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Back in March 2021, Dr Christopher Knee shared his views on cultural goods, specifically books, in an IADS Exclusive. Two years later, the cultural goods footprint in retail is growing in renewed ways, justifying a new look at the topic.

Several reasons are underlying the cultural goods trend. On one hand, the cultural goods business at large is growing as explained by Bain & Company and Altagamma in their 2021 luxury report: with the reopening of art fairs, the art market recorded a post-Covid renewed interest in art with an increasing participation of new and younger consumers buying in the mid-priced segment. Besides investment and speculation purposes, this phenomenon is also sustained by the new pivotal role of home and the intertwining of living and working. On another hand, many luxury brands are morphing from high-quality product manufacturers to cultural actors, offering consumers ‘on steroids’ value proposition and raising the bar for other retailers.

This expanded value proposition is an additional way to answer new consumers’ expectations for more experiences beyond the traditional retail transactional relationship. From that perspective, increasing the retail’s cultural component and the cultural goods offerings represent an additional opportunity to drive traffic in stores and possibly generate additional turnover.

High-end art is a traffic and brand builder, but could art selling generate turnover?

Many department stores display art in their stores. For more than 30 years, Le Bon Marché in Paris has supported the contemporary art scene by acquiring paintings, sculptures and drawings as well as exceptional design pieces. Visible everywhere in the store and in parts of displays for some design pieces, the store is now giving its collections an additional experiential value by monetizing visits (for a EUR 20 fee).

Galeries Lafayette also ventures into exhibiting art: since 2016, they are showing a massive ‘Light Machine’ by French artist Xavier Veilhan in the Haussmann men’s store. More recently, and now that the famous cupola renovation is completed (a cultural attraction in itself), they brought an art installation called ‘Time to Breathe’ by the Korean artist Kimsooja, which offers a new vision of the cupola. By covering the inside historic dome with a film that diffracts the sun's rays, Kimsooja creates ephemeral luminous effects on the exterior surfaces and in the interior spaces of the dome. To create a new experience, visitors can even book a visit to the in-between dome.

Since 2020, South Korean major department stores such as Shinsegae, Lotte and Hyundai are venturing into the art market in 2 ways. Firstly, they jumped into the art market by collaborating with existing art fairs: for example, Hyundai and Lotte’s Busan branches are partnering with local art fairs. Secondly, they are incorporating art pieces in their stores to enhance the customers’ shopping journey (up to 250 pieces for Shinsegae). As for other Western countries, interest in art grew during Covid-19, particularly among the Millennial and Gen Z generations. Overall, the purpose of art displays in department stores is about enhancing company branding and not trying to make a profit out of selling art pieces.

But art also increasingly enters department stores in transactional ways. In May 2023, Lotte announced they would open a pop-up store showcasing 200 different kinds of merchandise from the National Museum of Korea (replicas, limited editions). Here, this museum ‘gift shop’ overlaps with national pride amid the Hallyu cultural wave. Similarly to Lotte, La Samaritaine opened a 5-month ‘gift shop’ run by the international art gallery Perrotin at the time of the store reopening in June 2021. The 200 sqm pop-up store offered cultural goods such as art books, artists’ limited editions, replicas, goodies and decorative objects. Besides product selling, offering cultural goods was a great way to make the offer dedicated to younger customers more dynamic and attractive.

Finally, in May 2023, Galeries Lafayette Nice Massena store hosted a performing 50 sqm pop-up store dedicated to controversial, yet very successful, French artist Richard Orlinsky. The space was selling limited editions of the artist’s famous gorilla sculpture and an exclusive highly commercial capsule collection including items priced under EUR 100 such as t-shirts, pens, puzzles, suitcases, iPhone and AirPod cases.

Selling cultural goods thanks to partnerships

As explained by Dr Christopher Knee, some department stores have not abandoned books but run this business in partnership with bookstore partners. Harrods in London partners with WHSmith to manage their lower-ground bookstore. De Bijenkorf in Amsterdam has handed its book department over to AKO, part of Audex. In 2021, Manor signed a partnership with FNAC (a legacy French retailer specialised in cultural goods) to open 27 shop-in-shops to provide books, audio, video and electronics. There are business limits to partnerships though: having limited brand awareness in the German-speaking part of Switzerland, FNAC and Manor recently decided to close 10 shop-in-shops.

As part of their turnaround strategy launched in March 2022, Printemps announced that cultural goods would be part of their revamped product offerings. Pursuing their existing partnership with the famous Parisian bookstore Gibert, they opened a 490 sqm bookstore located on the 7th floor of the Haussmann men’s building. The space offers more than 20,000 books including 20% of second-hand books and also a very large selection of Japanese manga books. This is a smart move as the category is highly praised by Gen Z who is massively buying manga (France is the second market for such books). Filled with natural light and offering a great view of Paris rooftops, the bookstore is coming along with appealing food and beverage offerings, making the entire space a relaxing and engaging place. Whether profitable or not, this type of offering can generate traffic when shrewdly targeted and create the kind of lifestyle experience and ecosystem that consumers are currently looking for.

Being part of the Zeitgeist: cultural prizes and sponsorship

Brands are increasingly embracing culture to be visible to additional groups of consumers and to be a player in the Zeitgeist. Supported by the Loewe Foundation, the brand created a Craft Prize to support international artisans who create objects using materials such as ceramics, metal, leather, textiles, glass, wood, etc. To emphasize its cultural impact, the latest edition of the Loewe Craft Prize award ceremony was held by Fran Lebowitz (a famous New Yorker intellectual leading figure) at the Noguchi Museum in New York at a time when the brand is willing to grow its footprint in the US.

The world of department stores also participates in cultural prizes or acts as a sponsor. In the US, Neiman Marcus has 3 fashion awards which were given to Brunello Cucinelli, Loewe’s artistic director Jonathan Anderson and shoe designer Amina Muaddi. The department store will invest in merchandising, brand marketing and in-store experiences to promote these brands to its customer base. Closer to the IADS, the Manor Cultural Prize offers an opportunity to discover a wide range of emerging artists throughout Switzerland. For more than 40 years, the prize-winning artists have had exhibitions of their work throughout the country.

In terms of sponsorship, in 2022, Galeries Lafayette Group renewed its support for the international contemporary art scene by becoming a partner for emerging art galleries during the first-ever edition of Paris+ by Art Basel. The Group supported and boosted the visibility of 16 galleries and artists. Also, the group runs Lafayette Anticipations, a foundation supporting contemporary creation. The Foundation acts as a catalyser, providing artists with unique conditions to produce, experiment and exhibit their art.

Beyond retail: becoming a cultural ecosystem

Big luxury brands have always had privileged relationships with the art world in many ways, from product offerings (think Yves Saint Laurent’s Van Gogh sunflower jacket and Mondrian dress) to brands sponsoring art institutions (Chanel and Rolex being Paris Opera’s major sponsors) or art museums (Pinault Foundation in Venice and Paris and Louis Vuitton Foundation in Paris). Art and commerce have always been a great match and it’s only growing.

Since December 2022, the Louis Vuitton Dream exhibition is held in their Paris HQ, celebrating 160 years of creative exchanges with artists such as Jeff Koons and Yayoi Kusama. The exhibition includes a curated gift shop and a famous pastry chef restaurant offering logo-stamped cakes. Overall, Louis Vuitton is doing more than ‘only’ transforming into a luxury lifestyle brand: the value proposition is now to dress, eat, drink, sleep (they will open a hotel), and soon read and watch Louis Vuitton. It’s a complete mental ecosystem. And speaking of watching, Kering’s Saint Laurent launched a motion picture production company in 2023 with a first venture financing the latest Pedro Almodovar movie. Also, LVMH’s Loewe entered the world of high-end design with an exhibition held as part of the 2023 Salone del Mobile in Milano: building on their reputation for craftsmanship, they showed different weaving techniques in various materials to reinvent humble chairs. Chairs were sold out in minutes.

In the word 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 at the end of May 2023, Flannels X had a pop-up store showing a big part of the Beyoncé x Balmain couture collection for the first time, and also selling merchandise from Beyonce’s Renaissance World Tour. This initiative positions the store at the intersection of luxury and pop culture to offer more experiences and reach younger audiences.

In Hong Kong, on top of their art village, art collection, art space and events, K11 malls launched its Art Foundation, a non-profit organisation dedicated to fostering the development of Chinese contemporary art. Committed to supporting artists and young curators through exhibitions, artist residencies, and educational programmes, the foundation also established partnerships with leading art and cultural institutions around the world, Centre Pompidou in Paris, and the Metropolitan Museum of Art in New York among others.

Since their inception, department stores have always been cultural stakeholders. Their remarkable architecture, the size of the stores, the unprecedented abundance of products and the revolution they initiated in buying and selling made them an essential part of the Zeitgeist.

They lost a bit of their grip over the past decades. While fashion usually is department stores’ main source of revenue, cultural goods and footprint can for sure contribute to improving the shoppers’ journey (if not generate turnover), not to mention how acting as a cultural player can contribute to creating the experiences consumers are looking for.

Credits: IADS (Christine Montard)

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ChatGPT constantly made the headlines for the past 9 months and its adoption was massive (it reached 100m monthly active users in January 2023, 2 months after its launch. For comparison, it took 9 months for TikTok and 2,5 years for Instagram to reach the same amount of MAU). However, ChatGPT is just the tip of the iceberg, more precisely a ‘demo’ product showing to the general public the capabilities of Generative AI (a system able to answer queries, or ‘prompts’, after having been trained on large amounts of data, and therefore capable to bring answers which are going further than simply mimicking the data it learnt).

Generative AI has already started to disrupt many industries and retail is no exception. This is the reason why IADS invited Cyrille Vincey, Partner in Advanced Analytics at Bain & Company, to provide IADS member CEOs with more information and give a few examples of use cases in retail.

Cyrille Vincey has been in data science for 25 years in various industries, always obsessed with bridging business matters on one side, with technology and data science on the other.

After having started his career at a software publisher, applying operational research and graph theory approaches to supply chain optimization, he founded a data science startup, later acquired by an e-commerce player. He then took on a CDO role and shipped a large-scale audience-sharing platform used by 8,000 e-retailers.

As a consultant, Cyrille has been working primarily in the retail industry and assisted on most of the tech M&A deals in Europe, including ad tech, digital trust and enterprise software. At Bain, he fosters the next generation of data-enabled consultants and works closely with Open AI in the framework of the Bain x Open AI alliance.

He defines himself as a ‘data nerd’, a ‘tech guy’ who has been in tech entrepreneurship for 25 years and half-jokingly opened his presentation by mentioning that, now that AI is a commercially available product, people like him are not needed anymore, as businesses and organizations now only need software engineers to plug pipes and coordinate the new AI-powered tools available at hand.

Generative AI: landscape and perspectives

What are we talking about?

Generative AI, and large learning language models (LLMs), represent a new paradigm of artificial intelligence, which unlocks advanced capabilities to replicate human capabilities (perceive & understand, communicate & create, reason & plan, act & use tools). For instance, ChatGPT can complete a poem when fed with the beginning of it, based on the probability of the words’ occurrences.

The 2 root causes for this breakthrough are a 2017 research paper from Google describing a new architecture for deep learning models and the fact that IT costs for training this new type of model have been consistently falling for the past 3 years, by a factor of 100 (even though a training iteration for a large company would still cost EUR 20m today, that’s still a bargain when compared to the cost 3 years ago).

Vincey remarked that while OpenAI made a big splash with ChatGPT, the winners of this new arms race might be very well Google and Microsoft, who have the pipelines needed to integrate and scale this tech, make it available to the general public, and disrupt the way companies operate by providing them with new tools.

He also stressed the fact that ChatGPT is just a demo layer of a larger model, GPT, a text-to-text model. There are also other OpenAI products: Co-Pilot (text-to-code), Whisper (speech-to-text), Dall-E2 (text-to-image), Clip (image-to-text). This product portfolio will be questioned in Q4 2023 with the release of a general model proposing a multi-modal convergence (users will be able to use whatever form of input, text, image, speech or code, and to choose the form of the output they want as well). Vincey is convinced that this first general model will encourage the appearance of new applications still unheard of today. For instance, an entire PDF can be analyzed by this new model, and relevant parts can be extracted for use in a specific given context.

An impactful breakthrough in all industries

These new-gen AI-powered tools are fundamentally built with a general purpose in mind, while the previous models (IBM Watson, Einstein…) were built with a specific purpose. Generative AI models can be used out of the box by companies and applied to every internal use case. Therefore, AI innovation projects within organizations now take weeks, if not days, and not 6 months anymore like they used to. This allows industrializing innovation and experimentation with very limited time and costs. Companies who are late in AI-powered decision-making process investments, use Gen AI to leapfrog and do quite advanced things.

Generative AI does not, however, replace the existing quantitative AI-based decision models relying on machine learning and operation research, as it is not, by no means, a one-size-fits-all solution. Instead, it completes them by providing the possibility to bridge the decision taken thanks to the quantitative model, to stakeholders (partners, suppliers, clients, employees…), with adapted context. Gen AI is the ‘last mile’ of the decision-making process. For instance, if a company has invested in a quantitative AI tool to monitor prices and define the best price to be offered, Gen AI will generate ready-to-use pitches for negotiation with suppliers supporting the commercial team in charge.

How does it change business?

The shifts created by the rise of Gen AI have impacted all aspects of businesses and organizations. From a tech perspective, there are no more barriers. Now that AI is a commercial product, in-house development

does not make sense anymore and is not a strategic advantage. The focus now is on the use case play, rather than ensuring that the use cases can be powered. Companies are rushing to find applications for this new capability.

From a general business perspective, all industries are impacted. AI is a mature and business-ready tech, and finding the right way to use it is a competitive advantage, especially in low-margin sectors such are retail. Vincey mentioned that only 1/3 of the use cases developed at Bain are customer-facing solutions, while the remaining 2/3 are backstage efforts on productivity.

Now that tech is just a product that can be bought off the shelf, companies have only one strategic asset: their proprietary data. The urgency is to define the best opportunity how to combine AI products with company data. In that game, companies can either decide to be the first mover or the fast follower. All options are valid.

The impacts in terms of new needed mindset, capability to test, risk and encourage innovation within organizations, are heavily felt and visible. This is why phasing is key:

• The first phase is to develop and deploy Gen AI tools in employee assistance, to save time, limit errors and increase productivity (for instance, to help employees better recommend products to their customers),
• The second phase is to see AI as a co-pilot, proactively making propositions. For instance, AI can manage real-time customer engagement.
• The third phase is to consider full automation. Carrefour’s new chatbot takes over the relationship between the e-commerce website and the customer.

A tectonic shift in retail and for department stores

There are 4 current archetypes across industries on how Gen AI is used:

• Content generation, including images and assets. Coca-Cola now uses a platform based on GPT-4 and DALL-E to create artwork based on company archives and A/B test them at scale (millions of copies are created and tested automatically, vs. 2 in the past, which were developed by a third party). Carrefour uses Gen AI to deal with product data management (product descriptions).
• Advanced analytics, such as a predictive NPS based on conversations. Morgan Stanley has developed a model to help their advisors with AI ‘listening’ to their conversations and making product suggestions in real-time.
• Personalized chatbots, such as Carrefour which has developed a conversational grocery shopping chatbot, are able to make recipe proposals according to customers’ needs, adjust them and propose a full cart of

products needed to make such meals.

• Information retrieval, where syntheses are generated from unstructured data. Salesforce is developing a tool which generates AI-powered content for CRM across the data available in all Salesforce clouds. The Carrefour case perfectly illustrates the capability offered by Gen AI to leapfrog and quickly implement new services and usages: the chatbot, addressing a website with 15m MAUs, has been developed in 6 weeks between kickoff and going live. It can propose a list of menus according to the dietary requirements of the customer, adjust them, and suggest a shopping cart with the right quantity of ingredients needed, in a given budget. Only 10% of the whole development needed specific information from Carrefour, the rest came from the learning capabilities of GPT.

Where in the value chain Gen AI can impact retail?

The answer is simple: everywhere, both in customer-facing operations and backstage.

• In the outreach part, marketing is enhanced with tailor-made propositions customized at scale, which in turn provide the company with a smart view of the customer (for instance, Carrefour has now access to the

customer’s decision-making process easily as it can monitor it in real-time thanks to the client’s interactions with the chatbot), while, in terms of internal processes, Gen AI can help in RFP creation, vendors communications and negotiations, as well as category recommendations.

• In the “decide & buy” part, Gen AI impacts personalized targeting, product information (which is dynamically managed), checkout & payment, and customer service. It also impacts operations (employee enablement,

report generation, product design…) and HR.

• In the “receive & return” part, AI can help with the delivery scheduling and tracking, and provide help with returns, which are also more easily processed internally.
• Finally, in the” use” part, AI impacts customer connectivity and loyalty, and efficiency.

For Vincey, the impact of Gen AI is virtually unlimited. Some tests have been made on the supply part of Carrefour’s business, and GPT proved able to analyze and score RFPs on a quantitative and qualitative basis and recommend modifications that proved correct to buyers.

Bain noted from their own experiences with their customers that the productivity gain is on average +30% in the back office with the use of Gen AI.

Reimagining product categories and customer experiences

For department stores interested in beauty and fashion, he mentioned that Gen AI was specially adapted to 5 main use cases:

• Marketing campaign booster,
• Website content optimization,
• Community management,
• In-app beauty coaching,
• In-store beauty advisor personal assistant for salespersons

When it comes to customer experience exemplifications, Vincey showed a few demos of actual use cases:

• The US-based insurance company USAA uses a combination of GPT and DALL-E to create dozens of personalized ad copies according to a specific customer profile and a problematic, and A/B test them at scale,
• Adidas uses GPT in social media, where Gen AI makes proposals of answers to be sent to customer comments, in order to generate interaction,
• USAA uses GPT in up-sale and cross-sale with the analysis of credit card history, it can make mass-personalized emails (that can be also tweaked with external information) to be sent to customers.

*How can retailers move forward?

As of now, there are three ways for companies to address the challenges and opportunities created by Gen AI:

• Some decide to go into a full 360° transformation journey, based on a leap of faith, and the purpose is to go fast in the transformation in order to reap market share and reduce the cost of operations. This is the case with Coca-Cola or Carrefour.
• Some see Gen AI as a use case acceleration and adopt a test & learn approach with 1 to 2 use cases, which are developed and implemented quickly, to prove out the opportunity and identify the requirements for scale. This bottom-up strategy allows them to act and then strategize.
• Finally, some companies are voluntarily slower in their approach and decide to identify the value at stake by looking at their most critical use cases opportunities compared to their business strategy, and then implement those projects with a top-down approach.*

Whatever the option is chosen, no retailer has the choice to ignore what is going on now with AI, as the risk would be to be left on the side of the road. The change is equivalent to the 1990s when PCs and Internet invaded office spaces, with the difference that this change took place in 10 years, whereas now the timeframe for adaptation is much more reduced. For instance, at Bain, the technology component of the organization involves 1,500 technologists, including 400 data scientists, of which 150 specialized in text mining and analytics. In the course of only one year, these 150 people got rid of their in-house toolbox of natural language processing techniques, and now exclusively use GPT. The disruption in the consulting field is huge, and retail should expect a similar shift.

Vincey also reminded the audience that Gen AI is a great way to catch up with big tech as the leverage effect can be huge, not only in terms of business approach or organizational processes but also in terms of company mindset. It is all about granting the right to the teams to innovate, test and learn, sometimes at the risk of making mistakes.

For that reason, change can only happen if CEOs show the way and encourage such behaviour, if these tests do not take place in the mission-critical part of the business.

Credits: IADS (Selvane Mohandas du Ménil)

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Europe is on a mission to become the world’s first climate-neutral continent by 2050, but this is not a small feat. To achieve such a status, the EU is having to crack down on the way businesses are run and how people conduct their everyday lives in Europe. As a way to reduce the environmental impact caused by retailers, the European Union has started to define and impose new regulations that retailers must comply with. These directives are coming in waves and impacting certain players differently than others, thus raising questions and needing clarification. There are many of these sustainability regulations already in effect, but they are continuing to develop and become more stringent as the EU strives to become more sustainable and environmentally conscious, especially as it seeks to lead the world on the road to a more sustainable future.

Rules, regulations, and directives...the next wave of change

The number of directives, regulations, and reporting standards are multiplying faster than businesses and retailers can keep up. All of these codes are being set up to tackle ways to reverse the damage done by businesses with large value chains that touch various corners of the world. Overall, the objective is to ensure that there is visibility of their operational impacts and measurable metrics that can be used to benchmark and improve. While the number of regulations are many, and often they are being continuously rewritten and replaced as things evolve, IADS members have shared a few key ones that are already impacting their decision-making and investment processes.

The Corporate Sustainability Reporting Directive (CSRD) forces companies to publicly disclose detailed and transparent information on how sustainability issues affect their own business (covering Scope 1 and 2 emissions) and what impacts a business has on people and the environment (covering Scope 3 emissions). To achieve the latter, CSRD will soon require a double materiality assessment which identifies all potential negative and positive impacts connected with the company’s operations and value chain. CSRD aims to create a standard framework for companies to report on their sustainability efforts, thus enabling investors and stakeholders to make informed decisions about investing in sustainable businesses. The CSRD encourages companies to reduce their environmental footprint and contribute to the EU’s green economy.

The EU Deforestation-Free Regulation (EURD) was adopted to ensure that companies curb the impact their operations have on deforestation as well as protect indigenous people’s rights. This regulation mandates extensive due diligence on the value chain for all operators and traders dealing with products derived from cattle, cocoa, coffee, palm oil, rubber, soy, and wood. Risk assessments will have to include a broad view of whether the goods were produced in compliance with relevant local laws and with the informed consent of indigenous people. As the EURD requires a lot of communication and collaboration around the world with remote communities, it will be challenging to achieve compliance without the proper traceability tools (which are not mature yet).

The EU Green Claims Directive aims to set rules on how companies can market their environmental impacts and performance in order to eliminate misleading environmental messaging. As department stores pull together various brands and labels in one marketplace, it is very difficult for them to ensure there are zero misleading claims on the products across all their categories. This directive might eventually require retailers to educate and set their own guidelines for the brands in their stores.

The silver lining: sustainability regulations also present opportunities

Despite the uneasiness that new regulations can bring thanks to the many unknowns and new boundaries set, there are still many ways that businesses can play these new standards to their advantage. There are three main areas of opportunity with the upcoming sustainability regulations that are going into effect: innovation, collaboration, and financial opportunities.

First of all, in order to meet the new guidelines and reporting standards that require traceability and tracking of Scope 3 GHG emissions for benchmarking, there will need to be a lot of innovation. Retail supply chains are disjointed and will require a complete overhaul in order to be able to achieve what these new regulations set out to control.  Unfortunately, this means that the number of solutions and ‘quick fixes’ are multiplying, making it difficult for impacted businesses such as retailers to sift through the noise to understand which tools to adopt and which processes to invest in. While this may seem unclear at the moment, there will be a time when a winning solution will emerge, and it will probably be thanks to a successful use case from a player such as a mega-retailer.

Secondly, department stores and other types of legacy businesses will need to rely on communication and learning from each other's successes and failures in order for the industry to make advancements in these uncharted waters. Collaboration is the next key opportunity to help the industry grow and develop. With the current regulatory landscape, compliance is not simply black and white. Therefore, all businesses need to come together to work towards a common standard which can hold retail adjacent stakeholders accountable for their business practices to ensure everyone is on an even playing field in the journey to advancement. The road to achieving such a standard seems daunting, but there are coalitions and associations such as the Sustainable Apparel Coalition and Amfori that are leading the way in how such benchmarking can be achieved. It is not perfect, but it is an important first step in regard to setting the foundation for collaboration among all players in the retail value chain.

The third major opportunity that retailers should jump on is financial opportunities thanks to low-interest government loans that are being issued to help businesses make their operations more efficient which in turn makes them more sustainable. This kind of financing can allow retailers to significantly reduce energy consumption, leading to lower utility bills and an improved property value. Such investment plans are also key to innovation as technology plays a large role in operation efficiency, therefore the loan can also support digital transformation milestones.  Some IADS members have already taken advantage of such opportunities and found that it is a great way to get the C-Suite on board as it is an opportunity to invest in the business while also meeting regulatory requirements.

As new opportunities emerge, it is important to act now

Overall, the problem that retailers are facing is that regulation is moving faster than technology at this point. This means retailers are having to scramble and rely on piecing together data from various sources and tools in order to come up with the right information to put on their non-financial sustainability reports. Since the regulatory landscape is moving at such a fast pace, it is important for retailers to stay on track, or even better, get ahead of the curve.

