tap or scan a display object, and the app will provide additional information on it. The app also allows customers to get prices, add items to a digital cart, and check out without interacting with a store associate. They can pick up a bag full of sanitized products on their way out.

Originally not a response to any sanitary crisis, but a desire to offer customers the experience they choose, Nike has a similar option in its latest House of Innovation in Paris. While instore, you can order an item through the Nike app and have it delivered directly to you in the store. Try it and buy it at one of the self-checkout stations, without interacting with any sales associates if that is your wish.

Inside Showfields, additionally to the basic safety measures such as mandatory masks, social distancing and hand-sanitising stations, the retailer has decided to focus on brands that guarantee a safe experience, and brands such as Play Doh (kids modelling clay) were removed.

Showfields also offer curated virtual tours of their store, so customers can discover the products and enjoy the experience from the safety of their home.

However, be sure that the instore guided tours bring more than just an introduction on brands and description of products. They are led by actors portraying diverse characters such as scientists, artists, creators, and explorers, to give an even more narrative arc to the store visit and the brands featured.

Moreover, the store gives the possibility to book a guided tour with CEO Tal Zvi Nathanel himself. Has this ever been seen before?

Conclusion

Can department store become immersive experiential space? What can they learn from Showfields? And is experiential physical retail still relevant after a pandemic?

As to the question if department stores can offer immersive experience the answer is yes. Best example is IADS member SKP latest store in Beijing: SKP-S. Designed in partnership with Gentle Monster, the store offers an immersive experience on each of its floors through a purposefully ever-changing landscape. The entire experience is based on the theme Digital-Analog Future and the assumption that, in the distant future, technical leaps will allow the boundaries between human and digital to blur -think massive artificial intelligence. The concept of this new store differs completely from SKP flagship store, which resembles more the ‘traditional’ department store/mall model. The SKP-S store is even is considered a benchmark in forward-thinking retail by Retail Leisure News.

SKP-S follows the same theme and narrative through the entire store, while at Showfields one brand equals one story.

As to the relevancy, one can wonder if physical experience is still a viable option after the pandemic that left people afraid to go out, interact with one another and afraid to touch anything. According to Essential Retail, experience will be digital after Covid-19, even instore. But will it be enough? Is this the end of what was in pass to become the new way of making retail? Showfields manages to keep its experience intact through the crisis, but will it last?

Finally, what can department stores learn from Showfields that they do not already know? Bring experience not necessarily link with the idea of purchasing? Done at Selfridges. Offer an immersive décor? Done at SKP-S. At the end of the day department stores already have the answers and know what they need to do to gain customers. It is up to them to find the right formula that will suit their business best.

Credits: IADS (Louise Ancora)

PRINATBLE VERSION HERE

INTRODUCTION: what is remarkable?

Covid-19 pandemic and the consequent lockdown strongly affected SM Group’s ability to operate both online and offline, due to the harsh regulations applied. This led the group into setting up a new way of selling and distributing its products, in a record time (deployment to 63 stores in 1 month), with significant & quantifiable results:

• Sales: average of 3,2K daily orders after lockdown (from scratch)
• Marketing: increase the reach by 31% while maintaining the CPC at an acceptable level

The “Call to Deliver” setup uses the existing instore resources (staff, assortment) to address the needs of the local clientele with a low-tech and simple procedure, while remaining in line with regulations and safety instructions.

Its success made SM Group identify a new channel opportunity, and this temporary solution has now become permanent, as it ideally addresses local communities’ needs & tightens ties between SM and those communities.

