What: ThredUp 2024 report provides valuable insight about the second hand market.

Why it is important: The market is growing, more customers are joining, but no player is profitable.

The secondhand apparel market is seeing significant growth, with 52% of consumers shopping for secondhand apparel in 2023, a number that rises to 65% among Gen Z and Millennials. Consumers are investing nearly half of their apparel budget in secondhand items, and 25% have resold apparel themselves. The importance of resale value when purchasing apparel is recognized by 47% of consumers. Branded retail resale grew by 31% in 2023 with brands like H&M and J.Crew launching their programs. The global secondhand apparel market is projected to reach USD 350 billion by 2028, growing three times faster than the overall global apparel market.

ThredUp resale report 2024

What: An exploration of what «local » actually means in business

Why it is important: The reality is that the word can have as many understandings are there ar individuals

The article explores the complexity of defining a "local" business, highlighting the varied interpretations and expectations of consumers regarding local shopping. It discusses the economic, environmental, and community impacts of supporting local businesses, such as keeping money within the community and fostering a sense of belonging. The narrative also addresses the challenges of meeting all consumer expectations, such as sourcing locally while supporting fair trade or providing affordable options. Through examples from Bristol, UK, it illustrates the nuanced reality of operating and supporting local businesses, ultimately suggesting that being local transcends geographical boundaries to include economic and social contributions to the community.

What does ‘Local’ actually mean?

What: Forbes reflects on the expectations placed on physical stores, and wonders if they are too high, or if retailers simply lack imagination and will.

Why it is important: yes, physical stores are important, but they need a purpose to remain relevant in today’s shopping experience.

Retailers are reevaluating the role of stores, aiming to enhance experiences for consumers, especially Gen Z, who value discovery and engagement in physical locations. The challenge lies in innovating while balancing costs and expectations. Simple additions like Radio Flyer's test racetrack show the impact of creative, low-tech solutions, while Levi's "NextGen" store in Kyoto integrates local culture and technology. However, the sustainability of these experiences and the integration of technology remain critical for maintaining relevancy and meeting high consumer expectations, suggesting every store may need to offer a unique, flagship-level experience.

Is retail expecting too much from stores or not enough?

What: The Financial Times reviews the reasons for such an abrupt fall at Farfetch and Matchesfashion

Why it is important: the disappearance of these companies does not mean that there is not a need for a multibrand environment online, simply that the perfect model remains yet to be found.

The article discusses the challenges and decline of luxury e-commerce platforms like Farfetch and Matchesfashion. It outlines the factors contributing to their struggles, including the shift in consumer preferences post-Covid, difficulties in maintaining profitability amid rising operational costs, and luxury brands' push for more control over their online presence. The narrative highlights the complex dynamics between maintaining an online luxury marketplace and the traditional luxury retail model, emphasizing the importance of innovation and adaptation in the evolving retail landscape.

The implosion of luxury e-commerce

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The IADS is at a crossroads when it comes to helping its members, by addressing their most operational questions and helping them to address current and future challenges. Being sustainable is certainly a critical one and it requires means, energy and time, which is even more difficult in crisis moments. The IADS invited Andrea Baldo, CEO of the Danish responsible brand GANNI, to share his views on the best ways to make true impacts and maintain a responsible vision.

Shareholders are usually not happy to reduce profits to fund sustainable changes, customers ask for sustainable products but are not ready to pay the price for them, and businesses are not happy to see governments talking about taxing people to fund the green transition. However, Baldo argues that this is the responsibility of CEOs to address the future, even if this means making sure investors are aligned on this vision too. For him, becoming sustainable in the future is much more important than digital transformation. He explains how CEOs can fight sustainability systemic issues by taking risks, choosing realistic actions over hollow claims and always favouring adaptation and innovation.

Fighting a systemic issue: ESG credibility and taking risks

First of all, for Andrea Baldo, the fashion industry cannot become a sustainable industry as it is in essence consuming the planet’s resources. True sustainability will only be achieved with significant technological advancement. Second of all, when it comes to acting more responsibly, very little development happened in 10 years (between the 2009 COP meeting and the Copenhagen Fashion Summit in 2019). Illustrating this fact, organic cotton only represents 1% of the global production, which shows how slow progress is.

This issue is systemic. On one hand, CEOs of fashion companies have to generate return on investments for their shareholders who are not always in favour of the development of more responsible products as this is equivalent to reducing profits. On another hand, the fashion industry asks consumers to pay 25% to 30% higher prices for sustainable products to help companies in their transition towards more responsible operations. Finally, people and companies are also voters who might refuse to vote for candidates advocating for additional taxes funding sustainability efforts.

Besides being responsible for their company strategy, culture and people, CEOs can choose to drive change, knowing that this is adding responsibilities on their shoulders. This means taking the risk of disagreeing with shareholders. But the good news is investors are increasingly looking at ESG credibility when considering investments. This has been the case at GANNI when Baldo was looking for investors for the company.

Still, despite great results in the past years, how to maintain the company vision when the growth rate decreased from 2-digit to 1-digit in one year? Tactically, being B Corp-certified does help as it forces shareholders to accept change, look at the impact on the planet, keep it as a strategic priority and pursue the company vision. In that regard, GANNI has a second responsibility board that helps prevent shareholders from back-peddling.

Being responsible rather than sustainable: the path to true transformation?

Embracing responsibility as part of the company culture means accepting that it is impossible to be sustainable. So, rather than claiming a ‘make believe’ sustainability, GANNI focuses on innovation, transparency and creating visibility for stakeholders and consumers through various honest and rather small initiatives such as:

• Using recycled materials for store props (rugs made of fabric waste for instance),
• Having a team dedicated to scouting fabric innovations,
• Recycling coffee waste to grow mushrooms.

These examples show a realistic path on the journey to becoming a more responsible version of the company in a very honest and transparent way. Consistency is also a key value at GANNI. When they decided to discontinue leather as a decision truly reducing the accessories and shoe businesses’ carbon footprint, they showed consistency by not offering beef at their cafeteria or not paying for expenses involving beef consumption anymore. This is a matter of adding credibility to the company's actions.

Even though some initiatives might look minor, not only the big projects are impactful in changing the culture and being more responsible: smaller initiatives (which are most of the time zero-cost) bring change and are necessary to drive transformation within and outside of the company.

GANNI also explored rental and second-hand models with varying results: while they didn’t find the key to success for rental, second-hand is already profitable for them. Finally, in terms of marketing, they opened a second Instagram account called GANNI Lab to highlight responsible efforts and to provide consumers with more information than the ones they find on the label.