A number of IADS members have found that addressing regulatory requirements before they go into effect has been a great strategy to ease the process. For example, CSRD does not require double materiality assessments until 2024, but some IADS members have already started to conduct this evaluation to be sure that the business runs smoothly in the coming year. Acting in advance has also helped ease their minds as the process was much easier than anticipated and they can now focus on ’business as usual’ projects rather than chasing after being compliant.

It is no secret that keeping up with and complying with regulations is extremely complex, but some members have noted that it is especially helpful to build a relationship with EuroCommerce, a retail and wholesale association that informs their members about EU policy and legislation, among other things. This highlights yet again the importance and need for collaboration across industry players.

Conclusion: there is a such thing as first-mover advantage

What is the lesson learned? We continue to echo our latest White Paper ‘Reinventing department stores through sustainability’ in saying that the most important step is to get started and get started now. It is important to recognize that there is no clear path to take, but the longer businesses wait to tackle the new regulations, the harder and more expensive it will be to transition the business.

Department stores should use these sustainability regulations as ways to make their core business more efficient while taking advantage of government handouts such as low-interest loans, especially while there is still a bit of flexibility in how activities are regulated. It is also key to start building collaborative relationships with all players to not get left out of the important conversations and decisions as to where the industry goes next.

In the retail sustainability landscape, it pays to be a first mover.*

Credits: IADS (Mary Jane Shea)

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IADS recently held a meeting all about the Women's Fashion brands to look out for in 2023. Based on market research, IADS and NellyRodi presented a curated selection of 15 brands that are trending right now.

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

Explore The brands and pictures here

OUTDOOR

ECOALF

Ecoalf is a new-era brand the is pioneering ethical fashion by producing clothes made from plastic waste found in the ocean. Their clothes are made for surfing, yoga, pilates, running, cycling and post-workout.

Check out the ECOALF website here

CHECK OUT THE ECOALF INSTAGRAM

ROA HIKING

ROA employs crossover, experimental techniques to shape a product that reflects a hybrid attitude towards the landscapes. ROA takes the sportswear attitude and applies it to outdoor footwear. The brand exalts the

values of functionality through the use of avant-garde materials and construction techniques of performance derivation.

Check out the ROA HIKING website here

check out the ROA HIKING instagram here

ALK PHENIX

A new era of functional fashion. The brand produces Japanese minimalist style products that combine functional materials to create its own technical materials. Innovation and an adventurous philosophy are at the centre of the brand.

Check out the Alk Phenix website here

check out the Alk Phenix instagram here

MATEK

With an atypical aesthetic and style, Matek creates clothes for skiing and snowboarding. The brand has a unique combination of fashion-forward designs and functional performance. Products ensure protection, comfort and mobility even in harsh weather conditions.

Check out thematek website here

Check out the matek instagram here

ACTIVEWEAR

RAPHA

Renowned for its stylish and refined designs that combine style and functionality in its cycling apparel and accessories. Technical innovations are embedded into its products, such as breathable fabrics, ergonomic cuts and reflective detail to enhance comfort and cyclist safety.

Check out the RAPHA Website Here 

check out the rapha instagram here

GIRLFRIEND COLLECTIVE

Known for its body and sporty positive brand attitude. Each pair of leggings are made from approximately 25 recycled plastic bottles. The brand prioritises transparency regarding its supply chain and offers inclusive sizing options promoting body positivity and inclusivity.

check out the GIRLFRIEND COLLECTIVE website here 

check out the GIRLFRIEND COLLECTIVE instagram here

UNRUN

Activewear made by Olympic champions. Effortlessly cool, versatile and edgy products available in a full range of colours. Unrun also has curated a strong community of feminine athletes.

check out the unrun website here 

check out the unrun instagram here

CARDO PARIS

Luxury and premium poolwear brand. Products are an extension of the poolwear style territory into more fashionable and casual products: sophisticated skirts.

check out the cardo paris website here

check out the cardo paris instagram here

ATHLEISURE

VAARA

Contemporary wardrobe tailored to the active body that exudes comfort and elegance. Products are versatile and made with fine materials that are soft and recycled.

Check out the vaara website here

Check out the vaara instagram here

NINEPINE

Swedish brand that produces minimal, aesthetic and technical activewear made out of organic cotton. Clothes are versatile and can be worn both to do sport or relax in the city for any occasion.

Check out the ninepine website here 

CHECK OUT THE ninepine instagram here

7 DAYS ACTIVE

Versatile athletic clothing made of organic cotton. Product design is technical and stylish with bold colours and cuts, graphic prints and retro aesthetics. The brand motto is to inspire individual stories of motion.

CHECK OUT THE 7 days active WEBSITE HERE

CHECK OUT 7 days active INSTAGRAM HERE

COLORFUL STANDARD

Products made in Portugal out of organic cotton and merino wool. The brand embraces an eco-responsible approach to creating sportswear essentials with neat cuts and a wide range of colours.

check out the colorful standard website here

Check out the colorful standard instagram here

TECH-IPMENTS

STARCK X BALISTON

Baliston by Starck is the first collection of AI-augmented shoes to capture biometric data straight from your feet. It is made with just five materials: castor bean yarn, sugarcane, organic cotton, natural rubber and recycled plastic.

Check out the STARCK X BALISTON website here

check out the STARCK X BALISTON instagram here

SUNNTO

World renowned sports watches that are high quality with advanced featured, making them popular among outdoor enthusiasts and professional athletes. The watches are equipped with GPS navigation, heart rate monitoring and activity tracking.

check out the sunnto website here

check out the sunnto instagram here

COWBOY

An electric bike made for urban riders with a sleek design and connectivity capabilities. Each bike is outfitted with its electric motor enabling riders to travel longer distances or tougher terrain with minimal effort.

check out the cowboy website here

check out the cowboy instagram here

PRINTABLE VERSION HERE

IADS recently held a meeting all about the cosmetics, beauty and wellness brands to look out for in 2023. Based on market research, IADS and NellyRodi presented a curated selection of 10 brands that are trending right now.

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

explore the brands and pictures here

SKINCARE

TOPICALS

Topicals is skincare designed for flare ups. The effective, science-backed formulas address specific skin problems such as hyperpigmentation and eczema. The brand creates an inclusive environment by representing imperfect skin and designing their products to support every skin type and shade.

Check out the TOPICAL website here

CHECK OUT THE TOPICAL INSTAGRAM

DIEUX

Dieux is a clinically vetted skincare company that wants its consumers to know exactly what they are buying and how it works. Their products are rooted in science, price transparent, and responsibly sourced. .

Check out the Dieux website here

check out the Dieux instagram here

HERBAR

Berlin-based skincare brand, Herbar, takes a holistic approach to beauty that values plants and their benefits for skin, mood, and health. Using fauna, flora, and fungi-only formulations the brand champions sustainable beauty and the establishment of a responsible and transparent production and harvesting system.

Check out the HERBAR website here

check out the HERBAR instagram here

MAKEUP

YOUTHFORIA

Youthforia is a clean and sustainable makeup brand that creates makeup that acts like skincare. The brand has innovative and playful makeup that customers are able to sleep in thanks to its high quality, unique formulas.

Check out the YOUTHFORIA Website Here 

check out the YOUTHFORIA instagram here

ECLO

Eclo is formulated from vegan, organic, 100% natural ingredients that mostly come from regenerative agriculture. Their product range includes blushes, foundations, eye shadows, and lipsticks that come in compostable packaging. Not oly are their products good for the planet, but they are also good for the skin.

check out the Eclo website here 

check out the Eclo instagram here

19/99

19/99 is creating a new narrative in the beauty industry where individuals can define their own image of beauty. The brand has multi-use essentials that are easy to use, designed for people of all ages, and made with clean ingredients

check out the 19/99 website here 

check out the 19/99 instagram here

HAIR

OWAY

Oway uses naturally derived solutions for a variety of hair solutions. Their concentrated and multisensory hair and scalp products are rich in active ingredients and formulated according to the brand’s agrocosmetica principles which are put in place to improve the wellbeing of the Earth and others.

Check out the OWay website here

Check out the oway instagram here

PERFUME

NONFICTION

This lifestyle beauty brand sells products that offer moments of intimate well-being on a daily basis. They encourage customers to reset, refresh, and create a space for self. All products are formulated with high-quality and carefully curated ingredients to create unique scents that are inspired by natural environments, and the cultural traditions and lifestyle of Korea.

Check out the NONFICTION website here 

CHECK OUT THE NONFICTION instagram here

THE NUE CO.

The Nue Co. is an interhealth brand that is bridging the gap between health and the environment. With sustainability at the root of everything they do, Nue Co. is pro-science, pro-clean, and pro-planet. They are on a mission to redefin supplements, but also sell functional fragrances that have scents with proven efficacy on the body and mind, as well as skin and haircare products.

CHECK OUT THE NUE CO. WEBSITE HERE

CHECK OUT THE NUE CO. INSTAGRAM HERE

OTHER CATEGORIES

GESKE

Geske is a Germany beauty tool brand that is launching soon. They offer a wide range of multifunctional beauty tech tools at an affordable pricepoint that are designed with dermatoligists and aesthetic doctors. Additionally, the tools offer a personalized experience as they connect to the brand’s smartphone application.

Check out the GESKE website here

PRINTABLE VERSION HERE

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. The presentations had a large focus on tableware as it is the top-performing segment in home and decor at the moment.

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

explore the brands and pictures here

FURNITURE

MAISON DADA

Created in Shanghai, Maison Dada creates products that are bold, playful and daring. The brand fuses ancestral Asian influences, such as lacquer and ceramics, with a modern and colourful style to produce decorative furniture inspired by Surrealism.

Check out the Maison Dada website here

CHECK OUT Maison Dada's INSTAGRAM

HOUTIQUE

Houtique is a furniture and lighting editor that defines itself as a design incubator. Several designers work together to create its bohemian, colourful and joyful aesthetic. Products are subtly inspired by nature.

Check out the Houtique website here

check out the Houtique instagram here

POPUS

Popus furniture utilises vibrant colours, vintage prints and elegant materials. They allow customers to compose their own furniture with the opportunity to choose colours, fabrics and patterns.

Check out the Popus website here

check out the Popus instagram here

TABLEWARE

STUDIO ARHOJ

Fusing together Scandinavian and Japanese minimalism, Arhoj offers handcrafted creations made with passion. Designed to enhance the functional aspect of tableware, each product is hand-made and hand-decorated in Copenhagen.

Check out the Studio arhoj Website Here 

check out the studio arhoj instagram here

LA DOUBLE J

The Milanese brand offers its tableware line that consists of vintage patterned plates and maximalist ceramics and linens. The brand edits the very best of Italy and what was originally a shoppable magazine selling vintage clothing and jewellery, became a full lifestyle label now offering its own fashion and tableware.

check out the La double j website here 

check out the La Double J instagram here

MARIE DAAGE

Marie Daâge creates elegant and modern tableware to make every table a work of art. Each piece of porcelain is hand-painted and custom-made in local workshops, making it the haute couture of the table. The brand is an ode to the French art of living.

check out the Marie Daâge website here 

check out the Marie Daâge instagram here

ARTSENIAS DEL ATLANTICO

A collection of handcrafted pieces made by craftsmen in Colombia. Products are 100% made with local raw materials and artisan labour. They offer tableware, trays, placemats and more.

check out the Artsenias del Atlantico website here

Check out the Artsenias del Atlantico instagram here

MAISON FRAGILE

Maison Fragile produces porcelain tableware, made in France. The brand seeks to re-enchant the French art of living and the labour process consists of fifteen steps to make every piece. Maison Fragile has partnered with prestigious Michelin-starred chefs and the Élysée Palace.

check out the maison fragile website here

check out the maison fragile instagram here

MINVAL LIVING

Sophisticated pieces with sleek designs and elegant curves inspired by the art of the table of medieval monarchies. Minval uses noble and luxurious materials such as silver and marble to give tables a sense of royalty.

check out the minval living website here

check out the minval living instagram here

DECOR

ANNA + NINA

Anna + Nina use colourful designs to bring joy to interiors. The founders use inspiration from their travels to Bali and Thailand to bring rich colours and complex patterns into everyday life. The brand values every step of creation, from the manufacturing process to design to ensure all collections are made with love and attention.

Check out the anna + nina website here

Check out the anna + nina instagram here

PAPERMINT

Produced in Paris, France, Papermint offers made-to-measure and customisable wallpaper. The brand values creativity and explores all types of styles.

Check out the papermint website here 

check out the papermint instagram here

MATTINA MODERNA

Matina Moderna creates colourful lamps that bring life into every interior. Each lamp is handcrafted and hand-painted by a ceramist in Portugal and crafted in France by an artisan. The brand is a mother-daughter project and every product is one-of-a-kind.

check out the mattina moderna website here

check out the mattina moderna instagram here

ARETI

Areti is a collaboration of Swedish and German craftsmen to produce high-quality furniture and lighting. Areti values elegant and simple shapes and lines.

check out the areti website here

check out the areti instagram here

HOME APPLIANCES

STEAMERY

Steamery is a Scandinavian textile care brand. They make clothing care products such as steamers, fabric shavers and clothing brushes. On a grand scale, Steamery aims to slow down unsustainable processes and inspire a slow fashion lifestyle.

Check out the sTEAMERY website here 

CHECK OUT THE STEAMERY instagram here

ELECTRONICS

AMIBOT TECH

Amibot offers different types of robots adapted to the needs of every individual, ranging from vacuums to window cleaners. The brand is committed to local and eco-responsible production and all robotic vacuums are recyclable.

Check out the AMIBOT TECH website here

CHECK OUT THE AMIBOT TECH INSTAGRAM HERE

TRANSPARENT SPEAKER

The Swedish brand has made an innovative and differentiating design with a commitment to product circularity - all of its modules are forever upgradeable. They aspire to be the first circular tech brand and firmly believe that companies are responsible for removing electronic waste from the world.

Check out the transparent speaker website here

check out the transparent speaker instagram here

PRINTABLE VERSION HERE

IADS recently held a meeting all about the Women's Fashion brands to look out for in 2023. Based on market research, IADS and NellyRodi presented a curated selection of 10 brands that are trending right now.

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

Explore the brands and pictures here

FORMAL WEAR

RECTO

Recto is named for the right hand page of a book, alluding to what is yet tobe written. The word is formal and neutral, which is reflective of the brandsidentity. The RECTO label focuses on sleek staples with neurtral tones,making the pieces ideal for a minimalist or capsule wardrobe.

Check out the Recto website here

CHECK OUT recto's INSTAGRAM

TOVE

Tove curates a collection of elevated feminine pieces that transcendseasons and transition easily between occasions. They set out to create aminimal and refined wardrobe for the modern woman using expertcraftsmanship and luxury fabrics that are of the finest quality, natural,organic, and recylced with environmental and social certifications.

Check out the tove website here

check out the tove instagram here

THE GARMENT

The Garment is founded by a duo who have been inspired across decadesand have a deep affection for vintage garments. This can be seen in theirpieces which feature impeccable knitwear and precise tailoring in achromatic palette balanced between gray, white, and black. They focus onmaking beautiful garments in a more responsible manner through sharingtheir fabric and garment makers, offsetting CO2 emissions, and usingresponsible fabrics.

Check out the garment website here

check out the garment instagram here

DAILY WEAR

ALÉMAIS

ALEMAIS is a contemporary band that focuses on artisanal techniqueswhile respecting traditional craft. They use natural, durable and organicfibres to create unique pieces with fun and colorful prints.

Check out the alemais Website Here 

check out the alemais instagram here

7115 BY SZEKY

7115 is a design studio founded in New York City with a focus on creating an artful and robust wardrobe. They create classic and timeless pieces with a minimal and raw aesthetic in a neutral color palette. With each piece being expertly crafted and tailored, the brand aims to provide functionable and comfortable clothing that will last for years to come.

check out the 7115 BY SZEKY website here 

check out the 7115 BY SZEKY instagram here

TRENDY / CONTEMPORARY WEAR

PALOMA WOOL

This Barcelona-born brand is inspired freely by the act of getting dressed. Paloma Wool blends notions of community with artisanal qualities and a distinctly elemental aesthetic inspired by land and cityscape. Pieces are locally produced and often desgined in collaboration with local artists.

Check out the Paloma wool website here

Check out the paloma wool instagram here

ESTHÉ CLOTHING

ESTHE is a contemporary fashion brand based in Greece with a curated range of unique pieces. The brand is committed to sustainable practices and invests in local communities. Their pieces are feminine and relaxed, featuring nique pleating techniques, sophisticated shapes and dynamic textures.

Check out the esthe website here 

check out the esthe instagram here

INNOVATIVE WEAR

PH5

An advanced contemporary women's brand that aims to to inspire people to completely rethink knitwear and tell the world that knitwear is more than just a winter fabric. The brand leans towards edgy with a touch of feminitiy, combining whimsical designs with architectural dimensions of knitting techniques and even features UV reactive pieces.

Check out the PH5 website here 

CHECK OUT THE PH5 instagram here

OCCASION WEAR

MINUIT

MINUIT is a combination of industrial NYC, classic Paris, androgynefeminine, past and future. Their pieces are minialmist and sophisticated, with a delicate and feminine approach. With pieces that are full of texutre and functional, the creators share their love of art and architecture through their clothing.

Check out the MINUIT website here

CHECK OUT THE minuit HERE

MIRROR PALAIS

Mirror Palais is an NYC-based brand most known for its dresses which arevintage inspired, delicate, plafyul, and feminine. The brand features piecesthat are lingere-inspired and unique yet timeless.

Check out the Mirror palais website here

check out the mirror palais instagram here

CHRISTOPHER ESBER

Christopher Esber is an Australian designer who has built a globalreputation for contemporary tailoring with a sophisticated approach. Hiscollections are innovative and radiate confidence with elegance,minimalism, and laid back sensuality.

Check out the CHRISTOPHER ESBER website here

Check out the CHRISTOPHER ESBER instagram here

Printable version here

The IADS attended the 2023 edition of the Global Fashion Summit which took place from June 27th to the 28th in Copenhagen. This year’s theme was “ambition to action” and was an opportunity for industry leaders and professionals to share their knowledge, tools and experience to help shift the industry from vague aspiration towards concrete implementation to achieve a net-positive industry.

The overall tone of the summit was rather ominous - the clock is ticking, as 2025 sustainability targets are approaching quickly and seem unachievable, 2030 targets are the new focus as the global climate emergency becomes more pressing, and the fashion industry is not moving fast enough. In efforts to push the industry forward, the conference was an opportunity for industry leaders to share actionable case studies, step-by-step guides and conversations aimed to simplify complex topics. The IADS highlights the key takeaways and important resources for our members below.

Collaboration is key

The topic of collaboration when it comes to sustainability is nothing new as the industry has already established that working together is vital in order to see real progress. The crown princess of Denmark opened the first day of the summit and urged the industry to “work together locally and globally.”

Efforts to collaborate across the industry have already been established in recent years, one of the most notable initiatives being The Fashion Pact. Eva von Avensleben, Executive Director and Secretary General of The Fashion Pact, highlighted the importance of adopting unified methods and fostering a collaborative mindset throughout the entire value chain. She stated, “This means we need to include all stakeholders in conversations from suppliers and manufacturers to retailers and brands.”

Conversations regarding the inclusion of all voices from the value chain were a major talking point across both days. Hakan Karaosman, Professor at Cardiff University described supply chains as social economical ecosystems and explained how supply chains and social justice go hand in hand. In his talk, he further discussed how inclusive decision-making from retailers, suppliers and supply chain workers is vital in order to achieve a just transition in decarbonising the supply chain and an overall more sustainable and equitable industry.

Strategic partnerships were also showcased heavily throughout the summit. Integrated logistics company, Maersk, joined Puma and H&M on stage to display the ways in which these alliances have helped reduce scope 2 and scope 3 emissions by making shipping and transport logistics more efficient. Thomas Liske, Global Director of Puma, shared that even though its increase in transport efficiency would cause Maersk a 10% decrease in its business, Maersk has adopted a bigger picture vision for the industry and showed its commitment to long-term goals when it comes to its sustainability promises. For H&M, finding relevant partners, as they did with Maersk, who aligned with their goals was a necessity on the greater sustainability journey to see true progress.

Other industry alliances have come together to promote circularity and transparency, such as the Vestiaire Collective, Chloé and EON collaboration. The alliance announced earlier this year, that the Chloé Vertical initiative sets to roll out EON-powered Digital IDs for each Chloé product including ready-to-wear, bags and shoes. The Digital ID allows consumers to access information regarding the product and material, assistance for repairs and resale options with Vestiaire Collective. The initiative is an industry first, and in doing so Chloé is making resale easier for customers while also offering them the opportunity to make informed decisions about the transparency, traceability and circularity of their products.

On a wider scale, LVMH’s Antoine Arnault called for a luxury-specific sustainability pact to create a space that allows actors in the luxury sector to aggregate together to exchange best practices, share suppliers and more. He believes that if the luxury sector wants to see meaningful change when it comes to sustainability, coming together – even as competitors – as necessary.

LVMH wasn’t the only one offering an olive branch to competitors in an effort to work collaboratively. Allbirds unveiled their zero-carbon shoe, "M0.0NSHOT", along with an online toolkit, "Recipe B0.0K", which provides detailed information about the shoe's creation process to allow other businesses and rivals to draw inspiration to make their own sustainable products.

Crafting the narrative: How to communicate around sustainability

Setting targets and shifting business operations to achieve a sustainable business model is only one piece of the puzzle, and retailers and brands are now considering what the best practices are when it comes to communicating their sustainability efforts to consumers. In today’s world, taking a stand on sustainability is no longer a nice-to-have, but rather a necessity, and green hushing, when organisations stay silent regarding their sustainability efforts in an effort to avoid greenwashing accusations, is no longer acceptable.

In a talk titled ‘What comes next for communicating sustainability?’, the panelists discuss the ways organisations can properly communicate this complex topic to their consumers effectively. The impacts of greenwashing are damaging, and consumers are pushing back on greenwashing claims and are demanding to be informed by retailers.

According to Shakaila Forbes-Bell, Founder of Fashion is Psychology, consumers do not want brands flooding them with information and policies, but rather they want accurate information allowing them to be well-informed. Furthermore, she states that consumers desire the power to make informed decisions and require positive reinforcement that they are making good decisions by choosing sustainable products, and retailers who provide positive reinforcement can differentiate themselves from the competition in the eyes of the consumer.

When it comes to avoiding sharing misleading information, the panellists urged retailers that they ensure their statements are science-based and must include accurate and robust data in order to substantiate their claims.

Other panellists reiterated the importance that businesses should not treat sustainability as a marketing trend and instead need to make a commitment to make sustainability marketing systemic and to avoid getting caught in the cyclical marketing trends.

To further help businesses communicate around their sustainability efforts and actions, the United Nations Environment Programme (UNEP) and the UN Climate Change launched The Sustainable Fashion Communication Playbook, a guide designed to outline how to align fashion communication with global climate goals. It offers actionable frameworks for communicators to counter misinformation and greenwashing, reduce messaging the perpetuates overconsumption, redirect aspiration to more sustainable lifestyles and empowers consumers in their role as citizens to demand greater action from businesses and policymakers.

UNEP also presented The Eight Principles for Sustainable Fashion Communication, which includes a list of dos and don’ts, checklists and case studies for communicators to reference.

Resources like the ones provided by UNEP are key as the era of superficial sustainability claims and unethical practices are nearing its end as policies will compel companies to take full responsibility and accountability.

Regulation and profitability: An age-old question

The industry is subject to regulation coming down the pipeline, especially in Europe. The conference featured various conversations on policy, attempting to make complex regulations easier to understand.

What was of consensus, however, was that regulation is needed – the fashion industry will not change unless this happens. So now the industry acknowledges that regulation is needed what next?

Many businesses are struggling with the incoming regulations as there is a huge lack of resources. Not all brands and retailers have equal access to resources and businesses are operating in different countries with different policies coming from all directions, and many are finding it hard to stay afloat, unless they are a big industry player that has ample access to resources. So, what could help mend this unequal playing field and lack of resources? Harmonisation from policymakers can help, but a vital resource that many businesses need for survival is money. Investment and cash flow will be necessary for businesses to keep their heads above water as the slew of regulations ensues.

For brands and retailers, in a talk titled, ‘The Race to Net Zero: Decarbonising the Supply Chain’, panellists emphasised the importance of investing in tools that help measure sustainability efforts. For example, Marks & Spencer and Target are harnessing impact intelligence platform, Worldly, that delivers data specific to supply chain, products and operations to help retailers improve its product sourcing, carbon footprint and more. James Schaffer, Chief Strategy Officer at Worldly, discussed how platforms like Worldly can be the key needed to help the industry close the data gap by providing data, and in turn, insights.

