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*Galeries Lafayette made headlines earlier in 2022 when the “Wellness Galerie” opened on 3,000 sqm in the Paris Haussmann flagship. It was a step forward in terms of space allocated and percentage of services offered, compared to products. However, the French department store was not the first mover, as the wellness category had already been explored by other retailers in the world. Shifts in customer behaviour, focus on sustainability at large including self-care, and the need for retailers to diversify and explore new categories to stick to trends or generate new revenue streams… these are all reasons why retailers that are increasingly exploring or expanding their offer in this new category are multiple. Let’s review how department stores are currently addressing wellness.*

What are we talking about?

The wellness market is a growing category that includes products and services designed to improve or promote physical and mental health and well-being. It includes gym memberships, healthy food and supplements, beauty products, mental health services, and more.

The exact definitions of the market differ, which is why the size estimates of the market can significantly vary. While McKinsey evaluates it to be around $1.5 trillion in 2020 for what regards wellness consumer goods (encompassing fitness, nutrition, overall physical and mental health and appearance), the Global Wellness Institute (GWI), a non-profit organization based in the US, evaluates the total market at $4.4 trillion for a total of 11 sectors, of which personal care & beauty, healthy nutrition, and physical activity-related goods represented $2.6 trillion in 2020. However, here again, it is difficult to properly evaluate the size of the market addressable by retailers, as they are continuously creating new services and offers, and therefore blurring the boundaries. For instance, if we take the 11 sectors as defined by the GWI, should Mental Wellness and Spas be added to the addressable market, for an additional amount of $199m?

Whatever the numbers, they are sufficiently significant to make that category attractive, all the more that wellness as a whole makes sense for a department store:

•    There has been a growing focus on health and well-being in recent years, with more and more customers becoming interested in living healthier lifestyles. While studying the market in 2021, McKinsey found out that 79% of respondents believed that wellness was important, and 42% considered it a top priority,

•    It can be a profitable business when looking at the customer profiles interested in this category. Most of these customers are willing to (or already used to) pay a premium for wellness-related products and services, which is a good incentive for margin-squeezed department stores to look at this category,

•    Finally, wellness can help to differentiate from the competition. Offering a wide range of wellness products and services can help department stores to position themselves as destinations for health and well-being, which can be attractive to consumers looking for a convenient, one-stop-shop for their wellness needs. It is also a way to regain market share from specialty stores and specialized retailers, such as Sephora, that ended up taking the lion’s share of global beauty (a flagship category for department stores usually displayed on the ground floors for the vast majority of them). By looking early at wellness, department stores are able to take a position at the right time and make sure they can reap the first mover advantages.

In order to address this category, department stores can either:

•    Reorganise their existing offer to create new “wellness-branded” sections merchandise and brands already available in the department store offer, but regrouped and presented in a novel way,

•    Create new departments from scratch, with newly sourced brands and products such as wearable devices or ingestible cosmetics, and also introduce new services enhancing customers’ well-being (gym, yoga studios, etc..),

•    Some, especially in the US, go even further by including health services and light medical acts with injectables. This echoes the historical role of department stores as social hubs in city centres, accessible to anyone and housing everything under the same roof. Of course, such a strategy heavily relies on local regulations as performing light medical acts in a department store might not be allowed in every country.

To be noted: wellness is new and trendy, and it can lead to abuses, as it has also been the case in sustainability. Just like some retailers have been accused of “greenwashing” by heavily advertising their sustainable actions, others have used wellness as a blanket word to sell any kind of product (regular beauty brands, jewellery or even lingerie) in order to lure in customers.

Department stores initiatives typologies

We could empirically define five different types of initiatives led by department stores:

•    The “2.0 beauty salon”,

•    The bit-by-bit upgrade approach,

•    The specific case of the US and how healthcare is a selling point,

•    The digital approach,

•    The holistic set of solutions.

The 2.0 Beauty salon

Department stores began to offer a variety of beauty services as a way to attract and retain customers in the early 20th century. These services could include services like hair styling, makeup application, and skin care treatments.

