Check out the review of NK in pictures here 

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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)