Benefits of the Call to Deliver setup

• Use of existing relationship with local customers to provide them with what they need, while reassuring about SM’s commitment and legal compliance
• From order processing to fulfilment, a low-tech setup, easy to implement, fast to deploy
• An internal cohesion tool: all teams were involved and contributed to find solutions
• Can be easily transposed to other IADS members setups

Key learnings

• In a crisis, grouping together to design a collective solution with clear accountability lines can be effective and quick
• The implication and cooperation of all teams from the beginning brings a pragmatic and down-to-earth implementation
• Low-tech and simplified procedures sometimes exceed more sophisticated operations
• By putting the customer experience at the centre a new retail channel was created and allowed to reach a new clientele

A harsh Covid-19 context

100 million Filipinos went into lockdown on 16th March 2020. Planned initially for a month, the lockdown ended up being one of the longest of the world, until June, and one of the harshest: total closure of the country and impossibility to travel, restriction on mass gatherings of more than 10 people, total closure of schools and “non-essential” businesses, “stay at home” orders and mandatory wearing of face mask outside, curfew from 8pm to 5am in Manila region (30% of the population, 27 million people), and other strict measures.

The release from lockdown end of June saw a rise in cases and led the Philippines to revert to a second lockdown early August, with a 24-hour notice to citizens and businesses. However, due to the impact on the economy and the lack of publicly funded social support, the lockdown measures were softened mid-August, sometimes creatively: at the time of writing, the Manila region is going through a rolling lockdown: one week open, one week closed.

As of 7th September, the Philippines is the first country most impacted in South East with close to 239.000 cases and 3.890 deaths, making it the 21St most impacted country in the world. Economically speaking, Q2 saw a GDP contraction of -16,5%, household consumption -15,5%, unemployment +17,7% and -6,4% revenue from the Filipino diaspora abroad. Overall, the country GDP is expected to contract by -7% and is now in recession, the first in 30 years.

IADS Member presentation: THE SM STORE

The retail arm of SM Investment Corporation is the largest and most diversified retail group in the Philippines: food (SM Market, Waltermart and Alfamart) and non-food (SM Stores and specialty stores). Its 2019 turnover was 6,3bn euros (+9% vs. LY), with a net income of 217m euros (+10% vs. LY).

Part of the SM Retail division, the IADS member, the SM STORE, has 64 stores nationwide, representing overall more than 807.000 sqm. of retail space, operated with 23,479 collaborators. Pre-crisis, SM has operated e-commerce since 2018:  ShopSM, linked to the group’s loyalty programs and including a click & collect concept (buy online, pick up instore).

Reasons for implementing a new distribution channel

The impact of lockdown was immediate: deemed as “non-essential”, all 64 stores had to close from 16th of March till 18th of May. E-commerce operations were also stalled, with staff having difficulties to reach the fulfilment centre, and logistical difficulties abound.

This is why SM Store developed a new retail channel, adjacent to the e-commerce operations: “Call to deliver”. Simply put, use the existing instore resources (staff, assortment) to address the needs of the local clientele with a low-tech and simple procedure, while remaining in line with regulations and safety instructions.

Call to deliver program – the beginnings

The idea

No hard selling was allowed to anyone: the law about “non-essential retail” had to be respected. To comply with regulations while trying to find a business solution, senior store management contacted customers, either via email or social media, to “test the water”: gather some news & give comforting messages. Templates were circulated to make sure key messages from SM Stores HQ were carried, with a latitude given in the tone, allowing managers to express themselves in a natural manner.

Quickly, customers came back with questions about purchasing goods & SM identified opportunities:

• Kids (cater for their needs and entertain them)
• Working from home adults
• Keeping healthy and in good shape (from home)

E-commerce being itself crippled by the lockdown, it seemed natural to use stores resources and stocks.

How to onboard teams

Philippines is a fragmented country. Therefore, in addition to the lockdown measures and teams’ sickness*, the potential impossibility to travel due to the lack of transportation added to the difficulties.

SM assessed the local context surrounding each store and categorized teams according to their mobility:

A. can come to store, will not have problems with checkpoints

B. can reach the store, but might be difficult

C. impossible to move

This allowed the identification of resources to further contact customers.

*SM Store took care of all sick employees by providing them full support & equipment when blocked at home, in addition to the state support on pay.

