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The 2023 edition of the NRF Big Show took place on 14 – 17 January. After a virtual edition in 2021 and a limited reopening session in 2022, this edition showed that retail was back on track, with more than 1,100 exhibitors attending, to be compared with the 900+ previous record in 2019. As usual, a wide variety of themes were explored during this somewhat overwhelming event, and it is difficult, if not impossible, to recap all the conversations that took place.

We made a selection of presentations we attended, with a focus on department stores topics. Before doing so, looking at the big picture in terms of topics addressed also help understanding the general mood of the event:

-    The economy was not top of mind even though there were echoes of inflation and recession. Speakers were excited by many other topics and the socio-economic context did not overshadow every presentation,

-    Metaverse was of course not a topic anymore but excitement about Web3 was very much palpable,

-    CSR and ESG were widely discussed and mentioned in almost each and every presentation, confirming that going green is not a choice anymore, as we have echoed in our last White Paper released this month,

-    Social media is becoming more personalized and difficult to operate as customers are torn between their will to log out in order to go on a digital diet, while balancing the fear of missing out on important news if they do so,

-    Exceptional customer experience goes deeper, and it does so through how consumers are treated, what they get, and also the information they are provided with, including informing them about the sustainability aspects of their transaction.

Speakers we listened to during this event discussed retail transformation, physical stores and business models, customer experience, sustainability and retail media.

Table of contents:

-    Leading through transformation and purpose: Macy’s

-    The store of the future is less about the store and more about the business model: Havaianas, Sunglass Hut.

-    Retail strategies for major disruptors: GDR Insights

-    Curated, captivating, contemporary: a blueprint for physical stores: Neighborhood Goods, Studs,  CAMP

-    Building an innovative and personalized luxury experience: Farfetch, Harrods

-    Retail media networks: how the physical store will power retailers’ next phase of growth: Albertsons, Nordstrom

-    Placing sustainability at the heart of retail: Holt Renfrew

Leading through transformation and purpose: Jeff Gennette, Chairman and CEO, Macy’s

Gennette reviewed the actions performed during the pandemic in order to help the company get through the hurdle:

-    Inventory control was key to managing cash, and this led to negotiations with vendors, a review of the supply chain, and deals with smaller-sized operators,

-    Macy’s also learnt to use data and mix it with human forecasting to allocate the stock in the right locations in a quicker way through the use of smaller-scale channels,

-    Geopricing  was also reviewed, in order to geographically match the price according to the location of the customer, and avoid any kind of margin-damaging mistake.

As a consequence, Gennette considers the company to be in a much better position now that the synergy between online and offline is clearer, and works well: stores are needed to support online, as online penetration decreases when there is no brick-and-mortar in the region. The question is indeed not so much about having stores at all, but the type of stores needed:

-    Malls are no longer the main focus, and Macy’s closed a number of second and third-tier locations in favour of off-mall locations,

-    In regions with stores but where densification is needed (Dallas, Atlanta), or regions where stores are exiting malls in favour of smaller locations (Saint Louis), the group opened Market by Macy’s locations (8 locations to date),

-    In new markets where new doors are opened (Seattle), the group opened Bloomie’s locations (2 locations to date).

Even though many locations were closed in the review process, leading to a decrease in terms of square footage, the group currently operates more stores today than in 2019 in net numbers. Genette was very clear that the off-mall, new-format business was his new focus.

He also tackled the notion of talent retention, mentioning that compensation and benefits reviews helped with the frontline workers, but that it was the strength of the group’s brand that helped with specific populations such as data scientists for instance. He also mentioned that while the group had focused for a long time on frontline and boardroom diversity, it led to some gaps in middle-management which were being addressed.

Finally, he also reviewed the current customer’s state of mind. Even though the company enjoyed a great holiday season, Macy’s realized good sales masked a shift in terms of consumption, with the usually slow weeks in November and December (during which customers are not buying gifts but products for themselves), being even slower than usual. Even though the luxury customer is in very good shape, and enthusiastic about occasion wear (as shown by the sales results in dresses, formal men’s clothing and luggage), consumers overall are cautious, as they are under multiple pressure points (inflation, wage inflation, interest rates…).

Macy’s acknowledged this cautiousness in its own operations: reduced OTB, and more open reserves, to limit early season commitments and to be able to respond in a flexible way if and when needed.

The store of the future is less about the store and more about the business model: Alberto Serrentino, CEO of Varese, Alberto Funaro, CEO of Havaianas, Giorgio Pradi, President of Sunglass Hut.

Serrentino explained that the post-pandemic “new normal” places the store at the centre of a new game, by becoming a multi-purpose hub (customer acquisition, logistic hub, service hub, omnichannel hub). Hence, the traditional KPIs do not work anymore and need to be redesigned, knowing that everything starts with the data captured by stores. However, rethinking the store means rethinking the retail business model itself.

This is why Luxottica/Essilor (parent company of Sunglass Hut) acquired stores 27 years ago, a risky move then, as they saw this strategy as a way to collect sales data from customers and control the sales process.

Of course, the Covid-19 pandemic forced the digitalization of the business (from 2% of the business in 2019 to 12% in 2022, mostly on luxury products and through the use of endless aisles), but the store remains at the core of the model, be it in terms of experience (through the increase of omnichannel services allowing to display fewer products and focus on the quality of interactions) or people (with a globally trained workforce connected via a platform allowing the sharing of good practices but also guaranteeing a common culture among every business unit).

Shoe brand Havaianas prides itself on embodying the notion of “Brazilian summer”, as they want to “own summer”. As a consequence, all their stores are designed to be experiential, surprising, and all different. Investments have been performed in customer data analysis in order to manage product development and allocation (each store has a different assortment), the tech underlying sales team trainings, development and tracking, as well as omnichannel capabilities in order to provide a seamless experience.

Summing up, the conclusion of this roundtable did not lead to the discovery of a new business model, but paradoxically emphasized the need for a strong culture and the human factor in order to achieve a differentiation which can not only rely on tech, even the most expensive or up to date solutions.

Retail strategies for major disruptors: Kate Ancketill, CEO, GDR Insights

Like it or not, everyone’s lives are now affected by the 3 C’s: Covid (leading to a reset of many organizations), Conflicts (leading to energy and cost of living increases, as well as shortages of all sorts) and Climate change (with extreme climate events disrupt power grids and supply chains). For Ancketill, a long-time friend of the IADS, this means that we are switching from an economy of abundance to an economy of scarcity, leading to a focus on geopolitics, energy sobriety, no more premiums for convenience, and life extensions of all products.

However, she believes that it is possible to “bloom from the gloom” thanks to the right strategy, according to 3 axes that she exemplified:

1-    Power is shifting from global friction to decentralized resilience: Apple introduced self-service repair, Tesco launched a B2B marketplace for its suppliers to deal with excess or unsold food stock, Tesla allows customers to produce and sell energy, mobile phone network Pollen allows users to buy a mini cell tower and create a signal for peer-to-peer mobile telecommunication, Weshop allows customers to sell their second-hand products and then become shareholders of the company with their earnings.

2-    It is possible to regenerate inclusively by switching from offsetting to insetting. “Offsetting” is based on the idea that business harms the environment and can compensate for this harm by planting trees. “Insetting”, on the contrary, supposes that the damage is fixed at every point of the chain where it appears. Ancketill mentioned a number of sustainable brands (such as the UK-based cosmetic brand Faith in Nature which has placed an eco-lawyer on its board as a representant of Nature), but also the current regulatory trend (the AGEC law in France banning single-use packaging for instance) or new services (Samsoe fashion brand selling its clothes with a QR code granting a prepaid social media credit in order to enable customers reselling the products) as examples on how to “inset” emissions.

3-    We are moving from small indulgences to immersive luxury, to what she calls the “dopamine” economy: it is all about maximizing the use of technology (i.e. metaverse, omnichannel capabilities) to create immersive experiences, be that in the real-world (WOW concept in Madrid) or in the metaverse.

Ancketill’s presentation was, as usual, complete with many examples and very energetic, and welcomed as such by the audience. IADS members can read the latest GDR Report from last July here.

Curated, captivating, contemporary: a blueprint for physical stores: Matt Alexander, CEO, Neighborhood Goods, Anna Harman, CEO, Studs, Amanda Raposo, Chief Experience Officer, CAMP

This roundtable was dedicated to business models placing the physical experience at the core of their offer: fully immersive “shoppertainment for kids” at CAMP (see the IADS analysis of the concept here), custom experience from one store to another and fully meshed into local communities at Neighborhood Goods (see the IADS analysis of the concept here), and niche-specific experience based on the fun factor for Studs (ear piercing lounges).

On average, Neighborhood Goods stores are 1,400 sqm large. When opening the first unit, the company expected brands to take up more space but they realized that richness came from the diversity of the offer instead of having 10-15 brands, they ended up with 50-75. This does not always imply a higher rotation: Asos was expected to rotate but has remained in the stores for the past 3 years. Interestingly, in addition to the width of the offer, Neighborhood Goods also sees private labels as a strong opportunity. In order to funnel customers to stores, people prevail over content as the company leverages the voice of their sales staff, trusted by customers. As a consequence, Neighborhood Goods’ promotional emails have a very high rate of engagement.

Camp, which has a different type of business, has 2 types of store formats: flagship stores (up to 1,500 sqm) with a hidden part which represents 85% of the total surface, and community stores (100 sqm) service as hubs for local audiences. Permanent animation in the whole network, be it generated organically or through paid partnerships, allows the stores to be destinations for families on a regular basis. And just like Neighborhood goods, when it comes to marketing, it is all about allowing customers to share their testimonies and feedback.

Both retailers strongly emphasized their reliance on the human factor in order to remain close to their customers, even though they knew them thanks to data.

Building an innovative and personalized luxury experience: Kelly Kowal, Chief Platform Officer, Farfetch, Michael Ward, CEO, Harrods

Ward shared how Farfetch helped power Harrods’ offering towards its online customers through its white-label technology. Such a decision was made after understanding that Harrods was too small to develop its own tech and would leverage what Farfetch has developed.

This was the opportunity for Harrods to build e-concessions on the one hand (as Ward sees this as an inevitable trend, with brands willing to recuperate as much of their margin as possible), but also to keep a strong focus on experience, which is at the core of what Harrods stands for.

It is not about showing off any kind of tech, which is something customers are not demanding anyways, but truly to maximize every touchpoint and make sure each of them is an experience per se. However, Ward was very clear on two points:

-    The tech provided by Farfetch helped Harrods leverage and scale up its customer analysis and understanding in an unprecedented way, but this forced both parties to learn how to work together. Farfetch is only specialized in apparel and accessories, while Harrods sells every category, and can collect as many as 200 to 300 data points during customer journeys in the store. Farfetch admitted that this kind of scale was somehow overwhelming even for them.

-    Data is a must-have but is not enough to craft a superb and individualized experience: it helps understand and make decisions, but personalization is much more holistic than just an algorithm. For instance, while data helps fine-tune the buying assortment and implementing the brands in-store, Ward still relies on his buyers to make the appropriate choices in showrooms in order to define a differentiating selection.

Ward also shared that he was planning to multiply fourfold the resources allocated to private shopping (people and systems) in 2023. As he put it, it is easy to make an experience come to life in the store, but his goal now is to make it truly omnichannel.

He concluded by stating that in 2023, his main area of attention would not be on tech, but on managing relationships with luxury brands and making sure that Harrods will be able to satisfy the demand for luxury products, which he expects to soar this year.

Retail media networks: how the physical store will power retailers’ next phase of growth: Kristi Argylian, SVP Retail Media Albertsons, Aaron Dunford, senior director of digital markets, Nordstrom

Retailers are facing a triple depreciation of their marketing activities: TV ratings are going down, third parties are not part of the game anymore with the death of cookies, and heavy investments have been funnelled into the digitization of the store. By delivering contextual ads during the purchase process, based on first-party data, Retail Media, the third big wave for digital advertising after search and social is seen as a perfect answer.

It took 14 years for the search market to go from $1 billion to $ 30 billion, 11 years for social media, and only 5 years for retail media. The market is expected to grow $10bn per year and it appears that this will benefit all retailers and not only Amazon: smaller operators are carving out their positions, which can be lucrative when one realizes that 1% of the market represents $450m.

When it comes to starting from scratch, Albertsons explained that the real question was not to consider an in-house or externalized development, but how to phase the launch out. Albertsons launched and scaled up quickly thanks to an alliance with a small group of partners, who are aware that at some stage, Albertsons will be willing to recuperate more control of its operations. But only partnerships have allowed them to grow fast and high, which is why for instance Albertsons teamed up with Pinterest to make their targeting more sophisticated, or Omnicom Media Group to go on the streaming TV market.

Nordstrom launched the first phase of its retail media network in 2019 but with full functionalities in Q4 2021. Through the understanding of the customer experience across many touchpoints, they are able to sponsor products at the right moment, which is extremely attractive to brands when considering the quality of Nordstrom’s customers. Onsite advertising now represents 40% of the total retail media sales.

Both retailers emphasized the fact that the whole process was extremely difficult, as it is all about breaking silos (e.g. Nordstrom’s ecosystem is composed of Nordstrom and Rack stores, or online, stores and apps, all with different systems and people) in order to collect all data in one single spot. This is the reason why Nordstrom developed its Analytics platform which aggregates everything. Now, this platform allows connecting platforms like Instagram with their in-store purchases. For Nordstrom, the next step is to open the retail media network to its in-store stylists and allow them to push specific products and brands.

Finally, both retailers also mentioned that, in order to be attractive to advertisers and stand out from the crowd, it is essential to be able to provide them with quick incrementality measurement tools through a dedicated API. As Albertsons put it, measurement is key and the problem is that there is no standard for now.

Placing sustainability at the heart of retail: Sebastian Picardo, CEO and President, Holt Renfrew

Holt Renfrew as a brand is older than Canada and prides itself to be the first luxury destination in the country. As such, the retailer decided to lead the change and embrace sustainability a decade ago, and as Picardo put it, their mission is “to give their stakeholders the power to express themselves and the opportunity to generate positive change”.

Very well aware of the pollution created by the fashion industry, Holt Renfrew started its journey by engaging in dialogue with brands. For Picardo, the climate crisis is here, regulation is coming, and there is the opportunity to take the lead on sustainability, which the company did.

They are helping brands use new materials by promoting the new items manufactured in that way to their customers (the “Holt Sustainable Edit”) and using tech in order to track progress and results. Holt Renfrew, which started as a fur shop, also decided to eliminate fur products from its offer in 2021, which is a strong move. They have also engaged with their suppliers on Scope 3 tracking, although this is a very complex topic.

However, for Picardo, sustainability used to be a marathon but this is not the case anymore and is transformed into a spring. He concluded by stating that “sustainability is the new digital”.

Credits: IADS (Selvane Mohandas du Ménil)

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Sustainability in retail is hardly new and has become a major factor in business decisions and investments for retailers of all shapes and sizes. Consumers are increasingly becoming aware of the impacts that their purchases can have on emerging economies and garment workers and are consequentially becoming more demanding to understand how they can make impactful changes by harnessing their purchasing power. Governments are also taking a stance and demanding that retail industries start to release more accurate data that can be traceable through new laws and regulations that can have a large impact on profits and operations.

Retailers do not have the luxury of ignoring this topic. They hold responsibility as they translate customer desires and needs into market opportunities by acting as a bridge between consumers and suppliers. Department stores play an even more important role thanks to their historical and usually very central position in cities, allowing them to bring convenience and product curation to both local customers and tourists who view them as must-see places during their stay.

With such a position and impact, department stores are bound to transform into sustainable businesses offering consumers facilities, products and experiences that create net-positive environmental and social impacts. The IADS White Paper reveals how department stores are innovating and adapting to allow sustainability into their core business in order to remain relevant.

Sustainability is a chance for department stores to reinvent their business model

Now that all stakeholders (governments, investors, and consumers) are on the same page and understand that sustainability is a very important topic that needs to be addressed by businesses, it is time to take action. However, to the dismay of retail leaders, sustainability also reveals itself to be a Pandora’s box, with a seemingly infinite list of complex questions. The difficulty lies in the nature itself of a challenge in perpetual motion, making sustainability “a framework rather than a destination”.

Department stores, due to their size which involves dealing with a large number of suppliers, their central position in cities and customers’ lives, and their complex business models often including historical practices, are on the frontline of the needed changes. While they have already proven their ability to adapt to business disruption, they now face a much more holistic problem of either radically reinventing themselves or becoming irrelevant.

In our new White Paper, “Reinventing department stores through sustainability”, the IADS extensively reviews the sustainability topic from department stores’ point of view, including where they stand, their initiatives and remaining challenges. Hard questions are raised, and potential directions are identified, keeping in mind that while sustainability is not a trend but a true structural change, the solutions built by departments stores cannot be cosmetic and need to efficiently financially address the topic if they want to survive.

The variety of stakeholders complexifies an already fuzzy question: what does sustainability mean in retail?

At first glance, the situation looks overwhelming as even just defining where to start is hard. Retailers started their action plans by defining a Corporate Social Responsibility (CSR) framework, which soon was followed by trackable metrics compiled in Environmental, Social and Governance (ESG) reports. However, they quickly realised that properly addressing sustainable issues required more than reports or guides of good conduct. Simply being able to track greenhouse gas emissions requires nothing less than re-engineering the entire supply chain systems. To make things more complicated, retailers also must deal in real-time with many stakeholders with different views:

-    Customers, who require immediate and impactful actions, but do not always align intentions with their purchasing behaviour, especially in an inflationary context (not to mention that the very notion of sustainability has a different interpretation according to the age group or socio-economic cohort),

-    Pressurised governments, accelerating regulatory efforts without global coordination, leading to a variety of constraints that retailers must comply with, sometimes in a record time (the French AGEC law was enforced in 9 months) leading to the multiplication of non-scalable short-term compliance investments,

-    Suppliers, nudged by retailers to heavily invest to make their production output sustainable, in addition to auditing their carbon emissions to help fill in retailers’ Scope 3 tracking (a titanic task for department stores working with international brands contracting factories dotted across the planet).

Finally, shareholders and employees are worried that retailers will end up paying for the transformation bill, estimated from €315bn to €615 bn between now and 2030, in a shrinking profitability context (-6.5% in the past 6 years in France).

Travelling a long and winding road: an overview of department stores’ initiatives so far

Aware of their social role and seeing a transformative opportunity in this inescapable challenge, department stores have already initiated their journeys towards sustainability, despite not being all at the same stage of progress due to different local geographical and political situations. To document and draw a dynamic picture of these efforts, the IADS used its privileged ties with its members to conduct several studies, the first one just at the beginning of the pandemic, in March 2020, then another one in June 2021, followed by one in 2022.

When it came to defining objectives, retailers answered to mounting legal pressure by teaming up and exchanging ideas and experiences with an unprecedented degree of transparency. This took place through organised bodies, such as the 2030 Breakthrough Initiatives, various retail associations (such as the IADS) and federations helping department stores exchange with strict respect of antitrust guidelines, but also by talking with new third parties (NGOs, trade unions or consumer associations). Such a degree and scale of openness outside of dedicated frameworks from notoriously secretive department store organisations is new and considered critical in order to help them set goals and make progress in real-time.

This cooperation allowed department stores to take control of their Scope 1 and 2 emission rates rapidly, as shown by El Corte Inglés’ reduction of its Scope 2 emissions by 78% between 2017 and 2021, Breuninger’s offer of CO2-neutral shipping or Galeries Lafayette’s entire store electricity consumption being 100% renewable. Dealing with Scope 3 emissions (95% of the total emissions) proved trickier. Exchange organisations helped review market initiatives, such as Macy’s reducing its use of virgin plastic by 50%, or Selfridges’ plan to achieve 45% of its sales through the circular economy by 2030. It is also widely understood that the next area of focus is the supply chain, seen as the second most beneficial area of investment after digitalisation in terms of ROI.

Department stores are also experimenting with their own private labels, which in turn raises the painful question of the lack of a relevant global standard applicable to all brands and marketable in a simple way to customers. For that reason, the study of the Green Pea business case in Italy, “the first 100% sustainable department store in the world”, provided an idea of what new standards could look like. In addition to finding new ways to deal with the environmental impact of their real estate footprint, normally estimated to contribute up to 60% of a retailer’s total emissions, Green Pea educates their customers by openly sharing simplified, but brutally honest, information about their own consumption impact.

The head scratching has just begun

The unprecedented collaboration between companies does not overcome the fact that, their customers and markets being by nature extremely different, there is not a one-size-fits-all solution for all department stores. This has made the sustainable journey a collaborative and solitary trip at the same time. In addition, each department store must figure out how to deal with problematics that come on top of environmental issues and that are linked to their own social context, such as diversity and inclusion.

This raises questions on what to communicate and how, and above all, on what platform. The comparison of actions in 2020 and 2022 showed that department stores, always attentive not to be accused of greenwashing, also discovered that consistency across channels (stores, e-commerce) and partners (suppliers and brands) was necessary, but also that messages had to be adapted in each case to maximise reach and clarity.

The other question is the nature of the organisations guiding sustainability efforts. There is a wide variety of options, from a Chief Sustainability Officer to a dedicated ESG committee, also including partnerships with third parties or responsibilities dispatched between departments. Whatever the option chosen, leaders will have to be careful not to add an extra layer of complexity to their organisations, which has been the case in department stores in the past.

Finally, the most pressing topic is obviously the business itself and how to make sure that sustainable efforts are not an additional financial weight, but, on the contrary, contribute to new revenue flows thanks to the necessary reinvention of the model. While it is relatively easy for new companies such as Green Pea to propose contemporary approaches, the situation is different for heritage companies, as they must be creative in addressing the future in a sound financial manner that does not disrupt daily operations.

Don’t judge a book by its cover: sustainability is not a constraint, but a chance to be seized fast

Even though addressing sustainability might be painful, costly, and even hazardous, retailers do not have the choice and must follow the trend if they want to survive. Just as they addressed digital transformation, they need to start their journey as soon as possible, as passing time is definitively lost and could rapidly become a competitive disadvantage. In addition, they should not be troubled about not having a perfect plan: the most important thing is to get started, then the learning process will take place bit by bit in a non-linear progression.

We identify two phases in the approach, the short-term one being to fully focus on the sustainable transformation of the supply chain, as the needed technology is already here, and the longer one being to increase collaboration between retailers to accelerate the pace of innovation. This is proof, if needed, of the relevance of exchange groups and think tanks such as the IADS, which has been actively helping its members since 1928 address the most pressing business issues in a collaborative way.

Credits: IADS (Mary Jane Shea)

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The IADS Academy programme, a 27 year-old tailor-made mentoring workshop open to our members’ high potentials only, promotes cooperation and future orientation. Over the years, the IADS Academy have trained 180+ executives from 28 companies in 21 countries, some of whom reached top positions in member and non-member companies (for IADS only, 3 CEOs and 1 COO in 2020).

Introduction: Private Labels are an everlasting question

Considered a key topic by the IADS member CEOs, the question of Private Label profitability is constantly on department stores’ minds since margin enhancement is the first reason to carry Private Labels. So, it was no easy task for the 2022 IADS Academy participants to answer a question that has been asked many times at all decision-making levels in their companies.

At the beginning of their 9-month journey, the Academy group reflected on 2 different Private Label models: John Lewis and Marks & Spencer. In parallel, the International University of Monaco (IUM) partnered with the IADS to offer insights about additional case studies: Target and Nordstrom. Having worked on the topic with Galeries Lafayette, the Kéa & Partners consulting company was invited to share their vision on the Private Labels business. Finally, the group reflected on their own organisations, figures, strengths, and weaknesses to decide the most important KPIs to consider. Starting from reviewing department store members’ businesses and collecting best practices, the group built their own vision for a more profitable Private Label business.

All participants were invited to present the result of their research during the IADS 63rd General Assembly held in Geneva, as the tipping point of the hard work put into the Academy program. It included hours of research, collaboration, and discussions in small groups, as well as online meetings, some of them involving the benevolent support of Mr Jérôme Gilg, the Academy Mentor, and Mr Peter King, the Academy Dean of Honour.

Taking a step back: getting a larger perspective on Private Labels

Case studies: John Lewis, Marks & Spencer, Nordstrom and Target

John Lewis’ Private Label business is regarded as a growth driver. Participants studied ‘Anyday’ own brand, which was recently expanded with prices 20% to 40% lower than John Lewis' other own brands. The label is seen as a step towards modernizing its branding as it intends to offer customers John Lewis’ quality at lower prices. John Lewis is usually perceived as a ‘rather expensive place to shop’, but research shows that Anyday's promotional effort (£500m were invested into pricing and promotion to change customer perception) seems to be working: 25% of Anyday shoppers are either new or reactivated customers, as well as younger, yet less wealthy shoppers. This strategy comes with risks, identified below:

-    The value push could damage the premium status and dilute the brand which used to be aspirational.

-    Anyday tries to reach a new segment of customers, which might leave the usual John Lewis shopper behind.

-    The strategy puts de facto John Lewis against a different set of competitors, such as Primark.

-    A wider range of price positioning holds the risk of losing margins.

-    Staffing levels and service standards will be more difficult to maintain in-store.

As a strategy built on cheap prices didn’t fully convince the participants, they also reviewed Marks & Spencer’s Private Labels which have been simplified and reduced to increase performance. With long-term efforts on brand building, their products are perceived to be high quality among competitors. Interestingly, the company also has a strategy of buying out existing brands (such as Jaeger) and onboarding third-party brands (such as Ted Baker and Superdry) to muscle their offer as well as to be more popular and fashionable. As for John Lewis, the product diversification strategy aims at covering all age groups, including younger segments. Results seem promising: third-party brands account for 4.1% of the clothing and home sales, bringing in £70m of revenue in 2021.

The IUM was tasked to work on Target and Nordstrom business cases and issued their conclusions:

-    Nordstrom should reward associates more for selling Private Labels over other brands. Also, IUM students proposed creating online community spaces where customers could be rewarded for engaging with Private Labels. Finally, students proposed to improve Private Labels by including differentiated collection and visual merchandising strategies for fall-winter and spring-summer.

-    Target: students discovered that price is no longer the primary factor for customers. Quality is gaining more importance in building customer loyalty and encouraging repeat purchases. IUM students highlighted the need for good communication and an updated presentation of Private Labels whether that is done through the product quality or within the store layout, such as using shop-in-shop formats.

Learning from transformation and strategy experts

Kéa & Partners was invited to share their vision on Private Labels in department stores. Alongside the challenge of meeting consumer demands and competing with global brands, running a Private Label means navigating difficulties in the supply chain, dealing with contradictory if not unclear objectives, and finding the ideal margin equation for creating value for the consumer and the company.