We have also rounded up a selection of interesting startups that may be worth investing in for our members to support their path to sustainability:

• Carbonfact: Scalable life-cycle assessments to help brands and retailers lower their carbon emissions.
• IDFactory: End-to-end global supply chain traceability solution made to address the following challenges: lack of traceability, lack of transparency, supply chain disruption risk and supply chain sustainability risk.
• Reverse Resources: SaaS platform to match textile waste with the best possible recycling solutions, enable predictive transparency and build data-driven supply chains.
• Retraced: Platform that supports fashion and textile companies to digitise and trace their supply chains, efficiently manage their compliance data and gain full transparency down to the raw materials.

Conclusion

While we have seen little pockets of progress over recent years when it comes to sustainability, it is safe to say that the fashion industry is not moving fast enough. The overall mood of the conference was somewhat ominous as business leaders feel the pressure of facing crack-down regulations in the EU. While regulation is needed to see real progress and change, the transition to comply is no easy feat for businesses as they try to remain profitable.

2022 White Paper

Credits: IADS (Kaitlyn Lim)

DE PRATI STORE PICTURES

Printable version here

Following the IADS CEO meeting in Mexico City last May, where IADS members were able to visit the latest developments in El Palacio de Hierro’s flagships (Coyoacan, Polanco and Perisur), the IADS had the opportunity to travel to Ecuador to discover the De Prati stores. The purpose was to understand more about the market, the company and the vision of the CEO, Priscilla Altamirano.

A rather small country when compared to its neighbours (Colombia and Peru), Ecuador is classified as an upper-middle-income country, with a developing economy dependent on exports (agricultural products, oil). The country regularly topped the South American GDP growth charts in the 00s and even ranked the second most performing country in 2022. Since 1999, extreme poverty decreased significantly, and employment increased, fueling the growth of the middle class which aspired to consume.

De Prati, which was founded in 1940 in Guayaquil, the trading centre of the country, managed to fulfil these needs, becoming the largest department store company in the country, with 16 stores and an e-commerce website. Unlike its European counterparts, which had available resources to learn from each other and innovate (thanks to organizations such as the IADS, but also through a vast array of suppliers and brands, and the lack of regulation at the time which allowed unrestricted data exchange), De Prati, while always being the leader in the country, had to invent each step of its development by itself, by developing in-house what was needed and finding solutions on its own.

The result is a company that has been posting an average EBIT margin of 20% and a net profit margin of anywhere between 13 and 15% for the last decade, with a much-loved retailer brand and strong social involvement. This is not too bad for a business that has developed almost in a closed circuit, which makes it an interesting use case to review the company’s competitive advantages, as well as the stores that we visited.

Company history and background

De Prati was founded in 1940 by Italian entrepreneur Mario De Prati and his wife Domenica Cavanna, as a fabric store, which later also included homeware and tableware. After a fire destroyed the initial location, the first department store per se opened in 1951 in Luque Street, in Guayaquil, a location still in operation today. The company was a pioneer in many ways: it introduced the first payment card in the country, Credito De Prati, in 1968, the first national private label business in 1973, with local production, and the first Ecuadorian e-commerce website in 2007 (the website had already been launched in 2002).

The Credito de Prati card proved instrumental in establishing De Prati as a leader in the market, as it allowed it to capture and retain a significant share of the clientele who has access, in addition to credit, to special offers and perks (for instance, customers get a 30-day full guarantee with the possibility to return the product with no questions asked, a much-loved option that explains why, in the country, brands such as Apple and Samsung perform 80% of their business with Credito De Prati). Today, the program involves 1m active customers (Ecuador’s total population is 17m but the truly addressable target clientele base is much lower than that).

Also, when it comes to fashion, Ecuador has long remained isolated from the international brands’ sphere of attention, for its relatively small size as a market. For instance, Inditex came to Ecuador only in 2015 (introducing a new logic in the market based on markdowns and high-frequency seasonality). For that reason, De Prati’s private label business allowed them to develop a faithful client base, looking for interesting designs at low prices. 18 in-house designers develop the Women’s, Men’s and Kids’ private lines which are then manufactured in the country.

Today, the company operates 16 stores (7 in Guayaquil, 7 in Quito, the capital city where De Prati started operating in 1986, one in Manta and one in Machala, which opened in April 2023), and a website, to accommodate the needs of 18 million yearly visitors (online and offline), all powered by 2,300 associates. 50% of the total business is made in the historical location of Guayaquil, while Quito, more upmarket, represents 40%, and e-commerce close to 6% (this does not include digital activities related to stores, such as WhatsApp sales or instore iPad ordering, which are all attached to stores).

Every single store is positive and contributes to the final result of 20% EBIT margin on average, for a total turnover of $270m in 2022 (the same amount as the previous record in 2019) and an expected $305m in 2023. The whole business is 100% wholesale, as the company does not operate concessions or consignment (for big-ticket items, such as domestic appliances, the company “showrooms” the products and dropships them from the suppliers’ warehouses). In terms of categories, fashion represents 80% of the business, home 9% and tech 8%.

During the visit in Guayaquil, it was clear that each store had been developed according to a specific context, and for that reason, was perfectly adapted to its environment, while always keeping a very identifiable layout and branding.

Policentro: making the most of the opportunities in the company’s most profitable location

Policentro is the oldest mall in Guayaquil, and by far the most profitable location for De Prati. The specificity of this mall is that locations are not rented by retailers, but owned, which means that the mall itself is very similar to a condominium in terms of management (and this can create some inertia when it comes to renovating it or making sure that the brand and product offering remains relevant which raises some questions for the future).

For historical reasons based on real estate opportunities, De Prati operates three different units in the mall, each dedicated to a category: a women’s store (RTW, accessories, shoes and beauty), a men’s and kids one, including sport and electronics, and a home & decor store, for a total of 5,000 sqm. The core business is fashion (women, men and shoes), of which 70% is done with private labels. Women’s fashion itself represents 27% of the business, and Cosmetics and beauty 11%. For that category, even though brands are supplied by third parties, De Prati keeps firm control of the brand selection, price point, quantities in stock and promotions.

All three units have been designed with standardization and flexibility in mind, in order to be able to change the store overnight. This approach proved instrumental in dealing with the Covid-19 pandemic and allowed them to transform stores in e-commerce fulfilment centres during the 3 months of lockdown-related closures.

In the women’s store (due to be refurbished next year), most of the RTW space is dedicated to private labels, but third-party brands, such as Springfield or Veromoda, are presented in either dedicated branded spaces or a multi-brand testing space for the smaller ones.  In shoes, 80% of the business is achieved with third-party brands (Steve Madden, Michael Kors).

The men’s store was recently refurbished with the help of a Mexican designer and includes more visible third-party brands, such as Springfield or Aeropostale, presented in a very dynamic and airy concept, that slightly differs in the formal section, compared to the contemporary or the sport ones. The kid’s section is a mix of branded locations and generic displays. The category is extremely competitive in the country. Finally, a small electronics location presents a selection of products, completed by an “infinite aisle” option on digital screens, where customers can order from a wider selection and then pay at the cash desk.

The home stores are located on the first floor of the mall, where many services are available (banks and post offices). The location used to be the kid’s store in the past and that was the most profitable location of the whole mall. In the home category, 40% of the business is made with home textiles.

Overall, Policentro is a surprising location as all categories are spread over the mall in different locations. The fact that De Prati was able to purchase the locations (and amortize them) explains the high profitability of these operations overall, however, the disadvantage of split spaces is felt in terms of cost of people and refurbishment.

San Marino: a “lab” store in an upmarket mall

San Marino is a mall located 5 minutes away from Policentro by car and is very different. While inertia related to the ownership is felt at Policentro in terms of overall customer experience, San Marino feels much more dynamic, thanks to a very different set of tenants (including fashion names ranging from Pull & Bear, H&M to Polo, Tommy Hilfiger or Esprit) and a permanent renovation that allows the mall to look very modern, even though the mall layout is very disconcerting in terms of brands adjacencies.

The brand assortment implies that in that mall, the competition is harsher than in Policentro, which is why the De Prati store is relatively small, 2,500 sqm (vs. 6,000 sqm on average for the rest of the stores), and pushes a “curated’ assortment, only focused on women, men and young fashion.

Here again, the store fixtures are very flexible but they allow customers to understand where they stand in terms of product categories, which is not specifically the case in Policentro.

This store, significantly smaller than the others, is mostly used to show De Prati’s relevance in terms of fashion in a mall where the brand offer is one of the edgiest in the country. For that reason, this is where the company tests new brands, and also new ideas for its own private labels. This is also where De Prati can test the adequacy of its basics offer, which is planned to grow by a double-digit rate of up to 30% of the business in fashion, in order to make the most of the fact that these items are never marked down.

Plaza Navona: build-a-store

Plaza Navona is a real estate program that has been developed by De Prati, up north in the city on the way to Samborodon, a very wealthy suburb. This is why the relatively modestly sized mall (26,000 sqm) is positioned as a family shopping centre, aimed at the posh neighbourhood but also the middle class that started to relocate to Samborodon a few years ago. The mall is managed by De Prati itself, with a new team that has been created on the spot.

This also explains why the De Prati store concept of 7,000 sqm is slightly different from the other ones visited so far, and it is the most recent one (the new store in Machala, opened in April 2023, takes on this concept). The fixtures are lower and allow visitors to embrace the whole store easily, while also giving an impression of lightness and modernity. Third-party brands are much more visible than in the other stores (and in higher proportion), including some specific to this location (Oscar de la Renta, Chaps for men).

Plaza Navona is also the store where De Prati tests its innovative processes, both in customer-facing solutions and in behind-the-scenes improvements:

-    In customer-facing solutions, digital screens allow them to scan a barcode and check the stock availability of the product in all De Prati stores, book it, and pay for it with a nearby salesperson. Also, mobile POS is being tested in the store.

-    In the behind-the-scenes improvement, the store has been the one in the chain to have real-time visibility on its stock updated every 15 minutes thanks to a system developed internally from an SAP platform. The development team is currently deploying a solution allowing store staff to be able to immediately locate a product in the stockroom, which also gives useful data in terms of forecasts and auto replenishment, in addition to significantly reducing the waiting time for customers when asking for a specific size or colour.

Plaza Navona being closer to a place where many wealthy customers live, is a store destination for them when they want to equip their homes. For that reason, the share of home and electronics is higher in that store when compared to the other ones, with the pick-up section for online purchases is on the first floor, in the home and electronics section. In terms of stock management for these two product categories, De Prati only buys on firm conditions a certain stock amount in order to be able to display products in stores, and also guarantees larger stock quantities in the supplier’s warehouse. In that way, the stock imported for Ecuador will be reserved as the first priority given to De Prati.

This store represents the state-of-the-art savoir-faire at De Prati today, as well as a first incursion in the domain of mall development and management. A larger project of 90,000 sqm, is planned for 2026 and will also be a premiere in the country with such a scale.

Downtown: where everything started

We had the opportunity to visit the first historical location of the company as well, which allowed us to measure the level of innovation and progress made by the company between its first location and the latest store in Guayaquil, Plaza Navona.

The nature of the location has changed with time, as the area evolved, from being mainly residential in the ‘40s, to being more of an office and banking area. As a consequence, traffic patterns are different from the other stores which are close to the places where customers live.

Due also to its history, the store is spread across different buildings with different levels, leading to having floor differences on some floors. Only one building has windows, which also explains why the feeling is different, less airy than the other stores, an impression reinforced by the low ceilings and the rather old concept.

The last floor of the store is dedicated to the outlet section, as well as the customer service desk.

The specificities of the business at De Prati

De Prati is special for many reasons, as it has developed its own way in several areas of operation, to reach efficiency: private labels, BOPIS, and social commitment.

Private labels represent 70% of the total business and are designed in-house, fabrics are bought in Asia and products are made in Ecuador. Collections are kept in store according to a very simple calendar: they remain at full price for 90 days (in fashion) or 120 days (in home), then they are automatically marked down at 30%, 50% and then 80%, before being taken out of stores. This scheme allows the company to avoid having seasonal sales in the store (including third-party brands): during seasonal events, it is not about product clearance, but a maximum of 30% discount off fresh products, to which customers can add an additional 10% discount if they own the De Prati card. Given the size of the private label business in the fashion category, which represents 80% of the total business, this system allows them to have a very healthy margin structure, as overall the company enjoys 70% of sales at full price and promotions capped at 30% of the business. However, in order to remain relevant with the younger clientele, the plan is to introduce more third-party brands (international labels), from 19% today to 55% in 2026.

When it comes to picking up online sales, the store pick-up is the only free option, which allows 60% of all e-commerce orders to be picked up in stores. For that reason, e-commerce operations are profitable and total logistics costs for the company are limited to 6% of total sales. Also, returns are kept at an extremely low level (less than 1% in-store and 3.3% online) thanks to this approach and in spite of the 30-days-no-questions-asked return possibilities offered by the De Prati Credito card.

Finally, De Prati is also very much involved socially speaking, in addition to remaining committed to Ecuadorian production for its private labels. In 2014 it launched the ‘Mujeres Confeccionistas’ training program which allows women to grow and become independent. The program focuses on 3 pillars:

-    Improve self-consideration and provide a way to generate new life opportunities,

-    Teach entrepreneurship and basics in management,

-    Teach how to use social media to develop a business.

This program is open in every city where De Prati has a store and less than 5% of graduates work in factories after attending it, as they prefer launching their own activity and becoming more empowered. De Prati has also made agreements with national and Latin American universities in order to help its employees to validate their knowledge with diplomas.

Going further: for the sake of evolution

The most striking point about De Prati is the notion of permanent adaptation. The context is challenging: more brands are entering the country, prices are becoming an issue for most customers, and from a social point of view, violence is increasing, to the point of influencing customer behaviour as they now come earlier in the day and avoid staying until 6:30 pm when it is unsafe in the streets.

In order to face those realities, the company bets everything on its teams and their capability to develop and deploy new ideas, from customer processes to new systems. De Prati is currently developing an app which will provide a new purchase option for its customers, while also sticking to the needs of the younger clientele it wants to attract, in complement to a new brand offering including more international labels.

That permanent capability of adaptation has created a sentiment of pride to belong to such a company, which is palpable when discussing with the teams, and reinforced by the larger commitments of De Prati, which announced in 2022 a commitment to invest $80m in the country, in order to contribute to its development. Feeling this pride was probably the most impressive during the visit, as it really appeared as a true competitive asset for De Prati in the future.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS attended the 2023 Viva Technology conference that took place from June 14th to 16th in Paris to scout the key trends and interesting startups that could be of value to our members. We have highlighted the most relevant retail trends, topics and solutions that were strongly featured in this year’s edition of VivaTech.

VivaTech 2023 reflected the current state of the world – AI is all the buzz! Meanwhile, AR and web3 technologies are also still a significant focus as businesses gain a better grasp of how to leverage these technologies properly. And of course, businesses cannot write off the topic of sustainability, as the impending regulations are looming over their heads.

AI: the main attraction

AI undoubtedly dominated the show during this year’s edition. As Artificial Intelligence, specifically OpenAI, has taken the world by storm, ChatGPT has almost become synonymous with AI. This is not surprising as many retail organisations are harnessing this technology in a variety of ways. For example, Zalando has launched a ChatGPT assistant, and Hyundai department store is testing an AI system similar to ChatGPT for their copywriting. Other retailers have also been tapping into ChatGPT to make their chatbots smarter and VivaTech was the occasion to show off some of these interesting use cases.

Case study: Carrefour teams up with OpenAI to harness the powers of generative AI

In a rather timely manner, Carrefour announced its plans to launch a generative AI-powered shopping experience with OpenAI one week before VivaTech. Inside the exhibition, Carrefour had its own booth showcasing the ways in which it aims to utilise generative AI to enhance the customer experience and transform its working methods.

The retailer introduced a new AI Chatbot based on ChatGPT, called Hopla, which has been integrated into its website to assist customers with their daily shopping. Customers can seek assistance from the chatbot when it comes to selecting products within a specific budget, considering dietary restrictions and food constraints, or generating menu ideas.

Through the collaboration with OpenAI, Carrefour is also employing AI to enhance its product descriptions and streamline internal procurement procedures. These initiatives form a crucial component of Carrefour’s plan to enhance overall customer satisfaction and revolutionise its operational practices.

Although ChatGPT and AI are somewhat synonymous, AI overall should not be reduced to ChatGPT alone. Below is a selection of AI-powered startups scouted at VivaTech that may be of interest to our members.

• ChatLabs: AI-powered social experience platform that generates a unique, personalised journey for each customer based on the creative context of social media and level of engagement with brand content. ChatLabs was a finalist for the 2023 LVMH Innovation Award.
• Safira.ai: AI-based solution that generates, optimises and enhances online retailer’s product data to create an engaging shopping experience. It automates and professionalises the steps required to run an e-commerce shop.
• Vrdrobe LLC: Mobile app that harnesses AI technology to enable the user to try on clothes, shoes and glasses with their camera, thanks to AR models.
• Neobrain: Digital platform with three solutions based on AI to help companies match talent to opportunities, turning skills into collective performance. The platform was awarded the number one talent marketplace solution in Europe.

AR and virtual experiences: the future is digital

Augmented Reality and other digital experiences were also heavily present throughout the exhibition, likely due to the fact that businesses now have a greater understanding of how to leverage the Metaverse and other Web3 applications. Notably, many luxury brands like Dior, were showcasing their digital experiences as a means to provide distinct consumer experiences.

Case study: Emperia: Creating an immersive virtual store for Bloomingdale’s

Emperia is an immersive virtual store platform for retailers and fashion brands to create their own virtual and Metaverse experiences. Some of their clients include Ralph Lauren, Lacoste and Dior Beauty, as well as a department store client – Bloomingdale’s.

Bloomingdale’s launched their first-ever virtual store with Emperia in celebration of the company’s 150-year anniversary. The virtual store featured games, special surprises and a Bloomingdale’s exclusive collection for its anniversary celebration.

It also included rooms dedicated to brands, allowing Bloomingdale’s to sell virtual spaces to brands such as Chanel, Ralph Lauren, Nespresso and others. Essentially, it recreated the traditional retail concept of the concession model and transformed it into an e-concession in the virtual world.

Launching a virtual experience proved successful for Bloomingdale's as it was crucial in creating a new, innovative online shopping experience for customers and providing a platform for concessions.

It was evident that digital and innovative experiences remained at the forefront of businesses' minds at VivaTech, as AR and other virtual experiences were prominently featured in the exhibition. Here is a selection of intriguing startups in the sector that we discovered at this year's salon:

• Kivisense: AR-powered solutions that provide hyper-realistic try-ons for various store categories, including clothing, footwear, watches, handbags, eyewear and jewellery.
• BryanThings: Digital ‘retailtainment’ company that designs digital point of sale solutions for global and luxury brands, counting L’Oréal, Dior and Le Bon Marché among its clients.
• Cobalt: Merges digital and physical retail through a 3D immersive Metaverse experience for VR, desktop and web. It links real products to NFTs with NFC C-link chips, ensuring authenticity, supply chain transparency and data integration with logistics and CRM systems.
• GK Concept: Agency that creates bespoke interactive experiences in-store, strengthening the connection between consumers and brands. They design, develop and manufacture their own retail technologies.
• Veris Behavior: Develops VR, neuromarketing and data technology to conduct immersive consumer studies, assisting companies in the retail, consumer goods and hospitality sectors in validating their commercial and marketing strategies before launching to the market.
• Vyking: 3D and virtual try-on technology with an end-to-end platform, enabling fashion retailers to seamlessly create, scale and track 3D and AR shopping experiences both online and in-store.

Sustainability: still a pressing topic

Sustainability remains a pressing topic across all industries, with upcoming regulations driving businesses to prioritise their Scope 3 emissions and daily operations. However, the focus on sustainability was somewhat less prominent at this year’s conference than the last.

Kristen Davis, CEO of CinqC, chaired the panel discussions titled ‘Shifting to a Sustainable Business Model’. The panel included Julie Linn Teigland, Area Managing Partner EMEA at EY, Marie Ekeland, Founder and President of 2050.DO and Claire Martin, VP of CSR at CMA CGM. Together, the panelists discussed the importance for businesses embarking on a sustainability journey to look beyond individual countries or specific sectors and to consider ecosystems. Why? Examining ecosystems offers greater access to talent, resources and knowledge, and serves as a crucial avenue for businesses to observe how larger companies are collaborating with startups and other organisations to pave the way towards achieving a more sustainable business model.

Here is a selection of interesting startups in the sustainability sector that we pulled together from this year’s edition:

• EON: A product cloud platform that delivers business value with a digital ID for every product. This enables retailers to trace products from end-to-end, unlock and scale new business models, instantly authenticate their products, and engage customers long after the sale.
• Finds: A solution that serves as an overstock matcher, connecting fashion brands with surplus inventory to resellers, NGOs, and recyclers. Its aim is to maximise monetisation and achieve circularity.
• Carbon8: A circular impact company that converts carbon and industrial residues into sustainable value streams. Through its solution, it seeks to assist heavy industries decarbonising while transitioning to a more circular operation.
• Woola: A company that takes waste wool, material that would otherwise be discarded, and transforms it into a sustainable alternative to plastic bubble wrap.

Other retail solutions

Department stores are complex, centuries-old organisations who are constantly on the market for new solutions to help them stay relevant and work efficiently, here is a selection of startups that we scouted at VivaTech that we believe are relevant for department stores:

-    Alpha: A clienteling platform that simplifies and enriches the sales associate-client relationship. Sales associates can offer a "Red Carpet" like shopping experience to their clients thanks to a communication channel filled with product inspiration, client requests, style sessions and one click buy & try capabilities.

-    Fabriq: An app that combines digital tools for improving shop floor management, aiming to enhance the efficiency of shop floor staff, expedite the resolution of operational issues, enable seamless information flow, and leverage operational data to enhance daily decision-making.

-    Bloom: A business intelligence platform that analyses discussions and engagement and harvests data on social media to generate strategic insights for decision-makers to help brands leverage opportunities and detect risks.

This year’s VivaTech was also an opportunity for influencers to discuss the major advancements taking place in the wider technology industry. Among the overall 150,000 attendees, influencers such as Elon Musk, Bernard Arnault and Marc Benioff were in attendance, including French President, Emmanuel Macron, who discussed the AI landscape in France. This is a small piece of the fruitful exchange that VivaTech 2023 offered, and we can't wait to see what the next edition of VivaTech holds. See you in 2024 VivaTech!

Credits: IADS (Kaitlyn Lim)

THAT CONCEPT STORE PICTURES

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The IADS recently had the opportunity to visit THAT Concept store, located in the Mall of the Emirates, which represents a new breed of retail in a region dominated by malls and department stores.

THAT Concept store, taking on many of the concept-store codes known elsewhere in the world, includes many of the recent innovations spotted here and there across the planet, often made by department store companies looking to reinvent themselves through smaller formats, acting as showrooms located closer to communities of customers. Interestingly enough, this concept store is owned and operated by the Majid-Al-Futtaim Group (MAF), which uses it both as a window of its retail savoir-faire and also as a testing ground for brands.

For all these reasons, we review our store visit below, in order to understand how a mall owner turned franchise operator is using a concept store to deepen its retail expertise in all formats and test brands for further expansion, and share learnings for department stores across the world, especially for the ones currently experimenting new formats.

Company history and background

The eponymous individual founded the Majid Al Futtaim group (MAF) in 1992. Majid Al Futtaim (1934 – 2021) was the cousin of Abdulla Al Futtaim, head of the Al-Futtaim group, founded in 1930, an integrated commercial, industrial and services organization in the UAE, Qatar, Egypt, HK and Macau, and specialized in automotive, consumer electronic retail, and franchised retail (Robinsons, IKEA, Toys’R’Us and Marks & Spencer). Both cousins split in 1992 with Majid willing to focus on retail real estate.

MAF is now divided into 4 divisions:

-    Properties, including ownership and operations of 29 malls (including the Mall of the Emirates in Dubai, the Mall of Egypt in Cairo, the Mall of Oman, the Mall of Saudi, City Centre Bahrain, Mirdif City Centre, City Centre Muscat and City Centre Suhar commercial centres) for a total of 1.8m square meters, and 13 hotels and communities,

-    Retail, including 450 Carrefour franchised hypermarkets and supermarkets,

-    Entertainment, including 580 cinemas and 4 brands such as Ski Dubai,

-    Lifestyle, including a selection of brands ranging from Lego to Lululemon, to All Saints, Hollister, Abercrombie & Fitch, and THAT Concept store.

MAF reported in 2022 a revenue of AED 36.3bn (€9,96bn, +12% vs 2021) and a net profit of AED 2.4 bn (€0.6 bn, -2% vs 21), of which the lifestyle division, to which THAT Concept store belongs, represented a revenue of AED 801m (€199m, +38% vs ’21) and an EBITDA of AED 25m (€6.24m, +317%).

