What: Direct-to-consumer brands face challenges as consumer preferences shift towards experiential physical retail in the post-pandemic era.

Why it is important: The struggle of DTC brands reveals the limitations of online-only models and highlights the enduring value of physical retail spaces in creating memorable customer experiences.

The direct-to-consumer (DTC) business model, which thrived during the pandemic, is now facing significant challenges. In 2023, funding for e-commerce firms dropped by over 70% compared to the previous year, with many DTC brands struggling to stay afloat. This shift is partly due to changing consumer perceptions, as DTC is now associated with pandemic-era shopping habits that many are eager to move past.Consumers are increasingly drawn to physical retail spaces that offer unique, immersive experiences. Retailers are responding by creating multisensory, artistic environments that go beyond simple product displays. Examples include Prada's Instagrammable Café at Harrods and LEGO's 5th Avenue store, which offers interactive experiences like the LEGO Mosaic Maker and Minifigure Factory.DTC brands that have successfully adapted to this changing landscape are those that have established partnerships with physical retailers or opened their own brick-and-mortar stores. Brands like Harry's, Casper, and Warby Parker have thrived by adding a physical presence to their strategy. However, even brands with physical stores, such as Allbirds and Nike, are facing challenges, highlighting the importance of diversification in retail strategy.The article suggests that successful physical retail now requires more than just attractive decor or a selfie station. Consumers expect a comprehensive theme that represents the brand compellingly and offers engaging activities. This shift reflects a broader trend of blurring lines between shopping and leisure activities, with consumers seeking retail experiences that feel like "weekend plans" rather than just errands.

IADS notes: 

The challenges faced by DTC brands and the shift towards experiential physical retail align with broader trends observed in the retail industry. There's a growing emphasis on creating immersive and engaging in-store experiences , which corresponds with the article's focus on unique physical retail environments. This trend is part of a larger shift towards omnichannel shopping experiences that integrate both online and offline touchpoints . The resurgence of physical luxury retail stores post-pandemic  further supports the article's observations about consumers' renewed interest in in-person shopping experiences. Additionally, the increasing importance of personalization and tailored experiences in retail  underscores the need for brands to create unique, brand-specific experiences in their physical stores, as highlighted in the article.

Why DTC brands are struggling

What: Saks Fifth Avenue partners with Salesforce to implement AI-powered solutions for enhanced luxury shopping experiences.

Why it is important: This collaboration highlights the growing importance of tech partnerships in retail, demonstrating how traditional luxury brands can harness AI to bridge the gap between exclusive in-store experiences and data-driven online shopping.

Saks Fifth Avenue is expanding its partnership with Salesforce to enhance its luxury shopping experience through AI-powered solutions. The retailer will deploy Salesforce Platform, including Customer 360 apps, Data Cloud, and Agentforce, to deliver highly personalized shopping experiences aimed at boosting customer satisfaction and loyalty. Salesforce's Commerce Cloud will enable Saks to streamline sales tracking, order processing, inventory management, and fulfillment.

A key feature of this collaboration is the introduction of an autonomous Agentforce Service Agent, which will handle simple customer tasks like updating shipping addresses. This technological advancement is designed to free up human service agents to focus on more complex customer inquiries, potentially improving overall service quality.

Additionally, Saks will utilize Data Cloud to consolidate information from various systems into a unified customer profile. This integration of AI and data management technologies reflects a broader trend in luxury retail, where companies are increasingly leveraging advanced tech solutions to enhance customer experiences and streamline operations.

By adopting these AI-powered tools, Saks Fifth Avenue aims to create a more seamless and personalized shopping journey for its customers across both digital and physical channels.

IADS Notes:

The Saks Fifth Avenue and Salesforce partnership aligns with a significant trend in the luxury retail sector, where companies are increasingly leveraging AI technologies to enhance customer experiences and streamline operations. This move reflects industry-wide efforts to personalize shopping experiences, improve operational efficiency, and gain a competitive edge through AI-driven innovations. As the retail industry outpaces other sectors in AI deployment and revenue growth, partnerships between retailers and tech companies are becoming crucial for staying ahead in the market. Saks' adoption of Salesforce's AI-powered solutions positions the company to capitalize on the transformative potential of AI in areas such as customer engagement, data unification, and operational optimization, potentially setting new standards in the luxury retail space.

Saks Fifth Avenue deploys Salesforce AI and data technology

What: Many loyalty programs underperform due to economic misalignment, poor customer understanding, and lack of differentiation.

Why it is important: The article provides insights into evolving consumer preferences and the need for personalization in loyalty programs.

High-performing customer loyalty programs can significantly impact buying decisions and company valuations. However, many programs underperform due to poor economics, lack of customer understanding, and low engagement. Successful program redesign involves several key steps:

1. Accurate customer profiling using high-quality, actionable data.
2. Understanding what customers truly value, often through personalization and convenience.
3. Creating compelling hooks to attract and retain members.
4. Incorporating gamification elements, especially for younger audiences.
5. Building community around shared interests.
6. Considering strategic partnerships to broaden program appeal.Effective programs often require significant upfront investment but can scale quickly. They should focus on stimulating desired behaviors cost-effectively and use technologies like AI for personalization. Successful programs can transition from marketing tools to revenue drivers, integrating with commercial operations.Companies are advised to start with basics, identify valuable customers, understand their preferences, and use testing and learning approaches. This strategy increases the likelihood of generating strong ROI and turning consumers into brand promoters.

Why Loyalty Programs Fail

What: Bain & Company's 2024 guide for CEOs navigates the complex landscape of sustainability, offering pragmatic strategies to meet ambitious goals while balancing business imperatives.

Why it is important: As the retail industry grapples with integrating sustainability into core operations, from product design to customer engagement, this guide provides CEOs with practical approaches to transform commitments into impactful actions.

Bain & Company's "The Visionary CEO's Guide to Sustainability 2024" addresses the challenges faced by business leaders in meeting sustainability commitments while maintaining profitability. The report emphasizes that sustainability remains a priority for executives and consumers, despite competing concerns like inflation and geopolitical uncertainty. It highlights the need for a pragmatic approach, focusing on the next 5 to 15 years rather than distant 2050 goals.The guide outlines key strategies for CEOs, including building a clear business case for sustainability, collaborating across the value chain, and leveraging partnerships. It stresses the importance of understanding consumer preferences, with research showing 60% of consumers are more concerned about climate change than two years ago.The report also explores the potential of AI in sustainability efforts, cautioning about its increasing energy demands. It emphasizes the need for circular business models and new financing approaches in sectors like agriculture. Throughout, the guide underscores the importance of integrating sustainability into core business strategies, viewing it not just as a challenge but as an opportunity for innovation, cost reduction, and competitive advantage in a rapidly evolving business landscape.

IADS Notes:

Recent industry reports and initiatives reflect the trends discussed in Bain's guide. The NRF's 2024 report on Retail Circularity outlines strategies for adopting circular business models. Major retailers like Selfridges and Macy's are investing heavily in sustainability, with Selfridges aiming for 45% of transactions to involve circular services and Macy's committing $5 billion to its sustainability initiative. These efforts align with Bain's emphasis on integrating sustainability into core business operations and highlight the growing importance of circular economy practices in retail.

The visionary CEO’s guide to sustainability 2024

What: Major retailers outperform expectations by leveraging private label brands, AI, and customer loyalty strategies.

Why it is important: The integration of AI and customer loyalty programs with private label strategies showcases the future direction of retail competition.

Major retailers like Walmart, Costco, Target, and Nordstrom have exceeded expectations despite economic challenges, largely due to their focus on private label brands, generative AI in e-commerce, and customer loyalty. Private labels have become crucial in attracting value-seeking consumers, offering retailers higher profit margins and product differentiation.

The private label market has seen significant growth, achieving record highs in unit and dollar market shares. Walmart reported strong momentum in private brand sales, with over half of grocery baskets including a private brand product. Nordstrom's private labels contributed to expanded gross profit margins, while Costco's Kirkland Signature brand generated $56 billion in revenue.

Target's strategy of leveraging nearly 50 private label brands has driven significant financial returns, contributing to about a third of its revenue. The success of these strategies is evident in the strong performance of these retailers' stock prices compared to the broader retail sector.

However, the strategy isn't foolproof, as seen with Dollar General's struggles despite its focus on low prices, highlighting the importance of also providing convenience and a pleasant shopping experience.

Walmart, Target And Nordstrom Boost Sales By Expanding Private Labels

What: Nordstrom's focus on Nordstrom Rack expansion may be overshadowing issues with its core luxury business.

Why it is important: The situation demonstrates the potential pitfalls of diversification strategies in the luxury retail sector.

Nordstrom's CEO Erik and President Pete Nordstrom have agreed to take the company private through a $3.8 billion merger with Mexican retailer El Puerto de Liverpool. This move comes as Nordstrom faces declining sales in its flagship stores, with growth primarily driven by its off-price Nordstrom Rack division.

The article argues that Nordstrom's increasing reliance on Nordstrom Rack may be distracting from its core luxury business. While Rack was originally intended as an entry point for younger consumers, it has become a major focus for the company, potentially at the expense of its traditional high-end offerings.

The author suggests that Nordstrom might be better served by selling off Rack and refocusing on its luxury flagship stores, especially given potential changes in the competitive landscape with Neiman Marcus and Saks Fifth Avenue. The merger with El Puerto de Liverpool is questioned, as the Mexican retailer may lack experience in the U.S. luxury market.

What to think of Nordstrom teaming up with Liverpool

What: Tax-free shopping in department stores has exceeded pre-COVID levels, with notable shifts in shopper demographics and nationalities. In 2024, spending on apparel and jewellery is rising across many markets, with experiences remaining a key factor. The IADS explored these trends through presentations by Global Blue and Mastercard.

Why it is important: Recognizing the changing profiles and spending behaviours of international shoppers is vital for department stores to adjust their marketing strategies and improve the overall shopping experience, especially in the area of tax-free shopping.

The report discusses how tax-free shopping in department stores has exceeded pre-COVID levels, driven by changing consumer demographics and spending habits. Gen Z and Millennials now make up a larger portion of shoppers, with luxury spending also increasing among high-net-worth individuals (HNWIs). The report highlights key differences in shopping patterns across regions, noting a slower return of Chinese shoppers to Europe but a significant rise in U.S., Latin American, and Gulf Cooperation Council (GCC) nationals. Department stores are focusing more on providing unique experiences, with services such as personal shopping and dining playing a critical role in attracting international customers. Mastercard’s insights show a shift toward experiences over goods in consumer spending, alongside increased use of AI and digital solutions to personalise offerings.

Global Blue & Mastercard reports – How do consumers shop in 2024?

PRINTABLE VERSION HERE

IADS recently held a meeting all about the Women's Fashion brands to look out for in 2024. Based on market research, IADS and NellyRodi presented a curated selection of 18 brands that are trending right now.