Equivalent to digitalisation, sustainability has become a synonym for transformation and Baldo mentioned similarities in changing consumer behaviour and uncertain returns on investment. Circling back on the low share of organic cotton in the fashion industry, Baldo stressed the need for an improved supply chain, especially on the production side so that suppliers are paid more, allowing them to develop technical innovations and increase the usage of responsible materials.

Adaptation to markets and innovation: the keys to maintaining the vision

With an advanced contemporary positioning competing both with affordable luxury (Jacquemus, Acne Studios) and premium brands such as Sandro and Maje, 40% of GANNI’s customer base is 25 to 35 years old. 16 to 25-year-old customers account for 30%. Those groups usually declare they are interested in sustainability efforts.

In terms of territories, the brand has a strong presence in various European countries and the US, and it entered the Chinese market before COVID-19. After 2 years of presence in China, GANNI realized customers were primarily interested in their “scandi-cool” style and that was their entry point into the brand. They were also susceptible to the notion of woman empowerment. The responsibility credentials were coming at the bottom of the list. Actually, while the notion of sustainability appeals to communities in the West (we are all in the same boat and need to change our behaviour collectively), it is more of a personal choice in China (with the mindset of ‘I do it for myself and to feel better’), plus the notion of wellness is closely connected. For that reason, for instance, the alternative responsible materials required a lot of explanation to make sure customers understood them and liked them.

In Japan, the situation was different. It appears that when they entered the market, there were already a significant number of local players doing what GANNI was doing. However, they were not communicating these efforts as transparently as GANNI did, which is why many Japanese customers liked the relationship the brand proposed to create with them.

Evolving materials is also a key step towards responsibility. Discontinuing the use of leather is the number one priority and GANNI won’t use leather any longer from 2024. This is no easy task as challenges exist in that area. Non-leather materials are still perceived as cheap or plastic-like.

Andrea Baldo's insights offer a compelling vision for the future of sustainability in the fashion industry. Baldo's approach, as demonstrated by GANNI, emphasizes the importance of CEOs in taking risks to drive change, even in the face of shareholder resistance and market challenges. His focus on ESG credibility, embracing responsibility over hollow sustainability claims, and integrating innovative and transparent practices showcase a realistic path towards transformation. According to Baldo, sustainability is not about solving every big topic but taking a step-by-step approach: this could be done both by making sure shareholders are aware of what is at stake, but also by collaborating with other companies in frameworks such as what the IADS is.

GANNI's initiatives, from using recycled materials to discontinuing leather, and exploring rental and second-hand models, reflect a commitment to a more responsible business model. This approach is not just about environmental impact, but also about adapting to different market sensibilities and consumer behaviours, acknowledging the diverse perceptions of sustainability across cultures.

About Ganni

Based in Copenhagen, GANNI has developed exponentially over recent years thanks to a unique Scandinavian sense of style. Acting responsibly is seen as a moral obligation at the company which is on a journey to minimise its social and environmental impact. In 2020, they launched the GANNI Gameplan setting 44 tangible goals to be reached by 2023 across four main pillars: People, Planet, Product and Prosperity. The company is B Corp certified and has been elected one of the Time 100 most influential companies in 2023.

Credits: IADS (Christine Montard)

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IADS recently held a meeting on the home and decor sector. Based on market research, NellyRodi and The Style Pulse presented the most innovative brands from different segments in home and decor including furniture, tableware, decor, home appliances and electronics.

Check out our selection of these brands and the pictures by clicking the button below!

FURNITURE

FRAMA

FRAMA is a multi-disciplinary design brand that creates lifestyle objects to inspire the senses and encourage mindful living. With an emphasis on natural materials, simple geometries, and uncompromising quality, FRAMA’s work connects the imaginative with the practical, resulting in a uniquely warm and honest aesthetic.

Check out the Frama website here

CHECK OUT Frama's INSTAGRAM

DOOQ

Born in Portugal, Dooq is a design company dedicated to creating designs that stimulate the senses, and are inspired by the unexpected meeting of opposite things.They seek to find balance in things that are contrasting, creating pieces where feminine meets masculine, small meets large, soft meets solid and past meets the present allowing the new to blossom.

Check out the Dooq website here

check out the Dooq instagram here

POTIRON

Potiron Paris offers a blend of iconic and trendy decor products for every budget, including furniture, lighting, and decorative items. Emphasizing creativity, quality, and affordability, the brand now has an internal design studio to create unique, fashionable collections, making stylish interiors accessible to all.

Check out the Potiron website here

check out the Potiron instagram here

TABLEWARE

PINOLI GLASS

Pinoli Glass crafts unique, unconventional designs that elevate any home, celebrating life's beauty and unpredictability. Their pieces, embodying a "go with the flow" philosophy, provide an escape into extraordinary with every sunlight reflection.

Check out the PINOLI glass Website Here 

check out the pinoli glass instagram here

KNINDUSTRIE

KnIndustrie’s tools are conceived to serve food with practicality and elegance. On the table, KnIndustrie’s products become the center of conviviality, the protagonist of every experience dedicated to the presentation and use of food, where the functional element of the kitchen enters the “table space” with elegance, at the service of guests.

check out the KNINDUSTRIE website here 

check out the KnINDUSTRIE instagram here

AYA & IDA

AYA&IDA, established in 2018, is a Danish family business focused on reducing plastic waste by offering stylish, functional alternatives to disposable products. Named after the founders' daughters, their range

includes drinking bottles, food containers, and lunch boxes, promoting sustainable living and responsible consumption for a better future.

check out the Aya & IDA website here 

check out the Aya & Ida instagram here

DECOR

MAISON DEUX

Maison Deux is a Dutch design studio created to design fun, minimalist products that last for generations. We are a standalone design brand offering a range of durable rugs and rugs with playful, high quality designs, without compromising on quality and durability, while maintaining our social contribution.

Check out the Maison Deux website here

Check out the Maison Deux instagram here

WL CERAMICS

WL CERAMICS crafts porcelain with dedication, rooted in the historic porcelain capital, Jingdezhen, China. Since 1993, this family-operated business has been producing decorative porcelain, specializing in large, wheel-thrown pieces like vases and ceramic furniture. They collaborate with clients, architects, and designers to create custom designs, while also offering their own collection that can be personalized to meet individual preferences.

