What: Retail experts forecast modest holiday sales growth of 3.0%, reflecting a cautious consumer outlook influenced by economic uncertainties and changing spending patterns.

Why it is important: The modest growth prediction underscores the ongoing impact of economic factors on consumer confidence, with implications for retail strategies, inventory management, and overall economic health.

The holiday sales forecast for 2023 indicates a cautious consumer outlook, with experts predicting a 3.0% year-over-year growth. This rate, if realised, would be slightly below the average of 3.6% seen during the last expansion (2010-2019). The forecast reflects a combination of economic challenges, including softening labor markets, rising unemployment, and the absence of pandemic savings cushions. However, some positive factors persist, such as wage growth outpacing pre-pandemic levels and cooling inflation. The retail landscape is adapting to these conditions, with an elongated holiday shopping season and a shift towards more real (inflation-adjusted) consumer spending growth. This trend suggests that while foot traffic may increase, overall sales revenues might be tempered by moderating prices, presenting a complex scenario for retailers to navigate during this crucial sales period.

IADS Notes: The retail landscape is facing a complex set of challenges and opportunities as we approach the holiday season. U.S. holiday sales are forecasted to grow at their slowest pace since 2018, reflecting economic uncertainties and shifting consumer priorities. However, recent shopping events like Black Friday 2023 showed increased sales volumes, albeit with higher discounts, and a continued shift towards online and mobile shopping. This trend is set against a backdrop of consumer sentiment characterised by a state of stasis, where shoppers feel uncertain about the future despite current stability. Retailers are thus challenged to navigate these conflicting trends, balancing the need for competitive pricing and discounts with strategies to deepen consumer engagement and build long-term loyalty in an increasingly digital and value-conscious market.

Visa: US Consumers may face holiday headwinds this shopping season

What: Edelman, a consulting company based in the US and Europe, carried a study of the Gen Z. The lessons are sometimes surpising.

Why it is important: Department stores are eager to know better their next generation of customers.

Thirty percent of the global population, representing USD 13 trillion, is aged 12-27.

Debunking Myths:

• While 55% get informed from social media, 60% use traditional news, and 70% rely on search engines.
• Contrary to the belief that they are attracted only to provocative brands, two-thirds prefer brands that make them feel safe.
• Despite being labeled as impulse purchasers, 70% check everything they see online before making a purchase.

Interesting Trends:

A growing gender divide exists between Gen Z men and women. For instance, trust in government has decreased by 6% among females but increased by 6% among males. Additionally, there is a regional divide, with young people in the West being less optimistic compared to those in upper-middle-income economies.

Influence and Opinions:

Gen Z's opinions are significantly influencing other generations. Ninety-three percent of employers are influenced by Gen Z coworkers. Sixty-six percent of the global population has been motivated by teenagers and college students calling for boycotts. Additionally, 71% say teenagers and college-aged individuals influence their online purchases.

Gen Z believes brands should lead changes, with 63% thinking it is easier for brands than governments. Ninety-two percent of Gen Z say they need to share values with a brand to make a purchase. They have transformed the purchase funnel into a loop involving consumer advocacy and action versus brand statements and actions, all aimed at building trust.

Debunking Gen Z myths

What: The luxury industry is experiencing a significant downturn due to factors such as low consumer confidence in China, price hikes, and economic uncertainties in various regions.

Why it is important: This downturn highlights the challenges luxury brands face in maintaining growth amidst global economic pressures, necessitating strategic adjustments to pricing and market approaches to reconnect with consumers.

The luxury sector is currently navigating a challenging period marked by a slowdown in growth, as evidenced by recent third-quarter earnings. Key factors contributing to this downturn include a decline in consumer confidence in China, which has returned to levels seen during the COVID-19 pandemic, and economic uncertainties linked to upcoming elections in the United States. Additionally, the appreciation of the yen in Japan has impacted market dynamics. Despite these challenges, some luxury brands like Hermès and Brunello Cucinelli have shown resilience, posting positive growth figures. In contrast, other brands such as Kering and Moncler have reported declines in sales. Analysts anticipate that the situation may improve by 2025, with potential growth driven by economic interventions in China and interest rate cuts in the US. However, the industry faces ongoing challenges related to pricing strategies and consumer engagement, necessitating innovative approaches to sustain brand desirability and market share.

Luxury Industry Faces Prolonged Downturn Amid Global Economic Challenges

What: The report analyses the impact of AI on industry structure, enterprise value, data centres, geopolitical trading blocs, software, services, business opportunities, and talent.

Why is it important: Adoption rates for AI especially in cloud services, enterprises and technology solutions are high. The report analyses the return on investment for adoption and the changes needed in working processes to create value with AI.

AI adoption is already delivering performance gains in short time frames for specific functions. These include software and product development, customer support, sales and marketing, and back office operations. The capabilities of generative AI are being harnessed to save time, aid documentation and optimise operations. Investing most heavily in automation leads to improved savings and better adoption of new disruptive technologies. Combining automation technologies to create an overarching strategy maximises full adoption and performance. Innovation with smaller models (both open-source and proprietary) along with edge infrastructure is reaching enterprises, nations and institutions. Generative AI is the prime mover of the current AI wave but is complicated by regulatory shifts and the need to adapt business processes to deliver value. Creating proprietary models for specific functions can hence help avoid risks driven by post-globalisation.

Bain & Co. Technology Report 2024

What: Despite feeling optimistic about their personal circumstances, European consumers are reducing spending due to higher prices and stagnant wages, according to a July 2024 survey by Boston Consulting Group.

Why it is important: Understanding consumer sentiment and spending behaviour is crucial for businesses to adapt their strategies in product assortment, pricing, and promotions, especially in a challenging economic environment where consumers are prioritising essential purchases over non-essentials.

The survey highlights the complex sentiment among European consumers across Denmark, France, Germany, Sweden, and the UK. While individuals feel more positive about their personal situations compared to national and political issues, economic pressures such as inflation and stagnant wages have led to reduced spending on non-essential items.

• Consumer Sentiment: The survey reveals that 73% of respondents experienced higher prices for goods and services in the first half of 2024. This has resulted in a significant cutback on discretionary spending, with many opting for lower-priced brands or fewer purchases. Apparel, snacks, and alcohol saw notable declines in consumer spending.