The share of Private Label sales share can vary but they are generally seen as a tactical component (10% of the total business), a major contribution (20% to 40%) and occasionally as a core business (from 40%). In any case, Kéa & Partners shared the 5 pillars identified to ensure Private Labels profitability:

1. Positioning & Strategy: clear-cut positioning based on target clients, offer, price, and style help differentiate from national brands. There is no set requirement for where to begin or whom to target, and the offer can vary by category and gaps in the market. A helpful tip is to create a target P&L along with realistic KPIs to optimize spending and determine at what stage and scale the Private Label will be relevant and profitable. The KPIs will direct the annual targets which will be defined by the operating model chosen.
2. Offer Structure & Timing: this pillar requires determining the operating model of the Private Label, be it permanent, seasonal, capsule, etc. This will help with managing the size of the offer, its depth and purchasing according to the segmentation that has been decided. Counterintuitively, Kéa & Partners promotes crafting a singular offer that is not based on emulating other brands. This could mean leaving out products that some deem as needed: essentials should be based on the first pillar and not common industry practices, assuming that a generic offer can diminish brand visibility.
3. Sourcing & Purchasing, with a focus on logistical organization. This is where retailers need to overcome MOQ limitations and develop long-lasting partnerships with suppliers. Mixing near and distant sourcing will determine purchasing or developing products based on the margin goals and rhythm. Sustainability needs to be accounted for within the sourcing strategy.
4. The Organisational Model, which is about exploring new models, leveraging activities and expertise in digital processes or through data. In terms of models, coopetition and integration are two possibilities. Either retailers will divide the teams and buyers between Private Labels and national/international brands, or integrate them so that the purchase and sourcing teams are only divided by, for example, product category.
5. Marketing Amplification & Execution: this requires setting up the merchandising strategy as well as a marketing plan. In this case, for example, a capsule collection would influence event size and dates as well as how and to whom the collection is marketed. According to research, 5% of product references account for 20% of sales volumes meaning pushing that 5% could determine the overall success of a collection.

Digging in: Analysing their own Private Labels

Review of the Private Labels organisations

As mentioned by Kéa & Partners, coopetition and integration are 2 possibilities reflected in the IADS members’ organisations. At Galeries Lafayette, a new coopetition organisation has given more agility to the department: national brand buyers are buying the Private Label collections, representing a strong push for Private Labels to be more attractive, efficient and in step with trends. It also means a lighter team, with designers working outside of the company (freelancers and/or outside agencies). Breuninger Private Labels are organised in the same way with buying responsibility separated from the product development (only the Mrs & Hugs brand has a different organisation with shared development and buying responsibilities).

At Manor, each product category (womenswear, menswear…) has its own team including buying responsibility, product management, style, planning, sourcing, merchandising and visual merchandising. At El Palacio de Hierro, the Private Label director manages a team of category managers, each of them responsible for a Private Label: with their team, they are responsible for the strategy and execution as well as buying, planning and allocation. At El Corte Inglés, a category manager is responsible for several brands in the category. This executive manages a head of design who is responsible for a brand manager per Private Label. A brand manager is in charge of the buyer(s) negotiating with suppliers, merchandiser(s), planner(s) and designer(s). At Magasin du Nord, the design and sourcing department is managing all product categories. Each of them includes a buying manager and a merchandiser.

Comparing figures and sorting out KPIs

Participants shared key Private Label figures. Once carefully anonymized by the IADS, the idea was to compare and analyse them to find out the most important KPIs for profitability. The Academy group came to several conclusions:

-    Regarding markups and gross margin levels, a high markup is not a consequence of high volumes whereas low markups are a consequence of low volumes. A high markup (over 4.0), combined with entry-level to middle-range retail prices (€17-75), generates the best gross margins and the lowest discounts. On average, gross margins are 69% for the most profitable brands (62.9%-73.5%) and 49% for the worst ones (29%-62%). The number of pieces produced and sold is significantly higher for the brands with the highest gross margins. Markups are on average 4.22 for the best brands and 2.83 for the worst ones despite higher average full prices: it indicates that, even though they charge higher prices than average, their markups are still significantly lower to keep prices interesting for consumers.

-    When it comes to SKU efficiency, a smaller number of SKU won’t guarantee it. Having more colours in one reference may have a positive impact on turnover, thanks to the ‘Colorama’ effect for instance: one brand tends to confirm this assumption with an 11.7 multiplying coefficient and a 75% sell-thru. At least, having on average 5 colours per style guarantees the success of a collection. The number of SKUs is on average 5 times higher for the brands with the highest gross margin. Also, the turnover per SKU is 5 times higher for these brands (€6,565) compared to the worst ones.

-    When having a closer look at retail prices and discount rates, participants found out that there is no point in having a discount rate over 30-35% as it doesn't lead to a better sell-through. The best brands are limiting their discount rates to 26% on average. Retail prices should not exceed a certain point to be attractive to consumers, but it could be interesting to test elevated prices in Women’s Fashion for example: a wide range of prices could possibly lead to less price sensitivity. However, a very accessible range may lead to more dynamic SKUs and a higher turnover per SKU. Finally, brands with the highest gross margins have better sell-through rates (74.8%) and an average full price 46% lower than the worst brands (€39 vs. €72).

Following the conclusions above, participants proposed actions to be reviewed and possibly included in the final answer to the CEO question:

-    Reduce the number of references while maintaining a certain volume of SKUs.

-    Increase retail prices a bit (if they remain competitive), keeping in mind that an average lower full price can ensure a good sell-through and limits discounting to a healthy point, which in turn drives a higher gross margin.

-    Focus on the exit margin.

Creating their own vision: Private Labels will keep you going, Private Brands will keep you growing

The Academy’s overarching theme centred around the importance to transform Private Labels into real, independent brands. Department stores have the reputation and resources, so they benefit from competitive advantages. But, what’s missing?

Dealing with the internal ‘monsters’

After having identified the external threats to their existing Private Label business, the Academy participants focused on the internal ones (‘monsters’ as they called them) that need to be overcome.

Price positioning was listed as the first internal monster. It has become a critical topic with the current high inflation rates forcing department stores to increase their retail prices, at a time when customers are more price sensitive. This trend could also question the medium- and long-term investments necessary to build a healthy Private Label business, especially knowing department stores are fully responsible for every stage of the Private Label operations, making the risk greater.

Also, all participants from the start of the program shared one common challenge: misalignment inside their respective companies. This threat was immediately considered very important by the group as marketing and merchandising teams can face issues regarding priorities, budgeting, and scale. A cultural shift is necessary to get all departments on the same page.

The Academy’s proposed key actions to improve profitability

Participants really stressed the idea of allocating more marketing and advertising budget to Private Labels as they require visibility and their own storytelling. On top of enhancing the brand’s awareness, investing in marketing would increase the top line, boost sell-through rates and contribute to lowering the actual discount rate, ultimately leading to a higher margin in value. In the end, participants advocated for marketing departments to be seen as a profit centre rather than a cost centre.

Despite the difficulties Private Labels are facing, they have a good margin level when compared to other business models that can be found in department stores. In a comparative P&L, participants concluded that Private Labels offer the second-best EBITDA at 35.6% of sales (after the consignment model having an estimated EBITDA of 40% of sales). The concession model is 27% and the wholesale model is 23.9%. Private Labels have an estimated average net margin of 50-55%, just below the consignment model at 56-58%. Wholesale estimated average net margin is 40-45% and concession is 25-28%.

Participants established a ‘core focus’ program to improve profitability: it includes sourcing, assortment, positioning, and net margin as key pillars to be paired with KPIs to be closely monitored. The group acknowledged the difficulty of providing a fixed number per KPI when each company has different goals and scales. For example, they decided that 5 sourcing countries per product category could represent an average ideal number for healthy and controlled sourcing, considering many supply chain issues spurred on by COVID-19. Having backups is one way to provide more agility, however, the number of suppliers may vary per company, label, and category. Having compared how the recent supply chain issues impacted their business, the group set a target of 30% of SKUs produced in near-import countries to dilute the risk linked to producing in China and improve lead time.

Changing a Private Label into a brand also includes making the strategy visible on the shop floor. To that end, they advocate creating a difference between the assortment broadness (what customers see) and assortment depth (what the inventory looks like): the idea is to make the collection’s ‘candies’ (fashionable products such as a trendy pink jacket for instance) as visible as basics to attract customers who will ultimately buy the commercial and basic part of the collection.

A key point also showed when reviewing the Private Label anonymized figures: there is no need to be too cheap. Participants consider that prices should be 10% lower than comparable brands, not cheaper. Also taking cues from the figures, they set a discount rate of 28% to reach a minimum 90% sell-through rate after sales. This implies the need to carefully monitor the promotion strategy and calendar by killing the slow sellers at the beginning of the season (discounting them by 30%). All of these actions could allow Private Labels to reach a minimum 50% net margin.

Also, a true Private Label will become a driver of sustainability to promote responsible products, develop a sustainable selling environment, and ensure the working conditions in its production countries. Ultimately, Private Labels can have a competitive advantage as they often have higher standards than national brands: they should increase their capacity to communicate more proactively on these higher standards. Consequently, they could become a driver for traffic, transformation, loyalty and for the generational shift that department stores are hoping for by attracting more Gen Z consumers, who are expected to represent 28% of the world’s income in 2030.

Best practices from members 

When it comes to muscling the offer and attracting Gen Z, an interesting example came from Magasin du Nord’s collaboration with Trine Kjaer, a major Danish influencer. With a small capsule of 11 styles priced at €40-120 and 2,500 pieces produced, the sell-through rate reached 50% in 2 days, a net margin of 64% in 3 weeks and total net sales of €95,000. But most of all, 54% of the customers were new customers and the number of online searches increased 5 times, reaching 15,000 searches.

For El Corte Inglés, the example of their partnership with La Redoute (owned by the Galeries Lafayette Group) shows how integrating an outside marketplace can improve sales and profitability. In 2021, the department store’s Private Labels and other brands reached €5.5m on the La Redoute marketplace. Monthly fees (including commissions, set up and platform integration) are €55,000. Such results are positive, though there was no clear decision from participants about selling Private Labels through marketplace platforms. While it is an exciting proposition, using marketplaces could dilute the brand and lower margins. Reputational risks are also a factor when adding new selling channels outside of a group’s activity. This avenue also requires additional investment and organisation, making it an aspiration and not a qualification for a successful Private Label.

The importance of creating a visual identity was also something stated by Kéa & Partners and IUM students regarding the Target business case. This is backed up by one member example: Manor is currently working this way by developing shop-in-shop fixtures to give a true flare to their Private Labels. While it’s an ongoing process for fashion categories, the results have already proved efficient when it comes to home categories (bed and bath linen, tableware) as discussed during the IADS Merchandising Meeting dedicated to Private Labels held in December 2022. They have been reorganised with a more efficient display. Manor created new event zones and reworked the navigation by material (types of cotton, linen…) as the first decision criteria, and then by colour. A material testing zone, also known as an ‘education point’, is available. Beds demonstrating bed linen are more systematically displayed.

Conclusion: Private Label profitability is a complex combination of positioning, planning, marketing, closely monitored KPIs and faith

The question of Private Label profitability is likely to keep on going in department stores in the years to come. There are many reasons for companies to expand their offering through Private Labels, especially as inflation ramps up, leading many consumers to choose store-brand products over international and national brands. While each department store will need to adapt its plan, the insights provided by the IADS Academy offer a way to reassess the Private Label model. Setting KPIs for the ideal quantity of SKUs, for sourcing, planning, margins and discount rate can help with tailoring the offer and capturing their full value ahead of other brands. As the Academy Participants, IUM students and Kéa & Partners highlighted, having a unique offer that is specifically aligned with the department store is a great way to attract customers, meaning there is no perfect formula, only guidelines for creating an ecosystem to support Private Labels.

For the 27th edition of the IADS Academy, it was no easy task to define a toolkit for this increasingly important business endeavour. Each participant confronted the CEO’s question with involvement and seriousness, getting to step back from daily operations to learn from different department stores. Having the opportunity to work together across the world helped participants understand other visions, develop team spirit while expanding their network of peers facing similar missions.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

IADS recently held a meeting all about the Men'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!

CASUAL

DRÔLE DE MONSIEUR

Distinctive and wearable everyday wardrobe pieces that draw on iconic

sportswear halfway between 70’s and 80’s aesthetic and nostalgia for the

90’s. Past and present meet with the sophistication of retro silhouettes

combined with studied modern cuts and details for everyday wear.

Check out the DRÔLE DE MONSIEUR website here

CHECK OUT DRÔLE DE MONSIEUR INSTAGRAM

UNIFORME

A collection of minimalistic silhouettes that combine precise tailoring and

military lines to create streetwear that is stylish and utilitarian made in

France and Italy, crafted by specialized artisans to the highest standards of

luxury savoir-faire with responsibly sourced materials free of plastic

derivatives.

Check out the UNIFORME website here

check out the UNIFORME instagram here

DAVI

Created by Davide Marello under the label “davi”, the brand’s first collection

focuses on quality construction and artistic influence with its floral prints

developed for men’s shirts, trousers, and accessories.

Check out the DAVI website here

check out the davi instagram here

STREETWEAR

NEIGHBORHOOD

Tokyo-based brand established in the '90s by a motorcycle enthusiast,

NEIGHBORHOOD combines western influences with Japanese streetwear,

London’s punk scene and strong military influences to create a varied lineup

of utilitarian pieces, printed jackets and unexpected lifestyle pieces.

Check out the NEIGHBORHOOD Website Here 

check out the NEIGHBORHOOD instagram here

JJJJOUND

Originally launched as a digital mood board, JJJJound has grown into a

collaborative design studio producing timeless menswear pieces by

prioritizing materials and construction.

check out the JJJJOUND website here 

check out the JJJJOUND instagram here

RAEBURN

UResponsible and functional pieces that are fit for fashion and the

outdoors.

Check out the RAEBURN website here

Check out the RAEBURN instagram here

NEW & EMERGING TALENTS

BOTTER

Botter is a hybrid fusion of Caribbean culture, music, literature, food and

the arts that has evolved into an elegant and colorful collection of

sustainably conscious garments.

Check out the botter website here 

check out the botter instagram here

S.S.DALEY

S.S.Daley takes British elitism and its classic silhouettes to illuminate the

flowery femininity of what had been traditionally considered hypermasculine,

aristocratic dress.

Check out the S.S.DALEY website here 

ISO.POETISM

ISO.POETISM™ is a Copenhagen based fashion brand creating techwear as

artefacts that present as structural and rugged silhouettes with textural

prints and a futuristic undertone.

Check out the ISO.POETISM website here

CHECK OUT THE ISO.POETISM INSTAGRAM HERE

MWORKS PARIS

Inspired by the evolution of modern ways of living, architecture, and the

blending of contemporary cultures, MWORKS creates a sustainable

wardrobe that combines artisanal details with playful proportions.

Check out the MWORKS PARIS website here

check out the MWORKS PARIS instagram here

PRINTABLE VERSION HERE

Introduction to Thirteen Lune

IADS interviewed one of the co-founders of Thirteen Lune, Nyakio Grieco, to understand more about the inclusive e-commerce beauty marketplace. Grieco created her first beauty brand 20 years ago to celebrate the sophistication of Africa in premium beauty, inspired by the teachings of her Kenyan grandparents who shared their beauty secrets with her. During the racial reckoning of 2020, she found herself and many other founders of color on various lists celebrating Black beauty founders.

This pushed her to start researching these brands and founders, which then led her to realize that many of these brands had very little distribution or representation in large retailers. This is what led her and her co-founder Patrick Herning (founder of plus-sized fashion brand 11 Honoré) to create Thirteen Lune to be the first of its kind truly inclusive retail beauty platform. The company has a 90/10 rule: 90% of all the brands carried are created by people of color around the globe who make products for people of all colors, and 10% of the brands are dedicated to fostering allyship. Thirteen Lune is deeply committed to building generational wealth in Black and Brown communities while helping to make the beauty industry more inclusive.

A catalyst for change

IADS: What has been the catalyst for change in the beauty industry that has led it to focus more on inclusion and diversity? How do you feel that brands and retailers are adapting their business to put inclusion at the core of their decision-making process as well as their investments?

*Nyakio Grieco:* The catalyst for change is making the industry more equitable. People of color spend billions of dollars within the industry and deserve more shelf space and products that better reflect their needs on shelves.

I can only speak on behalf of what we’re building at Thirteen Lune and at our Thirteen Lune store in stores at JC Penney. Our business is built on the mission of a more fair and equitable representation for all in beauty. That is at the core of what we do, we deliver beautiful, non-toxic beauty brands to all, especially a consumer who has been long underserved.

Private Labels

IADS: You launched a new private label collection in Q2 2022. Can you share more about this collection? What was the inspiration? Are you doing anything different or innovative with your private label offer?

NG: Creating Relevant: Your Skin Seen is a culmination of 20 years of experience as a beauty founder. I created this brand, not only to evoke joy at a time of much-needed healing but to better serve all with formulas that don’t leave anyone out. Through building Thirteen Lune I was able to identify white space in the market where we could better serve consumers in regard to science-led innovation married with plant-based clean ingredients that provide efficacious actives at safe levels for all skin.

Being a Black female founder, I’ve experienced many wins but also extremely soul-crushing challenges. Mostly due to lack of access to capital, support from partners, or at shelf including opportunities to distribute successfully in large retailers. Relevant: Your Skin Seen is a testament to the fact that when you give a Black female entrepreneur the autonomy, support and runway to create - she is able to create the brand of her dreams dedicated to serving all!

Relevant is giving me the opportunity to truly build a globally conscious brand celebrating beauty rituals from around the world. I look forward to expanding our distribution globally to celebrate many cultures that have inspired the creation of these products. So many ingredients and beauty rituals come from the most marginalized parts of the globe. Relevant: Your Skin Seen is a manifestation of sharing and giving back to the communities that inspire this journey.

Empowering Allies

IADS: Thirteen Lune has created a place for brands to diversify their product offer to be more inclusive, labeling such players as Allies. How do these partnerships come to light? Are the brands typically approaching you first for guidance?

NG: We define an ally brand as a conscious beauty brand that was dedicated to empowering all long before 2020. They were considering everyone in their formulations, both in front of and behind the scenes, at the executive level in their companies, and in their campaigns modeled their commitment to moving the needle toward positive change in this industry. In the beginning, we invited ally brands to be a part of Thirteen Lune who displayed a non-performative commitment to change within their companies. Many of our early ally brands, Goop, Sara Happ, Olaplex, etc have been true allies to me personally in my 20-year journey. Now we get calls from major ally brands every day wanting to join our mission and it gives me enormous hope for our future as an industry. Thirteen Lune provides our Allies with an authentic space to reach a diverse consumer base to further their offerings to a range of eager customers who truly appreciate being seen and considered.

Thirteen Lune x JCPenney

IADS: Thirteen Lune has started to open physical retail locations in partnership with a US department store (JCPenney). How did you decide to start offering products in physical stores and how has this been working as a strategy for the company?

NG: From day one, my co-founder and I built Thirteen Lune to be a full omni-channel business. Even though we are a company that was born on Zoom while we were all in lockdown, we knew that physical retail would come back strong. Thirteen Lune is committed to meeting customers wherever they show up to have their beauty and wellness needs met.

We were connected to JCPenney only three months after the launch of thirteenlune.com. We were so thrilled to find that from day one we were completely aligned in our shared mission of hyper-inclusion and truly serving the consumer to feel seen, heard, considered, and valued.  It was love at first sight and it’s been amazing ever since. Partnering with JCPenney in their reimagined JCP Beauty space allowed us to bring brands to our Thirteen Lune stores within JCP to flourish and reach a wider audience.

IADS: What have you learned so far since partnering with JCPenney?

NG: I’ve learned that consumers want to experience discovery in their retail settings and that staff and consumers truly buy into people before they buy into products. Consumers are smart and want to spend their money for good. I believe the success we are experiencing is due in large part to the fact that the founders behind all of the incredibly efficacious and gorgeous products we offer at Thirteen Lune, are amazing authentic founders with rich stories to share and who deserve success.

IADS: Do you see physical store formats being a major part of the business growth going

forward?

NG: Yes, 1000%! Our plan is to have a global presence with many Thirteen Lune stores, coming soon! Any chance that we get to bring thirteenlune.com to life in a physical setting is a goal. The greater the presence we have globally, the more consumers we get to serve in a truly inclusive format.  As mentioned previously, we deliver on discovery and outside of our site which is truly a storytelling platform, we know that we have the opportunity to bring that experience to life in stores worldwide.

Thirteen Lune as an incubator

IADS: Thirteen Lune has now taken on a new role as becoming an incubator and accelerator for inclusive and diverse beauty brands. What does the process look like for these smaller brands once you onboard them?

NG: Incubating existing brands into Thirteen Lune and collaborating on new brands with diverse founders is on the horizon, and I can’t wait! We come from a place of support, mentorship and guidance through the retail process. It was so important to me to create the retailer I always wish I had with my first brand. Even when I got to shelf in some retailers, not having the capital support or mentorship needed to win at shelf truly held me and my brand back. I spent many sleepless nights wondering how I could afford to stay on shelf in those moments. I am very proud that we are committed to making sure every brand we onboard at Thirteen Lune, both smaller and bigger brands, has the support they need to focus on scaling their businesses and not being held back because of lack of said support.

IADS: Speaking of innovation, are there any exciting and upcoming trends that you have been noticing in the beauty and cosmetics space?

NG: Yes, the beauty of inclusion! If you are a large strategic or retailer and are not already working diligently to serve diverse founders and brands or aren’t truly looking at this mission as a necessary investment and proposition now, it might be too late. We all know how diverse this world will look like the majority in the not-too-distant future. If you as a corporation are not looking at the diversity of Gen Z and generations to come now, the future consumers who are already deeply committed to sustainability and diversity, you definitely should be!

What’s next for Thirteen Lune?

IADS: Thirteen Lune is starting to expand into new countries and regions. Can you share where the company is going and what opportunities you have found in these markets?

NG: While I can’t officially announce where we will be next, I am so thrilled about what’s to come this fall!

IADS: Are there any other target markets that are not on the roadmap that you would like to

reach? If so, what are the reasons you would like to enter these markets?

NG: Honestly, we’re exploring all major international markets. Personally, I see a huge opportunity for us in Europe, Southeast Asia, Dubai, Korea, and of course as a first generation American of Kenyan descent, would love to see a future presence in East Africa, South Africa and territories in North Africa./nbsp]

IADS: How will the company operate internationally? Will it be focused on e-commerce,

physical stores or take an omnichannel approach?

NG: In the same way we envisioned a full omnichannel approach here in the U.S., the same stands true for our international expansion. Whether it be through joint retail partnerships or stand-alone stores, we look forward to expanding our reach and mission globally.

IADS: Is there any other exciting news you would like to share about Thirteen Lune’s

projects and activities in the near future?

NG: I’m so excited to continue to release more Relevant: Your Skin Seen products across various categories, expanding our global distribution, and launching more portfolio brands under Thirteen Lune coming in 2023.

I’m also ecstatic about bringing these incredibly talented founders and brands we carry and are onboarding every Tuesday at Thirteen Lune on this global journey with us. This is what happens when you take your pain, and turn it into purpose ….. you get to build an amazing beauty business!

Credits: IADS (Mary Jane Shea)

Printable version here

The IADS took the opportunity of the 63rd General Assembly in Geneva to issue POAPs (Proof of Attendance Protocols) to member CEOs as a virtual representation of their 2022-2023 membership as well as POAPs to the graduates of the 2022 Academy Program as a virtual certificate of participation. The inspiration for this activity was to be able to learn by doing and put ourselves in the shoes of our members as they face questions about Web3 and its various applications. The following synopsis is a look into our Web3 journey as well as the takeaways we gathered from the experiment.

Introduction: testing the waters

As retail adopts more technological advancements to create a greater omnichannel experience, IADS felt that it was an ideal time to experiment with Web3. Our team began with questions, considering what our members might also be asking when deciding on their latest digital strategies: How can this technology work for us? What could it be? What would it cost? How would we distribute it? How does it add value for our members/community/customers?

After an initial brainstorming session, the team created a list of possible applications without constraints on whether the ideas were feasible:

•    Celebrating member achievements with a yearly POAP leading to a page that highlights individual accomplishments (think of Spotify Rewind)

•    A virtual hall of fame in the metaverse that includes current and former IADS members who made big impacts

•    POAP for events/membership that can grant access to a ‘vault’ of all our archives and data gathered over the years

•    Discord for members to exchange with separate channels per department and activities (i.e., Merchandising channel, PL channel, Academy channel etc.)

•    Member Stories – a ‘jukebox’ with members sharing how they solved a problem, a funny story, hopes for their company, etc. (similar to a short podcast; adds a fun part to the immortalization idea & gets members involved in a new way)

•    NFT awards – annual recognition tokens that signify exemplary retail achievements (i.e., ‘Most Sustainable’)

•    NFTs that are sold to the general public (if we go toward a more capitalistic strategy)

•    POAP for academy completion (leads to a gallery of photos from Châteauform and their presentation)

•    Virtual news map – inside a metaverse platform like Decentraland to make getting informed more fun and exciting

Once our extensive research and concept proposals had reached exhaustion, the team moved to make a selection between two possible starting points: a digital asset strategy or a metaverse strategy, both with a short- and long-term plan. We again narrowed the selection down to keep the strategy realistic and within budget. The process included discussions on how we could leverage our understanding and research on innovative technology to bring IADS to the forefront of digital retail knowledge (adding hands-on experience to our practical knowledge). As part of our inspiration, we revisited what IADS stands for. The team listed the reasons for creating NFTs based on four principal functions of IADS: Communication, Support, Organization, and Certification. Aside from trendiness, NFTs and POAPs can function as methods for protecting sensitive information, Discord servers, Google forms, websites, or VIP events online and off – perfect for what we do. While the initial focus of our strategy was broadly based on the sale of NFTs, due to the complications of monetizing data and navigating unofficial tax regulations, our team moved in a different direction. This will be expanded upon later in the text.

Metaverse: a more gamified approach

The concept of a metaverse is currently very popular and offers many opportunities for brands and retailers to strengthen consumer loyalty. This portion of Web3 activity has some of the most exciting applications: the integration of gaming and discourse channels, the development of functional virtual storefronts, VR events, and the integration of data into a virtual world. While IADS did not choose to move in this direction, it is still a potential avenue for experimentation. Of course, digital teams must be agile and create a strong roadmap with key points for transition.

When considering this path, the team asked practical questions: What would our metaverse look like? Why would people visit? What features would be offered? Where would it be? How much would it cost to build and maintain?

