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*Last May, LVMH signed a deal with Alibaba, cementing the luxury group’s omnichannel, data and digital capabilities. Through this agreement, LVMH will access Alibaba’s technology and investments, especially in AI capabilities, allowing luxury brands to be more accurate and personalised than ever. This is not unexpected: LVMH and Alibaba had already partnered in cloud data management for five years before changing gears. In addition, Alibaba is considered as a “global partner” by LVMH in a context where data is key to properly addressing Chinese customers’ needs, wherever they are in the world.

This is why the IADS interviewed Nicolas Cano, Fashion and Luxury Business Development Director at Tmall Luxury, a division of Alibaba, to understand more about the Alibaba ecosystem, how it completes LVMH’s expertise in the region, and what the luxury behemoth gets from this deal. He has over 15 years of international expertise in the luxury sector. He started his career at L’Oréal in the Luxury Division as a Product Manager before joining LVMH in 2005. He worked at Dior Homme, Christian Lacroix as Commercial Development Manager for Europe, and then EMEA. In 2010, Nicolas joined the Chalhoub Group to develop the Chanel franchise network in the Middle East. In 2016, he took over the General Management of the Symphony Group, the Alabbar Group's retail branch, deploying an omnichannel strategy and opening exclusive concept stores in the extension of the Dubai Mall. Since May 2018, Nicolas Cano has held the Fashion & Luxury Business Development Director position at Alibaba Group. He leads the e-commerce distribution of major Houses on Alibaba’s B2C platform, Tmall & Tmall Luxury Pavilion. Nicolas graduated from the L’Ecole Superieure de Commerce de Nantes (AUDENCIA).*

Introduction: Alibaba is a very unique business model in the world e-commerce landscape

Alibaba Group perfectly embodies China’s digital landscape, built over 20 years of customer needs’ observation and adaptation. It can be considered as the leading ecosystem on the market now, but not only: it is among the only ones in the world providing a true 360° approach to customers.

To achieve this level of expertise, the group is structured into 6 business units and a transversal set of companies:

• The International Digital Commerce Group, created in 2023, regroups all international e-commerce platforms, from Aliexpress and Alibaba.com (worldwide) to more localized entities, such as Lazada (S.E. Asia), Trendyol (Turkey), or Miravia (Spain).
• The Taobao Tmall business group includes Taobao (a C2C platform created in 2003 with 892m Monthly Average Users, MAU) and Tmall (a B2C platform created in 2008 with 877m MAU), two the larger platforms which both represent a different facet of China’s e-commerce reality.
• Two business units are dedicated to services to individuals (home delivery, localised delivery, digital media, entertainment), and two others are devoted to companies (cloud services, logistics),
• The ecosystem is completed with a transversal set of companies: Alibaba Health, Freshippo supermarkets, Fliggy travel agency, etc… all acting as funnels to capture customers into the larger ecosystem, but also as independent brands as well.

The Alibaba group ecosystem represents a fully omnichannel structure, articulating online and offline propositions in all consumption areas, including e-commerce, local services, cloud, financial services, and logistics, for both customers and companies (suppliers). Each app is designed to be an entry point to other apps from the ecosystem, keeping the customer in the Alibaba group universe. This unique proposition does not exist in the West due to privacy concerns: this fully integrated ecosystem allows for a 360° understanding of customers, from their tastes to their needs, even providing the possibility of anticipating their needs according to what they see, browse, or watch at any given moment. In China, customers’ rationale is different from western ones’: they are willing to let go a part of their privacy in exchange for performance and relevance in their shopping experience.

Another point worth noting: Chinese customers are digitally sophisticated, and probably more advanced on average than Western ones. This comes from the fact that China went from analogue to mobile without a sizeable, computerised era. As such, customers were born mobile-first and blending online and offline comes naturally for 97% of them, which means that a purely transactional approach does not work. Content and storytelling are key, as everything is about providing authenticity, emotion, and experience to customers who lack brand knowledge, but who learn fast. As such, Alibaba Group has focused very early on content creation, streaming, and social commerce on B2C and C2C platforms.

The Tmall Luxury Pavilion was launched in 2018 at the core of Tmall, not separate, to maximise the value of the 800m MAU traffic. This proved to be a winning formula: the Tmall Luxury Pavilion addresses the needs of 120m customers, of whom 60% are members of the “88VIP” loyalty programme. Out of these customers, the top ones spend an average of $14k a year on the platform. 5% of the customers provide 35% of the revenue.

Tmall focuses on customer experience, service digitisation, clienteling, engagement and innovation to always bring something new to clients. This means that, besides the transaction, Tmall aims to excel at product and brand push, search optimisation, and customer education before the purchase. Historically, in terms of brand proposition, Tmall and Tmall luxury started with premium labels, then moved to luxury brands, ultra-luxury brands, then niche. The current onboarding trend is all about super-specialized brands.

Tmall embodies the very notion of omnichannel retail

97% of Tmall’s clients are omnichannel customers, as they purchase on every possible platform, online or brick-and-mortar, and products are coming from a wide variety of fulfilling options (brands’ warehouses in or outside of mainland China, such as Farfetch and YNAP who ship their products from Hong Kong, brands’ partners’ warehouses…). Brands must team up with a partner to operate on Tmall, which acts as a mix between an exclusive multi-layered service provider and a retail representative .

In fact, Tmall, because it is a marketplace where brands must operate with a third-party partner, positions itself more as an amplifier than a pure retailer: they have the tech and the innovative tools to make brands stand out (AR, VR, digital collectables, virtual avatars, extended reality, blockchain…), which they offer to brands, allowing them to develop strong storytelling. An interesting point to make is that, for Tmall, customers are everywhere, be them end-customers, or brands:

• End customers are provided with a 360° experience with no boundaries between online and offline channels,
• Brands are given the space, tools, and capability to boost their creativity and offer an outstanding experience.

Tmall offers a wide variety of synergies between online and offline worlds and between end customers and brands, through various activations and activities: online and offline exhibitions, private viewings, made-to-measure service from online to store… For instance, Paris’ Place Vendôme was fully digitized and offered as a playground for brands, who could develop their creativity in this umbrella event and bring something new to customers. Numbers were astonishing: in 15 days, a billion customers attended the virtual event, they spent 1.7 times more time online, and new members joined the loyalty programme at a pace four times faster than in regular times.

Tmall has recently developed the “Meta pass,” a new activation that brings the online and offline worlds even closer: customers can purchase a digital collectable (NFT) in addition to the product, which provides them special access, benefits, or perks based on their ownership of the digital collectable. Cognac brand Hennessy recently used this approach to launch a new spirit.

Understanding the partnership with LVMH

Usually, brands are given the possibility to interact with and offer customers various perks on various platforms (for instance, a cashback from a purchase made on Tmall could be used on Taobao). VIC clients are leveraged through couponing, gifting, and payment instalments. To pilot this, brands have access to a dashboard that provides them with everything known about their customers’ behaviour on each platform (campaign ROI, CLV, information, etc.) and free access to Alibaba's technology.

The partnership with LVMH goes further, by providing additional, and exclusive, capabilities. It was not unforeseen as it started by a cooperation with Alibaba Cloud in 2020, focusing on data, omnichannel capabilities, and AI. Thirty LVMH brands then moved to the Alibaba Cloud for their Chinese operations, and some extended this partnership to the region.

This new deal allows LVMH to push this collaboration further: Alibaba provides LVMH access to 2 new AI languages the group has developed, and to a dedicated machine-learning platform. This, in turn, allows LVMH brands (including Sephora and DFS) to fully differentiate: their messaging, positioning and product proposition is less standardised than in the past, less similar from the competition, and more tailor-made to each brand.

In short, this partnership allows LVMH to tap into Alibaba’s vast investments in AI to leverage their operations in China (and potentially in the region) by:

• Fine-tuning their omnichannel strategy and limited-edition approach in a customised way for each customer,
• Create new digital experiences with more interesting shoppable content,
• Use new, state-of-the-art CRM tools that can be then seen as use-case for potential deployment outside of the region

*Given the size and the power of LVMH, such a deal with Alibaba/Tmall can appear surprising at first glance. However, one must keep in mind that, for many different reasons, the gap between how the West and the East operate in retail is increasing, and China, a strategic market for luxury, is a very good illustration, with customer behaviour and retail channels that simply do not exist in the US and Europe.

When looking at the current dynamics in China, it seems that the return to pre-pandemic international travels levels is very difficult to forecast: Chinese customers are increasingly favouring local consumption and local brands, all the more that, due to the COVID-19-related travel restrictions, they have been encouraged to rediscover their country instead of travelling abroad. As such, the incentive to travel far away has reduced. Also, another consequence of the pandemic is that they have taken even more the habit to inform themselves on social media, which suggests that anyone targeting them at a granular level needs to be efficient on social media platforms. It is difficult for foreign companies to do so, independently of their size or purchasing power.

This strategic alliance between LVMH and Alibaba can be therefore seen as the recognition by the French luxury group that such a different market as China requires a different, and individualized, approach, but might also show that, for them, the widening gap between how business is done in Europe/US on the one hand, and China on the other hand, is not going to resorb, and as such, a local partnership (whatever its size) is needed to project the business in the future.*

Credits: IADS (Selvane Mohandas du Ménil)

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Sustainability is not just a buzzword; it’s a pressing issue that demands our attention. Brands and retailers have put much effort into more responsible practices, but can they keep up with the increasingly stringent regulations? Are customers truly aligning their actions with their sustainability beliefs? IADS delves into the world of sustainability in fashion, exploring its meaning, how fashion brands and department stores can incorporate sustainable practices, and addressing the above questions.

Sustainability…. Everyone is talking about sustainability, but what does it really mean?

Sustainability refers to the practice of meeting present needs without compromising the ability of future generations to meet their own needs. It incorporates three main pillars: environmental protection, social equity, and economic viability. Applied to fashion, sustainability involves the entire lifecycle of a product, from design and raw material sourcing to production, distribution, use, and finally, disposal.

The fashion industry's environmental impact is not just a local issue but a global crisis. It's one of the largest contributors to pollution worldwide, with significant water consumption and pollution, carbon emissions, waste generation, and resource depletion. For instance, a fashion industry staple, cotton production, is notoriously water-intensive. Moreover, the dyeing and treatment processes for textiles often release harmful chemicals into water bodies, further increasing the problem. The fashion industry is responsible for approximately 10% of global carbon emissions due to the excessive use of fossil fuels in textile production and transportation. Furthermore, fast fashion has led to a culture of “disposability”, with consumers frequently discarding garments after only a few uses, resulting in vast amounts of textile waste, much of which ends up in landfills. Lastly, synthetic fibres, such as polyester, rely on non-recyclable resources like petroleum, and deforestation for materials like rayon contributes to biodiversity loss.

Sustainability in fashion extends beyond environmental considerations to include significant social and economic dimensions. The industry's impact on labour forces is particularly concerning, as many fashion brands outsource production to countries with weak labour laws, leading to exploitation, poor working conditions, and inadequate wages. Child labour remains a critical issue in some regions, with children working in hazardous conditions to produce garments and accessories. Workers often face unsafe environments, exposure to harmful chemicals, and inadequate safety measures, compromising their health and safety. Economic sustainability in fashion is not just about profits; it's about ensuring businesses can thrive financially while adopting responsible practices. This means paying fair wages, maintaining ethical supply chains, and adopting innovative business models like circular fashion, where products are designed for reuse, recycling, or composting. Educating consumers to make informed choices and fostering a market for sustainable products are also essential components of economic sustainability.

Case Studies: brands that have emerged as sustainable leaders

As environmental and social issues become increasingly pressing, fashion brands must adopt sustainable practices to remain up-to-date and responsible. This involves a diverse approach that addresses ecological impacts, social equity, and economic viability. By doing so, fashion brands can reduce their negative effects, drive innovation, capture new market opportunities, and contribute to a more sustainable future.

To achieve sustainability, fashion brands can implement various practices throughout their operations. These include incorporating eco-friendly materials, designing for durability, and creating timeless styles to reduce environmental impact. Using organic cotton, recycled polyester, and other sustainable materials minimises the ecological footprint of raw material sourcing and production. Ensuring fair labour practices, safe working conditions, and fair wages throughout the supply chain supports social sustainability. Transparency is also crucial; implementing traceability systems to monitor and report on the sustainability of supply chain practices builds consumer trust and ensures accountability. Minimising waste is another important strategy, and brands can do so by eliminating waste design techniques, recycling fabric scraps, and promoting garment repair and reuse. Energy efficiency is also essential for environmental sustainability, which involves utilising renewable energy sources, improving energy efficiency in production processes, and reducing carbon emissions. Responsible water use practices and the implementation of water-saving technologies in textile production can significantly reduce the industry's water footprint. Engaging consumers in sustainability efforts is vital; educating them about sustainable fashion, encouraging them to buy higher quality items less frequently, repairing and recycling garments, and making mindful purchasing decisions can drive broader changes in the market.

The transition to sustainability presents numerous challenges for fashion brands. Sustainable materials and ethical production processes can be more expensive, posing financial challenges for smaller brands. Shifting consumer preferences toward sustainable fashion requires significant marketing and educational efforts. Moreover, ensuring sustainability across complex global supply chains can be discouraging as it requires rigorous monitoring and collaboration.

Despite these challenges, substantial opportunities exist that brands can successfully adopt to differentiate themselves in a crowded market, attracting environmentally and socially conscious consumers. The quest for sustainability also drives innovation, developing new materials, technologies, and business models. Ultimately, sustainable practices contribute to the long-term life of fashion brands by alleviating risks associated with resource scarcity, regulatory changes, and shifting consumer preferences. By embracing sustainability, the fashion industry can reduce its environmental footprint and create a more fair and prosperous future for all interested parties.

Below are five case studies of sustainable brands:

Stella McCartney: a pioneer in sustainable luxury fashion, Stella McCartney’s brand avoids using leather and fur, uses eco-friendly materials, and promotes ethical production practices. Her Fall-Winter 2022 collection was 87% responsible, whilst her Spring-Summer 2023 collection reached 91% responsibly sourced materials.

Eileen Fisher: this brand focuses on timeless, sustainable fashion, using organic fibres, promoting garment recycling, and supporting fair labour practices. In 2022, 81% of their raw materials met third-party sustainable criteria, 73% of materials were processed using safer chemistry, they tracked 92% of their apparel manufacturers’ energy sources, and the brand supported eight policy initiatives in support of climate action, reproductive health, responsible business, and voting rights.

Reformation: emphasise transparency, provide detailed information about each product's environmental impact, and use sustainable materials and production processes. In the next few years, they want a 100% circularity commitment that removes new materials, makes all of their products recyclable, and helps them become climate-positive. They aim to do this in four different steps: making smarter materials, using better practices, making for good circularity, and transparency.

Patagonia: known for its commitment to environmental activism, Patagonia uses organised and recycled materials, supports fair trade practices, and encourages consumers to repair and recycle products. Its dedication to the climate is implicated in every part of its business. They want to reduce their carbon emissions by transforming how they make their products, use their resources to protect nature and support communities as they stop using fossil fuels, and demand systemic change from the industry and the government.

Ganni: rather than claiming a false vision of sustainability, Ganni focuses on innovation, transparency, and creating visibility for stakeholders and consumers through various honest and small initiatives that show a realistic path on the journey to becoming responsible.  These initiatives involve such things as using recycled materials for store props (such as rugs made of fabric waste), having a team dedicated to counting fabric innovations, recycling coffee waste to grow mushrooms, and consistency.

The role of department stores

Department stores in Europe face a unique challenge in the current sustainable fashion landscape with the new regulatory demands. They must ensure that their brands comply with new EU sustainability regulations, which require them to act as intermediaries, ensuring their suppliers meet the necessary standards. Using their significant purchasing power, they can influence and support brands in their supply chain to adopt sustainable practices, providing financial incentives, extending lead times, or offering logistical support for conformity.

In the US, retailers and brands are preparing to integrate the New York Fashion Act, also known as the Fashion Sustainability and Social Accountability Act, which was first introduced in 2022, and later reintroduced in 2023.

Department stores are directly accountable for meeting sustainability regulations for their private labels. This involves managing their own supply chains and ensuring agreement with the new standards, which will then mean investment in infrastructure, such as new machinery and systems for managing product data. Conformity comes with significant costs, including hiring data management staff and investing in energy-efficient technologies. Department stores need to balance these costs while remaining competitive in the market, and pricing strategies may need to be adjusted to reflect the increased costs of sustainable practices. Importantly, communicating the value of these practices to consumers can help justify higher prices.

Department stores can play a pivotal role in promoting partnerships with brands and suppliers, sharing the financial burden of compliance and developing innovative solutions for sustainability. Providing training and resources to suppliers can help them meet compliance requirements more effectively, acting as facilitators of knowledge and best practices.

There is an opportunity to educate consumers about the importance of sustainable fashion and the efforts being made to comply with new regulations, which can help build brand loyalty and justify higher prices. Offering transparency about the supply chain and the sustainability practices of private labels and other brands can enhance consumer trust and support.

Galeries Lafayette created a label called “Go for Good” as an example of this.  The “Go for Good” label is an initiative launched to promote responsible and sustainable fashion. It identifies products that meet social and environmental responsibility criteria, including eco-friendly materials, ethical production processes, and positive social impact. The goal is to make it easier for consumers to make informed, sustainable choices and support brands prioritising sustainability and ethical practices.

Incorporating sustainability into department stores' core values and business models can provide a competitive edge. This involves long-term planning and a commitment to sustainable practices. Department stores can also lead the way in finding innovative solutions to meet regulatory requirements, such as developing new sustainable materials or investing in renewable energy projects.

Green Pea, located in Turin, Italy, is a pioneering retail department store that opened in December 2020, dedicated to promoting sustainability and eco-friendly living, and is the world's first Green Retail Park focused on sustainable lifestyles. The building itself exemplifies sustainable architecture with features such as green roofs, solar panels, and geothermal energy systems, emphasising natural light and renewable materials.

It offers a diverse range of eco-friendly products, including clothing, home goods, food, and furniture. These items are sourced from brands committed to sustainability, ensuring they are made from renewable, recycled, or organic materials. Beyond shopping, Green Pea provides an environment with spaces for workshops, events, and exhibitions focused on green living and environmental awareness. The retail park also features restaurants prioritising organic and locally sourced ingredients and services like eco-friendly dry cleaning and electric vehicle charging stations. It aims to create a community centred around sustainability, offering educational programs and initiatives designed to inspire employees and visitors to adopt more sustainable lifestyles.

Critical concepts in understanding the environment’s impact on the retail industry are Scope 1, 2, and 3 emissions.

• Scope 1 emissions refer to direct emissions from sources owned or controlled by a company, such as emissions from company vehicles or on-site fuel combustion. In the retail sector, this includes emissions from delivery trucks, store heating systems, and any other equipment directly under the company’s control. Reducing Scope 1 emissions involves improving energy efficiency, adopting cleaner technologies, and transitioning to renewable energy sources.
• Scope 2 emissions encompass indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. For retailers, this typically involves the energy used to power stores, warehouses, and distribution centres. These emissions are not directly produced by the retail company but are a consequence of its energy consumption. Strategies to reduce Scope 2 emissions include investing in energy-efficient lighting and HVAC systems, purchasing green energy, and installing on-site renewable energy systems such as solar panels.
• Scope 3 emissions are the most extensive and challenging to manage, covering all other indirect emissions that occur in a company’s value chain. For the retail industry, this includes emissions from product manufacturing, transportation, use of sold products, and disposal. These emissions account for a significant portion of a retailer's carbon footprint, encompassing the entire product lifecycle. Reducing Scope 3 emissions requires collaboration with suppliers, improving supply chain efficiency, promoting sustainable products, and encouraging customers to adopt eco-friendly practices. Addressing this emission is vital for the retail industry to achieve comprehensive sustainability goals and reduce its overall environmental impact.

In summary, department stores must navigate the dual role of coordinating with the brands they carry and ensuring their private labels comply with new sustainability regulations. This requires strategic collaboration, significant investment in infrastructure, and a commitment to educating and engaging with consumers. By using their influence and resources, department stores can be crucial in driving the fashion industry towards a more sustainable future.

The behaviour where customers desire sustainability but continue to spend money on non-sustainable clothing is referred to as the “attitude-behaviour gap” or the “value-action gap”. This behaviour can be attributed to several factors, with cost and accessibility being number one on the list. Business of Fashion dedicated an article to “What’s behind the Slow Fashion Recession?” diving into the slow fashion movement and how it promotes ethical consumption and sustainability but how consumers struggle with the willingness to pay higher prices.

Sustainable clothing is often more expensive and less accessible than fast fashion alternatives. Many consumers may prioritise affordability and convenience over sustainability when making purchasing decisions. Awareness and understanding can also be seen as a factor. At the same time, consumers may be aware of sustainability as a concept, and they might not fully understand what makes a product sustainable or recognise the impact of their purchasing choices. Misleading marketing can also contribute to this confusion. Shopping habits and the convenience of fast fashion play a significant role here too.  Consumers are used to the quick turnover of styles, and the ease of purchasing from fast fashion brands makes it difficult to change consumer behaviour. Peer pressure and societal norms can influence purchasing behaviour. If sustainable fashion is not the norm in their social circles, consumers might find it challenging to change their shopping habits. In some markets, sustainable fashion options may be limited, making it difficult for consumers to find and purchase sustainable clothing.

Addressing this gap requires efforts from all parties involved. Brands must provide clear and honest information about their products and sustainability efforts. Educating consumers about the true cost of fashion and the benefits of sustainable choices can help bridge the gap, or by making sustainable fashion more affordable and accessible can encourage consumers to make more sustainable choices. This can possibly be achieved through economies of scale, innovations in sustainable materials, and supportive policies. Retailers and policymakers can implement strategies that push consumers towards more sustainable choices, such as rewarding sustainable purchases or making sustainable options more prominent. Lastly, encouraging a cultural shift towards valuing sustainability and responsible consumption can influence consumer behaviour over time.

While the attitude-behaviour gap is a significant challenge, addressing it through education, transparency, and systematic changes can help align consumer behaviour with their stated values.

*Leading brands such as Stella McCartney, Eileen Fisher, Reformation, Patagonia, and Ganni are setting examples by using eco-friendly materials, promoting transparency, and supporting fair labour practices. Department stores face the challenge of complying with local sustainability regulations and must manage their supply chains and educate consumers. Initiatives like Galeries Lafayette's "Go for Good" label and Green Pea's sustainable retail park in Turin demonstrate how stores can champion sustainable practices.

Understanding and reducing Scope 1, 2, and 3 emissions is essential for the retail sector. These emissions include direct emissions from company-owned sources, indirect emissions from purchased energy, and other indirect emissions throughout the value chain. Consumers often express a desire for sustainability but are reluctant to pay higher prices, a phenomenon known as the "attitude-behaviour gap." Factors influencing this gap include cost, accessibility, awareness, convenience, and social norms. Addressing this gap requires education, transparency, and systemic changes to align consumer behaviour with sustainable values.

Setting ambitious goals, particularly in areas like sustainability, is a complex effort that demands careful planning, commitment, and long-term vision. The difficulty lies in defining these targets and maintaining the determination to them through, even as circumstances change. Achieving such goals requires sustained effort, resources, and often the ability to adapt strategies without compromising the originally intent. Over time, as market conditions, political climates, and internal priorities shift, the temptation to revise or abandon these objectives can grow stronger. Yet, the true challenges to stay committed in pursuing these goals, ensuring that the initial ambition is not diluted or sidelined but is met with the persistence and innovation necessary to overcome obstacles and realise meaningful progress*

Credits: IADS (Elisabetta Falco Beccalli)

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*2023 has been a busy year for Magasin du Nord. With an unwavering commitment to meeting the evolving needs of its clientele, Magasin du Nord has introduced improvements and services such as BOPIS (Buy Online, Pick Up In Store) and harnessed cutting-edge technology through the implementation of smartwatch-equipped staff. New service lounges gathering all store services allowed Magasin du Nord to offer better and more efficient customer service. While retail operations were refined to achieve excellence in customer service and increase KPIs such as the conversion rate and the UPT, Magasin du Nord also launched layout changes and visual merchandising upgrades in their 3 most important stores (see the pictures review attached).

With the entire retail industry currently hoping that new technologies and approaches such as AI and retail media will help it reinvent itself, streamline, optimise operations and bring in new sources of revenue, the efforts recently made by Magasin du Nord (a company not shy when it comes to technological innovation) also show that to thrive in the new world, fundamentals have to be right. There is no point in building a state-of-the-art technological pyramid if the foundations are not well grounded.*

New services: BOPIS and on-demand staff

Click & Collect services were already available at Magasin du Nord with orders delivered in-store within 1 or 2 days. They recently introduced Buy Online Pick-up In-Store services (BOPIS). These purchases are now available within 1 to 3 hours for customers who pick up their orders in lockers. This solution makes this service easier to handle as assistance is not needed to retrieve purchases. Staff efficiency is improved as they take care of picking up the items bought, putting them in the lockers and informing customers of their availability. The service has been a great success during the Christmas period. While BOPIS services are seen as a huge opportunity to attract more customers and increase the conversion rate in the near future, it raises the question of how to handle growth with limited staff resources knowing the same people are assisting customers and dealing with BOPIS services. Also, Magasin du Nord opened a new automated warehouse closer to Copenhagen, Sweden and Norway (where they have an e-commerce presence). This will help store replenishment and allow Magasin du Nord to offer 2-day customer deliveries.

Magasin du Nord’s ambition is to offer excellent customer service while tightly managing resources. To that end, they tested a new in-store service from October 2023. The staff has been equipped with smartwatches (from the Turnpike system which offers solutions from store planning to task attribution). Each watch is part of an attributed zone, connected using the store's Wi-Fi and linked to ‘help’ buttons spread out across the store. When customers need assistance, they press the button which sends a signal to all the sales staff in the attributed zone. Staff members accept and go help the customer or they decline if busy, in which case the call goes to the next best person. Customers are informed a staff member will answer within a minute but the average waiting time is 17 seconds so far. The test has been highly successful, and the service will be rolled out to all stores. Besides, the data collected through help requests allowed Magasin du Nord to accurately know where customers need help. The customer service remains great and isn’t jeopardised as they found out customers are not necessarily interested in help except in specific areas such as home appliances. Since they don’t need help in all departments, Magasin du Nord increases self-service wherever it is possible. The smartwatch system helps a lot in conversion rate as customers are served faster and where they truly need to be. It implies that all store staff organisation has to be reviewed to make sure customer requests are answered within one minute. The stores that are already equipped have the highest level of staff availability.

Service lounges gathering all store services

Magasin du Nord has been rethinking how services are organised and managed. They replaced all existing service desks scattered across the shop floors with one new, bigger and improved service area per floor. Usually located in the middle of the floor, these new service lounges have been tested for several months and are currently being rolled out to all stores. They offer the following services:

•    Cash desks: they are equipped with a queuing system and are 100% managed by cashiers. Centralising cash desks in the centre of the store improves store operations but also makes it easier for the customer to have a place where they can always connect with staff and get assistance. Magasin du Nord’s cashiers are trained to be able to offer all store services which is key to increasing conversion. They are empowered in terms of responsibility so that they don’t need to call supervisors for operations such as product returns.

• Impulse buying small items.
• Tax-free services.
• Product returns.
• Storage services.
• Gift wrapping: the service is highly appreciated by customers. Depending on the loyalty programme tier they are part of, customers can access various gift-wrapping options and personalisation.
• Fitting rooms: they have been designed to be bigger than before. Also, they are equipped with iPads, enabling customers to request help directly from the fitting room and connect with the staff.
• A sitting area.
• The personal shopping lounge: Magasin du Nord found that it is more efficient to make the personal shopping service visible instead of making it more luxurious and setting it up in a hidden place. Since then, the service has been more successful which positively impacts the conversion rate and the UPT. The lounge also serves as a space for influencers.

Visual improvements: new flagship store entrance, Aarhus and Lyngby new layouts

Store appeal starts outside. This is why Magasin du Nord revamped Copenhagen Kongens Nytorv's flagship store entrance. It used to be all glass, dark and unwelcoming. The ceiling was also made of dark materials and light was scarce. Over 2 million customers a year use this entrance, therefore it was imperative to welcome them with an improved first impression. They changed the all-glass façade to light grey ceramic tiles and a mirror-tiled ceiling equipped with better lighting. They had a small flower shop selling flowers from black plastic baskets. They upgraded it to match the new entrance ‘look & feel’: flowers are now displayed in modern metal grey boxes. The flower shop creates true life and a positive atmosphere around the entrance.

Changes also happened in Aarhus and Lyngby, the largest locations after Copenhagen’s flagship store. Aarhus's ground floor has a new multi-brand jewellery concept with all windows opened to the street to create life. Units are given to brands that can show their DNA with Magasin du Nord controlling the overall environment and service.