The stock issue

E-commerce stock was not reachable and had a more limited choice than the stores themselves. It was therefore decided to use the store’s stocks. However, stores were still closed to the public as “non-essential” businesses.

At the beginning, customers were simply on the phone with a sales rep, who was going along aisles of closed stores to pick what the customer needed. This quickly proved inefficient and troublesome for everyone. It was then decided to gather a selection of items according to themes: “work from home essentials”, “stay at home essentials”… allowing compliance with regulations while expanding the number of skus available (this implied creating from scratch ad hoc catalogues).

How to deliver in a cost-effective way

Customers had 2 options: home delivery (thanks to the employees still able to freely move) or curb side pickup. In both cases, for the sake of simplicity, products were delivered into regular SM shopping bags from the store, and not the sophisticated e-commerce boxes. Interestingly enough, this contributed to tighten the link between stores and customers, by giving to the latter memories of what life was pre-lockdown.

Detailed organization of the Call to deliver process

CTD is organized into 5 simple steps, with clear lines of accountability:

• Ordering station – 2 positions:

• ‘CTD Shopper’: Order taken via phone/social media after engaging the customer.
• ‘Order controller’: checks the coherence of the order and accuracy of picking

• Picking station – 1 position: goes directly instore to pick the selection
• Packing station – 2 positions:

• Cashier
• Packer – checks the order slip, sends receipt to the customer and advise when orders are ready.

• Dispatching station: 2 positions

• Runner: takes the selection from packing station to dispatcher
• Dispatcher: monitors and updates delivery

• Delivery / pick up station: 2 options

• Employee rider (collects or processes payment)
• Delivery partner (for locations the employee rider could not get into)

Operation deployment and marketing

The rollout was quick and effective:

• 13-16 April: pilot in 3 stores
• 17 April: extension to 9 additional stores
• 65% of the network ready within 0,5 month
• 95% of the network ready within 1 month, mid-May (just before the reopening of stores)

No specific marketing campaign was carried during lockdown, however, since early June, SM carries monthly promotions including rebates or free delivery when ordering via CTD, on thematic “essentials” catalogues (Mother’s day, Father’s day, Independence Day).

Quantitative results: future of Call to Deliver

Call to deliver generated 212 K transactions during the course of 10 weeks, with an average of 23 K transactions per week, including a peak of 36K orders just before the end of the lockdown.

During the week of reopening, this channel generated 18K orders, and went back to 25K after 4 weeks.

On average, Call to deliver generated 4,9K daily orders during lockdown, and 3,2K daily orders after.

Measured digitally, CTD marketing generated in June a growth of +76% impressions, +31% reach and 75K clicks, at a CPC of 0.35 euros.

Going further, Call to Deliver is now a permanent option, along with store shopping and e-commerce: an app is available, logistics is handled by the e-commerce fulfilment partner. The articulation between e-commerce and CTD is quite down to earth:

• E-commerce is for people who have the time to browse and wait for the products, i.e. distant customers, content to have access to a selection of skus from the website
• Call to Deliver is for people wanting to order anything from the nearby department store. SM realized that this was a good option for quarantined people, especially the elderly.

CONCLUSION AND BENEFITS

SM identifies 6 key learnings from this implementation that will be rolled out to all operations:

• Simplicity of process for ease of execution
• Operations involvement for continuous improvement
• “The right person to staff the station”
• Digital advertisement is the best medium to quickly gain awareness
• The best endorsers are the most satisfied customers
• Sharing of best practices is key for common success

CTD’s execution also led SM to consider fulfilling e-commerce from its stores, and not from a central stock as it did before.