• Sustainability Considerations: Although sustainability is a consideration for nearly 40% of consumers when shopping, only 19% are willing to pay more for green products. This indicates that while environmental awareness is growing, cost remains a primary factor influencing purchasing decisions.

• Shopping Preferences: The survey also found that while online research is common, consumers still prefer physical stores for regular purchases like groceries. Online shopping is favoured for larger or less frequent purchases due to perceived benefits like time savings and product availability.

European customers are optimistic yet cautious on spending

What: The Asia Pacific travel landscape is changing rapidly, with systemic shifts in international relations, currency valuations and economic growth driving new patterns.

Why is it important: Post-pandemic shifts in travel have given rise to new drivers in tourism, the key ones being a changed economic outlook for Mainland China, currency revaluations, and newly emerging middle classes.

Outbound travel from Mainland China is still only at less than two-thirds of its pre-pandemic level, and those who are travelling are more focused on visits to Macau and Hong Kong. Destinations such as Japan and Thailand are seeing a surge in arrivals after the rapid rise of interest rates in the US which caused many Asia Pacific currencies—particularly the Japanese yen—to weaken. By the same token, residents of locations affected by currency depreciations are staying close to home. Meanwhile, rising incomes and a growing middle class in India, Malaysia and Indonesia are enabling more of the newly affluent to travel abroad, particularly to more affordable destinations in Southeast Asia. Outbound visitor numbers in the region are expected to grow by 20-25 percent in 2025.

Visa Economic Insights on APAC Travel

What: Beauty brands are creating immersive, tech-driven retail experiences to capture the attention and spending of Gen Z travellers, who prioritise experiences, exclusivity, and sustainability over traditional duty-free discounts.

Why it is important: With Gen Z projected to account for 30% of all travellers by 2030, retailers and department stores must adapt by offering experiential and value-driven shopping moments, both in-store and through digital touchpoints, to engage this growing consumer base.

Gen Z travellers are redefining the travel retail landscape, shifting away from traditional discount-focused duty-free shopping to seek more immersive and value-driven experiences. Beauty brands like Drunk Elephant, YSL Beauty, and Fenty Beauty are leading the way by introducing tech-driven activations, such as AR mirrors and gamification, to create engaging shopping moments. These experiences resonate with Gen Z’s desire for authenticity, exclusivity, and sustainability. For instance, YSL Beauty’s "Light Club" pop-ups feature Instagrammable spaces inspired by club culture, while Shiseido’s pop-ups educate travellers on skincare through interactive games and personalised consultations.

For retailers and department stores, this trend highlights the need to transform traditional retail spaces into interactive environments that appeal to Gen Z. By incorporating digital and physical elements, they can create memorable experiences that attract and retain this demographic. This approach not only increases engagement but also leverages Gen Z's preference for unique, experiential shopping, turning these interactions into growth opportunities.

Engaging Gen Z travellers with experiential beauty retail

What: Global rise of slow travel reflects a shift towards longer trips, off-the-beaten-path destinations, and more immersive cultural experiences, driven by post-pandemic changes in consumer behavior.

Why it is important: This shift in travel preferences reflects broader changes in consumer values and lifestyle choices, with implications for various sectors including hospitality, real estate, and remote work policies.

The concept of slow travel is gaining traction globally, representing a significant shift in how people approach their vacations and leisure time. This trend is characterised by longer-duration holidays, exploration of less touristy destinations, and a desire for more immersive experiences that connect travelers with local cultures, environments, and communities. The rise of slow travel is closely linked to the increasing prevalence of remote work and the emergence of 'digital nomads' who combine work and travel for extended periods. Analysis of transactional data from 203 countries reveals that travelers from a quarter of these nations are staying at least one day longer on average compared to pre-pandemic times. This trend is particularly evident in major outbound travel markets, with a notable increase in trips lasting over 11 days. The shift towards slow travel is driven by a combination of factors, including pandemic-induced reflection on personal values, increased flexibility in work arrangements, and a growing appreciation for experiences over material possessions.

IADS Notes: The post-pandemic travel landscape has seen significant shifts in consumer behaviour and industry adaptations. While there has been a travel boom benefiting fashion and beauty retailers, spending patterns have changed, with Western tourists prioritising experiences over shopping. The "hermit economy" trend has led to increased spending on home-centric goods and services, potentially influencing travel preferences. Travel retail is adapting by focusing on creating unique, memorable experiences and understanding the evolving shopper's journey. Meanwhile, fashion and lifestyle brands are pivoting towards versatile, everyday items that cater to both at-home and travel needs. These trends collectively point towards a more nuanced, experience-focused approach to travel and consumption, aligning with the rise of slow travel and its emphasis on meaningful, immersive experiences.

Visa report on Global Travel Insight

What: “Agentic” systems refer to digital systems that can independently interact in a dynamic world.

Why is it important: The next generation of AI transformation is likely to be led by agents that use foundation models to execute complex, multistep workflows across a digital world.

Agentic systems traditionally have been difficult to implement, requiring laborious, rule-based programming or highly specific training of machine-learning models. However, when agentic systems are built using foundation models (which have been trained on extremely large and varied unstructured data sets) rather than predefined rules, they have the potential to adapt to different scenarios in the same way that LLMs can respond intelligibly to prompts on which they have not been explicitly trained.

The article details several use cases, one of them being online marketing campaign creation. A potential agent-based solution could be to help develop, test, and iterate different campaign ideas as well as tap online surveys, analytics from customer relationship management solutions, and other market research platforms aimed at gathering insights to craft strategies to create inputs for content creation agents. These would collaborate to iterate and refine outputs and align toward an approach that optimises the campaign’s impact while minimising brand risk.

Why agents are the next frontier of generative AI

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Even though the department store changed its name to Galeries Lafayette more than 30 years ago, Annecy’s1 residents kept on calling it Nouvelles Galeries. This is why Citynove (Galeries Lafayette Group’s real estate arm)2 revived the old name to develop a shopping centre around the existing department store. But its drive-to-store strategy is fully anchored in today’s retail: Citynove’s president, Eric Costa, described it as a pilot project for the group. The goal is to adapt the department store format to the local market's realities, client expectations, and competition to create an optimal environment for the stores to evolve. This approach reflects the group's strategy of owning most of its stores, allowing for easier transformation and adaptation. Considered by Galeries Lafayette as an illustration of what tomorrow’s department store could look like, the whole project aims at becoming a hybrid place where people come to shop and live. Officially completed in October 2023, here’s what the place has to offer.