Aarhus men’s and women’s fashion floors used to be organised around a single centre walkway with large 3-wall shop-in-shops around. This layout lacked flexibility, with an inefficient use of space and resulted in poor profitability per sqm. Also, non-harmonized types and sizes of fitting rooms and cash desks were scattered across the floor. They now have a new floor layout with smaller 3-wall shop-in-shops allowing them to introduce more brands on smaller surfaces, hence a larger choice for customers with carefully curated merchandise ranges. Thanks to this new layout, they could also introduce their men’s and women’s young fashion concept which was only available in the Copenhagen store. All brand names are displayed in frames on shop-in-shop back walls for more clarity. In the centre of the floor, they now have a double walkway surrounding small flexible soft branded shops of approx. 15 sqm. The new fixtures allow easy changes to onboard new brands and adapt to the current trends customers are expecting from the store. Walls are painted in various tone-on-tone colours to create different atmospheres between casual, formal and young areas. As described above, a large service area including cash desks, fitting rooms and the personal shopping lounge (directly opening on the floor for special events) has been set up in the middle of the floor, directly accessible from the floor and opened to natural lights thanks to windows on the street.

Finally, creating a way to greet customers at the entrance of both men’s and women’s floors is considered strategic. Not initially designed to sell anything to customers, these new spaces are made of bench elements to offer a nice seating area. Located close to the service area, the new ‘greeting spaces’ have also been designed for specific campaigns or events and to be rented to brands for product launches.

Lingby's ground floor has been revamped. A new walkway runs through the centre of the store and connects the entrance with the escalator. Thanks to a new layout, they could introduce more partner shops whose soft corners use flexible fixtures and walls. Socks and stockings were moved to the women’s shoe section to give more space to the lingerie department which has also been renovated. The lingerie revamp included new fitting rooms and a personal shopper lounge using new fixtures as well as a new modern green palette, moving away from the obvious pink and frills imagery. A new jewellery section offers new furniture and floorings. Finally, the ground floor includes food offerings which have been regrouped with the addition of Magasin du Nord’s multi-brand concept (also available in Kongens Nytorv store).

Through strategic resource management and technological integration, Magasin du Nord has great customer service, setting new benchmarks for efficiency and customer satisfaction. By centralising services into sophisticated lounges, reimagining store layouts, and enhancing visual appeal, Magasin du Nord has created an immersive and seamless shopping environment that resonates with their clientele. This year, Magasin du Nord will continue working on retail fundamentals and improving standards in terms of in-store visuals and operations. To grow sales, they are also looking into increasing opening hours. Finally, to offer better customer service and to improve staff availability when it matters, they are working on finding the right balance between the 2 biggest months (November and December) and the other 10.

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Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

IADS recently held a meeting all about the Women's Fashion brands to look out for in 2024. Based on market research, IADS and NellyRodi presented a curated selection of 18 brands that are trending right now.

Check out our selection of these brands, and the pictures below!

MUST HAVE

GANNI

Ganni is a contemporary Danish fashion brand known for its playful, effortless, and distinctive designs that blend Scandinavian minimalism with bold, vibrant patterns. Established in 2000, Ganni has gained international acclaim for its innovative approach to everyday wear, focusing on sustainability and inclusivity while maintaining a chic, modern aesthetic.

Check out the Ganni website here

CHECK OUT ganni's INSTAGRAM

STAUD

Staud is a Los Angeles-based fashion brand founded in 2015 by Sarah Staudinger and George Augusto, celebrated for its modern, retro-inspired designs that blend sophistication with a playful edge. The brand is renowned for its distinctive use of vibrant colors, unique silhouettes, and innovative accessories, making high-fashion accessible and stylishly fun.

Check out the staud website here

check out the staud instagram here

RAINS

Rains is a Danish fashion brand founded in 2012, specializing in modern, high-quality rainwear that combines functionality with contemporary design. Known for its sleek, minimalist aesthetic, Rains offers a range of waterproof outerwear, bags, and accessories that are both practical and stylish. The brand has gained international recognition for its innovative use of materials and commitment to sustainable practices.

Check out the rains website here

check out the rains instagram here

SEA NEW YORK

Sea New York is an American fashion brand known for its romantic and bohemian aesthetic. The brand offers a mix of vintage-inspired silhouettes, intricate detailing, and modern sophistication. Sea New York's collections often feature feminine dresses, delicate lace, and unique prints, appealing to those who appreciate timeless, whimsical fashion.

Check out the sea new york website here

Check out the sea new york instagram here

BARRIE

Barrie is a Scottish fashion brand renowned for its luxurious cashmere knitwear, blending traditional craftsmanship with contemporary design. The brand offers a range of high-quality sweaters, cardigans, and accessories, celebrated for their softness, durability, and intricate detailing. Barrie has earned a reputation for its cashmere pieces, appealing to those who value timeless elegance and superior quality.

check out the barrie website here 

check out the barrie instagram here 

ON TREND

COURRÉGES

Courrèges is a French fashion brand founded in 1961, renowned for its futuristic designs and innovative use of materials. Known for pioneering the mod and space-age looks of the 1960s, Courrèges offers sleek, geometric silhouettes and bold, minimalist styles. The brand continues to influence contemporary fashion with its avant-garde approach and distinctive aesthetic.

Check out the courréges Website Here 

check out the courréges instagram here

SAKS POTTS

Saks Potts is a Danish fashion brand founded in 2014, known for its bold, playful designs and luxurious outerwear. The brand offers eye-catching pieces that blend Scandinavian minimalism with eclectic, modern flair. Saks Potts has gained international acclaim for its innovative approach to fashion, appealing to those who appreciate unique, statement pieces.

check out the saks potts website here 

check out the saks potts instagram here

CASABLANCA

Casablanca is a French-Moroccan fashion brand founded in 2018, known for its luxurious, vibrant designs that blend leisurewear with a sophisticated, sporty aesthetic. The brand offers a range of high-quality pieces featuring bold prints, rich colors, and exquisite craftsmanship. Casablanca draws inspiration from its founder's dual heritage, creating a unique fusion of Parisian elegance and Moroccan charm.

check out the casablanca website here 

check out the casablanca instagram here

LOW CLASSIC

Low Classic is a Korean fashion brand known for its minimalist, contemporary designs that emphasize clean lines and timeless elegance. The brand offers a range of sophisticated, versatile pieces that blend traditional craftsmanship with modern sensibilities. Low Classic's approach to fashion is characterized by understated luxury and a focus on high-quality materials and sustainability.

checkout the low classic website here 

checkout the fara low classic instagram here 

RISING TALENTS

LA VESTE

La Veste is a Spanish fashion brand known for its vibrant, eclectic designs and retro-inspired aesthetic. Founded by Blanca Miró and María de la Orden, the brand offers unique, statement-making pieces characterized by bold patterns, bright colors, and playful silhouettes. La Veste has gained a following for its innovative approach to vintage fashion, blending nostalgia with contemporary flair.

Check out the la veste website here

Check out the la veste instagram here

ESTER MANAS

Ester Manas is a Belgian fashion brand celebrated for its inclusive, body-positive designs that cater to a wide range of sizes. The brand offers bold, innovative pieces characterized by stretchy, adjustable fabrics and dynamic silhouettes, emphasizing comfort and versatility. Ester Manas has gained acclaim for challenging traditional fashion norms and promoting diversity and sustainability in the industry.

Check out the ester manas website here 

check out the ester manas instagram here

CARO EDITIONS

Caro Editions is a Swiss fashion brand known for its elegant, timeless designs and commitment to sustainable practices. The brand offers a range of high-quality, versatile pieces characterized by clean lines, refined details, and luxurious materials. Caro Editions has gained recognition for its ethical approach to fashion, blending classic aesthetics with modern sustainability.

check out the Caro editions website here

check out the caro editions instagram here

TIME

Time is a prominent Korean fashion brand known for its sophisticated, elegant designs that cater to modern, professional women. The brand offers high-quality pieces characterized by clean lines, luxurious fabrics, and timeless silhouettes. Time has established a reputation for its refined aesthetic and attention to detail, making it a favorite among those who appreciate classic yet contemporary fashion.

check out the time website here

check out the time instagram here

HIDDEN GEMS

BITE STUDIOS

Bite Studios is a Swedish fashion brand renowned for its commitment to sustainability and timeless design. The brand offers meticulously crafted pieces made from organic and recycled materials, characterized by minimalist silhouettes and high-quality construction. Bite Studios has gained recognition for its ethical approach, blending contemporary aesthetics with environmental consciousness.

Check out the bite studios website here

Check out the bite studios instagram here 

RUS THE BRAND

Rus The Brand is a Spanish fashion label known for its minimalist, timeless designs and commitment to sustainability. The brand offers a range of high-quality, versatile pieces crafted from natural materials, emphasizing comfort and durability. Rus The Brand has gained recognition for its understated elegance and ethical approach to fashion, appealing to those who appreciate simplicity and conscientious craftsmanship.

Check out the rus the brand website here 

CHECK OUT THE rus the brand instagram here

VALENTINE WITMEUR LAB

Valentine Witmeur Lab is a Belgian fashion brand celebrated for its luxurious knitwear and contemporary designs. The brand offers high-quality pieces characterized by bold colors, unique textures, and impeccable craftsmanship. Valentine Witmeur Lab has gained a following for its modern, sophisticated approach to fashion, blending comfort with stylish elegance.

Check out the valentine witmeur lab website here

CHECK OUT THE valentine witmeur lab INSTAGRAM HERE

HIDEMI

Hidemi is a Chinese fashion brand known for its blend of contemporary design and traditional craftsmanship. The brand offers a range of high-quality pieces characterized by clean lines, innovative cuts, and luxurious fabrics. Hidemi has gained recognition for its unique aesthetic, which combines modern fashion sensibilities with a deep appreciation for cultural heritage.

Check out the hidemi website here

check out the hidemi instagram here

EN VRAC PARIS

En Vrac Paris is a French fashion brand known for its eclectic, avant-garde designs and sustainable practices. The brand offers a range of unique, high-quality pieces characterized by bold patterns, innovative cuts, and artistic flair. En Vrac Paris has gained recognition for its creative approach to fashion, blending contemporary aesthetics with a commitment to environmental responsibility.

check out the en vrac paris website here

check out the en vrac paris instagram here

Printable version

*Paris’ Champs-Élysées have a rich history. Originally designed in 1667 by Le Nôtre, the famous French architect created a long tree-lined promenade starting from the Tuileries Palace. In the 20th century, the avenue experienced spectacular growth with the arrival of major stores, cinemas, and famous cafés such as Fouquet's. These establishments attracted an international clientele, earning the Champs-Élysées the reputation of "the most beautiful avenue in the world” where something was always happening. Luxury brands opened stores, transforming the avenue into a high-end shopping area./nbsp]

However, starting in the 1980s, the avenue began to experience a period of decline, luxury brands gradually gave way to more mainstream stores such as McDonald's, Zara and H&M, leading to a gradual dissatisfaction among Parisians. Between 1990 and the 2000s, many shopping arcades, once the pride of the Champs-Élysées, were deserted. The avenue lost its lustre, failing to attract the sophisticated clientele it once did. Allowing easy access from the suburbs, the opening of the regional train also changed the avenue's visitor profile, reinforcing its mass consumption image. More recently, the avenue faced years of "yellow jackets" protests, strikes and the pandemic, which drove away potential customers.

But the renewed appeal of the most famous avenue in the world is confirmed: there is a Champs-Elysées Renaissance.

Welcoming 300,000 pedestrians on busy days, the avenue is transforming into a prime showcase for brands. As measured by Knight Frank, the avenue recorded 46 brand movements in 2022 and 2023, especially in the sports and luxury sectors: 46% were new store openings, and 54% were relocations, expansions, or renovations. The movements recorded over the past 2 years involved 24% luxury brands and 17% sportswear brands.

Who will win the attention of tourists coming to the Olympics? Considering their investments, luxury and sport-style brands seem best positioned. Moreover, in the long run, who will win the 110 million people passing through the Champs-Élysées each year? Will the Olympics bring additional business?*

The Champs-Elysées Renaissance began before the Olympics, with luxury brands paving the way

In 1989, the city hall declared avenue rehabilitation was a major priority, aiming to restore the avenue's original purpose as a promenade. To that end, more than 4 additional hectares of sidewalks were created, with 2 rows of trees forming a pedestrian mall over a kilometre long. Truly enhancing the avenue, the works were completed in 1994 and involved famous international architects such as Norman Foster for the urban furniture.

The opening of the Sephora flagship store on number 72 in 1996, a milestone for the avenue, paved the way for luxury brands. Reopened in October 2023 after 6 months of strategic refurbishment, the store aims to reinvent the flagship experience ahead of the Olympics, especially as Sephora is an official partner of the torch relay. The store now offers a brighter, more open design, with elements inspired by Parisian architecture. Features include a central white marble path, a 90-meter-long glass-illuminated ceiling, and more natural materials like wood and plants. The store layout has been optimised for better navigation and customer experience to cater to a high volume of international visitors, previously recorded at 12 million annually. Louis Vuitton’s flagship store (number 101) opening in 2005 marked the beginning of the avenue’s retail transformation. Other luxury brands followed, reaffirming the Champs-Élysées' status as a luxury avenue: for example, also opened in 2005, Cartier settled close to the Arc de Triomphe, as well as Bulgari opening in 2016.

Closer to the time being, in March 2019, Galeries Lafayette launched a new department store format on number 60, willing to be more of a concept store than a traditional one. The store has 3 floors offering women's and men's fashion and accessories, beauty, restaurants, and a food court. Since then, the store has gained efficiency by rethinking the brand mix, offering a combination of premium, social brands, streetwear, designer and luxury brands. When asked about the Champs-Elysées store in June 2024, CEO Nicolas Houzé acknowledged that the store performance had "not been what we expected" for the store opened "at the worst time in the avenue's history". However, a "significant effort on the product offering, the teams, and the communication allows us to believe in a promising future."

Dior, Moncler, and Saint Laurent soon followed and settled in the highest part of the avenue (numbers 127, 119, and 123), in the surroundings of Louis Vuitton, the avenue’s luxury staple. Dior opened in July 2019, Moncler in December 2020 and Saint Laurent in December 2023. Same as Moncler, Saint Laurent made a bold choice as it is the brand’s largest boutique in the world. Presenting the entire range, including men's and women's fashion, accessories, and jewellery, this four-story store offers a minimalist aesthetic, blending raw textures with luxurious details. The store features art pieces and a VIP area.

At the intersection of luxury and sport-style, Calvin Klein unveiled a new global flagship store on number 44 in June 2024. The opening is part of a long-term strategy rather than solely driven by the Olympics. “We are not opening because of the Olympics. We are opening because it’s the right place to be for our brand. We’re excited by the momentum around the Champs-Élysées”, said global brand president Eva Serrano. The 850-square-meter store includes the brand’s full range of products, including menswear, womenswear, accessories, eyewear, fragrance, underwear, loungewear, swimwear, and sportswear. Ideally positioned in the lower part of the avenue close to Sephora and Lacoste, the flagship aims to solidify Calvin Klein’s positioning as a lifestyle brand focused on aspirational customers.

The Olympics, a booster for the ‘sport-style’ segment on the avenue

Streetwear and sportswear retailers and brands were early contributors to the avenue Renaissance. Taking over Nike, Citadium opened a second Parisian flagship store on Champs Elysées in July 2017 (number 65). Printemps’ streetwear and youth-oriented retailer new store is 1,600-square-meter on 3 levels. The store is supposed to attract 3.5 to 4 million visitors annually, with tourists potentially representing half of the clientele.

Nike House of Innovation opened in July 2020 at number 79. Blending digital and physical immersive experiences, the store was the brand’s first House of Innovation in Europe and the third worldwide, following locations in New York and Shanghai. Spanning 2,600 square meters over 4 floors, the flagship store features phygital initiatives such as QR codes on most items allowing quick delivery in your size in a fitting room. The store also offers self-checkout stations: order your item and have it delivered, try it on, buy it via the app, and leave the store. Storytelling is also emphasised, with a memory wall retracing the evolution of the Nike Air sneakers through to 2020, pointing out its progress and innovation.

Opened in June 2022 at number 50, Lacoste Arena, the brand’s 3-storey first global flagship store, emphasises the link between fashion and sport by balancing experiential spaces (exhibition space, customisation, interactive polo carrousel), entertainment corners (photo booth, VR featuring crocodiles) and sales areas. It addresses all types of shoppers: fashion and streetwear fans, sports addicts or consumers looking for sustainability.

In September 2022, Foot Locker changed locations to open its biggest European store at number 36. The store offers a high-level shopping experience, including technology-driven experiences, original artworks and a resting space with sofas. It includes multiple QR codes for customers to scan throughout the store and a large curved LED screen for interactive quizzes and gift giveaways.

Lululemon opened a flagship store at number 38 in December 2022, a crucial step in the brand’s expansion in the French market. The flagship store features spacious fitting rooms and a "shopping suite" area for a more personalised shopping experience, aligning with the company’s omnichannel strategy. Also, the brand has formed local partnerships to organise sports classes at local gym studios.

Clearly focusing on young customer segments, JD Sports opened 1,600 square meters over 2 levels at number 118 in April 2024. Locating the store in the higher part of the avenue is an exception, as counterparts are more settled in the middle and lower parts. Adidas, already present on the avenue, decided to move its flagship store to number 88, a 3-level 3,700 square meter location, making it the largest Adidas store in Europe. Opened in May 2024, the new "Home of Sport" store highlights lifestyle collections, premium collaborations and performance products, including a "run lab" for gait analysis. The store also offers a customisation area and features various artistic collaborations. Adidas plans several marketing activations, including appearances by Zinedine Zidane and other celebrities.

After opening in the Marais, Madeleine and Saint-Germain-des-Prés areas, Salomon has opened a new flagship store on the Champs-Élysées (number 42) in June 2024, aiming to elevate its sport-style positioning. This move aligns with Amer’s strategy to transform Salomon into a lifestyle brand while maintaining its mountain sports heritage. The Champs-Élysées store focuses on Salomon's history and innovative products, aiming to blend performance with sport-style. Salomon's approach aims to cater to both markets without losing authenticity. The brand's footwear category remains central, accounting for 80% of its revenue. Salomon's strategic expansion also includes new brand ambassadors to strengthen its presence in the fashion and culture sectors.

Offering a better customer experience than before, Levi's has relocated its flagship store from number 76 to number 44. The new store, opposite Lacoste and next to Calvin Klein's flagship, spans 540 square meters. This move enhances Levi's visibility, prominently displaying its iconic denim culture from the street. The store has a fully blue aesthetic. A dedicated section honours the history of the 501 model. They attached a sales associate to it, acting as a denim ambassador to share detailed stories about the products. The Tailor Shop, offering customisation and repairs, has been expanded to include a team of 4 dedicated staff members. The store also plans to host events to engage the artistic community. Touch screens are available to assist customers. The fitting rooms have been redesigned to offer more space and better service.

Finally, after an initial success in the Saint-Germain-des-Prés district, On opened at number 65 just 2 weeks before the Olympics. With 1,500 square meters, it is not just a store but a 3-storey shrine dedicated to running and innovation, offering an experience combining performance and design, well-being and personal achievement. Also surfing on the current tennis core trend, On introduced a more complete tennis offer, referencing Roger Federer.

What to expect from the Olympics?

First, the avenue is a magnet again for brands and tourists alike. The commercial vacancy rate on the Champs-Elysées has significantly dropped. Knight Frank said it fell to 3.7%, compared to nearly 10% at the end of 2022. Despite this, rents have not significantly increased, having already peaked before the pandemic. According to a study by Cushman & Wakefield and Mytraffic, the avenue's foot traffic increased by 15% between May 2022 and June 2023 compared to May 2021 to June 2022.

Second, to make the most of the Olympics, local businesses decided they could not wait for the multimillion-euro project planned after the Olympics, turning the area into an “extraordinary garden”. Instead, 180 businesses approved a plan to give the avenue a much-needed makeover to eliminate the ugly terraces. They are now standardised and aligned to ease the flow of pedestrians. Each terrace costs €400,000, showing how businesses are expecting from the Olympics opportunity. The alignment opens up the view between Place de la Concorde and the Arc de Triomphe and allows more of the avenue’s historic facades to be seen.

On the brands’ side, they aim to benefit long-term from the return of foot traffic to the Champs-Elysées. Beginning on 26 July, the Olympics certainly impacted the avenue turnaround. "The Olympics have been a booster, but businesses are not venturing into this market for just 3 weeks of the Olympics. It's a vector for accelerating a development plan; however, the outlook is long-term," explains Antoine Salmon, head of retail at Knight Frank.

Let’s see what the future holds, but tour operators are recording a slight decrease in tourist reservations during the Olympics compared to usual. The decline is small—about 2%—but it disappoints the sector. Similarly, hotels and Airbnb locations are observing a slowdown in reservations. In other words, July is less dynamic due to the Paris 2024 Olympic Games. Tourists are cautious and avoid France, especially Paris: they fear being unable to move freely, access tourist sites, or be hindered by security measures. Additionally, the threat of terrorism, to which Asian and American tourists are sensitive, is a concern. According to estimates from the Paris tourist office, 60% of the Olympics’ tourism revenue comes from foreign visitors. Nicolas Houzé is also cautious and estimates the Olympics are "an extraordinary showcase for the city of Paris" but will complicate accessibility to the city centre. The group has anticipated a "decline in activity of about 5 to 10% over the two summer months," which they hope to recover afterwards. "This happened to our English counterparts after the London Games," he explained.

Recent openings are momentum in the transformation of the Champs-Élysées, merging luxury with sports to draw in a varied clientele. Sportswear and brands specialised in ‘sport style’ have widely settled on the avenue. With a robust, attractive and concentrated zone in the middle and lower parts of the avenue (on both sides of the avenue, from 79 with Nike to 36 with Foot Locker), these brands are well positioned and prepared for the Olympics. Also represented, luxury brands have the power to attract tourists. Champs-Elysées has always been a place for superlatives as many retailers position their largest flagship stores. Results will be measured in the long run, as the Olympics are expected to disappoint the retail sector. The Olympic's impact will be measured over the years, acting on the overall appeal of Paris. The overall economic impact of the Olympics in the Île-de-France region (Paris and suburbs) is estimated at between €6.7 and €11.1 billion over a 17-year period (2018-2034). Despite the 16 million visitors expected, this does not give any indication of the profitability of the event itself.

Credits: IADS (Christine Montard)

Printable version

It is not every day that a retail CEO knows and plans his exit as the leader of a retail brand, but this is precisely what made Philip Mountford, the current CEO of Hunkemöller, an interesting guest speaker for the IADS 64th General Assembly in London last November.

Philip Mountford's career in fashion retail spans significant roles across Europe and the UK. He started at Simpson Piccadilly as a purchasing director, then advanced to senior positions in renowned companies. As CEO of Moss Bros Group PLC, he led a major menswear retailer with an extensive store network and franchise partnerships with brands like Hugo Boss and Canali. He also held the Managing Director role at Gianni Versace, focusing on regions including the UK, Ireland, and Scandinavia, and had pivotal roles at Nautica and Daks PLC. Most notably, as CEO of Hunkemöller, Europe's largest lingerie brand, he grew the business to an €800 million valuation, with e-commerce driving 40% of sales. Mountford stepped down from his position at Hunkemöller in January of this year after a transformative 15-year tenure. Before stepping down, he was able to address IADS CEOs and answer their burning questions with candid and open responses.

Hunkemöller: A lingerie brand with reinvention at its core

Since its founding in 1886, Hunkemöller has been no stranger to reinvention. This reinvention has been carried out through the test of time for the lingerie brand to weather many challenges that retailers have had to face. In the 2010s, the pace and scale of this reinvention were accelerated to expand more and to encompass the new digital age. Originally, it took Hunkemöller 100 years to open 100 stores, but when Philip Mountford took over, they opened 100 more stores in less than a year and they achieved over €300 million in e-commerce sales. Interestingly, reinvention was also a strong requirement from Hunkemöller’s shareholders: in the course of 15 years, Mountford has supervised the sale of the brand to 5 different owners, all expecting a satisfying ROI, and therefore, a new and adequate strategy to achieve it.

Marketing and brand building: A strong DNA 

One area of focus that has been key for Hunkemöller is its brand DNA and mission. Hunkemöller started as a classic business with the average age of its customers and employees at 45. True to its trend of reinvention, today the average age of the employees is sub-28. Due to the increased importance of social media to reach target customers, Hunkemöller has made this area of its business a key driver and is even considered by tech providers as one of the most advanced in testing and implementing new practices. The retailer has been so open to adopting new tech that Meta and Google have even included Hunkemöller in their test team to try out new features and solutions first as they are so progressive as a use case.

For example, Hunkemöller was included in a Google project where they built out a datalake that allows them to pull information to learn more about their customers. The information gives them access to sales data which allows the business to understand the customer’s shopping habits such as the frequency they visit, the months they shop, and their e-commerce habits. This data allows Hunkemöller to stimulate the customer in periods they tend to shop. They then use this data to find customers that are visiting a little bit more frequently or spending a little bit more than the target group so they can find ways to get the customers to increase their purchase behaviour to match the next level of shopper. The Hunkemöller app helps with this process by sending customers push notifications to stimulate their activity during certain times. The whole project took 2.5 years and required Mountford to hire a data scientist who gets paid as much as a senior director.

A focus on the target customer: age is not just a number 

Hunkemöller as a lingerie brand fully understands what it means to support women while being in touch, playful, and empowering at the same time. This is why they call their target audience “Sheroes” (a word invented by supporters of female voting rights in the 1920s) to capture the powerful image of their customers (this is more than just a label: Hunkemöller has assembled a focus group with which tests their new ideas and give feedback).

The target customer does not fall into a certain age category, rather it is about having a certain mindset. Mountford gave the example that a woman in her 20s and a woman in her 50s pick the same products to buy. As a lingerie brand, it is also very important for them to have a strong focus on diversity and inclusion, especially when it comes to the models that represent that brand.

The lingerie brand has also found a lot of success through its various forward-thinking marketing activities. They found that they can push the boundaries of where the brand can go through influencer collaborations, which have proven to be very successful. As a riskier venture, Hunkemöller prepared a Fashion Show in 2022 with an audience of 1,500 guests, which was unusual as this takes a very big investment, and they are an accessibly priced bra and underwear brand that usually would not have the budget to support such an event. The fashion show ended up being a success and very important for the overall brand image. The company will be continuing the Fashion Show with more than double the number of attendees.

Omnichannel: Returns, wholesale, and third-parties

Hunkemöller was very early to e-commerce, which represents 38% of the business, and therefore they are fully equipped with click-and-collect, check and reserve, fulfilment and dispatch from the store, with 80% of e-commerce sales coming from their app (4.5 million active members use its 2-click purchase feature). As an omnichannel retailer, Hunkemöller is as concerned as any other retailer when it comes to the issues that returns bring in terms of depreciating margins. However, the brand has noticed that for every return in the store, 48% of customers repurchase.

When it comes to the customer journey, customers who enter the store are greeted by scanning their membership badge, which allows the salesperson to understand their shopping habits across all channels and share the size and type of products that fit and correspond to the customer. This information helps achieve personalization through the empowerment of technology, such as Einstein from Salesforce, that can help customers get their sizing right, resulting in a reduction in return rates when purchases are made online for instance. This is critical:  Hunkemöller’s bras come in 73 different sizes and their bras only range on average between €30-50 per item. While these price ranges do not fall under the luxury category, Hunkemöller is offering high-street services, such as insights and personalization that help customers repurchase after a return, a service that you would typically only find from luxury brands.

Originally Hunkemöller was not open to wholesale and third-party models, but their partnership with Zalando pushed them into such a wholesale agreement which ended up being very successful for the business, doing €40 million in sales. Today the brand works beyond just Zalando with partners such as Amazon, Asos, Next, and Tmall to name a few. The brand is doing €140 million in turnover now with concessions, marketplaces, and wholesale. The brand’s global reach encompasses 19 countries, and 29 international franchise stores, with a projection of 972 own-operated stores by 2025.

In order to get ahead of returns in the third-party market, Hunkemöller takes any products off marketplaces that are not profitable and that have a return rate that is unacceptable after 10 days. While Hunkemöller’s return rates on their own site are 32%, the return rate on Zalando is 60%. Another downside to marketplaces is that EBITDA margins are very low in comparison to wholesale and a retailer’s own site. Overall, marketplaces are not easy to manage as they each have their own algorithms and Hunkemöller does not make a lot of money off of these partnerships. Originally Hunkemöller entered marketplaces to be able to prove themselves for wholesale relationships, but now marketplaces are being used so that there is no commitment to the stock by third parties.

To combat returns, Hunkemöller has 73 sizes and various styles from 65AA to 100J. They have also created a guide called “Sexy comes in all shapes” which assigns a shape to its customers. Customers start with their size and then pick the style that they would like to ensure the right fit. This categorization reduced returns from 48% to 32%. This is extremely difficult to master even with personalization offered in the app and online. Having consistent sizing is very important to reduce return rates, especially for Hunkemöller as the e-commerce business accounts for such a large portion of the activity.

When it comes to pure retail, Hunkemöller has about 15% of physical stores that are loss-making (this figure used to be only 3% pre-Covid). Hunkemöller sees that their e-commerce business is a strong driver of their profitability, although the e-commerce business is down as it is normalizing from the Covid spike, it is still stronger than pre-2019 levels. Today, salaries and rents are so expensive that these line items kill the margins for physical stores. While e-commerce is definitely easier to control, overall physical stores for Hunkemöller are running at around 85% profitable locations which is not a bad figure. Hunkemöller has an 82.2% intake margin, when Mountford joined, they were only at 64%, which gives them the cushion for positive performance. E-commerce is very profitable with a 38% EBITDA contribution, a returns rate of only 32%, an average pick at 5 pieces, and an average basket of around EUR 80. Hunkemoller uses JDL, a highly efficient and commercial pick rate provider from China, with a cost rate of less than 14%. Hunkemöller thought that the notion of “girl gangs” and their need to go to physical stores vanished just after the COVID-19 pandemic. However, while flagship store traffic remains challenging, 3 years later, it appears that mid-tier cities and small-town stores are doing very well.