The Mall of Emirates was opened in 2005 and boasts 245,000 sqm of retail spaces, with an occupancy rate of 98%. It includes 630 retail outlets, 80 luxury stores, 250 flagship stores and more than 100 restaurants, as well as Ski Dubai, a 500-seat capacity Community Theatre and Arts Centre, as well as Magic Planet, an indoor family entertainment centre.

THAT Concept store initial promises

THAT concept store was opened in January 2021 on 4,500 sqm and two floors, in an area of the Mall of the Emirates (Via Rodeo) which was previously dedicated to luxury mono-brand stores, now relocated either on the ground floor or in a new luxury section.

The promise of this opening was to bring a new perspective in terms of the shopping experience, in a market where immersive retail is omnipresent. Just like a true concept store, it is all about bringing a very special experience, combining fashion, beauty, art, and lifestyle products under one roof, completed by a full set of services, in order to cater for the needs of a demanding clientele. For those reasons, THAT Concept store is built on the following 6 key pillars:

1. An innovative shopping experience: the goal is to provide a fresh and immersive shopping experience by showcasing a wide range of handpicked products from both international and regional brands, usually (but not systematically) not available elsewhere in the UAE.
2. A curated selection: the store features a carefully curated selection of fashion, beauty, home, and lifestyle items, with the ambition to cater to a diverse clientele.
3. A platform for local talent: local and regional designers are able to showcase their work and connect with shoppers.
4. An art and culture scene: Art exhibitions, cultural events, and other interactive experiences are hosted, fostering creativity and promoting a sense of community.
5. Personalization and customer services, such as styling consultations and beauty treatments, are here to enhance the overall shopping experience and cater to individual needs.
6. Design and ambience: The store boasts a visually appealing interior design, with contemporary aesthetics that encourages exploration and discovery.

In addition to that, according to the store CEO, MAF also uses this store as a lab to test brands candidates for further expansion in case of success. Potential successful brands are assessed by gathering data in terms of try-ons, selection and purchases so that the group can engage in conversations with such brands in terms of distribution enlargement (MAF has the possibility to engage in franchised development in the region).

Visiting the store: how to bring something new on an oversaturated market?

First of all, one can say that the location of the store is not exactly the easiest, even though MAF (which owns the whole commercial centre) has implemented clear signage across The Mall of The Emirates in order to guide customers: THAT Concept store is located at the end of Rodeo Drive, in a space which used to host luxury boutiques flagships.

In that area, one can find a mix of luxury and fashion brands, such as Isabel Marant, Roger Vivier, Etoile, as well as gourmet food such as Ladurée, so the issue is not so much the immediate adjacencies, which all make sense. What is more problematic is on the one hand the series of hoardings still installed (Thom Browne, Bvlgari or even generic hoardings) which suggests that the revamping of the area is not yet finished and on another hand the proximity of Harvey Nichols (which has a clear high-end positioning) and Bloomingdale’s (more mass), which makes it difficult for something intermediate to position itself and capture market shares. In other words, it is difficult to get there, and there are many distractions on the way including competing value propositions.

However, once customers are in the store, the look and feel is radically different from anything available in the mall and probably in the whole of Dubai, with a profusion of innovative and edgy brands (more than 150 fashion brands such as JW Anderson, Simone Rocha, Paco Rabane or Vetements) all displayed in a holistic, proper and specific concept that reminds a bit of what Galeries Lafayette did in their Champs Elysées location.

The store concept is all about contemporary décor, making nods to the Arabic culture in a giant suspended display designed by local artists. It can be a little disconcerting as it is thought to be a space for exploration, so many retail codes have been reshuffled. The goal is to display a great edit in a uniquely designed space, thought to be versatile and adaptable to different situations (brands, popups, new spaces, etc..).

The store, which opened on January 21, was initially designed to be fully genderless and tried unprecedented ways of displaying products (e.g. shop by colours), however, this proved tricky for the region, which is why this approach was dropped during the summer of 22 when a new management team took over. The new GM, who boasts an extensive experience at Al Tayer Group and Emaar, worked closely with the Creative and Visual Director at MAF (also an Al Tayer alumni), and reviewed the zoning, with areas divided into categories and brands sometimes mixing gender (a nod to the initial intention).

The first floor directly leads to the jewellery area (the second best performing area after fashion, which represents 70% of the business) where brands are presented with THAT-specific signage (a common trait across the store which again reminds of the Galeries Lafayette Champs Elysées location). The product category is coupled with the very large and extensive sunglasses area, both presented on generic wall units and coloured carts, which really encourage customers to touch and try the products. A sushi restaurant completes the space, which will be replaced by a tea room with sweets in order to encourage all-day long lounging.

On the other side of the floor (as the very large Atrium divides the space and provides a great visual perspective on both the upper floor and the ground floor giving access to the carpark, even though it also complexifies the in-store journey), women’s fashion, shoes and accessories are presented in clearly divided spaces, with a special mention to the shoe space, which encourages try-ons and product exploration.

Private shoppers and salons are also available in this space and can be booked for now on the premises. An app allowing customers to book such services and also to connect THAT Concept Store to the MAF group loyalty program is on its way.

A very surprising element on this floor is the access to the elevator: to enter it, customers have to go across the recreation of a local supermarket (a ‘baqala’) selling only very typical brands resonating with every Middle East young customer (Oreo cookies, Lay’s and Pringles snacks, etc…). As a consequence, it really is a visually enticing magnet, and a smart way to upgrade this otherwise dead space. For now, the monetization of the whole installation is still to be fine-tuned, and ideas to connect this space to MAF-operated Carrefour hypermarkets were discussed during the visit.

The second floor is dedicated to unisex and male fashion, including streetwear and sneakers, beauty & cosmetics, as well as the home and design category (the third-best performing category). Again, special care has been brought to the overall experience and feeling, with strong visual designs and attention to detail (such as decorations integrated into the concrete flooring). The home and décor area, in particular, is extremely appealing and presents a selection of products and brands which is unmatched in the country.

On that floor, customers can also find an on-site hair salon, a barber, a nail and brow bar, as well as a yoga and fitness studio, with classes starting as early as 6:30 am in order to cater for working customers. When it comes to services, THAT proposes a very wide palette of options, from the tailoring service to the possibility to drop off laundry or ask for dry cleaning.

Finally, tech is all across the place, with smart mirrors in fitting rooms (allowing shoppers to ask for other colour or sizing options from the cabin), and interactive pop-ups for shoppers to try new tech. The idea is to further invest in tech in order to gather more data about brand successes and be able to leverage that data to consider further investing in brands (for instance, Santa Maria Novella is being tested that way).

Like it or not, one must say that the value proposition of the store is very different from what can be found elsewhere in the market, and would not even be out of place in any European capital (a feature that could raise the question of knowing if such a proposition is not too edgy, or perhaps early, for Dubai).

Are all promises fulfilled?

There are some elements in the concept that might be questionable, such as the location of the store as already mentioned, but potentially also the name itself, which might prove difficult to market on a larger scale (and which made writing this article difficult).

But the special sauce at THAT concept store is that it is run as a department store (in terms of back-of-store operations or brand purchases, all merchandise being own bought) but creatively managed like a concept store. This, completed by the size of the space (4,500 sqm), puts THAT Concept store in a category of stores which include department store companies-backed concept stores, such as Galeries Lafayette Champs Elysées as already mentioned, but also SKP-S, Coin Excelsior in Italy, U-Plex in Seoul, WOW in Madrid, Showfields in NY or, to some extent, the concept-store part at la Samaritaine in Paris or Bloomie’s in the US. THAT Concept store captures this current trend within department stores of having smaller formats, thought to be fully immersive and experiential, with a special display that takes distance from the traditional approach.

Having said that, the store promise is yet to be completed, as the perspective of being a lab to test brands is great but not yet fully operational, and probably very expensive to run if the purpose is only to test them. This is why it will be interesting to follow the evolution of the space in terms of tech equipment and additional experiential spaces, such as F&B offers, to assess to what extent MAF is ready to innovate in a market which is not particularly in demand of such innovations.

THAT Concept store is not a department store and does not claim to be. However, its approach in terms of the customer journey (especially by proposing a lifestyle approach rather than a category one) and store feeling is resonating with department stores’ efforts to reinvent the way they curate and present their offer, as well as their efforts to create a concept store feeling in order to assess their fashion credibility. It is a great inspiration for companies looking for ways to revamp their multi-brand areas with a specific brand identity and a compelling customer journey and visit.

For that reason, the store is an interesting visit, even though a bit frustrating when it comes to its present capability to gather data and truly act as a lab for brands, which is now the main focus of the managing team. However, it already managed to propose a radically different way to sell brands on the market, which has not gone unnoticed. While some are wondering if this is not too innovative for an otherwise conservative clientele, THAT Concept store provides a new option on the market and a refreshing take on how brands can enter Dubai and the GCC countries

Credits: IADS (Selvane Mohandas du Ménil)

AHLENS STORE PICTURES

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The IADS travelled to Sweden last April to meet with the new CEO and owner, Mr Ayad al-Saffar, almost a year after his inception at Åhléns. The purpose was to discuss and understand his plans and vision for the century-old department store company.

After a first year spent reviewing the fundamentals of the company, Mr Al-Saffar started to operate significant and structural changes to the business model, and they might very well be a game-changer in this part of the world. Rather surprisingly given the fact that Åhléns already operates 47 stores in a country with 10.42m inhabitants and ranked second in Europe in terms of retail density (after Monaco), he also detailed his plans to open more stores in second and third-tier cities, thanks to his new approach to business.

We review our store visit below to understand to what extent Åhléns will revolutionize the Nordic market with its new approach.

Company history and background

Åhléns was founded as a mail order business in 1899 in Insjön, a small town north of Stockholm, by two associates, Johan Petter Åhlén and Erik Holm. Within 10 years, Åhléns was a 1.5m SEK business (€128k in today’s money) with 255 employees, and the founder decided it was time to move to Stockholm in a newly acquired 7-story building.

Diversification started in 1932 with the opening of a first department store chain, Tempo, promising the lowest prices possible to customers. The physical retail activity of the company grew consistently, leading to the closure of the mail order business during the ‘60s, the opening of Åhléns City, the current flagship store, in 1964, and the progressive conversion of Tempo stores into Åhléns until 1985.

In 1988, the Åhlén family sold the company to Axel Johnson AB, a Swedish family business specialized in trade and services in Europe and part of the Axel Johnson Group, a Swedish international conglomerate. Åhléns was the only department store business operated by Axel Johnson AB, which portfolio also included Kicks (an beauty & fragrance e-commerce pure player which mutualized purchases with Åhléns), Axfood (a 300-large grocery stores chain under various names), an investment company in retail businesses, a restaurant wholesaler and an IT reseller. At Åhléns, the owner focused on developing the brand portfolio (mainly through concession deals and private labels development), automating the operations with a new warehouse, developing an outlet offering, and pushing the e-commerce business. Investments were made in both existing stores (Åhléns city stores were refurbished in Stockholm and Gothenburg in 2018) as well as in expanding the network (including outlet stores).

Åhléns reached a total turnover of SEK 5,019 (€431m) in ‘19, compared to SEK 4,809m in ’18 (€412m) and posted a net loss of SEK -116m (-€10m), compared to SEK -131m in ’18 (€ -11.2m), with 1,806 employees at the time. Just before the pandemic, the main focus of the company was to expand the outlet stores network, push private labels, and, more importantly, continue its heavy investments in IT to support e-commerce and marketplace expansion, which explained at the time the losses posted. The Covid-19 pandemic took its toll on the company, which saw sales decrease -15%, and losses almost tripling, even though Sweden never went into a lockdown and stores never closed. These difficulties, combined with Axel Johnson AB’s strategic focus on turning away from consumer goods, led to the sale of Åhléns in ‘22 after 34 years of ownership to a group of investors led by Mr Ayad Al-Saffar.

Al-Saffar, a seasoned retailer, came from Lebanon as a refugee to Sweden in 1984. Incarnating the “Swedish dream”, he started as a salesman on markets, before founding a watch wholesale company in ‘91 and being offered to purchase loss-making Ur&Penn, a 40-store-wide watches and jewellery specialist then owned by the H&M group. Al Saffar managed to turn the company around in one year by reviewing the assortment and the price point, and the company grew to 100 stores today. Al Saffar achieved a similar turning-around performance with Dutch loss-making retailers Lucardi in 2006 and Kijkshop in 2007.

Today, Åhléns as a whole achieves a total turnover of SEK 4.7bn (€403m), with 47 stores and an e-commerce platform, operated by a total of 3,000 employees accommodating the needs of some 60m annual visitors (in a country with 10.43m inhabitants). It concentrates on fashion, beauty and homeware, and has a loyalty program (Åhléns club) with 2.5m members.

Åhléns positions itself as “the department store with a smart mix”, providing solutions for time-pressed customers to simplify their lives by mixing the right brands, including sustainable ones (Åhléns issues ESG reports in Swedish every year).

Visiting a Tier II location

The first Åhléns store visited is located in Östermalmstorg, a posh neighbourhood 500m away from Birger Jarlsgatan, an avenue planted with luxury and fashion free-standing stores, from Chanel, Louis Vuitton and Prada, to Zadig & Voltaire, Max Mara and Zara, and faces a square with significant traffic in terms of local customers (this is not a touristy place).

By European standards when looking at a city centre unit, the store is disconcerting: windows are not fully utilized, as it was chosen instead to allow customers to see through them and see the store, and the small size of the store appears at first sight when entering (1,500 sqm).

The ground floor is dedicated to cosmetics, displayed with standard brand fixtures and name reminders, while fragrances are presented behind a closed glass wall, forcing customers to ask an operator to access them. The floor also displays summer wear and accessories (all with generic, middle-priced, local brands) and a para pharmacy section. The cash desk does not offer additional services.

The basement is connected to the subway system, and the entrance is also equipped with Post Nord pickup stations, allowing customers to retrieve parcels and click & collect items, not far from the cash desk. The floor displays kids wear and toys, as well as the home category, rather well-staged. However, overall, the experience lacks inspiration, and each retail space has a visible reference number, likely to help retail operators and brands to locate where they should set up their stores but instead impacts the customer experience.

The upper floor is mainly dedicated to women’s fashion and lingerie, with a mix of generic concepts and branded shop-in-shops. For fashion brands, shop-in-shops are more detailed and immersive than for lingerie brands where in reality they are only dedicated and delimited spaces with a brand reminder on the walls. A section is dedicated to activewear with brands such as Esprit, Levi’s and the Åhléns private label, and there is also a tiny men’s underwear section.

During the visit, the clientele was exclusively composed of middle-aged women.

Even though the visit was, somehow, disappointing, when discussing with Mr Al-Saffar, it appeared that this store, which was to be refurbished and modernized, was profitable, just like 100% of the 47 stores currently operated in the country.

Visiting a flagship location

The second store visited was the massive Åhléns City store, right in the centre of the city, at the same distance from the Royal House, the museum island, the train station, the Culture house and the high street. Talk about a flagship: the department store, built in 1964 and now rented from a real estate company, occupies an entire block of 40,000 sqm, and represents 20% of the company’s total revenue (125m€) thanks to very significant traffic for such a small country: 15m people visit the location every year (more than the Stockholm train station and airport).

The massive façade is windowless in red bricks as the initial objective was to make sure it would be easily recognizable and become a landmark. Åhléns uses this space to advertise collections and brands.

The ground floor is dedicated to cosmetics, fragrances, shoes and accessories. However, the plan is to move the shoe section and increase the space allocated to bags. The CEO explained that the first year of his tenure was dedicated to stabilizing and structuring operations (especially in terms of brand supplies) and that the new zoning of the store was next on the plan.

The luxury usual suspects (Dior, Byredo, Chanel) are operated in concession, in a high-traffic section at the entrance of the store (in semi-personalized spaces) with the purpose to increase the brand portfolio there. A Joe & the Juice bar, still present at the time of the visit, is planned to be removed and replaced with a watches section, in order to not interfere with the fragrance space. The rest of the product offer is a mix of private labels (such as Carin Wester, a private label developed by the previous management with a local designer celebrity, which Al-Saffar has repositioned both in terms of image and price point, and decided to design internally), and foreign brands operating in consignment, with good margin rates for Åhléns (more than 60%).

An upscale café completes the experience, which is overall very nice, as the store, in spite of its huge dimensions, is airy and the sight gives an impression of unconstrained space.

The first floor is dedicated to women’s fashion (luxury, contemporary, denim and activewear) as well as lingerie. The fashion section is mostly an alignment of shop-in-shop with each brand’s concept, with the exception of Åhléns Studio, a multi-brand section right in the middle of the floor (similar to the SKP-S multi-brand sections at SKP in Beijing) with a specific in-house concept. Most of the floor is operated in wholesale terms, which allows for negotiating discounts against immediate payments, with the exception of a few brands (Tiger of Sweden, Filipa K and others). This has been one of Al-Saffar’s main points of focus in the past 12 months as his goal was to reduce the number of brands operating in concessions, in order to regain control of the assortment and increase the operating margin, by reverting to a 90% rate of brands operated in wholesale.

This is why, for instance, the denim section was under construction at the time of the visit, as the new brand assortment (a mix of labels already in Sweden and exclusive ones) was being finalized. Switching from a concession business to a wholesale business obviously requires acquiring the needed savoir-faire (buying team), which means time in terms of recruitment and training.

The second floor is dedicated to home and kids. The Home section is rather beautifully staged with a very Nordic taste, and both this section and the kids one (apparel and toys) offer a selection of international and local brands, completed with private labels either developed by Al-Saffar or redeployed (such as the Rikiki kids line). A family room is available for customers willing either to relax from the shopping heist with their families or have their kids under supervision while they are in the store. The family room is astutely located near a café and the toys section.

The third floor is dedicated to menswear, services, such as a barber, and personal shopping services. Just like for women, menswear is a mix of international, local and private labels, and the target is to increase the number of brands operated in wholesale terms. The barber is quite well-executed, albeit not really visible from the floor and only customers in the know might find it easily.

The personal shopping service space is very welcoming and spacious, dotted with products in double exposure in order to entice shopping. The space can be booked in advance and is connected with the club membership program, with a system developed in-house and based on purchase value, with 3 different membership levels. The software developed by Åhléns teams also includes a system in which customer feedback received via email is collected, compiled and reviewed with the adequate teams on a daily basis.

The fourth floor is currently rented by Muji but the plan is to replace them with a new offer that remains to be defined. It could be either an extension of the Gourmet section which already occupies a side of the building, or a new upscale F&B section taking full advantage of the terrace, or a flex office space based on what Saks Fifth Avenue has developed in New York with WeWork at the time.

Interestingly, there are also many questions about the corporate offices, which are also on that floor, with offices enjoying incomparable views and a huge private terrace which is completely underused while avoiding demotivating employees who have been used to these offices since the 60s.

The Åhléns project is a work in motion, and the visit came at the right time to fully grasp the size of the transformation Mr Al-Saffar has started for the company.

What’s next for Åhléns?

Al-Saffar's most important plan is to review the way the department store company has worked with suppliers so far.

Historically, and for various reasons (non-aligned seasons, high import duties, different currencies), retailers in Nordic countries have always relied on third parties acting as importers and distributors to bring in brands and operate them. We already reviewed what it implied with NK, also in Stockholm: until the pandemic, NK was acting as a mall and leased spaces to brands and operators. When one of those operators went bankrupt in 2021, NK had no choice but to purchase its operations and learn how to operate fashion instead of simply managing real estate. Al-Saffar, a seasoned retailer, wants to go much further than that, and this is why he spend the past year cancelling concession agreements and reverting to a 90% wholesale model.

*While such a model theoretically allows to keep a much tighter control on the product selection and therefore the store positioning, Al-Saffar also states that it allows him to take a greater share of the pie, as he does not share the margin with anyone. This is also the reason why he wants to expand the private label business from 20% today to 35%, and his approach is very simple:

-    Either source products in Asia and label them adequately,

-    Or negotiate with foreign brands the exclusive rights of distribution in the whole of Sweden (the 47 stores fleet is an argument in that kind of conversation), as exemplified with the cosmetics brand Inglot

-    Or purchase the rights of an individual and build a brand accordingly. For instance, he made a deal with a Swedish chef to be able to use his name and face on a new line of kitchen accessories he will develop and sell in his stores.*

This approach allows him not only to consider keeping all 47 stores, which are all profitable but to plan expansions, including in second and third-tier cities and smaller ones, where the new stores will present 65% of private labels in their product offer.

That new approach, in which third parties are eliminated from the equation, is quite new in Sweden and in the Nordics in general and might very well be a game-changer for Åhléns and the region. While it is some kind of normalization as this move would make the Nordics more in line with usual business practices in the rest of Europe, it might also contribute to a more general movement for brands to see Scandinavia as a new market, as they could expand there with fewer constraints than in the past. As a consequence, the hype we noted last year when visiting the region could be very well fuelled by a new gold rush for brands looking for European pockets of growth.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS helps members address multifaceted issues from answering their most operational questions or coordinating information flow to helping them address future challenges by questioning their methodologies and providing a different perspective.

This is the reason why the IADS invited Demet Ikiler, COO EMEA at Publicis Group, to discuss the white-hot Retail Media topic. Retail Media Networks (RMNs) are making the headlines for their ability to generate an additional flow of revenue with high margin yields, while making the most of department stores’ most prized assets: their own sales channels. However, since the press often emphasizes big players’ actions, such as Amazon and Walmart, the purpose of this conversation was to give all department store CEOs a good understanding of the situation and the stakes at hand while discussing what would be needed for a department store company to launch its own RMN.

Demet Ikiler was appointed Chief Operating Officer of Publicis Groupe EMEA in January 2023. She joined after over two decades at WPP, where she was a member of GroupM’s global leadership team as CEO of GroupM EMEA and WPP Country chair, responsible for scaling and delivering more innovative cross-culture solutions for clients. Demet has been recognized by Fortune and The Economist as one of the ten most powerful female CEOs and as an Empower 100 Executive Role Model in 2022. She is also a board member of the United Nations Global Compact, leading its diversity and inclusion chapter. Prior to WPP, Demet Ikiler worked at Zenith and Saatchi & Saatchi.

Introduction: Defining Retail Media

Publicis Groupe defines Retail Media as selling advertisers the possibility to operate online campaigns aimed at the retailer’s own audience, on both its onsite platforms (own website) or offsite (on publisher premise), as a major evolution from pure trade marketing.

The development of retail media has been catalyzed by the progressive disappearance of third-party cookies, as, thanks to this move, retailers’ infrastructures gain more value in the eyes of advertisers (brands): it is no longer only about near-term sales on the platform (the purpose of trade marketing), but also a way to generate visibility, awareness and raise consideration as well.

In short, retail media answers more marketing needs than trade marketing and can provide much more precise ROI evaluation than ever before. CPG brands, for instance, need to reinvent their whole performance marketing approach, and retail media allows them to do so very precisely.

Also, the fact that retailers operate both e-commerce and stores enables advertisers to target customers during their whole journey, starting offsite on a publisher’s website with a co-branded retailer/brand display, continuing in-store with a digital screen, then to social media, and in product search results, all which is happening in real-time.

Ikiler explained that the net new revenue to be expected is capped: 60% to 70% of retail media revenues are new, an already significant and sizable new share. While a fraction of the money comes from the trade marketing budget (30% to 40% maximum for Publicis), its biggest share comes from a reallocation from other digital or traditional channels (print, TV/radio, social media...), i.e. a net gain for the retailer.

An opportunity first seized by the largest players

Retail media is in the headlines now and is generating a lot of noise, justifiably so: Arthur Sadoun, Publicis Groupe CEO, expects retail media to surpass traditional TV advertising spend by 2025, i.e. in 18 months (Ikiler notes that this new budget allocation dispatch is already happening for some of Publicis’ customers).

Such a rise is linked to the continuous e-commerce growth from the past 20 years in an exponential manner, transforming some retailers into “audience hubs” with massive scale:

-    Amazon, which moved early, is the first retail media network to have emerged, and by combining its other assets (grocery and supermarkets) was able to take a dominant position with advertisers.

-    Walmart has an addressable audience (expressed in millions of monthly viewers or users) that surpasses Google’s and Facebook’s. Therefore, they can gather massive amounts of consumer data, which opens opportunities to monetize this audience.

The stakes are high: while there is a ceiling in terms of margins when it comes to retailing physical products (10 to 20%), it can go as high as 40-45% offsite and 80% onsite when it comes to selling advertising inventory, due to the low cost of production. Amazon’s advertising services, which started in 2020, already represent almost $40bn in 2022, i.e. half of AWS, the largest non-retail activity within the company. The advertising activity’s margin is estimated between 70 and 90%, which explains why this activity drew a lot of attention.