Due to the current lack of interoperability across metaverse platforms, IADS was hesitant in pursuing this strategy. Investing both time and financial resources in a strategy that does not fully serve our members and is not guaranteed to last was deemed unwise. In light of IADS’ capabilities, a virtual storefront would be the most feasible option from our team’s proposals. However, due to financial barriers and limited technical experience, it was determined that this virtual location would not be a fully functional storefront. Thus, we moved in a different direction.

Virtual land on the popular metaverse platform Decentraland costs around USD 3,000-15,000. After, the fees to have a software developer or programmer build and test a virtual store in Decentraland would cost between USD 20,000 and 36,000. Having an in-house developer would also be expensive at USD 75 to 175 per hour.

According to our research, setting up a functional virtual store also requires a tremendous amount of time. Our team discovered that it takes around 3,040 hours to register your virtual crypto-based business on the digital network of Binance, which could cost around USD 228,000 to 532,000 (for an in-house developer). Another popular platform, Cryptovoxels, does not appear to be cheaper. Famous voxel architect, Bileca quotes USD 10,000 to 300,000 for a full build. Unfortunately, verifying credentials when choosing an architect also appears to be a challenge, making this option better for companies with the proper internal team that has more funding and lower risk aversion. A deep understanding of gaming and metaverses would also be beneficial.

POAPs: certification & commemoration

A short-term digital asset strategy became the most realistic for IADS. The final proposal was a POAP for member CEOs (a virtual representation of membership), and a POAP for Academy graduates.

POAPs are a type of NFT which stands for Proof of Attendance Protocol and can be described as an ecosystem for preserving memories. A POAP is a digital record for the holder that acts as proof of events that they attended or participated in, whether physically or virtually. Because POAPs are technically NFTs they have the capability to act as a utility for potential future events or product drops. They can be compared to any collectable such as the ticket stub for a famous concert or a band tee from the start of a musician’s career - proof you were there or proof of your fandom.

We believe POAPs provide the most relevant qualities for our mission. Our Academy program, which was established in 1995, seemed like the ideal way to begin fortifying our seal of approval through POAPs. As an association that is approaching its 100th anniversary, our expertise in retail insights and innovation certifies the skills development that Academy members receive upon completion of their project.

Another benefit of POAPs is that they are free to mint. For the creation of general NFTs, the cost can vary tremendously depending on the gas fees - a cost incurred from minting as one would mint fiat money. The cost can change hourly and based on the demand, the platform/marketplace, and the cryptocurrency selected. In general, selling on OpenSea, an NFT marketplace, requires two initial payments for creators: USD 70-300 to establish the account and USD 10-30 for OpenSea to be given access to generate your NFTs. Alternative sites exist, one of which is Rarible. The Rarible marketplace platform offers a lazy minting feature that makes creating NFTs free and diverts the gas fee cost onto the buyer. The platform also takes 2.5-5% of the final sale.

Once the team began creating the POAPs, the co-founder of POAP France, Sebastian Orellano, reached out to inquire about our motivations and goals as it was quite an unusual use case for his team. POAP France has assisted luxury fashion companies to distribute POAPs at their events such as Christian Louboutin at Paris Fashion Week this year. Following a meeting with him, he offered some insight into how he can assist us and our members. Thus, those who have questions can contact the Association to learn more or to be put in touch with him.

Ultimately, we distributed the POAPs through printed QR codes that were distributed during the IADS General Assembly. Sebastian also recommended incorporating NFC (Near Field Communication) tags into our strategy to better distribute to users that are unfamiliar with crypto wallets and digital assets. While it was too late in the process to incorporate NFC tags, we are considering this for any future initiatives IADS might launch to create a physical and virtual representation of membership or certification.

Going forward: challenges & opportunities

Looking toward a long-term goal, we believe it would be necessary to develop a method of separating monetizable non-sensitive information from private insights that should only be accessible to our members. This path would likely mean creating NFTs for purchase that commodifies our research and reports, such as our lists of emerging brands determined during our IADS Visual Merchandising Meetings. This would involve more work developing a business-focused production of these elements by creating an internal IADS position responsible for Web3 activities. The current membership structure poses an issue for pursuing the sale of NFTs as it might require constructing a complex hierarchy of subscription levels. As a non-profit focused on connecting and supporting our members, this goes against our values. The most tangible monetization of IADS activities is through our city guides. This idea is still being explored through pay-wall map platforms that can organize specific locations based on tags.

Another complication came from the unclear legal and regulatory framework in place for Web3 activities: To whom and how do we report virtual earnings? Will we sell securities or utilities? Do we need an accountant specialized in the Metaverse and crypto? What resources and team capabilities do we need?  Where is Web3 going?

We understand that the Association is not expected to carry out such activities, however, we consider ourselves a research lab, and therefore, felt that this emerging trend would be perfect for experimentation. Our conclusion: it does not have to be intimidating. Web3 specialists are eager to assist companies with entering this emerging digital space. With so much potential, we recommend exploring how Web3 can work for you, within your teams, and for your customers.

This initial trial of POAPs for IADS showed us the importance of understanding the different levels of familiarity with Web3. Ideally, this can be addressed by providing enough time to educate and assist newcomers. Digital innovations can be intimidating, and it can be tempting to wait for the trend curve to reach its peak. Yet, waiting does not equal eventual understanding. To best attract young consumers, being educated on the future discovery and shopping channels they will use is imperative to securing their loyalty. IADS will continue to provide insight and education on digital innovations and hope to connect you further with POAPs, NFTs, and all the exciting new Web3 developments.

Credits: IADS (Devon Blowers)

IADS recently held a meeting all about the leather goods & shoes brands to look out for in 2022. Based on market research, IADS and NellyRodi presented a curated selection of 13 brands that are trending right now. Check out our selection of these brands!

PRINTABLE VERSION HERE

SHOES

![CLARIS VIROT

CLARIS VIROT

The Claris Virot brand is above all new collections with injections of new

skins and new models such as the arrival of the basket for the summer or

the 100% leather line. Tanned, grained, smooth or tie and dye, the Claris

Virot leather, like the python used in all the models, is worked by hand in

Balinese workshops.

Check out the claris virot website here

![REIKE NEN

REIKE NEN

The inspirations are expressed every season by mixing the formal and the

atypical, the flexible and the hard, the raw and the refined. Contemporary

and new elegance Contemporary Refinement this is the purpose of this

rake nen.

Check out the reike nen website here

![ILIO SMERALDO

ILIO SMERALDO

Ilio Smeraldo’s shoes are crafted in Tuscany by local artisans, every single

piece is handmade with care using Italian leather and locally sourced

materials. They pursue the ancient Florentine tradition, ensuring quality

and uniqueness.

Check out the ilio smeraldo website here

![YUME YUME

YUME YUME

YUME YUME creates unique design pieces for all creatives in the world.

Check out the yume yume Website Here 

![MOEA

MOEA

MoEa uses innovative bio materials from recycled fruits and plants to create

low carbon and vegan sneakers.

check out the moea website here 

![ROMBAUT

ROMBAUT

Using luxurious plant based materials, recycled fibers and high grade

artificial leather, ROMBAUT creates unique sneaker styles with a story.

Often experimenting with cultural stereotypes and cross pollination of

archetypal footwear classics we create a new aesthetic of purity, optimism

and gloom, which feels very relevant today.

Check out the rombaut website here

LEATHER GOODS

![DESTREE

DESTREE

DESTREE tells the story of a colorful and singular passion, of a Parisian yet

different style, drawing its beauty from the visual dissonances it evokes and

which it translates through a graphic and structured aesthetic.

Check out the destree website here 

Check out the collection of pictures here!

PRINTABLE VERSION HERE

As of 2022, Walmart accounts for 10,585 stores in 24 countries, operating under 46 different names in the United States, Canada, Mexico, Central America, India, China and South Africa to name a few. Walmart is the world's largest company by revenue, with about $570 billion in annual revenue, according to the Fortune Global 500 list (Amazon comes second). It is also the largest private employer in the world with 2.2 million employees. Walmart was the largest United States grocery retailer in 2019, and 65% of their sales came from U.S. operations.

To keep its position and secure recurring customers, Walmart started a transformation before Covid to offer in-store seamless omni-shopping experiences. The new Walmart store has convenience, experience, and membership in mind, and it’s no surprise. The transformation came in 2 phases: the first one was completed in September 2020, and the second one has been in testing since February 2022. While the first phase was focusing on in-store navigation and efficiency, the second one is about giving stores a new look and feel, as well as offering customers a digitally enabled shopping experience. In parallel, the Walmart+ membership program was launched and gained traction.

On the one hand, by developing new visual merchandising features, Walmart is encroaching on Target’s turf, both taking cues from department stores that are usually masters in the visual merchandising area. On the other hand, by heavily boosting their membership program, they are chasing after Amazon.

Focusing on navigation and wayfinding

Focusing on a customer-centric approach, Walmart developed new store signage with a sleek and bold aesthetic. The update goes from the exterior to the interior of the store. New very visible signage (Dairy, Pizza, Bakery…) highlights product categories and brings enhanced visibility to key products and departments throughout the store. With surfaces ranging from 6,400 to 24,200 square meters (the average surface being 16,500 square meters), it’s key for Walmart to be able to quickly guide customers to the section they are looking for. In that perspective, using airport signage navigation has proven  efficient: as a result, Walmart stores’ aisles are now marked with letter and number combinations.

The new signage goes hand in hand with the store app. It has also been updated to reflect the Walmart app and make customers accustomed to downloading and using it from the very beginning of their journey. To that end, a store directory at the store entrance invites customers to download it thanks to a QR code. The app offers end-to-end digital navigation and guides customers throughout the store.

Stores also include self-checkout lanes with Walmart+ members dedicated ones, as well as contactless payment solutions, including Walmart Pay. Select locations also offer a Scan & Go service to help customers manage their checkout directly. Shopping cart’s comfort has also been improved to include phone and drink holders.

Overall, by helping customers navigate more easily and quickly throughout the store, Walmart wants to offer a more efficient and convenient shopping trip, hoping this will help retain customers in stores, and possibly to larger purchases. The first phase of the new concept was tested, got very positive shopper feedback and has now been rolled out in more than 1,000 renovated stores.

Competing with Target using visual merchandising tricks

Walmart launched phase 2 in early 2022. The new store experience developed there is called ‘Time Well Spent’ as the retailer ambitions to become a destination where customers want to spend time, and not just deal with shopping fatigue. As a result, the focus is on experience, product try, touch and feel, which are not necessarily the usual features of a supermarket. Walmart also increases comfort by offering wider lanes and more space within its key departments, in an attempt to make shoppers feel more relaxed and have the impression they spend some quality time shopping.

Walmart is amplifying the physical design elements to inspire customers and elevate the experience thanks to lighting, space enhancements and dynamic displays. New displays are featured at the most strategic corners of some departments to attract customers in and help them touch and feel products. For instance, home sections feature a bedroom or a living room set up where shoppers can try pillows or blankets and buy them on-site or order them to be home-delivered. Also inspired by Target, electronic sections have been reorganized with long display tables, including proximity stocks. In the apparel, nursery and beauty departments, the new Walmart store makes room for brand shops and intends to develop a “store within a store experience”, still following Target’s footsteps.

Digital touchpoints are also developed. Using stores as a primary display, a larger range of products and services is available a click away thanks to QR codes and digital screens. For example, in the pet area, a customer can scan a QR code to find additional product options, learn about Walmart’s pet insurance service or have their dog food bags home delivered. Smart screens are also used for a variety of purposes. For example, a passively interactive widescreen above the men’s grooming section will automatically display reviews of a product when a shopper takes it off the shelf.

Competing with Amazon thanks to a strong membership program

To compete with Amazon Prime, Walmart launched its membership program, Walmart+, in October 2020. Five months later, it was already considered a success thanks to its estimated 7.4 to 8.2 million users representing 30% of US online grocery transactions whereas Amazon was only accounting for 27%.

Early June, and in an attempt to coincide and compete with Amazon’s Prime Day, the first Walmart+ Weekend three-day sale event was held exclusively for Walmart+ members who received special access to sales on thousands of items. It remains to be seen whether this sale will become an annual event but the results seem quite promising: the average Walmart+ Weekend spend per order was $69.75: while it is slightly more than the regular average Walmart.com order of $64.99, it is much more than the Amazon Prime Day 2021 order of $54.17. Forty-seven percent of the Walmart+ Weekend orders were placed for $100 or more, compared to just 27% of Amazon Prime Day orders last year.

Walmart+ Weekend was also open to customers outside of the membership program even though they would not have access to the best deals. But it has obviously been a way to attract more customers and generate more sales.

Walmart+ membership is noticeably less expensive than Amazon Prime: it costs $12.95 per month (or $98 per year) compared to Amazon Prime’s $14.99 per month (or $139 per year). Since its inception, Walmart+ has attracted urban, young and affluent online shoppers, on top of the usual customers. Like most memberships, Walmart+ gives access to special prices, product releases, early access to sales, online special deals, free shipping with no order minimum required, and free same-day grocery delivery from local stores (with a $35 order minimum). At a time when inflation is skyrocketing and consumers are reducing their discretionary expenses, Walmart+ offers interesting additional perks: members can save up to 10 cents per gallon at more than 14,000 gas stations and receive 6 free months of Spotify Premium.

So, will the transformation be enough for Walmart to keep its position? Directly competing with Target and Amazon, Walmart is taking from both to become a perfect combination of experience, convenience, and membership. They are testing new ways to elevate their stores and design them as destinations rather than only competing on the price point. They are also in a ‘test and learn’ process and are making changes based on the customers’ feedback.

While such changes are important in the customer’s eyes, analysts are showing scepticism as consumers still prefer Amazon, Target or Home Depot, and as sales growth slowed down during the first quarter of 2022 first. The question is whether Walmart’s new store features and, crucially, distribution capacities will be enough to compete with Amazon growing its capacities very fast to shrink the delivery delays so much that customers won’t have a reason to go to stores. As an answer, Walmart will build 4 new fulfilment centres in the next 3 years including automation, machine learning and robotics, to offer next-day or two-day delivery to 75% of the US population. So far, one of Walmart’s strengths is also that half their sales are coming from groceries which are still mostly purchased in stores, whereas Amazon’s Wholefood and Fresh supermarket results have been disappointing so far. Also, having stores within 10 miles of 90% of Americans is an unparalleled opportunity to thrive in the omnichannel business, and - maybe - defeat Amazon?

Credits: IADS (Christine Montard)

Check out the collection of pictures here!

PRINTABLE VERSION HERE

As one of South Korea‘s leading department stores in the upper segment, Hyundai’s ambition is to “bring happiness to customers and enrich the world”. Seoul is known for its shopping culture as many people frequent department stores. Today, with the e-commerce spike caused by the pandemic, Hyundai is questioning the purpose of physical retail and answering the call for drastic changes in the industry.

Occupying no less than 89,000 sqm across a total of 12 floors (including 4 levels of underground parking) gathering nearly 600 different shops, The Hyundai Seoul first of all offers great architecture. The skyscraper complex where it is located was imagined by Sir Richard Rogers. Various international architects and designers took part of the department store project such as Cmk Architects for the cosmetics and beauty area, and Diego Burdi and Paul Filek for women’s and men’s fashion areas. Landscape designers Woo Kyung- Mi Woo Hyun-mi Design took care of the vegetal parts of the mall.

Besides offering city dwellers a place where they can shop, experience cafes, restaurants and art, The Hyundai Seoul claims it is Korea’s first eco-friendly department store, bringing together the concepts of nature and rest with shopping.

Opened in March 2021, the Hyundai Seoul also illustrates the end of a siloed business model which used to separate shopping, entertainment and communication. On the contrary, inspired by young generations and highly in line with social media posting, the department store merges the three businesses into one. IADS partner Nelly Rodi had the occasion to visit the Hyundai: check out what the new department store really has to offer and look at the collection of pictures provided.

Entertainment features from nature to GenZ content, culinary experiences and art

The Hyundai Seoul’s most striking feature can be found in how the surface is allocated as almost half of its space is dedicated to indoor landscaping. The department store wants to provide a space where customers can relax, rest, reconnect with nature and experience its healing benefits. To that end, a 12-meter-high waterfall called the 'Waterfall Garden' is visible from floor 3F to floor 1F (ground floor), and a 3,300 sqm garden located on the 5F floor comes with 30 trees, natural grass and nature sounds. It is the largest indoor garden in Korea with natural lights shedding through a 20-meter-high glass ceiling. The walkways in the shopping mall are also wider than usual, so customers don’t constantly bump into each other, which seems especially important since the department store opened during the pandemic.

llustrating a common retail trend, the department store clearly ambitions to capture the local GenZ by offering them entertaining and Instagramable spaces such as a pool full of pink balls, new brands and pop-up stores, all gathered within the B2 floor. Dubbed ‘Creative Ground’, the floor also includes metaverse and NFTs. But there’s more to attract the younger generations. Located on the 6F floor, CH 1985 (referring to Cultural House initials and to 1985 as the first year Hyundai mixed culture with retail) is the first boutique and cultural space intended for Millennials and GenZ. Defining itself as a social club, talks and masterclasses are organized such as the Late Night Salon centred around Korean culture and the bustling Seoul artistic creativity.

The food offering is probably the biggest of its kind in the country. Called ‘Tasty Seoul’ and located on B1 level, the 14,800 sqm food and restaurant area features no less than 90 different food and beverage venues ranging from a food market to food stands. As Seoul emerged as a culinary destination, Michelin-star chefs also offer upscale experiences. Wine and spirits are also developed, mostly to attract male customers and help entertain them while their wives are shopping: they can enjoy famous local sommelier advisory and taste wines while smoking cigars and reading books about Cognac or winemaking. On the 6F floor, groups of 6 people can benefit from famous chefs’ cooking masterclasses and then enjoy their meals in private dining rooms.

Illustrating the culture trend one can see growing in the retail industry, The Hyundai Seoul has a museum located on the 6F floor. Called Alt.1, it is set to offer various art exhibitions able to draw in many customers. Art exhibition examples include fashion photography with works from Paolo Roversi, Peter Lindbergh, Nick Knight and Ellen von Unwerth. The entry price is EUR 13, or at a reduced fee of EUR 10 to encourage younger generations to visit the museum.

Tech used to build a seamless and pandemic-ready department store

Located on the 6F floor, the ‘Uncommon Store’ gives a vision of what supermarkets and convenience stores could look like in the future. Before entering, shoppers are required to install an app by scanning a QR code. After registration, payments will be automatically and seamlessly registered and processed. The ‘Uncommon Store’ uses a cloud system and internet hyper connections, AI, complex sensors, and machine learning techniques, all being taken care of by Amazon Web Services which are fully integrated into the store’s retro-futuristic design. The Internet of Things also forms a two-way communication between the space and its users, allowing storage and reloading of the shopper’s purchases and consumption habits.

The Hyundai Seoul is infused with additional tech innovations, such as facial recognition to enter VIP areas, the deployment of a guide robot, a safety robot, and a special app to make restaurant reservations and check parking spaces. Given the pandemic, tech has also been applied to maintain safe shopping. Multi-recognition temperature scanners which are used in airports have been installed at all entrances while portable thermal imaging cameras and facial recognition heat scanners were installed at indoor entrances. Also, air sterilisers can be found at major customer facilities to enhance air circulation, and all door handles have been covered by a layer of 99.9% pure copper which has excellent sterilisation and anti-viral effects.

Customer-centricity and services are significantly developed

Overall, the department store offers a high level of customer service. Concierge services provide information on brands, events, as well as helping customers with restaurant and CH 1985 lecture room bookings. Dry cleaning, alterations, watch, bag and shoe repair services are also available and distributed across the floors dedicated to the fashion offer. Lockers are displayed on the B1 floor for customers to leave their heavy belongings and shop hands-free. As the 5F floor is dedicated to kids, it offers various kids-related services such as baby and kid lounges and stroller renting. Finally, a full lounge, ‘The Club Wedding’, on the 6F floor offers wedding services.

Finally, The Hyundai Seoul purposes 2 membership programs. The ‘classic’ one has 3 levels depending on their annual spending and also offers access to a private coffee shop. The second membership program is designed for Millennials and GenZ based on their level of influence.

What about the brand and product offer?

The department store offers a classic layout when it comes to cosmetics, beauty and luxury categories. Beauty brands and luxury brand concessions, including jewellery and a large watch offer, are gathered on the 1F floor (ground floor) under the ‘Exclusive Label’ area.

The 2F (‘Modern Mood’) and the 3F (‘About Fashion’) floors are dedicated to men’s and women’s fashion. They mix brand concessions and multi-brand areas (including a large Tom Greyhound shop, the Hyundai-owned affordable luxury multi-brand store), and overall try a more genderless approach to fashion in certain areas. The 3F floor also offers a multi-brand shoe section.

The 4F floor is the place to find sports and home products. The 5F floor is home to a comprehensive kids product offer and to tech brands. A Lego store is also coming along with brands such as Microsoft, Samsung and Dyson to name a few.

As it is also the case at their Seongnam branch, an affluent and fast-growing satellite town of Seoul, The Hyundai Seoul is clearly chasing after the younger generation’s wallets. But is that all there is? More broadly, and considering its size, the department store is also able to address all kinds of consumers from families with toddlers, to fashionable women and wealthy male consumers, each time developing the appropriate product, experience and service offer for each consumer group.

Overall, the Hyundai Department Store Group has evolved to provide comprehensive shopping experiences with a renewed lifestyle and cultural approach to retail. Without forgetting people’s cravings for nature, The Hyundai Seoul is a fair example of what the store of the future could be.

Credits: IADS (Christine Montard)

Check out the collection of pictures here!

PRINTABLE VERSION HERE

The IADS had the opportunity to travel to Seattle to attend and report the Global Department Stores Summit, co-organized with Nordstrom. It was the occasion to review how the iconic US department store is articulating its attention to customers, which they claim to be superior to the competition in the country. On this occasion, we visited the Pine Street store (in the Seattle city centre), a location not as glamorous as the store at Columbus Circle in New York that we reviewed earlier this year.

What is so special about their service and how is it organized in store from the customer perspective? What are the learnings for other retailers? And most importantly, how is this helping in a city still bearing the scars of the pandemic, including a devastated “Retail Mile”?

Visiting the store: caring for customers on every floor

The store is located in the heart of the Retail Mile, not far away from the Pike Place Market (known for its fish-throwing tradition and the 33rd most visited attraction in the world in terms of traffic). However, even a few blocks of distance from this energetic zone can feel very far away given the state of retail in the neighbourhood: the Macy’s store still bears its logo although it has been closed, and so does Barney’s just across the street. The competition has fiercely reduced, and Nordstrom is now the only department store in the location, along with a Nordstrom Rack across the street, and a Saks Off 5th a block away.

The store is built on 5 floors and was refurbished in 2016. The layout is simple: men’s fashion in the basement, shoes and beauty on the ground floor, women designers’ fashion on the first floor, contemporary fashion on the second one and sports, lingerie and services on the upper floor.

The basement is very accessible through large ramps, and features a full universe for every male customer: a significant suit and formal fashion area (according to the sales manager, Men’s suiting is still a significant part of the business), an animation area, the shoes and accessories space, and a restaurant (Nordstrom Grill), offering a full lunch service, representing 1 out of 4 transactions in the store.

The animation area has been developed according to a different graphic identity and is dedicated to delivering what is new in fashion. At the time of the visit, the space was dedicated to sports, and this is the 17th edition since the launch of this concept in 2019 (popups are opened on a quarterly basis). There, Nordstrom sells “products with a point of view” (meaning either exclusive brands, products or collaborations) and takes the opportunity to produce content with its selection (for instance, a part of the sport selection was featured in a promotional clip with the rapper Macklemore and generated 200m media impressions, in addition to selling 75,000 pieces in 2 weeks nationwide).

Apart from this specific space, the brand assortment is classic for a high-end fashion department store, with luxury shop-in-shops on the periphery (even though according to the salesperson concessions only represent a mere 10% of the total business) and more accessible brands in the middle section, including a denim section. Interestingly, Topman, which Nordstrom operates in exclusivity worldwide, is displayed without any mention of this exclusivity, and feels a bit lost in the retail space.

Services are proposed with third parties, such as a shoeshine family business that has been a local partner of Nordstrom for the last 30 years.

The ground floor features beauty, cosmetics, shoes and accessories.

For the beauty section, a concierge is here to sample the whole offer, which is impressive, in addition to helping customers and directing them to the right brands, all featured in a lightly customized concept with low displays. Customers also have the possibility to bring back their empty packaging to be recycled (although the execution itself of the recycling unit in cardboard is surprising and denotes with the environment). There are also food and beverage touchpoints in the cosmetic area in order to increase the time spent in the section.

When it comes to shoes, the space felt really crowded with products, with many advertised on sale. Interestingly, the shoe offer is doubled: entry and mid-price point products are featured on the ground floor, and expensive ones are featured in the designers’ section along with the related accessories and RTW, to propose a full silhouette.

The floor also features a “service bar”, here to offer “service and convenience” (quick returns, touchpoints, purchase pickup, alterations, click & collect). In terms of managerial practices, the best employees are featured there, and are highly visible to customers.

The first floor is quite immersive with brands’ locations featuring the whole product offer and differentiated from each other with subtle variations on the walls and flooring. The animation space, mirroring what is available in the Men’s section, is much lighter in terms of concept and somehow less visible. The denim section is huge, but not called “denim”.

Here also, services are available, such as alterations (Nordstrom has the largest US network of tailors able to alter any product).

The second floor is dedicated to contemporary fashion, including Topshop and Asos (not really advertised as unique or exclusive for any of the two). Here, no brand has its own concept, as it is all about rotation and new findings. For instance, a specific concept is dedicated to new brand discovery, just in front of the escalator, and makes a new product proposal every six months. The interesting point is the variable business model, as sometimes the space can be lent or rented to brands (such as Allbirds), and sometimes, Nordstrom makes its own selection of products.

The third floor is probably the most interesting, and not for the product selection (sports, kids, lingerie, home products), as all sections are quite heavy visually due to the number of products on display.

What is striking on this floor is the click and collect area, and the fact that the stocking area is on the sales floor, visible from all. Initially, the reason for such a situation was that it was easier during the pandemic, when the stores were closed, to set up a pickup area for sales associates there, but then, Nordstrom realized that it could be an asset to show operations.

When customers are coming, they see the sales associate taking their parcel from the shelving. If the product is in a box, it means that it comes from another store or a warehouse (there are 3 fulfilment centres in the country). If the product is in a bag, it comes from the store itself. Customers are then invited to open their boxes or bags, to make sure that the product is right for them. If not, they have the possibility to have them altered by the click and collect staff, who can also gift wrap them on the spot. Interestingly, the click and collect staff are not sales persons and are not trained on what is available, meaning that they can bring an additional service, but cannot complete a sale by another product suggestion.