Challenges as a risk-taking retail CEO

Being at the end of his tenure, Mountford shared insights into some of the challenges he faced as a CEO in retail, especially in the last couple of years. He shared that he had tried to take the company to IPO, but they got to three days before and the investors pulled the plug which was a huge disappointment as a CEO. They were able to finally re-stabilize the business to talk IPO again, but then Covid hit. Following Covid, there have been a lot of changes and growth in the business, but there are a lot of new challenges for retailers that operate in this age. Global inflation has led to an increase in rents, supply chains, and other expenses that are out of the business’ control. Mountford expects that management is going to become very complicated, because of external factors (for instance, a UK picker in a warehouse needs to be paid £41,000 a year to remain competitive compared to £48,000 for a loyalty manager in marketing).

An additional risk that Hunkemöller took on was increasing prices to address inflation and increased costs. Last year Hunkemöller increased prices by 7.5% and this year they are increasing them by 9.6%. Now, this is the first time that the brand has been conceived by its customers as expensive. This means that the future leadership will need to be very careful about the price threshold of their customers. Hunkemöller has also seen the units per transaction come down, this figure used to be 3 but now it is just under 3. While the average selling price and basket price are still increasing, the number of visitors is decreasing.

When it comes to discounting, markdowns fell close to 25% and 6% of this represents the discount to members from the point program. There is about 15 to 16% of failed fashion markdown in the business. And there is about 73.8% of on-price sales. The biggest influence on the markdown percentage comes from the membership program. Cardholders get discounts when they shop (€5 off every €50 purchase), which has become a drug for the business that has proven to be difficult to stop using. Every time this is scaled back, sales go down. Overall, there is a lifetime value of around EUR 800 per customer.

In his view, this is only the beginning of a very challenging period for retail leaders and businesses, especially for high-street businesses, as they will have to grapple and make do with factors of change that are entirely out of their reach and control.

Philip Mountford’s leadership of Hunkemöller leaves us with rich takeaways. During his tenure, he was not scared to fail and take big risks, which in turn brought high rewards from the success of the Fashion Show to his technological advances by partnering and being willing to act as a ‘guinea pig’ for large tech companies to test their new products on the company. These both boosted the brand’s visibility and recognition as well as drove their digital capabilities, setting them up to be able to serve their customers. He also emphasized the importance of retailers needing to intimately get to know their customers. Knowing your target audience, who they are, and what motivates them can allow retailers to better serve and even influence customers to buy more and return less. In the current landscape retailers are operating in, agility and reinvention such as the ones displayed by Hunkemöller need to be constant considerations for growth.

Credits: IADS (Mary Jane Shea)

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In early July, Hudson’s Bay Company, the parent company of Saks Fifth Avenue, announced a plan to acquire Neiman Marcus for $2,65 billion. This intention seems logical in a crowded market that calls for more consolidation.

Given the radical difference between the two companies, this would have already raised some eyebrows if the news had been limited to Neiman Marcus and Saks Fifth Avenue merging. However, conversations revolved instead around Amazon and Salesforce being involved in this deal.

While the merger is under review by the Federal Trade Commission, and therefore, everything is still being determined, this planned merger raises many questions when considering the context. While the IADS does not pretend to have a crystal ball, this Exclusive aims to review everything at stake and assess the challenges and opportunities the plan opens

Introduction: mega-mergers yesterday and today, from conquest to consolidation

The last mega-merger to have taken place on the US department stores scene was when Federated Department Stores, which had bought R.H. Macy’s in 1994 (8 years after R.H. Macy’s own efforts to take over Federated), acquired The May Department Stores Company for $11 billion (equivalent to $17.2 billion in today’s currency), creating the second largest department store chain company in the country by then, with more than 1,000 stores before divestments and a $30 billion turnover (equivalent to $46.8 billion in today’s currency).

This process, in addition to creating a giant which would be renamed Macy’s Group Inc. by 2007 with 850 stores in operation, led to the erasure of many iconic and legendary retail names, such as Filene’s in Boston, Kaufmann’s and Stern’s in New York state, Burdines in Florida, The Bon Marché in Pacific Northwest, Marshall Field’s in Chicago, or Hecht’s in Baltimore, to the dismay of many American customers. As of June 2024, Macy’s Inc. operates under various names, including Macy’s, Bluemercury, Bloomingdale’s and others, a total of 521 stores, and achieved a total of $23.69 billion turnover the past full year, a far cry from its peak in 2015 at $28.11 billion. In 2024, the NRF ranked Macy’s Inc. 22nd in their top 100 US retailers and did not even bother including the company in the Top 50 Most Influential Retailers Worldwide list.

The 2024 merger between Saks Fifth Avenue and Neiman Marcus, with the latter's absorption into a new company called Saks Global for a total of $2.65 billion and a consolidated turnover of $10 billion (behind Macy’s’ $23 billion and Nordstrom’s $14 billion), would not reshape the US retail landscape in such dramatic proportions, as the market has considerably changed since then. Many experts even wonder if this move will allow the new company to thrive in a market that has become hostile to department stores (it is worth remembering that Neiman Marcus rejected a Saks Fifth Avenue takeover bid in December 2023 for $3 billion, only to accept an offer for half a billion less six months after). They also have questions about the role of Amazon and Salesforce in it, as they both took a minority stake.

For now, the official post-merger announcement message is simple: no store closures, no rebranding. The whole purpose of this merger is to generate growth by encouraging vendors to sell more merchandise and customers to have more opportunities to purchase. But how realistic is that?

Branding, positioning, business model: where are the synergies?

Any retailer with a minimal understanding of the US retail market probably had the same reaction upon hearing of the merger project: there is a visible gap between Neiman Marcus Group, including its Bergdorf Goodman stores, globally acclaimed for its high level of services and focus on high-end repeat customers, and Saks Fifth Avenue, which has a much more diversified customer base.

In the past, the Federated example showed that mega-mergers encouraged branding harmonisation to generate scale economies when marketing the retailer’s name. This is why it led to replacing several historical names with Macy’s or Bloomingdale’s nameplates. However, times were different, and the US retail market was not as homogenised as it is now, with only a few names left, each displaying a more or less differentiated set of values to end customers. For that reason, a retailer’s name unification does not seem, for now, to be a potential road for the merging parties (even more that Neiman Marcus would have a lot to lose in such a move, probably more than Saks Fifth Avenue).

Let’s look at the opposite option: Neiman Marcus and Bergdorf Goodman represent the epitome of luxury retail in the US, in both US customers’ and international brands’ eyes. There would be no point for Saks Fifth Avenue to elevate itself and compete with such names, which suggests that a natural route would be for Neiman Marcus to consolidate its positioning on “hard” luxury, while Saks could trade slightly down. A downside of such a strategy would be that this could put Saks Fifth Avenue in an even more frontal competition with Nordstrom and Bloomingdale’s, which both have many locations in malls where Saks Fifth Avenue is already located.

From a pure retail name perspective, no option is more desirable than the other. However, the differentiation road seems the more probable. While this is great for US customers (and international brands), the nature of the differentiation and the ability to avoid unintended consequences remain to be seen.

The difference between the two companies' business models is also stark: while Saks Fifth Avenue operates most of its locations with a concession business model, Neiman Marcus and Bergdorf Goodman remain principally a wholesale operation. This has profound consequences as managing brand relationships and proposing the proper product selections to customers are radically different in a wholesale model, as many department store companies who have travelled the road from wholesale to concession: it takes years to become a merchant, and that savoir-faire can evaporate quickly.

This is not something to be taken lightly as it is probable that the centre of gravity of the newly created company, Saks Global, will probably be geared more towards New York, where Saks Fifth Avenue is located, rather than in Dallas, home of Neiman Marcus. It is striking that, within the announced nominations (Marc Metrick, CEO of Saks.Com, becomes CEO of Saks Global, Ian Putman, CEO of HBC Properties and Investments, becomes CEO of Saks Global Properties and Management, and Robert Baker becomes chairman of Saks Global), no mention is made of anyone from Neiman Marcus, including Geoffroy Van Raemdonck, the CEO.

Corporate culture is fickle and conditions future success. In another industry, aviation, it is probable that Boeing’s 2001 decision to relocate its headquarters to Chicago following its merger with Mc Donnell Douglas initiated a chain reaction leading to the current situation where the founding values of the plane manufacturer have evaporated.

Optimists write that, given Neiman Marcus’ ability to provide high levels of individualised services to high-end customers, this could be the opportunity for Saks Fifth Avenue to improve significantly its level of service, in particular online (which could be a factor explaining the presence of Amazon and Salesforce at the dealing table). However, this is easier said than done.

Is it about real estate…

The Hudson Bay Company and Saks Fifth Avenue are two particular groups in the retail world, as they decided in 2021 to spin off their e-commerce division and separate this business from the store operations. Consequently, Hudson Bay Group created The Bay, the company's e-commerce arm, and kept the stores being managed by Hudson’s Bay. Similarly, Saks Fifth Avenue created Saks.com, a separate business from the store operations, taken care of by SFA, in charge of 39 Saks Fifth Avenue stores and 95 Saks Off Price ones. This arrangement is unique because, in both cases, the online company oversees the general merchandising for all channels, including stores. In other words, the companies in charge of stores sell products selected and supplied by the online company. When this strategy was launched, many saw an approach aiming at maximising the value of real estate to offload it at some stage and focus on e-commerce.

Neiman Marcus, by contrast, is a genuine brick-and-mortar company, with 36 Neiman Marcus stores, 2 Bergdorf Goodmans and 5 Last Call discount stores. While it filed for bankruptcy in 2020 due to the consequences of the COVID-19 pandemic, Neiman Marcus Group came back as a Phoenix with new investors and a renewed success in terms of sales volumes and brand attractivity as early as 2022, thanks to a strict focus on top spenders and in-store services. This does not mean that the group remained idle online, as Neiman Marcus owned the mytheresa.com luxury e-commerce website until spinning it off in 2021 and filing for IPO in New York, with a $3 billion total shares value on the first day of trading. Since then, mytheresa.com has thrived in a context where other luxury pure players, such as Matches.com and Farfetch, went through significant difficulties.

It is expected that the new company, Saks Global, thanks to its tech minority stakeholders, will be able to create an innovative online shopping platform. However, a subsidiary managing the $7bn worth of real estate assets will also be set up. This suggests that the overall strategy will follow what HBC and Saks Fifth Avenue did a few years ago.

After all, there are already eight malls where both Saks Fifth Avenue and Neiman Marcus have a store each: Houston Galleria, Boca Raton, Bal Harbour, Troy, Michigan, St Louis, Las Vegas and Tyson’s Galleria. Offloading a location from some of these coveted malls (Bal Harbour, anyone?), knowing that Neiman Marcus stores are usually more extensive and more productive than Saks Fifth Avenue ones, might be an excellent opportunity to rack in a few dollars.

Interestingly, Hudson Bay will remain separate from Saks Global.

…or the money…

Both Saks Fifth Avenue and Neiman Marcus are privately owned. Saks Fifth Avenue belongs to Hudson’s Bay, which was taken private in 2019 by CEO and President James Baker for $1.5 billion (a third of its 2015 valuation), just seven years after being taken public by the same Baker. The activity has been challenging, which explains why James Bakers has been regularly offloading valuable assets, such as the Lord & Taylor building on 5th Avenue in New York, sold to WeWork in 2017 for $850m, with a 30% premium on its value by then.

However, things did not get brighter for Saks Fifth Avenue, especially its subsidiary in charge of buying, Saks.com, which brands recently accused of delaying payments, as the company was looking for additional borrowing capability. Estée Lauder Group placed Saks on credit hold for all its brands, including Tom Ford Beauty, Jo Malone and La Mer, as recently as last year.

Consequently, some brands might not be so happy to trade with a larger entity related to what recently worried them. It also does not come as a surprise that in Marc Metrick’s letter announcing the merger project, he mentioned that “absolutely no funds that otherwise support operations or vendor payables were used for the financing or associated costs of this transaction. It is our and SFA’s priority to fulfil our obligations to our partners. In the coming weeks, we plan to provide an update on the financial position for Saks and SFA from now through transaction closing.” He probably anticipated some embarrassing questions on whether the deal also aimed to clean off pending debts from the parent companies.

…or the tech?

In fact, everyone is scratching their heads about how Amazon and Salesforce will leverage their minority investment in the new entity and whether this is the dawn of a new way of approaching retail.

Having tech investors is a boon for a US department store company.

Unlike many of their European and Asian counterparts, which massively invested in the physical experience provided in their stores either during or immediately after the pandemic to remain relevant, US department stores failed to significantly reinvent themselves at scale in the past years in terms of experience, processes, merchandising and in-store services. As such, significant investments are needed, and not only in the flagship stores, to make sure the stores are attractive enough to lure in customers who are otherwise conveniently shopping for prices from home, thanks to many e-commerce options.

In addition, an increasing number of brands, especially in the luxury segment, are investing in direct distribution capabilities to eliminate a third party that is, in their eyes, no longer able to convey the level of experience they aim for.

Having tech investors allows, therefore, department stores to convince their stakeholders that the needed efforts will be carried out in no time to regain the lost ground. Given the fact that in recent months, the luxury e-commerce market has effectively imploded amid rampant discounting and astronomical costs of distribution, an Amazon-powered Saks Global would make sense: Amazon, with its vast scale and expertise in reconceptualising the online shopping experience, would be a significant boon to that effort. Every expert is, therefore, making predictions on the new areas of attention: AI, logistics, mass customisation and customer service.

It is, therefore, striking to listen to Marc Metrick when he evokes the “next day” or the low-hanging fruits he attends to pick with the merger: warehouse and fulfilment operations consolidation, scale economies by centralisation on customer services, and finding commonalities in terms of technology. In other words, the traditional retail playbook.

So, what’s really in store for Amazon?

Some analysts wonder if Amazon is not simply amplifying its range of investments, like a VC, after having burnt its fingers itself on new ventures (groceries, self-checkout…). This is not the first time that Amazon has inked a deal with a retailer, as in 2019, it issued a warrant to purchase 1.7m of Kohl’s in exchange for the right to allow Kohl’s customers to return Amazon products in the stores. However, the size and what is at stake is different. With Saks, Amazon focuses on the luxury customer, characterised by superior buying power, less price sensitivity, and more advanced tech acceptance.

In other words, for Amazon, the deal brings the possibility of entering a higher-end market than the one it currently thrives on without dealing with brands that have been so far in their vast majority reluctant to engage with it. Thanks to this partnership, Amazon might have access, in addition to high-margin goods, to fashion customers. It is out of place to consider that products sold on Saks/Neiman platforms would also end up in the Amazon marketplace, knowing that, for now, luxury brands would not be ready to drop their visibility at Neiman Marcus? After all, Amazon has, so far, not managed to break the luxury frontier, being blocked at the aspirational luxury step with brands such as Clinique, Kiehl’s or Coach.

Interestingly, there is nothing to be found about Salesforce’s involvement in the press so far.

*The merger between Saks Fifth Avenue and Neiman Marcus represents a significant shift in the landscape of luxury retail in the United States. Unlike the dramatic consolidations of the past, this merger is taking place in a much more competitive market. Integrating two distinct brands with different customer bases and business models will be complex and fraught with challenges and opportunities.

One of the most intriguing aspects of this merger is Amazon and Salesforce's involvement as minority stakeholders. Their participation signals a potential transformation in luxury retail operations, particularly in technology and e-commerce. Amazon's logistics and customer experience expertise, combined with Salesforce's strengths in customer relationship management and AI, could provide Saks Global with the tools needed to innovate and adapt to the rapidly changing retail environment. However, this is purely hypothetical for now.

However, the success of this merger will depend on Saks Global's ability to navigate several key issues. First, the company must manage the cultural integration between Neiman Marcus's highly personalised service model and Saks Fifth Avenue's more diverse customer base. Second, it must balance the need for maintaining distinct brand identities with the potential benefits of operational synergies. Third, the company must address the concerns of luxury brands wary of Amazon's involvement in the high-end market*

Credits: IADS (Selvane Mohandas du Ménil)

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Check out the pictures here

*Day after day, retail analysts remind us that the in-store shopping experience needs to be reinvented to appeal to the younger, tech-savvy generations and lure them into brick-and-mortar stores. Indeed, innovative projects are sprouting worldwide, each pushing the boundaries of what a retail space represents by introducing fresh and novel concepts.

However, creating a compelling physical retail experience is merely half the battle. Many endeavours have tried and failed, not due to a lack of ingenuity but simply because their ability to communicate and highlight their inventiveness effectively was lacking. In the US, customers struggled to appreciate Showfields beyond the much-touted slide fully. Pioneering concepts like b8ta in Manhattan (now closed) or WOW in Madrid presented too many ideas simultaneously, making it arduous to convey their essence engagingly to customers.

Let's examine two prominent large-scale projects that have successfully reinvented the retail experience in recent years: K11 Musea in Hong Kong and The Hyundai in Seoul. Both aimed to revolutionize shopping for younger generations, but how did they manage to articulate and bring to life their innovative concepts effectively?*

Korea: presentation of the Hyundai Department Stores company

Hyundai, originally a construction company founded in 1947 during the post-WWII boom, swiftly adapted and diversified its operations. It ventured into foreign markets in 1965, established Hyundai Motor in 1967, and Hyundai Heavy Industries, a shipbuilding company, in 1973. The Hyundai Corporation, a trading arm, was created three years later, and Hyundai Electronics was founded in 1977, showcasing its rapid expansion and ability to adapt to changing times.

In parallel, a retail company, Keumgang Development Industries, was formed in 1971 to operate the commercial constructions built by Hyundai. It started to build its own mall units in 1977 with the Ulsan Center (now known as the Hyundai Department Store Ulsan Dong-gu) and the Apgujeong-dong shopping center in 1979. The first department store to be open under the name Hyundai was Apgujeong, south of Seoul, in 1985 (still operating today). The department store business then separated from the Hyundai Group in 1999 and became Hyundai Department Stores Co. in 2000.

Hyundai's strategic moves have been instrumental in its growth. It made a significant entry into the Chinese market in 2011 and further expanded its portfolio by acquiring Handsome, a fashion and beauty provider, in 2012. The company's foray into e-commerce with the launch of thehyundai.com in 2016 and the Hyundai Department Store Duty Free business unit the same year, demonstrates its forward-thinking approach and adaptability to changing consumer trends.

Today, Hyundai operates 14 department stores, including two "The Hyundai" locations (in Seoul and Daegu) and eight outlets. The company generated KRW 4,208 billion (approximately €2.8 billion) in revenue for 2023, down from KRW 5,014 billion (€3.38 billion) in 2022. The division reported a loss of €27 million in 2023 compared to a profit of €125 million in 2022.

The Hyundai Seoul

The Hyundai Seoul, a landmark in the city, opened its doors in 2021 with a unique focus on attracting Gen Y and Gen Z. This strategic move aimed to rejuvenate the traditional department store clientele in a country where all companies are vying for their attention. In 2020, Hyundai’s competitor Lotte performed 47% of their sales with customers aged less than 40, highlighting the importance of this target demographic.

The Hyundai aims to offer a "creative space filled with global content," from luxury flagship stores to those targeting younger generations, and features Korea’s largest food court so far. It is also the first eco-friendly department store in Korea, boasting indoor lawns, trees, and flowers. Its location in Yeouido, Seoul’s financial center, is key: the store is close to a very affluent residential zone and the Han river parc, meaning a consistent traffic flow both during weekdays and weekends.

As a new brand from the group , The Hyundai is design-conscious and thought to be highly Instagrammable from basement to top floor. Following the first iteration in Seoul, a new store under The Hyundai name was opened in Daegu, and a project is planned in Gwangju. The Hyundai became the fastest store in Korea to reach 1 trillion won in just three years, reflecting its appeal to younger customers and foreigners—showing an 800% growth in sales among 20-30-year-old foreigners between 2022 and 2023, with 100 million visitors in just two years.

The store, which dimensions and structure recall those of a mall, spans 89,000 square meters with 600 shops over 12 floors, including four for parking. Its interior was designed by Canadian studio Burdifilek, with each floor having a distinct theme centred around the atrium. It is the largest store in Seoul, and 49% of its space is dedicated to rest areas, specially designed to be Instagrammable. The building includes 90 restaurants and a museum.

The structure is a mixture of traditional store planning and innovations:

• The second basement, arguably the busiest by far at the time of visit, is dedicated to trendy Korean brands, clearly appealing to the taste of the younger generation, quite enthusiastic with the brand offer witnessing the energy that could be felt there,
• The first basement is the largest food court in Korea, including a food truck park,
• The ground floor, quite classic, offers luxury items, cosmetics and perfume, highlighted by a 12-meter-high waterfall garden with benches to listen to the sound of water, completed with a BeClean wellness beauty store. The store is accessible through five entrances independently from the car park accesses,
• The first floor is a neutral gallery-like space dedicated to international designers brands,
• The second floor, dedicated to international fashion brands and with an overall bolder design, is, just like the first floor, mixing men’s and women’s in terms of customer journey and discovery,
• The third floor is dedicated to sportswear, outdoor, lifestyle and homeware,
• The fourth floor, dubbed the “indoor garden” is spectacular, as it has been designed as a real-size garden with grass, flowers, and trees. On this floor, customers can find children's clothing and activities, home appliances, a playground for adults, Play in the Box, and the Blue Bottle café, which is an incentive for customers to spend time and enjoy the garden,
• The fifth floor gathers restaurants (80 dining options are available, from low-end to exclusive SMT, which terrace overlooks Seoul), service desks including the tax refund, CH 1985, a cultural space aiming at millennials and Gen Z, Uncommon store, a fully automated store, and exhibition halls, dedicated to collaborations with museums such as the Musée d’Art Moderne de Paris at the time of visit.

For more, the IADS reviewed in detail the store structure in October 2022.

How The Hyundai Seoul highlights innovation

What stands out is the level of attention that has been given to details in services:

• The Food Court features self-order kiosks throughout, all accessible and usable by foreigners (even if they do not have a Korean phone number) and an open area for handwashing and face checking.
• The "Play in the Box", a cultural space for adults, is designed for taking photos in a self-studio setting while being pampered with food and beverage options. It is possible to rent a space and spend time with friends there.
• On the 6th floor, to ease the customer’s life when booking a restaurant (and ensuring that they spend their time in the store rather than in a waiting area), machines calculate queues and send alerts in cafés, restaurants, and stores. That way, customers can do something else while waiting for their table.
• Lockers and rentals for baby carts, portable chargers, bikes, and luggage storage are available on three floors. Kids and babies are especially pampered: the Petit Lounge is a comfortable space for one person and a baby (and allows the spouse to go shopping).
• Various related services, including a garment repair shop, bag and shoe repair shop, and green dry cleaning support sustainability claims support sustainability claims.

But what is really striking is the apparent ease with which crucial information is passed on to customers, especially foreign ones. The floor guide is an example of clarity, focusing on must-see places. Everything is QR-coded: store location, shopping news, smart waiting and table ordering, local parking information, and even how to get free beverages on each floor.

Going further, Instagrammable places (the Waterfall, the Sound Forest) are clearly indicated as such, as are experience places (food, culture). Traffic is funnelled, so it is impossible to miss anything and be disappointed.

Similarly, the paper guide highlights 3 to 5 places on each floor. They can be:

• A branded location (Liquides perfume bar, Oera, Bamford, Andersson Bell, Innometsa, Tino5 FGS, Klattermusen, Arket, Smooth & Leather, Nike Rise),
• A branded experience (Barberino’s barber, Blue Bottle Coffee, Eataly, Sooty), a category (Shoe library, Archetype, Wine works),
• A concept (Sculpt Store, IAMSHIP, Platform place, Tom Greyhound, CH 1985, Uncommon store, 22 Food truck piazza, Peer),
• An immersive experience or service (Studio Petit, Play in the Box, Sounds Forest, ALT.1).

While it is not clear how this works and how this is pushed (and monetized) to brands, the guide is extremely clear and is a great example of efficient trade marketing.

Finally, services such as immediate tax refunds and gift certificates are clearly explained and detailed. Recently, Hyundai inked a partnership with The Mall Group in Thailand (an IADS member) to provide visiting Thai customers with additional perks, including a loyal membership enrollment, and no doubt that many accept such an enrollment.

Hong Kong: presentation of K11

Established in 2008 by Adrian Cheng, the K11 Group, part of the New World Development, introduced a unique concept dubbed “Cultural Commerce”, which aims to integrate Art, People, and Nature to create a diverse ecosystem. Cheng, a prominent Hong Kong entrepreneur, also serves as CEO of New World Development, executive director of Chow Tai Fook, and owner of Rosewood Hong Kong Hotel.

The first K11 location opened in Tsim Sha Tsui, Hong Kong, in 2009, followed by expansions into Shanghai, Guangzhou, Shenyang, and Wuhan. In 2010, Cheng founded the K11 Art Foundation to support Chinese artists. His vision of merging art with retail aimed to transform the shopping experience into an artistic journey, targeting the millennial shift towards experiential rather than transactional engagements. As such, K11 Group seeks to democratise art, support young artists, and conserve Chinese artisanship while integrating sustainability and technology.

After research indicated a shift in demand from older generations to millennials, the concept evolved with K11 Artmall in 2013, blending retail and gallery spaces. It was further expanded with K11 MUSEA in 2019 at Victoria Dockside and K11 ECOAST in mainland China in 2022.

Today, out of the total 29 retail locations in Hong Kong and China, there are 7 K11 Art Mall locations, including 6 in China (Shanghai, Wuhan, Tianjin, Shenyang, Guangzhou, Beiling), one in Hong Kong, and the K11 Musea. The group reported a total revenue (Hong Kong and China combined) of HK$ 4,995m (Hong Kong representing 62% of this revenue) and a result of HK$ 3,193m in FY 2023 (note: K11 is not a retailer per se, but a mall operator, which is why revenue is 100% based on rent). In China, a new project, K11 Ecoast, is planned to open in Shenzhen in 2024. The group plans to operate 38 projects (not all under the K11 Art Mall brand name, as the group also operates smaller units), and a mega project in Hong Kong, 11 Skies, is currently being built.

K11 Musea

In 2017, Cheng spearheaded the $2.6 billion redevelopment of the Victoria Dockside, a site owned by New World since the 1970s. This redevelopment introduced several new ventures, including K11 ARTUS, a luxury waterside residence, K11 ATELIER, a Grade A office building, and Rosewood Hong Kong, a luxury hotel. K11 MUSEA, a pioneering 280,000 sqm museum-retail complex on the Victoria Dockside waterfront in Tsim Sha Tsui, then completed it.

Since its opening in 2019, this landmark, after ten years in the making, developed with contributions from over 100 international architects, artists, and designers, has aimed to provide an immersive "journey of imagination" for its visitors. Inspired by "A Muse by the Sea," this complex pays tribute to Hong Kong's rich history and cosmopolitan culture, occupying a historic site once known as Holt’s Wharf, a pivotal logistics hub.

The design of K11 MUSEA responds to research identifying Asian millennials as "Super Consumers," a demographic expected to wield $6 trillion in purchasing power. Catering to their sophistication and demand for exclusivity, K11 MUSEA positions itself as an aspirational global destination merging art, culture, and commerce.

Additionally, K11 MUSEA is committed to sustainable development, achieving green building pre-certifications such as LEED (Gold) and Hong Kong's BEAM Plus (Silver). Its eco-friendly design, from Kohn Pedersen Fox and James Corner Field Operations, collaborating with OMA and Hong Kong-based LAAB and AB Concept, features a large living wall, natural materials, rainwater harvesting, and a seawater-cooled, oil-free HVAC chiller system, underscoring the importance of ecological considerations.

To attract local and international visitors, the mall comprises 250 retailers, 70 restaurants, 40 artist installations, and several educational activities for kids and adults, including new to Asia names such as Fortnum & Mason or the MoMA design store.

The ground floor is dedicated to luxury brands in a stunning environment with a giant staircase in the atrium decorated with copper-coloured panels and large windows opening on a promenade overlooking Hong Kong Bay, decorated with giant pieces of art,

The first floor is a mix of retail space and exhibition and is featured in the former location of the Intercontinental Hotel, from which some elements, such as the ceiling, have been kept. The rest of the floors are also mixing experiences, such as a giant slide on 3 floors or a 12-theatre cinema, a rooftop garden with a selection of plants, and kid’s activities such as a 10-meter-high slide on the roof near the kid’s Donut playground. In fact, it is rather difficult to describe this mall floor by floor, as many different activities are intricated. For instance, a jewellery school also acting as a museum is what could be assimilated into the high jewellery section, except for the fact that this section is not as precisely defined as one might expect, and other jewellery stores are disseminated in the rest of the store. It is, in fact, all about surprising the eye and senses by bringing unexpected solicitations permanently when visiting the space. Consequently, it is also possible to feel some frustration not understanding the mall in its entirety and not making the most of the visit.