A new project for a new neighbourhood

Nouvelles Galeries is part of a larger reorganisation of the city of Annecy, including the future opening of the International City of Animated Cinema, a gourmet mall, and a landscaped park. This will link Nouvelles Galeries with the city centre, bringing them closer to each other. As Eric Costa explained, “It is an important and essential operation as it is the first time Citynove has extended an existing store with new stores and then managed the shopping centre.” The extension adds 9,000 sqm to the existing 15,000 sqm store space and includes about 30 new retail units to welcome brands and services.

Also, Citynove wanted to avoid the traditional shopping centre models, aiming for a more innovative and unique retail experience: “Our objective is to move away from shopping centre uniformity, where the brands are the same everywhere. We have chosen local, passionate players and included many services and leisure options to make people want to come more often." Still, shopping remains a major reason to visit Nouvelles Galeries, so a driving force was needed besides the department store. Uniqlo was chosen to boost traffic and attract Swiss customers. This is their only store in the region, including in Switzerland, thus reinforcing the nature of Nouvelles Galeries as a retail destination.

The whole project started in 2020 and was completed in October 2023 (Galeries Lafayette refurbishment was completed in 2022). As explained by Eric Costa, “We agreed to have more emptiness (wide aisle, high ceilings, etc.) to offer spaces where people feel good, therefore losing space and profitability. The rents for local businesses are not extremely high either. We chose to spend more and have less income. A relationship-based retail model, and not just transaction-based, is the key to seeing customers return today." To bring this vision to life, architect Manuelle Gautrand was part of the shopping centre renovation. The first French architect to receive the European Architecture Prize in 2017, she was responsible for redoing the exterior of the 1969 building. Known for the famous Noma restaurant in Copenhagen, Danish architect and designer David Thulstrup was chosen to create the atmosphere of the interior street and squares of the Nouvelles Galeries, as well as the landscaped surroundings. Finally, Dutch designer Sabine Marcelis participated in the project. Named one of the eight most prominent women designers by the Financial Times, she was picked to create the interior furniture: visitors use the organic-shaped comfortable benches to relax or work on their computers thanks to the many available sockets.

Designed to be human-sized, the shopping centre is not as overwhelming as more traditional malls can be. The 30 or so stores and offerings focus on:

• Local brands: jewellery brand DupontDupont, environmentally conscious fashion brand Concrete Raw, Blømeko flower shop, and Snö cosmetic brand.
• Sports and outdoor brands (most of them are also local): Millet, Bogner, Ekosport retailer specialised in outdoor, Girls Up community store for women into sports, Les Petits Baroudeurs kids outdoor brand.
• Experience with entertainment and F&B: the Atome climbing room, open 7 days a week until 11 pm, is extremely successful. There’s also an exhibition space in the shopping centre. In terms of F&B, Biofrais organic supermarket is run by a local market gardener and was profitable from year 1. Customers can also find Shouka speciality coffee (from Chamonix), a local French pancake restaurant, a local juice bar, a local street food joint as well as a French brasserie chain restaurant and an Italian restaurant.

Other brands are available, such as fashion brands like La Petite Etoile, Yaya, a vintage clothing store, a Clarins store and more. Some stores are dedicated to rotating pop-ups to bring novelties. About ten retail units remain available for brands, including a restaurant space. A large pharmacy, a medical lab, Amazon lockers, and a kids playground have been added to the pre-existing post office to provide services to the local customers.

Building a community besides shopping requires significant marketing investments

To officially launch the project, the shopping centre doubled down on Christmas with a 360° experience to become the ‘talk of the town’. To celebrate the arrival of Uniqlo, the chosen theme was Japan. The purpose was to convey the message that, besides being a shopping centre, Nouvelles Galeries is a cultural hub including fun and unprecedented activities. To that end, hostesses dressed in kimonos welcomed visitors by inviting them to try Japanese tea. Traditional fabric wrapping, knife sharpening and Ikebana floral art workshops were organised. To attract families, the programme also included free activities designed for children: martial arts, calligraphy and kirigami (the art of paper cutting) workshops, to name a few. A photo exhibition mirroring photographs of landscapes from the Annecy region and Japan was also organised. Pianist Rieko Tsuchida gave a classical music concert, and a cosplay competition was held (playing the role of a fictional character by imitating their costume, hair, and makeup).

A complete media plan was developed to spread the word, targeting the region, including Switzerland, through billboards, press, Instagram, and a partnership with Le Bonbon (a free lifestyle newspaper with branches in Lyon and Geneva). As a result, 29 million people were reached during Christmas, and the shopping centre traffic increased by 46% compared to the previous year. Since then, and to maintain momentum, many activities have been organised throughout the year, dedicated to both adults and children, from Pilates for kids to ceramic painting.

Since the relaunch, Galeries Lafayette also doubled down on marketing and events to create female and male customer communities. They successfully organised a summer sales preview the night before the official kick-off. Partnering with a local female association, ‘Les Chic Filles’ (translating to ‘great chicks’), the soirée gathered 700 women coming to shop and have fun thanks to the various activities offered (piercing, tattoo, makeup workshops and more). The shopping spree was followed by a large dinner and dancing, for which customers were dispatched to the shopping centre’s various restaurants. The sales results were excellent, leading the store management to build a similar initiative for male customers: a sort of invitation-only club centred around food, wine and gaming. City figures, entrepreneurs and the store’s best customers are targeted and the first event will be hosted in late September 2024. Overall, marketing and CRM initiatives can be fine-tuned and tailored to specific customer groups, as 89% of the store turnover is attributed, thanks to the loyalty programme and payment card data.

The new Galeries Lafayette store: rejuvenated offer and concept

Galeries Lafayette has little local competition and a loyal consumer base, two ingredients that made the store profitable before the refurbishment. However, it lacked desirability with an outdated store concept, as is often the case in secondary cities, and a product offer that needed a refresh. The store manager ran many meetings with customers to understand their expectations: results showed they were very much attached to the store and were expecting the store to change with a premiumisation of the product offer.