Publicis Groupe believes that retail media, even though it is massively growing (US digital media budget allocation to retail media has increased from 16% in ’19 to 25% in ’21, to reach $77bn in ’21 and $95bn in ’22), is still on the rise.

At some stage, Europe (and the rest of the world) will be closing the gap and should contribute to the global growth of this industry. It is not a US and China-only phenomenon, and new players are appearing in other countries, such as Carrefour and Intermarché in France, Boots and Tesco in the UK, and Falabella in Chile. While everybody has Amazon’s success in mind, there is room for other types of retailers, in terms of businesses and sizes, for them to monetize their platform.

Retailers should not take customers’ adhesion to RMN for granted

Some might be wary that customers might not be very happy with retail media, as clients could get annoyed to see a bunch of ads on retailers’ platforms across their journey. 70% of product search results on Amazon are sponsored. While this might not be much of an issue for Amazon, other retailers whose reputations lie on curation and selection might see this, justifiably so, as a risk.

This is why Publicis Groupe advises being extremely careful of the onsite customer journey and leveraging data to target consumers off their platforms, in other words, on publishers’ sites. Retail media is, in that sense, a great way to attract and capture new customers, in a more subtle way than hammering them on the retailer’s website itself. The cherry on the cake is that such customer acquisition is funded by suppliers.

The scale effect: how to compete with giants

Most retailers, especially in Europe, present a very fragmented offer, with a variety of products and different measurement tools, when compared to giants such as Amazon or Walmart. In that perspective, being able to compete with them can be seen as an illusion. However, Publicis believes that this fragmentation might represent an opportunity, and they have already started exploring it through new ventures, such as Citrus, a white label offering for a variety of retailers.

Ikiler argued that retail media is a reality that will end up hitting every market and vertical. Brands will increasingly ask to have access to such capabilities, which is, in itself, a very good reason to get prepared. In other words, this represents an opportunity that should not be shed for fear of competition. The reason is that retail media is inserting itself perfectly in the omnichannel transformation that all department stores are currently going through, as the physical stores themselves represent a competitive advantage compared to Amazon.

CEOs interested in retail media should focus their attention on two vital topics:

-    Systems: the market is increasingly gearing towards self-service proposals, i.e. SaaS offerings to brands, in contrast to managed services in the past. This requires a very significant tech investment. However, this will allow being able to deal with more brands at the same time, with a lower marginal cost. Also, retailers entering this space now will have access to all-in-one solutions available off-the-shelf and already up to date, which will reduce the time to market.

-    Organization: while the trend is moving towards in-house sales teams to have more strategic conversations with brands, which can be resource-intensive, new offerings on the market allow outsourcing services to optimize the ramp-up of activities, which is then progressively transferred to internal teams.

Ikiler concluded by observing that, given the relative similarities of department store companies in terms of size, nature of the business and offering, there would be some logic in teaming up and harmonizing technology and ROI calculation, while tracking across the board  to generate a common approach with brands. In other words, she recommends retailers team up together to generate new revenues out of their current existing assets.

Is the topic of retail media network a strategic one for department stores? There are so many priorities to deal with that it could be tempting to disregard this subject as it is more an opportunity than a necessity (digital transformation, human organizations, addressing AI or dealing with the sustainability requirements are examples of vital necessities for department stores). However, we also believe that any topic helping department stores when it comes to their productivity is crucial to know and to consider, which is the reason why the IADS will be dedicating its 2023 White Paper to Retail Media, in order to dive deeper into the topic and understand in full its ins and outs, and what’s in for department stores.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS joined cybersecurity professionals from various retail businesses at the RH-ISAC conference hosted by Nestlé in Barcelona in April ‘23. RH-ISAC provides a trusted forum for its members in the retail, hospitality, and related industries to share cybersecurity threat intelligence, best practices, and mitigation strategies. IADS attended on behalf of its members in order to get a better understanding of what is happening in the space.

The two-day workshop was an occasion for industry leaders to share the latest information and challenges around the cybersecurity landscape. Retail experts discussed the latest cybersecurity trends and threats especially in regard to advancements in ChatGPT, AI, Machine Learning, as well as the importance of implementing fusion centres.

ChatGPT: Cybersecurity risks vs business opportunities

To kick off the workshop, an icebreaker question was raised: How will ChatGPT impact cybersecurity? The answers varied from opportunities to warnings. First of all, ChatGPT offers opportunities for the task force of a company, especially lower-level employees, that want to learn new skills and received AI assistance. However, its performance is not always perfect and has even been proven to adopt biases based on its training. And as ChatGPT is susceptible to the information it is fed; it can also be taught to be bad. Therefore, attackers have even more opportunities to automate or expand their attacks.

One cybersecurity expert brought up the point that ChatGPT is technically the new-gen Google or Facebook because when these platforms came around, users were openly sharing their private and sensitive information. Without thinking people share their location, post photos of themselves, and search for information that should be treated privately. ChatGPT users are doing the exact same thing, but now also including private company information. For example, a software engineer might copy and paste code into ChatGPT to ask it to fix any problems with it. But within the code, there could be proprietary or sensitive information.

The more the workforce relies on AI to complete their work, the harder it is for companies to control and ban its use. ChatGPT is not the only AI tool, as now there are various iterations of ChatGPT’s power thanks to the APIs that have been released by OpenAI. Banning all of these tools would be impossible for companies. Therefore, reactive organizations will need to create policies and promote best practices, while also reviewing NDAs (Non-disclosure agreements) with the teams to ensure there are no risks with the AI tools being used in terms of data breaches.

Despite the red flags, ChatGPT and generative AI technology should be seen as exciting opportunities that can be harnessed for the good of a company. There are ways that organizations can use these solutions to scale and automatize their business to create more efficient operations.

Maximizing cyber resilience with AI and Machine Learning

Ignasi Paredes-Oliva, Data Science Project Manager at Nestlé shared how he is using AI and Machine Learning (ML) to automate the company’s threat detection and response. ChatGPT is integrating itself in almost every business unit thanks to various solutions harnessing its technology. For example, Microsoft has introduced Security Copilot to respond to incidents faster using AI. AI is becoming so advanced that tools such as AutoGPT are even allowing users to give an objective to a machine that then runs fully autonomously to complete a task.

As such technology advances, it is important for companies to keep in mind that threat actors will increase as tech barriers decrease. Attackers will be better overall, especially in terms of effectiveness, automation, and scale. But from a defense perspective, companies can also use the same type of technology to empower themselves to better counterattacks.

Historically, threat detection has been set by static rules, past incidents, and user behaviour. So currently, companies are protected against known attacks, but AI can help defend against future types of attacks that have not been seen before.

Nestlé is experimenting with AI to be able to anticipate threats while also automating processes. One solution that has come up with is a machine that automatically categorizes incidents into low, medium, and high risk and then, therefore, assigns a task to it. For example, all low-risk incidents are closed automatically, medium-risk ones are sent to the 24/7 incident response team, and high-risk incidents are escalated to the right people. Another AI machine can detect phishing emails based on language used within the text and warn the user. A third example is a machine that can detect brand impersonation of Nestlé’s logo across other sites so they are aware of any trademark infringement or impersonations that could negatively impact the brand.

Nestlé has already developed 10 to 15 AI solutions within their security business. So far, these solutions have resulted in increased threat detection and better operational efficiency. This suggests there are massive opportunities to boost cyber resilience with AI. Nestlé found that in this domain, the focus should be on building software products that actually bring real ROI to the business. Finally, in order to push such solutions through the business, there will need to be clear alignment with the management team as well as constant communication across all stakeholders.

Fusion centres: Bringing efficiency and communication to cybersecurity teams

Ahold Delhaize shared the process they undertook with Booz Allen Hamilton to build their Cyber fusion roadmap which is a framework that outlines the process of integrating and coordinating cybersecurity operations across the organization. Cyber fusion is the unification of all security and related functions—such as orchestration/automation, data analysis, incident response, and threat intelligence—into one operational group in order to better integrate threat detection, management, and response processes, and facilitate security collaboration between people, teams, and devices. For example, the September 11th terrorist attacks in NYC could have been prevented if the right information had been uncovered in the data and shared. Therefore, governments are now creating fusion centres to anticipate and prevent major issues such as attacks on the country from occurring.

The same can be said about retail. The 2013 Target data breach where hackers stole credit card information from millions of customers also could have been prevented if they had a better grasp on their network security environment. These tragic and damaging instances have led to the importance of getting fusion centres implemented across every business type to be able to respond, escalate, and communicate during incidents.

Implementing a fusion centre takes a lot of planning and evaluation. In order for a fusion centre roadmap to be built out, there needs to be a complete understanding of who needs to do what and when. A very detailed blueprint of the fusion centre maps out the organization of people, processes, technology, and governance. Implementing the fusion centre typically takes 3 years to build out the core functions, enhance and expand the opportunities to other areas and to deploy proactive measures.

Each company's fusion centre will be unique but aims to make headcount more efficient while eliminating redundant work or gaps between silos. Transforming operations can be challenging, but convincing employees to abandon inefficient practices is crucial for success. Ultimately, fusion centres allow staff members to have more bandwidth for tasks they are passionate about but previously lacked time for.

Conclusion: Cybersecurity teams are transitioning from defense to offense

According to ENISA (European Union Agency for Cybersecurity), which was created to enhance the EU’s cybersecurity capabilities and assist member states in addressing cyber threat vulnerabilities, the Commerce and Retail sector faces major threats that are targeting monetization services. For example, such threats can impact booking and payment capabilities, which are key components of the core business.

Retail businesses are also being hit with data leakage, ransomware, and malware which can occur through website infections, skims or stolen payment card information, among other things. For example, in 2020, South Korean conglomerate and retail giant E-Land suffered a ransomware attack causing 23 of its retail stores to suspend operations while they dealt with the attack. As retail businesses rely more and more on technology, the opportunity for threats increases, but so do the opportunities for advancement.

Specifically, the cybersecurity space has been hit by major technological advancements thanks to progress made in AI and ML solutions that are bringing new challenges to businesses. As technology advances, so do the techniques and capabilities of attackers. But the ‘bad guys’ are not the only ones that are becoming more empowered, cybersecurity teams can now leverage advanced AI tools to be able to build machines that can anticipate future attacks and automate processes to better manage, categorize, and escalate the various threats.

As such technologies advance, the human side of the business remains key. Cyber-attacks can be prevented through the implementation of proper communication channels.  Therefore, fusion centres are being built out to create a unified security team that addresses gaps and removes redundancies, thus making each position more efficient and reactive.

Historically, cybersecurity teams have played defense – addressing threats and incidents as they occurred, and responses were based on past events. But now, thanks to generative AI and ML and efficient communication hubs, a company’s cybersecurity team is able to anticipate future issues in order to put out a flame rather than face a fire.

Credits: IADS (Mary Jane Shea)

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To the relief of many retailers, Chinese borders reopened in January 2023 after 3 years of closure. While they learnt how to survive during and after the pandemic by addressing local clients and other nationalities, they eagerly waited to see Chinese tourists back in stores, especially in Europe, where they represented 50% of luxury sales before the pandemic, according to Altagamma.

2022 was not bad for continental European retailers: Galeries Lafayette and Printemps in France almost fully recovered to their 2019 levels, while La Rinascente in Italy, Breuninger in Germany and El Corte Inglés in Spain all exceeded either their 2019 sales revenues or profits. This can be attributed to several factors, the strength of the US dollar (an incentive for US tourists to splurge into luxury purchases in Europe), European tourists criss-crossing the continent to spend their Covid-19 savings, the UK decision to scrap VAT relief channelling clients to Paris, Milan and other destinations, among others.

However, these conjunctural factors are not expected to last. In parallel, while the Chinese appetite for luxury has not faded, overseas retailers wonder if they will be able to get a piece of the pie, which is why anxiety about Chinese tourism is mounting. Knowing when exactly they will be back, and what they will be looking for, is key to make sure stores are properly prepared to welcome such customers again.

This article was first released on MindRetail as an op-ed.

Will Chinese customers be back on time to save the next season?

According to various sources, a large-scale return of Chinese tourists should be expected in Europe only during the second half of 2023 (either during the summer or the Golden Week in October), while the most pessimistic reports mention early 2024.

It’s not that they do not wish to travel, on the contrary: just after the borders reopened, Fliggy (Alibaba’s travel branch) reported an increase of 200% in travel bookings, while Chinese travel agency Trip.com noted that outbound travel bookings multiplied by 18 times last April. However, long-haul international trips are another story:

-    A backlog of passport renewals and visa applications in China after 3 years of closure explains why closer destinations such as Hong Kong, Thailand, Japan and Singapore are easier to visit (not to mention the efforts these countries actively pursue to court Chinese tourists, such as Hong Kong giving away free airline tickets and food vouchers to encourage visits),

-    Airline tickets are scarce, as ramping up the frequency of flights takes time and people. For instance, Air France opened 6 weekly flights in May, up from 1 in January, far from the 30 operated pre-pandemic. Add to that diplomatic arm-wrestling since Chinese companies are not restricted to fly over Russia to come to Europe, while European companies see their operational costs increase by more than 20% to go around Russia (due to the war-related restrictions), and this is the perfect cocktail for high flight prices and a lengthy return to normal,

-    In addition, China developed its own luxury market during the pandemic, as illustrated by Hainan, the duty-free national mecca, where overall sales doubled in 3 years and customers can find prices which are competitive even with France (while, in the past, the price difference could justify a trip there).

Consequently, the sight of Chinese tour-operators in European city centers is still a distant idea. On XiaoHongShu (the “Chinese answer to Instagram”), out of all cities mentioned from September 2022 to April 2023, only London made it in the top 10 destinations (Paris is ranked 13th).

This does not mean that Chinese tourism has not resurrected at all. LVMH’s CFO mentioned that a new breed of Chinese tourists, travelling as individuals and not in tours anymore, was spotted across the globe. This raises another question about the very nature of these post-pandemic Chinese tourists.

Who are the Chinese tourists currently travelling to Europe?

So far, they are wealthier, with a higher education background, and probably more demanding than the ones that came to Europe in tours before the pandemic. This is not to be taken lightly:

-    They favour safe and Chinese-friendly places, i.e. countries that offer easy access to visa and security. For instance, Italy is taking the lead over France when it comes to visas. While French retailers are pressuring the government to speed up the flight frequency, Italy lowered the visa application cost, a smart move given that the first country visited usually pockets a significant share of tourists’ budgets. Security also explains the rise of newcomers, such as Balkan countries (Montenegro, Croatia, Georgia), as they are being seen safer than traditional destinations.

-    They are highly digital, well-informed, and unresponsive to clichés (such as rabbit-shaped products for the year of the rabbit). They favour experience and discovery over products and are also extremely interested in wellness and health-related options. Some of them even combine business trips and leisure travel, which raises questions in terms of how to accommodate such customers.

In short, recipes of the past won’t work. First, retailers’ attractivity should not be taken for granted, and the ones who invested during the pandemic to overhaul their shopping experience (such as Printemps’s revamp or the Galeries Lafayette flagship store renovating its cupola) will reap the benefits of their patience. Second, Chinese customers will be expecting a very different set of products and services, which should come as a justification for such travel. In other words, European retailers are now facing competition from China itself when it comes to tourists visiting their stores, and the risk of disappointment is real.

How are retailers preparing themselves?

The reopening of Galeries Lafayette’s Shopping and Welcome centre last month, a 2,800 sqm space dedicated to Asian clientele after 3 years of closure, is only the visible part of the iceberg on how Europe is preparing itself to welcome back Chinese customers. It would be misleading however to believe that retailers rely on old recipes to welcome these new-gen tourists.

First, they are preparing through a total reinvention of their product offer:

-    While they had to cap that category during the lockdown, stores are muscling their ultra-luxury offer, mirroring what brands are doing either at home (with the opening of a mega-flagship such as Dior or Cartier in Paris) or in China (with salons only opened to ultra HNWI in the Chanel, Louis Vuitton and Gucci stores at SKP). This has translated into new and larger spaces (such as with the new Rolex boutique in Galeries Lafayette or the double-decker stores in El Corte Inglés) but also the multiplication of takeovers, as seen in Harrods (Louis Vuitton, Dior, Celine) or KaDeWe (Dior). When it comes to the category, it is all about stocking up bags and hard luxury goods over RTW, which implies difficult negotiations with brands who prefer to keep these high-margin products for themselves.

-    They also focus on curating new brands, to provide younger customers (84% of Chinese travellers are Millennials and Gen X) uniqueness and originality with niche product offering. This is why Breuninger has opened B-Spaces, designed to provide a radically and highly curated selection of products.

-    Surfing on the growing interest from Chinese customers for fragrances, perfume bars have been reinvented:  Printemps and KaDeWe both redesigned their spaces. More generally, wellness is growing in China, as Covid impacted mental health. As a consequence, gyms are opening everywhere in the country, and wellness is now a trend meaning that new offerings, such as Galeries Lafayette’s Wellness Galerie, could prove to be a master move.

However, as mentioned, retailers also adapt to the fact that Chinese customers look beyond products (8 out of 10 favour experiences):

-    They crave for in-store experience (a common sight at home in places such as SKP-S). This is why luxury brands’ flagship stores and initiatives (such as the LV Dream restaurant) should attract crowds, and retailers should develop new concepts, such as WOW in Madrid. Also, culinary experiences are now key in department stores, which is why the first Michelin-starred restaurant opened in a department store, at El Corte Inglés.

-    Services are crucial, as Chinese customers no longer wish to queue for hours outside of a store. They prefer to connect with a local sales associate who knows them and can advise them personally. This pushes retailers to invest in their CRM, such as with Magasin du Nord. Also, being able to deliver products to their hotel, or offering them click & collect for products selected when in China for pick up while in the store, are services that are being developed. Every detail counts: La Samaritaine’s automatic tax-free kiosks are a competitive advantage for customers valuing speed and convenience.

-    Overall, retailers are developing “China-ready” teams, including Chinese speakers, translating point-of-sale material, and offering Chinese payment systems (China UnionPay, Alipay, WeChat Pay). Such teams are also trained to learn the culture codes and avoid any misstep.

Conclusion: standing out of the crowd will not be a question of products, but systems

The most difficult will be, however, to stand out of the crowd not only by being perceived as the “must-be” visited place, but also by being visible where Chinese customers look for information, i.e. the appropriate social media (60% of wealthy Chinese customers research a product online before buying it). Retailers have to make a choice, as there are significant differences between WeChat (where Harrods launched branded stickers), Tmall (where El Corte Inglés has a store) and others. That also implies having a dedicated content and marketing team, understanding the market to partner with the right KOLs, and a Chinese-focused promotional calendar (while CNY and Golden Week used to be the main events, Single Day, Couple Day and Women’s Day are now significant opportunities).

Finally, CRM systems that companies have rushed to deploy in the past few years will be delivering their full value, especially trans-national ones. Central Thailand’s unified system, which allows customers to accumulate points when indifferently shopping at la Rinascente (Italy), Illum (Denmark), Globus (Switzerland) or Selfridges (UK) represent, a good use case that should appeal to Chinese customers when travelling in Europe.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS attended the latest edition of the World Retail Congress in Barcelona, during which the Association had the privilege to moderate a roundtable dedicated to the future of department stores, with the CEO of Steen and Strøm in Norway, the CFO of Matahari in Indonesia, and the Deputy Chair at John Lewis in the UK.

This edition was also the opportunity to listen to great leaders and hear their insights. Below is a selection of the most interesting lessons we took home.

The WRC is one of the global events where every retail professional gathers to hear about the latest trends and grasp the industry mood. This year’s theme was dedicated to resilience and the leadership needed to navigate the “extraordinary times” we live in. It was the occasion for 750 attendees from 40 countries to listen to compelling presentations from leaders, sometimes disarmingly honest when it came to acknowledging the toll taken on them by the role today.

During his opening speech, the chairman and CEO of Tendam set the tone, as he advocated for leaders to embrace every change, be it customer behaviours, technological disruptions or sustainability issues, and find very agile solutions to face these challenges, in the most efficient way possible, but not at any cost. He insisted in a very compelling way on the fact that leaders should never lose sight of their ethics, as they should lead by example. This is all the more important that the retail leaders’ role now goes beyond the P&L: they have a responsibility in changing society and contributing to its transformation, a clear evolution from the past (and a Herculean one, when combined with the need to ensure business continuity and prosperity).

After an overall presentation of the global economic situation, three main themes emerged from the various presentations the IADS attended:

-    How brand storytelling is evolving from a purely growth-oriented purpose by showing how brands offer the best options to customers, to a broader message explaining how they are contributing to the general evolution of societies and well-being,

-    How tech is impacting businesses, with down-to-earth use cases, but also some messages of caution,

-    How retail leadership has transformed in order to help organizations navigate troubled times in the best way possible, involving sometimes that leaders themselves should question their approach and change.

Introduction: a global overview of the world situation

The Global Chief Economist at Deloitte drew a rather extensive picture of the world situation and the impacts on retail.

While inflation has increased in the past 2 years to the highest levels in 40 years due to various factors (pandemic, supply chain impact, durable goods prices surge, war in Ukraine), he was confident that the peak was behind us and that inflation should decrease. He was wary however that the labor market had not contributed to inflation so far: technically, a situation where there is a demand for labor should have led to a surge in wages, not the contrary which is what is currently happening, as prices are decorrelated from salaries.

He also addressed the risk of recession for the US, which was low in his opinion thanks to the stability of customer spending (fueled by their savings), and the strong balance sheets of businesses. On the contrary, Europe was more at risk, due to the much higher levels of inflation, and with Russia weaponizing gas and raising prices, thus forcing governments to increase public spending to support populations. Italy and Germany were, in his views, the countries most at risk. With the ease of Covid-19 restrictions, China had started to recover, even though there were some headwinds (weak global economy, supply chain disruptions, demographics and trade disputes) which could lead to a pivot in globalization, with global companies shifting assets from China to Southeast Asia, reflecting the decoupling that is already taking place in tech.

He concluded by reminding the audience that 2022 was the first year during which climatic events truly disrupted the world economy on a large scale, and that should become a norm in the future.

The brand storytelling evolution: from a business competitive advantage to a social involvement

The Chairman and CEO of LVMH’s Selective Retailing Division (which includes Sephora, DFS and La Samaritaine, Le Bon Marché department stores) explained that he did not see his role, and his businesses, as being a retailer, but rather a brand builder. In other words, the more stories he was able to tell the world, the more affinities he could create with the customer.

This rather classical approach to storytelling was twisted when the CEO of The Body Shop dynamically reminded the audience that being sustainable, the DNA of the brand since its inception, also involved concrete measures impacting how the company was interacting with society at large. An example of this was shared through the company’s recruitment process, (The Body Shop boutiques accept any person willing to work, especially the ones excluded from the job market), which he made part of the brand storytelling. For him, the social involvement of the company (and its public promotion) is a way to “appeal to customers who embrace the values we embrace too”.

Rather surprisingly, the Executive Vice Chairman of Shein had a similar approach to explain how his “on-demand retail business”, involving small factories, production on demand and promotion through social media was actually impacting society in a positive way:

-    From an environmental perspective, by reducing production waste (in terms of material consumption but also unsold products) and encouraging customers to engage in circular consumption,

-    From a social perspective, by proposing + size collections and promoting diversity,

-    From a job perspective, their different business model was seen as a strong element of motivation for their staff, who believed that Shein’s new approach could change the industry.

He concluded by mentioning that Shein was seeing itself as an agent of change, and that they were ready to influence other players in the market so that the industry could change. The audience’s reactions to those remarks were mixed.

Tech is a necessity, but not an end-game

AI and ChatGPT were the stars of the show in many presentations. The Chief Technology Officer of Zalando explained that ChatGPT was already used for product recommendations as their motto is to “use the new tech before the user does.” He shared that AI should be taken very seriously, as it will force businesses to rethink the way they operate, what they want and can do with the data they collect, and how they make sure it makes sense for the customer. For instance, he mentioned that call centres were clearly disrupted as Zalando was considering replacing them with chatbots.

However, he insisted on the fact that tech evolution is, in essence, a cultural change. This means that teams have to be motivated in the process of change, with full transparency, making sure they understand the goal, and share the same ambitions. He was very wary to remind the audience that AI would never help to solve all the issues by itself.

This is a view that the CTO and co-founder of Uber shared, while encouraging the audience to test, try and learn. For him, we live in the best moment to innovate, and retailers anyways do not really have the choice: if they do not do so, someone else will do it for them. This is the reason why many initiatives are taking place, from metaverse (which he saw more fit for gaming than anything else), to VR/AR, or NFTs (even though the current applications were disappointing).