Beauty salons are today a common sight in most department stores, as they offer convenient access to a wide range of services and products, including products from the store itself (a great incentive for department stores to operate salons themselves at the beginning). In addition, beauty salons perfectly fit into the “everything under one roof” initial proposal of department stores. This is why they can be found in department stores across the planet, usually in locations which otherwise would be less performing from a strict retailing point of view: the second basement in Corte Inglés Castellana (Madrid), a side part of the ground floor at Magasin du Nord (Copenhagen), higher floors in Stockmann (Helsinki) and NK (Stockholm), the top floor at Harrods (London) or a side floor in Steen & Strom (Oslo).

It is therefore easy for most of them to consider either upgrading spaces or increasing the offer available in such salons. However, due to their history in any given city, they might be perceived as old-fashioned and not attractive by the younger generations (for that reason it is interesting to note that KaDeWe in Berlin, which staged a total revamp of the store for the past few years, has not created a beauty salon per se, but instead opened a 200 sqm “beauty lounge” where brands’ shop-in-shops propose an vast variety of services).

This is why some department stores decided to create new-generation beauty salons in new locations, to make sure the novelty is fully perceived by the customers.

For instance, Le Bon Marché opened L’Institut, a 152 sqm space on the top floor of the store, in September 2022. The space is operated in partnership with brands (providing products, services and expertise) and the accent is put on intimacy and privacy. Equipped with 6 cabins, this new space is a new, and rather high-end, interpretation of the traditional beauty salon, however still very much focused on services based on beauty and care (in partnership with brands such as Dior and Guerlain).

Le Printemps went further when finishing the revamp of the Haussmann store in March 2022 and the new beauty space was unveiled:

•    On the Beauty floor, large areas were dedicated to beauty services (manicure, pedicure, brows, hair care). Such services were already available prior to the revamp but scattered in the store. Gathering them in one single location allowed Printemps to communicate about a new generation of beauty salons, in addition to making the offer visible, powerful and efficient,

•    Expanding beyond traditional beauty services, a partnership was signed with Face 2 Une, a spa proposing manual massages and machines,

•    In order to also propose unprecedented brands, Printemps has also made a partnership with a crowdfunding platform, aiming to contribute to the development of new brands and sell them in the store,

•    Finally, in addition to the traditional beauty offer, a section is dedicated to food treatments coming in complement to beauty products.

All in all, the ‘2.0 beauty salon’ is all about upgrading the offer, marginally adding related services, and making sure that the new location is perceived as new and as distant as possible from the traditional salons, unattractive to the new generations. However, even though they are making sure products and services are upgraded when compared to the previous offer, these department stores are not specifically going beyond the ‘traditional’ beauty and care offer at large.

The bit-by-bit upgrade

Some stores are venturing into uncharted territories and literally going beyond beauty to propose new services, one step at a time. Flannel’s in the UK has been an interesting watch for the past years, as they use wellness to attract Gen-Z customers. For instance, they have dipped a toe into the very light medical approach by opening a “social media-ready clinic” in partnership with a DTC cosmetics brand specialized in non-injectable treatments for lips in their Liverpool store last May. The space includes a live streaming screen and a champagne recovery room, and customers are also able to physically buy products which otherwise are only available online.

Going a step further, Flannel’s inked a partnership with Barry’s, a gym club, also in the Liverpool store. The 700 sqm club proposes fitness classes, protein shakes, and the possibility to test clothing and equipment from the nearby “World of Active” space. Interestingly, this partnership allows Flannel’s to enjoy collaboration in terms of customer base, but also propose highly specialized services and machines provided by Barry’s.

At this stage, Flannel’s has limited its experimentations to the newly opened Liverpool store. It is interesting to see that they are flirting both with the idea of suggesting customers come and do their work out in the store itself, but also to enjoy paramedical services (which can stay only this way: the UK regulation would prohibit the sale of injectable products in the store).