Located at the centre of the mall, the store's  selling surface is 9,000 sqm divided into two floors, with two entrances on the ground floor and three on the first floor. The layout reflects customer preferences:

• Unlike usual layouts, the ground floor opens on the home department on one side (the 3rd home business of Galeries Lafayette’s owned network, excluding Haussmann). It includes furniture with AM PM and La Redoute Intérieurs (a private label), a large section dedicated to bed and bath linens, home scents, cookware and tableware.
• The other side opens on accessories (sunglasses, scarves), leather goods (with mid-range brands like Nat & Nin, Love Moschino, Vanessa Bruno, Jérôme Dreyfuss, Lancel, etc.) and the men’s department, which includes ready-to-wear and shoes.
• The men’s ready-to-wear section includes suit offerings from brands like Fursac and Boss and a large casual section from brands like Ralph Lauren, Lacoste, Timberland, Schott, etc. The Urban Galerie offers backpack options. To complete the offer, Galeries Lafayette’s multi-brand space, dubbed Creative Galerie (premium or affordable luxury brands, depending on the store), carries Play Comme des Garçons, APC, and Isabel Marant.
• Two other multi-brand spaces are at the centre of the ground floor: the Winter Galerie (with brands like Rains and Canada Goose) and the Summer Gallery (with swimwear and beachwear).
• The centre of the floor also houses jewellery and watches, cosmetics, and beauty. Leader brands (Chanel, Dior Guerlain, etc.) have corners, and the Beauty Galerie (which gathers alternative brands), a perfume shop, and a niche fragrance space complete the floor.
• Private labels are very efficiently demonstrated on both floors, in the home, women and men's departments.

The escalator and a slide are at the centre of the store, linking the 2 floors. The slide represents an entertaining initiative driving many customers in. Kids and adults alike are having fun using it, and it has recorded 3 million posts and views on TikTok, often generating a line on Saturdays. A baby foot and an arcade game are also available and attract a lot of teenagers.

The first floor gathers women’s fashion with ready-to-wear shoes with brands such as Sandro, Sessun, Soeur, Zadig & Voltaire, American Vintage, Vanessa Bruno, Tommy Hilfiger, Zapa, Jonak, Birkenstock, Doc Martens, and more. A Crush On second-hand shop-in-shop is available on top of the escalators. As for the menswear department, the space includes an Urban Galerie with Dickies, Levi’s, Carhartt, etc. and a Creative Galerie with Samsoe Samsoe, APC and more. Despite being challenged categories these days, lingerie and kidswear have been attributed to large spaces. Finally, a small gourmet store and a luggage section are available to customers. The floor is also the place for services, including a VIP lounge and personal shopping, tax-free shopping, and click & collect. The VIP lounge is also used for events and collaborations with brands (sometimes monetised) and can transform into a beauty cabin. /nbsp]

Regarding the store concept, the furniture is harmonised across the store, be it for homeware, ready-to-wear, or shoes. Brands personalise a wall of their spaces and display bits of their store concept (usually a carpet and a piece of furniture). Only Fursac, Boss, Tommy Hilfiger, Ralph Lauren and Lacoste have a fully personalised space. High ceilings, hardwood floors, large alleys, and the see-through harmonised furniture make the store feel airy and harmonious. Reminding of Annecy’s Lake tones, blue and green colours are used on walls separating spaces and brands. Arches mimicking Annecy’s architecture on the ground floor separate leather goods from jewellery and the beauty department from home offerings. Also, the red shade is used on pillars to create focus points.

Is it working?

The refurbishment brought new customers in, including more Swiss citizens than before. During the last two years, these customers increased by +40%. Overall, the store recorded a +22% growth in traffic (2024 YTD compared to 2023). The store is a destination. It accounts for around 250 staff members (including approximately 100 people from brands). The conversion rate is high: roughly 30%, with a minimal decrease explained by the traffic increase. Shopping frequency also increased. The average basket ranks 2nd in Galeries Lafayette’s network after Nice (excluding Haussmann and Champs-Elysées) thanks to cross-selling. The turnover is increasing: 2024 recorded the store’s highest turnover ever. The company is optimistic about growing more in 2025, according to plans. The store now ranks 7th in Galeries Lafayette’s owned network (excluding Haussmann and Champs-Elysées stores) compared to 9th before. The presence of Uniqlo didn’t seem to erode private label turnover, even for the cashmere group. So far, private labels posted a +23% growth between 2023 and 2024.

The transformation of the Nouvelles Galeries into a modern retail and cultural hub exemplifies a forward-thinking approach to the department store format. By reviving the historical name and integrating it into a broader urban redevelopment, Galeries Lafayette has successfully aligned its retail strategy with local cultural and economic contexts. The project has expanded the shopping options, incorporating diverse local brands, sports and outdoor offerings, and unique entertainment experiences, enhancing its appeal as a destination. The inclusion of Uniqlo and the focus on creating a unique retail experience have been pivotal in attracting local and international customers, mainly from Switzerland. The strategic use of marketing and community events has further solidified its position as a cultural hub, driving significant growth in traffic and turnover. This rejuvenated approach revitalises the store's image and sets a benchmark for future developments within the Galeries Lafayette network, showcasing the potential of blending retail with cultural and experiential elements.

Credits: IADS (Christine Montard)

What: Perfumes with eye-watering price tags are becoming more common, as the boundaries between fragrance, luxury and art continue to blur.

Why it is important: In the midst of a luxury slowdown, brands are seeking new ways to stand out while leaning into growth categories. Beauty and jewellery are proving more resilient, according to Bain’s latest report, which can be seen in the Q3 earnings so far.

Luxury brands like Bvlgari, Jaeger-LeCoultre and Chaumet have recently launched fragrances in collaboration with high-end brands like Guerlain and Nicolas Bonneville among others. Creating one-of-a-kind scents in statement bottles, brands are deepening the emotional connection with their clients by offering them a unique, multi-sensory experience. The emergence of these projects indicates that, at the highest level of the luxury market, consumers still have a strong appetite for one-of-a-kind products, and an ability to spend. For fragrance brands, it is an opportunity to tap into a wider audience while luxury brands seek to reinforce their image.

Why luxury brands are launching ultra-expensive fragrances

What: US Home furnishing sector sees strategic shifts as retailers respond to sustainability trends and changing customer needs.