According to them, the visible shelving has now become an attraction and a destination for customers, who are happy to come to this floor to pick up their products. They have the possibility to wait at the nearby café (not particularly inviting) in case they have to wait for the alteration to take place.

Our opinion

Overall, at the time of the visit (early June), the sales floor was packed with merchandise, including discounted products even though the Nordstrom Rack is across the street. This was especially visible with shoes and accessories, suggesting that, even though we were told that business was great, the retail recuperation was somehow slow to take off.

Two other points were striking at the time of the visit:

-    Nordstrom takes great pride in being a knowledgeable fashion retailer, with a distinctive flavour and a specific selection. This is visible through the special concepts designed in the Men’s and Women’s sections (where they experiment with new brands or brands repositioning themselves, such as Lacoste or Aigle) and the animation zones in the women’s section. This makes it all the more surprising that they are not heavily advertising the fact that the Nordstrom customer has the worldwide privilege to shop Topshop, Topman and Asos, once global brands and now labels that only Nordstrom has the right to sell.

-    The service point on the third floor was visually impressive, and so were its organisational processes when described by sales associates. It is quite impressive to have managed to make the shelves an attraction per se, and decided to display them on the retail floor (this also relates to what we saw in the Nordstrom Men’s store in Colombus Circle, NY). However, such attention to customer service and detail should go hand in hand with the motivation of the associates: our experience at the service counter (ground floor) was, at best, poor, during the store opening hours, and somehow echoed the questions raised by the multiple signs on the sales floor encouraging people to apply and join Nordstrom teams.

All in all, the Nordstrom customer service quality is undisputed in the USA, and this Seattle store is no exception when compared to the competition. However, the level of inventory seen on the sales floor (a situation which is not specific to Nordstrom) might imply that physical retail is still difficult for stores located downtown (customers really need a very good reason to come there), leading to a focus on sales and discounted items (Nordstrom has even announced that the Rack business unit was a key component of its planned growth in these difficult times), which, in turn, reflects on the sales associates morale and the overall store experience.

The gap between the New York stores and this one is quite significant, and we are not talking about the stores’ setups (the New York units are more recent), but really, the atmosphere generated by a staff which seemed, at the time of visit, less motivated and excited in Seattle than in New York.

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

Whole Foods Market is an organic food grocery company currently operating in the USA, Canada and the UK, which achieved a total turnover of $17bn in 2021. Founded in 1980 in Austin, Texas, the company has consistently grown both organically and externally, by the opening of stores and acquisitions of regional players, allowing a geographical expansion, learning and implementing new processes, and entering new product category markets. The company has been purchased by Amazon in 2017, after having posted a total revenue the previous year of $16bn in 2016, for a total value of $13,7bn, the largest external acquisition operation ever made by Amazon at the time, with a 27% premium on the share price.

In a post-pandemic world, crafting an inclusive culture able at the same time to bond together employees and act as an element of motivation and pride is more important than ever, especially now that retail companies start to feel the pinch when it comes to attracting new talents. The IADS had the privilege to listen to Walter Robb, the former Co-CEO of Whole Foods Market, during the World Retail Congress in April 2022, on the topic of “conscious capitalism” and how, when properly implemented, it could help fuel growth for the company by creating an adequate corporate culture. This is the reason why we invited him to share his thoughts and vision when it comes to leading with a purpose, as well as to share the lessons he learnt during his 26-years-long tenure within the company.

Introduction

Walter Robb, a graduate of Stanford University, is a connoisseur and ardent entrepreneur in the organic food business, an industry he joined in 1977. He is the founder of Stonewall Robb Advisors, which mentors and supports entrepreneurs, a Senior Executive Partner at S2G Ventures, and a member of the Board of various companies in food, health and hospitality. Prior to this, Walter Robb was the Co-CEO from 2010 to 2017 of Whole Foods Market, a company that he joined in 1991 as a local owner and operator before moving up the chain of command, until overviewing its acquisition by Amazon in 2017. Robb has been inducted into the World Retail Congress Hall of Fame in 2022 which honours retail’s most influential representatives whose ideas have shaped retailing through the businesses and brands they have created.

Interview

IADS – You started and operated your own grocery store for 15 years, prior to selling it to Whole Foods and joining the company in 1991. 31 years later, how would you say this experience influenced your career at Whole Foods? What would you do differently?

WR – I started my career from the ground up: I borrowed 2,000 dollars from my stepfather, bought 3,000 dollars of inventory and started a business. During my first day, I did 200 dollars of sales. We were in 1977, I was 17 years old and I was a retailer.

Would I do anything differently? Probably not: I am convinced that to be a good retailer you need to start from the ground. I made some mistakes (a bunch actually) but it was all about permanently learning. I learnt by watching the owner of a hardware store across the street, who was all about customer service and building relationships through interaction prior to any intent of selling anything. I integrated that approach and later on implemented it at Whole Foods, trying to create a business based on relations, not transactions. This is why in the stores whenever a customer was asking for a product, clerks were not simply pointing them out in the right direction but bringing them to the right location.

There is no replacement for learning by doing when it comes to understanding how a retail business operates.

IADS - The expansion of Whole Foods Market in the Northern Pacific Region in the 90s under your watch was meteoritic: what was the competitive advantage back then? Product, people, systems? Do you feel this could be the same today?

WR – I do not think the situation is the same today as we are in different times: there are many more organic food companies now and all retailers have included that segment in their offers: look at Walmart!

At the time, there was a great sense of purpose to bring natural food to the market: we were the first ones to do it, with all competitive advantages linked to being the first mover, and we had the wind in our back, even though we did not know exactly what we were building. So, definitely, the situation has changed.

I believe that our differentiating point was our philosophy, all about empowerment and based on the idea that every associate can, provided they get support from their leaders, make a difference in the way the business grows. We supported the idea of sharing the responsibilities to collectively make the best decisions possible. A few examples to show how it translated:

-    Store teams leaders had a yearly budget of $100,000 to invest, on their own decision, to improve their stores,

-    Team members had to vote when it came to accepting a new member to the team.

So looking back, it was a combination of right timing, having the wind in our back, and a strong sense of purpose, to give good reasons to people to come and work at Whole Foods Market.

IADS - You spoke at WRC in Rome about the importance of purpose and culture for a company. How did you drive purpose during your tenure at Whole Foods? How did it evolve? How did you make sure it matched business expectations?

WR – Let’s start by looking at the purpose: it is the reason why the business exists, the “why”. You do not exist to make money, but to serve your customer. Every company needs a purpose: this is the most powerful leverage we can have.

How to make the purpose actionable? First of all, you define one, you communicate it, you lead it, you make your decisions according to it, and you share it with your teams making sure that they can give their own form of the purpose. But what does this mean?  What is key is to see it as a living concept:

-    You have to constantly talk about your purpose to the teams,

-    Your actions need to be taken in order to reflect the purpose. For instance, Whole Foods Market was one of the first retailers to walk away from one specific fish species which was unsustainably exploited, in order to be true to our purpose. We were also the first to go to a fully recyclable paper bag. Each of these steps, however little they might seem, are noticed by teams who understand that you are true to your word, which is what matters in the end.

-    On their side, your teams need to have the opportunity to act at their level through an empowered culture, to give the purpose its own expression through their own actions. We as leaders need to set up a culture where teams have room to make decisions. Giving them authority and power, you help bring the purpose alive throughout the organisation.

Now, a note about what I mean by “culture”. The Whole Foods philosophy, that I call “conscious capitalism”, is based on 4 pillars:

-    A sense of purpose, which is “why” the company exists,

-    Empowerment and leadership,

-    Values,

-    Culture, a mix of the purpose and values in a living form: how people feel shopping or working with you.

The culture is where we invested a lot of energy, time and money at Whole Foods Market.

IADS - When Amazon bought Whole Foods, the price strategy drastically changed: how did loyal customers react? What was the impact on WF culture and what did it take to remain true to the original promise?

WR – Amazon changed a lot of things for Whole Foods Market!

In terms of pricing, in 2016, the market had caught up with the organic food trend and our shares were down from the high 50s to the low 30s: the analysts were disappointed with our inability to adjust prices quickly enough. We had not realized that we had gone from a market where we were the only ones selling our products and setting our prices, to a market with fierce competition. The reason why we did not adjust the pricing and margins soon enough, was probably because the culture could not be adjusted even though we had already started some initiatives. But our freedom to test was limited, being a public company with the obligation to report every quarter. Amazon, being a private company, had the ability to go faster in the price lowering process, and they maximized the gross margin through a series of investments which showed results within a year. This was a great example of Amazon’s power and positive side. They also allowed us to invest in cybersecurity and e-commerce, for instance.

When it comes to the limitations of the partnership, I would probably say that the culture, which was so precious and particular at Whole Foods Market, could not be understood and maintained by Amazon. For instance, when we started discussing with Amazon, both teams were asked what they learnt from each other. The Whole Foods Market team answered that they learnt about data management, decision-making tools, and tech. The answer from the Amazon people was: “we learnt how to hug”, which is disappointing because they could not manage to understand our specificities. As a result, many of the Whole Foods Market teams left as the culture changed too much.

But on a broader note, I would say that the acquisition by Amazon has been a good thing for Whole Foods Market because it allowed the company to grow, including by making the pricing more adjusted to today’s competitive market.

IADS – You used to be Co-CEO at Whole Foods Market. What is a Co-CEO and how does this work?

WR - You have to remember that John (Mackey) and I were friends for 35 years and that before being appointed Co-CEO, I had already served as President and COO so it was not something coming out of the blue but a natural progression.

John is an extraordinary thinker but not so much interested in details, which is my case. We were really complementary to each other, without a strict division of actions even though in reality it came naturally (for instance I managed the relations with Wall Street). It was a specific set-up of 2 people doing something together in which they believed very much.

I would say that the clear benefit was to have 2 perspectives and points of view, both wanting to win together, and the downside is that we had to take the time to work it through with each other.

For instance, one time we were trying to decide to raise some product prices, I woke up in the middle of the night and I realised that we needed to act and I wrote John a note, he wrote back straight away at 4 am thinking the same thing. There were also times when we disagreed, for example on investments and tech. This is where it became a challenge because we ended up agreeing on compromises, turning out not to allocate enough capital to the projects.

When it came to the teams, of course, they were probably playing the mom and dad game, but I had most of the direct reports, so most of the organisation ran through me, which made things simpler.

At the end of the day, even though analysts were criticizing our set-up, it was working well for both of us, and it lasted 8 years!  Keep in mind that we had been friends for 35 years before. It was a unique arrangement, specific to our company and our history. I would not rule it out for other organisations, but it was quite unique and specific based on our personalities and situation.

IADS – How do you see the role of the CEO now and how did it evolve?

WR – The most important quality for a CEO is that they set the vision, and use the strategic chops they have access to, to understand the market and figure out how to proceed.

Beyond that, for me, as a CEO you have to be authentic and empathetic, all the more that you have to work with multiple generations of employees. In the US, we had social situations forcing CEOs to talk, without playbooks as this was an entirely new situation. A lot of CEOs told me that they found these situations strenuous. We are all different, there will never be a playbook on how to be meaningful and empathetic, especially given the fact that a lot more is expected from CEOs today compared to in the past.

Another set of qualities is agility and curiosity: now CEOs have to be willing to move, discover and act quickly, especially when it comes to technology.

All in all, there has been a crack in the idea that CEOs are all powerful and that teams are working for them: the work from home trend, among others, has changed the way organisations are led.

A lot more is asked from CEOs today in terms of skill set and the qualities needed. I do not think that it is possible to be a CEO without being so on a 24/7 basis. It demands a lot from you as a person and requires a strong, and permanent, willingness to grow. One of the principles of conscious capitalism is that if as a leader you do not grow, you will not be able to make your organisation grow either.

IADS - In terms of Price / Quality / Experience, what works and does not according to you? How did you drive customers’ attention?

WR – The three components of retail are price, quality and service. You can have two of the three but usually not the three at the same time. We chose quality and service. We never aspired to be the cheapest but we wanted to provide the highest quality. Of course, this depends on companies and what they want to achieve.

We developed a set of quality standards that evolved with the years, laid out in full transparency with vendors and suppliers. Again, this relates to our culture, our goal was to motivate our store leaders by showing that we were true to our purpose. We were known to have the highest product standards on the market.

When it came to the service, we invested a lot in the workforce and how to constantly better serve the customer. Our model was based on interaction and we were known for the great customer experience when they were coming to the stores. We controlled that with mystery shoppers but that was almost superfluous given the strength of our culture at the time.

It is all about the role of the leadership: to take care of teams who in return can take care of customers.

IADS - With the current limitations (staffing, experience), what would be your view for department store food retailing: go with a partner or develop ourselves?

WR – I went to several department stores in Berlin and Amsterdam, and I loved the way they set up restaurants on the roof-top. Food is a great business to bring animation and traffic to department stores, but a very complex one too because fresh products have a very limited shelf life.

For that reason, I would say that having a partner would be probably easier, but, if I had the choice, I would rather go direct by recruiting someone from the food industry, leveraging his own contacts, as I truly believe that outsourcing leads to losing a part of the experience. Plus, you might make more money by going direct.

IADS - How did you deal with innovation at Whole Foods Market? By sequence? In parallel? How did you create a culture of innovation?

WR – This is getting us back to the power of culture, in our specific case the notion of individual empowerment: our team members were able to make their own decisions at their level. In our case, we expected our 500 or so stores to be all different from each other, so we did not centralize the store development function at the national level, but, at best, at the regional level. This allowed all store leaders to do their things, all the more that our culture included a right to do mistakes. In Denver for instance, a store displayed a full Mac & Cheese aisle. Nobody told him to do that, but he came up with the idea which was specific and differentiating. Another example is when for material reasons, a store started to over self-serve bakery whereas so far, we were serving ourselves bakery over the counter.

IADS - How do you deal with innovation-related investments within a company? And how can you mitigate risks?

WR – For the food industry, there is more innovation now than in the past, and this is only going to accelerate. It would be suicidal for any retailer to ignore this. There is no way to succeed by holding on to what you have in such a competitive market today.

In terms of my investments, everything starts by meeting an entrepreneur who at the same time has the ability to build a sustainable company, which shows his seriousness, and at the same time provides a truly different and differentiated offer which will fuel my unique value proposition in a new way.

***

Question – Going back to the notion of purpose: how did you deal with all stakeholders (board, team members, directors, shareholders…)?

WR – Purpose is a living thing. It is not like you say it and that’s it. You have to consciously invest in the process of reviewing your purpose and see how it can evolve, first because you are a bigger company now and you can do more things, and second because you are focusing on the right things.

We had a meeting every 5 years called ‘Future Search’ when we were gathering about 150 stakeholders, and we worked through a process where we looked at the past, present and future, including reviewing our purpose.

Also, remember: simpler is better than more complex, and this is true for purpose too.

Question – Going back to the notion of culture in Whole Foods Market, in department store companies, usually legacy companies, we need to move fast but at the same time also deal with company owners, usually members of a family. I am sure that you have gone through the same changes, but how to deal with the needed changes which might, at the same time, make them very nervous?

WR – Always remember that the culture of a company is a living thing, it is not set forever. We took some leadership principles from Amazon, for instance. Another example is that we opened a leadership academy as we realized that a lot of our store managers lost, with time, their ability to drive with purpose. It is all about growing an organic set of values and ideas.

In order to pilot this, we were asking our whole staff twice a year about our culture, where we had to invest, where we were strong, and what were their ideas too.

In the department store world, Nordstrom is a good example: they are all about serving the customers. And this is not going to change: even if the “how” changes, the “why” does not.

Now, when it comes to the reaction of owners and how to deal with this, this is an excellent question and I will ask Pete and Eric Nordstrom about that!

Question -  How do you inspire all teams with purpose and make sure they embrace it?

WR – Give the possibility to the teams to embrace the purpose and make it theirs, by granting them autonomy to test ideas (as long as they enter within the purpose framework of course). Give them the possibility to do so in full autonomy (for instance, we gave a budget of $100,000 to store leaders to spend on an annual basis on their store, they were accountable for the expenses but the decisions were theirs). And, most importantly, keep in mind, and remind them, that it is ok to fail.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the collection of pictures here

Printable Version here

Introduction

The IADS travelled to Turkey (now known as Türkiye) last June to meet with Cem Boyner, the CEO of Boyner Grup, a former IADS member, to get an update on his latest initiatives following the Covid-19 pandemic. Located between Asia and the West, often tarnished with its international policy decisions (to the shame of Turkish businessmen), and riddled with inflation (estimated at 78,35% for 2022, a 24-year high), it is easy to overlook the country and consider it done.

In reality, the retail market is buoyant, and many innovations are taking place, which made the trip all the more interesting as many of these innovations could be interesting for IADS members to look at. We review below our store visit, as well as the insights collected during the meeting with Hopi, Boyner Grup’s data venture.

Company history and background

Department stores capitalised on the expansion of Turkey’s ready-to-wear sector in the 1990s and a concurrent boom in large shopping centres that have continued further. Despite continuous unfavourable exchange rates making imported goods significantly more expensive, as well as extremely expensive customs fees (up to 35% for merchandise coming from some parts of Asia), fashion and luxury found their way throughout the country. On another hand, the growth of Turkey’s economy gave rise to a new middle class and more wealth among the already rich. This transformation led to increased foot traffic at premium department stores as people became more eager to try new brands and spend beyond basic necessities.

Among the significant players shaping up the market, Boyner Grup was founded in 1952 as a clothing manufacturer, by Osman Boyner. The first Boyner store opened in 1981 and was operated under the name of Çarşı (name converted to Boyner in 2004). Nowadays, it is led by Cem Boyner and is mostly addressing the middle class, operating under the brands Boyner, YKM, Boyner Sports, YKM Sports, and Boyner Outlets. They report 276,000 sqm of retail space in 97 stores spanning across 37 cities.

The merger with YKM, another department store company, was achieved in 2012, which ultimately led to Boyner’s resignation from IADS in 2016 (YKM was a member since 2003 and membership had been transferred). Business includes international brands (active sportswear, Men’s, Women’s and Kid’s footwear, accessories and RTW, cosmetics, home decoration) and a significant private label business (13 brands). Boyner also launched Boyner Home in 2017, with stores dedicated to kitchen, bathroom, home textile, and electrical household appliances.

In 2015, the group was composed of 2 main arms: the Boyner retail and textile activity, including the manufacturing capabilities and some private labels sold through their own retail network, and the retail branch, composed of Beymen (a luxury department store brand name founded by Boyner in 1971) and AY Marka. Cem Boyner increased his equity in Boyner Retail and Textile Investments, while Qatar-based Mayhoola (which also owns Valentino, Balmain and Pal Zileri) invested in the retail branch. This led to the restructuring of the group in 2019: Beymen and AY Marka are now owned by Mayhoola while Boyner Holdings remain the full owner of the textile retail and production unit, including:

• Boyner stores,
• Altinyildiz (textile manufacturing),
• BR Magazacilik (retail distribution of the Altinyildiz brand, in partnership with Ran Retailing – BR reports 200 stores in 60 cities in 2020, and 300 points of sales including wholesale),
• Hopi (mobile and telecommunications),
• Morhipo.com (online retailing, launched in 2011 and ranked 6th online retailer in Türkiye with a turnover of $172m).

No financial information has been officially released at least since 2018.

Visiting the store: A holistic department store

We visited the latest Boyner store, in the Cadde location (in a residential part of the Asian side of Istanbul), which opened in September 2021 on 4,200 sqm and 5 floors. This store, seen as a prototype for the new Boyner concept, replaced a much bigger unit which was, according to Cem Boyner, in a much better location, and which became a local meeting point for residents in the past 22 years in addition to being a cash machine, thanks to a private brand, Limin (not sold in the new store). Boyner made the decision to challenge all this (and make the most of a real estate opportunity) as the goal is to move from being a department store company to a “multi-brand lifestyle store”, positioned on the mid-range segment (the goal is not to compete with Beymen, which operates all international luxury brands in).

What is sure is that the store is highly visible: the entire façade is covered with a 38-meter-long screen displaying anamorphic art pieces (a technology allowing to have a striking 3-D feeling from the store entrance) and Boyner makes sure people see it, thanks to a Costa Café just nearby (they have secured the franchising agreement for the country). Art is basically everywhere in and on the store (this is unusual for Boyner) and every artwork has been co-developed with artists, to make sure they are interactive and echo what is going on in the store, to avoid giving a museum feel.

The basement, dedicated to sportswear, is striking: all walls have been built in recycled plastic and wood (the eco-conception is at the core of the store model, for instance, solar panels on the roof help power the store, and toilets are used with collected rainwater) and, in addition to an immersive décor and visual merchandising, many services are offered to customers: a cold room to try the garments (similar to Canada Goose in Toronto), bikes where customers can pedal to recharge their phones, free water fountains in the gourds section… all in the middle of an advanced VM set up (a step forward for the company according to the staff), using interactive LED-lit flooring and artworks, or 3D holograms on the shelves to animate the products. This selling space is working extremely well and generates 25% of the total store turnover.

The ground floor displays a space dedicated to sustainable goods at the entrance, and the cosmetics spaces (25% of the turnover).

The sustainable goods space, where many products have been developed in collaboration, also features artwork developed by artists concerned about sustainability (a common trait across the whole store) and collecting points, where customers can leave their unwanted items, which are then recycled and sold, financing grants to students. Art is only displayed and not for sale.

The cosmetic area is more classic, with the usual names (Clarins, Lancome, Estée Lauder…) displayed in their own concept boxes with white logo on black background, all operated in concession (even though the system is quite exotic in this store: brands pay for their salespersons, do not pay rent but Boyner collects 100% of the turnover, making this system a mix between wholesale and concession).

What is more striking is the 40m high LED screen that goes from the ground floor to the 4th floor, displaying artwork which interacts with customers through their cell phones (an astute way to collect data!). This proves that it is possible to use screens in a lively manner, and not just as a décor like in, for instance, the Nike House of Innovation in Paris.

The first floor is dedicated to Women’s fashion, with an upgrade in terms of brands presented compared to what Boyner has in its other stores: Lagerfeld, DKNY… (the retailer wants to remain accessible to its customers and not go full speed on luxury). They also promote local initiatives, by collaborating with influencers and artisans to produce and sell one-of-a-kind products at accessible prices. There are no cash desks: Boyner is testing on this floor mobile payments. When asked about how they were dealing with the antitheft tag removal and the gift wrapping, they showed a mobile unit where all these actions can be performed on the spot and moved very quickly from one side of the floor to another.

The second floor is dedicated to activewear and denim. There, the seating section has been developed by an artist whose artworks are displayed in the entrance, echoing what she does in her art, and is completed with videogame booths and the possibility to interact with the screen, which increases the time spent in-store.

The third-floor features men’s collections. Interestingly, and due to the nature of the market, the mannequins also display women’s products there, as many customers are females looking for gifts for their husbands.

Finally, the top floor is dedicated to homeware and kids offers, as well as the “customer relation” lounge, where customers can proceed to click and collect and ask for home delivery. The lounge seemed to be still under construction at the time of visit, and was very surprisingly uninviting, in stark contrast with the rest of the store.

In terms of F&B, in addition to the Costa Café at the entrance, the store is flanked with a new concept, “Vertical restaurant”, which is a must-see. The concept is to be entirely sustainable at 100% and self-sufficient in terms of energy, water and consumption (except the aliments). This goes through, of course, the decor (entirely recycled), zero plastic and carbon policy, the use of recycled and filtered water at the bar, but also specific partnerships with LG, Electrolux or Bosch to create kitchens that customers can rent or where they can follow lessons with chefs, as well as an upcycling workshop, a local vegetable growing unit, and the systematic recycling of 100% of the food waste into facial cream (from the coffee waste), soap (from cooking oil), compost and pet food. On 800sqm, the restaurant features a high-end and vegan Turkish cuisine restaurant, a pizza place, a Japanese place as well as 3 locations that are offered to up-and-coming Turkish young chefs or street food stars every week, to generate curiosity and traffic.

What’s great and what’s next

The Cadde store is delivering results: the average ticket is 27% higher than in other stores, thanks to a different brand selection and a lifestyle approach, with many places where it is great to spend time (time spent in-store increased from 30mn to 1 hour). This concept will be rolled over to 20 stores in 2023 and 30 additional ones in the next 5 years.

Overall, the bet to create a “multi-brand lifestyle store” is paying off, as the general feeling is an energetic store, full of great ideas, addressing a young clientele and giving them an immersive concept, which feels rich but not expensive. Is that to say that Boyner has developed a new concept store? When discussing with Cem Boyner, he confirmed that such a concept was to be deployed on 9,000+ sqm stores. Among the good ideas that we spotted:

-    The many fun services (cold room to try warm garments, bicycles to charge phones,

-    The collaboration with artists to make art part of the store (and not museum-like, for instance, Le Bon Marché in Paris) and with sustainability in mind,

-    The practical approach, for instance with the mobile wrapping and antitheft tag removal unit, which has been developed by salespeople themselves,

-    The ‘Vertical’ restaurant and its radical approach, which could be interesting for IADS members in their food offer.

Of course, we had some questions when it came to salesperson management: 60% of them are paid by the brands, and only 40% are managed by Boyner. In these conditions, given the fact that the store has a cohesive, holistic lifestyle concept, how to make sure that they are all working together and orientating customers, instead of only selling their own brands?

Moving forward, we were also introduced to the Boyner online business, which is currently representing 30% of the total group’s turnover, with 17m loyal cardholders (in a country of 85m people).

Boyner is launching a new delivery service, “Boyner now”, with a 90mn delay in the whole of the country. When customers use this service, a Boyner-branded delivery person comes to their house (including, in the case of fashion items, a +1 / -1 size unit, just in case), waits for the selection confirmation and retrieves payment (meaning that customers pay for what they keep and not during the order itself). With this new service, Boyner hopes to capture 60% of its turnover online. In terms of technics, this service is fulfilled from the 97 stores in the country, and customers have access to 4m references, vs. 10m on the “normal” e-commerce website, which is also going through a revamp in order to increase the length of stay online from 1mn and 1% conversion to 8mn and 4%.

This growth in digital is supported by Hopi, another venture that Boyner launched in 2015, and dedicated to data management for B2B (marketing solutions, digital transformation, payment systems solutions, BNPL solutions) and B2C (hyper-personalized services for their 13m app users), leading to a full ecosystem which is truly competing with what Amazon or Alibaba can propose to Turkish retail companies today. Boyner will be looking at international expansion for Hopi in 2023 and hopes to equip foreign retailers in the future.