Check out the WL Ceramics website here 

check out the WL Ceramics instagram here

SHNEID STUDIO

Schneid Studio merges sustainability with timeless design, creating a wide array of products such as bowls, vases, benches, cups, wall hooks, and lamps. Rooted in a profound respect for nature, their work is characterized by ethical practices, collaborations with local artisans, and the use of naturally sourced materials. Their collection, inspired by traditional architecture, art, and poetry, showcases a balance between muted and vibrant designs, all embodying a contemporary yet enduring aesthetic.

check out the SHNEID STUDIO website here

check out the Shneid studio instagram here

DESIGN BY US

Design by Us blends fashion, fantasy, and humor to create distinctive lighting and interior designs. Challenging traditional design perceptions, they draw bold inspiration from the fashion industry to craft unique, recognizable pieces. With a commitment to creativity and an entrepreneurial spirit, their work is a playful exploration of forms, colors, and expressions that defy easy categorization.

check out the Design by us website here

check out the Design by us instagram here

HENRY DEAN

Henry Dean specializes in unique, handcrafted decorative glass objects, including vases, bowls, plates, and candleholders, focusing on recycled materials and in-house designs inspired by nature. Their commitment to artisanal craftsmanship and sustainability is evident in each distinct, mouth-blown piece that reflects a blend of traditional techniques and modern aesthetics.

Check out the HENRY DEAN website here

Check out the henry dean instagram here 

HOME APPLIANCES

CREATE

Create specializes in offering a broad array of affordable, quality home design appliances, from chef-grade kitchen gadgets to advanced cleaning tools, enhancing daily life with ease and efficiency. Emphasizing continual updates to include the latest functional, high-tech, and retro appliances, Create is dedicated to meeting the ever-changing needs of customers, ensuring a blend of modern convenience and classic style in every home.

Check out the create website here 

CHECK OUT THE create instagram here

AARKE

Aarke elevates daily routines with premium home essentials designed to improve water quality through innovative design and sustainable materials. Their commitment to meticulous engineering and quality ensures every product, from carbonators to water purifiers, enhances both function and aesthetics in the home.

Check out the Aarke website here

CHECK OUT THE Aarke INSTAGRAM HERE

ELECTRONICS

GINGKO

Gingko Design specializes in creating elegant and sustainable home and gift products, recognized for their innovative designs with international awards. Their range, inspired by the longevity and beauty of the gingko biloba tree, includes lighting, accessories, and timepieces, blending modern technology with a practical, aesthetic approach.

Check out the Gingko website here

check out the Gingko instagram here

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Michael G Jacobides is a strategy professor at London Business School as well as the Lead Advisor of Evolution Ltd, a boutique advisory firm helping clients adjust to a shifting context. A leading expert on business ecosystems, value migration and how firms navigate shifting, digital environments, he is Academic Advisor to the BCG’s Henderson Institute and has recently been a Visiting Scholar at the New York Fed and Visiting Fellow at Cambridge. . During the IADS 64th General Assembly held in 2023, Jacobides addressed IADS member CEOs to discuss the reinvention of retail and department stores, the foundations and evolution of ecosystems, and how these can be harnessed by retail businesses.

Harnessing the ecosystem advantage to reinvent retail

Defining an ecosystem as “a collaborative structure of interdependent firms delivering an integrated customer value proposition”, the concept provides a crucial lens for comprehending the evolving landscape of retail. Department stores, as integral components of these ecosystems, face new challenges stemming from shifts in consumer behaviour. These challenges prompt a closer examination of how department stores can effectively navigate and harness the advantages presented by dynamic business ecosystems.

Department stores: then and now:

The rise of the department store defined modern retail as we know it today. It changed the retail ecosystem from prices that were determined by negotiations between the clerk and customers to fixed prices. Department stores were the natural business ecosystem orchestrators in retail and consumer goods. Department stores did two things:

• They created superadditivity (the total value created by the platforms is greater than the sum of the values created by its parts), meaning that putting multiple items together in the same place makes other items more valuable just by being in close proximity to each other.
• Secondly, department stores offered customers experiences that were unmatched by any individual brand or manufacturer thanks to economies of scale and experiential displays that drive customers to spend more.

However, the 21st century has proven to be challenging for department stores. This has resulted in a sector-wide decline. Physical stores are starting to lose their superadditivity advantage to online marketplaces. According to BCG, the expected channel share for the 2023 holiday share of wallet shifted a lot with online marketplaces representing 30%, mass market retail representing 21%, and department stores representing 12%. This wallet share has been spread out among the different generations with department stores expected to perform well only among Baby Boomers. On the other hand, GenZ and Millennials are more drawn to off-price or discount offers, direct-from-brand, and specialty retail. And GenX is split between online marketplaces, mass-market retail, and direct-from-brand. This means that department stores’ Baby Boomer clients are getting to the age where they either die or stop spending money as they no longer bring in an income.

Redefining the role department stores should play in the 21st-century retail environment

Redefining the role of department stores in the current day retail environment requires an understanding of the business ecosystem. It is important to tackle ways that a department store can evolve as an ecosystem as the productive generation shifts from Baby Boomers to newer generations. These can be understood by asking a couple of questions.

The first question to address is: How can department stores collaborate with and complement (as opposed to compete with or substitute) the emerging digital retail ecosystems? They need to use physical locations as a lever to redefine the double value proposition user experience for influencers, brands, and shoppers by connecting the physical and digital worlds. For example, influencers offer live-stream shopping, which is experience-rich but lacks physical touch. Department stores can become complementors to online influencers and offer them things like iconic physical locations to stream from and interactions with fans, for example, Harrods offers a special room where customers can enjoy a beautiful setting with mirrors, lamps and screens allowing them to follow livestreamed masterclasses done by influencers from across the planet, and try the products on the spot at the same time.

Department stores can also fill the gaps by providing access to a wider subscriber base, new experiences, and increased reasons to visit (a possibility that not all brands are fully aware of). Taking on partnerships like these will create new revenue streams and advance and reposition brands in ways that can benefit all involved.

The second question to address is: How can department stores create a hub for reinvention of the retail experience without breaking the bank? They can leverage favourable economics of having central locations and high reputation as an anchor and bring complementors to fund the development of experiments in a controlled way. Deciding boundaries for criteria for innovation inside and outside the ecosystem is crucial for maximizing benefits and minimizing downsides. For example, European energy provider, Enel, is using its installed base of 3 million lamp posts as an anchor point to expand product offerings and get partners on board by promoting smart city initiatives to develop its value. It is also interesting to note that by doing so, they also expand their base of possible partners, as in addition to private businesses, local authorities were happy to team up as they know some of the new services or features could benefit their voting base.