A Doctor of Machine Ethics at UC Berkeley echoed that encouragement to test and try, explaining that this was the approach Microsoft or Google had when developing Large Machine Learning models. They sense that Generative AI is going to replace part of the tech stack, that they can learn and customize at scale, but for now, what is possible to be done and how is not yet fully understood. For that reason, every player, from the largest retailer to the smallest start-up, has a chance to run the race (a position echoed later by Bill Gates about the fact that AI could kill both Amazon and Google in a Tweet last May).

The human aspect of tech was left behind during these presentations, which made IKEA Retail (Ingka) Chief Digital Officer’s speech very interesting. By reminding that the company’s DNA was to “create a better everyday life for the many people (they serve), through affordable, sustainable and accessible products”, he explained that the company had the will to “responsibly approach automation”. In other words, make sure that automation and tech is used to improve IKEA’s employee’s employability in the long run, because the company believes that talents and people are scarce.

While IKEA started their digital transformation late (in 2012, with a dedicated digital organization only emerging in 2018), things advanced very quickly: 80% of IKEA customers start their journey online, and e-commerce represents 20% of the business (vs. 9% pre-pandemic). This is why they have developed many new innovations:

-    The paper catalogue was ditched, and replaced with 3D creative apps that allow phone users to virtually visualize the products they want in the actual locations where they want them to be,

-    Store inventory was tracked with autonomous drones, which improved security at work, self-replenishment, as well as contributed to reducing overwork,

When it comes to data and artificial intelligence, he candidly mentioned that they wanted to leverage AI to improve business efficiency, but without losing sight of workers. This implied that they did not have clarity on what this meant or how, yet.

The transformation of leadership and how to manage customers and teams

During a roundtable involving the CEOs of AWW Group (Pepe Jeans, Hackett, Façonnable), the President of Aerie (American Eagle Outfitter Group), the CEO of Marks & Spencer, and the CEO of Wumart, a 2,000-large Chinese grocery and supermarket chain, the evolution of leadership was discussed, and in particular how to convince loyal customers in a change process.

The conversation was very hands-on and honest: Marks & Spencer shared that the message about their new loyalty program was confusing customers who believed that the app itself was the program. Another example was the cashless cafés introduced by M&S to show its technological advancements, which were not understood, let alone used, by its traditional customers. The CEO of Aerie reminded the audience that whatever tech was on the table, people are needed to operate it, and that involved an inertia that had to be taken into account by leaders during the implementation process. During another talk, the CEO of Primark described his role as to “challenge technology and make sure the company does not move too fast for the customer”.

The chairwoman of The Lane Crawford Joyce Group tackled the other side of the coin, the people in retail organizations. She described her organization as “a business where you pay people to grow.” In other words, her job is to create a platform where people learn and grow. This translated into a retail academy where Lane Crawford employees can learn basic retail maths, manage 1:1 relationships, learn how to make content creation and use AI, but also have access to mental health and wellness programs.

The most emotional talk however was with Frasers Group’s CEO. While being honest about the fact that the context was challenging, he was candid about his role and how he had to make the right decisions about distributing brands and operating stores:

-    Are they relevant for the business?

-    Do they positively contribute to the distribution?

-    What do they bring to the structure?

He was honest about the fact that such filters were difficult to apply, especially when he had to close stores and lay off workers. To do that, it required being fully transparent about the economic conditions leading to such a decision. He reminded that the “P&L does not prime over moral and support for people.”

When it came to the department store format, he mentioned that for him, the model is far from being broken, but it can become very unproductive past a certain size as he discovered with House of Frasers. This is why in 2nd and 3rd tier cities (<100,000 people), he renegotiated leases with landlords and brought Sport Direct at the entrance in order to boost traffic.

Finally, he also mentioned the launch of Frasers, a loyalty program combined with payment capabilities, that will be available across all store formats (House of Fraser, Sports Direct, Flannels) which will also be sold under a white-label solution to other retailers.

What to remember from this WRC edition? The key takeaways were centred around calls to more transparency, collaboration and cooperation between retailers. The Chairman and CEO of Tendam even mentioned it in his introduction speech, by reminding the audience that “retailers cannot move alone” and it was the time to “develop alliances, as the world is becoming too complex to succeedalone.” This is exactly what the purpose of the IADS has been since its inception, and what we have been trying to bring to our members since the reinvention of our activities in 2020 into a more business-oriented and hands-on expert structure tackling topics together.

Another interesting thought was also the amount of risk that retailers had to willingly take if they wanted to succeed, as reminded by Mindy Grossman, who was inducted at the WRC Hall of Fame, and who said that taking risks was better than not taking risks and trying to cope along the way. Such an approach could be lethal for retailers today.

Extraordinary times indeed!

To go further:

WRC CHAIRMAN REPORT

Credits: IADS (Selvane Mohandas du Ménil)

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Private shopping is nothing new to retail. Think high jewellery and watchmakers, they have always traded in discreet ways. More recently, luxury flagship stores have increasingly developed private lounges. While they used to be opulent rooms with comfortable sofas, they have transformed and expanded into private floors, private apartments, and finally, full private stores that are only accessible to a limited list of VICs. This comes as an evolution for big spenders’ shopping habits. On one hand, top customers tend to spend more, hence expect to be treated accordingly. On the other hand, the pandemic created a new demand for one-of-a-kind or, at least, special experiences.

Besides, in an environment where luxury brands intend to increasingly go direct-to-consumer and where resale is gaining traction and is considered a more responsible shopping behaviour, private retailing represents an additional and crucial strategy for brands to make a difference in the way they consider their best customers.

While Covid accelerated luxury consumption, the private retailing trend is here to stay. Many options are available from full private stores, private suites and salons inside of the stores, to confidential retail spaces. The IADS pulled together the most relevant examples of what private retailing offers at the moment.

Private retailing in department stores

In close partnership with luxury brands, a few department stores were early adopters of private retailing. In different ways, Harrods and SKP are fair examples, both happening in China.

The Residence: Harrods outside of Harrods

Back in 2020, at a time when Chinese consumers were unable to travel to the UK, Harrods started a new format in China. Called ‘The Residence’, the concept was tested first with a 3-day pop-up store initiative during Shanghai Fashion Week, which soon transformed into a permanent space. The project, strictly invitation-only to its top-tier clients, consisted of stockless VIP lounges and showrooms, including personal stylists, exclusive collections and areas for customers to invite and meet with their friends, and even host dinner parties. The concept soon expanded to Beijing.

The reasons for such a strategy were to keep in touch with wealthy customers and increase brand recognition. Also, the company anticipated that, with the degrading relationships between the US and China, the UK might become a more enticing destination for affluent Chinese in the future. It was also a smart move since there is no physical stock to be found at The Residence: the department store counts on its relationships with brands to locally supply the products sold.

Luxury brand ‘social clubs’ at SKP

A few months ago, Chanel revealed its plans to open private boutiques dedicated to their VIP customers, starting in Asian cities in early 2023. The long queues in front of every Chanel store hardly represents a nice luxury experience so the news of this new exclusive experience didn’t come as a surprise. Besides, with only 250 stores worldwide (compared to 400 Louis Vuitton stores), Chanel has a relatively limited retail footprint, hence the need to take measures to accommodate the upper part of its growing customer base. To support its retail expansion, Chanel plans on hiring more than 3,500 new employees, many of whom will be sales associates.

In Fall 2022, the initiative was first implemented at SKP in Beijing where Chanel (along with Louis Vuitton and Dior) took over the third floor of the building to open a VIP-only store. What’s more interesting is that it is not as visible as one would expect, as the store is not dubbed Chanel but ’31 Cambon’: the reference to the historic boutique in Paris is highly challenging for non-Chanel shoppers to grasp, and that’s obviously the goal. The collections are displayed as if in a lavish art gallery with artisanal tools demonstrating the brand’s know-how and craftsmanship.

At Dior, the private boutique consists of 3 rooms only accessible upon reservation for a limited number of loyal customers. As for Chanel’s ’31 Cambon’, Dior’s salon concept is totally different from the usual boutiques. To showcase and emphasize the brand’s culture, the concept takes cues from an art gallery reminiscing of the Designer of Dreams wall created for the namesake exhibition. Besides sales service and consulting, these private stores are also meant to entertain VICs: private trunk shows and pre-orders, friends’ gatherings, birthday surprises, and educational courses. One VVIC (very, very important customer) of Dior shared her retail routine. Whenever she wants to buy something her sales assistant books her one of the 3 salons. She is welcomed with pre-selected items in her size, but also with her favourite sweets and drinks. Big spenders become addicted to such swanky treatment. And since being a VIC is not forever, the top customers are pushed to keep up with their purchase volume to maintain their status.

Private retailing as developed by big names

Brunello Cucinelli’s hidden Casa Cucinelli

Following the opening of a similar space in Milan before the pandemic, Brunello Cucinelli opened an invitation-only store in New York in December 2021 to emphasize private shopping for its most loyal customers. Located on 689 Fifth Avenue, the space at street level is not occupied by the Cucinelli store (but rather a Canada Goose). Actually, one will find it hidden on the 9th floor of the building. The Casa Cucinelli apartment space is designed so that top customers feel like they are at the designer’s home. Guests are first invited into the lounge, immediately leading to the kitchen. The rest of the apartment includes a living room, a study room and a dressing room where everything can be acquired.

From Dior to Cartier: renovated Paris flagship stores develop unprecedented private spaces

In 2022, Dior and Cartier in Paris offered 2 versions of a luxury revamped flagship. In Spring 2022, Dior reopened its store on the opulent avenue Montaigne. On top of haute-couture and private salons, the ‘Suite Dior’ is a private apartment whose keys give guests the full run of the building, with dedicated staff of six to eight people around the clock, ranging from chefs to personal shoppers.

Cartier’s 6-floor, 3,000 square meter newly renovated historic store located on rue de la Paix, is also a relevant case for private retailing. The 5th floor of the building is a completely private floor called the ‘Residence’, an apartment consisting of a dining room, a lounge, a large kitchen and a winter garden. It is designed to host exclusive events, a party for a client, or a product launch with VICs. The 4th floor is also dedicated to top customers: it hosts an archive space where they can discover old drawings, mood boards, books and old photos. The other floors’ breakdown is quite classic, with each floor having at least 2 private salons. Called ‘Prestige’ and dedicated to high jewellery and made-to-order, the 2nd floor has a special salon for bespoke jewellery: customers will decide on their projects there thanks to an inspirational library and archive pieces, and they will discover their unique creations in a rather impressive cabinet.

Private retailing is a key part of Gucci's turnaround strategy

Gucci opened its first private store in April 2022 in Los Angeles’ Melrose area. Accessible only by appointment, the ‘Salons’ exclusively show the most elevated products, including made-to-order collections. Privacy is key here: windows are tinted so clients can see out, but passers-by can’t see in. Private appointments are flexible and can be booked for 2, 3 or 4 hours, or all day, in which case a special menu is available from the Gucci Osteria restaurant on Rodeo Drive. The store has been designed to be flexible and host special events: the racks can be easily removed to use the store as a fine jewellery or watch salon, for example. Nine private stores are set to open in the coming months (New York, Paris, Milan, London, Dubai, Hong Kong, Shanghai, Taipei and Tokyo). They will support Gucci’s turnaround strategy and product elevation, with its average selling price rising double-digits last year.

Tiffany’s The Landmark has to both accommodate 2 million visitors per year and top VICs 

Tiffany’s Fifth Avenue store is a cultural destination and New York City’s fifth-largest tourist attraction. Now fully renovated, ‘The Landmark’ (as LVMH dubbed it) will probably be even more attractive than before, especially with tourism booming. The challenge will be to cater to the expected 2+ million visitors annually and to design remarkable shopping experiences for top-tier consumers under the same roof and at the same time. To that end, each floor is equipped with private salons, starting on the ground floor with consultation tables coming with panels to create private spaces. On the third floor (the Love & Engagement floor), 4 private shopping rooms are available for couples to have a more intimate shopping experience. The seventh floor (the high jewellery salon) offers spaces to reveal pieces specially curated for visiting clients. Finally, the 10th floor is a full VIP private selling salon only accessible to Tiffany’s top clients. It features 4 VIP salons and a private dining room that can host up to 60 people.

Confidential retailing: an efficient alternative to flagship stores to capture loyal customers

Intimate, more confidential – but not private – stores are also considered by luxury brands as a lucrative strategy to tie affluent loyal customers to their favourite brands knowing that they don’t necessarily want to shop in huge stores anymore.

Balenciaga’s couture store

In July 2022, before the media storm hit the brand and its artistic director, Balenciaga opened a ‘couture store’ located at 10 Avenue George V’s historic address, just below the brand’s couture salon. The store is not private per se but is dedicated to top customers, as it offers limited-edition high-price clothing and accessories (EUR 3,500 eyewear, EUR 8,500 to 15,000 bags and up to EUR 100,000 clothing that can be personalised by the ateliers upstairs). To refrain from random customers wandering around, the store is only accessible upon reservation on Saturdays, usually retail’s busiest day of the week. The store also serves as a “gateway to couture” as said by Balenciaga’s CEO Cédric Charbit: it’s a smart way to push the brand’s top clients to upgrade their spending and buy couture.

Thom Browne’s resolute alternative to a flagship store in Paris

When Thom Browne opened its first retail store in France in 2022, it was surprisingly not in Paris, as one would have expected. Rather, the brand opened a small 50 square-meter store in Saint-Tropez inside the member-only beach club Épi. The US label, whose ambition is to become a global brand, obviously cannot afford big flagship store locations yet. The idea here was not to cater to as many random customers as possible, but rather to develop close relationships with a few top ones. In that sense, the new outpost acts more as a clubhouse than as a billboard. Overall, the new Thom Browne stores are the opposite of the usual ‘mega-store’ that luxury big names are investing in or relaunching. On the contrary, they are on average less than 150 square meters and in locations that are more interesting than visible.

It’s no surprise SKP was the first to dedicate a floor to private luxury brand stores as the department store accounts for the highest sales in China. Besides, Asia is the continent where most of the future growth in luxury consumption lies (despite recent worries in China). Asian customers are also more eager to participate in exclusive and entertaining shopping experiences.

If Chinese VVICs will probably favour shopping at the most exclusive freestanding flagship stores when they are back in Europe or in the Americas, VICs and other big spenders are still to be caught by department stores. Assuming these consumers will revenge-shop when they resume travelling, department stores should consider opening private luxury brand shop-in-shops to make sure they will cater to these tourists’ demands. The surface allocated to such new stores could be made profitable thanks to higher average baskets. Even though questions remain on the business agreement to negotiate with brands, the initiative could be an additional tactic for department stores to retain luxury brands at a time when they are increasing their DTC operations.

Another option is to double down efforts on personal shoppers, private lounges and extend the services and experiences offered. This is what Harrods will do in 2023 as mentioned by CEO Michael Ward during the NRF big show in January 2023. He is planning to multiply fourfold the resources allocated to private shopping (people and systems) while focusing on managing relationships with luxury brands and making sure that Harrods will be able to satisfy the demand for luxury products.

Credits: IADS (Christine Montard)

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The IADS’ role as an expert platform is to be aware, explore, and inform its department store members about every aspect of innovation in retail, in order to help them address the future challenges with the best cards in hand. This involves taking a step back from fads and fashion, and addressing innovation with a cold head to report what is going on.

This is the reason why the IADS invited Sandra Gasmi, founder of Demain Beauty, an innovative clean beauty brand, to present the Metaverse initiative she has developed with her team in partnership with Chafik Studio, an architect company founded by Chafik Gasmi, her husband, that has worked with Sephora, Lancôme, LVMH, in addition to having experiences in the hospitality sector.

Is the Metaverse still relevant in 2023?

While the Metaverse was such a hot topic in 2022, the hype has died down a bit as AI technologies steal the limelight. But this does not mean focusing on the Metaverse as an extension of a retailer’s brand is to be completely set aside. According to Coresight Research, retail spending on technology is expected to reach USD 229 billion in 2023, a slight increase from 2022. The Metaverse is still seen as a place for growth as an extension of the omnichannel offer.

While the Metaverse is still in its early stages, it represents new revenue channels and opportunities for retailers, which is why many of them are continuing to invest in it in 2023.  For instance, L’Oréal’s venture capital fund, BOLD, participated in a USD 4 million funding round for French metaverse developer Digital Village as the technology enables a 3D world for brands to engage with customers. Also, a retail survey conducted by retail solution company Avalara found that omnichannel investments are top of mind for retailers, and the metaverse is seen as a priority in strategies going forward.

The Metaverse, applied business case: Demain Beauty

In order to get a first-hand look at what retailers can do with the Metaverse, IADS welcomed Sandra Gasmi, CEO of Demain Beauty, and her architect husband Chafik Gasmi, founder of Chafik Studio to showcase a brand experience in the Metaverse which trains and informs employees and consumers about the various products offered and active ingredients through an immersive and interactive experience.

Chafik and Sandra Gasmi brought their two worlds together of brands and architecture to offer an immersive experience that can help people discover the brand in new and fun ways. The tools and experiences that were developed are meant to create brand engagement and brand loyalty, as well as increase the conversion rate because consumers will better understand the brand.

Using the Metaverse to educate

If a person sees and feels a product, they will remember 20% of what they have seen. But if they have the opportunity to interact with the information in the real world, they will memorize 75%. This is what the Demain Beauty Metaverse experience aims to do. Users are fully immersed in a world that requires their full attention allowing them to be fully focused on what they are doing and what is going on in their surroundings. The Demain Beauty Metaverse experience has incorporated gamification tools to boost the attention of the user even further so that as they learn they feel a sense of pleasure that positively impacts the learning experience. The tool can be imagined in two ways: as a retail animation tool and as a training tool.

The Demain Beauty Metaverse experience

Within the Demain Beauty Metaverse experience, customers start their journey in a lobby, from where they can shop and learn more about the products. They always have a shopping cart attached to their avatar in this space so that they can continuously increase their basket size when desired.

The lobby is in the centre of a circular structure that is suspended in the air. Around the circle, there are various galleries that have games the user can interact with. The games are focused on educating the consumer about pollutants, good and bad bacteria, and that Demain Beauty does not use single-use plastics as a way of respecting the oceans.

The Demain Beauty Metaverse experience is still in its early phase, but they hope to eventually have it online and, on an app. The total cost to build out the experience was EUR 200,000 and took 7 months to complete.

What makes the Metaverse attractive to retailers?

While Web2 brought on major advancements in communication tools and social media outlets, Web3 has the potential to augment these applications even further. First, the new technology has the capacity to treat larger amounts of data. Second, this data all belongs to you which gives you more control over how you are seen or how your experience is dictated.

The Metaverse allows a brand to use the architecture and the offer of their experience to attract users to their brand. The difference between physical selling space and the Metaverse offering is that in the Metaverse, you can be more creative, not only in the physical build-out of the experience, but the brand can also be infused through communication, education, and the shopping experience. While inventing digital and immersive experiences that are meant to wow consumers, it is still important to focus on elevating physical experiences as well.

With the Metaverse, the technology can be used to create a “digital twin” of the physical store, which is something that has already been done in the hospitality industry, and which allows one to see and model any planned changes in the retail space in advance. It also significantly creates more fluid interactions between development teams and can even be used by marketing and communication teams for planning and simulation purposes.

The Metaverse can seem like an unknown technology that can easily suck up corporate research and development funds, but brands that act early gain the advantage of understanding how it works, which will be crucial once trends develop further. Brands that have tested the Metaverse so far see the potential, but warn that controlling brand image in the Metaverse is not easy and there can be higher risks of IP and trademark infringement. This proves that the relationship between the virtual and physical worlds for a brand is very important and must be carried out with caution.

Conclusion: The Metaverse is an experience worth experimenting with

Bringing customers and employees from the physical world into the metaverse might raise some challenges, especially in the sense that there is a learning curve when using new technologies, especially those as radical as the metaverse. Customers crave experience, and experience is centred around the senses. These sensory experiences are not as easy to capture in a virtual world as there are some limitations as to what can be mimicked online.

But what the Metaverse can offer is an out-of-world experience, one that consumers can only imagine. This is a great way for retailers to experiment with new ways of showcasing their products and educating their customers in a more memorable way. While the Metaverse offers some limitations, if executed well, it can transport customers into an immersive thought-provoking experience that can build up the brand power of a retailer.

Credits: IADS

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The IADS is at a crossroads when it comes to helping its members, by at the same time addressing their most operational questions and coordinating the informational flow, but also helping them to address future challenges, by questioning their methodology and providing a different point of view.

This is the reason why the IADS invited Eugenie Rives to share her view on the management of innovation and transformation, as the Early Project Managing Director at  Project X, Alphabet’s “moonshot factory”. Before joining X, Eugenie led Operations for Google in France and Sub-Saharan Africa. Before Google, Eugenie worked for Alcatel in Mexico city, managing projects to connect cities and public infrastructure online.

Alphabet’s moonshot factory is the place where uncomfortably ambitious, world-changing ideas are developed. These early-stage moonshot teams are exploring radical new ways to solve some of the world’s biggest problems using breakthrough technology. She explained how a moonshot project works.

Introduction: Google Project X’s purpose

Google Project X was created 10 years ago by the Google founders, Larry Page and Sergey Brin, to develop the Google of the future. In that framework, Project X’s mission is to invent and launch “moonshot” technologies where world-changing ideas are developed to make the world a better place. Moonshot teams are exploring radical new ways to solve some of the world’s biggest problems that cannot be solved with conventional, incremental ways of thinking and behaving.

A moonshot is a project which sits at the intersection of the 3 following ingredients:

1. A huge problem affecting millions or billions of people,
2. A radical, sci-fi-sounding solution that may seem impossible today,
3. A technology breakthrough giving hope that the solution could be possible in the next 5-10 years.

Managing such projects requires a different thinking process as well as alternative management methods which could inspire retailers.

The “moonshot” factory: a few examples to understand Project X and its variety

Waymo, formerly Project X’s self-driving car project, is the perfect illustration of a “moonshot”. 1.4 million people dying each year in car accidents is a huge problem. LiDAR (machine learning and smart sensors emitting pulses of infrared light instead of radio waves) is a true breakthrough technology which will empower a radical solution: a self-driving car.

Tapestry is a “moonshot” for the electric grid that aims to speed the transition to a resilient, carbon-free electricity system. It develops new computational tools that will create a holistic and dynamic picture of the grid.

Intrinsic is a robotics software and AI “moonshot” working to unlock the creative and economic potential of industrial robotics for businesses, entrepreneurs and developers. The team is developing software tools designed to make industrial robots easier to use and more flexible so that more people can use them to make new products, businesses and services.

Using beams of light, Taara is working to bring high-speed, high-capacity and affordable internet access to the 4 billion unconnected and under-connected people around the world.

Tidal is developing new tools to protect the ocean while preserving its ability to support life and help feed humanity, sustainably. To that end, the team is working with ocean farmers to develop an underwater camera system and a set of machine perception tools.

How does Project X work?

Filtering ideas and building projects 

Teams at Google Project X don’t want to work respecting processes. As a result, there is only one process: filtering. Each potential “moonshot” starts with an idea. A rapid evaluation (a few weeks) of the very interest of the project is done and a small team is created to enter the project’s early stage phase (lasting a few months). If all goes well, it becomes an X project which will last several years. During that phase, the team evaluates the risks and possible applications of the project. The incubation phase lasts 1 to 2 years before ‘graduating’ to become a 100-people project.

There is an additional filter to decide which project to work on, considering there 2 types of projects:

•    The ones with 100% chance of helping 10 million people.

•    The others with 10% chance of helping 1 billion people: this is the kind of project Google Project X is focusing on.

Six principles relying on people and culture

Project X is a “moonshot” in and of itself. Its breakthrough idea isn’t technology: it’s the people, culture, values and practices that can make radical, purpose-driven creativity the path of least resistance. Breakthrough innovation happens when passionate teams of people have the audacity to challenge each other’s perspectives and aim for what seems impossible.