Conclusion

Following the split with Beymen, Boyner Grup knew they had to reinvent themselves and the experience they wanted to provide to customers, so they initiated a sea of changes well before the Covid-19 pandemic. As a consequence, the pandemic acted as a catalyst and also allowed to speed up some of the planned changes.

Today, many boxes are ticked: a new approach to instore experience (which really competes with many higher-end world-class department stores), the use of art at the design level of the store to make sure it is echoed in the customer journey rather than just sitting there, a radical approach to sustainability with many innovative processes, and a clear vision when it comes to the use of tech and data in order to accompany today, and predict tomorrow, customers’ purchases. The setup of the Boyner Now delivery in 90mn in the whole country is a tour de force and it would be worth it for IADS members to go and see how this is actually performed in terms of systems and processes.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the collection of pictures here

printable version here

Introduction

The IADS was invited to take part in the 2022 Future of Retail Conference organised in Athens last May by the Hellenic Federation of Retail. The Association was interviewed on stage, along with Mr Dimosthenis Boumis, the CEO of Attica, the emblematic Greek department store, and invited to discuss the future of retail in city centres.

It was also the opportunity to reconnect with old acquaintances, since the former CEO of Minion, a defunct department store in Athens, used to be a member of the IADS and is now a member of the Attica board. Attica has gone through the Covid-19 pandemic with the same difficulties as other department stores in the world and came up with a new strategy designed to rely less on international tourists (even though they remain more than welcome) and more on the local Greek clientele, from every social class. If appealing to the rich Greeks is not a head scratcher, the current social and revenue structure in Greece makes it a bit more complicated to appeal the to lower classes without losing glamour or soul.

We visited the City Link flagship, in the heart of Athens, very close to the infamous Syntagma square, in order to see how the store is implementing and executing the new strategy.

Company history: just turning 17 and already a complicated story

The Attica department store (not to be mistaken with Attica Group, owner and operator of boats) has a recent and rather complicated history, since the company (and the brand) is only 17 years-old, in spite of the flagship City Link location in the heart of Athens being located in a historical building. Just like in other countries when it comes to the history of retail, it is mainly a story of powerful men and capital management, even though it is much more condensed in time in the case of Greece.

To fully get a grasp of it, one needs to have a quick historical approach to the Greek retail market, marked in 1934 by the opening of a small kiosk, called Minion, by Ionnis Georgakas. There, he only sold products in bulk, which proved so successful that just after WWII, he was able to buy a larger location in the city centre, increasing  progressively the surface until being able to sell 120,000 references in the 1950s, with 1,000 sales associates. Minion became a European-class department store and introduced escalators, air-con and computers to Greece, in addition to allowing Greek customers to become exposed to foreign fashion and tastes, generating queues in the streets to enter what would soon become an iconic location for any Athenian.

Georgakas, a wise businessman, understood early the role of seasonal discounts as well as TV and radio advertising,  and ruined the competition of the then-ubiquitous local bazaars. Unfortunately, the iconic 9-storey store was destroyed during a fire provoked by a criminal arson in 1980, and the company was ruined. Georgakas rebuilt the store but was not able to recover from the heavy losses, and the company was nationalized in 1983. Georgakas attempted a come-back in 1991 by purchasing back the company but failed and ultimately left the following year. The company survived until 1998, before being sold to another Greek company, Elmec, which in turn was acquired by Folli Follie, which had the project to renovate the store, a project dropped in 2018. The store, left empty for more than 20 years, has been sold in 2021.

Folli Follie was founded in 1986 by Dimitris Koutsoliotsos and is famous today for its luxury jewellery, watches and  fashion accessories, sold in 95 stores across the world. Koutsoliotsos, aware that the closure of Minion had left a hole in the Greek retail market (and before opportunistically acquiring it), founded the Attica department stores company in 2005 with the City Link location and the idea to replace Minion. Due to the nature of its business, Folli Follie was able to secure exclusive distribution rights for Greece (and other countries) for some brands, such as Shiseido, which were presented in the Attica stores. In 2018, Koutsoliotsos had to resign from his role at Folli Follie, but remains involved in Attica, where he appointed Dimosthenis Boumis as CEO. Boumis, who has a finance background, founded Cosmobrand in 2011, a joint venture between Attica and himself, dedicated to the import and distribution of cosmetics and food, as well as e-commerce. The CEO appointment came in 2021 and makes Attica quite special in the worldwide landscape, with a non-family-member acting at the same time as a major stake shareholder and CEO.

Today, Attica operates 4 department stores in total, including City Link (2005), Golden Hall (2008), Tsimiski (2014) in Athens, and a location in Thessaloniki (2012). All locations sell women’s, men’s, and children’s fashion wear, footwear, beauty and accessories and are recognized by customers and brands as true luxury hotspots. According to the Greek press, the company posted a total turnover of €140m in 2021, vs €98.8m in 2020 and €180m in 2019.

Visiting the store: a true and visible improvement from a year ago

The City Link store is located in a historical building that has been part of a city centre renovation project back in 2005, helping to preserve buildings that were built just before WWII. It is structured on 8 floors and 34,000 sqm, 4,000 of which have been added in 2021, mainly to house extensions of the Women’s Fashion and the sportswear sections, in addition to new services such as a VIP room, a hair & beauty salon, and new F&B points.

The large windows on the street are inspiring, quite efficient, and open on a space which is complex due to the structure of the store: the basement and the ground floor are narrow and the whole game is to make sure that customers are naturally going into the upper floors, which is the reason why the escalators are massive and just in front of the entrance, at the risk of overlooking what is left, right and down (to the point of not having visited the basement for this review…).

The narrow ground floor displays the cosmetics offer, with all brands having a shop in shop at their concept in the periphery, including a large Byredo location at the entrance. Circulation is not easy, but sales associates are omnipresent and willing to help. Security guards, too, are very visible and can be intimidating when it comes to entering the store. Interestingly, each floor displays the whole list of brands available, which suggests a certain effort to keep it up to date of course from season to season but also in season when popups and temporary collaborations are launched.

The first floor is dedicated to formal men’s RTW, shoes and accessories. The brands are high end, such as Hugo Boss, Zegna, Kenzo or Brooks Brothers (a company in which Konstantinos Tsouvelekakis, another significant shareholder of Attica department stores, has shares). The whole floor is closed, without windows, which can be somehow oppressing, and although all brands have their own concept,  some logos obviously produced on site are not entirely perfect.

The second floor is dedicated to Men’s casual fashion, and, contrary to the first floor, has all windows opened on the main avenue (a decision taken by Boumis when he took the job) which gives light and a real sense of depth since the building is narrow and long. Interestingly, all cash desks (for those not related to the shop in shops) are located at each end of the floor (this is the case for all floors) which can be painful as customers are obliged to go through the whole floor to pay for their purchases.

The third floor has been, just like the second one renovated, but also extended, with a very efficient sportswear section (the largest in Greece) on the other side of the building (the lower floors in that building are not part of the store as they belong to the Pyraeus Bank, and are under negotiation in order to re-structure properly the store for its basement, ground, first and second floors). The whole space has been imagined as a running track and this works extremely well given the structure of the building, with very large Nike, Lacoste and Adidas shop-in-shops. The “young fashion” space is also spectacular, including the Levi’s shop-in-shop of uncommon proportions. One caveat due to the structure of the building, is that the whole space feels like a tunnel, however immersive it might be, meaning that once customers have started their journey, they might have some issues in terms of circulation and finding the staircases to go up or down.

The fourth floor is dedicated to women’s fashion, and just like the third floor, benefitted from an extension which allows displaying, in addition to the traditional names (Max Mara and all its other lines for instance) a very wide selection of local Greek brands such as Forel. The hair salon is located just behind (not the old school salon, but a very spacious, well-lit and luxurious space), just near the jewellery and small accessories section. This floor also includes a very inviting bar (serving alcohol) and an interesting Carpo shop-in-shop. Carpo deserves a special mention, as it is somehow reminiscent of what Steen & Strom has done with headwear brand Varsity, by teaming up with a local partner and is making extremely good sales thanks to its premium positioning: Carpo is all about selling Greek nuts and chocolate in very nice boxes. The space, located in front of the bar and in a section where customers can not do anything but go through, is a must-see and very well decorated. Average ticket: €80 (literally for nuts).

The fifth floor displays contemporary fashion and lingerie, with a huge Zadig & Voltaire shop-in-shop, a smart sense of merchandising (for instance, Hei Poa cream is available just near the cash desk in the swimming wear section), but the execution of the lingerie space is somehow disappointing.

The sixth floor is dedicated to kids, duty free and also gives access to a rooftop café which, although it has a very nice view, is difficult to access (in terms of escalators and time to get there) and even to find on the floor itself.

What to remember and what is next?

Even though Attica used to be considered a second-class wholesaler by brands in the past, this is no longer the case. The brand selection is good (and improving) but above all, the new floors extensions show a very modern and acute approach to retail immersion, which also explain the dense traffic in these sections at the time of visit (noon, with a scorching 30°C  temperature outside) even though the building is difficult in terms of structure.

Also, the CEO is all about increasing omnichannel capabilities but also experience spaces, as shown by the extremely well-designed café and Carpo nuts store, which are both generating a fantastic return on investment.

In terms of what’s next, the company has announced a major and ambitious plan for the next 2 years, with new store developments taking place until 2026, and, of course, the relaunch of the e-commerce activities including full omnichannel capabilities.

The e-shop, launched in 2017, is to be relaunched during summer 2022, with, in addition to a new product curation, a new technical platform allowing the interaction with physical stores, i.e. picking products bought online in stores, or dealing with products purchased in store and exchanged online. In addition, while at the beginning the e-store will be limited to cosmetics and fashion accessories, RTW will be integrated at the end of the year. This development should contribute to connecting the department store with local customers.

However, we mentioned in the introduction that tourists are always welcome, especially the customers from the Balkan countries, who might not have the same exposure to international brands at home as, for instance, Dutch or French customers. For them, the offer sold in the Thessaloniki stores will be upgraded and amplified, in order to make the most of their appetite for international brands.

Finally, Attica is planning a new opening in the hip area of Ellinikon in 2025, near Athens, where rich Athenians either own a house or enjoy the beach, 25 mn from the city centre. The massive urban renovation project includes 2 retail areas, the Vouliagmenis Mall (“Ellinikon commercial hub”, on 185,000 sqm)) and the open air Marina Galeria, on 19.000 sqm. The new department store in Marina Galeria will display on 10,000 sqm an exclusive selection of brands, completed by a series of mono-brand stores that it will lease to international luxury labels.

Conclusion

The realisation that Chinese and Russian tourists had acquired a place too central in the business forced Attica to rethink its point of differentiation. But how to do so? Can you really compete for international tourists who are spoilt in their home cities and rushing through Athens to get to the islands?

This is why the nut stand is not as anecdotical as it might seem. Attica is well aware that it needs to differentiate in order to reach the customers it targets. This goes through providing experience, but also providing the right level of prices for the right luxuries: dry fruits delicacies for local customers who might want to treat themselves with something inspiring but not to the point of buying a Chanel bag (or being able to), or the right brands to tourists coming from zones where they do not have the same choice than in central European cities.

Even though this is an ongoing journey (which will be completed by the finalization of the omnichannel capabilities in Q3 2022), Attica has made a significant step up when compared to its pre-pandemic aspect and offer. The exciting and ambitious Ellinikon project will also be something to watch closely, as it will be all about experience and entertainment.

Attica company profile

Credits: IADS (Selvane Mohandas du Ménil)

IADS recently held a meeting all about the women’s fashion brands to look out for in 2022. Based on market research, IADS and NellyRodi presented the most innovative brands from different segments of women's fashion: DNVB, designer, contemporary, young talents and everything in between! Check out our selection of these brands!

DNVB

![salut

SALUT BEAUTÉ

Salut Beauté is an innovative and sustainable Parisian brand that creates

colourful, original, and comfortable sets for women. These sets are made

with different fabrics from second production circuits recovered from

luxury houses or manufacturers from there they are refurbished and made

into fashion forward yet powerful suits.

Check out the Salut Beauté website here

![never fully dressed

NEVER FULLY DRESSED

Never Fully Dress is a flattering effortlessly feminine fashion brand that was

designed for all shapes, sizes, and styles. The products are made with

premium quality materials without the premium price tag. They have

introduced recycled polyester and natural and biodegradable fabrics to

help reduce their environmental impact.

Check out the Never Fully Dressed website here

CONTEMPORARY BRANDS

![icicle

ICICLE

Icicle is a high-end fashion brand from Shanghai that presents a fine

elegance while still being made with sustainable materials with 100%

natural materials, vegetable dyes, recyclable packaging,

Check out the Icicle Website here

![LVIR

LVIR

LVIR is a modern and natural brand that can be enjoyed by all generations.

It is a flexible style that can blend with the attitudes and emotions of the

customer. It is refined women’s clothing for fashion professionals and

wants to focus on simple colors for a more comfortable and stereoscopic

style.

Check out the LVIR Website Here 

DESIGNER BRANDS

![MERYLL ROGGE

MERYLL ROGGE

Belgian brand curating an energetic medley of unexpected styles.

check out the MERYLL ROGGE website here 

![NENSI DOJAKA

NENSI DOJAKA

Albanian designer known for her lingerie-inspired dresses and cutout

pieces that reference '90s aesthetics.

Check out the NENSI DOJAKA INSTAGRAM here

NEW YOUNG TALENTS

![SUPRIYA LELE

SUPRIYA LELE

Led by her Indian heritage, British identity, and her passion for minimalism

in her creations she uses a deliberately vintage and subversive approach to

textiles, cutting and manufacturing, thus elevating them to the rank of

“new luxury”.

Check out the SUPRIYA LELE website here 

![HELIOT EMIL

HELIOT EMIL

The collections are unisex and monochrome, taking inspiration from

Scandinavian heritage and using different fabrics from around the globe.

Check out the HELIOT EMIL website here 

OTHER

![ELSE

ELSE

Elevated, everyday lingerie, loungewear, and swimwear brand for modern

women.

Check out the ELSE website here

![SPORTY & RICH

SPORTY & RICH

Collection of simple, yet thoughtfully designed products that emphasize

longevity over momentary relevance.

Check out the SPORTY & RICH website here

Check out Delipop's store front here

Introduction

The IADS recently sat down with Marek Piotrowski, Chief of Marketing Operations at Retail Robotics, a technology company that has been improving the efficiency and convenience of delivery and click and collect processes for e-commerce and e-grocery for more than 30 years. Marek Piotrowski has been involved in marketing and design for the entirety of his career working with top brands all over the world through advertising agencies where he utilized different successful strategies for a slew of brands. He joined the Retail Robotics team and oversees marketing, design, PR, and user experience at Delipop in France.

Delipop harnesses Retail Robotics’ click-and-collect multi-retailer smart parcel lockers that serves as multi-brand or single retailer pick-up points. Delipop recently opened its first locations across Paris, so the IADS team decided to use the opportunity to take a first-hand look at the ‘store front’.

An introduction to Delipop

The Delipop automated pick-up point locations have been created with customer experience at its core. As you are walking down the streets of Paris, your eyes are quickly drawn toward the colorful façade of the building which boasts bold blues, lime green, hot pink, and yellows. The entrance of the building is guarded by a keypad where customers can use a unique code to enter when they have a scheduled delivery. Inside the building, there are color-coded and numbered kiosks where customers are invited to scan a QR code to retrieve their goods. The machine registers the information and moments later, large, refrigerated drawers open to reveal the customer’s goods. Depending on the size of the order, multiple drawers can be used to fulfill the delivery. If the customer also has frozen items, they will need to scan another QR code at the same kiosk, which will then signal a separate frozen section that has numbered parcel lockers. The parcel with the item will light up in green and the door will pop open, then customers can retrieve the remainder of their goods.

The interior of the store is meant to help the customers disconnect from the outside world by offering soothing sounds such as birds singing as well as the specific use of colors, lights, and smells just like what other food retailers have started to do in their newest formats, such as Monoprix’s Monop’ iteration in Paris. As Delipop is committed to local communities, each Delipop offers a mural that highlights famous people and places in the neighborhood. This, however, is not particularly standard in terms of grocery retail, at least in Paris.

IADS: Can you give an overview of how Delipop came about, giving more detail about what the solution is and where it is going?

Marek Piotrowski: Parcel lockers have been around in e-commerce for a very long time, but they are gaining more importance as they consolidate flows and create a ‘hub effect’ which leads to improved economic benefits and sustainability. Retail Robotics is one of the biggest producers of parcel lockers in the world, and we believe that the concept of Delipop offers an interesting alternative to couriers and home delivery while also decreasing the limits of traditional e-commerce delivery options. On average, one courier could only deliver around 15 orders a day, but Delipop allows more orders to be fulfilled and reduces the cost of delivery.

Delipop offers a pickup point for e-grocery orders to local consumers. The pick-up point is equipped with smart parcel lockers that offer refrigerated and frozen sections. Before Covid, there were not too many issues with grocery deliveries, and the demand was growing slowly. But in the wake of Covid, it was almost impossible to get your grocery delivery scheduled and delivered. Delipop is now the only viable solution that can cope with the problem.

Partnership with Carrefour

*IADS: Delipop opened its first parcel location, in partnership with Carrefour, in Paris at the end of 2021. Can you explain the logic behind this partnership and what you have learned so far? What is the plan for the coming years and how are you going to achieve it?*

MP: Carrefour decided to join the network as the first partner because they like to show that they are the leader in retail and innovative solutions. The partnership has been in effect for over half a year, and we are satisfied. The most important thing we have learned is that once a customer starts using Delipop, they are very loyal. Over the last five to six months, we have had some clients use Delipop 50 times, which comes out to be almost 10 times a month. Now it is time to build the network and optimize logistics.

The two key factors that are important to our customers are location and price. We also set up Delipop to be user-friendly so that anyone can use it. Now we are planning on expanding partnerships as well as locations. The plan is to have 150 Delipop locations across Paris and to expand across France to be able to offer products locally and sustainably to more people.

IADS NOTE: Since the time of the interview, Delipop has added Monoprix as a retailer. Read their press release here.

Opportunities for departments stores

*IADS: What are some tangible takeaways from the Delipop solution that Department Store leaders should note?*

MP: Putting parcel lockers in stores will increase foot traffic, and 70% of customers that pick up a package from a parcel locker will stay and shop for other items. We are actually working on a project now to build a big network of parcel lockers in local convenience stores. This network of parcel lockers has no additional cost to the retailer, all they have to do is dedicate some space to a logistics partner and it will bring in additional foot traffic to the store. This helps retailers convert online traffic into physical in-store traffic.

(note from IADS: given the fact that for grocery pick up the parcel locker zone needs to be relatively accessible and easy going, which often implies ground floor locations, there is a hidden cost related to the missed turnover that is usually achieved on such locations)

Delipop and Sustainability

Delipop recently conducted a sustainability insight report titled ‘Sustainability in the last-mile delivery of groceries’ which takes a deep dive into how Delipop is addressing the challenges caused by scheduling e-commerce deliveries and changing customer habits. The report reveals that the growing demand for e-commerce delivery will result in 36% more delivery vehicles in inner cities by 2030. Delipop hopes to contribute to the 15-minute city concept developed by Professor Carlos Moreno where citizens can fulfill life necessities within a 15-minute walk or bike ride from their homes. The demand for last-mile solutions is growing rapidly and is expected to grow globally by 78% by 2030. The report suggests that a universal network of multi-brand hubs, such as Delipop, can solve many last-mile delivery issues from increasing costs to more sustainable operations.

Delipop plans to offer a multi-merchant pedestrian drive that provides local customers with all the products they need from various retailers at affordable prices. Delipop also offers greater efficiency for couriers as well. With home deliveries, a single courier can deliver around 15 orders a day, but with Delipop’s network, they will be able to fulfill 200 to 300 orders a day. The Delipop concept claims to reduce emissions, enhance local business, respect traditional commerce, harness technology, and offer an efficient multi-brand network to contribute to the overall improvement of the communities it serves.

IADS’ take on parcel lockers and city centers

While Delipop is providing a solution that is more specifically focused on the grocery market, parcel lockers that can house a variety of products could amplify retailers’ BOPIS and e-commerce fulfillment options. Such solutions are introducing a “buy online pick up in locker” option which can potentially reduce various types of friction related to the transfer of goods between retailers and consumers. Contactless fulfillment options can also save retailers’ employee service time and they could provide more flexible solutions to customers. Parcel lockers can also provide an alternative option for returns, which is a major cost to retailers with the uptick in e-commerce sales.

Parcel lockers are also providing solutions that contribute to localization, and as department stores are typically situated in the heart of cities, this makes them the perfect candidates to offer such services to citizens. Last-mile delivery, especially in large cities, has become quite the challenge as governing bodies are starting to regulate how deliveries are made to reduce traffic and make deliveries greener. Between the rising costs of inflation and supply chain disruptions, parcel lockers could offer a more sustainable and affordable way for retailers to create top-notch experiences for their local customers, while also bringing in more foot traffic to physical stores.

It is interesting however to note that specialized companies, such as Delipop, focus on local supermarkets to plan their expansion and often take for granted the presence of a parking lot in their reasoning. One could see that there is an obvious possibility of collaboration with department stores, but it seems untapped so far. Is it due to the fact that profitability perspective is not in line with expectations, or simply because the said specialized companies also fall victim to the biased perception that department stores are not a format fit for the future?

Credits: IADS (Mary Jane Shea)

printable version here

Introduction

Last May, the IADS had the occasion to travel to Andorra to visit the local landmark Pyrénées department store and meet with its leading team to understand where the company was heading. In Andorra too, the Covid-19 pandemic left its mark and forced retailers to rethink their business approach and positioning, especially in such a landlocked country normally living on touristic flows.

*Even though the size of the business is relatively small when compared to other IADS members, the Pyrénées business case raises a set of interesting questions when compared to the rest of its local market:

-    What does loyalty mean for the Pyrénées customers? Is the game all about attracting local customers to the Pyrénées ecosystem, or making sure that tourists will return to the store? And what is the differentiation point: price, or selection?

-    How can a retail company stand out from the crowd in a country where the whole industry is based on duty-free product sales, from tobacco and liquor to fashion and accessories?*

Given the specificity of the Andorran market and operations, such a visit was extremely informative as it helped to see another approach to differentiation and segmentation. Interestingly, in Andorra too, the game is not anymore to sell products (even at extremely competitive prices) but to provide a new, fresh and compelling experience both in-store and online.

Company history: a very big fish, in a very small pond

The Pyrénées department store (whose original name is Grans Magatzems Pyrénées in Catalan) has been founded in 1930 by the Perez family, twenty years before the touristic boom that took place in the 50s. At the time, Andorra was an isolated country living in autarchy, selling wood and tobacco, and there was an opportunity for a retailer to bring in novelties and a taste of the outside world fashion. It is remarkable to note that the country is still rather difficult to reach, with no international airport or railway connection, and that, in spite of this, it has built its reputation among some travellers thanks to the low VAT level of 4.5% and good retail prices (up to a third of the French ones).

The Pyrénées group (which used to be an IADS member from 1979 to 2019) grew remarkably in just a generation, and entered many different markets: local wholesale distribution (for brands ranging from Samsung, Sony, Leica, to Ray-Ban or Montblanc, and including food such as Horeca), automotive distribution (from Mercedez, Citröen, Jaguar, Land Rover to industrial vehicles or motorcycles), travel agency, banking and credit, insurance, in addition to its retail activities. The Group operates, in addition to two department stores in Andorra-la-Vella and Pas de la Casa, the FNAC-Darty stores in the country, hypermarkets and other franchises such as L’Occitane, McDonald’s, or various hotel chains.

It now represents 9% of the national GDP, employs 3% of the Andorran active population (1,200 persons), and the name is a household name for many, if not all, Andorrans. Being privately owned and managed by the third Perez generation (who lives in a cult of secrecy, following some succession scandals that took place in 2010 and 2020), it is difficult somehow to have an idea of the turnover achieved by the department store itself, knowing that the group total turnover is estimated at €271m in 2019.

Visiting the store: Testing new ideas in a changing context

The Pyrénées department store, that every Andorran knows, is located in the heart of the city and can be considered quite accessible taking into account the difficult local geography and tiny roads. Rather massive, with a complex floor plan, the store has a total surface of 15,000 sqm on 5 floors. There are several entrances, and each of them has a very distinctive flavour: according to the exit, the store can feel like an international department store with a nice selection of accessories, or, on the contrary, one can feel as if they are entering in a typical duty-free store if taking the massive tobacco and liquors entrance.

Even though the store is divided into 5 floors, not all of them are dedicated to the department store in itself: the basement is operated by FNAC/Darty (it is necessary to go through the department store to access it, which reminds a bit the Inno/Mediamarkt partnership in Brussels), the third floor adds to a reduced retail space a level of carpark, and the fourth floor is dedicated to customer service and carpark.

The ground floor is large and provides different experiences: hard and soft accessories, cosmetics and beauty, men’s fashion, and tobacco products, with an impressive cigar lounge. The whole floor is designed with mobile display units, whatever the section and the category, with only the peripheral sections being fully decorated by the brands, suggesting flexibility if and when needed.

When it comes to the accessories section, the brand range is international and attractive, with Longchamp, Furla or Michael Kors in corners decorated with the brands’ concepts, and generic areas in the middle featuring Ralph Lauren, Moreau or Coach. The execution and feeling in the leather goods section is more qualitative and distinctive than in the watches and custom jewellery section, essentially due to the level of brands available and the fact that in the rest of the town, the competition in that segment is harsh.

The tobacco products space is just near the parapharmacy space, which is somehow intriguing. There, customers can buy cigarettes, luxury cigars, but also chocolates and souvenirs. A dedicated cash counter allows separating such sales from the rest of the store (where customers have to go to central cash desks, Pyrénées is not yet equipped with mobile cashing solutions).

Probably for the same competition reasons that limit the business on watches and jewellery, the cosmetics and beauty section is less impressive than in other international department stores, and takes much less footprint. Once again, here, the story is about having the category present to capture any potential sale and making sure that no opportunity is missed, but without having the possibility to fully differentiate from what one can find in stores in the rest of the city.

Finally, the men’s section is probably the more immersive, with a surprising selection of luxury and semi-luxe brands (Boggi, Ralph Lauren, Hackett…) in a very nice and well-executed environment, neighbouring a younger and more contemporary offer, from Rains to Tommy Hillfiger. It naturally leads, and without much of a transition, to the sports section which is mixed and includes international brands which have claimed to stop wholesale distribution, such as Nike and Adidas (but Andorra is a specific and small market).