But does this mean that you need to have a cool and sexy brand in order to be successful in complemented services? Jacobides explains that it is not necessary, or even sufficient enough. Virgin is an example of a brand that has tried it and failed with their attempt to expand their mobile business into banking, finally taking a toll on both businesses. It is not only about having a cool brand, but you must also have something in terms of the value-add to the customers. WeWork is a good example of an ecosystem that lacked brand recognition that failed recently due to greed and not due to the failure of the idea. In fact, a strong brand is actually a reflection that you are doing something that people and consumers like. But you can also reinvent your brand in order to access a very different class of customers. Mercedes-Benz has done this by connecting with rappers in the United States to make their cars go from being seen as nothing special to the type of cars used by rappers in the music industry, appealing to a younger customer base.

Engaging and empowering legacy companies

Legacy businesses such as department stores are grounded in traditional ecosystems which might seem more difficult to reinvent and think outside of the box. To propel these entities forward, achieving organizational alignment becomes imperative for successful innovation. Deliberate attention is required to determine where innovation resides within the organizational structure, as this placement significantly influences its perception.

The innovation process design itself should be strategic and forward-thinking, taking into account the intricate dynamics among various departments and teams. When individuals feel integrated into something novel and inspiring, their receptivity to change is heightened. A straightforward narrative and a well-articulated rationale behind the proposed changes can cultivate a positive atmosphere, fostering enthusiasm and openness within the team.

Conclusion: Navigating business ecosystems for department store reinvention

In the ever-changing retail landscape, department stores face the imperative of reinvention, guided by insights from business ecosystems. Department stores, once retail pioneers, grapple with 21st-century challenges posed by shifting consumer behaviours and the fast emergence of online marketplaces, Jacobides explains. The posed questions — how to collaborate with digital ecosystems and create innovative hubs — signal a new era of adaptability and value proposition redefinition.

The cautionary tales of failed ventures drive home an important point: real success goes beyond just having a cool brand; it's about consistently giving customers something valuable and dynamic. Mercedes-Benz's brand reinvention, resonating with the music industry, can serve as inspiration for department stores seeking to connect with a discerning, younger clientele.

Engaging and empowering legacy companies calls for a deep commitment to organizational alignment and innovative thinking. Unveiling potential within traditional ecosystems requires a meticulous approach to innovation's placement and a forward-thinking design acknowledging team dynamics. The atmosphere fostered within these organizations becomes the catalyst for successful innovation.

In conclusion, the future of retail businesses hinges on the strategic navigation of business ecosystems, collaboration with emerging trends, and relentless innovation. By embracing these principles, department stores secure their survival and position themselves as pioneers in a continually evolving retail narrative. This transformative era invites exploration, reinvention, and enduring success.

Credits: IADS (Mary Jane Shea)

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Explore the pictures here

Sephora is one of the largest distributors of LVMH perfumes and cosmetics, which generated 7.7 billion euros in turnover in 2022 with 3,000 stores in 35 countries. After the recent launch of the retailers’ new concept dubbed ‘Store of the Future’ in Singapore, London, Shanghai and Wuhan, Sephora reopened the Paris Champs-Elysées store at the end of October 2023 after 6.5 months of renovations. As the second biggest Sephora (behind Dubai and ahead of New York’s Soho store) and considering its prime location, this refurbishment is strategic to the brand. Also, Sephora will be an official partner of the Olympic torch relay during the Paris 2024 Olympic and Paralympic Games. The perspective of such a major event called for the “reinvention of] the prestige beauty flagship experience”, as [Guillaume Motte, the retailer’s President and CEO puts it.

It is the first major remodelling of the 1,200 sqm location since it opened in 1996. Back then, Chafik Studio (a guest speaker at the IADS in 2022) designed the store with what was already a true and unprecedented customer-centric vision. The renovation budget is a well-kept secret, but it is the largest investment from Sephora Europe.

Before the renovation, the store accounted for 12 million visitors per year (10,000 daily, compared to 20,000 for the Eiffel Tower), with a quarter coming from outside France. The store sells a product every 15 seconds. In total, 200 people work at the flagship, with 50 to 60 people per day. This does not include the hundred or so brand ambassadors working daily.

The IADS visited the store to see what it has to offer. The store concept has evolved and is more relevant. The store offers a clear segmentation, personalised services and digital features, only if they are considered essential to customers.

Store concept: less black, more light, and the introduction of wood

The new store concept is more livable and a bit breathier than the previous black-and-white one. Considering the one-of-a-kind location, the flagship’s design inspiration is coming from Paris. The walls at the entrance are mimicking the limestone used on Parisian buildings. The Champs-Élysées avenue itself is also a source of inspiration with a large 2.6-metre-wide central white marble paved path that runs straight through the store. Also, the store is filled with light thanks to a 90-metre long glass illuminated ceiling, which can be adjusted to give a natural light feeling (very much needed in this low-ceiling buzzy space).

Sephora’s signature black-and-white stripes are still present, but more subtly on columns. Overall, complementing the white colour, the black colour is less present and used on the floor on each side of the white-paved path and for the lower part of the storage cabinets. The signature red carpet has been kept but only at the store entrance. The store is supposed to be less noisy than before thanks to some specific textures on the walls, as well as the use of wood, which adds a warm and wellness-like feeling to the skincare area. Also, the round-shaped embossed matte white walls contrast with the black elements. Finally, and for the first time in a Sephora, there are large green plants. All the furniture has been redesigned to be more compact without reducing the number of products on display. As a result, the store is easier to navigate.

Store organisation: clear segmentation, personalisation and… brands

Rather than featuring the usual list of product categories, the store directory at the entrance is service-oriented: makeup services, skincare services, hair services, fragrance discovery, brow bar by Benefit, face glow bar by Seasonly, personalised engraving, click & collect, gift wrapping and immediate tax-refund. The directory also mentions the private lounge and the fact that all products are on demand upon request to beauty advisors.

Right after the directory and on the left side stands The Corner, a huge shop-in-shop space which will be devoted to individual brands, with the first one being Dior. Then the category and brand experience rolls out up to the back of the store with a clear segmentation: fragrance, makeup and care.

The store is a big narrow rectangle: it gives a great perspective, but it requires visual stops. This is why the Beauty Hub (already existing in other stores but much bigger here) is located in the middle of the store and considered a kind of ‘Arc de Triomphe’ to the paved path. This space is used to advise customers and to organise events. It is modular and can be managed and animated by Sephora or monetised to other brands. At the time of the opening, a new brand was planned every day, with makeup and skincare brands mostly taking over the hub. Appealing to the younger customers, there is an area showcasing the brands that are ‘Hot on Social Media’, plus ‘The Next Big Thing’ gondola and the ‘Gift Hub’ for gift wrapping. The retailer’s private label collection has its own department, and there’s an area for hair care. A unit dedicated to Dyson hairdryers and GHD straighteners is a new store service. Contrary to the London store, there is no Lip Bar, a category significantly growing post-pandemic.