How K11 emphasizes innovation

Just like The Hyundai Seoul, public information made available to foreign customers is all about the vast offer of services and facilities made available: a nursery room, disabled facilities, mobile phone charger, ticketing, free Wi-Fi Internet access, water dispensers on different floors providing free and clean drinking water that complies with top international quality standards.

The mall also advertises its “Nature Discovery Park” on the 8th level and its “Happy Mega Slide”, a 3-levels-high slide in the kid’s area. Interestingly, everything is monetized: while the slide is free (but needs to be booked, at the frustration of some visitors), the kids playground requires a ticket to be used, and visitors can also purchase tour tickets to discover the species in the garden, learn more about the architecture of the building, and discover art and art history through themed-visits of the space.

It is, however, also notable when compared to The Hyundai, that the information provided during the visit does not allow the visitor in a hurry to be sure of having seen every single feature the mall has to offer, which might be a reason for a second visit. Attention to detail is extremely high: for instance, the buttons used to call the lifts are very smartly integrated into architectural books on shelves, encouraging customers to read about the architectural features of the building while waiting. However, this detail, for instance, might also confuse other customers when looking for the calling button.

*The examples of The Hyundai in Seoul and K11 Musea in Hong Kong showcase two distinct yet effective approaches to communicating retail innovation to younger demographics.

The Hyundai adopts a highly guided and didactic customer journey, ensuring visitors do not miss any pioneering features and services. Every detail is clearly explained, from Instagrammable experiences to seamless digital integrations, creating anticipation and allowing monetization opportunities for highlighted brands. This meticulous curation leaves little to chance, maximizing engagement.

In contrast, K11 Musea banks on an element of surprise and discovery. While key facilities are prominently advertised, the tremendous scale and artistic interweaving leave some delightful gems to be organically uncovered during the visit. This air of mystery fosters a sense of exploration that encourages repeat visits to unravel all the secrets this innovative mall holds.

Whichever philosophy they embrace, the success of these projects lies in their dedication to effectively communicating their avant-garde concepts. As the retail landscape continues evolving, stores looking to captivate modern customers must prioritize clearly articulating their unique value propositions and savvily marketing the novelties that set them apart.

For legacy retailers and contemporary brands alike, there are lessons to be learned from The Hyundai and K11 Musea's masterful translations of innovative ambitions into tangible, memorable experiences that resonate with the sophistication and expectations of younger spenders. Transparent, simple and didactic communication is key to transforming curiosity into footfall and spending. Going forward, it’s the retailers who masterfully translate innovative ambitions into tangible, buzz-worthy experiences that get people talking, which will emerge victorious in this unforgiving retail arena.*

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Credits: IADS (Selvane Mohandas du Ménil)

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In the last few months, brands have been rushing to open stores on Avenue des Champs-Elysées, hoping to catch a chunk of tourist wallets, especially the ones coming for the 2024 Olympics. Sports brands are no exception and tend to settle in retail spaces in the avenue’s central and lower sections. England-based retailer JD Sports chose another option and opened its new global flagship store in the avenue's upper section (number 118), across the street from the Louis Vuitton flagship store and not far away from Saint Laurent and Cartier. While the store was opened by Brazilian soccer legend and Nike brand ambassador Ronaldinho in April 2024, the group said it will be “continuing its run as the globally recognised king of the high street. JD’s new store offers the brand's latest innovations in digital technology and merchandising and will provide visitors access to all the hottest brands and latest launches.”

JD Sports was founded in 1981 in Bury, in the North West of England, with one shop, John David Sports. The JD group now accounts for more than 3,300 stores worldwide, including 100 in France and 29 JD Sports stores in the Paris region only. In terms of sales, JD Sports claimed in March 2024 to outperform a challenging market with a 4% like-for-like sales growth in the financial year ending 3 February 2024, reaching £10.5 billion, with an 8% organic growth. The profit before tax is expected to reach £915 million.

The retailer’s new flagship store aims to provide an immersive shopping experience to customers and establish itself as one of the sports champions on Champs-Elysées. Who will be the customers visiting the store? What will they find there to differentiate themselves in the crowded area?

Who is the store made for: JD Sports’ young customer base

According to GlobalData UK, JD Sports’ shopper base predominantly comprises male shoppers (61.3%) due to the retailer’s focus on sportswear and lifestyle brands. JD Sports caters to various customers, from sports enthusiasts and sportswear fans to trendy comfort-wear seekers. While they have been able to attract customers from all income groups, JD Sports aims to appeal to a wide range of customers, especially those between the ages of 13 and 35 who are interested in sportswear and streetwear:

• In 2021, Millennial and Gen Z customers made up 51.6% of JD Sports' UK shopper base: 22% were aged between 18 and 24, compared to 11% for its competitor, Sports Direct.
• 38% were from 40 to 59 years old, compared to 41% for Sports Direct customers.

These shares show that JD Sports cracked the code to attract the younger generation: they embrace all the youth culture codes, not just sportswear. With memorable slogans, eye-catching imagery, and partnerships with well-known athletes and celebrities, the brand’s advertising campaigns and social media channels are clearly focusing on this young demographic. During the store visit, the campaign was about ‘Nouvelle Ere’, translated to ‘New Wave’ as a slogan. Through this five-country campaign (UK, Germany, France, Spain and The Netherlands), JD Sports aims to “cultivate emerging talent from key regions” across the brand’s music, sport, community and youth culture pillars.

JD Sports is considered strong both offline and online as it succeeded in becoming an omnichannel retailer that offers a seamless journey to its young customer base, who live with their phones in hand. They show a great understanding of these customers by focusing on trends, backed up by solid data and insights.

What does the store look like: sportswear retail codes and GenZ flare

The store spans 1,500 sqm. The two-storey store window features mannequins and dynamic screens on the first floor, while sneakers wall displays serve as windows visible from the outside on the ground floor. The leading brands sold in the store have their logos on the ground floor windows: Under Armour, The North Face, EA7, On, Puma, Fila, Reebok, Supply & Demand, Ugg, Crocs, Nike, Adidas, Lacoste, New Balance, Asics, Vans, Converse, Juicy Couture, Hoodrich, Columbia, and McKenzie. Not all brands, such as Fred Perry and Tommy Hilfiger, are mentioned on the windows.

Progressing from the entrance to the back of the floor, the ground floor is mainly dedicated to sneakers and articulates as follows:

• Men’s shoes (90% sneakers),
• Women’s shoes (90% sneakers),
• Socks, caps and lifestyle shoes (Birkenstock, Crocs, for example),
• Cash desks and 3 fitting rooms (which were closed at the time of the visit),
• The back of the floor is split into 2 parts: a soccer section (mainly offering team jerseys) and a teen and kids shoe section.

Not surprisingly, the ground floor was crowded with young customers. Quite empty at the time of the visit, the first floor is dedicated to textiles and displays a product offer well-balanced between sports, streetwear and lifestyle clothes:

• For women, the product offer is mainly oriented towards tracksuits, leggings and athleisure wear, balanced with lifestyle brands such as Juicy Couture.
• For men, the offer seems more streetwear-oriented than performance-oriented. It concentrates on daily-wear branded T-shirts, NBA shirts, and bathing suits. For example, The North Face equally offers technical and lifestyle products.
• A similar balanced offer is available for kids and teens.
• 2 fitting rooms and cash desks are also available on this floor.

With various stone and metal types, JD Sports’ store concept is mainly black and grey, the usual colour codes sports retailers use. Touches of yellow are used to catch the customer's attention, especially for direction purposes. The lighting is only made with neon. To cater to the younger generations (at the time of the visit, most store customers were under 20 years old), the concept includes many screens (on the walls and ceilings) promoting the retailer ad campaigns and customer app and the brands they carry. These screens bring additional touches of colour, making the store more appealing. The screens on the ceilings also serve as transitions between sections. The music, pop and rap hits, is loud.

Store services and key features

The sales staff is very young, reflecting the customer base. They are well-trained, smiling, and systematically greet customers from the store entrance and throughout the journey. They wear uniforms: black JD Sports-labelled t-shirts and cargo pants, as well as yellow badge and phone holders, matching the store concept and making them very visible. During the opening month, the store included features like sneaker customisation and clothing embroidery, showcasing JD Sports' commitment to a personalised shopping experience.

All shoe sections are equipped with small TV screens hanging from the ceiling. When customers ask to try a pair of sneakers, sales associates can scan a QR code on products. Depending on the item's availability, the screen informs the sales associate that the required pair is ready to pick up at a specific counter (each item has a picture, reference, store section and requested size). This allows the sales staff to be fully dedicated to customer service instead of going back and forth in the stock room. Despite the many customers in the store, there were not many to try shoes on. It shows the store might be more of an occasion to socialise and browse products for the younger generation than to shop.

BOPIS options are available in the store. On both floors, through a specific ordering kiosk, customers can access the entire product catalogue, order and pay for their order to be delivered to the store of their choice or at home, and retrieve these orders, as well as click-and-collect orders, at the cash desks. At the time of the visit, customers were not using these kiosks.

There are very few fitting rooms in the store. At the time of the visit, only 2 were open, on the first floor, where ready-to-wear is located and where the traffic was relatively low compared to the busy ground floor. This shows again how the young generations use physical stores for experience and inspiration and e-commerce for ordering. Similarly, the cash desks were not busy with customers.

Finally, the soccer section on the ground floor offers a free FIFA Nintendo PS5 game console for small groups.

Sportswear fans know JD Sports’ “Undisputed King of Trainers” slogan. So will Champs-Elysées. The prestigious avenue is getting ready for the Olympics and will be packed with sports brands. Nike has been there since 2020 with its 4,300 sqm House of Innovation. Adidas' flagship store is currently relocated (and should be improved) from the lower to the mid-section of the avenue, with a 2,800 sqm space. On and Salomon are currently under construction. Lululemon opened last year, and Lacoste has a 1,600 sqm flagship store since 2022. How will JD Sports make a difference in this crowded area? JD Sports’ new location is in the more luxury-oriented part of the avenue compared to the other sports brands settled in the lower part with which they compete. As location can make a difference, in good or in bad, JD Sports is the second multi-brand sports retailer on the avenue, after Foot Locker, located in the lower part of the avenue. With a wider choice of sneaker options and a store designed for teens, JD Sports seems poised to attract more younger customers.

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Credits: IADS (Christine Montard)

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The rise of department stores in the mid-19th century marked the beginning of a commercial revolution that shaped retail and consumer culture as we know it. The world's first department store, Au Bon Marché, founded by Aristide Boucicaut in 1852, introduced groundbreaking commercial innovations and created a capitalist business model that birthed unique and effective marketing techniques still commonly used by retailers today.

The IADS had the opportunity to visit the “Birth of Department Stores” exhibit on display from the 10th of April to the 13th of October 2024 at the Musée des Arts Décoratifs in Paris. The exhibition's second part (IADS is a partner) will be presented at the Cité de l'Architecture et du Patrimoine from November 2024 to April 2025. It will place the emergence of department stores in a broader context, looking at the history of these institutions over time and in an international context.

Such excitement around the topic of department stores called for a piece on their history, reminding us why we love this model so much. From the seven hundred pieces on display, ranging from posters to clothing and toys to furniture, the exhibit allows visitors to understand the evolution of commerce and department stores from 1852 onwards. The long history of department stores underscores their lasting impact on both the commercial landscape and societal norms, prompting reflection on future innovations that will define the next era of retail.

We connect in the below piece the most recent initiatives spotted around the planet to their origins, and try to see if modern department stores remain true to their original groundbreaking role.

Department Stores started a commercial revolution

The exhibit outlines the rise of department stores in Paris, France, where the first-ever department store was born, becoming the new template of modernity and consumerism in the 19th century.

The rise of department stores in the mid-19th century started a commercial revolution that fundamentally transformed retail and consumer culture. Au Bon Marché’s Aristide Boucicaut laid the foundations of modern commerce with major commercial innovations like the invention of sales, fixed prices and seasonal exhibitions, children as a new commercial segment, and even mail-order sales.

Each of these innovations answered a specific question. Seasonal sales solved the question of extra inventory and were an occasion to attract less affluent customers willing to shop at Le Bon Marché despite limited means. Exhibitions helped maintain customer interest throughout the year and reduced slow periods. By organising events for products like household linens and fashion accessories, department stores could sustain a steady flow of customers. The use of free advertising calendars given to customers and posters by prominent illustrators further enhanced the appeal and visibility of the store, creating a culture of regular shopping events that encouraged consumerism.

Including children's sections in department stores marked a significant shift in retail strategy. As societal views on childhood evolved, children became a new commercial target and an additional way to attract female customers. Stores began offering a variety of children's clothing and toys, reflecting the growing importance of children in the family unit. Since then, department stores always maintained kidswear and toy sections, sometimes making them a strength in their business, as is the case at Manor, especially with toys. Despite ongoing challenges with kids-related products, department stores continue to find ways to represent this segment, showing the importance of an extensive product offer catering to their primary customers, women. Department stores show great agility in mitigating the impact of kids' product slowdown. For example, in May 2024, Galeries Lafayette Haussmann partnered with US famous retailer FAO Schwarz: the company took over the existing toys department to create a 620 sq. meter new toy area featuring iconic elements like toy soldiers and a giant piano. Differently, Boyner has embraced this trend with their new "Dynamic Teen store" at Boyner İstinyePark in Istanbul, which focuses on sports and entertainment for Gen Z and Gen Alpha. Department stores can create lifelong customers by introducing children to shopping alongside their mothers, appealing to them as teenagers, and retaining them as young adults.

Mail-order sales were another revolutionary aspect introduced by department stores. Boucicaut's colourful catalogues helped Au Bon Marché reach people outside of Paris, making its products available to more customers. American retailers like Sears and Montgomery Ward in Chicago later perfected this model. Unlike the earlier French mail-order businesses, which targeted niche markets or elite customers, Ward's model was designed for the general public, particularly those in rural areas. He issued the first general merchandise catalogue in 1872, which was simple and easy to use, listing 163 items on a single sheet of paper. Ward also introduced innovative product return practices with the "satisfaction guaranteed or your money back" policy in 1875, which built customer trust and loyalty. This innovation was significant in the United States, where distance had previously made it hard for people to access various products. Department stores were indeed at the forefront of distance ordering and delivering customers to their homes.

Today, this foundation has transformed into e-commerce. Even though some department stores were late in the digital commerce race, the COVID-19 pandemic forced them to transform rapidly. They now offer options such as ordering in-store for home delivery and same-day delivery services that cater to the demand for instant gratification. Omnichannel strategies like "Buy Online, Pick Up In-Store" (BOPIS) blend the convenience of online shopping with the immediacy of in-store pickup. At the same time, integrated approaches ensure seamless transitions between online and offline experiences. By constantly observing their customers and sticking to their needs, these innovations provide convenience and satisfaction, prompting us to wonder what new innovations will define the next era of retail.

By putting women at the centre, department stores started a social revolution

Department stores played a significant role in the liberation and emancipation of women, transforming public spaces and social norms during the late 19th and early 20th centuries. These establishments offered women a socially acceptable venue to step outside their homes, facilitating a new form of public participation that was previously limited or entirely restricted.

Historically, women's presence in public spaces was heavily regulated and often frowned upon unless a man accompanied them. Middle-class women, in particular, faced societal scrutiny if seen unaccompanied in public, as this was associated with scandalous behaviour. The emergence of department stores began to change this dynamic. These retail palaces were designed to be inviting and luxurious, featuring elaborate displays, comfortable lounges, and various departments catering specifically to women's needs and desires. The store wasn’t just about shopping; it was about creating a space where women could socialise, explore, enjoy cultural events and assert their presence in the public realm without needing male accompaniment. Department stores' architectural design and marketing strategies were crucial in promoting this new public role for women. Stores like Le Bon Marché in Paris and Macy’s in New York were true social hubs.

Department stores also played a pivotal role in employing women, marking a significant step towards economic independence for women. Positions such as saleswomen allowed women to work outside their homes in a respectable environment, breaking away from traditional roles confined to domestic, agriculture and/or factory work. Despite extremely difficult working conditions and a highly patriarchal culture, this employment provided financial independence and fostered a sense of self-agency and personal growth. Like men, women could also occupy management positions. Overall, cities became more attractive as they transformed into job centres, another aspect of the social revolution department stores were part of.

In essence, department stores acted as catalysts for social change. They gave women unprecedented freedom to explore public spaces independently, engage in economic activities, and participate in the booming consumer culture. This newfound public presence was a first step towards gender equality, challenging and gradually altering the misogynistic norms that confined women to private, domestic spheres. So, the rise of department stores was a commercial revolution and a social one.

From shopping palaces to modern consumption and cultural landmarks

The department store in the late 19th century stood as a monument to the new bourgeoisie class and used its members' entrepreneurial drive to accelerate growth and create a profitable business model. The middle class of that time fed off of the material world; the wide variety of garments and surplus of goods catered to the bourgeoisie, who would flock to put themselves on display at these stores.

Department stores became the symbol of modernity, not only through their innovative architecture but also by pioneering a new commercial system that laid the groundwork for contemporary marketing. Large, vibrant advertising posters were on display at the exhibit, showcasing elegant dresses that embodied the desired lifestyle of the time — depicting scenes like women strolling on beaches and in city streets while dressed in their finest attire. Making department stores visible outside of their premises was crucial: for the first time in history, these ads showed the act of shopping driven by desire rather than necessity, creating what was later called consumption.

Also, department stores developed techniques based on the notion that customers are not merely buyers but visitors who have come to experience the grandeur of the store. Usually featuring unique and innovative architecture and located at the heart of cities, these stores transformed shopping into a leisurely activity akin to attending the theatre, portraying department stores as attractions first and shopping destinations second. Nowadays, retailers are increasingly curating experiences to attract and retain consumers. Despite changes in the retail landscape, they continue to employ strategies that emphasise their role as destinations, leveraging stunning architecture and interactive displays to create engaging environments.

Historically, department stores have been architectural marvels designed to impress and entice visitors, contributing to reshaping city centres. This tradition continues as modern department stores often feature innovative and beautiful designs that draw people in, creating a sense of wonder and luxury. For example, this is the case at the Hyundai Seoul, which has a large atrium filled with trees, and Birmingham's stunning Selfridges store building. In addition, window displays and in-store pop-ups remain central to the department store experience. These visually captivating presentations are designed to inspire desire and imagination, transforming shopping into an event. Interactive elements, such as live demonstrations, themed displays, and experiential zones, enhance this immersive experience, as is the case at SKP-S. Over time, they expanded their influence and revenue potential thanks to new ventures outside their original premises. Most expanded to secondary cities, with stores becoming the new city centre landmarks.

Department stores emerged as cultural landmarks, blending innovative architecture and immersive shopping experiences to attract and retain consumers. Today, they continue to adapt to modern retail challenges by integrating digital advancements and maintaining their status as cultural and social hubs. The focus on creating a memorable experience as a primary marketing strategy ensures that department stores remain relevant and enticing to a new age of consumers. They encourage repeat visits and customer loyalty by offering a unique environment that combines shopping with entertainment and leisure. In the modern landscape, where department stores compete alongside e-tailers, positioning themselves as cultural and social hubs is more than ever pertinent to maintaining their appeal. The development of the department store from the early days of Le Bon Marché in Paris to today’s global retail giants shows their resilience and ability to adapt, innovate, and thrive in the dynamic industry. Reflecting on the rich history and impact of department stores on society, it is apparent that their evolution over time has shaped not only the retail sector but also cultural norms, paving the way for future innovations in commerce and retail. Their story is one of continuous change, a testament to their foundational role in the commercial and social fabric of society.

Credits: IADS (Katie Clark & Morghan Pollard)

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After years of speculation, Dover Street Market, the renowned fashion concept store founded by Rei Kawakubo of Comme des Garçons and husband Adrian Joffe, finally opened a new location in Paris. Located in the Marais area, the new store is the 7th location to open over the last 20 years after Tokyo, London, Beijing, New York, Los Angeles and Singapore (not to mention Dover Street Market Parfums opened in Paris in October 2019). Kawakubo and Joffe After took over the building in 2019, but soon after, they decided to wait until the pandemic was over and tourism normalised to open the store. From 2021 to 2023, the gorgeous 17th-century Hôtel de Coulanges (once the house of French writer Madame de Sevigné) temporarily housed a non-profit cultural hub (“le 35-37”, after the street number the building is located at) hosting art exhibitions, fashion shows, temporary fashion markets and art performances. All these events supported the anticipation and excitement around the space opening and secured a break on taxes and rent. After this long delay, the much-anticipated store finally opened to consumers on Friday, 24 May 2024. What can one expect from this latest Dover Street Market family addition? Paris is seen as the fashion capital, but will the store succeed in the long run?

Dover Street Market's Paris location: a unique ecosystem approach

The store spans 1,100 sqm on 3 floors and is centred around a courtyard accessible from the street (rue des Francs-Bourgeois). The store occupies the ground and first floors of the building and parts of the basement. Kawakubo designed the store and said she wanted its design to be a statement in itself, focusing not on selling garments (clothes are not visible from the street, for example) “but rather a space in which shoppers can immerse themselves.” Considering the historical nature of the building, the store is a succession of rooms (some are relatively small). The retail space is genuinely immersive, if not too much of a labyrinth, making it easy to miss parts of the store. The customer journey starts on the ground floor. Then, the staff recommends continuing in the basement on the first floor before ending up in another part of the ground floor.

When exiting the store, customers can seamlessly access other experiential parts immediately accessible through the next-door entrance. More of an ecosystem than a store, Dover Street Market also includes a Rose Bakery coffee shop (as is the case in the other retailer’s locations) with a terrace and 2 different basements (-1 and -2 floors) offering 2 exhibition spaces, making the store a genuinely experiential destination. At the time of the opening, one of the exhibitions was about the Bovan label, and the other showed pictures of the long-time collaboration between Comme des Garçons and photograph Paolo Roversi. That’s not all there is. Not accessible to the customers, the upper floors house the Dover Street Market’s brand development team, offices and various spaces to host events and showrooms for the roaster of brands supported by the company (and sold in the store).

What about the store concept? In many parts of the store, the interior design takes cues from the big white curved furniture and counters that one can find in the Tokyo Aoyama Comme des Garçons store. In other parts (especially in the basement), racks and displays are made of industrial steel poles and tubes, highlighted by coloured neon lights. Very few colours are used besides white, with a baby blue or a light pink wall here and there. Floors alternate raw concrete and old hardwood pavement. The natural light floods almost all parts of the store. Overall, this store does not include the kind of impressive props usually punctuating the other Dover Street Markets locations (such as the gigantic pillar covered in knitwear in the NYC store or the gigantic bugs in the Tokyo store). However, the retailer’s identity is visible. The staff is plenty and reflects the store style.

The challenges and opportunities of independent fashion

Unlike their other locations, Dover Street Market Paris almost exclusively focuses on independent fashion labels under the wholesale business model and does not include global luxury brand concessions. Even though the store business model might consist of consignment deals, this business model makes a big difference in terms of investments and operations. According to CEO Adrian Joffe, small independent designer brands' biggest challenge is the lack of a platform to showcase their work (especially after Matches Fashion collapse). As such, Dover Street Market is an excellent window for these labels.

Brands and products are mixed, with no visible gender, category, or price logic for a customer journey starting on the ground floor, continuing in the basement, on the first floor, before ending up in another part of the ground floor. The result of this unusual mix creates a diverse and refreshing shopping experience. The store houses many brands (the lists below are not exhaustive):

• Ground floor: Comme des Garçons is the first brand upon store entrance. Many of its sub-labels are available (Play, Black, Shirt, Homme Plus, Homme Deux, Girl…) and are to be found on each floor. Other brands are Melitta Baumeister, Junya Watanabe, Noir Kei Ninomiya, Vaquera.
• Basement: Erl, Jacquemus, Online Ceramics , Bovan, Rassvet, Loutre, MM6, Zomer, Kidill, Kartik Research, Human Made, Westfall.
• First floor: Meta Campagna Collective, Bottega Venetta men mixed with Random Identities and Prada men, Walter van Beirendonck, Objet Trouvé, Doublet, Willy Chavarria, Charles Jeffrey Loverboy, JW Anderson, Rick Owens, Lido, Simone Rocha, The Shepherd, Undercover, Bottega Venetta women, Miu Miu and Prada women, Marine Serre, Ponte, Cecilie Bahnsen, Duran Lantink, Sacai, Molly Goddard, Junya Watanabe Man, Jah Jah, Kiko Kostadinov, Eckhaus Latta. The first floor also has a room dedicated to sneakers, which will probably be a key source of revenue.
• Second part of the ground floor: Nicolo Pasqualetti, Wales Bonner, Marc Jacobs, Craig Green, Hed Mayner.

There are almost no brands from the LVMH group (aside from JW Anderson and Marc Jacobs selections) and the Kering group. Among the big global brands, only a short assortment of Prada, Miu Miu, and Bottega Venetta offer luxury products.

This radical approach is indeed a risky bet on independent fashion. Even though prices are not low, the store cannot rely on high-priced Louis Vuitton, Loewe or jewellery products as in other Dover Street Market locations.

Will it work?

Considering the traffic, choosing a location in the Marais seems a safe bet, but it doesn’t come without risks for a retailer like Dover Street Market. The Marais’ reputation is to be a stylish and trendy area. Still, it is now more of another outlet for blockbuster fashion and beauty brands such as Sandro, Maje, Diptyque or Kiehl’s, to name a few, than an area for edgy and independent fashion to thrive. Also, despite tourists flooding the streets and relatively wealthy people living there, luxury brands failed to establish themselves in the neighbourhood, showing the Marais is not the right area for them. Dover Street Market customers are usually luxury fans, so will they be convinced by the assortment?

As said, independent fashion is another risky bet. Once they see how it works, Dover Street Market is said to discontinue around 20 brands from the next buying season to focus on the most successful ones, as it seems obvious that not all of the countless labels will find their audience. On the other hand, Paris misses a concept store like Colette. There is undoubtedly a vacant spot here for Dover Street Market to cater to the Paris fashion crowd. Also, these labels are offering more accessible price points (t-shirts start at €100), so it will be an opportunity for customers to buy a chunk of hype at a low cost.

Professional press and Paris fashion people have gushed about the success of the opening. According to BoF, traffic on the first day was 2,500 people with a 20% conversion rate, generating €75,000 (including Rose Bakery turnover) for a €40,000 budget. The average basket was €150, which seems relatively small for a store like Dover Street Market. Figures on the second trading day (the first Saturday of opening) were not disclosed. The store targets €12 million in revenue in the first full year of trading and aims to reach profitability in the second year at around €15 million. BoF mentioned that previous locations needed 3 to 5 years to break even.

The opening of Dover Street Market in Paris marks a significant addition to the retailer’s global footprint, introducing an immersive retail experience in the historic Marais district. This new location, designed by Rei Kawakubo, emphasizes an ecosystem approach rather than a traditional store layout, incorporating art exhibitions, a Rose Bakery coffee shop, and spaces dedicated to brand development and events. By focusing primarily on independent fashion labels and avoiding reliance on major luxury brands, Dover Street Market Paris offers a distinctive and diverse shopping experience different from other high-end boutiques and department stores in the city. Despite the fashion market challenges and the inherent risks of promoting small designer brands, the initial response has been promising. The store has seen significant foot traffic and sales, reflecting its potential to fill the void left by previous concept stores like Colette. Dover Street Market could become a hub for fashion enthusiasts seeking niche brands and an alternative shopping experience underlined by a true sense of community.

Credits: IADS (Christine Montard)

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The IADS was thrilled to attend the 2024 Viva Technology conference last May in Paris, eagerly seeking out key trends and exciting startups that could bring value to our members. VivaTech 2024 broke new ground with record-breaking attendance of 165,000 visitors, a 10% increase over last year. The event buzzed with energy, attracting 13,500 startups from over 25 business sectors and over 2,000 investors. One hundred twenty countries were represented, solidifying VivaTech’s central position on the global tech panorama.

At VivaTech 2024, the interaction between startups and tech champions highlighted a significant trend in the tech industry. The event not only emphasised established tech companies' dominance but also showcased the boundless innovative potential of startups.

Key themes included artificial intelligence, retail, climate technology, and mobility solutions. Despite the prominence of major corporations, the event still celebrated start-ups. VivaTech 2024 facilitated connections between startups, investors, and corporate partners, promoting an ecosystem where emerging companies could flourish alongside tech champions. This balance indicates that while tech champions are undeniably powerful, the startup dream is far from over. Startups continue to be essential drivers of innovations, especially in niche markets and emerging technology sectors. Our non-exhaustive review below highlights the most relevant retail trends we spotted this year for our members.

Tech champions vs. startups: is this the dawn of realpolitik in tech?

While having traditionally communicated on the startup ecosystem to promote a certain mindset in technology, this year, VivaTech concentrated on "tech champions", referring to companies that play a crucial role in shaping the technology sectors in their respective countries.

These companies have the economic power and capacity to promote innovation, attract talent, create jobs, and boost investment and exports. They can dominate their domestic markets and grab a significant share of global markets. Their size can even sometimes surpass country economies: if Nvidia, a chipmaker, was a country, it would be the 12th largest economy in the world after Mexico.