Why it is important: These trends signal a significant transformation in the home retail landscape, where success increasingly depends on blending online convenience, in-store experiences, and eco-friendly options to meet diverse consumer needs.

The home furnishing sector is experiencing significant shifts in consumer behaviour and retailer strategies. Nearly half (49.8%) of consumers purchased home furnishing products in the three months ending September 2024. Amazon and Walmart dominate the market, with at least one-third of shoppers buying from these retailers, despite Walmart seeing a 15.8 percentage point decline since October 2023. IKEA and Wayfair saw notable increases in shopper penetration. Home accessories and decorative items remain the most popular category, with wall decor seeing a significant rise in popularity. In the home improvement sector, 63.5% of consumers made purchases, with The Home Depot leading the market. Gardening products showed strong seasonal trends. Consumer sentiment towards personal finances has weakened since August 2024, while expectations about the economy have improved slightly but remain negative overall. These shifts are driving retailers to adapt their strategies. For instance, Ikea is testing smaller store formats in China and has launched a secondhand marketplace, while Kohl's is expanding its home product offerings to attract younger customers. These moves reflect the industry's focus on sustainability, flexibility, and targeted product offerings.

IADS Notes: Recent trends in the home furnishing sector show retailers adapting to changing consumer behaviours and economic conditions. Ikea is leading with two significant initiatives: testing smaller store formats in China to meet evolving customer needs in a challenging market, and launching a second-hand peer-to-peer marketplace called Ikea Preowned, aligning with growing demand for sustainable options. Meanwhile, Kohl's is reimagining its home assortments by significantly increasing space for home products and introducing new categories, aiming to attract younger customers and boost sales volume. These moves reflect the industry's focus on flexibility, sustainability, and targeted product offerings to meet shifting consumer preferences.

Coresight: a report on US trends in homeware

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*IADS member Boyner Grup unveiled its new strategy in 2022 to establish itself as a genuine “multi-brand lifestyle company”. This came with a new approach to merchandising, including the introduction of more international brands, less reliance on private labels, the exploration of new categories, including F&B, the introduction of new types of marketing and events in Turkey, and the launch of a new store concept, in Cadde, on the Asian part of the city. We reported this new concept and its many innovations in a previous IADS Exclusive.

Since then, Boyner Grup has been relentless in its efforts to improve and expand this store concept to other locations, including the iconic Istinye Park. This commitment to innovation and improvement is a testament to the company's dedication to providing a unique and engaging retail experience. As the second major iteration of the store concept, it includes some evolutions based on the key learnings from the Cadde store, reviewed in this IADS Exclusive article.*

Introduction: about Istinye Park

Istinye Park has been a cornerstone of Istanbul's retail landscape since its inception in 2007. Spanning an impressive 242,000 sqm, with 85,000 sqm dedicated to retail space, this mixed-use complex houses 280 stores, including a comprehensive array of luxury and fashion brands. Its strategic location near Maslak, Istanbul's primary business district, and several universities makes it a magnet for both middle-class consumers and affluent shoppers. This positioning has likely contributed to Istinye Park's superior turnover performance compared to the newer Zorlu Center, located in another part of Istanbul. This mixed-use complex opened in 2013 with 200 stores, various F&B concepts, and the Raffles Istanbul Hotel.

The visitor experience at Istinye Park is notably distinct and arguably more captivating. The complex is anchored by a stunning rotunda lined with luxury boutiques, creating an immediate sense of opulence upon entry. Like Zorlu, Istinye Park incorporates a residential component spanning 190,000 sqm, which provides with a valuable repeat clientele. As the pioneer in introducing an actual luxury mall experience to Istanbul, Istinye Park has cemented its prestigious image in residents' minds.

The complex is composed of three main elements:

• The Grand Rotunda: Designed as a central entertainment hub, this four-level arena-like space is crowned by a 78-meter-diameter hard-shell canopy supported by a central exterior mast over three panoramic elevators. Adding to its allure, the Rotunda features kinetic water sculptures animated with lights and music.
• The Lifestyle Centre: This open-air town square incorporates a verdant central park and a fashion district housed in a glass-roofed indoor retail area.
• The Bazaar: This section stands out with its historical Turkish styling. Each facade draws inspiration from Turkish architecture and history, offering a unique blend of modern retail and cultural heritage.

Sustainability has been a core principle of Istinye Park since its inception. The complex boasts automatic energy-saving systems, dedicated trash collection centres, and an overall design that minimises its energy footprint.

Istinye Park is home to Turkey's three premier department store chains: Beymen, Boyner, and Vakko. While Boyner is the only one accessible from the mall's ground floor, Beymen and Vakko can also be reached from the open-air first-floor section and are, therefore, more visible at first glance.

The Cadde store concept’s initial pillars

The Cadde store, Boyner's pioneering concept, was built on four key pillars:

• Sustainability: Eco-designed store with energy and water-saving systems, customer-centric services like garment recycling points, and innovative features such as pedal-powered phone chargers. The assortment was carefully curated with sustainability in mind.
• Integrated art: Impressive installations and purchasable art pieces seamlessly blended into the store environment.
• Cutting-edge technology: Anamorphic screens adorning the façade and a colossal display stretching from the basement to the top floor.
• Revolutionary merchandising: Prominence given to international brands over private labels, Instagram-worthy product displays, strategically placed rest areas, and dining spots like Costa Coffee at the entrance.

These innovations yielded impressive results: a 27% higher average ticket than the Boyner network average and increased dwell time from 30 minutes to an hour.

The Istinye Park store: an evolution rather than a revolution

The second store concept iteration at Istinye Park, builds on the lessons learned and activates the pillars differently, as the 6,000 sqm store was refurbished entirely.

Firstly, the integration of art, mixed with an efficient store design, remains a key component of the store. It is cleverly used on the ground floor store frontage, as the store is located relatively far from the atrium escalators and behind a Starbucks, making visibility critical. To ensure the store is noticeable, a giant interactive piece of art, “Flip Dot Display”, mirroring what is happening in front of it like a glittering screen, creates surprise and amusement.

This is placed next to a series of large entrances, providing a clear view of the entire store. Perspectives have been meticulously designed, giving an overall impression of a neat, curated store with eye-catching elements while providing a clear understanding of the space organisation. The floors are well-designed, and the simple yet effective furniture allows for easy brand name changes.