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

MUST HAVE

GANNI

Ganni is a contemporary Danish fashion brand known for its playful, effortless, and distinctive designs that blend Scandinavian minimalism with bold, vibrant patterns. Established in 2000, Ganni has gained international acclaim for its innovative approach to everyday wear, focusing on sustainability and inclusivity while maintaining a chic, modern aesthetic.

Check out the Ganni website here

CHECK OUT ganni's INSTAGRAM

STAUD

Staud is a Los Angeles-based fashion brand founded in 2015 by Sarah Staudinger and George Augusto, celebrated for its modern, retro-inspired designs that blend sophistication with a playful edge. The brand is renowned for its distinctive use of vibrant colors, unique silhouettes, and innovative accessories, making high-fashion accessible and stylishly fun.

Check out the staud website here

check out the staud instagram here

RAINS

Rains is a Danish fashion brand founded in 2012, specializing in modern, high-quality rainwear that combines functionality with contemporary design. Known for its sleek, minimalist aesthetic, Rains offers a range of waterproof outerwear, bags, and accessories that are both practical and stylish. The brand has gained international recognition for its innovative use of materials and commitment to sustainable practices.

Check out the rains website here

check out the rains instagram here

SEA NEW YORK

Sea New York is an American fashion brand known for its romantic and bohemian aesthetic. The brand offers a mix of vintage-inspired silhouettes, intricate detailing, and modern sophistication. Sea New York's collections often feature feminine dresses, delicate lace, and unique prints, appealing to those who appreciate timeless, whimsical fashion.

Check out the sea new york website here

Check out the sea new york instagram here

BARRIE

Barrie is a Scottish fashion brand renowned for its luxurious cashmere knitwear, blending traditional craftsmanship with contemporary design. The brand offers a range of high-quality sweaters, cardigans, and accessories, celebrated for their softness, durability, and intricate detailing. Barrie has earned a reputation for its cashmere pieces, appealing to those who value timeless elegance and superior quality.

check out the barrie website here 

check out the barrie instagram here 

ON TREND

COURRÉGES

Courrèges is a French fashion brand founded in 1961, renowned for its futuristic designs and innovative use of materials. Known for pioneering the mod and space-age looks of the 1960s, Courrèges offers sleek, geometric silhouettes and bold, minimalist styles. The brand continues to influence contemporary fashion with its avant-garde approach and distinctive aesthetic.

Check out the courréges Website Here 

check out the courréges instagram here

SAKS POTTS

Saks Potts is a Danish fashion brand founded in 2014, known for its bold, playful designs and luxurious outerwear. The brand offers eye-catching pieces that blend Scandinavian minimalism with eclectic, modern flair. Saks Potts has gained international acclaim for its innovative approach to fashion, appealing to those who appreciate unique, statement pieces.

check out the saks potts website here 

check out the saks potts instagram here

CASABLANCA

Casablanca is a French-Moroccan fashion brand founded in 2018, known for its luxurious, vibrant designs that blend leisurewear with a sophisticated, sporty aesthetic. The brand offers a range of high-quality pieces featuring bold prints, rich colors, and exquisite craftsmanship. Casablanca draws inspiration from its founder's dual heritage, creating a unique fusion of Parisian elegance and Moroccan charm.

check out the casablanca website here 

check out the casablanca instagram here

LOW CLASSIC

Low Classic is a Korean fashion brand known for its minimalist, contemporary designs that emphasize clean lines and timeless elegance. The brand offers a range of sophisticated, versatile pieces that blend traditional craftsmanship with modern sensibilities. Low Classic's approach to fashion is characterized by understated luxury and a focus on high-quality materials and sustainability.

checkout the low classic website here 

checkout the fara low classic instagram here 

RISING TALENTS

LA VESTE

La Veste is a Spanish fashion brand known for its vibrant, eclectic designs and retro-inspired aesthetic. Founded by Blanca Miró and María de la Orden, the brand offers unique, statement-making pieces characterized by bold patterns, bright colors, and playful silhouettes. La Veste has gained a following for its innovative approach to vintage fashion, blending nostalgia with contemporary flair.

Check out the la veste website here

Check out the la veste instagram here

ESTER MANAS

Ester Manas is a Belgian fashion brand celebrated for its inclusive, body-positive designs that cater to a wide range of sizes. The brand offers bold, innovative pieces characterized by stretchy, adjustable fabrics and dynamic silhouettes, emphasizing comfort and versatility. Ester Manas has gained acclaim for challenging traditional fashion norms and promoting diversity and sustainability in the industry.

Check out the ester manas website here 

check out the ester manas instagram here

CARO EDITIONS

Caro Editions is a Swiss fashion brand known for its elegant, timeless designs and commitment to sustainable practices. The brand offers a range of high-quality, versatile pieces characterized by clean lines, refined details, and luxurious materials. Caro Editions has gained recognition for its ethical approach to fashion, blending classic aesthetics with modern sustainability.

check out the Caro editions website here

check out the caro editions instagram here

TIME

Time is a prominent Korean fashion brand known for its sophisticated, elegant designs that cater to modern, professional women. The brand offers high-quality pieces characterized by clean lines, luxurious fabrics, and timeless silhouettes. Time has established a reputation for its refined aesthetic and attention to detail, making it a favorite among those who appreciate classic yet contemporary fashion.

check out the time website here

check out the time instagram here

HIDDEN GEMS

BITE STUDIOS

Bite Studios is a Swedish fashion brand renowned for its commitment to sustainability and timeless design. The brand offers meticulously crafted pieces made from organic and recycled materials, characterized by minimalist silhouettes and high-quality construction. Bite Studios has gained recognition for its ethical approach, blending contemporary aesthetics with environmental consciousness.

Check out the bite studios website here

Check out the bite studios instagram here 

RUS THE BRAND

Rus The Brand is a Spanish fashion label known for its minimalist, timeless designs and commitment to sustainability. The brand offers a range of high-quality, versatile pieces crafted from natural materials, emphasizing comfort and durability. Rus The Brand has gained recognition for its understated elegance and ethical approach to fashion, appealing to those who appreciate simplicity and conscientious craftsmanship.

Check out the rus the brand website here 

CHECK OUT THE rus the brand instagram here

VALENTINE WITMEUR LAB

Valentine Witmeur Lab is a Belgian fashion brand celebrated for its luxurious knitwear and contemporary designs. The brand offers high-quality pieces characterized by bold colors, unique textures, and impeccable craftsmanship. Valentine Witmeur Lab has gained a following for its modern, sophisticated approach to fashion, blending comfort with stylish elegance.

Check out the valentine witmeur lab website here

CHECK OUT THE valentine witmeur lab INSTAGRAM HERE

HIDEMI

Hidemi is a Chinese fashion brand known for its blend of contemporary design and traditional craftsmanship. The brand offers a range of high-quality pieces characterized by clean lines, innovative cuts, and luxurious fabrics. Hidemi has gained recognition for its unique aesthetic, which combines modern fashion sensibilities with a deep appreciation for cultural heritage.

Check out the hidemi website here

check out the hidemi instagram here

EN VRAC PARIS

En Vrac Paris is a French fashion brand known for its eclectic, avant-garde designs and sustainable practices. The brand offers a range of unique, high-quality pieces characterized by bold patterns, innovative cuts, and artistic flair. En Vrac Paris has gained recognition for its creative approach to fashion, blending contemporary aesthetics with a commitment to environmental responsibility.

check out the en vrac paris website here

check out the en vrac paris instagram here

What: Japan has emerged as the strongest market for luxury sales in Q2, despite a global luxury slowdown.

Why it is important: Japan's exceptional performance in luxury sales offers a crucial revenue stream for major fashion brands amidst declining sales in other key markets like China, the US, and Europe, underscoring the market's strategic importance.

As the global luxury market faces a slowdown, Japan has stood out with remarkable sales growth in Q2. Major luxury brands like Prada, Hermès, and Kering reported significant sales increases in Japan, driven largely by tourism and a weak yen that attracted many Asian shoppers. Despite the broader downturn affecting regions like China, the US, and Europe, Japan has shown resilience, becoming a critical market for luxury brands. To sustain this growth, brands are advised to focus on matching supply with demand, enhancing customer experiences, and maintaining appeal to tourists and locals. While economic and geopolitical uncertainties remain a concern, Japan's luxury market continues to be a pivotal area for revenue and strategic investments.

Japan's luxury market: A bright spot amid global slowdown

What: Walmart is leveraging generative AI to enhance its product catalog data quality, aiming to improve customer and associate experiences across its retail operations.

Why it is important: This initiative showcases the practical applications of AI in retail, setting a benchmark for the industry and potentially influencing how other retailers approach technology integration.

Walmart is harnessing the power of generative AI to enhance its product catalog data quality, with the goal of improving customer and associate experiences. CEO Doug McMillon emphasized the tangible ways AI is being leveraged to benefit all stakeholders. The company has used large language models to create or improve over 850 million pieces of data across its product catalog, a task that would have required 100 times more human resources without AI.

The improved data quality impacts various aspects of Walmart's operations, from helping customers find and purchase products more easily to optimizing inventory management and order delivery. In-store, associates can now use mobile tools to quickly locate inventory, significantly upgrading from the previous "treasure hunt" approach. Online, AI tools combine customer intent data with enhanced product information to present more relevant items to shoppers and improve product display pages.

Walmart is also focusing on "perfect orders," which measure the ability to find desired products online and ensure timely, undamaged delivery. This initiative is particularly crucial for Walmart Plus members, as free delivery is a core perk of the loyalty program. The company reported double-digit growth in Walmart Plus memberships during the quarter, partly attributed to these improvements.

These AI-driven enhancements align with Walmart's broader strategy of technological innovation. The company has been exploring various AI applications, including a GenAI Search feature for iOS users, an AI-driven InHome Replenishment service, and AI Receipt Verification for streamlined checkout processes. By integrating AI across its operations, Walmart aims to create a more seamless and personalized shopping experience while improving operational efficiency.

Walmart used AI to crunch 850m data points and improve customer experience

What: Amazon has developed a very concrete way to use AI, in predicting demand and delivery  needs

Why it is important: Not everything is about generative AI.

Amazon has significantly enhanced its delivery efficiency, announcing over 5 billion items delivered globally within a day, a 30% increase in same- or next-day delivery rate year over year. The company credits advancements in artificial intelligence for improving demand forecasting and inventory placement. This technological integration has allowed for a more regionalized inventory approach, leading to a 10% reduction in the travel distance of items and more orders being shipped from local sites.

The online retailer now offers same-day delivery in over 120 U.S. metro areas and has expanded the selection of items eligible for Same-Day or One-Day Delivery to "tens of millions." This marks a 20-fold increase in the selection of quickly deliverable items compared to when Amazon Prime first launched. Additionally, Amazon's strategic inventory management has increased the average number of items per box in the U.S., reducing the overall number of deliveries required and contributing to a more efficient distribution model.