Tech champions are crucial for the growth of digital economies, as they create other similar enterprises, put significant resources into innovation ecosystems, and integrate new products at a global scale. They also provide practical exit opportunities to startup entrepreneurs and invest heavily in research and development. Overall, some believe that developing tech champions is crucial for the growth and competitiveness of digital economies, and countries must adopt the right policies and strategies to support their emergence.

It is notable, however, that not all players share this vision. Many, such as Meta's tech scientist Yann LeCun, are also calling for more control over these companies.

Many startups can potentially become tech champions, especially if they demonstrate innovative solutions, vigorous growth, and strategic approaches to scaling. Tech champions are companies that play a pivotal role in the global technology industry, driving innovation, attracting talent, creating jobs, and boosting investment and exports. Startups can achieve this status by following strategic approaches and developing necessary economies of scale and scope.

AI in retail goes beyond chatbots and copywriting.

AI continued to reign and dominate the event this year as companies showcased new and more concrete AI-powered use cases from fashion, beauty products, and payment systems. Below is a subjective curated selection of some of the most inspiring and exciting start-ups we spotted at VivaTech:

• Lowe’s Lowebot (retail): Lowebot is a prototype exploring how Autonomous Retail Service Robot (ARSR) technology can improve and enhance in-store service within a large-scale retail environment. It is designed to help customers with more straightforward needs navigate throughout the store and guide them to the product they are looking for, allowing them to get in and out quickly with exactly what they need. On a sales associate level, Lowebot is designed to enhance the employees’ ability to serve customers by addressing simple questions, focusing on more complex queries and delivering trusted project advice. Additionally, Lowebots allows for the streamlined processes and facilitation of real-time inventory and patterns across the enterprise.
• imki (fashion): Augmented and creative AI for luxury and fashion; a creative process with tailor-made, specialised, secure, and responsible solutions. They offer their clients specialised “business” AI bots, the bots having explicitly been trained, and they guarantee accuracy, precision, and efficiency. AI bots are adapted to the clients, driven by their brand DNA. They integrate their codes, the foundation of the brand, and their identifying product attributes. When brands integrate imki into their process, they reduce the time from the first creative explorations to the design phase and then to the product realisation. As a result, the product is brought to the market faster, reducing the risk of unsold, overstocked, and wasteful products.
• xydrobe (fashion): xydrobe collaborates with luxury brands to create narratives for customers. Their platform offers brands a unique opportunity to weave their stories into immersive virtual worlds, engaging the audience on a deeper level. Physical meets virtual, whether through the one-person xydrobe Pod or multi-person VR cinema, delivering one-of-a-kind experiences.
• Scentronics (fragrances): Scentronics was created on the belief that the era of mass perfumery is over. People no longer want to smell the same under the “rule” of brands. By breaking the traditional supplier-brand-retailer model to create and distribute scents, they bring actual value to consumers. Scentronics is the first AI-driven public scent creation platform. The customers' personal data (such as likes, dislikes, what makes them happy or sad) is collected via an intuitive web app, applied to the matching scent, and one’s perfume is made. These machines are currently found in over 45 countries, and the number is growing. They have three different scale models, each holding several ingredients, and can make a certain number of samples or bottles per hour, depending on the scale model.
• Lunu (payment systems): parallel to the product category innovations, we also spotted this startup that offers payment terminals to support a wide range of cryptocurrencies and wallets, making such transactions as easy as using a credit card.

Case study: AI and robotics are transforming inventory management

As every retailer knows, keeping inventory track has become more complicated given the amount of stock to move online and offline.

AI algorithms allow more accurate and data-driven decision-making processes. They optimise stock levels by analysing vast amounts of data, ensuring the right products are available at the right time. This reduces the risk of stockouts and overstocking, improving customer satisfaction and profitability.

AI-powered systems use historical sales data, market trends, and external factors to predict demand accurately. This enables retailers to make informed decisions about inventory replenishment, avoiding overstocking and costly markdowns, referred to as predictive demand forecasting. It also automates tasks such as updating inventory levels, reordering products, and predicting demands. Automating inventory management minimises human error and ensures optimal inventory levels, reducing the need for manual intervention.

AI and robotics automate inventory tracking, reducing the time and effort required for manual counting and coding. This improves accuracy and efficiency in inventory management.

These AI algorithms analyse customer preferences and purchase patterns to offer personalised inventory management, ensuring the right products are stocked at the right place and time. AI and robotics are integrated with supply chain operations to optimise inventory distribution across various locations, reducing transportation costs and improving overall operational efficiency.

AI-powered systems monitor inventory levels and sales data to prevent discrepancies and identify issues, ensuring products are consistently available for customers. Some of the top start-ups we found that are revolutionising supply chains with AI and robotics are:

• Trax: Provides in-store solutions using computer vision, machine learning, and hardware like cameras and autonomous robots to gather real-time data about shelf availability.
• Standard Cognition: Develops AI-powered checkout systems that allow customers to grab what they want without needing to go to a cashier.
• Trigo: Develops AI-based automated retail checkout systems, which can be seen in many different types of retail and service establishments with varying degrees of complexity. The common thread is the empowerment of customers, enabling them to complete transactions at their own pace.
• Sentient: Develops AI solutions for website experimentation and e-commerce recommendations that can transform customer experiences and increase conversions.
• Bossa Nova: This company produces robots for retail stores that scan shelves to help employees restock and track where items are located.
• Everseen: Uses computer vision to prevent theft at self-checkout counters.
• AiFi: develops store automation systems using AI and robotics. Its camera-first frictionless checkout experience allows shoppers to anonymously purchase items in-store without having to wait in line, stop to scan, or pay.

AI was not the only topic to take the stage, as sustainability remains an area for innovation

Sustainability remains a hot topic, and the event highlighted green technologies and sustainable solutions to reduce the environmental impact of digital technology. This included innovations in transportation, logistics, and energy efficiency.

CNN International gave a masterclass on how CNN is adapting its approach to sustainable storytelling.

Producing commercials can be unsustainable due to all the work and travel that goes into creating them. CNN started Create, an award-winning brand studio that works with a broad range of global brands to bring their stores to life, to the team space, TV, digital, and social.

Retail businesses can follow CNN Create’s lead by integrating sustainability into their operations, from transportation and material use to waste management and energy consumption. By doing so, they can significantly reduce their environmental impact and appeal to the growing market of eco-conscious consumers.

Create examines six critical areas: transport, material, disposal, fuel, and space. To reduce air travel emissions, Create sends smaller crews and uses local/remote crews. Where possible, Create will aim to use electric and hybrid vehicles.

As for material, Create will encourage all relevant parties of their productions to cut meat from catering and restrict the use of plastics. Regarding disposal, Create will follow the AdGreen ‘waste hierarchy’ of “Reduce, Reuse, Recycle, Recover, and Dispose” to aim for higher reuse and recycling rates. As for fuel, Create will use electric vehicles where possible and opt for petrol instead of diesel. Lastly, Create will explore energy-saving solutions and find ways to ensure that space can be powered by renewable energy.

Create continues its mission to obtain carbon-neutral certification for global film productions and events and has joined Ad Net Zero to help reach this goal. They place sustainability stories at the centre of campaigns and ensure all films and events are produced with our carbon footprint in front of our minds.

VivaTechnology 2024 demonstrated the enduring significance of startups in driving innovation, even as tech champions continue to dominate the industry landscape. The event highlighted the complementary roles of both entities: tech champions with their extensive resources and global reach, and startups with their agility and innovative prowess. Key themes such as AI in retail, sustainability, and the evolving realpolitik of tech underscored the potential for synergistic growth. By fostering connections between startups, investors, and corporate partners, VivaTech 2024 reinforced the idea that the startup dream remains vibrant and essential. As startups and established companies navigate this dynamic ecosystem, their collaboration and competition will continue to propel technological advancements and economic growth.

Credits: IADS (Elisabetta Falco Beccalli)

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Brand differentiation through a strong and relevant positioning is commonplace. The leading brands are built-in with clear added value and customer promise, meaning that the best-in-class are often pre-empting a whole category in the minds of customers. For example, Louis Vuitton is linked to “the art of travel” (a phrase which encapsulates its origins as a trunk manufacturer, its positioning as a luxury brand, and connotes an idea of freedom of movement), Nike relates to sports and performance, and Emirates Airline with the notion of travelling in style. This is true as well for branded retailers: Apple’s appeal is all about uncompromising quality high-tech lifestyle, Zara about high fashion at affordable prices, and The Gap about quality apparel at the right price.

For brands and branded retailers, such differentiation in the minds of customers is achieved through heavy marketing investments, allowing them to establish a clear positioning which is at the core of their business.

Third-party retailers, such as department stores, are in a different position, especially for the larger ones. For a long time, they were seen by both businesses and customers as “houses of brands” and, as such, able to talk to anyone, proposing “everything under the same roof” (JCPenney was promising in 2006 “It’s all inside. For all the sides of you”, and well before that, Harrods’ motto was “all things for all people, everywhere” in Latin). For that reason, they were positioning themselves as being a crossroads (in Paris, well-known slogans like “everything can be found at La Samaritaine” and “there is always something going on at Le Bon Marché”), places of constant discovery (Manor’s slogan is “Special Everyday”, Isetan Shinjuku’s promise in the 1960s was “everyday is new. Isetan is for fashion”), or pre-empted the authoritative position of being the leading fashion destination (Harvey Nichols slogan in the 1950s was “London’s leading fashion house”, Peek & Cloppenburg was “House of Fashion” in 2000, and Dillard’s “the style of your life” in 2009). The notion of price was also important: in 2001 Arnotts was promising to be “the heart of style and value” while John Lewis has long committed to “never knowingly undersell”.

However, a brand promise based on being the place to be, at the edge of fashion, or at the best price, is quite difficult to sustain in the digital age when the Internet precisely allows the creation of massive digital marketplaces, giving access to the most obscure fashion in a millisecond, and always with the possibility to compare prices with retailers across the planet.

Some department stores have resisted thanks to their historical advantage: Harrods or KaDeWe’s reputation about luxury is universal (KaDeWe’s slogan in 2004 was “the fine art of first-class shopping”) while Galeries Lafayette is recognized as a place where fashion is much more than a mere promise, by giving access to every trend from across the planet.

But what happens when the goal is to pre-empt a new market, far from the historical moneymakers that luxury, fashion, cosmetics, or home categories have represented for department stores?

Last September, for the first time, IADS member Boyner, in Turkey, hostedtheir “Boyner Dynamic” event: 3 days of outdoor activities and gatherings to establish Boyner as the leading lifestyle destination in the country. The catch? Nothing was to be sold. It was all about gathering people together and animating a community. Let’s review it.

Boyner’s strategic goals are to capitalize on a perfect trifecta of changes, with the country, customers and market changing

We reviewed Boyner’s history in an IADS Exclusive earlier in 2022. What came up clearly about the situation the company found itself in was that a change was needed due to macroeconomic shifts in the country:

• The country’s population is younger than in Europe, but ageing: the median age is 33.5 years old (to be compared with 28.3 years old in 2007), with half of the population aged less than 30 years old.
• This population is urban (77% live in cities), connected to the Internet (95.5% of the 15-24 years old and 80.8% of the 25-74 years old) and healthy: life expectancy in Turkey is 77.31 years (the same as in Europe), 9 years more than in 2000, and a whopping 20 years more than in 1980 (while, in Europe, life expectancy was above 70 years in 1980).

As such, the average Turkish customers know trends and are well informed about brands. In parallel, the notions of nature, environment and health have become much more important than in the past.

In parallel, Boyner underwent some significant changes, as we reported in our previous paper: it transformed from being a manufacturer-turned-retailer in the 1950s to a branded distribution group, active in many verticals, and heavily relying on its private labels, appealing to the middle class.

This strategy worked until a few years ago, and 2020 represented an inflexion in the strategy with the release of a new store concept acting as the visible part of a new company approach to the market. Sensing that customers were evolving and starting to ask for something else, especially the younger ones, Boyner decided to pivot in the following areas:

• They decided to become a “lifestyle multi-brand destination”, combining private labels and international brands, selected, curated and presented in a way which appealed to and made sense for the new generation of customers,
• Anchoring the stores in their neighbouring communities was also key, as price was not seen as a sufficient differentiation point anymore. Sustainability and wellness were identified as key differentiation points, in tune with customers’ new preoccupations.
• Proposing a set of new innovative digital services, including state-of-the-art apps and a 90-minutes delivery service, Boyner Now, to easily blend into customers’ lives while at the same time facilitating the data harvest.

As a consequence, new stores were opened which reflected exactly this: vibrant locations with a different approach according to the neighbourhood (the first iteration, Cadde, located in the Asian part of Istanbul, has a different look & feel from the latest unit to have opened, in the posh Istinye Park location), but all promoting the notion of a sustainable lifestyle, good for the planet and oneself (this was also a very astute way to differentiate from the other large retail company in the country, Beymen, a former entity of Boyner, which is fully focused on trendy fashion and luxury).

However, Boyner’s top management also realized that new stores, and money invested in marketing campaigns, were a necessary, but not sufficient, condition for success: they had to find ways to change the Turkish customers’ perception of them (especially the younger ones), not an easy feat knowing that the company, and the brand name, have been around for 70 years. This is how they came up with the idea of the Boyner Dynamic Fest.

What was the Boyner Dynamic Fest?

Last September, Boyner organized a festival over a sunny weekend, in Istanbul’s largest open-air park, to “celebrate its passion for active life”. More specifically, this meant that Boyner organized a multi-faceted event designed to entertain its customers and celebrate a sporty lifestyle:

• The first day opened with a morning run, and participants were then invited to take part in dance workshops, workout routines, yoga sessions and other communal activities over the weekend which were striking in terms of the level of participation from many different generations of people,
• It was also possible to practice sports, thanks to a basketball court, a soccer field, gym machines and bikes in the open air,
• Nutritionists and life coaches were also animating workshops to explain more about the work-life balance, and Boyner completed this approach by inviting Turkish Olympic athletes on stage to share their experience with the crowd,
• A kid’s zone was organized where children could play, spend energy, practice face painting, or design wooden shoes.
• The 2 days were also peppered with concerts and public performances from Turkish singers and celebrities.

The event also aimed at communicating on the topics of sustainability. For this reason, participants were invited to step for charities: 1.3m steps were given to 11 non-governmental organizations in the domains of health, sport, and education. Also, the whole event was designed to be waste-free: rubbish was collected and recycled (7,000 plastic bottles and 4.5 tons of garbage were recycled), including the decor (500m2 of vinyl was upcycled) and raw material (6 tons of water used during the event were used in agricultural irrigation after the event, and 3,600 nails used in the festival were removed and reused).

All in all, the event looked like a very pleasant festival, which ticked all the boxes in terms of encouraging a healthy, green, and responsible lifestyle, but mixing it with enjoyable experiences and learning. As the Boyner CEO put it after the event, “We feel responsible for social goods on issues that affect everyone, such as the good life, and we always take steps that we combine with experience”.

What was so special about the Boyner Dynamic Fest?

From a participant’s point of view, this event looked like a very cool and enjoyable weekend full of activities that could be practiced in open-air, with family and friends. The fact that entrance was free of charge probably also helped.

However, a closer look at how the event was built showed some interesting features.

First, while the event entrance was free, participants had to register through a dedicated platform, independent from the existing Boyner ecosystem (the Boyner Dynamic Fest was advertised on a regional basis independently from the retail platforms). All in all, the event attracted a crowd of 6,000 people, which means that this event was a good deal in terms of customer data acquisition and the ability to contact them, even if they are not customers yet, in the future.

Also, another interesting point is that many brands took part in the event. In a dedicated area, a village of brands was built, with names such as Adidas, ASICS, DC, Jack&Jones, Levi’s, MACFit, Merrell, Puma, Skechers and Under Armour. Boyner astutely convinced this specific set of brands, which is perfectly aligned with the healthy and sporty purpose of this event, to take part in the festival. It should be noted that not only were brands not paid nor given perks to take part in this event, but they also had to pay for the set-up of their tents and product displays. The fact that this festival was a completely unprecedented initiative probably helped convince them, but Boyner’s argument was more striking: it was, for those brands, a great way to be associated with a retailer striving hard to be recognized as the champion of lifestyle, sport, and health in Turkey.

And this went through one of the most striking aspects of this whole festival: nothing was for sale.

It was all about customer education and experience and giving them the possibility to discover brands and products in a relaxed, no-strings-attached environment. The fact that no transaction was involved probably helped people ask questions about products and services without the fear of being lured into purchasing something at the end.

Boyner also made a good deal in terms of content, since all brands were more than happy to bring with them their own stories and customer-oriented content, adding to the richness of the event.

The fact that the whole event was free, without even making a product out of participants, made it quite interesting in terms of approach. Boyner dedicated a significant amount of time, energy, people and money to organizing an event that was not designed to directly contribute to its P&L. It was instead seen as a marketing investment, but designed in such a way that its free and generous aspect would encourage the crowd to participate even more and, ultimately, associate Boyner with the values that were championed during this event.

Some consumer brands already have such an approach of making marketing investments without any hope of ROI, just to pre-empt a specific positioning or customer perception. This is exactly what the President of Coca-Cola explained during the IADS CEO call in January: the company was directly investing in consumer marketing even though they do not have any B to C activity in Europe, as they rely only on the activity of their distributor (their bottler). They see these investments as “holistic”:

• They allow placing the brand close to the customer,
• They make their partners successful.

If, in this case, such “disinterested” investments are understandable, they are less common on retailers’ side: after all, department stores have always insisted brands should invest in trade marketing to promote their names to the final customer, even though this also contributed to the department store to being perceived as the exclusive place to find them.

Boyner’s initiative of financing their brand equity without any ROI expectation is uncommon at this stage but is also part of a larger trend where department stores have to invest in their brand perception to make sure they stay relevant to their audience or attract a new one. For instance, when Magasin du Nord invested to open a popup in Malmö, Sweden (where they do not have any activities), the purpose was not so much to generate sales but to create brand equity. Brand equity’s efficiency was proven when Breuninger renamed the recently acquired Konen store in Munich with its name, sales soared even though the upgrade works had not started yet.

Department stores cannot rely only on their featured brands’ marketing efforts to differentiate themselves through selection and curation, they need to stand for the values they aim to promote. In this perspective, the Boyner Dynamic Fest is a great example of a genuinely disinterested operation, included in a broader marketing scheme, which contributes to building brand equity, one brick at a time.

Credits: IADS (Selvane Mohandas du Ménil)

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IADS recently held a meeting on the Cosmetics & Beauty sector. Based on market research, NellyRodi and The Style Pulse presented the most innovative brands from different segments in cosmetics and beauty including skincare, makeup, haircare, fragrances, and more.

Check out our selection of these brands and the pictures by clicking the button below!

SKINCARE

IPSUM ALII

IPSUM ALII uses scientifically proven ingredients, infused with the ancient wisdom of Kampo medicinal herbs, associated with their anti-inflammatory and antioxidant properties, to restore skin to its equilibrium state.

Check out the IPSUM ALII website here

CHECK OUT IPSUM ALII's INSTAGRAM

MIMÉTIQUE

Mimétique is a skincare brand that targets knowledgeable consumers with scientifically-backed, education-focused products. They offer effective skincare solutions formulated with active ingredients that are kind to the skin and environmentally sustainable, using green chemistry and biotechnology in their French-made products.

Check out the MIMÉTIQUE website here

check out the MIMÉTIQUE instagram here

MTMLABO

MTMLABO is a skincare brand that offers custom-blended products using a unique library of botanical extracts. For over 30 years, the company has specialized in personalizing skincare to match individual needs and skin types, promoting natural beauty and self-acceptance.

Check out the MTMLABO website here

check out the MTMLABO instagram here

TALM

Talm is a skincare brand designed for women during pregnancy, postpartum, and breastfeeding, emphasizing safety, effectiveness, and beauty. Founded by Kenza Keller, the products are organic, vegan, and environmentally friendly, made in France, and include specialized prenatal and postpartum massages to enhance maternal well-being.

Check out the TALM website here

Check out the TALM instagram here

MEGABABE

Megababe is a body care brand founded to address common yet often overlooked issues like thigh chafing, underboob sweat, and body odor. Focused on creating clean, vegan, and appealing products, Megababe aims to tackle "taboo" body topics, helping people feel more comfortable and confident in their own skin.

check out the megababe website here 

check out the megababe instagram here 

MAKEUP

OBAYATY

Obayaty is a men's beauty brand that combines luxury, wellness, and innovation to promote self-care and self-expression. Using sustainable, consciously sourced materials and potent formulas, Obayaty offers a multipurpose collection that encourages male beauty and inclusivity, while striving for harmony with the community and the planet.

Check out the OBAYATY Website Here 

check out the OBAYATY instagram here

FLORASIS

Florasis is a beauty brand that combines traditional Chinese beauty rituals with modern technology, offering products that blend makeup and skincare. Their line emphasizes nourishing floral essences, celebrating the legacy of ancient craftsmanship while promoting inner health and outer beauty.

check out the Florasis website here 

check out the Florasis instagram here

GOOD WEIRD

Good Weird is a beauty brand that champions inclusivity and exploration in the beauty aisle. Emphasizing ease and versatility, their multipurpose products are designed for every gender, skill level, skin tone, and type, encouraging everyone to express their individuality. Good Weird is about looking good, feeling better, and embracing the unique in each of us.

check out the good weird website here 

check out the good weird instagram here

FARA HOMIDI

Fara Homidi embodies "Slow Beauty" with high-performance, cruelty-free cosmetics that prioritize quality and environmental responsibility. The brand uses sustainable materials for packaging and offers refill options, emphasizing a luxurious, eco-conscious approach to beauty.

checkout the fara homidi website here 

checkout the fara homidi instagram here 

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The future of department stores has become a topic that experts and media have expressed their views on many times, predicting the end of the model. While the so-called “retail apocalypse” didn’t happen, the retail landscape is indeed changing with a long list of mid-range store chains collapsing everywhere in the world and department stores evolving their model. With COVID-19, they showed agility to reinvent themselves by developing online capabilities overnight, updating their product offer and including more experiences and services to differentiate from the competition.

However, the transformation is not over yet. We are seeing an increase in the number of department stores resembling malls, favouring luxury over the idea of a ‘department store for all’. Conversely, branded retailers are increasingly resembling department stores. In that regard and following a premiumization strategy, Zara's most recent stores are taking cues from the department store playbook. Also, Marks & Spencer has emerged as a winner in the UK retail landscape.

Is that a natural evolution from both sides? Now that branded retailers are taking on the department stores’ codes, what’s in for department stores themselves? Are there any fundamental risks if they lose their factor of differentiation, or is it just a not-so-important question of display and presentation? Some department store companies have dropped the traditional way of presenting products by section and opted for a very immersive approach, becoming very large concept stores in the process. Is the future approach of department stores to merge customer journeys into innovative store concepts, to remain destinations for customers and differentiate from copycats who contribute to commodifying their once-typical approach?

A progressive evolution towards a luxury mall experience on some department stores’ floors…

Traditionally, department stores have been regarded as stores selling luxury in one form or another (either via their ‘look & feel’ or simply with the products and services offered). Take Galeries Lafayette in Paris: they are expanding the luxury footprint on the ground floor, with leading leather goods brands such as Loewe, Gucci and Balenciaga having bigger shop-in-shops. Considering their remarkable size, they can increasingly be compared to these brands’ free-standing stores. Also, Chanel and Louis Vuitton are growing their presence on the first floor, only further emphasizing the luxury mall feeling. Finally, with brands like Rabanne, Jacquemus, Carven, Marni, Jil Sander and Acne Studios, more affordable luxury fashion is also expanding with larger shop-in-shops on the second floor (compared to their previous locations on the first floor). Expanding luxury on the second floor is unprecedented as it was previously only dedicated to premium brands such as Sandro and Maje. In Copenhagen, Illum has Celine, Prada and Balenciaga shop-in-shops that are both accessible from the street and the department store's ground floor, transforming them into real free-standing stores. This set-up with double access to boutiques is now visible in every part of the world, from KaDeWe in Berlin to Beymen’s Zorlu location in Istanbul, or The Mall Group EmQuartier in Thailand.

Another example is Harrods, in London, which relentlessly ups the ante with luxurious shop-in-shops. The first floor is dedicated to luxury RTW and has truly become a mall. The plan also includes transforming the affordable luxury and contemporary fashion floor in the same way. Luxury fashion is undeniably ingrained in the DNA of department stores, so it's only natural for them to prioritize it. But one can wonder if the flare of those stores is still there; from a customer’s perspective, why shop at Harrods when you could have the flagship store experience a few blocks away? In the past, department stores allowed customers intimidated by luxury flagships to have access to luxury products. Now, in the new-generation Harrods, such clients may not feel as comfortable shopping there following the upgrade.

But to what extent is that a deliberate strategy? Luxury brands are increasingly pressurizing department stores to provide an experience in their locations on par with what brands are now able to display in their own, highly sophisticated, experiential, free-standing stores. In case department stores are not able, or willing, to accept such requests (which also often come with new demands in terms of financial arrangements), such brands do not hesitate to leave, putting the department store’s ability to regroup a compelling and aspirational offer in one place at risk.

…while, at the same time, branded retailers take on their codes

In the UK, Marks & Spencer is an interesting breed achieving growth while others are struggling. With the opening of 9 new stores in November 2023, they are in the middle of a massive store rotation and optimization programme aiming to transition from 247 stores to 180 higher quality, higher productivity, full-line stores, while maintaining their competitive advantage with the right locations. Also, M&S focuses on and streamlines its product range and achieves digital transformation, resulting in strong financial performance and increased sales. M&S's CEO, Stuart Machin, emphasized going back to the company's foundations of providing quality products at the best price and putting the customer at the heart of everything they do. Marks & Spencer gives a series of reasons to pay a visit:

• The onboarding of third-party brands: they bought out Jaeger (after its collapse) to revive its fashion department and include more beauty brands (they now sell 47 labels accounting for 40% of the beauty sales).
• In Leeds, which is their “best store yet” according to the CEO, the 9,000 square metre surface (formerly a Debenhams store) houses a supermarket, a fresh market-style food hall, a flower shop, a spacious clothing, home and beauty department, and a 164-seat café.
• A product offer tailored to local needs.
• Fun sensorial attractions to emphasize the experiential feeling, with cow sounds in milk aisles and rooster sounds in the egg areas.
• Events with daily M&S product testing such as alcohol-free wines or specialty coffee.

It is telling that M&S’s CEO has vowed to open “better, bigger” stores in former Debenhams locations than in the past, as it increasingly blurs the once very clear boundary between them and middle-class department stores selling fashion, home and beauty.

The case of fast-fashion operator Zara also raises a series of questions, as it has consistently challenged the boundaries between their offer, and, for a long time, luxury brand codes. After all, they were among the first ones to present coherent and structured stories in their windows at a moment when then old-school luxury houses were still simply showing products to passers-by. In the same perspective, they muscled up the notion of visual merchandising, as the concept of having an enticing store at each visit is part of their business model. Luxury brands and department stores noticed and learned along the way.

Fast fashion’s second transformative wave is now about associating the qualities once solely linked with department stores and making them the norm. Fast fashion seems to have appropriated them in a very convincing way: branded retail stores now look like department stores, and should their logo be removed, the illusion would be perfect.

For example, Zara in Battersea Power Station in London or in Champs-Elysées in Paris: both in terms of categories and set-up, they look like mini department stores. The new Zara concept is described as a stroll through different sophisticated atmospheres. The use of different upgraded materials and contrasting shades helps to delimit the spaces and product lines. Accessories and shoes now have their own section with a comfortable seating area and single shoes displayed on shelves, as in any department store. Lingerie is displayed in a specific cocoon-like area. While the Champs-Elysées store (2,700 square meters) only offers men's and women's RTW and accessories, the Battersea Power Station store is even more impressive. Spanning 4,500 square meters, it is the home of all product categories developed by Zara: men’s and women’s RTW and accessories, but also kids, beauty and an impressive Zara Home shop-in-shop. The result is quite stunning and extremely elevated for a fast fashion brand. Also, the customer journey is easier and more efficient thanks to the embedded RFID technology: Zara offers self-checkout options, but also faster access to fitting rooms as the counting of items is automated in real-time. Besides, customers can book their fitting room in advance to avoid waiting in line. Finally, as the stores have different departments and are getting bigger, there is a need for more directions: QR codes help customers locate the different sections on a map.

As a consequence, Zara’s stores are part of the process helping the brand to elevate itself in terms of customer perception, without raising its prices, which is a strong competitive advantage in a moment when new business models (Shein, Temu) are rising fast1. In the process, one could feel confused: remove the Zara sign in Battersea, and it would be easy to feel in a U.S. department store for instance, thanks to the quality of execution and store zoning. In a similar manner, the new Massimo Dutti store in Paris Champs-Elysées would not look too foreign to the usual men’s department store section anywhere in the world, as IADS’ partner Newstores reported last December.

But if branded retail smells, looks and tastes like good old department stores, what should actual department stores do to remain ahead of the race?

In 2024, what is a department store anyway?

To stay relevant, make a difference from copycats and aside from their price point, it is generally agreed that department stores should make sure to propose the following:

• Show tradition, authenticity and roots, but not too much to avoid looking old and stuffy
• Develop experiences, which means the store should be interesting enough to be worth the trip
• Emphasize novelty, spectacle and events, which will depend on where the store is located and whom it addresses
• Include more hospitality, an increasing part of the shopping experience
• Increase services, be it human or otherwise linked with understanding
• Guaranty variety in the product, brand and category offer
• And make sure the overall environment will make lingering worthwhile.