The store emphasises personalised services with a large number of beauty counters which are monetised to brands. The beauty hub accounts for 16 seated counters where customers can benefit from personalised services depending on the brand: skincare consultations, face massages or makeup services to help consumers achieve the look they want, etc. The Brow Bar offers Benefit masterclasses. The skincare accounts for 8 seated counters. At the time of the visit, some were managed by Clarins (a simple brand sticker is put on mirrors making the brand rotation easier). The hair section has 4 seated counters where customers can book 30-minute hair appointments. The Gift Hub offers personalised gift packaging but also individualised voice messages, scents, and gift boxes. Finally, a private lounge is accessible to Gold customers (the highest level in Sephora's loyalty programme). It is also monetised, as brands can use it for product launches or specific services: at the time of the visit, Guerlain was offering made-to-measure care services.

Is the Champs-Elysées store the store concept for future renovation projects? “Our new stores, such as the Champs-Élysées flagship, as our first London store and our newly renovated stores in Shanghai, Singapore and Wuhan, are sources of inspiration for our future renovations, as they illustrate our strategy and the experience we want to provide to our customers,” Motte said. “But there is no ‘template. Each of them must be meaningful locally and resonate with local communities.”

Finally, Sephora is well known for its power in attracting key, hot new brands and making them exclusive (an issue our members are very familiar with). The brand assortment accounts for 309 brands. There is a handful of exclusive brands including Prada Beauty, Valentino Beauty, Glow Recipe, Maison François Kurkdjian and Penhaligons, which will only be available at the flagship and on Sephora’s French website. This shows efforts in developing the premium and niche fragrances business, which is significantly growing at the moment.

Digital features and payment options emphasize efficiency and loyalty

Click & collect is available in the store. A smaller specific entrance on the left-hand side of the main entrance (already existing before the renovation) is dedicated to click & collect orders and is accessible from the main entrance as well. Also at the entrance, is a selfie-friendly multicolor light box.

A large screen is on display at the right side of the entrance, communicating promotions and events. In the end, fewer screens are animating the different spaces than before, with no use of augmented or virtual reality and no mention of metaverse or Web3. For now, the digital tools are considered gadgets by Sephora and efforts are being put into giving customers a real-life experience. In the future, Sephora might integrate more digital tools, but they will be placed in the hands of the beauty advisors and not in self-service.

The checkout area is located at the end of the central alley. Sephora has completely overhauled its checkout management and now has 4 different flows for customers to access a cash desk. Gold customers have dedicated checkout access. Other customers can choose between a traditional checkout, accessible via a single queue to optimise the customer flow or a self-service checkout, the latter being permanently supervised by advisors to limit shrinkage and help customers during the operation. The display dedicated to miniature and impulse products has been optimised for the checkout waiting line. Finally, cash points are also discreetly scattered around the store for payment by credit card on the sales floor. In 2024, to facilitate payments, Sephora plans on deploying a payment tool directly on beauty advisors’ PDAs using the Tap to Pay Apple technology.

The extensive renovation of Sephora's Champs-Elysées flagship store marks a significant milestone in the company's ongoing evolution and is a testament to the brand's approach to customer-centricity and customer experience. The emphasis on personalisation is a strategic move that addresses the evolving desires of today's consumers. The store's layout doubles down on offering a variety of personalised services such as makeup, skincare, haircare and fragrance discovery, catering to individual customer needs in a more tailored manner. The store is more ‘breathable’ than before, thanks to the optimisation of the displays, the introduction of more light, as well as natural elements like wood and plants.

Credits: IADS (Christine Montard)

What: Coresight reviews the perspectives of AI in setting up prices.

Why it is important: Decision making tools is of optimal importance to set up prices properly in the age of AI.

The report discusses the impact of artificial intelligence on pricing strategies in the retail sector. Here are the key points:

1. Market Scale and Opportunity:

The global retail pricing optimization software market is expected to each $1.6 billion in 2024, growing at a CAGR of 16.5% between 2023 and 2028. The US holds the largest market share at 51.0% as of 2023.

1. Optimal Pricing Strategies Contribute to Success:

An optimal pricing strategy, which considers both internal and external factors, is crucial for business success. 99% of respondents in a survey stated that having an optimal pricing strategy is either "moderately" or "very" important to determining business success.

1. AI-Informed Pricing Decisions Are Prevalent Among Retailers: 92% of respondents in the survey use an AI-based pricing solution to inform their pricing decisions, and all respondents have benefited at least "slightly" from this solution.

1. Leveraging AI Can Be Cumbersome and Challenging:

Despite the prevalent use of AI in pricing strategies, companies face challenges in leveraging advanced AI-based pricing solutions. The three most widely cited challenges are a lack of integration with key complementary business functions, a lack of trust around AI models, and limited integration capabilities with company-wide solutions.

1. Integrated Business Functions and Real-Time Pricing Amplify AI-Based Pricing Benefits:

The survey revealed that only 41% of respondents have "fully integrated" their price planning strategies with complementary business functions. Real-time pricing also has huge growth potential, with only 56% of respondents currently using it.

1. Outlook on AI Usage and Investments Reveals Upbeat Retailer Sentiment: 97% of respondents plan to increase investments in AI-based pricing solutions in the coming year. The most influential differentiators for choosing an AI-based pricing solution are those that support retailers' integration goals.

The report concludes that retailers who can effectively leverage AI and machine learning in their pricing strategies will have a competitive advantage. Those slow to integrate these technologies risk losing customers to competitors and facing margin erosion.

The use of AI in dynamic pricing

What: Veronica Servantez, Senior Vice President of Marketing at BigCommerce, discusses significant shifts in shopping behaviors post-pandemic and highlights the critical importance of a seamless and personalized customer experience in the evolving fashion industry landscape.

Why it is important: The discussion underscores the permanent changes in consumer expectations and behaviors brought about by the pandemic, emphasizing the hybrid model of online and offline shopping as the new norm. Servantez's insights shed light on the necessity for retailers to adapt by offering frictionless online shopping experiences, flexible payment options, and personalized interactions to meet the heightened expectations of today's sophisticated shoppers.

In a post-pandemic retail environment, consumers exhibit a preference for a hybrid shopping model, combining the convenience of online shopping with the tactile experience of in-store purchases. Veronica Servantez from BigCommerce, in a session at the WWD Wear House, pointed out that while consumers are returning to physical stores, their expectations for an enjoyable online brand experience have significantly increased. Key to meeting these expectations are strategies to remove friction from the shopping process, such as implementing one-click checkout systems, offering flexible payment solutions like buy now, pay later, ensuring easy returns and exchanges, and providing personalized product recommendations. The evolution of omnichannel retailing, particularly the rise of social commerce driven predominantly by fashion and apparel, further demonstrates the necessity for brands to engage customers where they spend their time, especially on social media platforms. These insights are crucial for retailers aiming to thrive in the modern fashion industry by enhancing customer satisfaction and loyalty through tailored, efficient shopping experiences.