Amazon uses AI to reach delivery speed milestones

What: Just Walk Out has received an upgrade thanks to AI helping improving its accuracy rate

Why it is important: Beware of the equipment cost, which is extremely high.

Amazon has refined its Just Walk Out technology, which facilitates seamless shopping experiences, by integrating an advanced AI model that enhances system accuracy and efficiency. This model uses simultaneous input analysis from various data sources like cameras and shelf sensors, reducing processing times and improving the system’s operational speed. All 170 third-party locations currently employing this technology will receive upgrades within the next month.

This technological enhancement not only boosts accuracy in complex shopping scenarios but also simplifies the overall system, making it more appealing to third-party retailers. Despite its high initial cost, which has deterred widespread adoption, Amazon is strategically shifting focus from its own retail spaces to broader commercial applications, including venues such as hospitals and stadiums. The system's potential for 24-hour service in various settings underscores its utility in high-traffic areas where quick transaction times are crucial.

Moreover, Amazon is continuing to innovate in retail technology by introducing an RFID-powered checkout system suitable for environments where customers prefer browsing before purchasing, such as in clothing and merchandise stores. This move, along with the ongoing improvements to Just Walk Out technology, aims to reduce installation costs and enhance the return on investment for retailers, potentially broadening the market for Amazon's advanced retail technologies.

Amazon’s checkout technology is getting an AI upgrade

What: Department stores are enhancing VIP shopping experiences to cater to their highest-spending customers, who contribute disproportionately to overall sales.

Why it is important: VIP experiences build loyalty and can attract influential customers who may bring awareness to other potential high-value shoppers.

Department stores are intensifying their focus on VIP shopping experiences to capitalize on the spending power of their top customers.

In South Korea, where luxury retail spending per capita is the highest globally, retailers like Galleria Department Store have opened exclusive VIP clubhouses for customers spending at least KRW 40 million annually. This trend extends beyond Asia, with London's Harrods launching an exclusive club in Shanghai with a hefty annual membership fee.The emphasis on VIP customers is driven by the stark reality that just 1% of the highest spenders contribute around 25% of department store sales, while the top 20% account for 80% of revenue. This concentration of spending power makes catering to these customers crucial for financial success.

VIP experiences often include access to private rooms, personalized styling services, and exclusive events, creating a sense of exclusivity and fostering loyalty. Foreign VIP customers are particularly valuable, with some spending over KRW 10 million per visit. To attract and retain these clients, department stores are introducing loyalty programs specifically for foreigners, offering reward points and tailored services. The strategy extends to popular tourist destinations like Beverly Hills, where luxury stores provide VIP experiences such as private appointments and exclusive access to special areas. As department stores face challenges from e-commerce and changing consumer behaviours, focusing on VIP experiences allows them to differentiate themselves and leverage their physical spaces by creating memorable, personalized experiences for their most valuable customers.

Should department stores all have VIP services?

What: The retail industry is experiencing a shift towards increased security measures, including locking up merchandise and restricting store access, which is creating a new era of "untailing" where sales prevention becomes an unintended consequence of loss prevention efforts.

Why it is important: The situation calls for innovative solutions that can address security concerns without significantly hindering the shopping experience.

The retail industry is undergoing a significant transformation in how it approaches security and customer access, dubbed "untailing" by the author. This shift is characterized by an increasing tendency to lock up merchandise and, in some cases, restrict access to entire stores. This trend represents a departure from the self-service model pioneered by Piggly Wiggly in 1916, which revolutionized shopping by allowing customers direct access to products.

Major retailers like CVS, Walgreens, Target, and Walmart have expanded the practice of locking up merchandise beyond traditionally secured items like razor blades and perfumes to include a wide range of products. This approach, while aimed at reducing theft, often seems arbitrary and can significantly impede the shopping experience.

The article highlights extreme cases, such as Saks Fifth Avenue converting its San Francisco location to an appointment-only operation, effectively locking out casual shoppers and potentially impacting sales. While retailers cite increased theft as the primary reason for these measures, the author notes a lack of transparent data on the actual scale of the problem.

The piece suggests that these restrictive practices may be counterproductive, potentially driving away customers and reducing sales. It calls for more innovative solutions to address retail crime without compromising the shopping experience. Examples of alternative approaches include increased visible security presence, as seen in Atlanta's Lenox Square mall, and advanced surveillance technologies similar to those used in Las Vegas casinos.

The author argues that retailers, known for their innovative marketing strategies, should be able to devise more effective solutions to combat theft without resorting to measures that fundamentally alter the shopping experience. The challenge lies in finding a balance between security and maintaining an open, inviting retail environment.

This new era of "untailing" raises important questions about the future of retail, customer experience, and the industry's ability to adapt to changing security needs without alienating shoppers.

When combatting retail crime leads to “untailing”

What: In her weekly newsletter, the founder of MBS, a headhunting group, reflects on the role of department stores today

Why it is important: They need to prioritize experience over anything else in order to resist the luxury groups’ increasing power.

The relevance of UK department stores in a post-COVID, digitally competitive environment is notable despite the decline of many major online multibrand retailers. These stores, historical pillars of luxury retail, continue to adapt to shifting cultural, political, and technological landscapes, as exemplified by prominent names like Fortnum & Mason, established in 1707, and others like Harrods and Selfridges which opened in the 19th and early 20th centuries, respectively.

Department stores must now focus on innovation and experiential retail to remain destinations of choice. Selfridges, for instance, emphasizes creating engaging experiences such as Sportopia, an in-store festival featuring interactive sports activities. This shift towards experiential retail is echoed by former executives of Saks and Harrods, emphasizing the transformation of these spaces from mere shopping locations to centers of discovery and engagement.

Moreover, the role of physical elements like store windows remains significant, evolving to complement online engagements that extend the stores' reach and influence. However, department stores face growing competition not only from online platforms but also from luxury brands that are enhancing their direct-to-consumer capabilities, as demonstrated by Kering’s strategic real estate investments.

Despite challenges, the narrative surrounding department stores remains one of evolution and adaptation, crucial for their survival and continued relevance in the luxury retail sector. The future, while uncertain, still holds potential for innovation within this traditional retail format.

Department stores: a destination for the ages

What: In the US, department stores are desperately trying to differentiate thanks to an offer which goes beyond the international, standardized, well-known brands.

Why it is important: This raises both the point of being able to detect new labels and talents, and be able to develop them. In fact, this is a call to revert to the initial role of department stores, at the cost of reverting to a wholesale business model.

Department stores, including Macy's, Kohl's, and Nordstrom, are actively adjusting their strategies to engage younger consumers. Notably, Nordstrom has successfully attracted more next-gen customers compared to its competitors. These legacy retailers are integrating strategies like smaller store formats, expanded brand partnerships, and a focus on independent designers to stay relevant.

The effectiveness of influencers is diminishing as next-gen consumers shift their focus from authenticity to the frequency of posts and follower counts. This trend emphasizes the importance of an influencer's visibility over their perceived genuineness. Consequently, brands with a strong online presence and engaged followers are becoming crucial partners for traditional retailers.

Retailers are leveraging independent brands to differentiate their offerings. For instance, Nordstrom has enriched its assortment with emerging designers, which helps attract fashion-forward younger customers. Similarly, Target is harnessing its partnership with Shopify to introduce indie products both online and in physical stores, enhancing its appeal to next-gen shoppers.

The collaboration with indie brands, however, presents challenges such as maintaining product quality and aligning brand values. Lessons from failed partnerships like Kanye West's Yeezy and Gap highlight the risks involved. To mitigate these risks, retailers are establishing dedicated teams to vet potential partnerships and engage their consumer base in the curation process, ensuring the brands they onboard resonate with their target audience. This approach aims to solidify consumer loyalty and adapt to the evolving retail landscape.

US department stores are in need of new brands

What: At a NRF conference, Walmart reviewed how they explore new use cases for the application of AI in their processes

Why it is important: it is less about “where is my order” and more about “help me to find a gift for my 10 years old nephew whose birthday is next week”.

Desi Gosby, Vice President of Emerging Technology at Walmart Global Tech, leads a team focused on conversational AI, generative AI, and extended reality to enhance customer and associate experiences. Gosby's team, already adept in conversational AI prior to her joining, has expanded its applications to include about 30 conversational experiences for associates and a beta version of a shopping assistant for customers. This new assistant aims to help users with more nuanced requests, such as finding specific gifts, rather than just tracking orders.

Gosby emphasizes a problem-solving approach to technology, involving iterative development and close collaboration with business units to understand and address specific needs. The use of AI has been pivotal in increasing the efficiency and productivity of customer care agents and in improving website content. Her approach involves direct engagement with associates to incorporate their feedback into technology solutions, enhancing their work rather than imposing new tools without their input.

How Walmart explores new chat use cases through AI

What: Fashion brands are increasingly setting up shop in 'third places' like cafes, bars, and studios to create intimate, community-driven shopping experiences outside traditional retail spaces.

Why it is important: This strategy allows brands to connect with consumers on a deeper level, offering unique, personalized experiences that traditional stores can't provide. It also helps brands establish a physical presence without the overhead of a permanent storefront, tapping into the growing trend of hobbyism and community engagement.

Fashion brands are moving beyond traditional retail environments to set up pop-ups and events in 'third places'—venues like cafes, gyms, and art studios—where people gather outside of work and home. This approach allows brands to create unique, community-focused experiences, driving sales and building deeper connections with customers. The trend reflects a broader shift toward hobbyism and the re-emergence of physical spaces where people can connect and engage. These 'third places' offer brands a flexible and cost-effective way to establish a physical presence, while providing consumers with a more personalized and memorable shopping experience.

Fashion brands embrace 'Third Places' to foster community and drive sales

What: Department stores in the U.S., including Macy's, Nordstrom, and JCPenney, are unveiling new strategies to counter declining market share, focusing on store closures, international expansion, experiential shopping, and improved customer experiences.

Why it is important: These strategies are crucial as they represent the sector's efforts to regain relevance in an increasingly digital and competitive retail environment, where consumers are shifting their spending towards online platforms, off-price retailers, and mass merchants.

The U.S. department store sector, long seen as struggling, is implementing a series of strategic initiatives to reverse declining sales and market share. Major players like Macy's, Nordstrom, and JCPenney focus on different approaches such as international expansion, enhancing store experiences, and targeting younger customers with revamped product assortments and store formats. Despite introducing these strategies, the sector continues to face challenges, with many retailers reporting declining sales and profits, and analysts remaining cautious about the potential for long-term recovery. The effectiveness of these strategies will be crucial in determining whether these iconic retailers can successfully adapt to a rapidly changing retail landscape.

Department Stores Fight Back: Will New Strategies Revitalize the Sector?