While most of these key points are ticked by iconic department stores such as Selfridges, Galeries Lafayette and KaDeWe, good examples of department stores not looking like department stores, but actually interesting destinations, could be Liberty in London, Le Bon Marché in Paris, Bergdorf Goodman in New York, or Jelmoli in Zurich. The catch? All these department stores are destinations because they only have one store. But what are the options for department store companies with more than one flagship store? 2 options seem to rise from the analysis of the market:

• Become Harrods, Liberty or Selfridges. Retailers now know they don’t need a store everywhere. Fewer but better stores with a deeper rather than broader assortment and a high level of service could be a solution. The extreme is of course for a chain to shrink to one door only, lose scale effect and negotiation power, and end up being dependent on external factors which become critical from merely influential in the past (the reasons of the demise of Barney’s in New York in 2020 are, in the end, purely linked to their inability to generate scale effect and, therefore, remain dependent on lease conditions. Jelmoli in Switzerland is the same).
• Become John Lewis (especially the Oxford Street store) or Frasers. This means going wide and increasing the entry-level appeal.  The issue is that the days of “everything under one roof” and “a bit of everything for everybody” are not anymore a working recipe for physical retail now that companies like Amazon do that very well online.

So, what should we learn from the fact that department stores have such a footprint that they are now imitated by large single-brand retailers, leaving them in a position of not being able to pivot unless they lose their most critical factor, their bargaining power thanks to their scale? Does this mean that the only future of department stores is to become great again by becoming a single destination, to the point of disappearing because this is the nature of any business based on trends?

Some markets have generated the conditions for the appearance of new concepts and business models. In China, department stores such as SKP-S and K11, or EmQuartier in Bangkok, Thailand, are interesting because they keep the purpose of a department store (curate an interesting offer for a curious customer and make sure the location is attractive and enticing, in one coherent and unified concept) but also unbundle its components at the same time. In SKP-S, K11 or EmQuartier, product offer is not organized by department, but by customer journey. In addition, the whole store displays such a strong concept (otherworldly at SKP-S, arty in K11 and entertaining in EmQuartier) that it becomes a destination per se, just like Galeries Lafayette Haussmann with the cupola, Harrods with the Egyptian staircase, or the atrium at Saks Fifth Avenue in New York), but with a je-ne-sais-quoi based on something else than purely architectural details. In addition, these concepts are created with the ambition to bring their specificities to various locations, not to base their uniqueness on one single, iconic location.

For anyone familiar with the evolution of fashion retail in the last 50 years, this means that large department store companies are putting the notion of concept store on steroids, by expanding this approach on a much larger scale (both in terms of single store surface and number of stores), mixed with the capability of department store companies to identify, curate and enhance interesting new trends and brands, but this time organized by customer journey and profile, and not anymore by section. In other words, any customer can have a different high-octane experience in these stores, at each visit.

Conclusion: Department stores have embedded their own reinvention in themselves since the beginning

It is no secret that department store companies have managed to adapt to many retail disruptions in the past, from the appearance of malls and commercial centres in cities’ peripherical zones, to discounters, hypermarkets, speciality chains, e-commerce and DTC brands. As they have managed to do so until now, they will probably manage to find a solution to this seemingly strange issue: how to remain special when companies from other industries do everything possible to look like them?

As SKP-S, K11 and EmQuartier show, it is possible to remain special while also being attractive to both customers and brands (who are not tempted to think that these department stores are increasingly becoming commoditized by new players). However, heritage companies such as Galeries Lafayette, El Palacio de Hierro or Breuninger do not have the luxury to close their stores and rebuild them in a new manner (even though this is what Breuninger is doing now that it has acquired the former Konen department store in Munich).

And yet, this is with this reinvention in mind that new initiatives should be seen, from the increase of high-end restaurants in Harrods (to revamp the experience just like what K11 is doing) to the Wellness Galerie in Galeries Lafayette (mixing retail and paid experiences like in SKP-S) or the way new El Palacio de Hierro stores are designed (in terms of seamless customer journey, independently of brands or business models, just like in EmQuartier).

Everyone in the industry knows that status-quo is not a viable strategy for survival. While chain stores and branded retail are progressively adopting old-world department store codes to gain credibility and luxury perception, department stores are, on their side, reviewing what they bring to a customer who has also changed in recent years. Old recipes will not work for new generations. This is one of the reasons why many IADS department store members have already started working on reviewing their approach to the customer journey, to imagine how they can present what they have to offer to new customers, accustomed to purchasing differently compared to their parents.

Credits: IADS (Christine Montard)

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Have you heard about Taylor Swift, a singer with a global impact?

Last year, NYU announced a class based on her. In March and November 2023, Stanford and Harvard respectively announced they would do the same. Swift holds the record for most songs to ever chart on the US Billboard Hot 100 (188 songs), and in fall 2022 she became the first artist to own the entire Top 10 simultaneously. Finally, Taylor Swift’s 2023 “Eras Tour” is the first tour to gross $1 billion, surpassing Elton John (the previous record holder with $939 million for his “Farewell Yellow Brick Road” tour).

In one way or another, Taylor Swift has amazed the world with her music, persona and business skills for over a decade. Sparked by this buzz, the IADS took a look at this phenomenon to figure out how exactly this popstar branded herself and her music and how she became a master in influence. Her highly engaged community of fans is interesting to look into to understand how emotion is a key factor in enhancing loyalty.

Co-creation, the value of the middleman

Is control everything? 

One of the most notable copyright cases in the music industry happened when Taylor Swift tried to purchase her ‘masters’ (the original recordings of her songs) in an attempt to control her music. The story is that after leaving her former record label where she recorded her first six albums, Swift found out that her manager had acquired her ‘masters’, preventing her from using her own music. This is when she decided to re-record her albums. Dubbed “Taylor’s versions”, they instantly acquired a higher value than the original recordings. Compared to the original ones, the new versions resulted in +43% in streaming and +4512% in album sales.

In a way, Taylor Swift's copyright case could be compared to a brand reclaiming control ownership and trying to increase its margin by going direct-to-consumer hence skipping the multi-brand retailer. This has been a fantasy that DNVBs like Glossier thought they could fulfil before realising that 1) they needed physical outlets to show their products and increase their customer reach, and 2) multi-brand retailers were well equipped to offer them this physical outlet. In the case of Glossier, they opened (and closed) a few free-standing stores and ended up signing a deal with Sephora in the US and Canada. For smaller DNVBs, engaging with a multi-brand retailer is also a way to test the waters before going brick-and-mortar. So just any brand can pretend to be the Taylor Swift of its category.

Convenience and relevance 

In their defence, it is worth reminding that, as a middleman, department stores also have a large and diverse range of merchandise and are located in city centres most of the time. As a result, to be efficient with their time and resources, it could be a more rational decision for the customer to shop at their facilities rather than at a single retailer. Convenience is an important factor in the customer journey that can greatly influence the purchasing option. On top of customer ease, department stores offer other significant advantages. As they attract different types of customers, they often have a superior market knowledge compared to a single brand. Adding a middleman into the sales process is also in the interest of the brand, as they can gain insights into customer behaviour and the performance of competing businesses. This is increasingly the case thanks to the retail media growing business (see our latest white paper on the topic). Also, when it comes to fashion or lifestyle brands, they can gain more flare and coolness by being displayed and mixed with other labels. And above all, department stores assume most of the market risk.

The case of the collaboration between Beyonce and Flannels 

Retailers are evolving from being a pure marketplace to experience hubs or even cultural centres as mentioned in a previous IADS Exclusive. In that regard, department stores are and have always been cultural stakeholders and their cultural footprint is ever-present. Luxury brands are also embracing the cultural aspect of physical retail with the emerging trend of mega flagships such as the Dior one in Paris.

In the world of department stores, Flannels is currently rethinking the role of its London flagship store. They opened a new space dubbed Flannels X. Rather than a space designed to sell products, it is meant to become an ever-evolving cultural playground of pop-ups, gigs and exhibitions for cultural creators to exchange and broadcast ideas. On the occasion of Beyoncé’s tour coming to London in May 2023, Flannels X had a pop-up store showing the Beyoncé x Balmain couture collection for the first time, and also selling merchandise from Beyonce’s Renaissance World Tour. While positioning the store at the intersection of luxury and pop culture to offer more experiences, this initiative helps Flannels create a community of younger engaged customers able to develop influence. It also demonstrates the relevance of department stores when it comes to collaborating with artists or brands: in the case of Beyoncé, Flannels offers her a convenient outlet she wouldn’t have otherwise. And in the case of brands, department stores remain customer magnets.

Developing influence: the power of a community

Building a community  

Beyonce has the BeyHive and Taylor Swift has her Swifties. They analyse her social media posts, lyrics, and visuals and try to predict the artist’s next move. This type of superfans is crucial to the success of the artist: they are the people who buy everything from vinyl records to merchandising, collect memorabilia, spend hours streaming the newly dropped music on every platform possible, and get the most expensive ticket package at every tour. But there’s more.

In 2007, researchers Duncan Watts and Peter Dobbs interrogated influence as a phenomenon. Their work revealed that influence is not driven by individuals but by a critical mass of easily influenced individuals. In fact, their research suggests that the Beyoncés and Taylor Swifts of the world are only modestly more influential than average individuals. This may sound counter-intuitive, but the spread of ideas and behaviours depends less on the person who starts them, and more on how susceptible the group is to what is being spread. It would be irrelevant to deny Taylor Swift’s influence though, but her true influence is on the Swifties, who in turn influence their friends, their other connections and beyond. In other words, Swift influence power should be attributed to her ability to foster a community. Rather than trying to reach out to everyone, it’s more effective to speak to superfans.

Rewarding the superfans 

First, Taylor Swift rewards her super fans by reposting or commenting on their posts. But the superfans are granted more. They can receive an invitation to secret sessions which are small and intimate gatherings in Swift’s home, in which she hosts previews of her new albums. While it seems Taylor Swift has its own tier-based loyalty programme, it might be difficult for retailers to offer a similar kind of reward as it goes through a true form of intimacy. However, DNVBs such as Glossier succeeded in establishing direct lines of communication with their customers through their websites, social media, etc, which foster a strong sense of community and trust. Superfan customers feel heard and valued as if they were truly part of the brand's adventure and narrative. But they (the VICs and VVICs) need to be rewarded in an emotional way that could compare to what Swift is doing with her secret sessions. Retailers have taken notes.

Loyalty programmes: rewarding through emotion

The case of Sephora 

A recent example of rewarding VICs comes from Sephora. When reopening their Paris Champs-Elysées store in October 2023, they gave privileged access to some of their best customers, even before the stars flooded the opening party. Over the past decade, Sephora has become a champion in leveraging the emotional drivers of loyalty. Research has found that almost 75% of what drives customer engagement and loyalty are emotional perks. Sephora believes emotional rewards are the new currency of loyalty. Sure, the right balance of transactional and emotional is needed, but Sephora’s Beauty Insider programme leans toward the emotional side, especially since 2017 when they launched the Beauty Insider Community for their superfans. It was designed to be an opportunity for beauty addicts (spending more than $1000 per year) to come together, ask questions, comment on products and post beauty looks. It is also a great way to get product recommendations, not just from Sephora but from the community itself. It’s a real-time, real-talk forum that has become a great resource for the customers and for the retailer to collect precious data.

Other examples from the industry 

When inviting a handful of their best customers to their runway shows, luxury brands master the emotional part of loyalty. With competition being increasingly fierce, some of them upped the ante by inviting their superfans (their VVICs) to their showrooms. It is a way to offer access to a form of ‘behind the scenes’, but mostly they can choose the items they want months ahead of their official in-store release. Other luxury brands understand the power lying in rewards based on human interaction. For example, Brunello Cuccinelli himself meets and spends time with the top brand VICs.

During the IADS Operations Meeting dedicated to Chief Customer Officers, members talked about customers' rising expectations for non-tangible benefits. In that regard, The Mall increases the benefits related to status such as lounge access, free parking, pre-sales and special seats for events. To create an emotional bond, El Palacio de Hierro offers a bottle of wine or a meal at one of their restaurants for their best customers' birthdays. On its side, Boyner considers offering airport fast-track for their top-tier customers. They also found out that people ask for digital subscriptions like Spotify premium: the cost is low and appreciation is high.

Other examples are interesting to consider in the reward economy. Chewy (the US pet brand) sends its best pet owner customers free, personalised portraits of their cats and dogs. Moreover, when a customer loses their pet, Chewy sends a letter of condolence. This human touch is priceless for the ones receiving the letter and a guarantee those customers will be returning to Chewy as soon as they get a new pet. Moreover, by rewarding their best customers, brands and retailers generate meaningful word of mouth and earn media value. The fans who attend one of Swift’s secret sessions will tell everyone they know about it for years. The customer who gets an unexpected pet portrait from Chewy will share it on social media and offer Chewy free marketing.

Conclusion

The remarkable success of Taylor Swift offers insights for the retail industry, highlighting the power of community and emotional engagement in fostering customer loyalty. Swift's ability to build a dedicated community of fans, the Swifties, is a lesson in developing brand loyalty. Retailers can learn from this by developing their own communities and rewarding their most loyal customers, as exemplified by Sephora's Beauty Insider programme, which balances transactional and emotional rewards to foster a strong customer connection. In addition, the emotional aspect of customer rewards, a key component of Swift's success, is crucial. Retailers can create a lasting impact by offering unique experiences and personalised gestures that resonate emotionally with customers, much like Swift's secret sessions or Chewy's personalised pet portraits. Besides, in the digitalised world we are living in, boundaries between categories tend to fade away. It is an opportunity to learn from other industries as they share the same customer base as retailers. They might have different practices which can be inspiring for department stores.

Credits: IADS (Christine Montard)

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*The IADS attended the 2024 edition of the World Retail Congress, held in Paris from April 16th to 18th, which gathered 850 participants from 400 companies across 16 countries. During this edition, the Association had the privilege to moderate a roundtable between the CEO of Galeries Lafayette, Nicolas Houzé, and the CEO of Harrods, Michael Ward.

This report is a selection of the most relevant insights gathered for our members.*

*Table of contents

1-    Introduction: the difficult task of forecasting in 2024 (Deloitte, Blackstone, VML)

2-    But what is retail anyway? A fresh perspective (Springstudios)

3-    How to win the new generation customers (Claire’s, MARS Wrigley, Pepe Jeans)…

4-    …in a time of mass distraction (Adidas)?

5-    What to expect from AI in retail? (Keystone, Decathlon, Google Cloud)

6-    The human factor: purpose, planet, profits… and communities (ThredUp, REI, Milani Cosmetics)

7-    A look at 3 retailers set in motion: Sephora, Printemps, Myer

8-    The future of department stores: the IADS interviews  Harrods and Galeries Lafayette

9-    Interesting Quotes*

As retail continues to navigate unprecedented challenges and rapid transformations, the 2024 WRC focused on how to maintain high performance, from integrating cutting-edge technologies like GenAI to adapting to changing consumer behaviors influenced by economic, social, and environmental factors and the overall convergence of digital and physical retail.

During the opening speech, the Chairman and CEO of Carrefour set the tone, as he dwelled on the 4 more important challenges faced by the industry:

• The unprecedented challenges faced by retail, through an uninterrupted series of crises.
• The digital transformation, which started 20 years ago, with a strong acceleration last year, increasingly blurring the border between online and offline. Some models born with this new paradigm, such as quick commerce, disappeared, however, new marketing models have disrupted the industry, and omnichannel strategies have proven successful. Digital transformation now focuses on AI-driven technologies, which could lead to the optimisation of supply chains, product assortments and personalised promotions.
• Inflation has reached unparalleled levels and will continue to impact businesses. Although inflation may subside, its effects will still be felt through fragmented shifts in customer behaviour.
• Climate change presents a decisive challenge, requiring businesses to adapt beyond merely reducing carbon emissions. Factors such as rising commodity costs and volatile energy prices demand transformative approaches as resources become scarcer and more expensive.

In fact, the retail industry is on the brink of rapid and intense transformation, with new shocks expected.

When it comes to Carrefour, the company has undergone a significant journey over the past six years. With 15k stores across 26 countries and various retail formats, it faced difficulties six years ago that required restructuring and selling off activities, such as in China.

Three strategies were employed to tackle the issue of low growth in the hypermarkets segment:

1. Adopting a customer-centric approach using NPS (for the first time!).
2. Changing processes to increase productivity.
3. Partnering with entrepreneurs for troubled stores (a significant change from the historical strategy of controlling all stores).

In addition, Carrefour implemented a CSR policy in 2018 that was formally integrated into its corporate status. The new plan, Carrefour 2026, focuses on acceleration and continuity with the aim of building a European platform and verticals (centralised purchasing in Spain, retail media, etc.).

Introduction: the difficult task of forecasting in 2024

The Global Chief Economist at Deloitte started the panel by stating that the economy in the world was not as in bad shape as often painted. In the US, a strong outlook is driven by low inflation, a tight labour market and robust consumer spending. Europe faces challenges, particularly in Germany and the UK: inflation may rise faster than expected, which might trigger answers from the European Central Bank very different from the US Federal Bank. China's growth will be relatively slow due to state favouritism of the public over private sectors and difficult demographics.

Overall, globalization is experiencing shocks from events like pandemics, trade wars, and geopolitical tensions. Companies now prioritize resilience and diversification over low cost and speed. This shift benefits countries like India and Mexico. However, potential risks of derailing remain, and they include Middle East tensions, China-West conflicts, and Ukrainian instability impacting business confidence.

The Senior Managing Director at Blackstone, a real estate investment company, gave the point of view from an investor’s perspective:

• 2024 presents complex investment opportunities due to increasing tensions and changing balance sheets.
• Cash flow becomes king again as the gap between value/convenience and luxury widens. As a consequence, niche and speciality businesses will survive, but scale will be key to thrive.
• More public-to-private transactions and consolidations are expected for investors able to catch the right sign at the right moment: “You can’t wait for the all-clear sign”, as she concluded. That was echoed later on by the former CEO of Walmart International, Judith Mc Kenna, who explained that she had to divest 40bn$ when arriving (out of a total 130bn$) in order to re-invest in digital and customer experience, without having the certainty that this would pay off.

Finally, the Global Chief Commerce Officer at VML, a consumer research company, gave a perspective from the customer point of view:

• For VML, “the customer is the product” now, as they are all living in a digital, heavily influenced world.
• Physical stores remain important but need revamping to remain relevant in the digital age, given the growing acceptance of data exchange for personalization and the emphasis on experience and emotion in marketing.
• Brand values and purpose are more crucial than ever for success.

But what is retail anyway? A fresh perspective

Giuseppe Stigliano, writer, researcher, professor of Retail Marketing innovation, and CEO of Spring Studios, proposed opening the session by reflecting on what retail stands for nowadays. It can be tempting to consider that the job remains the same… even though the context has radically changed.

From the academic perspective, “Retail is where goods are sold directly to customers (B2C), in small quantities, for non-business use and serve as the final step in the supply chain.” The traditional image of retail could be a supermarket alley. But when the future of retail is considered, it could very well be a customer wearing AR goggles while shopping in-store, meaning a very different image from this traditional perception.

This raises the question of the experience that customers have while shopping in-store: they rush to get groceries but also expect to have an experience such as discussing with a wine expert when they choose a bottle. How can retailers combine these contradictory demands?

In addition, retail encompasses a wide range of formats and channels (brick-and-mortar, online marketplaces, mobile shopping platforms), but something is broken due to new consumer trends such as B2Cization (customers bypassing retailers), C2C business (including second-hand through platforms such as Vinted), or their often conflicting expectations for experiences, speed, and efficiency.

In short: retail has to adapt, but the solutions found so far (going phygital) are not adapted and do not work. Omnichannel isn’t relevant enough as it is often not achievable. Besides the physical and the digital dimensions, virtual is now a third dimension (like buying a Balenciaga sweater in a Fortnite video game).

This is why Stiglilano suggested a new definition of retail: “retail is the curation and sale of a diverse assortment of goods and services to end consumers.”. From there, 5 key ideas need to be considered:

• Anyone capable of engaging with the final consumer should be considered a retailer. Retailing requires retailers to fulfil essential functions, because everybody can be a retailer.
• There is no one-size-fits-all approach, as the ideal customer experience is, by definition, a relative concept. Retailers should build on their experience and be ambitious, knowing that they don’t have all the answers.
• Developing effective use cases with emerging GPTs, such as GenAI and Blockchain, is necessary to win the customer. Either we understand, or we end up with digital Darwinism.
• Processing data to understand the role of each touchpoint along the 3DCJ (physical, digital, virtual) and optimising the right channel mix is the only way to thrive in a post-digital world. Once they understand what they can effectively manage, retailers should focus on optimisation and be ‘opti-channel’ rather than omnichannel retailers. *IADS Note: ‘Opti-channel’ could be considered a new blanket word for retail operations and an easy marketing concept, but it describes how IADS members currently work. Through the IADS Operations Meeting dedicated to the Omnichannel Business, we can see how IADS members are becoming opti-channel retailers as they work on optimising services (such as Click & Collect and BOPIS) instead of willing to invest in all omnichannel services, which would be ineffective.*
• Employees and customers seek purposeful corporate behaviour that resonates across organisational culture, product nature, and customer experience.

How can retailers embrace the paradigm shift? We come from a world where we think we need to build extremely strong foundations to secure our future. Stigliano recommends moving to a Lego brick world mindset, which can allow retailers to adapt (like changing the size and colour of the bricks when needed). Foundations are not everything retailers need; adaptation is key.

How to win the new generation customers…

This talk mostly tackled the thorny question of reaching younger generations without losing existing customers. To do this, retailers need to understand Gen Z and Alpha Generation value systems and not only offer them a transactional environment: the keys are about developing specific products addressed to specific communities, personalising products, and ways of self-expression.

For Mars Wrigley, the M&M’s example demonstrates how to offer experiences besides transactions. The company also taps into specific communities: for example, they developed the Respawn By 5 Gum brand. Infused with B vitamins and green tea extract, the brand is addressed to gamers willing to improve their accuracy and focus.

For Pepe Jeans, denim products are key, including new details, fabrics, and personalisation options. Developing content for social media is crucial: in that regard, they work with very young influencers.

At Claire’s, it is important to offer ways of self-expression to Gen Z and Alpha Generation. Customers produce their own content for Claire’s YouTube channel. They also built a Claire’s world in Roblox, where customers shop and give live feedback.

…in a time of mass distraction?

In today's era of information overload, retailers face the challenge of capturing consumers' limited attention in-store and online. To successfully connect in this age of mass distraction, retailers must focus on what is relevant and avoid overwhelming customers with excessive digital features.

With attention spans decreasing from 150 seconds to 46 seconds over 20 years, it is crucial for retailers to reduce clutter by resisting the urge to add too many screens. Instead, they should allocate clear and easy-to-find information at store entrances, freeing customers' minds to explore other products and potentially increase sales.

Retailers should also amplify the importance of products by giving customers what they want and remembering that human attention spans are limited. Embracing tangible and analogue elements within stores can capture consumer interest more effectively than an abundance of digital screens. For instance, one of the Adidas stores has a statue of the brand founder, and people pay true attention to it, touching it and taking pictures. This comes as a manifesto for physical stores, a proof that physical retail is far from being dead when well-executed.

What to expect from AI in retail?

AI has evolved from a budding technology to a transformative force, thanks to three key milestones: chips, hardware innovation, and data utilization. This powerful innovation is not mere hype. For instance, in 2008, Amazon was not prepared to go global due to numerous manual processes, isolated business operations, and insufficient focus on long-term customer experience, and AI could have provided strategic answers back then.

Since 2015, Google has been a pioneer in AI, recognizing the importance of unified data for efficiency. Gen AI offers numerous opportunities for increased conversion. Key initiatives that can boost KPIs and efficiency include:

• Content management: Improved product descriptions and conversational commerce can significantly impact conversion rates and customer loyalty.
• HR: AI can streamline the hiring process by analyzing resumes to find the best candidates.
• Procurement: AI can efficiently sift through contracts to extract vital information.

Achieving these goals requires building a solid platform for data and security.

At Decathlon, Gen AI focuses on enhancing customer experience, with visible innovations expected by 2025. AI will enable personalized product recommendations and provide guidance on sports practices. Offering hyper-contextual search and reassurance, Gen AI will help customers discover unknown products, which is valuable for retailers with extensive inventories.

It is key to recognize that developing Gen AI solutions should involve interdisciplinary teams, not just data scientists. Retailers must embrace a collaborative mindset between humans and machines to successfully organize AI developments.

The human factor: purpose, planet, profits… and communities

Thredup presented itself as a white knight when it comes to sustainability: approximately one-third of the items in a person's closet are worn regularly, while the never-worn rest holds value. As a consequence, ThredUp aims to revolutionize the second-hand market: circularity enables consumers to continue shopping in a very entertaining way. As such, ThredUp enhances customer engagement by offering an enjoyable experience: searching for specific items. Resale platforms present millions of unique products daily, unlike traditional retail. This encourages customers to return frequently and make purchases to avoid missing out on one-of-a-kind items.

Another way to look at the human factor is to talk about communities federated around a brand, or its purpose. REI, with its 23 million members, exemplifies successful community-building. The company supports grass-roots advocacy by educating people on engaging with officials for nature conservation efforts.

Interestingly, the sense of community and belonging developed post-Covid. For brands interested in harnessing such an approach, staying connected with communities requires ongoing dialogue through surveys that reveal customer preferences and opinions. This can lead to sometimes seemingly counter-intuitive consequences: some brands launched initiatives targeting specific communities, such as using unretouched photos in ad campaigns to increase engagement. A significant trend for community-focused brands is the concept of consequential strangers: customers seeking friendships through their association with a brand. Inclusivity, transparency, and authenticity are essential for appealing to Gen Z and Millennials, who often place more trust in influencers than the brands themselves.

4 points should be considered when building communities:

• Invest in company culture and ensure employees believe in the mission. This internal commitment will be evident to customers in the external brand culture.
• Develop emotional connections by meeting people where they are and increasing convenience.
• Incorporate retail into mixed-use areas, like Washington DC's Union Market, which combines housing, hotels, entertainment, and retail spaces.
• Prioritize customer stories by staying informed about events outside store walls.
• Maintain focus on core strengths even when attracting new customers beyond original communities. For instance, Milani Cosmetics continues catering primarily to pigmented skin customers despite expanding its customer base.

A look at 3 retailers set in motion: Sephora, Printemps, Myer

Sephora’s CEO promoted the company by showcasing its results and values, as the leading global beauty retailer, operating 35 markets, 3,000 stores with 52,000 colleagues and selling 500 brands. Following a 10-year growth trajectory, 2023 results were very good with +50% vs. pre-Covid, growing twice as fast as the beauty market levels:

• North America +27%
• Europe +23%
• Middle East +28%
• South East Asia +27%
• Latin America +43%
• China +2%

For him, Sephora's success relies on four pillars:

• Product curation and differentiation through strong brand partnerships. Sephora transforms small businesses into leading brands and maintains a unique perspective on beauty. They also support smaller brands to meet the 50% pledge in the US, reflecting consumer diversity. Clean and Planet Aware labels demonstrate Sephora's commitment to responsible retailing.
• Exceptional in-store experiences using innovative tools like diagnosis and skin analysis technology to foster personal relationships with customers.
• Community-building by nurturing the largest beauty community, hosting special events like "Sephoria" for product discovery and testing. Initiatives extend beyond the loyalty program.
• Talent development in retail as a people-driven business. Sephora values inspiration and aims to fill 70% of roles internally. To continue attracting top talent, they've introduced new work practices, such as full weekends off.

Printemps CEO’s speech was a bit more of a presentation of the company to an audience which might lack general knowledge about it. The Printemps Group, which includes Printemps, Citadium, Place des Tendance e-tailer, and home e-tailer Made in Design, processes a transaction every 2 seconds.

The company began its transformation journey four years ago in response to COVID-induced online growth, decreased tourism and local traffic, and brands going direct. To adapt, Printemps implemented a new strategy to create a personal omnichannel department store experience. This included:

• Enhancing the wow factor by redesigning their visual identity with nature-inspired green and luxurious gold accents. They introduced 30 new concepts such as 'Le 7ème ciel' for luxury second-hand items, upcycling, circularity, and restaurants.
• Fostering an intimate atmosphere with welcoming staff, personal shoppers, and special attention to VICs who spend over 30,000 euros annually.
• Embracing omnichannel retail with a unified stock system, marketplace integration, in-store e-commerce features (communication tools, QR codes, and distant shopping studios), and an online store presence.
• Expanding internationally to reach customers worldwide and opening additional locations in Doha last year and New York in February 2025.

After four years of transformation, Printemps exceeded pre-Covid levels. They doubled their Middle Eastern and Korean customer base, tripled the business from 30,000+ euro VICs, and achieved 9% of total revenue through e-commerce.

The Chief Customer Officer of Myer then took the stage to describe the company’s transformation journey. Myer, Australia's largest department store, has 56 stores, 20,000 employees, and a AUD $3.4 billion turnover.