The first floor is dedicated to women’s and kid’s fashion, as well as toys. Interestingly, on the whole floor, the feeling is much less generic as many brands do have their own concept all along the aisles, giving a feeling of shop-in-shop even though all purchases are also processed on central cash desks in the middle of the floor. This brand concept approach is not linked to a specific positioning such as in the Men’s luxury section a floor below, and goes for brands from IKKS to Scotch & Soda but also Tommy Hilfiger.

The lingerie space is large and impressive, and at the time of the visit, was one of the busiest sections of the store, entirely with female customers, which suggests that this section is more well-suited for local customers and their own consumption (probably for historical reasons as Pyrénées was one of the first retailers in the country) rather than being a duty-free location such as Victoria’s Secret airport stores where travellers can buy spicy lingerie on the go.

Interestingly, a portion of the floor is dedicated to a specific concept, called “Gallery”, where designer brands are available, such as Isabel Marant, Ganni, MSMG or Vince. Some kids’ fashion is also available here and also comes, just like the women’s selection, as a complement to what is available on the rest of the floor. This space feels like a laboratory where Pyrénées tests new brands or new processes, as some second-hand luxury handbags are also available. The space, equipped with carpets and sofas, is also somehow a bit more comfortable than the rest of the store, which is fitted with a cold luxury kind of approach (marble, generous lights…).

The second floor is dedicated to food but looks more like a supermarket than a gourmet food section. Aisles are pretty basic and advertising is more price-centred than product-centred. A click and collect service, “shop and go”, is available on this floor and works with a dedicated app.

The third floor welcomes customers with the reproduction of an old fountain, which can direct customers either to the food court, with a selection of a few restaurants (well suited for lunch but quite unappealing for dinner options), or home equipment, including pet accessories, a locksmith, and a dry-cleaning service. A spa is advertised but, in reality, is not much more than four massage tables in a private room, closed for Covid-19 regulations at the time of visit.

Customers can access the carpark from here, and this floor is the only one with all amenities, including toilets.

The fourth floor is dedicated to customer service, where all clients are accommodated in the intimacy of a private cabin with a customer representative. There, customers can deal with purchase pick-up, and returns, but also tax refunds, credit limit increases or other requests. Attention to the customer is maximal but overall feeling a bit vintage.

What to remember and what is next?

A duty-free store is not precisely expected to be the place testing and trying new full-price categories or services. Even though they are still at the very beginning of the journey, the leading team of Pyrénées is well aware that in a city like Andorra, the price point is no longer a competitive argument, however old or familiar the retailer’s brand name might be.

This is why they have started pre-pandemic to go upwards in terms of brand positioning, which explains the nice luxury spaces spotted in the Men’s section on the ground floor or on the first floor with the Women’s section. It also explains why the “Gallery” space acts as a laboratory of new ideas, both in terms of new brands (many of them are not sold elsewhere in Andorra), or categories (by mixing design with fashion, for instance).

Most importantly, Pyrénées has been working a great deal behind the stage, with the launch of My Piri, the loyalty programme boasting a subscription rate of as much as 80% of the total Andorran population, allowing the retailer to have a very good understanding of its purchase behaviour, and its data, which could turn up into a gold mine since Pyrénées is the only player on the market.

Is that to say that Pyrénées is now all about bringing “the best quality and the largest brand and product assortment in the country” to local customers? Not exactly: it also wants to reclaim its status of destination store for any tourist coming into town, which is the reason why the expansion plans include in the coming year the opening of a new floor entirely dedicated to wellness and spas (which also explains the reason why the current “spa” lounge space is closed) and a rooftop overlooking the roofs of Andorra-la-Vella.

Conclusion

Travelling to Andorra is fastidious, and long, as it can take up to 3 hours from Barcelona or Toulouse to get there. Now that customers can access good deals from the comfort of their homes (with some limitations to this claim as it is difficult to find cheap cigarettes online, if not illegal), they are asking for something more.

A good illustration is the fact that now, there are 3 distinct types of tourists travelling to Andorra: the travel retail tourism, aiming to take advantage of the prices which can be up to three times lower than in France or Spain, the “white” tourism, people coming to Andorra during winter for ski, and the “mountain” tourism, a new breed of travellers increasingly hungry for outdoor and rock-climbing experience, a population for whom smaller cities in Andorra are building equipment and designing trails in nature.

The Pyrénées department store has well understood that, in a city where the price point is a reason to come for a third of the tourists, selection, curation and experience were the best way to differentiate. The cherry on the cake is that this allows to killing two birds with one stone, as locals might also very well enjoy a place to hang out. The opening of an entire floor dedicated to wellness is, for sure, a major piece of news for the city of Andorra-la-Vella, and will deserve a review in a year or so to see how they executed their vision, all the more that some interesting benchmarks are coming to light at the same time, such as the new space at Galeries Lafayette.

All in all, a new destination within the destination is born in Andorra, proof that department stores all across the world, whatever their size or market, are alive and kicking, in spite of what some might say.

Check out the collection of pictures here!

Credits: IADS (Selvane Mohandas du Ménil)

Printable version here

Introduction

The IADS had the occasion to travel to Brussels and took the opportunity to visit Inno, the iconic Belgian department store celebrating its 125th year of activity this year and a founding company of the IADS. A new CEO was appointed in 2019 with a new plan, and this visit was the opportunity to take stock.

What can we learn from the Inno revamp? Where do they stand? To what extent the Belgian retail scene has evolved after the Covid-19 pandemic and where is the company heading?

Historical background: the many ownership changes added to the market difficulties

“A l’Innovation” (the original name of the company) was founded in 1897 by Julien Bernheim and the Meyer family rue Neuve, in Brussels. In 1928, the company was a founding member of the IADS, where it remained until 2011.

Just like many other department store companies, A l’Innovation was all about novelties and first times for the Belgian market, and developed a network of stores across the whole country, until becoming the largest retailing company in Belgium 40 years after being founded. After WWII, the market consolidated and A l’Innovation merged with its competitor Bon Marché to become Inno-BM in 1969, and then with GB Entreprises to become GB-Inno-BM in 1974 (also increasing the store portfolio).

However, difficulties increased with the evolution of new retail formats (mass distribution, specialty stores) leading to the purchase of Inno (a new name minted in the 90s) by German department store Kaufhof (another long-term member of the IADS, from 1930 to 2015), then the property of Metro AG, in 2001. When Metro sold Kaufhof to the Hudson’s Bay Company in 2015 for €2.42bn, Inno was part of the deal. History repeated itself in 2018 when Signa Holdings purchased Kaufhof (which had been renamed Galeria Kaufhof) to the Hudson’s Bay Company for an estimated €3bn, and merged it with the other German department store it already owned since 2014, Karstadt, into a new entity called Galeria Karstadt Kaufhof (the new name was released in 2019). On the same occasion, Inno was rebranded as Galeria Inno on the Belgian market.

This long and complicated story of ownership is not entirely unrelated to the difficulties of the company up to 2019: it has never been a priority for its successive owners, due to its isolated (and smaller) market, and its size when compared to its Canadian or German counterparts.

Bringing in the changes

A new CEO, Armin Devender (a Kaufhof veteran with 23 years of experience in the company, followed by a 3 years stint at the Hudson’s Bay Company), was appointed in October 2019 with the clear mandate of revamping the company’s appeal and increasing sales. Even though the Covid-19 pandemic obviously did not ease things for him, a strategic transformation plan was implemented and executed, with visible results.

The plan included 21 projects, among which:

-    The most visible part was the rebranding of the stores into Inno in April 2021. Devender was aware that Belgian customers did not recognize Galeria Inno as the original brand and he was eager to recreate a sense of proximity between the general public and the iconic store (the current tagline of the company is “Inno for you”),

-    Stores also had a makeover, both in terms of spaces (larger and easier circulation areas, opening of new lounge spaces, lighting, the opening of the windows on the outside…) and offer, with an increased range of brands sold (including younger or more upmarket ones) and new partnerships, especially in the F&B area with the opening of BON restaurants on the ground floors of the stores,

-    Somewhat more impressive, behind the stage the plan also included a technical upgrade. During the pandemic, Devender and his new management team have managed to implement a new ERP with SAP in only 7 months, which allowed them to relaunch a proper e-commerce website which also includes a marketplace, allowing them to test new product categories not sold in stores such as design pieces, furniture units or lights and either delivered via dropshipping or picked up in stores.

According to Devender, the results were quick, with an increase in the conversion rate noticed as early as in November 2021, and when the IADS met with him in May 2022, he mentioned that total sales were now almost back to pre-pandemic levels.

Strangely enough, however, the rejuvenation plan was first launched in secondary locations (Schoten end of 2020, Liège, Louvain and Waasland in 2021-22) and not in the capital city flagships. This has raised some critics about a strategy which requires capital and time to refurbish a 16-wide network of stores, in a very uncertain context, and questions about its realism and time needed to achieve it. For instance, the company had to put on furlough 50% of its overall staff, including HQ, in early 2022 due to liquidity issues.

The IADS visited the two stores in Brussels city center, in the posh location of Place Louise and the original one of Rue Neuve. The feeling, look and touch differ considerably from one location to another and even allows to have a “before / after” kind of understanding of the work done so far.

Place Louise store

This store is the place to go to have a taste of what the department store concept looked like prior to the arrival of the new CEO, as the revamp has not started yet. This retail unit is surprisingly out of synch with the immediate neighbors (the usual luxury brand suspects, Hermès, Louis Vuitton, Tiffany’s…) and looks at best dull, at worst unattractive.

Organized on 4 floors, the zoning is classical with a few surprises:

-    The basement is dedicated to lingerie, and visitors land immediately in the section from the escalator facing the entrance. This is somehow surprising as there is no boudoir nor intimacy feeling here, but this clearly reflects a practice from the past (many department stores in the Northern part of Europe used to display lingerie either on the ground floor almost immediately at the entrance or in the basement). One can wonder about the efficiency of such a set-up in modern times.

-    The ground floor is rather classical: cosmetics, accessories with multi-brand generic central displays, and walls with brand concepts, showing an assortment of local and international brands. The wholesale model seems predominant with no shop in shop with separate cash desks in view, but a large bank in the middle of the floor, flanked by a guard, where customers can line up and pay for their purchases under his close watch. The fact that customers are given their purchases in new concept packaging is destabilizing and shows that the store is about to be upgraded, which would explain why the barber space is closed and under construction.

-    On the first floor, the feeling is airier thanks to the large windows overlooking Avenue Louise, and customers can find access prices and contemporary RTW and shoe fashion. Construction is being carried out in the middle of the floor, with a sign “this is the right moment for a relooking” and workers are busy with the upgrades.

-    On the second floor, mature fashion is presented. A mannequin was lying on the floor unattended at noon, facing the escalator exit, which raises questions about the attention given to service and image.

-    The last floor is dedicated to Men’s and Kid’s Fashion. The height of the ceiling and structure of the walls makes it almost impossible for salespersons to see who is in the kid’s section, which is a problem and leaves customers being left alone there. The customer service space is under construction and without any type of hoarding or explanatory sign.

During the visit, sales assistants were either not in sight, or discussing between themselves. None of them were saluting customers, even at a moment when affluence was low, and they seemed pretty much left to themselves, as some of them were having surprising behavior (hiding behind a corner or spending time folding garments at a moment when customers were gathering in front of them with questions).

Overall, the visit was disappointing and far away from the promise implied by the new plan. The CEO latter confirmed that this store should be upgraded in S2 2022 / S1 2023.

Rue Neuve store

This location is a stark contrast to the posh Place Louise area: like many other areas in Europe, this area used to be a must-go during the 20th century, and gradually lower-range retail and restaurants started to get locations there and make the most of the traffic. As a consequence, the Rue Neuve location is rather mainstream with a concentration of fast foods and high street fashion boutiques.

However, the store, due to its historical status, has started to undergo a makeover launched in November last year. The new logo is proudly displayed on huge banners floating on the façade. However, they are made less visible from the street as Media Markt, the partner leasing the last floor of the store, has also displayed their logo on the building.

On the total 5 floors, 4 are occupied by Inno itself, from the basement to the third floor (the last one being entirely occupied by Media Markt):

-    The basement is dedicated to home products, design and decor. Even though it had been revamped in 2019, hence not with the current concept being deployed, the feeling is the antithesis of the Place Louise store, with perfect lighting, a feeling of space and the use of bright colors. In comparison, the cash desks are inviting and look like places where one can receive advice and help, rather than just paying bills. The way the floor is organized allows us to comprehensively measure and sense the dimensions of the store, and this is impressive.

-    The ground floor allows customers to enter directly through the main entrance into a cosmetic space which has been built with international standards: brands are properly displayed in their own shop in shops with their own concepts, with competent, welcoming and smiling staff, and this is clear that here, the floor is being looked after both by the retailer and by brands. The cosmetic area is then connected to the lingerie space (with a cozier feeling than in Place Louise) and bags and accessories. The brand selection is also a bit more upmarket than in Place Louise, with names such as Furla, Coach, or Calvin Klein, coming as a top up to the Guess or Liu-Jos of this world.

-    The first floor is dedicated to women’s fashion, organized in nice spaces with corners build with specific brand concepts. The whole floor is clear, and gives a sense of space with set ups and displays which are supporting the glance while not cutting it.

-    The second floor is dedicated to men’s fashion, with a similar sense. It was noted there that all sales staff were wearing their own looks, not uniforms, giving a sense of youth and credibility.

-    The last floor shows a bit of everything, from shoes, sportswear, gift, travel accessories and a restaurant that is a reminiscence from the 80s (not in a cool way). Here, the rebranding is still on going, with signage mixing both the old and the new concept. Again, the space gives a feeling of light and is quite welcoming.

Although both stores were visited on the same day, within 20 minutes of each other, traffic intensity and quality were incomparable, and seemed out of synch with the environment itself: the younger, cooler and apparently richer customers were not in the posh area location but in the more popular one, which suggests that the rebranding strategy is beginning to bear its fruits.

Online presence

It is interesting to see that even though the rebranding of the company now dates back more than a year, not every detail has been yet fixed: for instance, Google still displays “Galeria Inno” on its maps for the Rue Neuve location, which Place Louise is simply called “INNO Louise”. This is the kind of detail that can be confusing for tourists and people unfamiliar with the names, for instance.

When visiting the neat and very efficient website (where marketplace products are presented in an indistinct manner until the product page), the accent is clearly put on the loyalty program recruitment, using the anniversary celebration as a pretext to display the new perks according to the 4 levels of membership (‘Unique’, ‘Amazing’, ‘Exceptional’ or ‘Premium’: perks are quite classical and range from free parking, alterations or make up sessions, to access to special and VIP events, and including point-based vouchers, birthday date discount and extended return policy).

Even though the overall display is very simple (and somewhat unappealing for the younger generation), it is probably the best way to make sure existing customers start to use the online channel, and one might wonder if the current website is not simply a transitional one for a more sophisticated version once the customer based has evolved.

Check out the collection of pictures here!

Conclusion

It is paradoxically too early to know if the plan launched by Armin Devender in 2020 is bringing success, from visiting the flagship stores only. While the idea of testing new concepts and projects in the second-tier stores can make sense in order to limit risks, the current look and feel in the capital city stores suggests that this approach was too shy and timid given the timing. Now that tourists are coming back and local customers are looking for new experiences, the situation in Brussels is not on par with everyone’s expectations which is a shame given the fact that the corporate revamp has now been launched close to two years ago.

Also, even though the revamp in the Rue Neuve store is not finished yet, the progress made so far suggests that there is still a long way to go for Inno to get to international standards: while the offer is more attractive, there is no hint that the stores are becoming more experiential and able to generate new streams of revenue in the same manner than what we see in France, England, Spain or Germany. As a consequence, critics in the local press stating that the overall plan is too slow and not radical enough (especially in terms of restructuring and rightsizing the network) can be understood: there is no evidence that Inno is currently building the solid foundations it will need to succeed in the future.

Additional reading

Also see the press release (rebranding and new rue Neuve Store)

Credits: IADS (Selvane Mohandas du Ménil)

Printable version here

Introduction

The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This third part is dedicated to Steen & Strom in Norway.

Company history: the oldest department store company still in operations in the world

A former member of the IADS (1940 – 1992), Steen & Strom is one of the oldest, if not the oldest, department store company still in operation today as it was founded in 1797. The first department store, built in 1874 over four floors, was destroyed in a fire in 1929 and the current 6-storey store, of Parisian inspiration, was built and opened in 1930. Steen & Strom has been instrumental in introducing novelties to Norway, from fashion to technology, as well as innovations such as the first escalators.

The company went bankrupt in 1992 and from then, went from hands to hands of various owners, until being purchased by Soylen Eiendom in 2011 for €95m, who then sold the department store as well as the surrounding 11 real estate locations in 2015 to the Meyer Bergman investment company for €500m. Meyer Bergman, renamed MARK in 2020, still owns Steen & Strom to this date, through the Norwegian structure Promenaden Management which operates both the department store, the nearby Eggert shopping centre, and the luxury boutiques locations in the streets adjacent to the department store (MARK, based in London, is involved in maximizing the value of prime real estate assets such as The Whiteley in London, Richardstrasse 20 in Berlin or the Pershing Hall Hotel in Paris).

The Steen & Strom store owned and operated by Promenaden Management, is not to be mistaken with another Scandinavian company with the same name, owned by Klepierre and involved in managing 52 shopping malls across the region. To this end, the department store has rebranded into Steen & Strom 1797, also emphasizing its history and heritage.

Given the fact that the company is privately held and Promenaden Management a holding company, it is difficult to get actual numbers about the turnover of the store. Steen & Strom 1797 mentioned that they experienced record sales in Q1 2022 and claim a total footfall of 2.2m visitors, with the goal to increase that number to 5m in the coming years (the Karl Johans gate, where the store is located, is Norway’s most visited shopping street with 15.5 shoppers p.a. in normal times).

Visiting the store: a luxurious work in progress

The store, renovated in 2020 for a total investment of €29.5m, is structured on 6 floors and 12.500 sqm including the basement and a fully renovated entrance on Karl Johans gate, which allows to open the building on the outside, bringing in a lot of light and provide a spectacular space for events and marketing activations. It has already proved to be a success as the footfall and traffic have constantly increased since the opening of this section.

The department store’s revamp is timely: Oslo is ramping up its touristic attractivity, with the constant opening of luxury hotels, and fine dining restaurants, but also with the inauguration of impressive landmarks: after having opened the Opera House in 2008 and the Astrup-Fearnley contemporary art museum (in a building designed by Renzo Piano) in 2012, the city inaugurated the new Munch Museum at the end of 2021, and has just opened the new National Museum in May 2022, all located in different zones of the city, allowing to spread the development and investments. In order to be part of the game, Steen & Strom 1797 has worked on its visibility and recognition: the store is perfumed with its own recognized scent and equipped with a studio quality sound system, windows have been renovated and are at the same time promotional and educative, the visual identity has been modernized with the use of vivid colours, and the website will include e-commerce activity in July 2022.

The revamp of the store is still in progress, meaning that fully finished zones coexist with sections still under construction (at the time of visit). For instance, while the entrance on Karl Johans Gate is fully finished, spectacular and extremely inviting, opening up to the event space and giving a good view of the cosmetics section, the opposite entrance is still under process and opens directly to hoarded sections. The surroundings of the store are perfect, since Steen & Strom is adjacent to Louis Vuitton, Chanel, Saint Laurent, and houses the Gucci, Balenciaga or Burberry stores.

The basement is extremely immersive, with a series of entertaining food concepts, extremely well executed, which allowed generating a significant footfall at lunchtime with employees from nearby coming to experience the gourmet offer there (ranging from bars, restaurants, to delicacies and a deli). This floor represents 24% of the total business in the store, and upscale private labels are planned to be launched in 2023.

The ground floor is very different from what has been seen in the other Nordic department stores: while it houses cosmetics and the usual international brands, the choice has been to avoid having the classical white logo on black boxes approach, and replace it with the store’s own concept, all in low-rise white marble displays, lit with huge rounded lamps, and a space dotted with couches and activation zones including a lot of testers. As a consequence, the immersion in the store’s atmosphere works also extremely well here, and provides an enjoyable experience, completed by the atrium, which is a new space consecutive to the renovation of the entrance on Karl Johans gate, where small accessories such as Dior sunglasses and caps are sold (a small shop-in-shop in the entrance dedicated to high-end caps designed and produced by a local brand, Varsity, generates a €10,000 weekly turnover). Interestingly, the store, still in revamp and repositioning, does not sell footwear, lingerie or hard luxury accessories yet, but already outperforms its targets, convincing the leading team that the steps taken are the right ones.

The first floor is dedicated to “men’s new luxury” but, in reality, is still in progress when it comes to the offer. While all peripheral zones are at brands’ concepts, the central area is in a generic concept (but brands are not operated in wholesale as Steen & Strom 1797 is still a 100% leasing concept), including a more formal offer than what has been seen in Helsinki and Stockholm, and an underwear section located in the middle of the floor. There is also a multi-brand concept, “Collage”, which displays brands such as Givenchy, Celine, and Off White (some of them are also available in the city in their boutiques, or in other points of sales). Since the offer is a work in progress, the goal is to increase the size of the Collage space, and also go more upmarket and luxurious when it comes to the brand selection available in the generic area. Also, one must remember that the current structure of the store will be revised in the future, as the first floor is, according to the plan, to be dedicated to accessories and shoes (a category which is not yet sold at all in the store). This floor will also provide the click & collect service once activated.

The second floor is dedicated to “women’s new luxury”, and, here again, still in process, with a very large section dedicated to dummies, probably for lack of better. The whole building is structured according to 2 escalators at the opposites of the floors, allowing smooth and easy navigation on each of them. Here again, the brand selection is also a work in progress, with good visibility given to Scandinavian and Norwegian brands. There is also access, separated by a small bridge, to a very high-end hairdresser where customers can also buy beauty products, in double exposure to the ground floor. This floor also accommodates the personal shopper lounge.

The third floor gathers the “contemporary fashion” and the brand selection is quite adequate, echoing the trendy and young feeling of the floor. It is to be noted that, so far, there is no F&B space on any of the floors with the exception of the basement, and this is a topic that the leading team is currently exploring. It is possible, from this floor, to access a separate space via a small bridge where the outlet section can be found. Execution is very elegant.

The fourth floor is advertised as childrenswear and home lifestyle in the store maps, but, so far, is used as an exhibition space, just like the fifth floor, advertised as “events and services” but so far only housing the Promenaden Management offices.

All in all, the overall impression is a very good execution and attention to detail for the finished sections of the store, which conveys a convincing feeling of luxury and shopping appeal. The basement and ground floors are the zones which are closest to completion and give a very positive understanding of what the store is striving to achieve.

Interestingly, there are many internal debates in the company to take a similar road than the one taken by NK in Stockholm, namely operating directly with some multi-brand zones, by selecting, buying and selling specific brands. The rationale for this approach is to consolidate the fashionable positioning of Steen & Strom 1797 in a city where competition exists but has not coped yet with international standards.

The closest competitor in town is the Paleet shopping centre. Just like Steen & Strom 1797 (and NK in the region), it operates a business model based on leasing, including a historical fashion multi-brand, Hoyer (with brands such as Zadig&Voltaire or Anine Bing for women’s, and Burberry, Comme des Garçons, Heron Preston, Lanvin, Moncler, Nike or Off-White for mens). This is not the historical location of Hoyer, as they recently relocated to this centre, and they are said to have lost customers in route. Apart from the brand offer (which is not competitive when it comes to womenswear), the size, width and breadth of assortment presented there tends to validate Steen & Strom 1797’s thinking that they have an opportunity to become a fashion centre, in addition to already being an undisputed luxury hub.

Check out the collection of pictures here!

Conclusion

What to remember from Steen & Strom 1797? Since the store is still in work-in-progress mode, it is difficult to draw conclusions already. However, what has been striking during the visit was the fact that Oslo has considerably evolved when it comes to fashion, with a young and affluent clientele, seemingly immune to the European political events and worldwide economic woes, and eager to spend. Steen & Strom 1797 has understood that and the moves made to make the most of this opportunity have already been successful. The atmosphere, execution and quality of details in the store are all impressive and make it the most adequate place to shop in the city so far.

Of course, there are some challenges, such as making sure that the right brands are present (which implies that they realize the potential of the market, and this is not obvious as Scandinavia is often overlooked in terms of retail potential) and making a decision on the business model (leasing vs. buying) which will increase flexibility but will also imply new competencies and team structure in the company.

But whatever the decision made, it is already obvious that Steen & Strom 1797 is making all the needed steps to becoming a destination for all tourists visiting Oslo (a growing breed), in addition to entertaining the local, young and experience-hungry clientele. In addition to that, we also believe that the level of immersion and execution so far should also put back Steen & Strom 1797 on the international scene in the mid-range as it has all that it takes to become a reference for other markets too.

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

Introduction

*With Covid, the search for wellness has become increasingly important for consumers. In a survey from McKinsey, the global wellness market was estimated at USD 1.5 trillion in 2021, with a predicted annual growth of 5 to 10%. In this survey, 79% percent of the respondents said they believe that wellness is important, and 42% consider it a top priority.

As a consequence, retailers started to tip toe in this relatively unknown part of the business, in the intersection of beauty, sports practice, health products and services. Selfridges first launched a wellness program in February 2022. Dubbed “Superself”, the initiative included paid sex counselling sessions, confidence coaching sessions and other services to help customers live a “brighter lifestyle”. This month, they are transforming their Corner Shop into “The Feel Good Bar”, a well-being destination focusing on sex and sleep-enhancing products and services. The cinema at Selfridges will also be part of the program, converting into a sleep session area. Health-based experiences like acupuncture sessions, IV drips, bio-hacking, and oxygen therapy will become available later this year. Also in the UK, on top of a cosmeceutical space, Flannels partnered with Barry’s Bootcamp to open a gym in their new Liverpool store. In the US, mental health initiatives developed in the past months for instance at Walmart, CVS and Rite-Aid drugstores.

In France, last year, Monoprix launched “La Santé au Quotidien”, a new department dedicated to products that are in between traditional beauty offerings and medical treatments. In March 2022, Le Printemps Haussmann store also launched a new beauty floor gathering beauty services such as manicures, pedicures, brow services, hair products and a salon, dermo-cosmetics and food supplements, as well as a spa developed with the Face 2 Une beauty tech brand, proposing no gender services through manual massages and machines. Next September, using a more confidential approach, Le Bon Marché will also open a permanent 150 sqm beauty salon.*

Obviously, initiatives are plentiful but Galeries Lafayette goes further than any other department store in the wellness business. Last week, and after a year in the making, they opened the “Wellness Galerie” in their Haussmann store. On 7 July, Alexandre Liot (Haussmann Store Director) and Arthur Lemoine (Offer and Buying Director) unveiled the new floor. The IADS attended the floor visit for you, and we are delighted to report back this exciting member news.