The entry leads immediately to the women's section, which showcases Turkish art pieces from a selection of 10 artists supported by Boyner, labelled and sold next to international brands like Karl Lagerfeld, Desigual, Marks & Spencer, and Turkish local labels. Visual merchandising, another pillar of the concept, is striking: every piece in the women's section is well-presented, Instagram-friendly, and well-lit (although lights tend to focus on entire zones and sometimes don't highlight specific products).

The swimwear and resort wear section is also visually attractive, distinct from the ready-to-wear section, and located near the fitting rooms. The transition to accessories and shoes is almost seamless, with bags on impressive shelves equipped with screens and shoes in cleverly designed circular spaces for easy try-on, including mirrors. Interestingly, accessories are located at the back of the store, while one might expect to see shoes in that part. Zoning is not strict: some shelves mix shoes and bags, giving an overall impression of constant and playful discovery. However, while the ready-to-wear section is airy and spacious, knowing where to look in the shoes and accessories zone is challenging due to the numerous visual stimuli.

Drawing inspiration from the Cadde store, the centre of the floor has been designed to provide a breathing space between areas and a reason to sit, with a Costa Coffee (a franchise owned by Boyner Grup) implemented right in the middle of the store, flanked by a small luggage stand and some designer home equipment. Its brilliant location next to the kids' area is attractive: it gives reasons for children to ask for ice cream or for parents waiting for their spouses to sip a coffee while choosing kids' wear.

The kid's wear section itself is highly colourful and attractive. However, it's not visually separated from the rest of the store except for the floor and ceiling, suggesting that the zoning here is temporary (no specific furniture or branding is used). Another smart F&B integration is the Bubble Tea bar between the kids' section and the cosmetics one, just next to the Ala Nail Art nail bar. Everything is designed to capture customers' attention and time. This makes it even more surprising that the cosmetics area is relatively standard visually, contrasting with the rest of the store.

While the store concept is evident throughout the fashion section, it seems absent in cosmetics, where individual brands dominate with their codes. A similar approach was taken at Cadde because 100% of the cosmetics section brands operate in concession while Boyner purchases on other terms for other categories. While this economic system explains the situation, it unfortunately results in a visual discrepancy between the cosmetics section and the rest of the store.

Vertically navigating the store is not easy: only one escalator allows access to the first sub-level, which displays the men's, sportswear, and accessories categories, arriving directly in the semi-formal section with brands such as Boyner Business or Brooks Brothers (a surprising decision given the young and fresh feeling from the women's section: are customers shopping at Boyner that different in terms of expectations according to their gender?).

The feeling is distinct from upstairs on that floor (which is also connected to the mall through a large entrance directly onto the food court). While the men's concept is on display everywhere, it's a bit simpler than the women's section, potentially due to a different positioning. This difference in display wasn't as noticeable in the Cadde store, which also played more on gender fluidity, not visible at all in the Istinye Park store.

A customisation atelier is in the centre of the men's space but physically separated, giving the impression of a cabin with specialists inside who should not be disturbed. The store's playful aspect is present, but unlike in Cadde, it's somewhat less inviting and spontaneous.

Cash desks in the men's section are also very different in aesthetics from the women’s ones. They are lined with impulse-purchase or necessity products, such as underwear, socks, and belts, which somewhat downgrade the experience.

The highly dynamic sportswear section uses screens abundantly, creating a vibrant feeling. It also opens to a staircase leading down to a new store concept, the Boyner Dynamic Teen concept, located on the two floors below, currently only accessible through the escalator. However, a mall entrance will be implemented in the future. Overall, the Boyner Dynamic Teen is a compelling and exciting space that sells sport-related goods to kids and teens, including spaces where products can be tried (such as a tennis cabin). However, it was empty during the visit, given that it had just opened and the other entrance was not yet available.

Istinye Park: Boyner's retail laboratory

Boyner's latest venture in Istinye Park demonstrates a laser focus on profit maximisation. Initially tested in Cadde, the store concept has been refined and streamlined, discarding underperforming elements to create a retail powerhouse tailored to this upscale mall. The strategy is paying off handsomely; Boyner reports that early results are outpacing those of Cadde at a comparable stage, relatively speaking.

Key elements amplified in this iteration include:

1. Art as a subtle beacon: While less prominent than in Cadde stores, artistic elements still serve as attention-grabbing focal points.
2. Visual merchandising excellence: The womenswear section stands out with its impeccable presentation. Each item is meticulously displayed, optimised for social media appeal, and thoughtfully illuminated. This attention to detail extends to the sportswear and Boyner Dynamic Teen sections. The large, open layout facilitates seamless category transitions, creating an uninterrupted visual journey for shoppers.
3. Strategic customer comfort zones: Boyner Grup-owned F&B stands are cleverly integrated throughout the store. These rest areas enhance the shopping experience and retain profits within the company. This integration goes far beyond what was attempted in Cadde stores.
4. Embracing innovation: While perhaps less playful than its Cadde counterpart, Istinye Park still incorporates key innovative features. The "mobile Pass Kasa" - a mobile cash desk enabling on-the-spot payment and packaging - exemplifies this commitment to cutting-edge retail technology. Similarly, customers have access to kiosks that deliver information about stock status, content, price, and product reviews. An “Inspiration wall” even allows customers to get recommendations according to the selection they make on the video screen.

Looking ahead: Tersane flagship

Boyner's next flagship project is slated for Tersane, a sprawling 242,000 sqm mixed-use development on the Golden Horn, currently nearing completion. This new iteration will likely address some of Istinye Park's structural limitations:

• Istinye Park's layout somewhat hampers cross-floor traffic, particularly between the women's and men's sections. The relative isolation of the men's floor and Boyner Dynamic Teen areas marks this store as more of a prototype than a final concept.
• The cosmetics section, while reflective of specific brand relationships, feels disconnected from the overall store aesthetic. Observing how Boyner evolves this space in the Tersane flagship will be crucial.
• Private Label strategy: Istinye Park showcases recently developed private labels like the outdoor brand Discovery Expedition, or more established ones such as Fabrika. However, these in-house brands don't receive the same prominent positioning as other IADS members like Falabella or El Corte Inglés do. Consequently, they do not stand out and international brands are more visible. Whether Boyner will adopt a more assertive approach to private label promotion in future iterations remains to be seen.