At IADS, we also consider this experience interesting for the following reasons:

• Contributing to solidify a team spirit within each store by trying to set up something new, together,
• Impressive speed of execution and deployment thanks to management and teams cooperation
• A good solution proving that getting back in touch with local clientele does not always imply complex setups

video: Click here for more information about the Call to Deliver program

Sources on general situation of Philippines:

nCOv2019.Live: Covid Worldwide statistics

Foreign Policy, 14/03/20, Coronavirus Lockdown Launches Manila Into Pandemonium

Flanders Trade, Coronavirus, the situation in Philippines

BBC News, 04/08/20, Coronavirus: Millions return to lockdown in Philippines

The Diplomat, 07/08/20, Philippines tightens lockdown measures as Covid-19 cases rise and economy plunges

The News Lens, 18/08/20, Philippines Lockdown Lifted, no Relief for Frontline Workers

Manila Bulleting, 03/09/20, Moody’s sees deeper economic contraction in PH

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

Department stores are being challenged to rediscover what it means to serve their local customers. Going local in retail has been a trend for some time but the Covid-19 pandemic has brought it into focus and perhaps accelerated the trend. What does this mean for department stores and their business model?

The trend to local

The current Covid-19 pandemic has all but put an end to international travel and tourism, and indeed put a serious dent in national travel and tourism too. The proud department store boast comparing their visitor numbers to those of the Eiffel Tower, the Colosseum, the Great Wall, the Statue of Liberty, now seems irrelevant. At least this is the case for the world’s flagship stores, some of which relied on foreign tourists for upward of 60% of their business.

Even at a local level, shoppers are tending to remain in their own areas of the city rather than travel to shop.

For those department store chains present at a local level in smaller national cities, the challenge of getting their customers back into their stores is already great, especially if many customers have been tempted to use online alternatives. For the large flagships, the challenge is acute. Indeed, our city-centre flagships have been privileging customer experience in an effort to convince visitors to browse, stay as long as possible, be inspired and “shop”, as opposed to enter, search, find, pay and leave.

With the fear of contagion, shoppers are more than ever interested in convenience, in a frictionless intuitive experience, which allows them complete control over their use of time and effort. Even in the luxury world, as the hospitality industry is keenly aware, convenience is a type of luxury. The luxury retail world needs to take this on board in terms of knowledgeable and sensitive staff, and maximum use of technology, including for payments or inventory search for example.

If we combine this with another trend, that concerned with global warming, diminishing carbon footprints, gas and particle emissions, energy use and environmental preservation generally, then localism becomes even more attractive, and addresses a younger demographic. To a certain extent, this has already taken root in parts of the food retail industry, and, for example, in department store Manor’s local produce traceability to nearby farmers; see also Whole Foods local sourcing.

Local city

Department stores have been at the centre of the life of cities since their invention in the 19th Century. A reassessment of cities is currently underway in the light of environmental, health and social considerations which concentrates, for example, on grouping inhabitants’ needs within a 15-minute radius by foot or bicycle. Work, home, shops, entertainment, education and healthcare should all be available within the same time a commuter might once have waited on a railway platform, according to Carlos Moreno of the Sorbonne.

The recent opening of the first full-line Nordstrom store in Manhattan has attracted a lot of attention. Perhaps the equally important openings of two Nordstrom Local stores in the city have been less commented. The first Nordstrom Local in Melrose, LA, was noticed but, like the Manhattan stores, the two further ones in LA were not. And yet these are efforts to cater to a local population in terms of service, assortment and of course convenience. "Whether it is our Nordstrom Local locations on the Upper East Side and in the West Village, our new flagship opening, or our Nordstrom Rack locations across the city, we want to bring the added convenience of services such as online order pick-up, fast and easy returns, alterations, styling and more as close to customers as possible," Nordstrom's president of stores Jamie Nordstrom said in a statement.

The combination, at least for the moment, of flagship global brand store with local outlet, appears to be replicated with Nike which has recently opened its third House of Innovation in Paris after New York and Shanghai, while simultaneously developing the Nike Live local concept in California (Melrose and Long Beach) as well as in Tokyo.