What: Indian international tourism is rapidly growing, with predictions of 90 million departures by 2040 and annual spending reaching $89 billion in three years, making India an increasingly important market for the global tourism industry.

Why it is important: The rise in Indian tourism presents significant economic opportunities for countries worldwide, especially as Chinese tourism has declined.

Indian international tourism is experiencing substantial growth, with annual departures expected to reach 90 million by 2040 and spending projected to nearly triple to $89 billion in three years. This surge is particularly significant as Chinese tourism, previously a major driver of the global tourism industry, has declined following the COVID-19 pandemic.

To attract Indian tourists, countries need to implement specific strategies:

1. Visa Facilitation: Simplifying visa processes and reducing costs can significantly boost visitor numbers. Countries like Malaysia and Thailand have seen surges in Indian visitors after abolishing visa requirements. In contrast, many Western countries' complex and expensive visa processes deter Indian tourists.
2. Cultural Collaboration: Partnering with Bollywood has proven effective in promoting destinations. Spain saw Indian arrivals double after collaborating on a popular film. Switzerland and Dubai have also benefited from featuring in Indian movies.
3. Diplomatic Influence: Indian Prime Minister Narendra Modi's international trips generate interest in destinations through media coverage, indirectly promoting tourism.
4. Culinary Offerings: Providing a variety of Indian cuisine options, especially vegetarian food, is crucial for attracting and satisfying Indian tourists.

These strategies reflect the unique characteristics of Indian travelers, including their cultural preferences and dietary requirements. As Indian tourism continues to grow, it presents significant economic opportunities for destination countries, potentially reshaping global tourism patterns and influencing international relations.

The rise of Indian tourism also highlights the changing global dynamics, with India's increasing economic power translating into greater international mobility for its citizens. This trend could lead to broader cultural exchanges and strengthen India's soft power globally.

Preparing for the Indian tourism boom

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*Paris’ Champs-Élysées have a rich history. Originally designed in 1667 by Le Nôtre, the famous French architect created a long tree-lined promenade starting from the Tuileries Palace. In the 20th century, the avenue experienced spectacular growth with the arrival of major stores, cinemas, and famous cafés such as Fouquet's. These establishments attracted an international clientele, earning the Champs-Élysées the reputation of "the most beautiful avenue in the world” where something was always happening. Luxury brands opened stores, transforming the avenue into a high-end shopping area./nbsp]

However, starting in the 1980s, the avenue began to experience a period of decline, luxury brands gradually gave way to more mainstream stores such as McDonald's, Zara and H&M, leading to a gradual dissatisfaction among Parisians. Between 1990 and the 2000s, many shopping arcades, once the pride of the Champs-Élysées, were deserted. The avenue lost its lustre, failing to attract the sophisticated clientele it once did. Allowing easy access from the suburbs, the opening of the regional train also changed the avenue's visitor profile, reinforcing its mass consumption image. More recently, the avenue faced years of "yellow jackets" protests, strikes and the pandemic, which drove away potential customers.

But the renewed appeal of the most famous avenue in the world is confirmed: there is a Champs-Elysées Renaissance.

Welcoming 300,000 pedestrians on busy days, the avenue is transforming into a prime showcase for brands. As measured by Knight Frank, the avenue recorded 46 brand movements in 2022 and 2023, especially in the sports and luxury sectors: 46% were new store openings, and 54% were relocations, expansions, or renovations. The movements recorded over the past 2 years involved 24% luxury brands and 17% sportswear brands.

Who will win the attention of tourists coming to the Olympics? Considering their investments, luxury and sport-style brands seem best positioned. Moreover, in the long run, who will win the 110 million people passing through the Champs-Élysées each year? Will the Olympics bring additional business?*

The Champs-Elysées Renaissance began before the Olympics, with luxury brands paving the way

In 1989, the city hall declared avenue rehabilitation was a major priority, aiming to restore the avenue's original purpose as a promenade. To that end, more than 4 additional hectares of sidewalks were created, with 2 rows of trees forming a pedestrian mall over a kilometre long. Truly enhancing the avenue, the works were completed in 1994 and involved famous international architects such as Norman Foster for the urban furniture.

The opening of the Sephora flagship store on number 72 in 1996, a milestone for the avenue, paved the way for luxury brands. Reopened in October 2023 after 6 months of strategic refurbishment, the store aims to reinvent the flagship experience ahead of the Olympics, especially as Sephora is an official partner of the torch relay. The store now offers a brighter, more open design, with elements inspired by Parisian architecture. Features include a central white marble path, a 90-meter-long glass-illuminated ceiling, and more natural materials like wood and plants. The store layout has been optimised for better navigation and customer experience to cater to a high volume of international visitors, previously recorded at 12 million annually. Louis Vuitton’s flagship store (number 101) opening in 2005 marked the beginning of the avenue’s retail transformation. Other luxury brands followed, reaffirming the Champs-Élysées' status as a luxury avenue: for example, also opened in 2005, Cartier settled close to the Arc de Triomphe, as well as Bulgari opening in 2016.

Closer to the time being, in March 2019, Galeries Lafayette launched a new department store format on number 60, willing to be more of a concept store than a traditional one. The store has 3 floors offering women's and men's fashion and accessories, beauty, restaurants, and a food court. Since then, the store has gained efficiency by rethinking the brand mix, offering a combination of premium, social brands, streetwear, designer and luxury brands. When asked about the Champs-Elysées store in June 2024, CEO Nicolas Houzé acknowledged that the store performance had "not been what we expected" for the store opened "at the worst time in the avenue's history". However, a "significant effort on the product offering, the teams, and the communication allows us to believe in a promising future."

Dior, Moncler, and Saint Laurent soon followed and settled in the highest part of the avenue (numbers 127, 119, and 123), in the surroundings of Louis Vuitton, the avenue’s luxury staple. Dior opened in July 2019, Moncler in December 2020 and Saint Laurent in December 2023. Same as Moncler, Saint Laurent made a bold choice as it is the brand’s largest boutique in the world. Presenting the entire range, including men's and women's fashion, accessories, and jewellery, this four-story store offers a minimalist aesthetic, blending raw textures with luxurious details. The store features art pieces and a VIP area.

At the intersection of luxury and sport-style, Calvin Klein unveiled a new global flagship store on number 44 in June 2024. The opening is part of a long-term strategy rather than solely driven by the Olympics. “We are not opening because of the Olympics. We are opening because it’s the right place to be for our brand. We’re excited by the momentum around the Champs-Élysées”, said global brand president Eva Serrano. The 850-square-meter store includes the brand’s full range of products, including menswear, womenswear, accessories, eyewear, fragrance, underwear, loungewear, swimwear, and sportswear. Ideally positioned in the lower part of the avenue close to Sephora and Lacoste, the flagship aims to solidify Calvin Klein’s positioning as a lifestyle brand focused on aspirational customers.

The Olympics, a booster for the ‘sport-style’ segment on the avenue

Streetwear and sportswear retailers and brands were early contributors to the avenue Renaissance. Taking over Nike, Citadium opened a second Parisian flagship store on Champs Elysées in July 2017 (number 65). Printemps’ streetwear and youth-oriented retailer new store is 1,600-square-meter on 3 levels. The store is supposed to attract 3.5 to 4 million visitors annually, with tourists potentially representing half of the clientele.

Nike House of Innovation opened in July 2020 at number 79. Blending digital and physical immersive experiences, the store was the brand’s first House of Innovation in Europe and the third worldwide, following locations in New York and Shanghai. Spanning 2,600 square meters over 4 floors, the flagship store features phygital initiatives such as QR codes on most items allowing quick delivery in your size in a fitting room. The store also offers self-checkout stations: order your item and have it delivered, try it on, buy it via the app, and leave the store. Storytelling is also emphasised, with a memory wall retracing the evolution of the Nike Air sneakers through to 2020, pointing out its progress and innovation.

Opened in June 2022 at number 50, Lacoste Arena, the brand’s 3-storey first global flagship store, emphasises the link between fashion and sport by balancing experiential spaces (exhibition space, customisation, interactive polo carrousel), entertainment corners (photo booth, VR featuring crocodiles) and sales areas. It addresses all types of shoppers: fashion and streetwear fans, sports addicts or consumers looking for sustainability.

In September 2022, Foot Locker changed locations to open its biggest European store at number 36. The store offers a high-level shopping experience, including technology-driven experiences, original artworks and a resting space with sofas. It includes multiple QR codes for customers to scan throughout the store and a large curved LED screen for interactive quizzes and gift giveaways.

Lululemon opened a flagship store at number 38 in December 2022, a crucial step in the brand’s expansion in the French market. The flagship store features spacious fitting rooms and a "shopping suite" area for a more personalised shopping experience, aligning with the company’s omnichannel strategy. Also, the brand has formed local partnerships to organise sports classes at local gym studios.

Clearly focusing on young customer segments, JD Sports opened 1,600 square meters over 2 levels at number 118 in April 2024. Locating the store in the higher part of the avenue is an exception, as counterparts are more settled in the middle and lower parts. Adidas, already present on the avenue, decided to move its flagship store to number 88, a 3-level 3,700 square meter location, making it the largest Adidas store in Europe. Opened in May 2024, the new "Home of Sport" store highlights lifestyle collections, premium collaborations and performance products, including a "run lab" for gait analysis. The store also offers a customisation area and features various artistic collaborations. Adidas plans several marketing activations, including appearances by Zinedine Zidane and other celebrities.

After opening in the Marais, Madeleine and Saint-Germain-des-Prés areas, Salomon has opened a new flagship store on the Champs-Élysées (number 42) in June 2024, aiming to elevate its sport-style positioning. This move aligns with Amer’s strategy to transform Salomon into a lifestyle brand while maintaining its mountain sports heritage. The Champs-Élysées store focuses on Salomon's history and innovative products, aiming to blend performance with sport-style. Salomon's approach aims to cater to both markets without losing authenticity. The brand's footwear category remains central, accounting for 80% of its revenue. Salomon's strategic expansion also includes new brand ambassadors to strengthen its presence in the fashion and culture sectors.

Offering a better customer experience than before, Levi's has relocated its flagship store from number 76 to number 44. The new store, opposite Lacoste and next to Calvin Klein's flagship, spans 540 square meters. This move enhances Levi's visibility, prominently displaying its iconic denim culture from the street. The store has a fully blue aesthetic. A dedicated section honours the history of the 501 model. They attached a sales associate to it, acting as a denim ambassador to share detailed stories about the products. The Tailor Shop, offering customisation and repairs, has been expanded to include a team of 4 dedicated staff members. The store also plans to host events to engage the artistic community. Touch screens are available to assist customers. The fitting rooms have been redesigned to offer more space and better service.