To that end, 6 work principles are applied at every step of the way. Some are counterintuitive to how projects are often managed in companies:

1. Aim for 10X, not 10%: the surprising truth is that it’s often easier to make something 10 times better than it is to make it 10% better. Applying this principle is also more exciting for people involved in the project and forces them to free themselves from existing assumptions, always questioning the status quo.
2. Work on the hardest things first, even if it can be seen as counterintuitive. If someone was asked to train a monkey to stand on a pedestal and recite Shakespeare, most people would start by building the pedestal, because it’s easier even though training the monkey is a crucial task. When taking “moonshots”, it’s almost always best to take on the hardest, most important part of the problem first, rather than waste time on relatively simple tasks that can be achieved later on. Working on the hardest thing first is basically the opposite of what companies usually do: look for the ‘low-hanging fruits’. At Project X, small wins are not considered fulfilling while overcoming significant challenges quickly is.
3. Make contact with the real world. The outside world will always teach things which cannot always be anticipated. The key is to get out and test in the field as early and often as possible. The real world quickly tells what doesn’t work and what can be improved.
4. Fall in love with the problem, not with the solution or not even with the technology. Technology is ‘just’ a tool, not the end game. The starting point for any new challenge should be to focus on the problem and seek to gain a deep understanding of it. That way, people can be more open to new approaches to find the best solution possible. This is a paradigm shift as people to run away from problems as fast as possible.
5. Build in diverse perspectives: innovation happens when creativity is fuelled by diverse teams, communities, cultures, and disciplines, challenging each other to spark even better ideas.
6. Embrace learning, not failure: people should be able to kill the project they are working on, hence killing their jobs. Society has conditioned us to see failure as shameful and best to be avoided at all costs. But taking “moonshots” isn’t possible without failing. So it is crucial to create a culture that makes it psychologically safe for people to fail and reframes each failure as an opportunity to learn. Celebrating such failures as much as successes and valuing each mistake for its lessons is the purpose of ‘Dia de Los Muertos’ events organized to celebrate the death of projects. It is also noted that failures are an intrinsic part of future innovations (what Google calls the “moonshot compost”: every innovation comes from an earlier project that had been stopped). In order to enable teams to be able to kill their projects in a reasonable manner, management is defining with them the bare minimum to be achieved and the no-return points, which are all reviewed at every management checkpoint.

What retail companies can learn: breaking predictability and a few rules

Sometimes counterintuitive, such principles can be interesting to companies in the midst of a transformation process. A lot of CEOs are coming to Project X to know more about the principles and how to apply them to their own teams. Innovation and transformation are not just a team’s problem, they are a company problem. Ikea is a fair example of a company transforming itself by hiring many talents coming from the tech world, bringing them together with the other teams, and empowering them with autonomy and trust. Executives should probably do it first, but the key idea is to have all employees on board to avoid a company working at 2 speeds: the ones innovating and the others. In that sense, CEOs are expected to lead by example as well as be ready to learn from “technical” people.

Innovation can be difficult to implement in companies where resources are limited. Project X’s point of view is that innovation should be a mindset. People and teams should innovate in their own jobs: this is not easy and requires a profound ability to change, but in the end, innovation doesn’t require that many resources.

Trying to break as many rules as possible, Google Project X asks employees to spend 20% of their time on any creative activities (from the doorman to the HR or the CFO). As a result, employees -not only do it- but come back to work with better ideas and feel empowered. It works, as Project X employees are eager to learn and want to make an impact. As a result, they truly use this time in stimulating activities.

When assembling a team, Project X makes sure each person’s background leads to a unique point of view or might mirror someone else’s. People who have wildly divergent paths can break each other’s routines and generate creative connections that aren't likely otherwise. People are encouraged to use ‘and’ instead of ‘but’: it encourages value and constructive feedback.

Finally, the performance management and the incentive scheme are quite different from the ones usually put in place in retail companies. Project X splits incentives as follows:

•    50% on ‘how’: team development, how people are helping others. Of course, it’s more difficult to manage as it’s more impalpable.

•    50% on the what, the result.

Conclusion: innovation is all about shifting perspectives

Being agile by shifting perspectives can be more powerful than being smart. Very often, people think that the answer to a difficult problem has to be complex or expensive. But simply looking at it from a different perspective could uncover simple and efficient answers: working on the hardest things first and spending more time understanding the problem rather than running away from it can make a difference.

As far as transformation is involved, whether it’s about digital or sustainability, it has to infuse the entire company and all the employees to bring actual innovation. Agility has become an important value and skill (even more since Covid): in its own way, Project X is an agile company, shifting paradigms to achieve true innovation.

Credits: IADS

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Digital transformation remains a central topic of discussion for department stores. The IADS already dedicated its 2021 White Paper to the topic, trying to understand what was at stake and what was needed within department store companies to fully embrace the change. In order to bring a very down-to-earth angle to the conversation, the IADS invited Laurent Raoul to explain his views on digital transformation in heritage organisations in a new global context.

Laurent Raoul is the founder and managing consultant of XLc Consultancy Company, specializing in Supply Chain, Operating Models and Back Office IT systems dedicated to the Fashion Industry. He has run development or restructuring projects for brands belonging to main Fashion Groups in Europe or in the US, and for mass market and bridge brands or retailers.

Introduction: there is no such thing as “back to normal”

Retailers now live in a systemic world, which means that anything happening anywhere can have a worldwide impact. It is even estimated that a crisis is likely to happen every 12 to 18 months. As a result, retail operations are impacted by increasing chain reactions. ‘Heavy weather’ management becomes the norm, whether it’s to deal with natural disasters, financial crises, geopolitical uncertainties (if not wars) or the next pandemic.

In this troubled environment, past certainties fall short: it is no longer about being “big rather than small”, but about being “fast rather than slow”. Even though size will still matter, upcoming changes won’t be about the big companies eating the small ones, but about the fast companies overpowering the slow ones. To that end, they have to quickly change their methods in all aspects of the value chain and focus on raw data and back office operations, with extra attention put on IT management and knowledge.

Finance, planning, management, sales: it’s all about new agile methods

To manage companies’ transition and transformation, the most important words are resilience (obviously much-needed to mitigate crisis) and agility. While the word “agility” has become an overused blanket word, it still does mean something crucial for companies: the ability to go from situation A to B with both celerity (speed of transformation) and magnitude (depth of transformation).

The new finance: rolling budgets

In an unpredictable world, in which the coming year will probably not have much to do with the past year, is the usual yearly timeframe still important or even relevant for operative finance? Since Laurent Raoul discussed this matter with IADS member CEOs, the French newspaper Les Echos explained that the dogma of the budget completed at the end of the year to set the objectives for the following 4 quarters is over. Furthermore, it is increasingly considered that the usual budget management is becoming a growth inhibitor for companies.

Since Covid and even more so since the geopolitical and energy crisis, many companies have been calling for a more up-to-date and reliable forecast of their finances. Transforming management methods and tools is now a priority for many finance departments. Rolling budget tools develop as an answer: a few key indicators such as turnover, gross operating surplus, working capital requirements, etc… are updated each month or quarter. The method may vary as everyone has their own recipe and applies it totally or partially, generally keeping the annual budget exercise as a safety measure.

New ways of planning: the thinner, the more wrong

Should organisations better forecast or better react? As Eisenhower put it: “plans are useless, but planning is indispensable”. Nowadays in forecasting, it’s overall useless to go into details: the thinner and deeper they will go into details, the more wrong retailers will be. Still, forecasting remains very much relevant these days, but companies should not spend that much time and money on it in advance (no more planning quantities per SKU, store, and season) as situations are changing often and very quickly. Then a new concept emerges: “forcasgility”. It involves a better plan, better reactions and progressive engagement.

There are also 2 contradictory constraints to take into consideration, especially for finance teams. Procurement and production require early engagement to secure upstream supply, but distribution and retail increasingly engage as late as possible to better stick to sales. To tackle and anticipate the consequences of this contradiction, the supply chain should reverse. In short: we go from a front-to-back to a back-to-front system.

Velocity in transformation management

From a transformation perspective, unicorns’ work methods can inspire department store management teams. Such methods are making bureaucracy or heavy processes disappear from project and transformation management. New principles, work methods and tools should be promoted among teams.

The well-known ‘test & learn’ method is still relevant. Meetings should only be 4 people and never exceed 1 hour to ensure efficiency and decision-making. The ‘quick & dirty’ could even be used for some critical situations. KISS (Keep It Simple & Stupid), war rooms should also be considered. Also, POC (Proof of Concept), a demonstration of a product, service or solution in a sales context, could help show that the product can fulfil customer requirements and also provide a compelling business case for adoption.

Cross-channel operations 

The pre-tail (VICs, VIPs, influencers) is now a channel as much as a department store can be: B to C becomes a business in itself as B to B is. This means assortments and allocations have to be more precise and accurate than before, so working on arbitration is key. In that perspective, AI will be of some help to decide the most efficient product allocation, even more in case of product shortage.

Brands are also trying to build cross-category assortments, which is especially difficult as product categories work with different IT systems. Previously built in silos, operating models and IT systems tend to converge: it’s now visible in luxury brand collections with cross-category aesthetics, animations and market events, but also with seasonal and seasonless, short or long lifespan product cohabitation.

Raw data is the most important asset for the future

Back-office data for front operations

There are now countless CSR regulations to comply with. In France for instance, if retailers are not ready, fines will go up to €50,000. The level of information that should be provided will go up to tier 4 (at the animal level for wool for instance). The needed information for the front operations will come from the back-office supply chain data, using brands and retailers’ direct communication, partners, social media and apps, but also through governments and customs as well as coalitions and lobbies -up until the end consumers.

It’s a big change, as such information used to be kept in the back office. Strong agility and organisation in operations and IT will be required to bring data from back to front, in order to comply with the high number of rules and regulations. The fact that the product might be in licensing or sub-contracting won't make any difference when it comes to the data required. Of course, private labels will be considered the same way as national brands.

Regulation requirements and claims will be based on calculated KPIs such as the share of recycled and recyclable materials, main origin, etc… That is only the tip of the iceberg that we (consumers and retailers) see now. In fact, such information is rooted in the raw data: material scientific names, weight per unit, reference ID, batch ID, serial ID… All this data will have to be available, organized, and aggregated, to be available to consumers and regulators.

Which system for raw data?

From that perspective, an important question is to know in which system this raw data should be stored. For retailers, could it be in tier 1 and 2 internal applications such as their ERP? For brands, could it be in the internal applications such as PLM (Product Lifecycle Management) and the TMS (Transport Management System) for instance? Actually, none of them is able to aggregate all the countless information needed from the thread used in a piece of clothing to the garment’s overall carbon footprint. As third part upstream SaaS applications are already very much involved in retail companies, an aggregator is needed such as PIM (Product Information Management), data lakes or data hubs. It means the most critical information might be stored outside of the companies./nbsp]

Companies like Elementum (the provider of Apple, and considered as the potential successor to AWS) could become competitors for retailers and should be looked at. Elementum could lead the market upstream. In 2040, there might be a B2B equivalent to Uber, having no factory, and no physical business, but ruling all the business between brands and factories. Retailers could become a sort of taxi managed by Uber, with another company owning the most critical information needed to operate the business.

The importance of IT: people, knowledge and speed

A critical role in the digital transformation: the CIO

Companies are increasingly dependent on IT knowledge and IT teams. This is why the CIO position plays a pivotal and critical role in the transformation process. First of all, the CIO has to sit at the board and grasp what is going on. As a consequence, the CIO has to be a human being, which means he/she should be able to talk to the CEO and other stakeholders and make technical things clear to everyone. As a kind of teacher, he/she should give the appropriate wording and KPIs for the transformation project.

The KPIs assigned to the CIO should include speed, which is almost never taken into consideration, compared to cost or risk KPIs. The CIO also has to promote agile methods and avoid bureaucracy in IT: it is really toxic as IT sometimes ends up spending more time managing the process, rather than making sure the target is met.

In IT, the position and role given to consultants should be carefully considered. Even though they can help and provide important insights, consultants can be very dangerous if they manage architecture as it should be managed internally: it is too serious to be given to external companies.

The example of ERP implementation: speed and ‘state-of-the-art’, the double road map

A real-life case comes from companies looking for a new ERP system, like SAP, to transform their IT. SAP implementation is at least a 12 to 18 months project whereas speed is a key to success. But if speed is the only key, why would people work with SAP which is the slowest ERP? It might mean companies should pick the quicker solution rather than what is assumed to be the best one: it’s a paradigm shift.

In reality, retailers constantly need to adapt when it comes to digital transformation, which somehow forces them to invest in overpriced IT systems that they don't fully know how to use. It seems there is no alternative but there is an agile way to proceed with ERP implementation. Having a double road map works: this means running 2 projects at the same time. One team works in the short term with a first roadmap: it is not about being ‘quick & dirty’ here, or not even about quick wins, but it rather means quick solutions, first and second steps. In parallel, a second team is working on the medium and long term. Both teams are coordinated and discuss almost every day. The long-term team can use short-term quick solutions to help with the following steps of the project. Companies using this method have seen very good results.

Conclusion: agility in digital transformation is about speed

Laurent Raoul explained how digital transformation implies a paradigm shift in many ways. This shift involves new methods in all steps of the value chain: more flexible operative finance and planning, new management methods and cross-channel selling. At the time, the importance of data grows and is now necessary to front operations, only emphasizing the CIO’s critical role.

While agility has become an important value and skill (even more since Covid), speed is not taken into consideration enough when running digital transformation projects. Considering the inevitable crisis retailers and their teams will have to go through in the near future, and mandatory compliance with countless CSR regulations, speed might be the ultimate key to transforming a business and succeeding.

Credits: IADS (Christine Montard)

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The IADS invited Green Pea to address member CEOs. This exclusive covers the most important takeaways from the meeting.

As shown in the latest IADS White Paper on Sustainability and Department Stores, the topic of converging towards an environmentally and economically durable and sustainable model is extremely complicated. The more retailers dive into CSR and ESG commitments, the more complicated questions they have to face. In addition, the majority of IADS department stores do not have the luxury of starting from scratch to create a ‘green’ or ‘sustainable’ business from the ground up. They have to pivot their centuries-old organisations to be able to meet the standards of today’s regulations and expectations while keeping business-as-usual operations.

However, it is still possible to find inspiration from new business models. In order to provide IADS member CEOs another angle, the Association invited Francesco Farinetti, CEO of the Green Pea department store in Turin, Italy to present the first “Green retail park” in the world.  The department store has been constructed sustainably and considers the impact that its business has on its community as well as the earth. Farinetti, who has been CEO of Eataly prior to this experience, presented his company’s radical take on a retailer that puts sustainability at the core of the business.

Introduction: Green Pea- Challenging the retail business model

Green Pea department store was born from the same family that created Eataly. Eataly’s offer encompasses everything that people put in their bodies, while Green Pea focuses on what people use outside of the body from furniture to fashion. In other words, it aims to be the “Eataly of things” and provide a new set of options when it comes to how people consume and buy.

Consumers are paradoxically demanding more information from retailers regarding the impact of their consumption but not actively looking for it, which is why Green Pea focuses on products storytelling. It is common knowledge for instance that fashion contributes to pollution, contributing up to 10% of water consumption and 20% of CO2 emissions, but customers hardly read the labels, so they need to be nudged. Such stories need to clearly describe where goods come from, what they are composed of, and their impact.

Green Pea asks challenging questions: Should we stop consuming altogether? Or should we consume in a new way that respects the environment? The issue in the retail business is that as soon as a good is produced, there is an impact that must be measured. Not only are goods creating impacts, but retail real estate also has a lasting impact on the communities they serve. This is why Green Pea has created its own “Manifesto” in order to create a set of guidelines for itself and its partners to shop and sell differently.

The Green Pea Manifesto

When the Green Pea project started in 2010, sustainability was not yet a major topic. But soon the team realised that there was no such thing as “green products”, therefore the road to sustainability would be long. It was not possible to be 100% green because every action taken by a retailer had a footprint, leading to the need for close collaboration with its suppliers with the objective to create a community.

Green Pea has decided to address the issues raised by creating a Manifesto, signed by all of the retailer’s partners.  The Green Pea Manifesto details the department store’s strategy which is focused on respecting the planet. The document is meant to create clarity for all stakeholders including suppliers, management, employees, and the final customer in order for them to all remain aligned on the same vision and rules that should be upheld.

The Manifesto hopes to contribute to the improvement of human life on Earth through its 10 pillars which detail a self-constraining set of guidelines for their present and future actions. While Green Pea is a seller of products, from furniture to fashion, the Manifesto ensures that all partners are in line with the company’s beliefs. This is why almost all partners are Italian or fully produce in Italy, as locality has a major impact on sustainability.

Green Pea’s Manifesto can be seen clearly in their 15,000 square meter store that spans 5 floors. Green Pea’s building has been created so that it could be taken apart with a screwdriver and a 24mm wrench in case the building structure needs to be taken apart and reused for other buildings or projects. The wood on the outer shell of the building comes from trees that had naturally fallen in a storm. The paint used in the building turns the walls into purifiers that reduce air pollution by 88% and kill 99.9% of bacteria. All sources of energy are green and include innovative energy capture opportunities with decorative wind turbines at the entrance of the store and electric floor panels that capture the energy of foot traffic to be reused to power the store. It is important to note that building the store sustainably created added a 20% cost to the building structure than it would have been if done traditionally.

Green Pea also highlights the importance of second-hand offers, and this is especially important for their fashion and home businesses. Green Pea sells second-hand items with relative success and sees this part of the activity as alignment with their Manifesto and a strong marketing vehicle. They even offer repair services and encourage customers to bring back items that need to be fixed up.

A new vision of a store, the ins and outs of Green Pea

The first thing seen by customers entering the store is a museum which aims to educate customers about complex to simple problems. The ground floor is also dedicated to cars, energy and services, all carefully curated to offer green alternatives to customers.

The first floor is dedicated to furniture (starting at €2.500, up to €50.000 and more) and appliances (it is possible to have a fully equipped kitchen for as low as €4.000). It took 5 years for Green Pea to build partnerships with brands, from artisanal companies to international labels.

The second floor displays more than 60 fashion brands, of which 80% are Italian, in addition to a book and a cosmetics area. The following floors are also dedicated to fashion, while the rooftop is only open to Green Pea loyalty card holders and aims to be a communal space.

In the fashion area, there are 2 kinds of brands:

-    The ones which have built themselves with sustainability as their DNA (Patagonia, EcoAlf),

-    The ones with which Green Pea has made partnerships, encouraging them to produce in new ways for short product series (Superga, K-Way…) creating a sense of exclusivity for the department store.

It is not limited to mid-range: Cuccinelli, Zegna and Herno are present in the store. The brand portfolio grew from 20 to 65 brands between 2020 and 2022, which shows the attractiveness of the model, and the vast majority of them are operated under concession terms (in other categories such as cars, leases are also used). There is also the possibility to generate financial revenue by setting up sponsorships with brands willing to use Green Pea as a spot to be sustainable (Mastercard, Unicredit…).

The store is completed with a wide selection of restaurants (from a bistro to a Michelin-starred restaurant) and a congress area.

During the first full year of operation, in 2021 (when weekends were closed due to Covid-19 restrictions) the store welcomed 20m visitors, of which 10m visited the ground floor, 5m the restaurants and leisure, 3m the home section and 2m the fashion one. Green Pea expects to welcome 30m visitors in 2023 with strong growth in the home and fashion sections.

Green Pea’s customer

Green Pea’s customers are 60% 55 years old and above with 60% female and 40% male shoppers, which happens to be the same audience demographic as Eataly. The retailer offers its space as a place to host more than 250 events a year as a way to attract younger customers. Events include pizza-making classes, informative courses on sustainability, as well as venues for companies that want to host events. The events are targeted to attract customers aged 28-35 years old. Green Pea will also hold some vintage sale events in order to attract Gen Z shoppers.

The department store also offers a membership programme at a cost of EUR 50 per year which allows members to enjoy 10% off on everything in the store. Currently, there are around 5,000 members that come to the store at least once a month. Unfortunately, the whole database had to be built from scratch as it was not possible due to Italian regulations to synergize the Eataly customer database.

What is next for Green Pea?

Green Pea has big plans to expand and grow their business internationally. Green Pea is currently in talks with Amazon to build out its e-commerce offer from scratch. For the retailer’s physical footprint expansion, they are first focused on expanding internationally with a store in Dubai. Then they would like to open the next Italian store in Milan. The department store is also starting to work on becoming a certifying body that could offer a sustainability certificate to brands and partners.

Conclusion: How can other retailers be inspired?

Green Pea’s Manifesto can be of great inspiration to retailers around the world, especially retailers in the EU that are facing waves of sustainability regulations. Legacy retailers will need to deeply analyse how the business can be rejuvenated from the ground up in order to account for better practices and incorporate new ‘green’ operations. This overhaul will not be easy, but the sooner action is taken, the easier it will be to comply with future laws and regulations.

Green Pea’s positioning as a retailer that prioritizes consumer education is very revolutionary. As transparency becomes a more important topic, communication and information sharing with customers will be key in order to own the company’s brand and messaging.

Credits: IADS (Selvane Mohandas du Ménil)

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It is no secret that relational shopping is becoming very important to grow a retail business from local to international clients, and anyone not aware of it learnt it the hard way during the pandemic. Mobile and web solutions are now helping sales associates understand their customers better and increase sales thanks to a single tool pulling in consumer data points from various channels. The IADS’ role as an expert body is to be aware, explore, and inform its department store members about every aspect of innovation in retail, which is why the Association invited Arnaud Barbelet, COO of Clientela, and Thomas Meyer, CEO of Mobile Now Group to share the importance of relational shopping.

Clientela is a software company based in New York City, with global operations. They aim to reinvent the store as an engine for growth, with a complete suite of Acquisition, Loyalty and Retail Operations solutions. Arnaud Barbelet is COO and co-founder, in charge of European markets. He focuses his expertise on clienteling, consumer experience and product strategy for key brands and retailers including Chloé, Diptyque and Magasin du Nord.

Mobile Now is a leading, full service, mobile development studio, with a focus on digital experiences, products, and platforms. Founded in 2009, it is now present in Shanghai, Hangzhou and Changsha, China and Singapore. An international team of 90, Mobile Now provides consultancy through to UX and UI design, as well as development across all the key mobile platforms. Thomas Meyer, CEO and co-founder, started the company in 2009 after realizing to what extent mobile phones could disrupt consumers’ and retailers’ existences.

Together, they presented examples (Magasin du Nord, Lane Crawford) in order to generate a very lively conversation.

Clientela business case: Magasin du Nord and relational shopping solutions

Overall presentation

Clienteling is seen as an opportunity to provide every tool that a sales associate needs to help clients buy products in a more automated and seamless way.

Magasin du Nord decided to implement Clientela’s solution in order to drive digital innovation around business needs, especially in the middle of the pandemic when there was a need to build bridges between online and offline (through online booking features, for instance). Following the pandemic, there is a need to focus on better understanding clients and prospects to improve their experience online and in stores.

Clientela offers rich data capture, an advanced booking engine and scheduling service, event management, 360-degree client profile details for store staff, and full integration with other applications. These key features allowed Magasin du Nord to get a comprehensive view of data related to sales and their customers.

Clienteling allows retailers to get to know their customers

Clientela’s in-depth data capture capabilities allow retailers to understand why customers are coming and thus generates more opportunities to create value so customers will return. The system implemented enables customers to book personal shoppers for any occasion. Historically, this service was reserved for weddings and special occasions, but now retailers can extend this service to help shoppers find the right products they will need to start a new job or go to a party.

Communicating with customers across various channels and frequencies helps build relationships with them and fosters loyalty. Communications can include sending personal messages such as reaching out to them on their birthday, if they haven’t visited the store in a while, or if the products they have bought need to be refilled soon.

All of these communication channels help sales associates gather more information about their customers in order to offer efficient advice that is valuable, through one single set of tools which are simple to use.

Since Magasin’s partnership with Clientela, the department store has seen year-over-year bookings increase by 17%, returning client engagement up 13% and staff engagement up 68% on the app.

Future challenges

Clientela is now working with Magasin du Nord on a few problems aiming to simplify the processes even further:

-    Online bookings need to be easily configurable in order to adapt to a variety of product categories, client typologies and languages,

-    Data should simplify the life of the sales associate, and be also easily used by the marketing department to create dedicated communication and event without too much complexity,

-    Personal touch should be injected into the processes: the current solution allows the connection of two people (a customer to a sales associate) and, the future one should focus on how to always connect to the most qualified person in a given customer context. All in all, taking context into account is the next step for the solution in order to enrich the variety of responses and possible interactions.

The aim is to move from a Customer Relationship Management to a Prospect Relationship Manager:  the question now is not to help “if” the customer is buying, but to anticipate “when” the customer will do so. In other words, work on occasion automation (for instance, the system remembers when the customer last purchased a cosmetic cream and is able to send a reminder when the product is reaching its end of life).

Mobile Now business case: Lane Crawford WeChat O2O Commerce & CRM in China

Thomas Meyer shared how technically advanced the Chinese market is when it comes to its digital climate. WeChat, is mistakenly seen as similar to WhatsApp by Western observers, and is much richer as it offers users many capabilities within the app that allows users to even browse the internet and access apps without leaving WeChat. This integration allows retailers to serve their customers better.