How to navigate the post-pandemic retail landscape

What: Investors are heavily funding AI startups tailored to the fashion industry.

Why it is important: This investment trend underscores the transformative potential of generative AI in fashion, offering innovative solutions for design, marketing, and consumer engagement, and heralding a new era of creativity and efficiency.

The surge in funding for AI startups, particularly those applying generative AI in fashion, reflects a broader shift towards industry-specific solutions. In 2023, over 400 AI companies secured more than USD 21 billion globally, marking a significant increase from USD 4.3 billion in 2022. High-profile investments in companies like OpenAI and Stability signal a growing investor interest in how AI can solve unique challenges within the fashion sector.

Startups such as Raspberry AI, Flock AI, and Blng.Ai are exploring ways to use AI for trend-driven design, on-model photography, and jewelry design, respectively, attracting significant seed funding and pilot brand partnerships. These initiatives aim to democratize design access, enhance marketing strategies, and improve consumer discovery and personalization, thereby addressing the industry's pressing challenges like unsold inventory and the need for greater design speed and variety.

Moreover, ventures like Mmerch, Glaze, and Kopia are pushing the boundaries by linking fashion to Web3, enhancing online shopping experiences, and offering virtual try-on capabilities. These developments underscore the potential of AI to revolutionize fashion through customization, efficiency, and an enriched customer experience, signaling a promising future for the integration of technology and style.

Here are the fashion problems AI can solve, according to investors

What: French government is proposing new bills targeting environmental impact of fast fashion

Why it is important: Such regulations in France could impact other EU countries in regards to environmental and and social issues in fast fashion

France's lower house of parliament has proposed a new bill targeting the environmental impact of fast fashion. The bill seeks to penalize textile companies for their climate impact by increasing fees per garment annually until 2030, making it more expensive for fast fashion companies to operate in France. Additionally, the bill includes measures such as banning advertising by fast fashion companies in the country and requiring apparel companies to provide information on product reuse, repair, recycling, and environmental impact on their websites and apps. This proposal aligns with other French laws aimed at addressing textile waste and promoting sustainability in the fashion industry. Similar initiatives are also emerging in the US, with California having passed the Garment Worker Protection Act in 2022 and other bills under consideration. Some observers suggest that France's fast fashion bill reflects efforts to protect its domestic fashion market from the competition posed by rapidly growing companies based in China.

The proposed fast fashion bill in France has sparked debate due to its ambiguous definition of fast fashion and potential legal implications. The bill aims to penalize companies based on the volume of garments they distribute, but the lack of clarity on defining fast fashion raises questions about its effectiveness and enforcement.

There are also legal concerns raised regarding the bill's potential violation of international trade laws if it prioritizes French industry over others. Additionally, the proposed ban on advertising fast fashion products is seen as extreme by some, potentially damaging companies heavily reliant on digital marketing like Shein and Temu.

Despite these criticisms, the bill reflects broader efforts in France and the EU to address environmental and social issues in the fashion industry. However, there are concerns that such gradual solutions may lead to unintended consequences and push companies to seek loopholes.

Looking ahead, there's uncertainty about the bill's impact and whether it will be replicated in other EU countries. The upcoming elections in France could influence policy direction, with some seeing the bill as a move to demonstrate sustainability leadership and support local brands committed to sustainable practices.

Does France’s anti-fast fashion bill have legs?

What:  Vogue Business looks at the new EU sustainability policies, and how it is affecting the fashion world.

Why it is important:  The fashion world will be dealing with a whole new set of regulation that could come with serious implications for an industry unaccustomed to navigating policy.

For over a decade the EU has been focusing on aligning economic activities with the urgent need to address climate change and other environmental and social issues. Numerous initiatives have been launched targeting various aspects of planetary health, but the fashion industry has largely been overlooked until recently. Fashion has not been a priority on policymakers' agendas, nor has it actively sought inclusion. However, as new regulations are introduced, many of which will impact fashion operations, the industry faces challenges in complying due to a lack of guidance.

Several significant bills are already on the radar of fashion brands and retailers, including bans on forced labor, directives on waste management, and corporate sustainability due diligence. However, there are additional regulations addressing issues such as deforestation and carbon footprint, which will also significantly affect the fashion industry.

The regulatory landscape is undergoing profound changes, signaling that the fashion industry cannot continue operating as it does currently. The lack of close monitoring of legislative developments by the fashion sector, combined with insufficient involvement from policymakers, has created a situation where many businesses may struggle to comply. It's predicted that up to 75% of existing fashion industry players could disappear within the next three to five years due to an inability to meet regulatory requirements.

While some predict a dramatic impact on the fashion industry due to upcoming regulations, others believe the situation might not be as severe, although there is widespread agreement on the significant shift and unprecedented stakes involved.

The EU’s policy wheels are in motion, and fashion has a lot of catching up to do

What: Lord & Taylor, a once-iconic department store, has concluded its operations, shutting down both its brick-and-mortar stores in 2020 and its online presence by 2024. This marks the end of the retailer's long history of financial struggles, ownership changes, and the inability to keep pace with modern retail demands.

Why it is important: Lord & Taylor's closure symbolizes a significant shift in the retail landscape, highlighting the challenges traditional department stores face in an era dominated by digital shopping and fast-changing consumer preferences. The store's inability to adapt to digital trends and the impact of macroeconomic conditions underscore the critical need for retail innovation and flexibility.

Lord & Taylor, once a beacon of high fashion and American design talent, closed its storied Fifth Avenue flagship store in January 2019, with the rest of its locations following suit in 2020. The department store, founded in 1826, struggled for years with declining shopper traffic, outdated perceptions, and limited regional presence. Despite efforts to revitalize the brand, including a sale to the Saadia Group and an online relaunch in April 2021, the retailer was unable to overcome its financial difficulties. Legal issues with Saadia Group's lender, resulting from a default on a substantial loan, further complicated any potential recovery. The series of ownership changes—from the May Company to Federated, then to HBC, Le Tote, and finally Saadia Group—coupled with an unsuccessful attempt to merge subscription rental services and online investment, contributed to Lord & Taylor's eventual demise. The store's bankruptcy filing in August 2020 and subsequent liquidation marked the end of its journey, closing a chapter on what was once a premier destination for fashion-forward consumers.