Before the COVID-19 pandemic, Myer faced a challenging situation with a AUD $107 million debt, struggling e-commerce, loss of core customers, and a weak balance sheet. As early as 2018, Myer developed a plan to drive transformation by resetting its values and vision to prioritize the customer. The “Customer First Plan” focused on five key areas:

• Accelerating online capability and leveraging multi-channel opportunities
• Achieving factory-to-customer excellence
• Transforming in-store experiences
• Refocusing product offerings
• Rationalizing property and overheads

Myer implemented a more balanced merchandise strategy that relied less on seasonal fashion and more on deeper brand partnerships and inventory control. This led to a 26% reduction in core ranges since Fall 2019 and 35% growth from major brand partners during the same period. Over 400 new branded shop-in-shop concepts were introduced across stores, resulting in a better-balanced category portfolio.

To enhance team capabilities, Myer invested in transforming sales associates into tech-savvy, well-informed team members who could focus more on customers and less on administrative tasks. They introduced the M-Metrics app for analytics and customer feedback, which was sent directly to team members' phones. This investment in technology improved in-store customer satisfaction by 23% and increased sales associates' time spent helping customers by 20%.

Myer also built omnichannel capabilities by investing in their supply chain and launching a new national distribution center with world-class automation technology. This led to a 163% growth in online sales. Now, 59% of customers browse online before shopping in-store, making the online platform Myer's largest shop window. Multi-channel customers spend 2.6 times more than those shopping only in-store.

Finally, Myer worked on their CRM to re-engage with customers more effectively.

By altering value perceptions and increasing reward frequency, they developed a wider loyalty and points ecosystem through partnerships with third parties. Enhanced analytics and AI capabilities facilitated personalization, resulting in 36 million customers in their loyalty network. Moreover, they revamped their PR, offering unique events and experiences to attract customers.

Productivity improvements and strategic space reductions of 14.1% contributed to a 12% increase in in-store sales productivity. Additionally, over AUD $210 million was invested in store environment and infrastructure upgrades.

The future of department stores: an IADS interview of Harrods and Galeries Lafayette

The interview tackled the current department stores’ challenges and the most important topics for the future.

• How to cope with brands going direct? Harrods and Galeries Lafayette consider themselves houses of brands. Harrods creates iconic shop-in-shops comparable to free-standing and flagship stores, while Galeries Lafayette positions itself as a brand offering the best in fashion, luxury, beauty, and food.
• What do they do with data? Harrods employs large CRM and data science teams. However, the real difference lies in the customer experience. As customers return to stores post-COVID, Galeries Lafayette adapts to become an omnichannel retailer with the best assortment.
• What does omnichannel mean? Harrods prioritizes ultra-wealthy customers before targeting local or international ones. Personas are identified, and communication is tailored for long-term relationships. Galeries Lafayette caters to both tourists and locals seeking the best in fashion. Customers often research online before visiting the store, proving omnichannel is not solely transaction-based.
• What is the big elephant in the board meeting room these days? At Harrods, the focus is on providing exquisite services and ensuring staff possess excellent product knowledge. Customer centricity and NPS are vital for both Harrods and Galeries Lafayette. Staying updated on trends like sustainability and wellness is also essential.
• What about international development? Both stores represent their cities and beyond. Harrods has outposts in Shanghai to connect with wealthy local customers. Galeries Lafayette began international expansion over 100 years ago, accelerating growth in China 20 years ago, with plans to open more stores directly next year (also expanding into India through a franchisee partner). This development communicates their brand to customers worldwide.

Both CEOs concluded with pieces of advice for other retailers: Harrods recommends investing in data scientists, CRM, and customer-facing IT innovations. For Galeries Lafayette, being customer-centric is key.

Interesting quotes

Judith Mc Kenna, Former CEO Walmart International: “If in a team you have 2 people who think the same, you have one person in excess in your team”.

The World Retail Congress 2024 highlighted that despite the digital transformation, the physical store remains a cornerstone of the retail industry. More than ever, successful retailers are those who blend digital prowess with the tangible, sensory experiences only possible in physical spaces. This congress showcased the innovative ways stores are being revamped to create immersive, personalised experiences that attract and retain customers. The future of retail involves a strategic interplay between online efficiency and the experiential richness of brick-and-mortar stores. Physical retail isn't just surviving; it's evolving to fulfill new roles in community building, experiential marketing, and as a touchpoint for deepening consumer relationships in an increasingly digital world.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS recently attended a webinar hosted by Bain & Company covering the topic of ‘Monetizing sustainability – Navigating ESG pricing’ where the relationship between profit and sustainability was discussed. As we have covered in our previous IADS Exclusive on how retailers can turn sustainability regulations into opportunities, sustainability directives are here to stay and will only become stricter, but this should not stop retailers from finding ways to make such changes a win-win situation. In the same vein, the IADS also recently studied the key takeaways from Adam Werbach’s book ‘Strategy for Sustainability’ which explores how businesses can integrate sustainability principles into their strategies to create long-term value. Building on the principles and ideas discussed by Bain & Company and in the book by Werbach, we explore some of these ways to build a positive and profitable groundwork for retail businesses while keeping sustainability topics at the heart of the company, which in these days, is key to survival.

Bain & Company: How investments in sustainable initiatives can convert into financial value

To give an overview of the current landscape, Bain & Company shared in their ‘Navigating ESG’ webinar that it is clear many industries and geographies are moving at different paces in terms of Environmental, Social, and Governance (ESG) initiatives. Nevertheless, these topics have become central to boardroom discussions, with 90% of S&P 500 companies publishing sustainability reports. The projected annual expenditure on Green Capex for this decade is estimated at USD 6 trillion, with approximately 50% of new product launches embracing sustainability goals. This trend is further amplified by increasing media coverage and heightened consumer awareness. At this point, companies have not yet fully linked their sustainability efforts to a return on investment, as they are primarily driven by regulatory and corporate objectives. Today, there is quite a debate on whether ESG is truly being addressed fully to encompass the “E” (Environment), “S” (Social), and “G” (Governance), thus blending the 3 concepts is distracting and not always productive. Nevertheless, the next step, and major challenge, is to translate these sustainability initiatives into commercial success, which will require a lot of dedication and effort.

The benefits and risks of tackling ESG pricing 

If retailers can master ESG pricing and take advantage of green business models, although it is a complex exercise, they will be able to unlock significant benefits. The landscape offers promising prospects, such as the ability to command price premiums from a sourcing perspective and enhance margins through the emergence of new profit pools. Additionally, adapting to the evolving demands across the value chain presents vast opportunities for market share expansion and value capture. Launching new markets and products that are in line with ESG initiatives also provides a platform for brands to distinguish themselves and secure a competitive edge.

Conversely, the stakes of mismanaging ESG products and services are high. Overlooking emerging value trends could forfeit potential market gains while misjudging the market entry timing could close the opportunity window. Furthermore, exploiting these trends with too keen an eye on opportunism could tarnish a brand's reputation and compromise its success, underlining the delicate balance between seizing opportunities and navigating the risks associated with ESG initiatives.

Navigating ESG market opportunities effectively requires a multifaceted approach 

Bain & Company broke down the navigation of ESG pricing into 4 key guidelines.

Firstly, it is essential to have a clear understanding of the value at stake to guide prioritization, resourcing, focus and ensure that the overall sustainability strategy is in line with delivery and monetization. This includes being intentional when setting up new ventures especially in terms of the number of resources allocated, what they will focus on, and understanding the levers to be pulled whether that involves tapping into a new market or holding out for more premium offers or customers. In terms of customers, it is essential to understand the factors that push their willingness to pay and the problems the initiative helps the customer address. Supply and demand dynamics play a large role in success as well and it is important to understand if there will be enough green supply (resources) to carry out the initiative. Finally, it is important to understand the minimum margin requirement, meaning the target ROI and effective floor price, and the relationship this demand has on current products, wallet share, or loyalty.

Secondly, it is important to recognize that ESG triggers span across the value chain, with the intersection of costs incurred and value generated not always aligning. This means businesses not only need to understand their customers’ needs, but also their customers’ customers, and eventually the end consumer. This means that ESG pressures can come from a variety of places either from consumers changing opinions and driving pressures upstream, it can also come from regulations that bring more stringent practices, or it can come from a revolutionary technology change. Some examples of companies acting on these pressures are Coca-Cola announcing plans to use more recycled materials due a response to consumer demand, BMW sourcing aluminium from manufacturers exclusively using electricity obtained from solar power to meet their internal sustainability goals, or Rio Tinto investing in renewable energy and low carbon technologies to decarbonize their mining operations due to goals to meet both regulatory compliance and their internal sustainability objectives. Such internal sustainability objectives are important to get just right because efforts to go above and beyond, as seen with Walmart's Project Gigaton, will in turn have an impact on customer perception of the brand. The key to being successful in this stage is to ensure that the business is agile enough to act on these pressures quickly to clearly address the market demands, no matter which area the pressure is stemming from.

Thirdly, is it necessary to comprehend the currencies of value to accurately identify target segments and relevant propositions. Customer segments will vary in their willingness to pay across value attributes. When articulating the value proposition of an ESG initiative, it is important to understand the contributions that will resonate with customers. This can be addressed by asking questions such as: how can we help our customers drive value from ESG? and how can we help our customers deliver on their sustainability agenda? These questions cover tangible attributes such as helping customers drive growth or generate premiums from an improved ESG value proposition and improving their risk profile by helping them avoid greenwashing. The questions also address intangible values like helping customers attract and retain motivated talent due to stronger commitments to ESG or helping customers strengthen their ESG claims around their brand and helping them improve their market positioning. Such questions can also address sustainability value by helping customers deliver on their ESG and time-critical targets as well as offering more cost-effective pathways to achieve goals.

Finally, it is about playing the long game and ensuring pricing is established within the strategic context of sustainable offerings, carefully navigating supply and demand curves to achieve optimal outcomes. When defining the value proposition, it is important to focus on differentiation and going beyond regulatory requirements to drive bold change and address the industry’s main challenges to set the company to be an outlier versus the competition. The business needs to decide which areas it wants to be considered ‘compliant’, ‘proactive’, or ‘leading the market’ compared to the competition which helps protect the business from downside risks. These initiatives are more about laying a foundational ESG groundwork and might bring less tangible added value out of the ESG offering, but such changes will lead to longer success in terms of brand recognition.

Monetization might be the goal, but it can’t be achieved without a long-term strategy 

Bain & Company’s presentation broke down the ways that ESG initiatives can help a company find the right opportunities and monetize their sustainability strategies, but it is not enough to stop there. ESG needs to be ingrained into every fibre of a business to make a long-term and lasting effect. This is why the strategies and principles of Adam Werbach’s “Strategy for Sustainability” book are also important to consider when building out a corporate ESG playbook.

Strategy for Sustainability: Building out a solid long-term corporate sustainability strategy

In his book “Strategy for Sustainability”, Werbach explores how businesses can integrate sustainability principles into their strategies to create long-term value. He emphasizes the importance of aligning business goals with environmental and social objectives, arguing that sustainability is not just about minimizing negative impacts but also about seizing opportunities for innovation and growth. Werbach emphasizes that sustainability is not just a moral imperative but also a smart business strategy.

By integrating sustainability principles into their operations, businesses can unlock a myriad of benefits. Firstly, they can achieve cost reduction through the implementation of energy efficiency measures, waste reduction strategies, and sustainable sourcing practices, ultimately leading to long-term savings. Secondly, by addressing environmental and social risks such as supply chain disruptions and reputational damage from environmental controversies, companies can effectively mitigate risks and safeguard their bottom line. Thirdly, as consumers increasingly prefer environmentally and socially responsible brands, demonstrating a commitment to sustainability can significantly enhance brand reputation and foster customer loyalty. Lastly, sustainability challenges can spur innovation, prompting companies to develop new products, services, and business models that are not only more resource-efficient but also environmentally friendly, driving continuous advancement within the industry.

Werbach encourages companies to consider going beyond compliance and being transformational organizations by embracing sustainability as a core value and fundamentally transforming their business models to create positive social and environmental impacts.  With this philosophy, sustainability should be integrated into all aspects of a business, rather than treated as a separate, siloed function. This integration involves embedding sustainability into the company's mission, vision, and values to ensure alignment with business goals, incorporating sustainability considerations into decision-making processes across departments, from product design and procurement to marketing and human resources, and engaging employees at all levels to foster a culture of sustainability and empower them to contribute to the company's sustainability efforts. The key idea is to ensure that all decisions are driven by long-term sustainability goals rather than simply trying to meet quarterly exercise expectations.

Introducing new analysis strategies to ensure sustainability is a foundational consideration 

In rethinking traditional analysis methods, Werbach advocates for a shift towards more dynamic strategies and away from slower frameworks such as SWOT (Strengths, Weaknesses, Opportunities, and Threats) and PESTLE (Political, Economic, Sociological, Technological, Legal and Environmental). Werbach focuses on two methodologies: STaR Mapping and TEN Cycle.

STaR Mapping focuses on Social, Technological, and Resource changes, and moves away from competitive analysis towards simple incremental steps, termed North Star Goals, that can be implemented across the organization. STaR Mapping aligns short-term objectives with long-term strategies, anticipates energy and commodity costs, addresses demographic shifts toward aging populations, and prepares for future changes.

The TEN Cycle method takes into account Transparency, Engagement, and Networking in a cyclical process aimed at revitalizing conditions for long-term prosperity and the achievement of North Star Goals. The TEN Cycle helps strategists for sustainability celebrate transparency, build from the inside out, demonstrate that people are the most important company asset, provide deep induction processes and long-term equity incentives for employees, stay highly networked to outside organizations and companies, and employ cyclical and constant actions.

Xerox: a use case using Star Mapping, North Star Goals, and TEN Cycle 

Werbach illustrates the practical application of STaR Mapping, North Star Goals, and the TEN Cycle through real-world examples. Once again, these strategies focus on internal changes rather than on competitive analysis, which has been illustrated with a couple of examples from Xerox, where leadership teams leveraged these strategies to innovate and build sustainable and profitable businesses with significant industry impacts:

In 1993, Xerox hired chemist Patty Calkins to drive change as the company sought to integrate eco-conscious design principles into its products and services. Against the backdrop of heightened environmental awareness, Calkins helped the company set an ambitious North Star Goal: to produce waste-free products in waste-free facilities, fostering waste-free offices for customers through offering remanufactured products and parts. This simple foundational change led to big impacts, activating a TEN Cycle: the development of the ISO 24700 standard ensuring the quality of office equipment with reused parts, the reduction of overall costs due to better quality parts that would last longer and could be interchanged between products and offering better products to consumers. It is estimated that Xerox saved several hundreds of millions of dollars through the copier remanufacturing program.  Such a change also made Xerox reputable as being a sustainability innovator and the company became active in associations working towards regulation and spent time educating customers on why sustainable businesses do not always need to be considered more expensive as they make products that are made to last, thus saving customers money in the long-term.

In 2021, Xerox faced substantial challenges, with a staggering USD 17 billion debt, operating losses of USD 237 million, and a substantial loss in stock market value. Under the leadership of CEO Anne Mulcahy, the company embraced its tradition of innovation and community service to chart a new course, grounded in the North Star concept. Mulcahy's strategic vision allowed Xerox to move away from only selling copiers to expanding their product offering- which significantly propelled the company, resulting in a USD 978 million gain by 2005. This foundational change also set the company up to develop the first plain paper copying machine and to establish the renowned Xerox Palo Alto Research Center (PARC), which played a pivotal role in the evolution of personal computing and laser printing, giving Xerox recognition as an innovator.

Conclusion – A winning ESG playbook is all about the Domino Effect

The playing field of how businesses operate more sustainably and responsibly, especially in terms of ESG initiatives, might not ever have a set of official rules and guidelines to follow. Thanks to experts at Bain & Company and the advice taken in the examples shared in Werbach’s book, retail businesses do not have to act as guinea pigs and can follow the examples of many companies that have tried to innovate in the sustainability space.

What can be learned from these examples? There is a critical intersection between simplified long-term sustainability strategies that bring business value and profit in today’s business landscape while amplifying a company's culture and leading to strong relationships with employees and customers. There is also an advantage to being a first and influential actor, as seen with Xerox, that sets the stage for what a sustainable company looks like. By integrating sustainability principles into their strategies, businesses can achieve various benefits, including cost reduction, risk mitigation, enhanced brand reputation, and innovation. Overall, by embracing sustainability as a core value and integrating it into all aspects of their operations, companies can not only mitigate risks and comply with regulations, but also drive innovation, enhance competitiveness, and create long-term value for shareholders, stakeholders, and society as a whole.

IADS Note: To access the full Bain & Company webinar on ‘Monetizing sustainability – Navigating ESG pricing’, follow this link. You will need to input the passcode: !0J?Lp3D

Credits: IADS (Mary Jane Shea)

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The IADS attended the Global Peter Drucker Forum, an annual event organized in Vienna, Austria, last December. This event is an international management conference dedicated to the management philosophy of Peter Drucker, a management professor, writer, and consultant, often referred to as a “management guru”. The conferences held during the Forum aimed at making a reconciliation between pure research (systematically based on Peter Drucker’s findings) and practice, by having on-stage academics and executives.

While the whole session was dedicated to exploring the notion of “creative resilience” in an age of discontinuity, two specific talks raised our attention, as they challenged some notions that are taken for granted in business :

• Simplify to win,
• Plan a transformation process,
• Have the appropriate individuals carry this process.

What if the simplification process has become a poison for businesses in a world where uncertainty is everywhere and every day, at every level? What if the business transformation was not a process, but a never-ending moment, because its true nature is more psychological than measurable in actions? Finally, what if CEOs could not count on dedicated individuals to carry out a digital transformation process due to its very evanescent nature?

While we already reviewed these notions in our 2022 White Paper, “Smarter department store organizations”, by especially wondering if the structure had always followed strategy in the past for department stores, these two conferences gave an interesting angle that comes as an ideal complement to the conclusions we made at that time.

Introduction: Questioning Conventional Business Strategies

During a conference held at the Peter Drucker Forum in Vienna last December, Pierre Le Manh, CEO of the Project Management Institute (PMI), an HR consultancy company dedicated to upskilling and reskilling people, made a disconcerting remark: at the beginning of the COVID-19 pandemic, the whole market thought that PMI would go down, as their business entirely relied on discretionary budgets. Contrary to expectations, they did not. The surprising part comes from Le Manh’s candid admission that they performed much better than anticipated, but no one in the company, including himself, truly understood why or what factors contributed to their relative success over competitors.

Since his career was built on the fact of being an outsider (he was first appointed CEO at less than 30 years old, under the premise that “he did not have any clue about the business he was about to lead,” a trait seen as a strength by the then-president of CFL Holdings who recruited him), he proposed to review his inability to explain PMI’s success by questioning what leaders are usually taught, and what he did not do “by the book” when he joined.

In doing so, he challenged the long-term effectiveness of conventional business strategies: defining a value proposition, choosing a market, adapting the offer, focusing on specific customers, and optimizing the supply chain are all sound strategies… but what if this simplification also creates an organizational fragility? After all, the business tactics companies have been using for the past 20 years were adapted to a world where free money, safe real-time logistics, and the predictability of events were taken for granted, a world that no longer exists.

He also emphasized that natural ecosystems are extremely complex and based on millions of interactions that allow the environment to remain very resilient. In his opinion, this suggests that the simplification businesses often pursue might not be the wisest move in a world where resilience and the ability to face the unexpected are now vital.

This strong view against simplification in business, for the sake of ensuring resilience and the ability to absorb shocks (even though “simplified” processes such as Just in Time were initially described as the best way for organizations to absorb shocks), was later echoed in another conference dedicated to digital transformation.

Digital Transformation: More Than Flexibility

When asked about digital transformation and its ability to add flexibility to organizations, Lalit Karwa, the Head of Tata Consulting Services in Europe, was clear: the question is whether digital transformation adds enough flexibility. He stated that the answer was negative: given the changes the world is undergoing, the need for flexibility is now extreme, and expectations to reach that level are not realistic. Moreover, the notion of flexibility varies according to different perspectives, and the gap between decision-making and execution in digital transformation often leads to failure.

He emphasized that digital transformation is primarily a transformational process, with the “digital” aspect being just a component. The foundation relies heavily on people and processes, often overlooked in transformation efforts:

• 70% of transformations fail due to internal resistance: making a company more flexible often involves less flexibility at the individual level, creating friction,
• Placing people at the centre of a transformational process does not reduce complexity, on the contrary,
• Processes cannot also systematically be trimmed down or reviewed according to general principles. In the same way that Le Manh mentioned that playbooks might have to be reviewed, Karwa suggested that “inefficient processes in any given company were there for a reason, and leaders should empower their staff capable of tweaking these processes rather than replacing them with external elements.”

In summary, digital transformation is a complex process that, unfortunately for CEOs, cannot be simplified by creating an ad hoc department responsible for such a transition. As Karwa put it, “If one does business as usual and launches into digital transformation as a parallel process, it will fail. There is nothing in digital transformation that has a start and an end.”

Instead of top-down efforts, Karwa emphasized the need for bottom-up transformation approaches, mixed with a systematic revaluation of conventional business practices. He cautioned against relying on external experts (notably interesting as he leads a consultancy company) and emphasized that, for change to be successful, employees must be motivated, equipped, and empowered to redesign processes.

He proposed a set of 6 rules to define the “new generation” digital transformation in organizations:

• The outcome should drive what gets prioritized,
• The outcome should be time-boxed,
• Uncertainty should be managed in new ways,
• Adoption should be planned at the design stage,
• Transformation should be an innovative process.
• Transformation should be carefully balanced in an equilibrated portfolio.

The outcome should drive what gets prioritized: 

Karwa explained that, for front-liners, respecting deadlines and budgets is paramount, and then they deal with “HQ’s eccentricities”. To ensure this group feels involved in the transformation efforts, the value proposition of such efforts should be clear, relevant, and valuable to them, and be the sole focus of management. Too often, transformation efforts culminate in grandiose plans that fail to connect with or engage the workforce.

The outcome should be timeboxed 

Karwa suggests that relevant teams (if not the entire company) should be tasked with realizing the value of their efforts within 120 days. Ninety days is too short a period, and 180 days too vague. Therefore, leaders involved in the effort should report and demonstrate results, ROI, and KPIs within this 120-day period.

Uncertainty should be managed in new ways 

It's impossible to act without checkpoints, which Karwa suggests implementing every two weeks. During these checkpoints, micro-decisions should be made according to market developments, user feedback, and general observations. These micro-decisions are intended to steer the project in real-time and mitigate the expensive commitments that will eventually need to be made.

Adoption by design 

Addressing the disconnection between decision-makers and those tasked with developing solutions, Karwa stressed the importance of empathy and humility. The transformation plan's solutions must be centered around people’s needs. In his words: "If no one uses your solution, why do you build it?"

The transformation should be infused with innovation 

The transformation process should be planned, designed, and developed with the objective of empowering the organization and providing it a competitive edge. In other words, innovation should be embedded in the transformational process to ensure the organization is not only equipped for today but also for tomorrow.

The transformation plan should be part of a larger perspective 

Karwa expressed his view that transformation initiatives should be part of a balanced portfolio, which plays at the same time offence and defence.

These last two points echo Le Manh’s views, who insists that businesses should allocate 70% of their resources to business as usual, 20% to innovating in known territory, and 10% to uncharted territory (a distribution rarely observed in real conditions, as per his own words).

While Le Manh advocates for CEOs to avoid oversimplification when developing a strategy and keep room for manoeuvring, Karwa goes further by stating that "innovation departments" are ineffective in driving company-wide transformation (as this opposes day-to-day business to innovation). Instead, he stresses the need for companies (and their cultures) to make innovation an everyday practice, rather than a periodic transformation. In other words, dismiss the notion of transformation as a plan with a beginning and an end, but instead, see it as a perpetual movement within the organization.

Karwa acknowledges that this vision is disconcerting, if not uncomfortable, but for him, this is the price to pay to be stronger. Le Manh goes further by reminding us that crises are opportunities for organizations to emerge not different but stronger. While this is now a widely accepted statement, he affirmed that companies today have no excuse not to be ready for unforeseen events, as developing alternative contingency plans is a critical and essential piece of work in a world where disruption becomes the norm.

Pierre Le Manh and Lalit Karwa’s viewpoints highlight the necessity of integrating resilience, innovation, and adaptability into the very fabric of organizational culture. This approach requires a shift in mindset, from viewing transformation as a finite project to understanding it as an ongoing, integral part of business evolution.

To broaden the subject and to resonate with the essence of their messages, a fitting reference from Peter Drucker, whose forum sparked these discussions, can be utilized. Drucker, a visionary in the field of management, famously said, “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” This quote encapsulates the core theme of the discourse presented by Le Manh and Karwa. It suggests that the key to thriving in today’s rapidly changing business landscape lies not in adhering to outdated models and strategies, but in developing an agile, forward-thinking approach that can adapt to new challenges and opportunities.

This idea prompts a broader reflection on the future of business leadership and strategy. As organizations navigate through an era of unprecedented change and complexity, the principles and strategies discussed by these leaders could serve as a guiding framework for others. It emphasizes the importance of understanding the evolving dynamics of the global market, the increasing interconnectivity of systems, and the unpredictable nature of future challenges. By embracing a mindset of continuous learning, innovation, and adaptability, businesses can not only survive but thrive in the face of uncertainty, turning potential crises into opportunities for growth and transformation.

Credits: IADS (Selvane Mohandas du Menil)

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In 2023, despite a promising start to the year, IADS members experienced a significant turning point in the retail market following the summer. This shift was further exacerbated by terrorist attacks in Israel in October 2023, leading to global economic concerns, particularly regarding inflation and growth in 2024. These apprehensions were evident during the IADS General Assembly in November, prompting IADS to invite The Coca-Cola Company to share their insights with IADS CEOs for 2024 and the FMCG (Fast Moving Consumer Goods) market.

The presentation was delivered by Nikos Koumettis, President of the Europe Operating Unit at Coca-Cola, and Rami Sabanegh, Vice President of Strategy at Coca-Cola Europe. Nikos Koumettis began his career in Marketing and Sales, working for Kraft Jacobs Suchard, Elgeka and Papastratos/Phillip Morris, and joined Coca-Cola in 2001 as General Manager for Greece and Cyprus. Since then, he has built a wealth of experience in several international roles. Similarly, Rami Sabanegh has an impressive list of credentials and uses his extensive knowledge of management consulting as a member of Coca-Cola’s European leadership team, where he leads business analysis, strategy, insights and strategic transformation for 40 countries. Together, they shared their expertise on the European customer landscape, macroeconomic factors, sustainability, technological shifts and their company's extensive reach, serving 500 million customers across a wide product range.

Introduction: Europe is a highly diverse and challenging space to operate in

The diversity and unique characteristics of Europe's market make it a difficult and exciting retail space to navigate for companies, including Coca-Cola. The European market, spanning 40 countries, including the 27-nation European Union, presents a diverse landscape with multiple currencies and a population of 600 million residing in 250 million households. This market's allure lies in its blend of developed and emerging economies, extending from Ukraine to Switzerland. However, despite the immense opportunity this presents, there are also challenges faced by retailers in this vast market presented by a few distinct features of European constituents and consumers.

Europe's population is on the verge of decline, even when immigration is considered, it is also a swiftly aging demographic with one in four Europeans aged over 60, and it features an increasing trend towards single or two-person urban households. These shifts hold significant implications for companies, including Coca-Cola, leading to evolved market strategies and the introduction of different types of product lines including zero-sugar and zero-caffeine products.

Such demographic changes should also be considered by department store businesses but are often overlooked by retail marketing departments. The evolving market, such as the ageing European consumer demographic, necessitates adjustments and adapting to the consumers’ needs. An example of such a change is the need to print larger product labels and price tags for ageing customers. As Europe continues to face macroeconomic crises and businesses must learn how to adapt to a ‘business as usual’ volatility, they need to think about how customers will respond and reallocate resources effectively to survive.

If the customer is ever evolving, who is the target audience?

Customers have undergone significant behavioural changes in response to various market forces, displaying both short-term and permanent shifts. In the short term, behaviours include down-trading, where consumers opt for discounters and private labels. The new generation of thrifty shoppers is showing reduced spending on non-essential FMCG products and a focus on finding the best deals. The more permanent changes that are here to stay include more planned purchases, reduced impulse buying, smaller but more frequent shopping trips, and an emphasis on value for money.

Coca-Cola is adapting dynamically to these shifts by developing fresh and healthier products, expanding retail partnerships, and implementing dynamic pricing strategies. Coca-Cola's revenue growth management methods involve offering various pack options at different price points per channel to address customer affordability and preferences toward value. The change in demand can be seen when analysing discrepancies in purchasing between regions and countries. The Classic Coca-Cola product is growing in Eastern countries, while in the West, growth mostly is driven by Coca-Cola Zero or low-calorie equivalents.

Another way Coca-Cola has shown its creative adaptability to a transformed consumer is with the offering of products in new formats such as its smaller 150mL cans to allow customers to still enjoy Classic Coca-Cola, but also control their calorie intake. These changes stress the importance of differentiation in terms of value for money, as middle-market brands face competition from discounters' private labels and premium products.