Finally, after an initial success in the Saint-Germain-des-Prés district, On opened at number 65 just 2 weeks before the Olympics. With 1,500 square meters, it is not just a store but a 3-storey shrine dedicated to running and innovation, offering an experience combining performance and design, well-being and personal achievement. Also surfing on the current tennis core trend, On introduced a more complete tennis offer, referencing Roger Federer.

What to expect from the Olympics?

First, the avenue is a magnet again for brands and tourists alike. The commercial vacancy rate on the Champs-Elysées has significantly dropped. Knight Frank said it fell to 3.7%, compared to nearly 10% at the end of 2022. Despite this, rents have not significantly increased, having already peaked before the pandemic. According to a study by Cushman & Wakefield and Mytraffic, the avenue's foot traffic increased by 15% between May 2022 and June 2023 compared to May 2021 to June 2022.

Second, to make the most of the Olympics, local businesses decided they could not wait for the multimillion-euro project planned after the Olympics, turning the area into an “extraordinary garden”. Instead, 180 businesses approved a plan to give the avenue a much-needed makeover to eliminate the ugly terraces. They are now standardised and aligned to ease the flow of pedestrians. Each terrace costs €400,000, showing how businesses are expecting from the Olympics opportunity. The alignment opens up the view between Place de la Concorde and the Arc de Triomphe and allows more of the avenue’s historic facades to be seen.

On the brands’ side, they aim to benefit long-term from the return of foot traffic to the Champs-Elysées. Beginning on 26 July, the Olympics certainly impacted the avenue turnaround. "The Olympics have been a booster, but businesses are not venturing into this market for just 3 weeks of the Olympics. It's a vector for accelerating a development plan; however, the outlook is long-term," explains Antoine Salmon, head of retail at Knight Frank.

Let’s see what the future holds, but tour operators are recording a slight decrease in tourist reservations during the Olympics compared to usual. The decline is small—about 2%—but it disappoints the sector. Similarly, hotels and Airbnb locations are observing a slowdown in reservations. In other words, July is less dynamic due to the Paris 2024 Olympic Games. Tourists are cautious and avoid France, especially Paris: they fear being unable to move freely, access tourist sites, or be hindered by security measures. Additionally, the threat of terrorism, to which Asian and American tourists are sensitive, is a concern. According to estimates from the Paris tourist office, 60% of the Olympics’ tourism revenue comes from foreign visitors. Nicolas Houzé is also cautious and estimates the Olympics are "an extraordinary showcase for the city of Paris" but will complicate accessibility to the city centre. The group has anticipated a "decline in activity of about 5 to 10% over the two summer months," which they hope to recover afterwards. "This happened to our English counterparts after the London Games," he explained.

Recent openings are momentum in the transformation of the Champs-Élysées, merging luxury with sports to draw in a varied clientele. Sportswear and brands specialised in ‘sport style’ have widely settled on the avenue. With a robust, attractive and concentrated zone in the middle and lower parts of the avenue (on both sides of the avenue, from 79 with Nike to 36 with Foot Locker), these brands are well positioned and prepared for the Olympics. Also represented, luxury brands have the power to attract tourists. Champs-Elysées has always been a place for superlatives as many retailers position their largest flagship stores. Results will be measured in the long run, as the Olympics are expected to disappoint the retail sector. The Olympic's impact will be measured over the years, acting on the overall appeal of Paris. The overall economic impact of the Olympics in the Île-de-France region (Paris and suburbs) is estimated at between €6.7 and €11.1 billion over a 17-year period (2018-2034). Despite the 16 million visitors expected, this does not give any indication of the profitability of the event itself.

Credits: IADS (Christine Montard)

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It is not every day that a retail CEO knows and plans his exit as the leader of a retail brand, but this is precisely what made Philip Mountford, the current CEO of Hunkemöller, an interesting guest speaker for the IADS 64th General Assembly in London last November.

Philip Mountford's career in fashion retail spans significant roles across Europe and the UK. He started at Simpson Piccadilly as a purchasing director, then advanced to senior positions in renowned companies. As CEO of Moss Bros Group PLC, he led a major menswear retailer with an extensive store network and franchise partnerships with brands like Hugo Boss and Canali. He also held the Managing Director role at Gianni Versace, focusing on regions including the UK, Ireland, and Scandinavia, and had pivotal roles at Nautica and Daks PLC. Most notably, as CEO of Hunkemöller, Europe's largest lingerie brand, he grew the business to an €800 million valuation, with e-commerce driving 40% of sales. Mountford stepped down from his position at Hunkemöller in January of this year after a transformative 15-year tenure. Before stepping down, he was able to address IADS CEOs and answer their burning questions with candid and open responses.

Hunkemöller: A lingerie brand with reinvention at its core

Since its founding in 1886, Hunkemöller has been no stranger to reinvention. This reinvention has been carried out through the test of time for the lingerie brand to weather many challenges that retailers have had to face. In the 2010s, the pace and scale of this reinvention were accelerated to expand more and to encompass the new digital age. Originally, it took Hunkemöller 100 years to open 100 stores, but when Philip Mountford took over, they opened 100 more stores in less than a year and they achieved over €300 million in e-commerce sales. Interestingly, reinvention was also a strong requirement from Hunkemöller’s shareholders: in the course of 15 years, Mountford has supervised the sale of the brand to 5 different owners, all expecting a satisfying ROI, and therefore, a new and adequate strategy to achieve it.

Marketing and brand building: A strong DNA 

One area of focus that has been key for Hunkemöller is its brand DNA and mission. Hunkemöller started as a classic business with the average age of its customers and employees at 45. True to its trend of reinvention, today the average age of the employees is sub-28. Due to the increased importance of social media to reach target customers, Hunkemöller has made this area of its business a key driver and is even considered by tech providers as one of the most advanced in testing and implementing new practices. The retailer has been so open to adopting new tech that Meta and Google have even included Hunkemöller in their test team to try out new features and solutions first as they are so progressive as a use case.

For example, Hunkemöller was included in a Google project where they built out a datalake that allows them to pull information to learn more about their customers. The information gives them access to sales data which allows the business to understand the customer’s shopping habits such as the frequency they visit, the months they shop, and their e-commerce habits. This data allows Hunkemöller to stimulate the customer in periods they tend to shop. They then use this data to find customers that are visiting a little bit more frequently or spending a little bit more than the target group so they can find ways to get the customers to increase their purchase behaviour to match the next level of shopper. The Hunkemöller app helps with this process by sending customers push notifications to stimulate their activity during certain times. The whole project took 2.5 years and required Mountford to hire a data scientist who gets paid as much as a senior director.

A focus on the target customer: age is not just a number 

Hunkemöller as a lingerie brand fully understands what it means to support women while being in touch, playful, and empowering at the same time. This is why they call their target audience “Sheroes” (a word invented by supporters of female voting rights in the 1920s) to capture the powerful image of their customers (this is more than just a label: Hunkemöller has assembled a focus group with which tests their new ideas and give feedback).

The target customer does not fall into a certain age category, rather it is about having a certain mindset. Mountford gave the example that a woman in her 20s and a woman in her 50s pick the same products to buy. As a lingerie brand, it is also very important for them to have a strong focus on diversity and inclusion, especially when it comes to the models that represent that brand.

The lingerie brand has also found a lot of success through its various forward-thinking marketing activities. They found that they can push the boundaries of where the brand can go through influencer collaborations, which have proven to be very successful. As a riskier venture, Hunkemöller prepared a Fashion Show in 2022 with an audience of 1,500 guests, which was unusual as this takes a very big investment, and they are an accessibly priced bra and underwear brand that usually would not have the budget to support such an event. The fashion show ended up being a success and very important for the overall brand image. The company will be continuing the Fashion Show with more than double the number of attendees.

Omnichannel: Returns, wholesale, and third-parties

Hunkemöller was very early to e-commerce, which represents 38% of the business, and therefore they are fully equipped with click-and-collect, check and reserve, fulfilment and dispatch from the store, with 80% of e-commerce sales coming from their app (4.5 million active members use its 2-click purchase feature). As an omnichannel retailer, Hunkemöller is as concerned as any other retailer when it comes to the issues that returns bring in terms of depreciating margins. However, the brand has noticed that for every return in the store, 48% of customers repurchase.

When it comes to the customer journey, customers who enter the store are greeted by scanning their membership badge, which allows the salesperson to understand their shopping habits across all channels and share the size and type of products that fit and correspond to the customer. This information helps achieve personalization through the empowerment of technology, such as Einstein from Salesforce, that can help customers get their sizing right, resulting in a reduction in return rates when purchases are made online for instance. This is critical:  Hunkemöller’s bras come in 73 different sizes and their bras only range on average between €30-50 per item. While these price ranges do not fall under the luxury category, Hunkemöller is offering high-street services, such as insights and personalization that help customers repurchase after a return, a service that you would typically only find from luxury brands.

Originally Hunkemöller was not open to wholesale and third-party models, but their partnership with Zalando pushed them into such a wholesale agreement which ended up being very successful for the business, doing €40 million in sales. Today the brand works beyond just Zalando with partners such as Amazon, Asos, Next, and Tmall to name a few. The brand is doing €140 million in turnover now with concessions, marketplaces, and wholesale. The brand’s global reach encompasses 19 countries, and 29 international franchise stores, with a projection of 972 own-operated stores by 2025.

In order to get ahead of returns in the third-party market, Hunkemöller takes any products off marketplaces that are not profitable and that have a return rate that is unacceptable after 10 days. While Hunkemöller’s return rates on their own site are 32%, the return rate on Zalando is 60%. Another downside to marketplaces is that EBITDA margins are very low in comparison to wholesale and a retailer’s own site. Overall, marketplaces are not easy to manage as they each have their own algorithms and Hunkemöller does not make a lot of money off of these partnerships. Originally Hunkemöller entered marketplaces to be able to prove themselves for wholesale relationships, but now marketplaces are being used so that there is no commitment to the stock by third parties.

To combat returns, Hunkemöller has 73 sizes and various styles from 65AA to 100J. They have also created a guide called “Sexy comes in all shapes” which assigns a shape to its customers. Customers start with their size and then pick the style that they would like to ensure the right fit. This categorization reduced returns from 48% to 32%. This is extremely difficult to master even with personalization offered in the app and online. Having consistent sizing is very important to reduce return rates, especially for Hunkemöller as the e-commerce business accounts for such a large portion of the activity.