Local community

It has now been conclusively demonstrated that most of the traffic for online department store customers comes from the area near the bricks and mortar stores. So even if the store itself depends heavily on tourists, the online sales form a hub pattern around the store. When this channel took off during the pandemic, a number of stores concentrated on what they could do to help their local communities. John Lewis, for example, donated £1.4 m to around 3000 local charities during the lockdown.

John Lewis has also recently vastly increased its local reach in spite of plans to close stores by partnering with 500 Coop shops to serve as collection locations.

Technology plays a part in convenience and efficient service: Marks & Spencer has recently introduced a Mobile Pay Go facility in 310 stores. It is available through the app and linked to the loyalty programme, and for the moment targets convenience shoppers. The Japanese giant Lawson convenience store company is rolling out prefabricated stores to local communities in China and planning to develop them in Japan also.

Economies of scope

The advantages of a local perspective described so far are clear in terms of serving the changing needs of the market. It allows:

• Targeting and personal service (return on service investment)
• Increasing quality of offer and relationship (adaptation to market)
• Developing trust and loyalty (dependable and stable customer base)
• Supporting the local economy (earning good will/increasing intangible asset)

However, it also requires some costs. For example:

• Adjustments in marketing (local and social media)
• Adapting assortment (local merchandise team)
• Agile supply chain
• Upgrade in staff skills base
• Relative management autonomy

Traditionally, department stores have relied on economies of scale: centralised management and support departments have allowed larger companies to get better prices for volume from suppliers, to minimise supply chain costs per unit, to rationalise management processes to reduce the marginal cost of growth etc. And these might still be relevant, to some extent, for some businesses.

However, the current situation underlines the obsolescence of the traditional mass-market approach of department stores. Other industries (and in particular manufacturing which is where the original inspiration for department store management found its roots) have moved on.

Technology and new management practices today offer new or refined capabilities:

• Flexibility which allows variety of designs or offers
• Rapid response to changes in market demand
• Greater control and accuracy leading to better quality and reliability
• Reduced waste of goods as well as of training and maintenance
• Greater predictability from information and data reducing markdowns and personnel costs
• More speed from smart processes and AI

All of these points challenge the assumptions of economies of scale which the volume-based department stores have been wedded to since their inception. (Even the higher end “luxury” department stores have been following that same logic, but compensating for their higher costs through a higher gross margin justified by enhanced service, innovation in merchandise or “customer experience”.) Arguably, technology, processes and management today allow a shift towards economies of scope, and a vastly different model of the department store.

Could it be that the team of outsiders currently running the John Lewis Partnership in the UK is moving in the right direction? They are closing stores (even recently opened ones), considering new businesses (retail and non-retail), planning to move to 60% online sales, developing partnerships (and reducing central staff) to increase flexibility, and revisiting their technology offer through further partnerships. Only time will tell; and it will depend at least as much on the execution as on the strategy. But the challenge of local is real.

Credits: IADS (Dr Christopher Knee)

What the world’s subways are doing to get people back on board.

Although Tube occupancy has picked up since the UK lockdown eased, passenger numbers at the end of July were still down 76 per cent on the same time last year. The New York subway has registered almost identical falls. In Tokyo, the Metro has seen passenger numbers increase from their low point in April, but they were still down 36 per cent in the fourth week of July. The thought of being infected with Covid-19 is enough to keep underground travellers at home.

Now the cities’ transportation authorities are taking diverse measures to reassure the commuters and attract them back on the trains.

Read the full article below

Are we ready to travel on underground trains?

The duty free market is usually fuelled by Chinese tourists overseas, and yet with the pandemic it’s China domestic travel retail industry that sees an impressive upswing. As the government estimates that about 500 million inter-provincial trips will be made during the October Golden Week holiday period, domestic duty free sales are expected to surge.

Business of Fashion looks at how domestic travel might save the duty free sector in China; while in another article Vogue Business highlights the Chinese's travelling spot for China Golden Week.