Inside the demise Of Lord & Taylor 

What: Coresight reviews how retail still needs to get the basics right.

Why it is important: retailers are facing the necessity to evolve and reinvent themselves, but, prior to this, they need to make sure their operations are efficient.

This report by Coresight Research examines the key challenges that retailers face with in-store operations and inefficiencies around out-of-stocks, pricing errors, promotional execution, planogram compliance, and inventory allocation/assortment planning. Based on a survey of 150 U.S. retailers, the report finds that:

1) Over 90% of retailers experience significant challenges across these areas, resulting in an average 4.5% revenue loss.

2) The biggest obstacles are product pricing errors, lack of real-time inventory visibility, misplaced items, and overstocking/understocking.

3) Around 40% of retailers lose at least 6% in gross sales due to these inefficiencies. Over 70% lose more than 5% operating margin.

4) Around half of retailers are investing in store intelligence technologies like AI/data analytics, automated inventory tracking, price optimization to address these issues. More plan to invest soon.

The report highlights the billion-dollar sales opportunity for retailers by solving in-store operational challenges. It underscores the urgency for leveraging technologies to enhance efficiency, reduce losses, optimize pricing/promotions, and deliver superior customer experience to gain a competitive edge in today's dynamic retail landscape.

The state of in-store retailing: opportunities to redefine operations

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The International Association of Department Stores (IADS) had the opportunity to visit Thailand in 2023, providing a chance to review the myriad of innovations that are consistently emerging in this specific retail market. Thailand, particularly Bangkok with its state-of-the-art stores like The Mall Group's Emquartier, is renowned for an exceptional focus on customer service and offers valuable insights and lessons for European retailers.

In an era where customer loyalty is increasingly crucial for department stores, the approach of Central Group in Thailand stood out. They have established a business unit with its own profit and loss accountability, solely dedicated to cultivating customer loyalty. This initiative extends well beyond the confines of their own operations, presenting intriguing elements that could be of interest to external observers.

Therefore, we explore in this article Central Group's business strategies, focusing on their main flagship stores - Central @ CentralWorld and Central Chidlom. These establishments are integral parts of a larger ecosystem where loyalty is not just a concept but a tangible, profitable asset. This strategy enhances Central Group’s engagement with its customers and strengthens its relationships with brand business partners.

Introduction to Central Group

Just like many other retail giants, such as IADS’ Thai member The Mall Group,  Central Group's origins are surprisingly humble. The journey began in 1925 when Tiang Chirathivat, hailing from Hainan Island, established a modest shop on the outskirts of Bangkok, specializing in basket sales. Recognizing the potential in Thailand, he soon partnered with his son, Samrit, to open a more centrally-located store near the present-day Mandarin Oriental hotel in Bangkok. There, they expanded their offerings to include books, magazines, and a variety of general merchandise.

In 1956, they made a significant leap by opening Thailand's first and largest department store at that time in Wang Burapa in central Bangkok (this location has since closed). Central Chidlom, the first full-scale department store in Thailand, opened in 1974, encompassing 11,000 square meters. Originally a four-floor establishment, it was rebuilt after a 1995 fire and reopened in 1998 with seven floors.

Central Group has mirrored global corporate strategies by understanding the importance of real estate control. This led to the establishment of the ‘Central Pattana’ subsidiary in 1980, focused on development. Their inaugural mixed-use project, featuring retail, private apartments, offices, and hotels, opened in 1982 on 31,000 square meters in Ladprao. At the time, it was Thailand's largest shopping mall, including a department store that remains the most successful in the Central Retail network to this day.

Expansion and scaling up were achieved through acquisitions (like Robinsons in 1995), diversification (such as Tops supermarkets and Powerbuy in 1996, and the Park Hyatt hotel in 2017), and international growth (with La Rinascente in 2011, Illum in 2013, KaDeWe group in 2015, Globus in 2020, and Selfridges group in 2022). This growth occurred alongside typical retail group developments: the launch of ‘The 1’ loyalty programme in 2006, the introduction of an e-commerce channel in 2013, and the opening of flagship locations like the Central department store in Central World (opened in 1990 as Zen department store, with the real estate acquired in 2002) and the Central Embassy mall in 2014, which includes a direct connection to the Central Chidlom department store and the Park Hyatt hotel.

Today, Central is a conglomerate composed of three direct business units: Central Retail, Central Pattana, and Central Plaza Hotel. It owns The 1, Central Insurances, Grab Thailand, KaDeWe, Illum, and Globus. Operating in over 3,700 locations and with branches across more than 7 million square meters of retail and commercial spaces, including 84 department stores, the group is supported by 80,000 employees and serves 30 million loyal members.

Visiting Central @ CentralWorld

CentralWorld, Thailand's ninth-largest shopping complex, encompasses not only 550,000 sqm of retail space but also houses a hotel and an office. Previously known as the World Trade Center, it was acquired by Central in 2002, strategically positioned to complement the nearby luxury Siam Paragon mall. CentralWorld, which targets the middle-class demographic, underwent significant changes, including the transformation of its Central department store. This store, formerly named ZEN, was completely revamped following a fire in 2019.

Notably, CentralWorld was home to the Japanese department store Isetan until 2020. This influence is evident in the food court, which exudes a distinct Japanese ambiance.

The Central department store spans seven floors, covering 50,000 square meters, and serves as a model for new store concepts across the nation. A unique aspect is the integration of sustainability messaging with fragrances throughout the store, enhancing the shopping experience with pleasant scents.

The ground floor is dedicated to beauty and fashion, featuring accessible luxury brands such as Sandro, Maje, Vivienne Westwood, Veja, Etude House, and Sunay. The layout includes red carpet walkways and well-presented brand signage, creating an upscale atmosphere. This floor is also a hub for temporary installations, like the prominent Seiko watches stand observed during the visit.

The first floor showcases women's shoes, jewelry, and designer clothing, with brands like Paul Frank, Steve Madden, and Nine West, also available in the Siam Paragon mall. Unique features of this floor include a second-hand stand, Komehyo, in partnership with a Japanese company, and a dedicated space for Thai fashion designers.

On the second floor, shoppers can find women's accessories and ready-to-wear items from Marks & Spencer, which includes a small food section. However, the lack of windows on this floor limits natural light, making some areas, like the lingerie section, feel crowded and enclosed.

The third floor is dominated by sportswear, divided into brand-specific areas, suggesting a concession-like operation. It also features denim, luggage, gifts, and a Muji store.

Men's casual and formal wear, along with watches, are located on the fourth floor. This level is spaciously designed to showcase both local and international brands such as Wrangler and Polo. Additionally, it houses a barber shop and cafes near piano displays, offering a unique blend of services.