Check out the a collection of pictures of the Wellness Floor here

The Wellness Galerie in a nutshell: sports, beauty, health, wellbeing, and more

This recent move is part of a larger modernisation plan which already witnessed the revamp of the floors: 2 and 3 (women’s fashion), 4 (women’s shoes) and 5 (kid’s wear). The Wellness Galerie is located on the -1 floor where women’s shoes used to sit, and one of the most important floors in terms of traffic. The idea behind such a space is to make wellness accessible to a larger part of consumers as it is still quite segmented to date in France.

With this new 3,000 sqm department, Galeries Lafayette has an ambitious goal: the holistic concept is set to become the destination for well-being in Paris, where people come to think about themselves and do something good for their body and mind. In a nutshell, the Wellness Galerie splits into 3 main areas: a gym studio and a fitness product offer, beauty and health  (services, and a care-oriented beauty store. Many brands are exclusive, and some are introduced for the first time in France.

In terms of architecture, the Wellness Galerie is full of rounded spaces, even using a reverse cupola to mirror the store’s famous one. Curved walls and ball-shaped private rooms echoing the 70s are emphasizing the impression. Walls are usually tiled with earth-tone ceramics. Hardwood and concrete floors come one after another depending on the area.

Galeries Lafayette gets physical

La Source, a Parisian bootcamp studio, is opening a 200 sqm workout space which will offer group coaching, as well as other classes, such as boxing and cardio starting at EUR 30 for a 50-minute class. With its direct access from the subway station, the gym can open outside of the usual operating hours, from 6:30 am to 9:00 pm (the store is open from 10 am to 8:30 pm). A large sitting area, thirty shower cabins, supplied with bath towels, body soap and lockers make the place a true gym.

This part of the floor also includes a trendy yet technical athleisure product offer, the “Fitness Store”. Some 15 responsible brands recognized for their expertise, from big names (Adidas, Under Armour, The North Face, Eres and Wolford) to emerging brands are gathered on a 200 sqm surface: Born Living Yoga and Alo Yoga (exclusive brands), Luz Collections and Girlfriend Collective for fitness and Pilates, Circle for running and Chlore for swimming are completed by Colorful Standard for loungewear and the latest yoga accessories from Bala and Athlé. Finally, Champion Spirit, sports accessories and equipment that connect digitally, are available to shoppers. The “Fitness Store” doesn’t sell sports shoes.

A wide array of services focusing on well-being, care, beauty, and fun

What makes the ‘Wellness Galerie’ special also lies in the plentiful service offers. First, through the “Lobby Wellness”, the “Wellness Team” welcomes customers and guides them in choosing the program that best suits their current objectives. The Wellness Team can also carry out a broader assessment of one’s physical, mental and emotional condition to guide clients toward the right treatment. A dedicated platform on Galeries Lafayette’s website is available to book any service.

When it comes to brands and partners, the space proposes unexpected pure health-related or well-being services such as Aantomik. Created by 2 osteopaths, services combining prevention and treatment such as cryotherapy, hyperbaric chamber, osteopathy, meditation, muscle strengthening, yoga and Pilates in group sessions are available. Many other services oriented towards well-being and beauty are also proposed: Belleyme offers sessions in their infrared saunas for detoxing, disconnecting, and regenerating your body. The famous Martine de Richeville combines Chinese medicine and psychology to remold the body through her special and renowned massage technique that targets fatty deposits, circulation issues, deep skin tissue, and internal organs. L’Institut Nathalie Duarte is a physiotherapist, masseuse, and official trainer of the Renata Franca method. Les Bains du Marais brings ancestral rituals for beauty and well-being thanks to a hammam and a collection of bathing products. And Alexandre de Paris will open a hair salon in the  Wellness Galerie in September.

To improve body figures, Skinneo delivers anti-ageing and silhouette-enhancing treatments by using exclusive technology to care for the face and body. Chronodiète offers nutritional coaching for diet and well-being using a methodology based on chronobiology and the glycemic index to adapt to the rhythm of each person for an efficient weight loss journey.

More oriented towards beauty, the Galeries Lafayette buying team recruited Chillhouse in New York to differentiate their manicure offer. The brand offers fun and accessible body, face, and nail services. Le Boudoir du Regard develops innovative bespoke eyebrow waxing, eyelash and eyebrow dyes, long-lasting eyelash extensions and permanent make-up services to provide structure and harmony to the face. Finally, Djula proposes piercing services with a trendy line of body jewelry made from 18 Carat gold, diamonds and other precious metals and gemstones.

Two “bubble spaces” are available for private bookings. In these two cocoons, customers can celebrate a birthday, a bachelorette or bachelor party, or any other occasion. Some treatments can be organized in the intimacy of the “bubbles” as they can be entirely personalized. Nutrition being a key aspect of wellness, a restaurant, the DS café, has been designed to offer healthy meals and juices, to stay or to go.

The Beauty Store is focusing on care

Central to the floor, the 600 sqm Beauty Store is divided into shop-in-shops and a multi-brand area. New names mix with famous ones that were previously available on the ground floor. The idea here was to leave the tri-axis brands such as Chanel or Dior, the perfume and makeup brands on the ground floor and to move the more care-oriented ones to the Wellness Galerie: for instance Augustinus Bader, Origins, The Ordinary, Clinique, Aesop, Shiseido, Kiehl’s, Aveda, Clarins, Dermalogica, LA:Bruket, Rituals. New brands are introduced such as Seasonly, the 100% clean and vegan French line of beauty products, benefiting from a large area. Sunday Riley provides innovative and exclusive formulas to see rapid results and rebalance skin for the long term. And 111SKIN which reproduces surgical and clinical treatments through innovative formulas.

Brands developing alternative products have also been onboarded. L’Officine Immortelle combines phyto-aromatherapy and grimoires to bring ancestral formulas up to date through its herbal teas, oils, treatments and elixirs all 100% organic and made in France. Aromatherapy Associates has been a leader in the wellness industry for over 35 years by producing handcrafted natural formulas using essential oils designed for physical and emotional health. Finally, a food supplement section with Sensiness and Maison Louno, and a book store gathering 500 books are also available for a 360° product offer.

Conclusion

Department stores recently entered a relatively new business: wellness. Being about beauty, well-being, ageing, nutrition, health and sport makes this holistic trend and the market coming with it difficult to be clearly defined. While the wellness trend remains unframed, retailers are experimenting with various options from traditional beauty treatments to healthcare-related services. Some department stores are even going further by offering injectable services like Saks Fifth Avenue in the US. In France, Galeries Lafayette certainly takes the lead in this area by devoting an entire floor to its Wellness Galerie. It also marks an additional venture into experience and service offerings.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

Introduction

*Among the many consequences for retail stemming from the Covid-19 pandemic, which we are exploring at length, a major one is the international tourism crash and the closure of China, which historically steadily contributed to department store companies’ growth in the past years. Even considering the recent closures taking place in Shanghai, Beijing and other Chinese cities, the business has flourished domestically for the past 2 years in China and the acceleration of retail digitization has also taken place there. The road seems to be still very bumpy, but there is definitively a light at the end of the tunnel. What can we learn from what took place in China and are there lessons to have in mind? To answer this question, we interviewed two specialists from Mobile Now Group and Clientela.

Mobile Now Group, founded in 2009, is a development studio with a focus on digital experiences, products, and platforms. With offices in Shanghai, Hangzhou, and Changsha, in addition to their Singapore office, they have a commanding understanding of the Chinese market and its evolution. They have worked on more than 100 projects with leading companies in the world such as Richemont, Cartier, IWC, Montblanc, Sephora, DFS, Hennessy, Lane Crawford, Shiseido, NARS, SMCP, La Samaritaine, and others.

Clientela, a software company based in New York founded in 2010, has developed a complete suite of acquisition, clienteling and retail operations for stores, in order to cater to customers’ needs through an optimal experience, while maximizing efficiency and profitability for retailers. They have developed solutions for several leading global brands, such as Cartier, Benefit Cosmetics, Marc Jacobs, Chloé, MaxMara, and Carolina Herrera, and they have led a pilot project with IADS member Magasin du Nord in Denmark.

Mobile Now and Clientela partnered in 2020 realizing that retail clients needed a global clienteling approach that brings together two important approaches:*

• The maturity and knowledge of global clienteling best practices,
• The specificity of the Chinese digital ecosystem, especially in mobility, social commerce, and O2O commerce.

We interviewed Thomas Meyer, co-founder of Mobile Now, and Arnaud Barbelet, COO and partner at Clientela. Thomas spent 20+ years in Asia (14 in China) and most of his career in tech and mobile development before co-creating Mobile Now Group 12 years ago, with experiences at Wunderman, OgilvyOne, and WPP among others. Arnaud has 18+ years of experience in start-up development centred on customer approach and understanding. He brings a complementary eye to what’s going on in China and helps draw conclusions for retailers from other regions.

IADS – With your combined experience, what are the key learnings and innovations that you noted over the past years in China? What should the rest of the world be aware of?

TM, Mobile Now - Social commerce, and how it became central for Chinese department stores and international brands, is on top of my mind and especially WeChat. Many players are operating in social commerce: Douyin (equivalent of TikTok), Little Red Book… They all work a bit differently and most of them are in reality engagement and branding platforms. For me, WeChat stands out from the crowd.

WeChat has a multilayer spectrum:

• There, brands can build their apps (Miniprograms) hosting the whole product catalogue, acting like websites or native apps we know in the West. In addition, these Miniprograms include WeChat Pay and easy user identification.
• It is at the same time a livechat platform, used by brands and sales associates for anything: pre-sales, sales and after sales, making appointments in stores and reserving products.
• It also offers retailers a wide range of analytic data, through WeCom (a professional sister app) to track KPIs and perform additional analyses.

Not all brands have jumped onto WeChat online-to-offline (o2o) commerce and in some way, this is what seems to differentiate losers from winners in China. For customers, the possibility to use WeChat customer service and Miniprograms now make a difference between good and bad service.

AB, Clientela – For me, international department stores willing to attract Chinese shoppers once the pandemic restrictions end have no choice but to invest in WeChat or other significant national super apps (such as Kakao for Koreans or Line for Japanese customers). However, China has crafted this business model, we see WeChat as a sort of digital lab for social o2o commerce. The Korean and Japanese examples show that this model might very well happen in other countries as well (for instance, India).

IADS – Thomas, e-commerce in China is extremely different, and much more competitive, than in other markets. How have Chinese department stores adapted to the digital ecosystem and what were their main innovation points?

TM, Mobile Now - E-commerce in China is a completely different ecosystem, and structural changes are constantly happening, which complexifies the picture. The way the different platforms work changes over time, which can be disorientating for outsiders.

For instance, many brands heavily invested in Alibaba’s TMall without taking a broader look at the whole ecosystem, and forgot to build brand awareness and engagement prior to these heavy investments.

To avoid this, WeChat really stands out as a Swiss Army knife: it is at the same time a platform for brands, their omnichannel commerce enabler, bridging online to offline and vice versa. By acting as a DTC platform for brands, WeChat has been central for Chinese department stores, and probably for others located outside the country and who wanted to catch the train.

In any case, investments need to be made step by step, and with thorough due diligence: WeChat is not the only option. For instance, when it comes to dynamic marketing and engagement, Douyin, Weibo or Little Red Book (aka XiaoHongxu) are adequate platforms for social PR and Communications teams and agencies. To make a parallel, this is more or less the difference between Facebook and Instagram outside China.

IADS - What is your understanding of the Chinese customers’ expectations now that they have everything available at home at the same price (Hainan…)? How have they evolved?

TM, Mobile Now - Hainan has indeed gone through an amazing development for home-based Duty-Free business in China in the past couple of years. But this situation may not last, as Chinese consumers can’t wait to also be able to travel again internationally.

Many brands are still cheaper to buy in Europe, US or Australia than in Hainan due to other costs than taxes or pricing policy differences. And Chinese consumers know very well that brands are usually cheaper in their original market andoffer more choice and improved experience.

Once the restrictions stop, we believe, and analysts do so as well, that the Chinese will be heavily travelling again.

AB, Clientela – Actually we expect a massive revenge travelling and shopping behaviour to take place. As the Chinese have waited a long time for this to happen, they are comparatively richer than prior to the pandemic, they have more savings, and prices are higher in China (even in Hainan) than in most international brands’ home countries. So, we expect a wake-up call and surprise revenge shopping spree.

IADS - How can department stores in the rest of the world prepare to welcome Chinese tourists again? To what extent are we talking about a shift in terms of the offer, store experience, or anything else?

AB, Clientela –The Covid-19 pandemic took marketing and IT departments by surprise as they had to identify and set up new digital solutions quickly, such as e-consultations and masterclasses, but also with queuing and online booking solutions. Department stores can’t afford to make any new mistakes, especially by waiting for Chinese tourists to ask employees to install WeChat. By “install WeChat” I mean to set up a new technical environment, teach sales associates how to use it and define new business flows to collect data, better prepare boutiques visits and provide results.

In addition, there is a trend for department stores to differentiate themselves according to the audience they want to serve (international travellers vs local crowds, such as La Samaritaine vs. Le Bon Marché, or Les Galeries Lafayette Haussmann vs. Champs-Élysées in Paris) and we expect it to continue.

This positioning differentiation (international vs local) will be paramount in defining traffic generation strategies, leading to strategic decisions to make. International travelers-focused stores will probably double down on Chinese tourists once they are back, and will need to re-activate and refresh their plans very quickly.

For us, the key steps to efficiently preparing the Chinese travelers’ return are:

• Brand awareness and reputation,
• Chinese focused product/brand assortment and overall experience,
• Chinese-speaking sales staff and consultants,
• Mastering Chinese platforms and delivering above expectations on omnichannel and clienteling services, (and that’s clearly WeChat first and foremost, but also other social media platforms as well) to optimise their customer experience and journey. This is paramount as it naturally drives word of mouth, creating a virtuous circle.

IADS – And what about international department stores’ digital tools and ecosystem?

AB, Clientela – It is important for department stores not to miss the Chinese revenge shopping spree we expect to happen eventually. This is why Clientela and The Mobile Group have teamed up to help our partner clients, mono brands, and department stores to be ready to welcome Chinese customers.

They use WeChat to prepare for their trip, book their shopping experience, pay, reserve products, share with friends, and ask questions to the Sales Associates they are bonded with. They expect a truly o2o shopping experience. Like what they have at home. It is crucial for department stores to be ready for that. And like in China, there will be international winners and losers.

IADS - What would be needed which is not yet implemented outside China?

AB, Clientela – Provide a differentiated and relevant experience including a product catalogue, Customer Service, the ability to reserve products, book their shopping visit and enjoy their VIP experience with other perks and services. They come with very high expectations. The trip is like the realisation of the dream, and the risks of disappointing them are therefore very high.

TM, Mobile Now – Such an approach based on WeChat will help customers to ensure a direct connection with Chinese-speaking sales associates. In turn, sales associates and retailers will have access to tools helping them to better manage this customer flow, help them, and know them or track them in a more efficient manner.

IADS - Can we expect Chinese tourism to be the same kind of fuel for growth for department stores as it used to be in the past? And how can it be combined with local customers that have been (successfully) courted for the past 2.5 years?

AB, Clientela – Eventually, borders will reopen, and I am personally convinced that the return of Chinese travellers will totally and positively surprise flagship retail and related tourism business. I think it is clearly going to be even stronger than before.

TM, Mobile Now – Of course, the tricky topic is to define the nature of the Chinese tourists who will come back. But keep in mind that change is constant in China and during the 14 years I spent in China I have been surprised every year to see how fast decisions could be made, right from the top, and how impactful they can actually be for business. When I talk to Chinese friends, I hear how eager they are to travel back across the world (Europe included, of course) and I personally believe this will happen sooner than most people think.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the review of NK in pictures here 

pRINTABLE VERSION HERE

Introduction

*The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This second part is dedicated to NK in Sweden.*

Company history: a leaser learning the art of retail

A founding member of the IADS (1928-1991), Nordiska Kompaniet was founded in 1902 in Stockholm by Karl Ludvig Lundberg and Josef Sachs, who wanted to bring a store with the same level of service that what Paris or London has to offer at the time. The Stockholm flagship store opened in 1915 and took its inspiration from American department stores, with a steel structure and a granite façade (which still contributes to the dramatic aspect of the store today). The emblematic circular neon sign was installed on the façade in 1939 and is still a well-known sight in the city today. NK is reputed for having brought both innovation (for instance, the first escalators) and fashion to Sweden: it was for instance visited by Mr Dior who decided to open a salon there.

Today, the company operates 2 stores (Stockholm, Gothenburg) and is owned by Hufvudstaten, a real estate company, which posted total net revenue of €168m in 2021, down -4% vs. 2019. An interesting point, however, is that until 2020, NK was exclusively operating under leasing agreements and, therefore, was only focused on the maximization of the assets. During the pandemic, one of their operators, an importer of fashion, cosmetics and jewellery brands, went bankrupt. Given the fact that this operator represented 25% of the total offer (turnover 2019: €72m), NK made the decision to repurchase its activities for €5.5m in February 2021 (the value of the inventory) and launched a new division, NK Retail, which generated an additional turnover of €59m and a profit of €9m from February to December 2021.

As the President, Bo Wikare, put it when the IADS met with him, “before the pandemic I was running a real estate company with 40 people, now we are collectively learning the retail job and how to manage 450 people”. Mr Wikare joined Hufvudstaten in 1994 and was appointed CEO of Hufvudstaten and President of NK in early 2020. Q1 2022 showed promising trends as turnover (both from property management and retail activities) already exceeded the same period back in 2019.

Visiting the store: a true temple to luxury

The monumental entrance, fully covered with granite, still works its magic more than a hundred years after its opening: the store is spectacular and can face even the most modern competition, as during the visit, the impression made was probably on par with La Samaritaine which re-opened two years ago. It displays, on 5 floors including the basement, a spectacular assortment of Swedish art de vivre and international luxury brands, all organised around a central well of light, just like what La Rinascente has done in the Via del Tritone location, but significantly bigger, giving a true sensation of space.

The monumental ground floor is dedicated to international luxury shop-in-shops (Hermès, Loewe, Balenciaga, Burberry…) including the newly opened Saint Laurent space, near a high-end café and restaurant. The space then unfolds on the cosmetics, shoe, accessories, jewellery and watches sections, all sold in multi-brand zones by third parties, meaning that each zone has its own cash desk and anti-theft system (an incongruous sight for anyone more familiar with continental department stores). The cosmetics area features all international brands with their own concept and is a first taste of the offer that continues in the basement. Finally, a space dedicated to cultural exhibitions, at the time of the visit displaying the collaboration between NK and Monsieur Dior, finished bridging the glorious past of the store to its future.

What was striking during the first minutes was truly the quality of execution: the store felt really spacious, airy, well-lit, and luxurious, thanks to the quality of the materials used, but also the attention to detail (the toilets are remarkable, for instance).

The basement is dedicated to the beauty lounge (including a hair and nail bar), the home and design offer as well as a café (very inviting and looking very artisanal), a restaurant, a pharmacy, a library, a candy shop, and a baker. From this section, customers can join a pharmacy and the subterranean network to the rest of the city. Here also, the execution is perfect, with one caveat related to its connections with the ground floor, as there are not many escalators and their locations can make them hard to find when visiting the store.

The first floor gives a good feeling of what Hufvudstaten has excelled at for the past 50 years, leasing, as the neat alignment of perfectly executed branded shop-in-shops is a reminiscence of the Asian luxury department stores operating according to the same leasing business model, such as Lotte in Korea. The only, but significant difference, is that all the retail units are displayed according to a very airy store plan, including around the atrium space, on which edges a café is being built, which gives more a feeling of a department store than a mall. The floor is dedicated to Women’s fashion and lingerie and dotted with very welcoming and smiling sales persons (the visit was done at the opening of the store). 3 zones popped up during the visit:

• The Seazona space, a partnership with a local online marketplace, is entirely dedicated to promoting, Swedish designers. A good way for NK to promote local creativity while limiting the stock risk,
• The second-hand space, which has been played according to a very different line when compared to Stockmann: here, no treasure hunt feel, and products are presented in a very exquisite way (mostly accessories) thanks to dedicated podiums and lights, making them stand out of the crowd and feel very special. The setup is perfect, and features an astute selection of luxury and affordable luxury items,
• The “NK stage”, a space dedicated to popups allowing also to generate a permanent animation on the floor (goods are purchased by NK).

Also, all across the store, dedicated zones, dubbed “NK designers”, “NK international fashion”, and “NK Wedding”… show a selection of brands that have been purchased by NK Retail and sold directly.

The second floor is dedicated to men’s RTW, accessories and shoes, as well as luggage, through a series of shop-in-shops. NK also displays its own multi-brand selections in the “NK Street” and “NK Design” points of sales, all equipped with specific cash desks, separate from the other retailers’ shop-in-shops’. This sales organisation is somehow complicated for anyone not familiar with the store, and also suggests complex systems behind the scenes to retrieve the sales data (we did not test a purchase within a third party shop in shop, but salespeople at NK spaces are systematically asking if customers are NK loyalty card holders).

The third floor, dedicated to sports and home, adds drama to execution and selection: aside from the sports brands shop-in-shops, the multi-brand spaces operated by NK for both categories are spectacular. The sports section is divided into the female, male and exhibition (called gallery) sections where all products are mixed: garments, equipment, and devices… giving a sense of freedom and space which is remarkable. The home section is extremely immersive and well set up. This floor is also, just like the others, dotted with many F&B spaces, many of which are around the atrium, which is treated as a sight to be seen in the store (a feature that is not achieved, for instance, by La Rinascente in Rome).

The fourth floor is dedicated to kids, books, restaurants and customer service (wardrobe, click & collect). Interestingly, it is at this moment of the visit that we realized that there are only two floors equipped with toilets, the basement and this one, while at Stockmann every floor is equipped.

What about the competition?

There is another major department store chain in Sweden, Ahlens, which was founded in 1899 first as a mail-order business. It ventured into the department store business in 1932, and the flagship store, Ahlens City, opened in the heart of Stockholm 500 metres away from NK in 1965. Today, the company manages 57 department stores and claims a total turnover of €450m, which makes it the biggest retailer in the country. It was rumoured in 2009 that Ahlens offered to purchase NK for a total value of €41m.

The feeling offered by Ahlens is radically different than at NK: in addition to being more mid-market, the model seems in its vast majority on a wholesale basis, leading to structural differences (lack of anti-theft systems from zone to zone, sections more intrinsically mixed together, navigation from one section to another less abrupt, less shop in shops) which impact the customer experience:

• Windows are not dedicated to one brand in particular, but mix different products, indicating where to find them in the store,
• The ground floor, dedicated to cosmetics, fragrances and accessories have a traditional setup with international brands shop in shops in the central zone and multi-brand spaces in the periphery. If the cosmetics offer is rather classical and repeats brands already on display at NK, the accessories section has a lower positioned offer: Furla, DKNY, Sandqvist… The space is delimited into sections through walls which are not so much of an issue for the sight thanks to the very high ceiling height. Coming as a strong difference from NK, customers have to queue to pay at central cash desks with are regrouped in specific sections of the ground floor.
• The first floor is dedicated to women’s fashion and lingerie. Here again, one can find corners with brand concepts, but only Malene Birger seems to be sold in a shop-in-shop. The central “Ahlens Studio” section displays cooler and younger brands such as Stine Goya and Jeanerica, but apart from this section, the feeling is less luxurious than NK,
• The second floor is not dedicated to men’s, but to kid’s, home decor and lights. Cash desks are visible from afar, and customers are also invited to wander through “Sally & Voltaire”, a restaurant which also sells the products used in its dishes,
• The third floor is dedicated to the whole men’s offer, including RTW, accessories, shoes, sportswear and services (barber). A personal shopping space and a dry cleaner are located behind the underwear and socks section (a surprising location choice) and a burger restaurant is located right in the middle of Lacoste and Ralph Lauren Polo, giving the location a distinctive smell.
• The fourth floor is leased and dedicated to Muji just like what Illum has done in Copenhagen. It is possible from there to access the rooftop restaurant which provides a great view of the city.

All in all, Ahlens presents a more classical approach when compared to NK, for anyone familiar with department stores across the world. The notion of “everything under one roof” is clearer there, even though the range of the offer does not approach luxury, contrary to NK where the message is clear. As a consequence, both department stores are really contrasted and it is highly probable that customers at Ahlens are much more looking for a bargain or a good deal, and less looking for an experience or the latest or most fashionable product.

What to remember from NK?

The transition from a purely real estate model to a hybrid one, which has been decided out of necessity but is extremely convincing on the sales floor, one year after its inception. This evolution perfectly follows the retailer’s vision of remaining a destination store for both the local customers looking for an international and luxurious offer, and tourists coming to Stockholm: it goes through curation, differentiation and a point of view, only achievable when the offer on display is managed one way or another.

The quality of execution and a perfect mix between retail and F&B makes NK a perfect place to hang out, and could be considered a good and relevant example by many other retail companies across the world. Visitors feel pampered and privileged when walking along the aisles and are encouraged to shop (it is extremely difficult not to feel in the shopping mood).

The capability to permanently create surprise and animation on all floors, not only by relying on brands’ own capabilities, but by mixing the business models: own operated popups, specific seasonal zones rented to brands, partnerships with a fashion marketplace, and own retail zones with superior execution such as the sports section.

Conclusion

*NK has long been seen from the brand point of view as a true luxury hub, only accessible to the most established companies able to deal with local retail operations, or to the ones with the adequate relationship with the relevant local agents able to operate on their behalf.

Now that NK has a retail arm, following a trajectory that has been taken by others already (see SKP for instance), this is going to be probably helpful to widen the distance with Ahlens and contribute to its international reputation. Already designed to be a place of leisure and discovery, NK is on the right way, at least in Stockholm, to become a regional standard and maintain its status of an unmissable destination when visiting Stockholm in the coming years.*

Credits: IADS (Selvane Mohandas du Ménil)

Check out the review of Stockmann in pictures here 

PRINTABLE VERSION HERE

Introduction

*The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This first part is dedicated to Stockmann in Finland.*

Company history: a former real estate magnate turned tenant of its own previous properties

A former member of IADS (1950 – 2020), Stockmann was founded in 1862 in Helsinki by Georg Franz Stockmann and is credited for having introduced revolving doors, soda fountains and escalators in Finland. The company grew to the point of adding, aside from a significant store fleet in Finland, stores in Tallinn (Estonia), Riga (Latvia), and 4 stores in Moscow and one in St Petersburg at the peak of its history. However, business was challenging, and Stockmann separated its retail operations from real estate in 2014 and started selling under a lease-back scheme its assets in 2015. Divestment in Moscow was achieved in 2016 (operations started there in 1989) and in St Petersburg in 2019. Difficulties accelerated during the Covid-19 pandemic, forcing the company to apply for corporate restructuring in 2020, to sell off Tallinn and Riga properties in 2021, and the Helsinki flagship property in Q1 2022 for €400m.