The interesting case of the US and how healthcare is a selling point

The US regulation is less restrictive when it comes to this particular point compared to Europe, which is the reason why US retailers have been getting closer to the healthcare market, adding up new products and services to their initial beauty and care offers. Even though some therapies might be available online, when it comes to in-person treatments, there is no possibility to bypass the store visit. For that reason, retailers see medical treatments as a great way to generate footfall and repeat visits from high-margin customers.

For instance, Saks Fifth Avenue offers medical-grade beauty treatments (botox and filler injections) in their Manhattan flagship. 3.4m women got an injection of Botox in 2021 in the US only, 41% of them aged 36 to 50. For that reason, such non-surgical procedures can be extremely profitable and this is why SFA was reported to consider expanding this service to Miami and Houston. In 2021, Nordstrom had also introduced injectables in the New York store for the same reasons.

However, it is not only about non-surgical medical acts (which anyways are limited by what local regulations allow from state to state, even in the US), but also venturing in new territories: mental health, and sexual well-being.

Mental health proved to be an important topic for customers during and after the Covid-19 pandemic (in the US, the number of people reporting anxiety or depression quadrupled in 2020). This is the reason why CVS, the largest retail pharmacy in the country, has added licensed social workers trained in behavioural therapy in 13 locations in 2021, offering mental health assessment and counseling, either in person or remotely, on a 24/7 basis (which is more flexible than what usual therapists might offer). Such staff is also able to make prescriptions. Rite Aid, a competitor, has opened “virtual care rooms” in 13 locations offering teletherapy, which Walgreens also offers in partnership with specialized companies. Walmart has acquired an online medical and mental health care operator, to complete its Walmart Health services.

Sexual well-being is also a territory being explored by retailers, even though for now the category is somehow a catch-all term. It can go from lingerie, sex toys and jewelry at Nordstrom, to shaving products, massagers and lubricants at Bloomingdale’s. Interestingly, it is systematically packaged under the umbrella of body positivity and inclusion in order to relate to the broader notion of well-being.

Outside of the US, some retailers also ventured into the paramedical market. The IADS reported the interesting case of the French supermarket chain Monoprix which opened a new concept in 2021 in Paris. It is a mix of reworking the offer, and proposing new services:

•    Clear sections cover many well-being health-related topics: sleep, relaxation, nutrition, feminine case, sexuality, junior and senior care, even going to Ayurvedic and CBD products (remember that Monoprix is a supermarket, not a concept store),

•    Customers also have the possibility to connect to a distant GP in 20 minutes maximum, a strong novelty in France, where practitioners are increasingly difficult to access,

•    Finally, they are also able to have an ophthalmologist service, with examinations, prescriptions and frames done on-site.

But wellness should not be considered as an in-person-only, OPEX-consuming category (in space and people). It is also possible to synergize digital capabilities in order to make the most of the online platforms that were built or revamped during the 2020 pandemic.

The digital approach: what to do online with wellness?

It is obviously possible to sell the wellness offer online, as e-commerce is a great way to both test the trend and attract new customers. Saks Fifth Avenue did so at the beginning of 2022 and reported that it attracted 25% of new customers to SFA. However, the biggest challenge is to merchandise and animate properly the digital space:

•    For instance, Nordstrom categorizes wellness in the Beauty online section, while SFA and Macy’s have dedicated specific independent sections (in the case of Macy’s, with a focus on “wellness at home”, allowing to unify categories which would be otherwise separated),

•    Online platforms have to be animated. For instance, SFA proposes live fitness workout classes with celebrities, or branded seminars, in order to make sure customers are well aware of the new services available overall within the company.

Some retailers have gone further and used wellness as a way to reinforce the retailer brand equity and generate additional sales, such as Walmart, which launched a specific shop-by-diet app, in order to target the 200m customers following specific alimentary diets in the US. The app, which is separate from the other Walmart apps, allows customers to scan grocery items when purchasing to verify that they align with their dietary needs.