Can China Save Travel Retail in 2020?

Chinese shoppers skip Europe for Hainan and Macau this Golden Week

The decline of physical retail and the rise of the internet has been discussed for years, and yet the desire for retail experiences is on the rise. The Store Front looks at the notion of ‘retailtainment’ and immersive retail experiences, and take examples of several immersive shopping and customer experiences to attest that experiential retail is the future.

Read the full article below

9 Case studies that prove experiential retail is the future

With the democratisation of the internet, a new class of startups emerged: first generation of “direct-to-consumer” (DTC) companies. Today, many of those businesses are looking less viable than they once were. Many things have changed, and what has worked in the past almost certainly won’t work in the future. The path forward must include both a return to management fundamentals and a move beyond the existing DTC playbook to incorporate the learnings of the last decade.

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Reinventing the Direct-to-Consumer business model

Forbes argues that now is the moment for a bold investment and try-on policy regarding pricing. It is seen as the ultimate way to build customer relationship and trust, by making sure that everyone feels privileges, without falling prey to the permanent discount for everyone. In fact, this pricing strategy is already set for airlines companies & hospitality (yield management) and this article proposes to see it as a good way to make the customer feel special.

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why retailers need to innovate and experience now with dynamic discount and pricing

Covid radically hit the most recent retail projects opened in the US, Hudson Yards in NY in March 19, the American Dream mall in NJ in October 19, not to mention the first Nordstrom store in NY which opened the same month. In September 20, Hudson Yards is facing a lack of rent payment from 75% of its retailers and Neiman Marcus exitted, the American Dream mall plans to shift from 55% entertainment and 45% retail to 70% entertainment and 30% retail, and Nordstrom is negotiating rent reduction. However, this woes were not caused by Covid, which only played as an accelerator. Retail Dive argues that mall developers have been late into addressing digital, but, above all, need to rethink their role and the reasons why customers would need to come to their place. The involvement in society and commitment to local communities, by giving back, is key to create a personal relationship with clients.

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A case for radical retail reinvention

Bayard Winthrop, chief executive of a private, midsized sportswear retailer, American Giant, is sharing key lessons he learnt from the current situation. Lesson one “lead with digital”. Second lesson:”be creative about cost cutting and deal renegotiation”. Third lesson: “price matters, but so does purpose” as localism for instance is becoming more important and as younger consumers are demanding that the companies they spend money with reflect their values.

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How to survive the Covid-19 retail apocalypse

Online marketplace could be the answer to designers who don’t have an e-commerce, especially in times of crisis such as the one we are facing in 2020. It’s also a good way to reach more customers, potentially worldwide. However, the rise of marketplaces has led to strong competitions and many shuts down only a few months or year after being born. Can brands really trust marketplaces; and could those marketplaces replace the department stores? BoF looks at this issue.

Are Online Marketplaces the New Department Stores?

McKinsey reviews 6 business cases from various industries on how some players managed to reinvent themselves, their operations and their way to address the market, by focusing on 5 elements: digital implementation speed, readiness to challenge its own status quo, ability to put all its efforts into a project, taking decisions based on data, and focusing on customers. 6 companies explain their digital reinvention: real-estate RXR Realty, Goldman Sachs bank, mining companies Petrosea and Freeport, Levi-Strauss and Majid al Futtaim Retail.

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Six companies use technology & data to transform themselves

By observing that 14% of large corporations managed to increase their revenue during the last 4 crisis, the HBR is proposing a few methods to look at the situation and reassess the growth opportunities, by looking at usages and behaviour evolution, data and adopting multiple perspectives. The business model reconfiguration, taking into account today’s realities, needs also to make sure you are able to express your USP online, in addition to identifying the right target and tools to do so. In substance, it is not really the time to reduce your capex, but challenge the way it is spent, reallocating it if needed to different projects.