As Boyner continues to refine its retail formula, the Tersane flagship promises to be a fascinating case study in department store evolution.

*Boyner's journey from Cadde to Istinye Park, and soon to Tersane, illustrates the dynamic evolution of retail concepts in response to market demands and location-specific opportunities. The Istinye Park store represents a refined iteration of Boyner's innovative approach, balancing profitability with customer experience. As the retail landscape shifts, Boyner's upcoming Tersane flagship presents an opportunity to address current limitations and further innovate.

Key areas to watch include:

1. How Boyner will tackle cross-floor navigation and section integration.
2. The evolution of the cosmetics section's visual alignment with the overall store concept.
3. Potential changes in private label strategy and positioning.

Moreover, Boyner's ongoing experiments with store concepts raise broader questions about the future of department stores in an increasingly digital age. How will other retailers respond to these innovations? And how might these evolving concepts shape consumer expectations and behaviours in the long term?

As Boyner continues refining its approach, its strategies may offer valuable insights for the wider retail industry, potentially influencing the direction of global department store evolution*

Credits: IADS (Selvane Mohandas du Ménil)

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

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

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

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

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

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

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

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

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

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

Tmall embodies the very notion of omnichannel retail

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

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

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

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

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

Understanding the partnership with LVMH

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

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

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

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

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

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

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

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

Credits: IADS (Selvane Mohandas du Ménil)

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

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

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

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

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

Case Studies: brands that have emerged as sustainable leaders

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

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

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

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

Below are five case studies of sustainable brands:

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

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

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

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

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

The role of department stores

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Credits: IADS (Elisabetta Falco Beccalli)

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

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

New services: BOPIS and on-demand staff

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

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

Service lounges gathering all store services

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

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

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

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

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

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

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

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

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

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

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Credits: IADS (Christine Montard)

What: Study reveals gap between shopper preferences for personalisation and retailers' implementation in customer journeys.

Why it is important: This gap underscores the urgent need for retailers to invest in technologies and strategies that enable seamless, personalized experiences across all channels to meet evolving consumer demands.

Nearly 7 in 10 shoppers prefer retailers that offer personalized experiences across all channels, including both digital and physical touch points, according to a study by Incisiv and Talkdesk. However, only a third of retailers are personalising just one-third of their customer journeys, highlighting a significant disparity between consumer expectations and retail implementation.The study, based on a survey of 5,000 consumers and customer experience audits of 131 U.S. retailers, found that most shoppers are willing to spend more when their experience is tailored to their preferences. Luxury retailers are leading in personalisation capabilities, with over 90% offering one-on-one appointments with experts for assisted shopping, compared to the retail industry average of 30%.The importance of personalisation extends beyond product recommendations. In-store associates play a crucial role, needing mobile devices to assist customers efficiently. Over three-quarters of retail leaders say personalised customer service significantly boosts customer retention rates. Two-thirds of shoppers report that personalised interactions, such as chatbots recognising their name and purchase history, make them more likely to shop again with a retailer.

IADS notes:

The current study's findings align with broader industry trends towards personalisation and seamless omnichannel experiences. Retailers are increasingly focusing on integrating digital and physical shopping experiences to meet evolving consumer expectations . This shift extends beyond online platforms to in-store interactions, emphasising the importance of personalisation across all touchpoints . To achieve this, many retailers are investing in advanced technologies such as AI and AR to enhance customer experiences and drive loyalty . These trends underscore the growing importance of personalised, technology-driven retail strategies in meeting modern consumer demands.

Shoppers want personalisation online, in-store and on customer service calls

What: The Nordstrom brothers are advised to sell their Rack stores and refocus on their flagship luxury business.

Why it is important: This recommendation highlights a strategic pivot that could enhance Nordstrom's brand prestige and financial performance by concentrating on its core luxury offerings and differentiating itself in the competitive retail market.

The article suggests that the Nordstrom brothers should consider divesting their Rack stores to concentrate on their flagship luxury business. This move is proposed as a way to strengthen Nordstrom's brand identity and financial health by focusing on its high-end retail operations. The advice comes amid challenges in the retail sector, where a clear and strong brand positioning is crucial for success. By realigning its strategy towards luxury, Nordstrom could better leverage its heritage and expertise in the upscale market, potentially leading to improved profitability and market standing.

Strategic shift: Nordstrom Brothers advised to focus on flagship luxury

What: Private labels have evolved from generic alternatives to strategic retail assets, reshaping the price/value paradigm and challenging major CPG brands' market dominance.

Why it is important: As private labels gain market share and quality perception, they're becoming a crucial differentiator for retailers, driving customer loyalty and profitability while challenging the long-standing dominance of CPG giants.

Private labels, once viewed as inferior alternatives, have transformed into powerful retail assets with roots dating back to the 19th century. The turning point came in 1984 with Loblaws' launch of President's Choice, setting a new standard for quality store brands. Today, major retailers like Walmart, Target, and Costco experience over 25% of their sales from private labels, with Costco's Kirkland brand alone generating $56 billion annually. This success is driven by changing consumer attitudes, particularly among younger generations who view private labels without stigma. The COVID-19 pandemic and subsequent economic pressures have accelerated this trend, with consumers increasingly prioritizing value. Major CPG brands, focusing on short-term profits through price increases and "shrinkflation," have inadvertently accelerated the preference for private labels. This shift is not just about price; it reflects changing attitudes around brand values and trust. Retailers are capitalizing on this trend by expanding their private label offerings across various price points and quality levels, from premium options to budget-friendly alternatives. As private labels continue to gain market share, they're reshaping the retail landscape and forcing traditional brands to reassess their strategies.

IADS Notes:

Recent trends in retail highlight the growing significance of private labels across various market segments. Major retailers like Walmart, Costco, and Target have leveraged private brands to exceed expectations, with Costco's Kirkland Signature brand alone generating $56 billion in revenue. This success is reflected in broader market data, with private brands achieving record highs in the first half of 2024, capturing approximately 23% of unit market share and 20% of dollar market share. Retailers are not only expanding their private label offerings but also diversifying their strategies. Walmart's launch of Bettergoods, a premium private label brand, demonstrates a move towards "premiumization" in the sector. Conversely, Target's introduction of Dealworthy, a low-price private label, shows a continued focus on value-conscious consumers. These developments underscore the evolving role of private labels in retail strategy, catering to a wide range of consumer preferences and price points.