How macroeconomics push Coca-Cola to adjust its strategy

Europe is experiencing a transformation of trends that are reshaping consumer behaviours and business strategies, which are likely to extend to other markets in the future. These trends include a growing emphasis on health and wellness, with EU customers actively seeking mental and physical well-being. Coca-Cola acknowledges this trend's impact on customers and employees, addressing issues such as mental health support for staff.

Environmental concerns are also on the rise, with European consumers increasingly becoming more eco-conscious, prompting brands to adopt sustainable practices. It is also important to acknowledge that compliance with evolving government regulations is difficult as directives are still being set in place (noting that Brussels's demands for the European Union are stricter and more challenging compared to meeting the United Nations' expectations). Coca-Cola is actively addressing the evolving regulatory sustainability framework in Europe by keeping up with these directives and setting ambitious targets. These targets include giving back more water than they use, which they have already achieved, and focusing on increasing the scale of recyclable packaging use, with a target of 50% by 2030. CO2 emissions remain a challenge, and the company has committed to achieving Net Zero for bottlers by 2040, implying a substantial annual decrease of 8% which is a very ambitious goal.

Implementing digital strategies into marketing efforts

Technological shifts, including increased tech literacy and AI usage among consumers of all ages, are also changing how people consume and interact with brands. The company aims to have a visible presence where customers are investing in digital media and targeting the 18-28 age group to stay relevant and measure the effectiveness of their investments. Achieving relevance with young emerging consumers also includes shifts in Coca-Cola's talent acquisition. The company has an average age of 26-27 with a low turnover rate of 4%, meaning they value the company and tend to stay longer to grow with the company.

Coca-Cola's growing digital investments serve several strategic objectives, other than just appealing to a younger customer and talent base. These digital investments have a dual purpose: one aspect focuses on bringing the brand closer to customers, while the other aims to ensure the availability of appropriate digital platforms for various aspects like e-commerce.

Coca-Cola’s overarching vision is to replicate the brand's offline success in the online world, relying heavily on first-party data to understand customers and tailor offerings to them. Additionally, these investments are driven by the pursuit of measurable ROIs, a feature not readily available through traditional media channels.

Conclusion: An extreme need for adaptability

The insights presented by the Coca-Cola Company shed light on the multifaceted dynamics of the European market and the evolving behaviours of consumers that department stores should consider when developing marketing strategies and business models. The European market's diversity, ageing population, and changing household structures are factors influencing customer preferences, leading to short-term and permanent shifts in buying habits. These changes have been ignored by many marketing departments in favour of more traditional techniques, yet as pointed out by the Coca-Cola company, they are key to remaining relevant and innovative in an ever-changing consumer landscape. Coca-Cola’s insights highlighted the need for retailers in Europe and those operating across differing cities, regions, and countries to adapt to changing demographics, stay up to date on economic conditions, and respond to evolving consumer behaviours. Retailers should focus on offering value for money, addressing wellness and sustainability concerns, and leveraging digital marketing to remain competitive in this consistently dynamic market.

Credits: IADS (Mary Jane Shea)

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The IADS is at a crossroads when it comes to helping its members, by addressing their most operational questions and helping them to address current and future challenges. Being sustainable is certainly a critical one and it requires means, energy and time, which is even more difficult in crisis moments. The IADS invited Andrea Baldo, CEO of the Danish responsible brand GANNI, to share his views on the best ways to make true impacts and maintain a responsible vision.

Shareholders are usually not happy to reduce profits to fund sustainable changes, customers ask for sustainable products but are not ready to pay the price for them, and businesses are not happy to see governments talking about taxing people to fund the green transition. However, Baldo argues that this is the responsibility of CEOs to address the future, even if this means making sure investors are aligned on this vision too. For him, becoming sustainable in the future is much more important than digital transformation. He explains how CEOs can fight sustainability systemic issues by taking risks, choosing realistic actions over hollow claims and always favouring adaptation and innovation.

Fighting a systemic issue: ESG credibility and taking risks

First of all, for Andrea Baldo, the fashion industry cannot become a sustainable industry as it is in essence consuming the planet’s resources. True sustainability will only be achieved with significant technological advancement. Second of all, when it comes to acting more responsibly, very little development happened in 10 years (between the 2009 COP meeting and the Copenhagen Fashion Summit in 2019). Illustrating this fact, organic cotton only represents 1% of the global production, which shows how slow progress is.

This issue is systemic. On one hand, CEOs of fashion companies have to generate return on investments for their shareholders who are not always in favour of the development of more responsible products as this is equivalent to reducing profits. On another hand, the fashion industry asks consumers to pay 25% to 30% higher prices for sustainable products to help companies in their transition towards more responsible operations. Finally, people and companies are also voters who might refuse to vote for candidates advocating for additional taxes funding sustainability efforts.

Besides being responsible for their company strategy, culture and people, CEOs can choose to drive change, knowing that this is adding responsibilities on their shoulders. This means taking the risk of disagreeing with shareholders. But the good news is investors are increasingly looking at ESG credibility when considering investments. This has been the case at GANNI when Baldo was looking for investors for the company.

Still, despite great results in the past years, how to maintain the company vision when the growth rate decreased from 2-digit to 1-digit in one year? Tactically, being B Corp-certified does help as it forces shareholders to accept change, look at the impact on the planet, keep it as a strategic priority and pursue the company vision. In that regard, GANNI has a second responsibility board that helps prevent shareholders from back-peddling.

Being responsible rather than sustainable: the path to true transformation?

Embracing responsibility as part of the company culture means accepting that it is impossible to be sustainable. So, rather than claiming a ‘make believe’ sustainability, GANNI focuses on innovation, transparency and creating visibility for stakeholders and consumers through various honest and rather small initiatives such as:

• Using recycled materials for store props (rugs made of fabric waste for instance),
• Having a team dedicated to scouting fabric innovations,
• Recycling coffee waste to grow mushrooms.

These examples show a realistic path on the journey to becoming a more responsible version of the company in a very honest and transparent way. Consistency is also a key value at GANNI. When they decided to discontinue leather as a decision truly reducing the accessories and shoe businesses’ carbon footprint, they showed consistency by not offering beef at their cafeteria or not paying for expenses involving beef consumption anymore. This is a matter of adding credibility to the company's actions.

Even though some initiatives might look minor, not only the big projects are impactful in changing the culture and being more responsible: smaller initiatives (which are most of the time zero-cost) bring change and are necessary to drive transformation within and outside of the company.

GANNI also explored rental and second-hand models with varying results: while they didn’t find the key to success for rental, second-hand is already profitable for them. Finally, in terms of marketing, they opened a second Instagram account called GANNI Lab to highlight responsible efforts and to provide consumers with more information than the ones they find on the label.

Equivalent to digitalisation, sustainability has become a synonym for transformation and Baldo mentioned similarities in changing consumer behaviour and uncertain returns on investment. Circling back on the low share of organic cotton in the fashion industry, Baldo stressed the need for an improved supply chain, especially on the production side so that suppliers are paid more, allowing them to develop technical innovations and increase the usage of responsible materials.

Adaptation to markets and innovation: the keys to maintaining the vision

With an advanced contemporary positioning competing both with affordable luxury (Jacquemus, Acne Studios) and premium brands such as Sandro and Maje, 40% of GANNI’s customer base is 25 to 35 years old. 16 to 25-year-old customers account for 30%. Those groups usually declare they are interested in sustainability efforts.

In terms of territories, the brand has a strong presence in various European countries and the US, and it entered the Chinese market before COVID-19. After 2 years of presence in China, GANNI realized customers were primarily interested in their “scandi-cool” style and that was their entry point into the brand. They were also susceptible to the notion of woman empowerment. The responsibility credentials were coming at the bottom of the list. Actually, while the notion of sustainability appeals to communities in the West (we are all in the same boat and need to change our behaviour collectively), it is more of a personal choice in China (with the mindset of ‘I do it for myself and to feel better’), plus the notion of wellness is closely connected. For that reason, for instance, the alternative responsible materials required a lot of explanation to make sure customers understood them and liked them.

In Japan, the situation was different. It appears that when they entered the market, there were already a significant number of local players doing what GANNI was doing. However, they were not communicating these efforts as transparently as GANNI did, which is why many Japanese customers liked the relationship the brand proposed to create with them.

Evolving materials is also a key step towards responsibility. Discontinuing the use of leather is the number one priority and GANNI won’t use leather any longer from 2024. This is no easy task as challenges exist in that area. Non-leather materials are still perceived as cheap or plastic-like.

Andrea Baldo's insights offer a compelling vision for the future of sustainability in the fashion industry. Baldo's approach, as demonstrated by GANNI, emphasizes the importance of CEOs in taking risks to drive change, even in the face of shareholder resistance and market challenges. His focus on ESG credibility, embracing responsibility over hollow sustainability claims, and integrating innovative and transparent practices showcase a realistic path towards transformation. According to Baldo, sustainability is not about solving every big topic but taking a step-by-step approach: this could be done both by making sure shareholders are aware of what is at stake, but also by collaborating with other companies in frameworks such as what the IADS is.

GANNI's initiatives, from using recycled materials to discontinuing leather, and exploring rental and second-hand models, reflect a commitment to a more responsible business model. This approach is not just about environmental impact, but also about adapting to different market sensibilities and consumer behaviours, acknowledging the diverse perceptions of sustainability across cultures.

About Ganni

Based in Copenhagen, GANNI has developed exponentially over recent years thanks to a unique Scandinavian sense of style. Acting responsibly is seen as a moral obligation at the company which is on a journey to minimise its social and environmental impact. In 2020, they launched the GANNI Gameplan setting 44 tangible goals to be reached by 2023 across four main pillars: People, Planet, Product and Prosperity. The company is B Corp certified and has been elected one of the Time 100 most influential companies in 2023.

Credits: IADS (Christine Montard)

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IADS recently held a meeting on the home and decor sector. Based on market research, NellyRodi and The Style Pulse presented the most innovative brands from different segments in home and decor including furniture, tableware, decor, home appliances and electronics.

Check out our selection of these brands and the pictures by clicking the button below!

FURNITURE

FRAMA

FRAMA is a multi-disciplinary design brand that creates lifestyle objects to inspire the senses and encourage mindful living. With an emphasis on natural materials, simple geometries, and uncompromising quality, FRAMA’s work connects the imaginative with the practical, resulting in a uniquely warm and honest aesthetic.

Check out the Frama website here

CHECK OUT Frama's INSTAGRAM

DOOQ

Born in Portugal, Dooq is a design company dedicated to creating designs that stimulate the senses, and are inspired by the unexpected meeting of opposite things.They seek to find balance in things that are contrasting, creating pieces where feminine meets masculine, small meets large, soft meets solid and past meets the present allowing the new to blossom.

Check out the Dooq website here

check out the Dooq instagram here

POTIRON

Potiron Paris offers a blend of iconic and trendy decor products for every budget, including furniture, lighting, and decorative items. Emphasizing creativity, quality, and affordability, the brand now has an internal design studio to create unique, fashionable collections, making stylish interiors accessible to all.

Check out the Potiron website here

check out the Potiron instagram here

TABLEWARE

PINOLI GLASS

Pinoli Glass crafts unique, unconventional designs that elevate any home, celebrating life's beauty and unpredictability. Their pieces, embodying a "go with the flow" philosophy, provide an escape into extraordinary with every sunlight reflection.

Check out the PINOLI glass Website Here 

check out the pinoli glass instagram here

KNINDUSTRIE

KnIndustrie’s tools are conceived to serve food with practicality and elegance. On the table, KnIndustrie’s products become the center of conviviality, the protagonist of every experience dedicated to the presentation and use of food, where the functional element of the kitchen enters the “table space” with elegance, at the service of guests.

check out the KNINDUSTRIE website here 

check out the KnINDUSTRIE instagram here

AYA & IDA

AYA&IDA, established in 2018, is a Danish family business focused on reducing plastic waste by offering stylish, functional alternatives to disposable products. Named after the founders' daughters, their range

includes drinking bottles, food containers, and lunch boxes, promoting sustainable living and responsible consumption for a better future.

check out the Aya & IDA website here 

check out the Aya & Ida instagram here

DECOR

MAISON DEUX

Maison Deux is a Dutch design studio created to design fun, minimalist products that last for generations. We are a standalone design brand offering a range of durable rugs and rugs with playful, high quality designs, without compromising on quality and durability, while maintaining our social contribution.

Check out the Maison Deux website here

Check out the Maison Deux instagram here

WL CERAMICS

WL CERAMICS crafts porcelain with dedication, rooted in the historic porcelain capital, Jingdezhen, China. Since 1993, this family-operated business has been producing decorative porcelain, specializing in large, wheel-thrown pieces like vases and ceramic furniture. They collaborate with clients, architects, and designers to create custom designs, while also offering their own collection that can be personalized to meet individual preferences.

Check out the WL Ceramics website here 

check out the WL Ceramics instagram here

SHNEID STUDIO

Schneid Studio merges sustainability with timeless design, creating a wide array of products such as bowls, vases, benches, cups, wall hooks, and lamps. Rooted in a profound respect for nature, their work is characterized by ethical practices, collaborations with local artisans, and the use of naturally sourced materials. Their collection, inspired by traditional architecture, art, and poetry, showcases a balance between muted and vibrant designs, all embodying a contemporary yet enduring aesthetic.

check out the SHNEID STUDIO website here

check out the Shneid studio instagram here

DESIGN BY US

Design by Us blends fashion, fantasy, and humor to create distinctive lighting and interior designs. Challenging traditional design perceptions, they draw bold inspiration from the fashion industry to craft unique, recognizable pieces. With a commitment to creativity and an entrepreneurial spirit, their work is a playful exploration of forms, colors, and expressions that defy easy categorization.

check out the Design by us website here

check out the Design by us instagram here

HENRY DEAN

Henry Dean specializes in unique, handcrafted decorative glass objects, including vases, bowls, plates, and candleholders, focusing on recycled materials and in-house designs inspired by nature. Their commitment to artisanal craftsmanship and sustainability is evident in each distinct, mouth-blown piece that reflects a blend of traditional techniques and modern aesthetics.

Check out the HENRY DEAN website here

Check out the henry dean instagram here 

HOME APPLIANCES

CREATE

Create specializes in offering a broad array of affordable, quality home design appliances, from chef-grade kitchen gadgets to advanced cleaning tools, enhancing daily life with ease and efficiency. Emphasizing continual updates to include the latest functional, high-tech, and retro appliances, Create is dedicated to meeting the ever-changing needs of customers, ensuring a blend of modern convenience and classic style in every home.

Check out the create website here 

CHECK OUT THE create instagram here

AARKE

Aarke elevates daily routines with premium home essentials designed to improve water quality through innovative design and sustainable materials. Their commitment to meticulous engineering and quality ensures every product, from carbonators to water purifiers, enhances both function and aesthetics in the home.

Check out the Aarke website here

CHECK OUT THE Aarke INSTAGRAM HERE

ELECTRONICS

GINGKO

Gingko Design specializes in creating elegant and sustainable home and gift products, recognized for their innovative designs with international awards. Their range, inspired by the longevity and beauty of the gingko biloba tree, includes lighting, accessories, and timepieces, blending modern technology with a practical, aesthetic approach.

Check out the Gingko website here

check out the Gingko instagram here

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Michael G Jacobides is a strategy professor at London Business School as well as the Lead Advisor of Evolution Ltd, a boutique advisory firm helping clients adjust to a shifting context. A leading expert on business ecosystems, value migration and how firms navigate shifting, digital environments, he is Academic Advisor to the BCG’s Henderson Institute and has recently been a Visiting Scholar at the New York Fed and Visiting Fellow at Cambridge. . During the IADS 64th General Assembly held in 2023, Jacobides addressed IADS member CEOs to discuss the reinvention of retail and department stores, the foundations and evolution of ecosystems, and how these can be harnessed by retail businesses.

Harnessing the ecosystem advantage to reinvent retail

Defining an ecosystem as “a collaborative structure of interdependent firms delivering an integrated customer value proposition”, the concept provides a crucial lens for comprehending the evolving landscape of retail. Department stores, as integral components of these ecosystems, face new challenges stemming from shifts in consumer behaviour. These challenges prompt a closer examination of how department stores can effectively navigate and harness the advantages presented by dynamic business ecosystems.

Department stores: then and now:

The rise of the department store defined modern retail as we know it today. It changed the retail ecosystem from prices that were determined by negotiations between the clerk and customers to fixed prices. Department stores were the natural business ecosystem orchestrators in retail and consumer goods. Department stores did two things:

• They created superadditivity (the total value created by the platforms is greater than the sum of the values created by its parts), meaning that putting multiple items together in the same place makes other items more valuable just by being in close proximity to each other.
• Secondly, department stores offered customers experiences that were unmatched by any individual brand or manufacturer thanks to economies of scale and experiential displays that drive customers to spend more.

However, the 21st century has proven to be challenging for department stores. This has resulted in a sector-wide decline. Physical stores are starting to lose their superadditivity advantage to online marketplaces. According to BCG, the expected channel share for the 2023 holiday share of wallet shifted a lot with online marketplaces representing 30%, mass market retail representing 21%, and department stores representing 12%. This wallet share has been spread out among the different generations with department stores expected to perform well only among Baby Boomers. On the other hand, GenZ and Millennials are more drawn to off-price or discount offers, direct-from-brand, and specialty retail. And GenX is split between online marketplaces, mass-market retail, and direct-from-brand. This means that department stores’ Baby Boomer clients are getting to the age where they either die or stop spending money as they no longer bring in an income.

Redefining the role department stores should play in the 21st-century retail environment

Redefining the role of department stores in the current day retail environment requires an understanding of the business ecosystem. It is important to tackle ways that a department store can evolve as an ecosystem as the productive generation shifts from Baby Boomers to newer generations. These can be understood by asking a couple of questions.

The first question to address is: How can department stores collaborate with and complement (as opposed to compete with or substitute) the emerging digital retail ecosystems? They need to use physical locations as a lever to redefine the double value proposition user experience for influencers, brands, and shoppers by connecting the physical and digital worlds. For example, influencers offer live-stream shopping, which is experience-rich but lacks physical touch. Department stores can become complementors to online influencers and offer them things like iconic physical locations to stream from and interactions with fans, for example, Harrods offers a special room where customers can enjoy a beautiful setting with mirrors, lamps and screens allowing them to follow livestreamed masterclasses done by influencers from across the planet, and try the products on the spot at the same time.

Department stores can also fill the gaps by providing access to a wider subscriber base, new experiences, and increased reasons to visit (a possibility that not all brands are fully aware of). Taking on partnerships like these will create new revenue streams and advance and reposition brands in ways that can benefit all involved.

The second question to address is: How can department stores create a hub for reinvention of the retail experience without breaking the bank? They can leverage favourable economics of having central locations and high reputation as an anchor and bring complementors to fund the development of experiments in a controlled way. Deciding boundaries for criteria for innovation inside and outside the ecosystem is crucial for maximizing benefits and minimizing downsides. For example, European energy provider, Enel, is using its installed base of 3 million lamp posts as an anchor point to expand product offerings and get partners on board by promoting smart city initiatives to develop its value. It is also interesting to note that by doing so, they also expand their base of possible partners, as in addition to private businesses, local authorities were happy to team up as they know some of the new services or features could benefit their voting base.

But does this mean that you need to have a cool and sexy brand in order to be successful in complemented services? Jacobides explains that it is not necessary, or even sufficient enough. Virgin is an example of a brand that has tried it and failed with their attempt to expand their mobile business into banking, finally taking a toll on both businesses. It is not only about having a cool brand, but you must also have something in terms of the value-add to the customers. WeWork is a good example of an ecosystem that lacked brand recognition that failed recently due to greed and not due to the failure of the idea. In fact, a strong brand is actually a reflection that you are doing something that people and consumers like. But you can also reinvent your brand in order to access a very different class of customers. Mercedes-Benz has done this by connecting with rappers in the United States to make their cars go from being seen as nothing special to the type of cars used by rappers in the music industry, appealing to a younger customer base.

Engaging and empowering legacy companies

Legacy businesses such as department stores are grounded in traditional ecosystems which might seem more difficult to reinvent and think outside of the box. To propel these entities forward, achieving organizational alignment becomes imperative for successful innovation. Deliberate attention is required to determine where innovation resides within the organizational structure, as this placement significantly influences its perception.

The innovation process design itself should be strategic and forward-thinking, taking into account the intricate dynamics among various departments and teams. When individuals feel integrated into something novel and inspiring, their receptivity to change is heightened. A straightforward narrative and a well-articulated rationale behind the proposed changes can cultivate a positive atmosphere, fostering enthusiasm and openness within the team.

Conclusion: Navigating business ecosystems for department store reinvention

In the ever-changing retail landscape, department stores face the imperative of reinvention, guided by insights from business ecosystems. Department stores, once retail pioneers, grapple with 21st-century challenges posed by shifting consumer behaviours and the fast emergence of online marketplaces, Jacobides explains. The posed questions — how to collaborate with digital ecosystems and create innovative hubs — signal a new era of adaptability and value proposition redefinition.

The cautionary tales of failed ventures drive home an important point: real success goes beyond just having a cool brand; it's about consistently giving customers something valuable and dynamic. Mercedes-Benz's brand reinvention, resonating with the music industry, can serve as inspiration for department stores seeking to connect with a discerning, younger clientele.

Engaging and empowering legacy companies calls for a deep commitment to organizational alignment and innovative thinking. Unveiling potential within traditional ecosystems requires a meticulous approach to innovation's placement and a forward-thinking design acknowledging team dynamics. The atmosphere fostered within these organizations becomes the catalyst for successful innovation.

In conclusion, the future of retail businesses hinges on the strategic navigation of business ecosystems, collaboration with emerging trends, and relentless innovation. By embracing these principles, department stores secure their survival and position themselves as pioneers in a continually evolving retail narrative. This transformative era invites exploration, reinvention, and enduring success.

Credits: IADS (Mary Jane Shea)

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Sephora is one of the largest distributors of LVMH perfumes and cosmetics, which generated 7.7 billion euros in turnover in 2022 with 3,000 stores in 35 countries. After the recent launch of the retailers’ new concept dubbed ‘Store of the Future’ in Singapore, London, Shanghai and Wuhan, Sephora reopened the Paris Champs-Elysées store at the end of October 2023 after 6.5 months of renovations. As the second biggest Sephora (behind Dubai and ahead of New York’s Soho store) and considering its prime location, this refurbishment is strategic to the brand. Also, Sephora will be an official partner of the Olympic torch relay during the Paris 2024 Olympic and Paralympic Games. The perspective of such a major event called for the “reinvention of] the prestige beauty flagship experience”, as [Guillaume Motte, the retailer’s President and CEO puts it.

It is the first major remodelling of the 1,200 sqm location since it opened in 1996. Back then, Chafik Studio (a guest speaker at the IADS in 2022) designed the store with what was already a true and unprecedented customer-centric vision. The renovation budget is a well-kept secret, but it is the largest investment from Sephora Europe.

Before the renovation, the store accounted for 12 million visitors per year (10,000 daily, compared to 20,000 for the Eiffel Tower), with a quarter coming from outside France. The store sells a product every 15 seconds. In total, 200 people work at the flagship, with 50 to 60 people per day. This does not include the hundred or so brand ambassadors working daily.

The IADS visited the store to see what it has to offer. The store concept has evolved and is more relevant. The store offers a clear segmentation, personalised services and digital features, only if they are considered essential to customers.

Store concept: less black, more light, and the introduction of wood

The new store concept is more livable and a bit breathier than the previous black-and-white one. Considering the one-of-a-kind location, the flagship’s design inspiration is coming from Paris. The walls at the entrance are mimicking the limestone used on Parisian buildings. The Champs-Élysées avenue itself is also a source of inspiration with a large 2.6-metre-wide central white marble paved path that runs straight through the store. Also, the store is filled with light thanks to a 90-metre long glass illuminated ceiling, which can be adjusted to give a natural light feeling (very much needed in this low-ceiling buzzy space).

Sephora’s signature black-and-white stripes are still present, but more subtly on columns. Overall, complementing the white colour, the black colour is less present and used on the floor on each side of the white-paved path and for the lower part of the storage cabinets. The signature red carpet has been kept but only at the store entrance. The store is supposed to be less noisy than before thanks to some specific textures on the walls, as well as the use of wood, which adds a warm and wellness-like feeling to the skincare area. Also, the round-shaped embossed matte white walls contrast with the black elements. Finally, and for the first time in a Sephora, there are large green plants. All the furniture has been redesigned to be more compact without reducing the number of products on display. As a result, the store is easier to navigate.

Store organisation: clear segmentation, personalisation and… brands

Rather than featuring the usual list of product categories, the store directory at the entrance is service-oriented: makeup services, skincare services, hair services, fragrance discovery, brow bar by Benefit, face glow bar by Seasonly, personalised engraving, click & collect, gift wrapping and immediate tax-refund. The directory also mentions the private lounge and the fact that all products are on demand upon request to beauty advisors.

Right after the directory and on the left side stands The Corner, a huge shop-in-shop space which will be devoted to individual brands, with the first one being Dior. Then the category and brand experience rolls out up to the back of the store with a clear segmentation: fragrance, makeup and care.

The store is a big narrow rectangle: it gives a great perspective, but it requires visual stops. This is why the Beauty Hub (already existing in other stores but much bigger here) is located in the middle of the store and considered a kind of ‘Arc de Triomphe’ to the paved path. This space is used to advise customers and to organise events. It is modular and can be managed and animated by Sephora or monetised to other brands. At the time of the opening, a new brand was planned every day, with makeup and skincare brands mostly taking over the hub. Appealing to the younger customers, there is an area showcasing the brands that are ‘Hot on Social Media’, plus ‘The Next Big Thing’ gondola and the ‘Gift Hub’ for gift wrapping. The retailer’s private label collection has its own department, and there’s an area for hair care. A unit dedicated to Dyson hairdryers and GHD straighteners is a new store service. Contrary to the London store, there is no Lip Bar, a category significantly growing post-pandemic.

The store emphasises personalised services with a large number of beauty counters which are monetised to brands. The beauty hub accounts for 16 seated counters where customers can benefit from personalised services depending on the brand: skincare consultations, face massages or makeup services to help consumers achieve the look they want, etc. The Brow Bar offers Benefit masterclasses. The skincare accounts for 8 seated counters. At the time of the visit, some were managed by Clarins (a simple brand sticker is put on mirrors making the brand rotation easier). The hair section has 4 seated counters where customers can book 30-minute hair appointments. The Gift Hub offers personalised gift packaging but also individualised voice messages, scents, and gift boxes. Finally, a private lounge is accessible to Gold customers (the highest level in Sephora's loyalty programme). It is also monetised, as brands can use it for product launches or specific services: at the time of the visit, Guerlain was offering made-to-measure care services.

Is the Champs-Elysées store the store concept for future renovation projects? “Our new stores, such as the Champs-Élysées flagship, as our first London store and our newly renovated stores in Shanghai, Singapore and Wuhan, are sources of inspiration for our future renovations, as they illustrate our strategy and the experience we want to provide to our customers,” Motte said. “But there is no ‘template. Each of them must be meaningful locally and resonate with local communities.”

Finally, Sephora is well known for its power in attracting key, hot new brands and making them exclusive (an issue our members are very familiar with). The brand assortment accounts for 309 brands. There is a handful of exclusive brands including Prada Beauty, Valentino Beauty, Glow Recipe, Maison François Kurkdjian and Penhaligons, which will only be available at the flagship and on Sephora’s French website. This shows efforts in developing the premium and niche fragrances business, which is significantly growing at the moment.

Digital features and payment options emphasize efficiency and loyalty

Click & collect is available in the store. A smaller specific entrance on the left-hand side of the main entrance (already existing before the renovation) is dedicated to click & collect orders and is accessible from the main entrance as well. Also at the entrance, is a selfie-friendly multicolor light box.

A large screen is on display at the right side of the entrance, communicating promotions and events. In the end, fewer screens are animating the different spaces than before, with no use of augmented or virtual reality and no mention of metaverse or Web3. For now, the digital tools are considered gadgets by Sephora and efforts are being put into giving customers a real-life experience. In the future, Sephora might integrate more digital tools, but they will be placed in the hands of the beauty advisors and not in self-service.

The checkout area is located at the end of the central alley. Sephora has completely overhauled its checkout management and now has 4 different flows for customers to access a cash desk. Gold customers have dedicated checkout access. Other customers can choose between a traditional checkout, accessible via a single queue to optimise the customer flow or a self-service checkout, the latter being permanently supervised by advisors to limit shrinkage and help customers during the operation. The display dedicated to miniature and impulse products has been optimised for the checkout waiting line. Finally, cash points are also discreetly scattered around the store for payment by credit card on the sales floor. In 2024, to facilitate payments, Sephora plans on deploying a payment tool directly on beauty advisors’ PDAs using the Tap to Pay Apple technology.

The extensive renovation of Sephora's Champs-Elysées flagship store marks a significant milestone in the company's ongoing evolution and is a testament to the brand's approach to customer-centricity and customer experience. The emphasis on personalisation is a strategic move that addresses the evolving desires of today's consumers. The store's layout doubles down on offering a variety of personalised services such as makeup, skincare, haircare and fragrance discovery, catering to individual customer needs in a more tailored manner. The store is more ‘breathable’ than before, thanks to the optimisation of the displays, the introduction of more light, as well as natural elements like wood and plants.

Credits: IADS (Christine Montard)