As seen so far, the various typologies show that department stores as a whole are quite active in wellness, however, their actions are still fragmented or touch specific aspects of the business. We have identified 2 specific examples where department stores approached wellness from a holistic point of view: Selfridges and Galeries Lafayette.

The Holistic approach

According to McKinsey, customers define wellness across 6 dimensions: health, fitness, nutrition, appearance, sleep and mindfulness. This broad compass is the reason why the category is difficult to address as a whole by retailers. Some of them have already started, such as Kohl’s in the US, which announced in 2020 the launch of the Kohl’s Wellness Market, which was however still very much based on goods only.

Selfridges’ early 2022 wellness program, “Superself” (as a seasonal animation) was another notable attempt. It gave the possibility for customers to enjoy therapeutic experiences such as sex counselling or confidence coaching sessions, for both couples and individuals. It was also possible to use VR sensory pods to “facilitate a deeper connection with the self”. Selfridges doubled down on wellness during summer 2022 by transforming their Corner Shop (the store’s most profitable space on the ground floor dedicated to seasonal animations) into a “Feel Good Bar” proposing products, services and access to professionals to advise customers on improving sleep, overall health, and sex. The product offer included at-home health tests allowing customers to inspect their blood, thyroid and genes, and they had access to acupuncture, IV drips, and oxygen therapy, while the Selfridges cinema was temporarily transformed into a sleep session area.

Galeries Lafayette significantly raised the bar in September 2022 when they opened the Wellness Galerie. The 3,000 sqm basement space, formerly used for shoes (which shows the leap of faith made by the management), was transformed and dedicated to a permanent offer mixing products (40% of the offer) and services (60%). The move was timely: already in 2020, McKinsey noted that of all customers, who were spending 30% of their wellness expenditures on services and 70% on products, 37% of them were expecting to spend more on services at 37%, vs. 23% in products. Unprecedented services in a French department store are proposed, such as physiotherapists, a hyperbaric chamber, a sauna, a hammam, a studio and gym, private salons that can be hired to test products with friends… and a “wellness receptionist”, here to advise on the variety of services and products available. The gym, for instance, remains accessible outside of the store opening hours.

Conclusion: is wellness a must-have for department stores?

*The new approach to wellness is increasingly making traditional beauty salons look old-fashioned, and they will have to adapt to remain relevant. For that reason, it is probable that department stores in the world will have to embrace the new trend while being fully aware of the challenges waiting for them:

•    Competition: The wellness market is highly competitive, with many companies and organizations offering products and services related to health and well-being. Differentiation will be key.

•    Customer demand: Department stores will need to accurately gauge and respond to customer demand for wellness products and services in order to be successful in a market where they lack experience (for instance, in physiotherapists’ time management).

•    Expertise: The wellness market can be complex and multifaceted, with many different products and services falling under its umbrella. Expertise in various and different areas will be needed.

•    Marketing: Marketing is critical to the success of any product or service, and this is especially true in the wellness market, as the target customers are already over-solicited by the first entrants.

•    Regulation: The wellness market is subject to various regulations, which can vary depending on the location of the store and the specific products and services being offered.*

Despite these challenges, there are many good reasons for department stores to consider entering the wellness market. For one, the market is large and growing, with strong consumer demand. Additionally, department stores have the advantage of being able to offer a wide range of products and services under one roof, which can be attractive to consumers who are looking for a one-stop shop for their wellness needs. Finally, by offering wellness products and services, department stores can help to position themselves as destinations for health and well-being, which can help to differentiate them from competitors and attract customers.

When Chinese customers are said to be more sensitive to the notion of sustainability when it relates to personal well-being, no doubt that having adequate spaces and offers will help global department stores accommodate the needs of this returning population in the future.

Going further on Wellness:

Feeling Good The Growing Wellness Market

IADS Exclusive: Business Case 6 Monoprix

IADS EXCLUSIVE: wellness the next step in galeries lafayettes makeover

Sustainability: Western versus Chinese Icicle

WWD: The Wellness Boom

Credits: IADS (Selvane Mohandas du Ménil)