When it comes to pure retail, Hunkemöller has about 15% of physical stores that are loss-making (this figure used to be only 3% pre-Covid). Hunkemöller sees that their e-commerce business is a strong driver of their profitability, although the e-commerce business is down as it is normalizing from the Covid spike, it is still stronger than pre-2019 levels. Today, salaries and rents are so expensive that these line items kill the margins for physical stores. While e-commerce is definitely easier to control, overall physical stores for Hunkemöller are running at around 85% profitable locations which is not a bad figure. Hunkemöller has an 82.2% intake margin, when Mountford joined, they were only at 64%, which gives them the cushion for positive performance. E-commerce is very profitable with a 38% EBITDA contribution, a returns rate of only 32%, an average pick at 5 pieces, and an average basket of around EUR 80. Hunkemoller uses JDL, a highly efficient and commercial pick rate provider from China, with a cost rate of less than 14%. Hunkemöller thought that the notion of “girl gangs” and their need to go to physical stores vanished just after the COVID-19 pandemic. However, while flagship store traffic remains challenging, 3 years later, it appears that mid-tier cities and small-town stores are doing very well.

Challenges as a risk-taking retail CEO

Being at the end of his tenure, Mountford shared insights into some of the challenges he faced as a CEO in retail, especially in the last couple of years. He shared that he had tried to take the company to IPO, but they got to three days before and the investors pulled the plug which was a huge disappointment as a CEO. They were able to finally re-stabilize the business to talk IPO again, but then Covid hit. Following Covid, there have been a lot of changes and growth in the business, but there are a lot of new challenges for retailers that operate in this age. Global inflation has led to an increase in rents, supply chains, and other expenses that are out of the business’ control. Mountford expects that management is going to become very complicated, because of external factors (for instance, a UK picker in a warehouse needs to be paid £41,000 a year to remain competitive compared to £48,000 for a loyalty manager in marketing).

An additional risk that Hunkemöller took on was increasing prices to address inflation and increased costs. Last year Hunkemöller increased prices by 7.5% and this year they are increasing them by 9.6%. Now, this is the first time that the brand has been conceived by its customers as expensive. This means that the future leadership will need to be very careful about the price threshold of their customers. Hunkemöller has also seen the units per transaction come down, this figure used to be 3 but now it is just under 3. While the average selling price and basket price are still increasing, the number of visitors is decreasing.

When it comes to discounting, markdowns fell close to 25% and 6% of this represents the discount to members from the point program. There is about 15 to 16% of failed fashion markdown in the business. And there is about 73.8% of on-price sales. The biggest influence on the markdown percentage comes from the membership program. Cardholders get discounts when they shop (€5 off every €50 purchase), which has become a drug for the business that has proven to be difficult to stop using. Every time this is scaled back, sales go down. Overall, there is a lifetime value of around EUR 800 per customer.

In his view, this is only the beginning of a very challenging period for retail leaders and businesses, especially for high-street businesses, as they will have to grapple and make do with factors of change that are entirely out of their reach and control.

Philip Mountford’s leadership of Hunkemöller leaves us with rich takeaways. During his tenure, he was not scared to fail and take big risks, which in turn brought high rewards from the success of the Fashion Show to his technological advances by partnering and being willing to act as a ‘guinea pig’ for large tech companies to test their new products on the company. These both boosted the brand’s visibility and recognition as well as drove their digital capabilities, setting them up to be able to serve their customers. He also emphasized the importance of retailers needing to intimately get to know their customers. Knowing your target audience, who they are, and what motivates them can allow retailers to better serve and even influence customers to buy more and return less. In the current landscape retailers are operating in, agility and reinvention such as the ones displayed by Hunkemöller need to be constant considerations for growth.

Credits: IADS (Mary Jane Shea)

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In early July, Hudson’s Bay Company, the parent company of Saks Fifth Avenue, announced a plan to acquire Neiman Marcus for $2,65 billion. This intention seems logical in a crowded market that calls for more consolidation.

Given the radical difference between the two companies, this would have already raised some eyebrows if the news had been limited to Neiman Marcus and Saks Fifth Avenue merging. However, conversations revolved instead around Amazon and Salesforce being involved in this deal.

While the merger is under review by the Federal Trade Commission, and therefore, everything is still being determined, this planned merger raises many questions when considering the context. While the IADS does not pretend to have a crystal ball, this Exclusive aims to review everything at stake and assess the challenges and opportunities the plan opens

Introduction: mega-mergers yesterday and today, from conquest to consolidation

The last mega-merger to have taken place on the US department stores scene was when Federated Department Stores, which had bought R.H. Macy’s in 1994 (8 years after R.H. Macy’s own efforts to take over Federated), acquired The May Department Stores Company for $11 billion (equivalent to $17.2 billion in today’s currency), creating the second largest department store chain company in the country by then, with more than 1,000 stores before divestments and a $30 billion turnover (equivalent to $46.8 billion in today’s currency).

This process, in addition to creating a giant which would be renamed Macy’s Group Inc. by 2007 with 850 stores in operation, led to the erasure of many iconic and legendary retail names, such as Filene’s in Boston, Kaufmann’s and Stern’s in New York state, Burdines in Florida, The Bon Marché in Pacific Northwest, Marshall Field’s in Chicago, or Hecht’s in Baltimore, to the dismay of many American customers. As of June 2024, Macy’s Inc. operates under various names, including Macy’s, Bluemercury, Bloomingdale’s and others, a total of 521 stores, and achieved a total of $23.69 billion turnover the past full year, a far cry from its peak in 2015 at $28.11 billion. In 2024, the NRF ranked Macy’s Inc. 22nd in their top 100 US retailers and did not even bother including the company in the Top 50 Most Influential Retailers Worldwide list.

The 2024 merger between Saks Fifth Avenue and Neiman Marcus, with the latter's absorption into a new company called Saks Global for a total of $2.65 billion and a consolidated turnover of $10 billion (behind Macy’s’ $23 billion and Nordstrom’s $14 billion), would not reshape the US retail landscape in such dramatic proportions, as the market has considerably changed since then. Many experts even wonder if this move will allow the new company to thrive in a market that has become hostile to department stores (it is worth remembering that Neiman Marcus rejected a Saks Fifth Avenue takeover bid in December 2023 for $3 billion, only to accept an offer for half a billion less six months after). They also have questions about the role of Amazon and Salesforce in it, as they both took a minority stake.

For now, the official post-merger announcement message is simple: no store closures, no rebranding. The whole purpose of this merger is to generate growth by encouraging vendors to sell more merchandise and customers to have more opportunities to purchase. But how realistic is that?

Branding, positioning, business model: where are the synergies?

Any retailer with a minimal understanding of the US retail market probably had the same reaction upon hearing of the merger project: there is a visible gap between Neiman Marcus Group, including its Bergdorf Goodman stores, globally acclaimed for its high level of services and focus on high-end repeat customers, and Saks Fifth Avenue, which has a much more diversified customer base.

In the past, the Federated example showed that mega-mergers encouraged branding harmonisation to generate scale economies when marketing the retailer’s name. This is why it led to replacing several historical names with Macy’s or Bloomingdale’s nameplates. However, times were different, and the US retail market was not as homogenised as it is now, with only a few names left, each displaying a more or less differentiated set of values to end customers. For that reason, a retailer’s name unification does not seem, for now, to be a potential road for the merging parties (even more that Neiman Marcus would have a lot to lose in such a move, probably more than Saks Fifth Avenue).

Let’s look at the opposite option: Neiman Marcus and Bergdorf Goodman represent the epitome of luxury retail in the US, in both US customers’ and international brands’ eyes. There would be no point for Saks Fifth Avenue to elevate itself and compete with such names, which suggests that a natural route would be for Neiman Marcus to consolidate its positioning on “hard” luxury, while Saks could trade slightly down. A downside of such a strategy would be that this could put Saks Fifth Avenue in an even more frontal competition with Nordstrom and Bloomingdale’s, which both have many locations in malls where Saks Fifth Avenue is already located.

From a pure retail name perspective, no option is more desirable than the other. However, the differentiation road seems the more probable. While this is great for US customers (and international brands), the nature of the differentiation and the ability to avoid unintended consequences remain to be seen.

The difference between the two companies' business models is also stark: while Saks Fifth Avenue operates most of its locations with a concession business model, Neiman Marcus and Bergdorf Goodman remain principally a wholesale operation. This has profound consequences as managing brand relationships and proposing the proper product selections to customers are radically different in a wholesale model, as many department store companies who have travelled the road from wholesale to concession: it takes years to become a merchant, and that savoir-faire can evaporate quickly.

This is not something to be taken lightly as it is probable that the centre of gravity of the newly created company, Saks Global, will probably be geared more towards New York, where Saks Fifth Avenue is located, rather than in Dallas, home of Neiman Marcus. It is striking that, within the announced nominations (Marc Metrick, CEO of Saks.Com, becomes CEO of Saks Global, Ian Putman, CEO of HBC Properties and Investments, becomes CEO of Saks Global Properties and Management, and Robert Baker becomes chairman of Saks Global), no mention is made of anyone from Neiman Marcus, including Geoffroy Van Raemdonck, the CEO.

Corporate culture is fickle and conditions future success. In another industry, aviation, it is probable that Boeing’s 2001 decision to relocate its headquarters to Chicago following its merger with Mc Donnell Douglas initiated a chain reaction leading to the current situation where the founding values of the plane manufacturer have evaporated.

Optimists write that, given Neiman Marcus’ ability to provide high levels of individualised services to high-end customers, this could be the opportunity for Saks Fifth Avenue to improve significantly its level of service, in particular online (which could be a factor explaining the presence of Amazon and Salesforce at the dealing table). However, this is easier said than done.

Is it about real estate…

The Hudson Bay Company and Saks Fifth Avenue are two particular groups in the retail world, as they decided in 2021 to spin off their e-commerce division and separate this business from the store operations. Consequently, Hudson Bay Group created The Bay, the company's e-commerce arm, and kept the stores being managed by Hudson’s Bay. Similarly, Saks Fifth Avenue created Saks.com, a separate business from the store operations, taken care of by SFA, in charge of 39 Saks Fifth Avenue stores and 95 Saks Off Price ones. This arrangement is unique because, in both cases, the online company oversees the general merchandising for all channels, including stores. In other words, the companies in charge of stores sell products selected and supplied by the online company. When this strategy was launched, many saw an approach aiming at maximising the value of real estate to offload it at some stage and focus on e-commerce.

Neiman Marcus, by contrast, is a genuine brick-and-mortar company, with 36 Neiman Marcus stores, 2 Bergdorf Goodmans and 5 Last Call discount stores. While it filed for bankruptcy in 2020 due to the consequences of the COVID-19 pandemic, Neiman Marcus Group came back as a Phoenix with new investors and a renewed success in terms of sales volumes and brand attractivity as early as 2022, thanks to a strict focus on top spenders and in-store services. This does not mean that the group remained idle online, as Neiman Marcus owned the mytheresa.com luxury e-commerce website until spinning it off in 2021 and filing for IPO in New York, with a $3 billion total shares value on the first day of trading. Since then, mytheresa.com has thrived in a context where other luxury pure players, such as Matches.com and Farfetch, went through significant difficulties.