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Adapt your business to the new reality

“Retail renaissance” is the light at the end of the tunnel: no, the epidemic and the current situation will not last forever. By reminding that the marketing value of malls itself makes it worth saving them, by also remembering that they are usually located in the middle of transportation hubs, making them highly convenient, and by also disclosing that “the best kept secret in retail is that it is really difficult, if not impossible, to be profitable in e-commerce”, Forbes sends in a splash of optimism and encourages landlords to be bold even in crisis times, by investing in the experience.

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Malls are struggling now, but there is hope for a retail renaissance post-Covid

Lessons from a true professional of local retail: Whole Foods  employs what they call “foragers,” employees who are tasked with finding and growing the best local producers from the communities in which Whole Foods operates.

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How Whole Foods Became a Leader in Local

NYC’s House of Showfields location is envisioned as an “immersive retail experience,” that combines popup shops with art exhibitions and theatrical experiences. Self-proclamed “the most interesting store in the world,” Showfields offers a “new model of what a department store can be” according to Forbes.

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Showfields imagines a new kind of department store combining retail with theater

A new vision of the city which is simultaneously more convenient, more environment-friendly, and yet remains a thriving hub of culture and excitement. Conjugates local and global with consequences for flagship department stores.

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Welcome to the 15-minute city

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Covid-19 has changed people’s consuming habits, but how exactly? Lockdowns across the globe boosted trends that were already emerging before the pandemic. We identified these trends and reviewed some examples from various markets.

Home

The “Netflix and chill” was already the new hot Saturday night pre-covid, and people had been activating their nesting mode for the last few years, as shown by the “Hyyge” Danish trend (a sense of cosiness that comes from doing simple things such as lighting candles, baking, or spending time at home). This translates into quilts, pillows and good food to ensure a good night home. Obviously the trend was taken to an all new level when the pandemic forced us to stay in. A trend which might become the norm eventually, as remote working -already in sights pre-Covid- has also been accelerated by the situation. A study by FlexJobs released in February 2020 (before the pandemic) indicates that remote working has grown by 44% over the past five years in the US. A study by McKinsey published in July reveals that “74% of surveyed CFOs plan to keep part of their workforce permanently remote after the Covid-19 crisis.” McKinsey also highlights that in “around 200 million people were working remotely by the end of the Chinese New Year holiday” this year.

Lifestyle

Forced remote working (because of lockdowns) gave legitimacy to sweatpants, and more generally comfortable clothing. It follows the athleisure movement that already allows for people to walk down the street wearing leggings and sports equipment with style. Without overanalysing, we can only assume that the next generation of worker will be mobile and will need a hybrid workwear wardrobe both smart and comfortable, that adapts to the new habits of consumers: working from home to office, biking to work, using flexible offices. Additionally, in the current economic uncertainty and the financial crisis that will follow the health crisis, people are not particularly in the mood for crazy fashion. They need basic, daily essential clothing to suit the timing we are entering.

Local

The sanitary crisis also accelerated the desire for local consumption, in food and fashion. According to consulting firm Nielsen “local origin has become an important accelerator in brand/product decision making during COVID-19 and will remain a major choice driver into the future.” Indeed the fact that global supply chain slowed down during the lockdowns, forcing people to rely more on locally produce items, led to consumers putting more trust in the local market at the exit of the crisis. A study by Cetelem lead in Europe shows that “94% of those surveyed think that products manufactured in their home country offer an added guarantee and 93% believe the same is true of regional products.” Customers also see local consumption as a way to be more sustainable and to support the local economy.

All these trends do not necessarily question retail as we know it, but as we make it, and address the needed actions to activate the change, with a common guideline: go back to the essential.

What made the department stores great when they opened in the 19th century was to give clients the possibility to buy everything, and anything, at one place. It was convenient. Soon they started selling products made with valuable material. It was fancy. They had an assortment available nowhere else. It is exclusive. And they used to be a platform launch for brands. It was trendy. For some they welcomed clients in the most beautiful Art-Deco buildings. It was magical.