Private labels: How Major CPG Brands Have Brought on Their Own Demise

What: The article discusses the resurgence of physical retail catalogues in 2024 as a strategic tool for brands to engage consumers and drive sales.

Why it is important: Physical catalogues are gaining renewed importance as they offer a tactile experience that digital media cannot, helping brands differentiate themselves and build stronger connections with consumers in an increasingly digital world.

In 2024, physical retail catalogues are making a comeback as brands recognize their potential to enhance consumer engagement and drive sales. Despite the dominance of digital marketing, physical catalogues provide a unique tactile experience that can capture consumer attention in ways digital formats cannot. This resurgence is driven by the desire to stand out in a crowded digital marketplace and offer consumers a more personal and immersive shopping experience. Brands are using catalogues not just as sales tools but also as a means to tell stories and create deeper emotional connections with their audience. By investing in high-quality, visually appealing catalogues, companies aim to build brand loyalty and differentiate themselves from competitors. The article highlights how this trend is particularly appealing to luxury brands, which can leverage the physical format to showcase the quality and craftsmanship of their products. As a result, physical catalogues are becoming an integral part of the marketing mix for many retailers in 2024.

The resurgence of physical retail catalogues in 2024

What: The second-hand economy is booming, with major brands like Ikea, Zara, and Lego entering the market alongside established platforms like Vinted and Depop.

Why it is important: This trend highlights a significant shift in consumer behaviour, particularly among younger generations, towards sustainability and cost-effectiveness, while also presenting challenges and opportunities for brands to innovate and adapt to a circular economy.

The second-hand market is experiencing rapid growth, driven by younger consumers' preferences for sustainable and affordable options. Major brands, including Ikea, Zara, and Lego, are joining the second-hand economy, launching platforms and services to capitalize on this trend. The global second-hand clothing market, for instance, has seen substantial growth and is projected to continue its upward trajectory. However, challenges remain, such as sourcing quality items, managing fraud, and ensuring profitability. Despite these hurdles, the second-hand economy offers brands an opportunity to connect with consumers and contribute to sustainability efforts by promoting a circular economy.

The relentless rise of second-hand economy

What: Jeff Bezos-backed Perplexity AI develops a new AI-powered advertising model to disrupt the $300 billion digital ads industry, engaging top-tier companies in its implementation.

Why it is important: Department stores might have to change their SEO spending habits very soon to cope up with the new competition to Google.

Perplexity AI, a startup backed by Jeff Bezos and challenging Google, is developing a "sponsored" question system to disrupt the $300 billion digital ads industry. The company is in talks with major brands like Nike and Marriott to launch this new advertising model by year-end. Perplexity's system allows brands to bid for a "sponsored" question featuring an AI-generated answer approved by the advertiser, aiming to provide more relevant and high-quality ads to users.

The startup's ad system will charge marketers on a CPM basis, costing over $50 for every 1,000 impressions, significantly less than Google's estimated $1,100 for the same number. Perplexity has seen remarkable growth, with revenue and usage increasing 700% since the start of the year. The AI-powered search engine answered about 250 million questions in the last month alone.

Despite its success, Perplexity has faced challenges, including accusations of plagiarism from Forbes and Wired. The company has responded by updating its user interface to highlight citations more clearly and adjusting its system to avoid summarizing content from websites that have blocked its crawlers.

IADS Notes:

The retail industry is rapidly embracing AI-driven technologies to enhance customer experiences and revolutionize advertising strategies. Consumer interest in AI-enhanced shopping is growing, with 58% recognizing its positive impact . Major players like LVMH and Amazon are leveraging AI to improve customer interactions and operational efficiencies . This trend aligns with Perplexity AI's approach to challenge traditional digital advertising models. High-profile partnerships, such as LVMH's collaboration with Alibaba , mirror Perplexity's strategy of working with major brands like Nike and Marriott. Retailers across the spectrum, from luxury brands to department stores, are integrating AI into their core strategies , signaling a shift towards more personalized and efficient advertising and customer engagement methods.

Perplexity AI in discussion with Marriott and Nike as it prepares to challenge to Google's dominance

What: Adaptive AI technology is being adopted by some of the UK's leading retailers to enhance their operations and customer experiences.

Why it is important: The implementation of adaptive AI represents a significant opportunity for retailers to gain a competitive edge by improving efficiency and personalization, though it also poses challenges in terms of skill acquisition and investment.

The UK retail industry is undergoing a transformation driven by the adoption of adaptive AI technologies. This branch of AI, capable of learning and evolving as it performs tasks, is being embraced by forward-thinking retailers to stay competitive in a rapidly changing market. Richard Lim, CEO of Retail Economics, notes a widening gap between retailers who understand and leverage AI's potential and those who do not. The report highlights best practices and inspiring examples from ten of the UK's top AI-powered retailers, offering insights into successful tech investment strategies. The adoption of adaptive AI is seen as the next wave of digital acceleration, with significant benefits for those willing to embrace the technology.

Adaptive AI: Transforming the UK retail landscape

What: Subscription-based businesses face challenges as consumer fatigue grows and market competition intensifies.

Why it is important: It highlights the need for businesses to adapt their subscription models to changing consumer expectations and market conditions.

Recent closures of subscription services like Bellabox and Rocksbox highlight challenges facing the subscription economy. Factors include increasing competition, operational costs, and consumer fatigue. A survey found that 81% of subscribers in India and Southeast Asia believe there are "too many" subscription services available.

Despite these challenges, the subscription model shows potential for growth. The Subscription Economy Index (SEI) reports that subscription-based companies have outpaced traditional businesses, with revenue growth 3.4 times faster than S&P companies since 2012. In Asia Pacific, SEI businesses reported 14.6% revenue growth last year.

To succeed, businesses must focus on delivering clear value, enhancing customer experience, and offering flexible options. Strategies include customizable plans, bundling complementary services, and integrating advanced technologies like AI for personalization. Payment flexibility, including rent-to-own models and Buy Now Pay Later options, is increasingly important.

The subscription model remains attractive in Asia Pacific for its agility, affordability, and convenience, particularly in making high-end products more accessible to a broader audience.

Is the subscription economy still relevant?