It is expected that the new company, Saks Global, thanks to its tech minority stakeholders, will be able to create an innovative online shopping platform. However, a subsidiary managing the $7bn worth of real estate assets will also be set up. This suggests that the overall strategy will follow what HBC and Saks Fifth Avenue did a few years ago.

After all, there are already eight malls where both Saks Fifth Avenue and Neiman Marcus have a store each: Houston Galleria, Boca Raton, Bal Harbour, Troy, Michigan, St Louis, Las Vegas and Tyson’s Galleria. Offloading a location from some of these coveted malls (Bal Harbour, anyone?), knowing that Neiman Marcus stores are usually more extensive and more productive than Saks Fifth Avenue ones, might be an excellent opportunity to rack in a few dollars.

Interestingly, Hudson Bay will remain separate from Saks Global.

…or the money…

Both Saks Fifth Avenue and Neiman Marcus are privately owned. Saks Fifth Avenue belongs to Hudson’s Bay, which was taken private in 2019 by CEO and President James Baker for $1.5 billion (a third of its 2015 valuation), just seven years after being taken public by the same Baker. The activity has been challenging, which explains why James Bakers has been regularly offloading valuable assets, such as the Lord & Taylor building on 5th Avenue in New York, sold to WeWork in 2017 for $850m, with a 30% premium on its value by then.

However, things did not get brighter for Saks Fifth Avenue, especially its subsidiary in charge of buying, Saks.com, which brands recently accused of delaying payments, as the company was looking for additional borrowing capability. Estée Lauder Group placed Saks on credit hold for all its brands, including Tom Ford Beauty, Jo Malone and La Mer, as recently as last year.

Consequently, some brands might not be so happy to trade with a larger entity related to what recently worried them. It also does not come as a surprise that in Marc Metrick’s letter announcing the merger project, he mentioned that “absolutely no funds that otherwise support operations or vendor payables were used for the financing or associated costs of this transaction. It is our and SFA’s priority to fulfil our obligations to our partners. In the coming weeks, we plan to provide an update on the financial position for Saks and SFA from now through transaction closing.” He probably anticipated some embarrassing questions on whether the deal also aimed to clean off pending debts from the parent companies.

…or the tech?

In fact, everyone is scratching their heads about how Amazon and Salesforce will leverage their minority investment in the new entity and whether this is the dawn of a new way of approaching retail.

Having tech investors is a boon for a US department store company.

Unlike many of their European and Asian counterparts, which massively invested in the physical experience provided in their stores either during or immediately after the pandemic to remain relevant, US department stores failed to significantly reinvent themselves at scale in the past years in terms of experience, processes, merchandising and in-store services. As such, significant investments are needed, and not only in the flagship stores, to make sure the stores are attractive enough to lure in customers who are otherwise conveniently shopping for prices from home, thanks to many e-commerce options.

In addition, an increasing number of brands, especially in the luxury segment, are investing in direct distribution capabilities to eliminate a third party that is, in their eyes, no longer able to convey the level of experience they aim for.

Having tech investors allows, therefore, department stores to convince their stakeholders that the needed efforts will be carried out in no time to regain the lost ground. Given the fact that in recent months, the luxury e-commerce market has effectively imploded amid rampant discounting and astronomical costs of distribution, an Amazon-powered Saks Global would make sense: Amazon, with its vast scale and expertise in reconceptualising the online shopping experience, would be a significant boon to that effort. Every expert is, therefore, making predictions on the new areas of attention: AI, logistics, mass customisation and customer service.

It is, therefore, striking to listen to Marc Metrick when he evokes the “next day” or the low-hanging fruits he attends to pick with the merger: warehouse and fulfilment operations consolidation, scale economies by centralisation on customer services, and finding commonalities in terms of technology. In other words, the traditional retail playbook.

So, what’s really in store for Amazon?

Some analysts wonder if Amazon is not simply amplifying its range of investments, like a VC, after having burnt its fingers itself on new ventures (groceries, self-checkout…). This is not the first time that Amazon has inked a deal with a retailer, as in 2019, it issued a warrant to purchase 1.7m of Kohl’s in exchange for the right to allow Kohl’s customers to return Amazon products in the stores. However, the size and what is at stake is different. With Saks, Amazon focuses on the luxury customer, characterised by superior buying power, less price sensitivity, and more advanced tech acceptance.

In other words, for Amazon, the deal brings the possibility of entering a higher-end market than the one it currently thrives on without dealing with brands that have been so far in their vast majority reluctant to engage with it. Thanks to this partnership, Amazon might have access, in addition to high-margin goods, to fashion customers. It is out of place to consider that products sold on Saks/Neiman platforms would also end up in the Amazon marketplace, knowing that, for now, luxury brands would not be ready to drop their visibility at Neiman Marcus? After all, Amazon has, so far, not managed to break the luxury frontier, being blocked at the aspirational luxury step with brands such as Clinique, Kiehl’s or Coach.

Interestingly, there is nothing to be found about Salesforce’s involvement in the press so far.

*The merger between Saks Fifth Avenue and Neiman Marcus represents a significant shift in the landscape of luxury retail in the United States. Unlike the dramatic consolidations of the past, this merger is taking place in a much more competitive market. Integrating two distinct brands with different customer bases and business models will be complex and fraught with challenges and opportunities.

One of the most intriguing aspects of this merger is Amazon and Salesforce's involvement as minority stakeholders. Their participation signals a potential transformation in luxury retail operations, particularly in technology and e-commerce. Amazon's logistics and customer experience expertise, combined with Salesforce's strengths in customer relationship management and AI, could provide Saks Global with the tools needed to innovate and adapt to the rapidly changing retail environment. However, this is purely hypothetical for now.

However, the success of this merger will depend on Saks Global's ability to navigate several key issues. First, the company must manage the cultural integration between Neiman Marcus's highly personalised service model and Saks Fifth Avenue's more diverse customer base. Second, it must balance the need for maintaining distinct brand identities with the potential benefits of operational synergies. Third, the company must address the concerns of luxury brands wary of Amazon's involvement in the high-end market*

Credits: IADS (Selvane Mohandas du Ménil)

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*Day after day, retail analysts remind us that the in-store shopping experience needs to be reinvented to appeal to the younger, tech-savvy generations and lure them into brick-and-mortar stores. Indeed, innovative projects are sprouting worldwide, each pushing the boundaries of what a retail space represents by introducing fresh and novel concepts.

However, creating a compelling physical retail experience is merely half the battle. Many endeavours have tried and failed, not due to a lack of ingenuity but simply because their ability to communicate and highlight their inventiveness effectively was lacking. In the US, customers struggled to appreciate Showfields beyond the much-touted slide fully. Pioneering concepts like b8ta in Manhattan (now closed) or WOW in Madrid presented too many ideas simultaneously, making it arduous to convey their essence engagingly to customers.

Let's examine two prominent large-scale projects that have successfully reinvented the retail experience in recent years: K11 Musea in Hong Kong and The Hyundai in Seoul. Both aimed to revolutionize shopping for younger generations, but how did they manage to articulate and bring to life their innovative concepts effectively?*

Korea: presentation of the Hyundai Department Stores company

Hyundai, originally a construction company founded in 1947 during the post-WWII boom, swiftly adapted and diversified its operations. It ventured into foreign markets in 1965, established Hyundai Motor in 1967, and Hyundai Heavy Industries, a shipbuilding company, in 1973. The Hyundai Corporation, a trading arm, was created three years later, and Hyundai Electronics was founded in 1977, showcasing its rapid expansion and ability to adapt to changing times.

In parallel, a retail company, Keumgang Development Industries, was formed in 1971 to operate the commercial constructions built by Hyundai. It started to build its own mall units in 1977 with the Ulsan Center (now known as the Hyundai Department Store Ulsan Dong-gu) and the Apgujeong-dong shopping center in 1979. The first department store to be open under the name Hyundai was Apgujeong, south of Seoul, in 1985 (still operating today). The department store business then separated from the Hyundai Group in 1999 and became Hyundai Department Stores Co. in 2000.

Hyundai's strategic moves have been instrumental in its growth. It made a significant entry into the Chinese market in 2011 and further expanded its portfolio by acquiring Handsome, a fashion and beauty provider, in 2012. The company's foray into e-commerce with the launch of thehyundai.com in 2016 and the Hyundai Department Store Duty Free business unit the same year, demonstrates its forward-thinking approach and adaptability to changing consumer trends.

Today, Hyundai operates 14 department stores, including two "The Hyundai" locations (in Seoul and Daegu) and eight outlets. The company generated KRW 4,208 billion (approximately €2.8 billion) in revenue for 2023, down from KRW 5,014 billion (€3.38 billion) in 2022. The division reported a loss of €27 million in 2023 compared to a profit of €125 million in 2022.

The Hyundai Seoul

The Hyundai Seoul, a landmark in the city, opened its doors in 2021 with a unique focus on attracting Gen Y and Gen Z. This strategic move aimed to rejuvenate the traditional department store clientele in a country where all companies are vying for their attention. In 2020, Hyundai’s competitor Lotte performed 47% of their sales with customers aged less than 40, highlighting the importance of this target demographic.

The Hyundai aims to offer a "creative space filled with global content," from luxury flagship stores to those targeting younger generations, and features Korea’s largest food court so far. It is also the first eco-friendly department store in Korea, boasting indoor lawns, trees, and flowers. Its location in Yeouido, Seoul’s financial center, is key: the store is close to a very affluent residential zone and the Han river parc, meaning a consistent traffic flow both during weekdays and weekends.

As a new brand from the group , The Hyundai is design-conscious and thought to be highly Instagrammable from basement to top floor. Following the first iteration in Seoul, a new store under The Hyundai name was opened in Daegu, and a project is planned in Gwangju. The Hyundai became the fastest store in Korea to reach 1 trillion won in just three years, reflecting its appeal to younger customers and foreigners—showing an 800% growth in sales among 20-30-year-old foreigners between 2022 and 2023, with 100 million visitors in just two years.

The store, which dimensions and structure recall those of a mall, spans 89,000 square meters with 600 shops over 12 floors, including four for parking. Its interior was designed by Canadian studio Burdifilek, with each floor having a distinct theme centred around the atrium. It is the largest store in Seoul, and 49% of its space is dedicated to rest areas, specially designed to be Instagrammable. The building includes 90 restaurants and a museum.