**WHAT NOW:

HOW CAN DEPARTMENT STORES ADAPT QUICKLY TO THE NEW TRENDS?**

Home & Lifestyle

Retailers should rethink their assortment and their lifestyle offer. Put the accent on home and furnishing, as people are learning to spend time in their own home again when they have been used to spend the biggest part of their day in an office for most of their life. Highlight clever ways to make a home-office. In its strategic plan, Swiss IADS member Manor indicates that it is repositioning its focus toward core activities such as home and beauty. During the lockdowns, Filipino IADS member SM Retail offered ‘ad-hoc’ catalogs, made-to-measure curated offers based on the physical inventory and focusing on immediate needs for customers like for Home, to ensure a good remote-work environment, and Toys, to keep the kids busy. There is no surprise that the home department was the busiest and most popular.

In fashion, department stores should turn toward a comfortable fashion offer, and stock stylish training gears that are necessary for the new urban equipment (bikes, scooters …) that are practical and wearable in the office, as Printemps did when opening outdoor dedicated space La Réserve in its Paris flagship.

Local – in terms of customers and assortment

Become again a local retailer. Big flagships in capital cities should compensate the lack of tourists’ flow by betting on their local clientele. Know you immediate customers, watch their environment, learn from their lifestyle, and gave them what they want and need. You don’t sell the same handbag to a Parisian woman and to a Chinese tourist. A way to know one’s customers is to offer one-to-one shopping experience such as personal stylists like French IADS member Galeries Lafayette did when launching its new personalised live video retail service in May 2020 or via extensive data gathering like Nike is doing through its diverse communication platforms (see our latest exclusive article here). For instance, Venezuela-based IADS member Beco reaches their customers directly on Instagram, attracting a younger, social-media savvy crowd. That is how the retailer adapted its offer before launching its e-commerce this summer.

Increase the offer of locally-made and locally-sourced produce in the lifestyle and the food departments is becoming necessary so retailers should turn to local designers and producers. Here again Manor is reinforcing its local F&B supply chain strategy, via its ‘Local’ label, promoting locally-sourced fresh organic products. Betting on local brands and producers is also a way to diversify the assortment from one big chain to another on a global level.

Conclusion: what is your next step?

Look at Texas-based retailer Neighborhood Goods whose success story should be an example and inspiration for department stores. Referred to as a “new type of department store” by the retailer itself, and dubbed ‘the new Sears’ by Forbes, the three physical locations (open in less than three years) feature an ever-changing rotating assortment, carefully curating brands that are right for each neighbourhood, and therefore offering something new each time a customer returns to the store. Plus, a rotating and time-limited assortment will help avoid being left with too much stock -especially in this uncertain timing.

We can question if having a rotating assortment a suitable model for department stores; or if investing in the local market will be their recovery. However we acknowledge that the health crisis, as it did for retail and fashion trends, has forced a change on department stores that had been in question for years now, and it is up to each to define what is their priority. Is it adapting assortment? Is it re-engaging with customers on all channels? Is it refocusing on core values?

Credits: IADS (Louise Ancora)

Vogue Business focuses on Fashion retailers struggles with global and local closures, according to the resurgence of the virus. Local lockdowns are an option we need to be prepared to. Leicester’s example in the UK shows that footfall after the second reopening fell by 30%. This means that the bond with local customers’ needs to be set up and activated as soon as possible and on a permanent basis, in order to be prepared at best.

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Can fashion survive a second wave of coronavirus?

In this article, the New York Times looks at issues the fashion industry was facing before the pandemic and how its collapse has been accelerated by the crisis. Among others, fashion designer Scott Sternberg explains how the pressure of the system, always in demand for more designs and over production, led him to shut is Band of Outsiders brand, long before the Covid-19 crisis.

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Sweatpants forever - how the fashion industry collapsed