WeChat Mini Program Membership and Loyalty Service

The example of Lane Crawford’s WeChat loyalty program allows synchronization between clients and sales associates. Clients can easily access and edit personal data while the tool continuously learned more about the customer as they use the tool. The sales associate can also contribute to a client’s profile by creating prospecting cards and can better serve their audience by accessing their personal data, transaction history, and communication preferences.

The sales associate is able to share recommendations via email, SMS, chat apps, or social media. Clients can then buy online and engage with the sales associate through the various channels while all the information is retained in one singular place. There is also the possibility to livestream events and commerce events to learn more about products and services. Sales associates even have the possibility to craft a shopping cart that customers can validate with a few clicks.

Lane Crawford has managed to achieve 1.5 times what they used to do with e-commerce during a full year, in the first 6 months of the launch of their WeChat account. In 2022, each month so far has doubled the 2021 performance on similar periods, with May 2022 even multiplying the sales by 6 times compared to the previous year.

Relational shopping can help global brands prepare for the return of Chinese shoppers

When Chinese customers return to shop internationally, they will be expecting WeChat-level connections and capabilities from retailers on a global scale. The rest of the world needs to be ready in a variety of ways: retailers will need to have an advanced technical landscape, and sales associates will be expected to speak Chinese. It is also important for retailers to understand that in Chinese culture, consumers shop to celebrate travel. European retailers will need to be ready to welcome Chinese customers and serve them in the same mediums that they have become accustomed to in China.

Retailers that are wanting to welcome Chinese shoppers when they return will need to focus on their customer experience, make sure that technology and digital innovation are at the core of the business, and the business needs to be ready to innovate in order to keep up with expectations.

Thomas Meyer mentions that most of the issues to overcome are cultural (this was the case at Lane Crawford, which is first and foremost a retailer which owns real estate) and human, and not technical. It is all about making sure that these projects are supported by a key sponsor close to the CEO, with an organisation able to deal with legacy systems and salespeople’s new incentivization. It also includes:

-    A shared understanding of the available tech and what it can offer,

-    Linguistic competencies,

-    Specific product offerings.

Conclusion: Customer data can create new opportunities for existing customers

Relational shopping data empowers brands and sales associates with all of the information needed to create new sales opportunities. Whether it be serving a loyal customer in a new market (as seen for Chinese customers that tend to shop while traveling) or for local customers that frequent a shop only when they need to repurchase a good, relational shopping allows brands to offer upscale services to ensure the customers are always thinking of the brand and the experience. By harnessing customer data to communicate effectively with clients, retailers can save a lot of time and effort on prioritizing the right products to ensure a five-star experience through all channels and store visits.

Credits: IADS (Selvane Mohandas du Ménil)

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The IADS attended the latest edition of the Retail Summit in Dubai, during which the Association had the privilege to moderate two roundtables, one centered on customer centricity (with the CEO of AWW group, owner of Pepe Jeans, Hackett and Façonnable, the CEO of WHP Global, owner of Toys’R’Us, and the President of Fashion, Beauty and Homeware at Chalhoub), and the second one on the future of specialty retail (with the CEO of Fred Segal, CEO and co-founder of The Latest Concept Store, and the CEO of Al Sulaiman Group).

This edition was also the opportunity to listen to great leaders and hear their insights. Below is a selection of the most interesting lessons we took home.

Overall, the Retail Summit is a rather surprising event when compared to the NRF in New York or the WRC. Its regional dimension makes it an ideal event for any organization or business interested in the Middle East, but it is also a great opportunity for networking, as guest speakers and high-ranking visitors are easily reachable thanks to its intimate and smaller format. Bumping into CEOs is easy during lunch breaks and conversations are casual.

While the first day was focused on functional approaches to the business, the second day was star-studded with retail legends, bringing the audience into another dimension. Three ranges of topics were discussed:

• New ways to address the notions of customer lifetime value, mass and scalable experience customization, and customer-centricity (a key topic in the Middle East),
• Sustainability and how it translates into fashion and retail,
• Keeping legacy businesses (either brands or retail formats) relevant for the future.

New ways to address the customer

Upon joining the company, Tom Athron, CEO of Fortnum & Mason, explained that he focused on the top 10 customer complaints collected during the previous Christmas campaign, to prepare for the upcoming one. He incentivized managers on those specific complaints. This helped him set up the right priorities, establish a climate of change and prepare for new challenges:

Taking inspiration from the hospitality sector, he created a new team, the “red coats”, whose role is to dedicate themselves to better serve customers, either by helping them when lost or providing assistance and information. Their role is really to provide high-level service and promote Fortnum & Mason as a brand. This also creates an emotional connection both with customers, but also within the staff, who increasingly sees the Red Coat team as a very desirable position, highly valued and accessible with hard work.

To better address customers’ needs, he also reviewed the product offer, making sure it was relevant to a different & younger clientele. For instance, arguing that customers were not coming to Fortnum & Mason to buy menswear (Jermyn Street, dotted with historical shirtmakers, is situated behind the store), he decided to replace the category with “supper clubs” instead, to reinforce both the retailer brand’s credibility and increase customer loyalty. In these clubs, customers can book exceptional food experiences in-store, and enjoy those experiences with their friends.

The CEO of Kiko Milano, the cosmetics brand, echoed Fortnum & Mason’s view on the fact that employees are crucial in creating and maintaining a great relationship with customers if salespersons are turned into actual brand ambassadors. For him, this is by far the most difficult part to perform. The director of Consumer and Retail Excellence at Zegna agreed, and this is why they use tech according to 3 key pillars to help teams focus on the experience and nothing else. Their systems help sales teams to:

• Show the right product at the right moment to the right person in the right channel (45% of Zegna turnover is performed online),
• Use tech at best to fine-tune and customize the B2B purchase experience,
• Have the possibility to stock, and re-stock, in a minimal time thanks to the fact that Zegna is both a brand and a manufacturer for other brands and owns factories.

When discussing customer lifetime value maximization, Majid Al Futtaim’s (MAF) Head of Customer Engagement explained that they stopped mass marketing based on promotions, after they realized that granting customers discounts, even if it could drive positive results in the short-term, was toxic. Consumers became addicted to receiving discounts and stopped purchasing at full price, while retailers ended up spiralling down and killing their brand equity. Instead, MAF believes in the importance of being an early adopter when it comes to marketing channels, in order to remain relevant to each customer according to their preferences. In turn, this requires being able to find the right marketers per channel (someone in charge of Instagram or mailing campaigns might not deal as easily and efficiently with TikTok). This is why the company massively invests in education in order to stay on top of current trends and have innovative employees, even though there are some risks involved in trying everything new.

Michael Ward, the CEO of Harrods closed the conversation by mentioning that, independently from the level of fortune owned by its customers, all of them were obsessed with their points acquired through the loyalty scheme, and the richest were probably the more vocal on this topic. After all, every retailer likes to look at tech in order to find new ideas or possibilities to increase customer loyalty, but having a sound and solid loyalty program, easily available online and offline, is the first goal to achieve.

Sustainability and retail

A panel allowed brand leaders and new-generation retailers to exchange their views about sustainability and fashion. It was interesting to hear German brand Lala Berlin CEO explain that she was hoping to learn from the other participants as she found the topic of social governance very difficult to address alone (this echoes one of the key messages from our 2022 White Paper on sustainability, in which we advocate for more cooperation and transparent exchanges between department stores). This panel was also the opportunity to hear from English social shopping platform, My Wardrobe HQ, which launched in 2019 and offers brands, but also customers, the possibility to rent and sell their collections or wardrobes, in addition to proposing a subscription model. They also provide their solution under a white label model to Harrods, Burberry and Tommy Hilfiger in the UK, and offer access to 500+ brands, including designers and luxury, from Maje to Gucci and Saint Laurent.

Addressing specific topics such as returns and fabrics, the panel shared several interesting points of view:

• To limit returns, it is key to give customers an accurate and precise set of product pictures, and the maximum information about the sizing (not only a sizing grid) to help them buy in full confidence. Asking about the reasons for returning the product is also a psychological way to make sure that customers are not simply having whims.
• Another important point stated by Lala Berlin (and which is already being applied by department stores’ private labels) is to make sure education goes both ways, with customers but also in the company’s mindset, and translates into very concrete results, such as a strict reduction of prototyping and production batches, to maximize the marginal value of each reference.
• Eyebrows were raised when new materials were mentioned, and it seemed that no one around the table was convinced that customers were either properly informed or paid a significant amount of attention to that topic. Instead of wondering about the ROI of such an operation, the CEO of Jigsaw mentioned that it was the responsibility of brands and retailers to make such efforts even though they were not directly demanded by customers.

During another talk, Chalhoub Group, the CEO of Anabela Chan, a jewelry brand, and Walpole, the UK’s association of British luxury brands, discussed the tricky question of how to include sustainability at the core of the business. For new brands, it is easy: Anabela Chan uses diamonds manufactured with carbon captured from the atmosphere or recycles aluminum from soda cans instead of using gold and silver. But for already existing businesses, the story is different as the idea is not only to go green while making sure this is not hurting the business but on the contrary look for positive outcomes for both the business and the environment. Chalhoub gave the example of their sustainable packaging project, which helped reduce the number of suppliers from 15 to 4 and costs by 20% while reducing their carbon footprint. In the same idea, Chalhoub identified that their commitment to gender equality (translated into a specific leadership program) helped the group increase its productivity, recruitment rate, and decrease its turnover within specific categories of executives.

How to keep legacy brands relevant in the 21st century

For the CEO of Manolo Blahnik, to remain relevant the company had to stop being a fashion company and focus on messages based on tradition and know-how, as Fashion, for her, is by nature transient. This view is not incompatible with a hi-tech approach, but choices have to be made: she mentions that AI is almost fully embedded in their ERP system now, while she does not believe in VR, the other hot topic among analysts, as for her this does not help convey a luxurious experience.

Zegna provided a very interesting point of view by reminding the audience that, in addition to staying on top when it comes to service excellence and luxury experience, remaining relevant also imposed remaining rooted in society and making sure to give back. This is why Zegna is the only brand in the world to own a national park, located in Italy, initially a strip of land purchased by Ermenegildo Zegna and then transformed into a park opened to the public.

The CEO of Fortnum & Mason mentioned that his biggest challenge was to “innovate everywhere while not changing anything” given the degree of public love for the iconic London-based flagship store. It was a true balancing exercise between keeping the brand alive and seemingly not changing anything, while at the same time making the needed structural changes to make sure the company would survive:

• For instance, while the store was only achieving 5% of online sales, they have grown that part of the business to 35% through a much stronger presence online and in social media, and a true digital transformation which he defines as wearing the customer’s shoes and considering the journey with a holistic approach. That translated into a subscription model for biscuit refills in a packaging that allows shipping via Royal Mail. As a consequence, this kind of new initiative allows the store to have a broader reach and use online as a true acquisition channel, for overseas or distant customers willing to have the Piccadilly Circus experience, rather than cannibalization of its in-store sales.
• Another example of subtly instilling changes in the organization is the level of attention put into hospitality, with champagne bars and restaurants operated at Heathrow airport or St Pancras train station, or in Hong Kong’s K11 art mall. Interestingly, Athron explained that hiring professionals with a hospitality background helped change the company’s retail mindset in a way which makes it much more modern and adequate to current customers’ needs. For him, keeping Fortnum & Mason relevant means being aware of what modern luxury is, and how it differs from its past definition: luxury should be, in his own words, “not for everyone, but for anyone”.

Harrods also mentioned that hospitality was the best way to remain relevant to very demanding and modern customers, as the iconic store aims to become part of their lifestyle through this new category (Harrods has more Michelin chefs than anywhere else in the world).

There were many other topics tackled during the series of interviews and conferences held during the event, and the reported selection of talks and speakers is, in essence subjective. While the sheer size of the event, much smaller than the NRF, does not provide space for more technical talks, it was interesting to hear retail leaders reflecting on their activity, always taking into account, or mentioning, the Middle Eastern customer in their talks.

After all, 16% of Harrods’ clientele comes from GCC and a recent article highlighted the fact that the region could very well be a reservoir for the growth of luxury brands in the near future.  For that reason, the Retail Summit is not as regional of an event as it may seem and it will be interesting to see its future development for next year’s edition.

Credits: IADS (Selvane Mohandas du Ménil)

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Retailers do not need to be reminded that disruption in the space has been numerous with up-and-coming tech (Web3 and AI), figuring out the “new normal” following a global pandemic, a war in Europe, as well as inflation. These are only a few of the things that have impacted retail businesses between 2020 and 2022.

The role of the IADS as an expert platform dedicated to the department store world is to be able to step away from the immediacy and the constant stream of news and be able to analyse the situation based on actual and reliable numbers.

This is the reason why the IADS launched the first edition of its exclusive Department Store global observatory, the IADS 100, in May 2021. This list, capturing data from a number of department store companies around the world, is intended to track the changes in the retail format and see how players in various markets are able to adapt to challenges and change. It is exclusively based on first-party information that the IADS sources itself.

In the latest rendition of the IADS 100 monitor gathering 2021 fiscal year figures, it has been clear that compiling comparable information across markets has proven to be more and more difficult. Many retailers are forecasting against ‘normal’ times and looking to beat 2019 figures rather than 2020 results. This is fair as department stores were forced to operate in limited ways or not at all for long periods of time, therefore typical KPIs from 2020 are no longer reliable when moving the business back to ‘usual’ times.

What is hard about referring to 2019 figures rather than 2020 data is that there might not be a ‘business as usual’ reference to compare to anymore. It seems as if retailers are having to constantly adapt, therefore year over year comparisons need to be deeply analysed to be fully understood.

This report will attempt to understand some of these major changes across global retail markets. In order to make comparisons year over year, all exchange rates to Euros come from March 22, 2021, which was the date chosen during the initial IADS 100 release.

2021: retailers are not out of the woods yet

Before breaking into the numbers, it is important to first look at what happened in retail between the years 2020 and 2021 as a reminder of the times that these department stores are operating. 2021 started as a year of hope and recovery, but many could not imagine the impact that the global pandemic left on the world.

In March of 2021, the Suez Canal was blocked for 6 days, disrupting the global supply chain that was already weak due to Covid impacts. If the shutdown of factories was not enough to showcase the risks for retailers to operate with a global supply chain, this 6-day disruption brought even more awareness of the impact of having reliable and locally sourced products. The shipping delays caused by the Suez Canal block and from Covid interruptions led to a number of fully packed shipping cargo being stranded in ports. By the time some products arrived, they were out of season and no longer relevant, leading to too much inventory and major markdowns at the end of the year.

These supply chain disruptions also heightened the awareness of consumers as to where their products actually come from. They started to ask more questions about where brands are sourcing their goods, how the products are made, the impact supply chains have on the environment, and what the ‘made in’ label actually means. This even led to sanctions imposed by western countries on Chinese goods as a response to the alleged use of forced labour in Xinjiang, China.

The year 2021 also saw the re-emergence of social interactions with the release of the Covid vaccine. After being locked up at home during the pandemic and shifting to a more permanent work-from-home scheme, consumers started valuing personal interactions more, and their expectations for how retailers can entertain them are higher. Shoppers are looking for personalised and experiential shopping which has shifted the role of the physical store, meaning department stores need to make the most of their square footage and prime locations to capture the interest of consumers.

Working from home also changed what products consumers needed to buy. There was an increased need for home office furniture and technology and a reduced demand for work attire and formal wear. In fashion, loungewear took over sales from suites and dresses as formal celebrations like weddings and holiday parties were pushed or completely cancelled.

Understanding that selling to consumers where they are also grew in importance, especially when it came to reaching Gen Z customers. Retailers needed to successfully add social media platforms to their omnichannel strategy. Keeping up with the latest technology to stay relevant in the eyes of young shoppers is neither easy to implement nor cheap. New platforms beyond TikTok and Instagram started to emerge, and retailers realized the importance of fully understanding how to achieve sales across such channels.

Was 2021 a year of false hopes for retailers? What the final numbers tell us

Asia: struggles to bounce back due to waves of lockdowns

Asian department stores continued to be up against strict lockdowns and Covid measures in 2021, especially seen in China and Hong Kong. In China, BHG, Wangfujing, Rainbow, Parkson Retail Group, Maoye, and New World all saw a slightly positive sales trend in 2021 compared to 2020 as stores began to occasionally reopen and citizens were allowed to leave their homes. Travel has been heavily restricted, therefore Asian tourists that typically buy luxury goods in Europe have been forced to use this money at home rather than abroad. Despite the redirection of funds to local stores, Chinese department stores such as Wuhan and Golden Eagle continued to report losses in 2021 versus 2020. And in Hong Kong, Lifestyle Sogo reported positive turnover while Wing On saw losses.

Japanese department stores also saw a range of results with Takashimaya, Daimaru Matsuzakaya, H2O, Marui reporting relatively strong positive turnover between 2020 and 2021, while Isetan Mitsukoshi, Tokyu, and Tobu reported losses. Sogo Seibu in Japan reported a major loss from 2019 to 2020, but rebounds have yet to be reported as figures for 2021 are not available yet. It is important to note that Japan was closed to foreign tourists for two and a half years due to the global pandemic, thus the reopening in 2022 is sure to help sales figures for retailers in the coming year. This will be for sure a much-needed breath of air in the market, as all Japanese department stores reported lower sales in 2021 compared to 2019, including Tobu, where sales halved, and Isetan Mitsukoshi, which lost 66% compared to the 2019 sales level.

The rest of Asia saw a variety of results. In India, Lifestyle Landmark Group and Shopper’s Stop reported positive earnings. Matahari in Indonesia reported a slight increase in turnover, which was the same case for SM in the Philippines and Hanwha Galleria in Korea. Finally, Odel in Sri Lanka reported a loss of turnover from 2020 to 2021. The whole region was affected by relatively severe lockdowns, which explains why no retailers from this group were able to recuperate the 2019 sales levels, despite the stimulus checks granted by some governments.

With the goal being to outperform 2019 numbers, the only department stores in Asia that reported higher sales in 2021 than in 2019 are BHG, Wuhan, and Golden Eagle, all of which operate in China. BHG in particular grew an astounding +62% vs 2019, thanks to its exceptional positioning in the country when it comes to luxury brands and experiences. Such a performance allowed the Beijing location to secure the title of the most profitable department store in the world, which Harrods lost in 2020.

This indicates that department stores in Asia still have quite a journey to make to return to usual operating times and they might be heavily dependent on the reopening of Chinese borders, that was decided early 2023.

Europe: mostly a recovery story

The year 2021 was seen as a time to get back on track for European department stores. In the UK, John Lewis, Marks & Spencer, Selfridges, Harrods, Fenwick and Liberty all saw positive, but almost flat, results compared to 2020 figures. While Fortnum & Mason was not as fortunate and saw a continued downward trend in their sales figures. Harvey Nichols has not shared 2021 figures, but the department store shows the same 2019 to 2020 trend of a -67% drop in sales during the 2020 fiscal year.

Other European players such as Kaubamaja from Estonia, Stockmann from Finland, El Cortes Inglés from Spain, Ahlens and NK from Sweden, and Coop and Jelmoli from Switzerland showed positive but almost flat sales results from 2020 to 2021 that prove the road to recovery will not happen overnight. Europe is not only recovering from the direct impacts of Covid but also have new challenges which will make the bounce back even more challenging. This will be discussed further in the section below dissecting what is to be expected from 2022 results and beyond.

Only Marks & Spencer, Coop Group, John Lewis, and NK beat 2019 ‘normal time’ KPIs in 2021, making a swift recovery from the 2020 decline. The remaining European department stores will be looking to close the gap in the coming years with many barely missing the mark.

Interestingly, in the 4 department stores that increased their sales in 2021 compared to 2019, 3 of them (Marks & Spencer, Coop Group and John Lewis) include large food sections and a strategy based on prices, which explains their resilience in tough times thanks to their proximity with their customers (El Corte Inglés also belongs to this typology, however, the business in the company is also very much based on touristic flows, especially in Madrid, Barcelona and the Balearic islands).

NK is an anomaly as a luxury department store (hence also very much dependant on tourism), which is explained by the fact that it changed the nature of its business between 2019 and 2021. In 2021 NK bought the Departments Stores Europe AB company, a brand importer, and started de facto to purchase and manage product flows, while prior to this acquisition NK was only managing the real estate space within its department store.

Finally, the variable gap between 2019 and 2021 sales for the companies who did not pass also gives an idea of their sensitivity to tourism. For instance, in the UK, Selfridges and Harrods are much more dependent on tourism than Fortnum & Mason, which explains why returning to normal is harder for the two former companies.

Americas: 2021 sees positive growth

Department stores in the Americas (the sampling including United States, Mexico, and Chile) all saw positive sales trends between 2020 and 2021. In the United States, Macy’s, Kohl’s, Nordstrom, Dillard’s, and Neiman Marcus all saw a strong recovery in 2021 sales figures. While the United States was also hit by the global pandemic, stores did not shut down as drastically in the US as in other parts of the world such as Europe or Asia. US retailers were also able to reap the benefits of numerous stimulus checks granted to US citizens in 2020 and 2021 that boosted the economy.

In Latin America, positive sales trends were also noted from El Palacio de Hierro and Liverpool in Mexico, and Falabella, Ripley, and Cencosud in Chile. These countries have not only faced the pandemic but also lived through drastic political changes in government leaders that have shifted right winged regulations to more left policies since 2018. These changes might prove to bring more challenges in the upcoming years.

Compared to 2019 figures, most US department stores neared the 2019 target but slightly fell short except for Dillard’s and Neiman Marcus which reported figures just over 2019 figures. In Chile and Mexico all department stores in the sample outperformed 2019 turnover. This shows that at the end of 2021, the Americas retail markets were showing strong signs of recovery from the pandemic, but this might not be enough to get them through the next set of challenges that 2022 is to bring.

What to expect from the 2022 fiscal year and beyond

While fiscal results for 2022 are still being calculated and modelled, we can already predict what the data might reveal. While most of the world is rebounding from the global pandemic, China and parts of Asia are facing waves of lockdowns that have impacted travel and store operations. Beijing was also the host of the 2022 Winter Olympics which typically welcomes international travellers and is a major economy booster, but the event was strictly limited to citizens living in China to avoid any further spread of the Covid virus.

Chinese consumers being stuck in Asia has also impacted European department stores, especially the French ones that dedicate a lot of resources to selling to Chinese tourists. These department stores have had to shift to appeal to locals and US tourists to try to get their sales figures back on track. But with restrictions starting to lift for Chinese tourists, Europe could record a major bounce back in 2023 sales reflecting the return of these prized consumers. Across the English Channel, the UK faced the death of Queen Elizabeth in 2022 which closed shops for a short period of time and the country is dealing with an unstable government representative and heavy criticism of the leadership.

Another major headline in Europe in 2022 has been the war incited by Russia’s invasion of Ukraine. As countries and businesses show their support for Ukraine, many retailers had to pull their operations out of Russia, including department stores which were previously selling their private labels on the market, for instance. Russia and Ukraine are also both heavy exporters of goods that have impacted the global supply chain and created scarcities in a wide array of goods and increased the price of goods worldwide. Energy scarcities have led to a crisis that has heavily impacted the overhead costs of retail operations.

Between the Covid recovery and the war, the increase in the price of goods has led to painful inflation. Governments are now weary to respond with raised interest rates for fear of causing a recession. If a recession is in fact in the near future for 2023, this will greatly impact sales figures for retailers as consumers will stop spending on unnecessary goods and products.

Finally, regulations surrounding climate change and sustainability are starting to become more concrete with mandatory steps that are needed to be taken by brands and retailers. At the beginning of 2023 regulations will be enforced by Europe and the US that will heavily disrupt how they operate and communicate with consumers. But with the threat of inflation and a recession, it will be interesting to see if such sustainability issues will still be prioritized as profits and recovery take precedence in the eyes of governments and business leaders.

The ultimate test for department stores is not merely to encounter these disruptors, but to be able to make it out on the other side and learn lessons along the way. The unknown challenges that retailers face year after year are never black-and-white topics and each market has its own unique set of hurdles in their own time. Facing these obstacles alone is the greatest challenge, but difficult times can be eased by understanding how similar business cases have been dealt with by department store partners around the world. Exchange associations such as the IADS give global retail leaders an opportunity to ask hard questions when facing difficulty and share the lessons of their triumphs.

<u>IADS Note*</u>

While department store diversity can be a strength, it also makes comparisons difficult. It is clear, for example, that data concerning revenue, profits, selling space etc. will often not be available from privately held companies. If the IADS obtains such data privately and confidentially, we will not publish it.*

Read the financials from 2020 and 2021 here:

2020 and 2021 FINANCIAL RESULTS

Credits: IADS (Mary Jane Shea)