Today, the company operates 5 stores in Finland in addition to Riga and Tallinn, all of them under a lease agreement in buildings that used to be the company’s properties. Stockmann conglomerate also owns and operates Lindex, a Swedish fashion chain representing 475 stores in 16 countries, which has fared so far much better than the department store division.

For the department store division, full-year sales in 2021 represented €291m (of which €226m was achieved in Finland, growing +3%, the rest being achieved in the Baltic states), with an operating result of €11.6m vs. a loss of €-48.2m in 2020 during the pandemic. Q1 2022 grew +27% vs. 2021 to €196m and operating profits to €9.8m from a loss of €-27.6m in the same period last year.

A new CEO, Mr Jari Latvanen, joined the company in August 2019 with the mission to help the company to exit the difficult situation at the time. After an all-time-low in 2020 leading to the near bankruptcy of the company, the sale of the property helped the company clear off debts in a record time and revert to a near-healthy situation, in spite of a new customer structure (in 2019, 20% of the business was done with Chinese and Russian customers, two groups which have both totally disappeared and replaced by locals).

Visiting the Helsinki flagship, the largest department store in the Nordic countries

The historical store spans over 50,000 sqm and 8 floors. Due to the fact that it is constituted of two different buildings, navigation can be somehow tricky as there are intermediary floors on the ground floor, and +1, +2 and +3 levels. As a consequence, for some categories such as women’s and men’s fashion, the offer is fragmented in different spaces, making product discovery difficult.

The basement is at the same time a service area, a recreational space and an event zone:

• A pharmacy is accessible from the parking space before entering the store,
• A deli, several restaurants and a bar are available. One of the restaurants is managed by a local chef offering set menus for lunch, helping business customers to come back into the store after having lost the habit during the pandemic (stores were never forced to close in Finland, Sweden or Norway, however the stay-at-home instructions and remote working were implemented),
• The event space, for instance used for Christmas, was used at the time of visit for “Stocklet”, a smart way to liquidate stocks while avoiding cluttering the regular selling areas. It is all about efficiency: products are gathered by size and customers are invited to hunt for a good deal (no inspirational trick here).

The ground floor is dedicated to cosmetics and accessories in addition to a small flower stand.

• For the cosmetics, the usual international suspects are all present, in the spectacular atrium (all brands have their own concept) and also includes related products (Dyson) and services (hair bar, nail bar). It is notable to remark that local brands are also present in abundance and a lot of space is dedicated to them.
• The women’s accessories zone is the most appealing one in the store (and most differentiated), as it has been refurbished very recently. All windows have been open and let natural light come in, with plants and trees giving a feeling of nature (they are changed according to the season), and low rise furniture giving full sight of the space. International brand names are cleverly mentioned on the floorplan, but this can be somehow deceptive as in reality, the products are simply put on small tables just like any other generic area, while one would have expected to find a shop in shop (the only shop-in-shop on this floor so far is Longchamp with its own cash desk, the rest is operated in wholesale. Overall, 5% of the business is made in concessions, with Dior Cosmétiques, Longchamp, Hugo Boss and the brands on the 6th floor).

The first floor is dedicated to men’s fashion on several sub-levels, including some kind of mezzanine. This is not helping to embrace the whole offer at once. According to the CEO himself, the men’s business has considerably evolved and it is now almost impossible to find a formal offer in the store, as Finns (known to be extremely formal) are not looking for these products anymore.

The second floor is dedicated to women’s fashion and is better lit, more engaging and spacious than the men’s section. All brands are displayed with their own concepts on murals, which makes them more outstanding. 3 elements were worth being noted:

• Fitting rooms are surprisingly uninviting. At the time of the visit (morning), a rack with unsold items was displayed in front of them, not precisely an encouragement to buy, in addition to the cabins themselves, which are rather disconnected from the overall feeling of the floor,
• Customers also have the occasion to shop in dedicated lounges, which have been recently opened along with the revamping of the private shopping activity. Such spaces are significantly more attractive.
• On the side, a “Relove” café has been open, astutely mixing racks of second-hand items with a café, giving a charming boudoir feeling to the space, which was crowded (unlike the rest of the floor) at the time of the visit.

The third floor is dedicated to contemporary fashion, sportswear and, curiously, lingerie, which is displayed just near men’s garments and women’s sportswear coats and shoes. Lingerie space execution is poor.

The fourth floor is dedicated to home accessories including the Casa Stockmann private label. Overall, private labels cover home and fashion RTW and accessories. For fashion, private labels (an activity which is made easier for Stockmann thanks to Lindex production capabilities) represent 15% of the business, including at the same time an inspirational offer and lines designed to complete missing prices and functions.

The fifth floor mixes Stockmann’s own operations with kids RTW, sneakers and toys (the space is supposed to be redesigned in the coming months), spaces leased to Halti, a Finnish outdoor brand, and Isku, a furniture brand. Transitions from space to space are abrupt. Recycling spaces (garments, electronics) are available on this floor only, which is not particularly handy.

The sixth and seventh floors are hybrid spaces:

• On the sixth floor, customers can find every service they might need: a bridal salon, a hairdresser, a perfume shop (not clear if operated by Stockmann or not), a medical and dental clinic, a dry cleaner, and a Solaris optical shop. This zone is not as appealing as the rest of the store and looks like a mall more than a part of the department store. Last but not least, a lounge is available, closed at the time of the visit and looking like an old-fashion gentlemen’s smoking lounge.
• The seventh floor is dedicated to services, but is not accessible from all lifts or staircases. There, customers can come to pick up products or have their purchases delivered through partners, but the overall feeling is that the zone is not inviting and a significant amount of space is empty. A champagne bar and a terrace complete the floor.

What to remember?

The store is getting ready for tourists to come back: it is clear that the Helsinki store is good at addressing tourists, information is provided in English (including promotional audio messages), in a clear way, and a strong push is set on local brands. However, the consequences of the Covid times were still felt at the time of the visit, with the tourist information desk on the ground floor only open from noon to 6 pm, and some specific cash desks curiously closed (such as the one near the flower stand). In addition, salespersons are still managing sales through central cash desks (no mobile payment) which, given the structure of the store, can be troublesome if someone has to go a few steps up or down to pay.

A smart approach to second-hand and outlet: the “Relove” café is a clever move: Stockmann teams up with local socialites and influencers to sell their wardrobe, creating a one-of-a-kind effect designed to attract a younger crowd to the store. It works, as there is a significantly different demographic in the Relove space compared to the rest of the Women’s fashion floor. Also, the way the outlet is presented, in the basement, helps to keep the display coherence and cleanliness in the rest of the store.

In spite of uninviting dedicated spaces, it is all about superior customer service: with the exception of the private shopping lounges, the customer service physical spaces are disappointing in the store (a feat that the CEO is aware of). However, Stockmann has implemented a new tool to cater for the needs of its Mystockmann loyal customers (1.3m out of a total of 5.5m Finnish citizens, with an active rate of 50%, generating 73% of the business) to replace the Net Promoter Score: the Emotional Value Index (EVI), which has been co-developed with a local Finnish start-up. This system gathers in real-time actual wordings from customers, evaluates their satisfaction, and gives the tools for the relevant teams to address their issues or receive their congratulations.

Conclusion

*Where is Stockmann going? Even though renting its store locations could be dangerous, this option allowed them to recuperate from a very difficult financial situation. The changes in the store feeling, customer approach and online services are truly perceptible and make a real difference from what the store used to be in the past (the accessories zone on the ground floor, now well-lit, is inviting and open on the outside, but was in the past used to sell rugs, for instance).

The IADS only visited the Helsinki store and it seems that it is getting more and more well-equipped and ready to welcome customers in large quantities, be them tourists (increasingly growing) or local customers, who have already increased their average shopping basket, just like in the rest of Northern Europe. We only wonder if operating a store fleet of 5 stores in Finland and 2 overseas is still relevant as it might not allow the company to fully focus on becoming a destination name in three capital cities, at a moment when competing companies from other countries in the same zone, such as NK and Steen&Strom, are also reconsidering their strategy and revamping their offer, taking a more luxurious and international fashion way than what Stockmann seems to be doing at the time.*

Credits: IADS (Selvane Mohandas du Ménil)

PRINATBALE VERSION HERE

Introduction

In Europe alone, subscription models and paid memberships account for EUR 350 billion, dominated by information and technology (think Microsoft or Adobe software), as well as media and content (Netflix obviously). Consumer goods ‘only’ represent 15% of the total business.

According to a McKinsey study, consumers attached to paid membership programmes are 60% more likely to spend, compared with only 30% for free loyalty programs. Purchases are said to be more frequent and average baskets bigger, transforming paying members to extremely valuable customers. While the footprint of paid loyalty programmes still remains small, it has expanded with Covid. Why? Firstly, with stores closed, subscription services offered a convenient way to keep needed products on hand. But that’s not the only reason as offering the usual discounts and free delivery through a basic 3-level (bronze, silver, gold) free membership feels somehow basic to the consumers who find other ways to access such table-stake perks anyway.

With the war in Ukraine and Covid locking down a part of China, inflation is skyrocketing. As a result, consumers are forced to lower their discretionary spending, and they tend to discontinue their subscriptions whether it’s for Netflix or goods.

But still, brands and retailers need to pimp their loyalty programmes, and paid membership remains an option to consider for funding more interesting and exclusive perks that customers agree to pay for as soon as programmes match their expectations. Firstly, customers want high benefits that balances out or exceeds the fee amounts. Secondly, they want benefits that can be used immediately and as frequently as possible. Finally, with everything else in retail right now, they want experiences. Illustrating such expectations and following up with last year’s Exclusive about subscription retail, the IADS gathered the latest initiatives in paid membership.

Higher benefits

Pret A Manger has a subscription service and it’s not new: customers pay a EUR 20 fee per month and can benefit from up to 5 beverages per day. Whereas it’s unlikely that all subscribers will extensively use their 5 beverages every day, the perks of the programme are way higher than the fees. It shows that attracting new members comes with strong benefits clearly outweighing fees. In fact, consumers expect to receive at least a 150% return in perks when compared to the subscription fee. As a result, brands and retailers considering a paid program must make their value extremely visible.

In US pharmacy retail, the CVS CarePass programme charges a USD 5 monthly fee and offers its members 20% off on all CVS Health brand products in addition to services like free shipping and a 24/7 pharmacy helpline. Knowing the high price point of drugs in the US, the discount rate is really appealing compared to the reasonable monthly fee.

Some recent initiatives like renting fashion are a great push to the subscription business. In the luxury department store area, the Japanese group owning Daimaru-Matsuzakaya launched in March 2021 a new subscription-based rental service to try to escape the traditional inventory-based business model. The new service allows customers to rent up to 3 high-end women’s clothing items from brands such as Marni or See by Chloé, for a monthly fee of approximately USD 103. Fees are rather low when compared to the cost of 3 items from premium or luxury brands. While acquiring more loyal customers, the department store hopes to achieve a USD 55 million turnover by 2026 thanks to a projected 30,000 customer base.

Whereas it’s too soon to know if such a business can be profitable in itself, it will be interesting to check if the Financial Times is right: in an article from September 2021, they argue that the subscription model works best for higher priced-items. Anyway, it seems like a win-win deal: for the department store, it’s about increasing customer loyalty while reducing inventory. On the customer’s side, it represents a new access to luxury products, and an answer to sustainability concerns.

Now and always

Customers want to use their membership perks immediately upon sign-up, and very frequently: 50% of cancellations occur within the first year of membership. In that case, the main reason is that they are not using the benefits enough to justify the membership fees.

Walmart launched a membership programme in September 2020 primarily designed to compete with Amazon, the ultimate champion when it comes to immediacy and recurrent usage. Walmart+ members pay a USD 98 annual fee and are offered perks like an app allowing them to skip the checkout line, unlimited free deliveries with no minimum, member-only game console releases, up to 85% off on prescription drugs, discounts on gas, and special promotions and events. Also, at a time when customers were afraid of potential product shortages, they have enjoyed a true competitive advantage: early access to the 2021 Black Friday deals. Now accounting for 32 million members, Walmart+ can boast about amazing statistics: Cowen analysts estimate 12 million US households have a Walmart+ membership and 69.6% use it at least once a week. Members currently account for about 13% to 14% of the total Walmart.com business.

On the brand side, On Running sports shoes released a running shoe monthly subscription in April 2021. Dedicated to serious and frequent runners, they pay GBP 25 per month to subscribe (rent) their pair. When the shoes are worn-out, the customer can stop the subscription or request a new pair. Once it arrives, customer can send their old shoes back to On Running, who takes care of recycling, an additional perk answering customers’ environmental concerns.

In fashion, Ralph Lauren launched a rental subscription service in March 2021, a first for a luxury brand. The service aims to be a new channel for customers to engage with the brand. Starting at USD 125 per month, subscribers can access a constantly renewed range of clothing. Members curate their own online closet before receiving their shipment. Once they are done with the clothes, they can choose to either send them back and have them replaced by new styles or purchase them at exclusive member prices. On top of creating loyalty, the ‘Lauren Look’ is also a great opportunity to generate direct customer feedback and gain a better understanding of their expectations. As for On Running, the initiative also answers the growing consumer concerns about overconsumption.

Still, offering discounts remains a mandatory perk. In that perspective, Vasquiat is an interesting alternative free membership model when it comes to immediate discounts. Founded by Spanish influencer Blanca Miro, Vasquiat is defining itself as “the marketplace for discovering the most exciting emerging brands in the world.” What’s more important is that they “disrupt the traditional model by creating a new category: the discounted pre-order.” Vasquiat’s members can pre-order styles from the next season's collections at up to 40% off. The sooner they buy, the less they pay, reversing the usual end-of-season discount model. Then, the closer the collections are to their official release date, the smaller the discount is, until eventually reaching the full retail price.

Experience and emotion

Even though they remain table-stake perks, free delivery and discounts are not enough to lure and retain customers for paid membership programmes. Consumers are looking for differentiation. In that sense, they are expecting exclusive offerings, personalized and more emotional experiences, or member-only content.

In that perspective, Volvo launched a new car dealership concept inspired by clubhouses in 2021. Opening first in Amsterdam (now available in 6 other cities across Northern Europe), Lynk & Co is more than just a car dealership. The club house is the promotional face for a hybrid SUV that members can rent starting at EUR 500 per month (including insurance and maintenance service). The brand's strategy is simple: focus on car sharing through a subscription system (which is especially relevant in a city like Amsterdam where people don’t need a car on a full-time basis), and attract new customers through the services offered by the clubhouse. It includes a lounge area with a bar to host DJ sets, exhibitions, as well as workshops, film screenings, etc… These events are of course reserved to members who feel nurtured with the emotion of being part of an exclusive club.

In an attempt to compete with Amazon, Best Buy launched a USD 199.99 membership programme in April 2021, designed to basically offer great customer service. Among various perks (such as free 2-day deliveries, up to 24 months of product protection, dedicated phone teams, extended 60-day return and exchange window), the 24/7/365 tech support and product installation in particular offer a security sentiment and a safe product experience to members. The membership, called ‘Totaltech’, also includes ‘My Best Buy’ programme perks (including reward points and exclusive deals).

Food is highly about experience and emotion. Shinsegae department store in Korea came up with an interesting initiative: a fresh fruit subscription service which has proved very popular since its inception in April 2021. As part of the “VIP Gold” loyalty program, customers can subscribe to the service for a monthly fee of approximately USD 194 and they have a selection of seasonal fruits delivered to their door on a weekly basis. Tips on how to store and eat the fruits are also included as part of the package. This new service follows up the launch of a bread subscription service: subscribers can pick up bread in store every day for a monthly fee of approximately USD 42. Shinsegae’s goal is obvious and clear: “attract people to the store, which could lead to the purchase of other products.”

When it comes to paid memberships, the wholesale club model in groceries is also a true lever to loyalty. But it can do more: it can help create a sense of belonging, which will give customers more reasons to visit and push them to significantly increase their purchases. It’s the case with Store X supermarkets (a division of Alibaba in China). With its USD 40 yearly membership, Store X targets a group of young, affluent, digitally savvy shoppers expecting to be treated differently, and willing to spend more for better services and shopping experiences. The first Store X opened in Shanghai at the end of 2020 and became profitable within two months.

Conclusion

So far department stores are sticking to free membership through their loyalty programmes, but they have been revamping them for a few years now. A few months ago, Harvey Nichols in the UK did so with a 5-level ‘classic’ programme where money spent equals reward points. Depending on the level customers will reach, points are converted into benefits revolving around discounts and (more interesting than in other programmes) experiences appealing to many different customer groups: 10% off food & wine, bars & restaurants and beauty & grooming, 15% off fashion vouchers, double points booster, free drink in store, ‘kids eat free’, pamper hamper, birthday gift, dining or beauty school experience, wine or crafty beer box.

While it would be very costly for department stores to design perks and experiences worth a paid membership, the model needs to be considered anyway (and despite the recent subscription model setbacks), especially if focusing on big spenders that are not really impacted by inflation and who are always expecting additional reasons to visit stores. In that sense, the Soho House business is a model to look at as experiences are part of the equation: at Bloomingdale’s, the Loyalist programme has been redesigned to include a new shopper segment, the ones spending more than USD 15,000 per year. Representing less than 1% of the customer base and mostly women in their forties, these ‘Top Of The List Unlocked’ status members receive elevated benefits such as a 2-star Michelin cooking class at the Baccarat hotel, and even have a private Instagram account to reserve the latest designer styles.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

*Best Buy is one of the most recognized examples of successful company turnarounds in the past decades. In 2012, the company was ailing, sales were declining (although the company was not yet in the red) and a sense of common purpose was missing within the teams. The turnaround was not executed via a purely financial approach, cutting costs and increasing profitability, but took another standpoint, betting on the human side of each and every employee to reinject meaning and will to achieve something bigger than them, together.

The ongoing digitization of department store companies involves integrating new and very different teams, reinventing the jobs of the existing ones, and finding a common motivating purpose for all of them. In that sense, there are some similarities between what Best Buy went through and what IADS members are currently trying to achieve. This is the reason why we invited Mr Hubert Joly, CEO of Best Buy from 2012 to 2019, to share with us his experience and retrospective understanding of what he achieved during his tenure.*

Introduction

Hubert Joly, a graduate of HEC Paris (business school) and Sciences Po (political sciences school), is a senior lecturer at the Harvard Business School and the former Chairman and Chief Executive Officer of Best Buy from 2012 to 2019. Before this experience, he has held various CEO positions at Vivendi and Carlson Companies, after having been partner at McKinsey for 13 years. Under his leadership at Best Buy, the share value rose from $20 to $70, the company had 5 uninterrupted years of growth and the online share of the business doubled, reaching 17% of the total sales for a turnover of $6.5bn (post-pandemic, online sales  have tripled, and represent 40% of the business). He was also instrumental in redesigning the management team structure, by helping the Board of Directors increase the proportion of female leaders. He has been ranked as one of the top 100 CEOs in the world by the Harvard Business Review, top 30 CEOs in the world by Barron’s, and top 10 CEOs in the US by Glassdoor. Hubert Joly released his book, “The Heart of Business – Leadership Principles for the Next Era of Capitalism”  in 2021, which was sent to IADS members prior to the exchange.

Interview

IADS - When you took over Best Buy, things looked bleak – tell us what it was like and why you accepted this position?

HJ – In 2012, everyone thought Best Buy was going to die in a context where brick & mortar retailers were considered dinosaurs. In addition, I did not have any background in retail at the time. However, after making my due diligence, interviewing Best Buy alumni and employees, and making my own mystery shopping visits, I understood two things:

• Customers needed Best Buy: they wanted to touch, feel, see, and experience the products,
• Vendors needed BB, as it was a great way for them to showcase their R&D investments.

I also realized that all of Best Buy’s problems were self-inflicted: incoherent pricing, poor customer experience, and deteriorating infrastructures (stores). This meant that it was possible to have a grip on these problems, and fix them.

IADS – You have turned around the company in a few years. What do you think was key to this success while so many others in the retail industry tried and failed?

HJ – There were actually two phases to turn around the company and generate growth.

The first phase, “Renew Blue”, was all about the turnaround itself. We are not talking about strategy or vision here, but pure execution: we were fixing what was broken. We pinpointed all the issues and addressed them one by one: matching Amazon prices, investing in customer experience, offering better shipping experience including next-day delivery, investing in stores or partnering with vendors…

This is what we did. The “how” part is more interesting though! The usual recipe involves cutting costs, especially reducing the headcount. In our case, this would have meant closing stores, when a lot of them were profitable. We preferred to have a human-centric approach. This meant two things:

• Listen to the frontliners and see what was wrong. I spent the first week on the job visiting stores and talking to teams, to understand what was going on. All I had to do was to listen and make sure they had the right answers and tools from the leading teams.
• Create positive energy within teams by showing them that they are placed at the centre and listened to.

For me, headcount reduction was really the last resort, I preferred to focus on reducing non-salary expenses (for instance, finding ways to reduce the rate of TVs being broken during handling!),

The second phase, “Building the New Blue”, was launched once we knew the foundations of the company were solid again. We reflected together and defined what company we wanted to be, and how to accelerate our growth. This can only be done by pursuing a noble purpose and putting people at the centre. That’s my idea of leadership.

IADS – To what extent the turnaround was a 100% human adventure, or a human adventure supported by systems? How did you manage this transition from an infrastructural point of view?

HJ – In electronic consumer goods, 90% of the shopping decisions involve a digital touchpoint at some stage, or even start digitally, so of course, emphasising digital solutions was the long-run approach. Every meeting I led always started by discussing e-commerce and digital, and we increased investments in the website. But systems are human-powered, and decisions must be made by someone, so we also invested in employee tools to adopt agile ways of working and spread a digital mindset within the company. That was a true asset for Best Buy during Covid-19 and allowed us to easily transition to contactless pickups and other solutions when stores were closed.

IADS – How did you prioritise the adoption of solutions and make decisions on investments?

HJ – The two phases were different.

The first phase was about eliminating pain points, understanding what was not working and fixing it. For us, that was the search engine, which we redesigned. Then, we worked down the list of remaining pain points and prioritised them by how important they are to the customer journey and business impacts.

In the second phase, the lens was different. We had defined our purpose: enrich people’s lives through technology, and that meant that we were not anymore only addressing tech fans, but also people who needed help with tech. That meant pivoting on several angles: from B to B, to B to C, from being a retailer to something else. Partnering with vendors was key, as they understood that it could be beneficial for them too, and that helped co-fund the needed investments in stores and systems.

IADS – You diversified your leadership team, the board – why did you feel it was important and how did you do it?

HJ – Simply put: I do not think we could have done anything without diversifying the teams. How do you want to address the world if your teams do not reflect its diversity, from a gender, ethnic, background or education perspective? Leaders need to create an environment where they can leverage diverse team members. For example, in Chicago, if your sales team doesn't speak Polish then you might not sell much. Same thing in Orlando for Portuguese, to address Brazilian customers.

For me, diversity is a business imperative. As leaders, we know how to sell business problems: how to attract, develop, and retain customers. These same methods need to be applied to employee retention and attraction. If there is not enough diversity represented within the organisation, you need to understand why it is not drawing these types of profiles, because that is putting you at risk.

IADS – How did you trickle down the changes until the base of the pyramid? How did you share, in a concrete manner, your Noble Purpose with frontliners?

HJ – It did not trickle down. Many companies have worked on defining a purpose.  But let’s be honest: a company’s purpose is corporate speech that doesn’t mean much to frontline workers. Frontline workers need motivation, not corporate speeches. And motivation comes from within, it is intrinsic.

This is what I call the “human magic”. I give you an example: in 2018 a young boy came in with a broken dinosaur toy. He didn't want a new one, he wanted a cure for his dinosaur. Two employees understood what was happening and they started a ‘surgical procedure’ to make the dinosaur feel better. In reality the toy was swapped with a new one, but the boy believed that it was still his original toy and was happy to have it repaired. To be honest, I can’t teach employees how to “cure” a dinosaur, and I do not know about KPIs measuring the number of cured dinosaurs per quarter. So, these employees did that just out of pure motivation. They wanted to make customers happy.

Once again, the “how” is key: how do you make sure that all your employees share the same approach? Not by having a top-down Power Point presentation. Our strategy was to be an inspiring friend to customers, but also to ourselves. So, one day, we closed all our stores on a Saturday morning, and broke the teams into small groups, asking each employee to share their own story and a story of an inspiring friend. Everyone understood, independently of their hierarchical level, that the others were more than employees or co-workers: they were human beings with their complexity. They realised that they needed to treat each other and the customers as human beings and as inspiring friends, rather than walking wallets.

Also: training is important, but it does not work if you return to a poisonous environment. Top-down scientific management approaches don’t work. Bottom-up and inside-out approaches should be prioritised. Here are the ingredients that worked for us:

• Allow every employee to connect to what drives them and connects them to their work,
• Create an environment where there are genuine human connections and where people feel seen.
• Allow for autonomous work.
• Offer a learning environment with individualised weekly coaching.
• Provide psychological safety.

We need to move away from the model where the leader is seen as the superhero who knows everything. Today’s leaders should show signs of authenticity, vulnerability, empathy, humility, and humanity!

Conclusion

**IADS – What is your view on retail after the pandemic? Where are we?

HJ –** 10 years ago, the debate was all about the dichotomy between online and brick-and-mortar. That is not the case anymore. For me, the dichotomy is now between great and mediocre retailers, and their purpose.

Purpose is an intersection of what the world needs, what you are uniquely good at, what you are passionate about, and how you can make money. The crucial question retailers should have to ask themselves to be successful is to know if they would be missed, and why, if they did not exist. Retail is being completely reinvented around purpose, people, and great execution.

To conclude, I remember my conversation with Tim Cook in 2012 about the bad press Best Buy had then. He told me to focus on doing my things and being successful, without minding the press. Department stores are in the same situation today. Keeping the focus is key.

I would also add that I believe that we, as business leaders, have a huge role to play in the society. We cannot predict the business environment or the future, but we can decide what kind of leader we want to be and how we want to contribute to the world. I have 3 guiding ideas:

• Having a purpose,
• Being clear on my principles - key ideas we have about how we want to lead and drive the business,
• Doing our best- we control what we do and how we lead our teams

Credits: IADS (Selvane Mohandas du Ménil)