The structure is a mixture of traditional store planning and innovations:

• The second basement, arguably the busiest by far at the time of visit, is dedicated to trendy Korean brands, clearly appealing to the taste of the younger generation, quite enthusiastic with the brand offer witnessing the energy that could be felt there,
• The first basement is the largest food court in Korea, including a food truck park,
• The ground floor, quite classic, offers luxury items, cosmetics and perfume, highlighted by a 12-meter-high waterfall garden with benches to listen to the sound of water, completed with a BeClean wellness beauty store. The store is accessible through five entrances independently from the car park accesses,
• The first floor is a neutral gallery-like space dedicated to international designers brands,
• The second floor, dedicated to international fashion brands and with an overall bolder design, is, just like the first floor, mixing men’s and women’s in terms of customer journey and discovery,
• The third floor is dedicated to sportswear, outdoor, lifestyle and homeware,
• The fourth floor, dubbed the “indoor garden” is spectacular, as it has been designed as a real-size garden with grass, flowers, and trees. On this floor, customers can find children's clothing and activities, home appliances, a playground for adults, Play in the Box, and the Blue Bottle café, which is an incentive for customers to spend time and enjoy the garden,
• The fifth floor gathers restaurants (80 dining options are available, from low-end to exclusive SMT, which terrace overlooks Seoul), service desks including the tax refund, CH 1985, a cultural space aiming at millennials and Gen Z, Uncommon store, a fully automated store, and exhibition halls, dedicated to collaborations with museums such as the Musée d’Art Moderne de Paris at the time of visit.

For more, the IADS reviewed in detail the store structure in October 2022.

How The Hyundai Seoul highlights innovation

What stands out is the level of attention that has been given to details in services:

• The Food Court features self-order kiosks throughout, all accessible and usable by foreigners (even if they do not have a Korean phone number) and an open area for handwashing and face checking.
• The "Play in the Box", a cultural space for adults, is designed for taking photos in a self-studio setting while being pampered with food and beverage options. It is possible to rent a space and spend time with friends there.
• On the 6th floor, to ease the customer’s life when booking a restaurant (and ensuring that they spend their time in the store rather than in a waiting area), machines calculate queues and send alerts in cafés, restaurants, and stores. That way, customers can do something else while waiting for their table.
• Lockers and rentals for baby carts, portable chargers, bikes, and luggage storage are available on three floors. Kids and babies are especially pampered: the Petit Lounge is a comfortable space for one person and a baby (and allows the spouse to go shopping).
• Various related services, including a garment repair shop, bag and shoe repair shop, and green dry cleaning support sustainability claims support sustainability claims.

But what is really striking is the apparent ease with which crucial information is passed on to customers, especially foreign ones. The floor guide is an example of clarity, focusing on must-see places. Everything is QR-coded: store location, shopping news, smart waiting and table ordering, local parking information, and even how to get free beverages on each floor.

Going further, Instagrammable places (the Waterfall, the Sound Forest) are clearly indicated as such, as are experience places (food, culture). Traffic is funnelled, so it is impossible to miss anything and be disappointed.

Similarly, the paper guide highlights 3 to 5 places on each floor. They can be:

• A branded location (Liquides perfume bar, Oera, Bamford, Andersson Bell, Innometsa, Tino5 FGS, Klattermusen, Arket, Smooth & Leather, Nike Rise),
• A branded experience (Barberino’s barber, Blue Bottle Coffee, Eataly, Sooty), a category (Shoe library, Archetype, Wine works),
• A concept (Sculpt Store, IAMSHIP, Platform place, Tom Greyhound, CH 1985, Uncommon store, 22 Food truck piazza, Peer),
• An immersive experience or service (Studio Petit, Play in the Box, Sounds Forest, ALT.1).

While it is not clear how this works and how this is pushed (and monetized) to brands, the guide is extremely clear and is a great example of efficient trade marketing.

Finally, services such as immediate tax refunds and gift certificates are clearly explained and detailed. Recently, Hyundai inked a partnership with The Mall Group in Thailand (an IADS member) to provide visiting Thai customers with additional perks, including a loyal membership enrollment, and no doubt that many accept such an enrollment.

Hong Kong: presentation of K11

Established in 2008 by Adrian Cheng, the K11 Group, part of the New World Development, introduced a unique concept dubbed “Cultural Commerce”, which aims to integrate Art, People, and Nature to create a diverse ecosystem. Cheng, a prominent Hong Kong entrepreneur, also serves as CEO of New World Development, executive director of Chow Tai Fook, and owner of Rosewood Hong Kong Hotel.

The first K11 location opened in Tsim Sha Tsui, Hong Kong, in 2009, followed by expansions into Shanghai, Guangzhou, Shenyang, and Wuhan. In 2010, Cheng founded the K11 Art Foundation to support Chinese artists. His vision of merging art with retail aimed to transform the shopping experience into an artistic journey, targeting the millennial shift towards experiential rather than transactional engagements. As such, K11 Group seeks to democratise art, support young artists, and conserve Chinese artisanship while integrating sustainability and technology.

After research indicated a shift in demand from older generations to millennials, the concept evolved with K11 Artmall in 2013, blending retail and gallery spaces. It was further expanded with K11 MUSEA in 2019 at Victoria Dockside and K11 ECOAST in mainland China in 2022.

Today, out of the total 29 retail locations in Hong Kong and China, there are 7 K11 Art Mall locations, including 6 in China (Shanghai, Wuhan, Tianjin, Shenyang, Guangzhou, Beiling), one in Hong Kong, and the K11 Musea. The group reported a total revenue (Hong Kong and China combined) of HK$ 4,995m (Hong Kong representing 62% of this revenue) and a result of HK$ 3,193m in FY 2023 (note: K11 is not a retailer per se, but a mall operator, which is why revenue is 100% based on rent). In China, a new project, K11 Ecoast, is planned to open in Shenzhen in 2024. The group plans to operate 38 projects (not all under the K11 Art Mall brand name, as the group also operates smaller units), and a mega project in Hong Kong, 11 Skies, is currently being built.

K11 Musea

In 2017, Cheng spearheaded the $2.6 billion redevelopment of the Victoria Dockside, a site owned by New World since the 1970s. This redevelopment introduced several new ventures, including K11 ARTUS, a luxury waterside residence, K11 ATELIER, a Grade A office building, and Rosewood Hong Kong, a luxury hotel. K11 MUSEA, a pioneering 280,000 sqm museum-retail complex on the Victoria Dockside waterfront in Tsim Sha Tsui, then completed it.

Since its opening in 2019, this landmark, after ten years in the making, developed with contributions from over 100 international architects, artists, and designers, has aimed to provide an immersive "journey of imagination" for its visitors. Inspired by "A Muse by the Sea," this complex pays tribute to Hong Kong's rich history and cosmopolitan culture, occupying a historic site once known as Holt’s Wharf, a pivotal logistics hub.

The design of K11 MUSEA responds to research identifying Asian millennials as "Super Consumers," a demographic expected to wield $6 trillion in purchasing power. Catering to their sophistication and demand for exclusivity, K11 MUSEA positions itself as an aspirational global destination merging art, culture, and commerce.

Additionally, K11 MUSEA is committed to sustainable development, achieving green building pre-certifications such as LEED (Gold) and Hong Kong's BEAM Plus (Silver). Its eco-friendly design, from Kohn Pedersen Fox and James Corner Field Operations, collaborating with OMA and Hong Kong-based LAAB and AB Concept, features a large living wall, natural materials, rainwater harvesting, and a seawater-cooled, oil-free HVAC chiller system, underscoring the importance of ecological considerations.

To attract local and international visitors, the mall comprises 250 retailers, 70 restaurants, 40 artist installations, and several educational activities for kids and adults, including new to Asia names such as Fortnum & Mason or the MoMA design store.

The ground floor is dedicated to luxury brands in a stunning environment with a giant staircase in the atrium decorated with copper-coloured panels and large windows opening on a promenade overlooking Hong Kong Bay, decorated with giant pieces of art,

The first floor is a mix of retail space and exhibition and is featured in the former location of the Intercontinental Hotel, from which some elements, such as the ceiling, have been kept. The rest of the floors are also mixing experiences, such as a giant slide on 3 floors or a 12-theatre cinema, a rooftop garden with a selection of plants, and kid’s activities such as a 10-meter-high slide on the roof near the kid’s Donut playground. In fact, it is rather difficult to describe this mall floor by floor, as many different activities are intricated. For instance, a jewellery school also acting as a museum is what could be assimilated into the high jewellery section, except for the fact that this section is not as precisely defined as one might expect, and other jewellery stores are disseminated in the rest of the store. It is, in fact, all about surprising the eye and senses by bringing unexpected solicitations permanently when visiting the space. Consequently, it is also possible to feel some frustration not understanding the mall in its entirety and not making the most of the visit.

How K11 emphasizes innovation

Just like The Hyundai Seoul, public information made available to foreign customers is all about the vast offer of services and facilities made available: a nursery room, disabled facilities, mobile phone charger, ticketing, free Wi-Fi Internet access, water dispensers on different floors providing free and clean drinking water that complies with top international quality standards.

The mall also advertises its “Nature Discovery Park” on the 8th level and its “Happy Mega Slide”, a 3-levels-high slide in the kid’s area. Interestingly, everything is monetized: while the slide is free (but needs to be booked, at the frustration of some visitors), the kids playground requires a ticket to be used, and visitors can also purchase tour tickets to discover the species in the garden, learn more about the architecture of the building, and discover art and art history through themed-visits of the space.

It is, however, also notable when compared to The Hyundai, that the information provided during the visit does not allow the visitor in a hurry to be sure of having seen every single feature the mall has to offer, which might be a reason for a second visit. Attention to detail is extremely high: for instance, the buttons used to call the lifts are very smartly integrated into architectural books on shelves, encouraging customers to read about the architectural features of the building while waiting. However, this detail, for instance, might also confuse other customers when looking for the calling button.

*The examples of The Hyundai in Seoul and K11 Musea in Hong Kong showcase two distinct yet effective approaches to communicating retail innovation to younger demographics.

The Hyundai adopts a highly guided and didactic customer journey, ensuring visitors do not miss any pioneering features and services. Every detail is clearly explained, from Instagrammable experiences to seamless digital integrations, creating anticipation and allowing monetization opportunities for highlighted brands. This meticulous curation leaves little to chance, maximizing engagement.

In contrast, K11 Musea banks on an element of surprise and discovery. While key facilities are prominently advertised, the tremendous scale and artistic interweaving leave some delightful gems to be organically uncovered during the visit. This air of mystery fosters a sense of exploration that encourages repeat visits to unravel all the secrets this innovative mall holds.

Whichever philosophy they embrace, the success of these projects lies in their dedication to effectively communicating their avant-garde concepts. As the retail landscape continues evolving, stores looking to captivate modern customers must prioritize clearly articulating their unique value propositions and savvily marketing the novelties that set them apart.

For legacy retailers and contemporary brands alike, there are lessons to be learned from The Hyundai and K11 Musea's masterful translations of innovative ambitions into tangible, memorable experiences that resonate with the sophistication and expectations of younger spenders. Transparent, simple and didactic communication is key to transforming curiosity into footfall and spending. Going forward, it’s the retailers who masterfully translate innovative ambitions into tangible, buzz-worthy experiences that get people talking, which will emerge victorious in this unforgiving retail arena.*

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Credits: IADS (Selvane Mohandas du Ménil)