Children's products are the focus of the fifth floor, where the loyalty programme is prominently advertised. This area includes child-friendly facilities like arcade games (that were not operational during the visit). Facilities are very interesting: baby changing rooms and kid’s toilets are extremely well designed and user-friendly, in addition to smartly-presented reminders of all the F&B offering available in the store. In comparison, it was very strange to see that the cash desks were rather difficult to find, and not particularly tourist friendly.

The sixth floor is dedicated to home decor, offering full-priced merchandise in a spacious and inviting environment. This floor features a food court designed to mimic Bangkok's street dining ambiance, strategically located near the cash registers. The ventilation system effectively prevents food scents from permeating the floor. This level also emphasizes the group's sustainable practices, through material explanation and encouragement to eco-friendly gestures.

The last floor houses an outlet for home and decor items. The layout is clean and well-organized but lacks decoration. Given the view from the windows, it is also very surprising that this space is not used for other purposes that could make the most of its potential.

Each floor of the Central @ Central World department store is seamlessly connected to the mall, with entrances opening onto promotional stands offering discounts on products relevant to each floor's category.

Visiting Central Chidlom

Central Chidlom, a venerable establishment in the company’s network, predates its high-performing counterpart, Ladprao, by eight years, having opened its doors in 1974. This iconic store encompasses seven floors, which, at the time of our visit, were undergoing extensive renovations planned to last two years.

The ground floor is dedicated to cosmetics (including Buly) and accessible luxury items, including brands such as DKNY, Calvin Klein and Longchamp. The accessories section exudes a luxurious ambiance, contrasting with the rest of the floor which presents standard brands commonly found in other retail locations.

The first floor is dedicated to women's ready-to-wear clothing, accessories and jewelry, including a local Thai fashion section called Thai Thai, a Marks & Spencer store, and mid-range brands such as Tara Jarmon, Maje and Sandro (which are displayed in the “luxury” section in Central @ Central World). Additional amenities on this floor include a click-and-collect area, a dedicated cash desk for The 1 loyalty programme members, and direct access to the Central Embassy mall.

The second floor is a dynamic space focused on denim, sports apparel, and watches, where cleverly designed columns demarcate the various sections.

The third floor is dedicated to men's fashion, including luxury, as well as a Supersports section (a company owned by the group). The men's fashion area is well-executed with a classic style, though the brands are predominantly mainstream.

The fourth floor focuses on tech, home decor and furnishings, but not only. Amidst ongoing restructuring, this floor also accommodates hair care and high-end jewelry salons, as well as a mattress display. Despite a somewhat disjointed layout, the atmosphere retains a luxurious feel, and the expansive electro-domestic space invites browsing.

The fifth floor, dedicated to children, offers an immersive experience surpassing that of CentralWorld. It includes a changing room, a breastfeeding area, and personalized cash desks for each section. During our visit, lingerie and swimwear sections were being added due to the ongoing restructuring.

Finally, the sixth floor caters predominantly to tourists, featuring a Muji store and customer services. It also houses a food court, reminiscent of CentralWorld but with a more organized and compact layout. Muji occupies half of the space, with the food court taking up a third, and the remaining area dedicated to tourist items, luggage, and customer services. A lounge is available, although its signage is inconspicuous, making it challenging to locate without prior knowledge.

Interestingly, and surprisingly for any European customer, neither Chidlom or CentralWorld department stores featured visible anti-theft systems on the products sold at the time of visit, which suggests either total lack of it, or massive use of RFID tagging to prevent fraud.

Central’s vision: be the “central of life”

When examining the mission of Central as presented on their website, their objective is manifestly defined: they strive to be the 'central of life.' This goal is to be at the forefront of people’s everyday experiences through a comprehensive ecosystem encompassing physical stores (as exemplified by two case studies), an online shopping platform, and superior customer service. A critical component in materializing this vision is their loyalty programme The 1, which offers a fascinating subject for analysis.

Predominantly, The 1 is unique to Thailand and has not yet expanded internationally. While each European department store operates its own loyalty scheme, sub-programs do exist to acknowledge Central Thailand's customers in affiliated stores like Selfridges.

Since its inception in 2006, The 1 has diversified beyond conventional retail, encompassing food specialty stores, hotels, banks, and offices. A significant milestone was the launch of a dedicated app in 2020, followed by the introduction of a top-tier membership category in 2021 and an extension into the restaurant sector in 2022. Importantly, The 1 is designed to be a profit center, which is why the whole programme needs to be profitable.

Presently, the programme has garnered over 20 million members (with 8 million active annually) and circulates more than 10 billion points across various partners, including notable brands like Toyota, Adidas, and even hospitals or gas stations. The points system is designed with location-specific variability; for instance, Marc Jacobs purchases accrue different points based on whether they occur in a Central Department Store or an offsite franchise.

The primary strategy for profitability focuses on partnerships rather than solely on Central’s in-house businesses, such as Central or Robinson Department Stores. Regarding total sales volume generated through the program's ecosystem, approximately half derives from external partners, with the majority of the remaining points being utilized internally.

The 1's privileged class signifies a premium tier for members who spend over THB250,000 annually (approximately €6,500). This group, consisting of about eighty thousand members, contributes significantly to the loyalty scheme's revenue, generating about one-fifth of the overall sales. This segment predominantly utilizes partnership credit cards and dedicated apps, which facilitate customer engagement through inspiring content, serving as platforms for offer discovery without necessarily concluding transactions.

Demographic analysis reveals that the program's user base mainly comprises Generation Y (45%) and X (35%), with a notable presence of Generation Z (11%). Predominantly female (62%) and residing primarily in the Greater Bangkok area, the programme evidently caters to an affluent clientele. Advanced CRM techniques enable customer segmentation and identification through various models, such as life stages or lookalike propensities.

Consent management is centralized under The 1 programme, which also plays a pivotal role in enabling cross-channel acquisitions between business units. The programme also tracks the types of credit cards used in transactions, including those from private banking, thereby providing valuable customer insights through comprehensive dashboards available to brands. Current initiatives include developing retail media programs for advertisers, aiming to automate processes both online and offline, albeit with limited traffic numbers. When comparing their vision of retail media to, for instance, the US models, they do not sell to advertisers a quantity, but rather the quality of the audience.

The top 20% of customers enjoy a 95% retention rate, with an annual spending growth of 8%. On average, members engage with around 4.8 product categories within the scheme. The offers encompass access to data, insights, rewards, and engagement solutions, maintaining a flexible approach that can be adapted internally to meet specific needs. Future plans include fully internalizing and white-labeling strategies, though there is no provision for training on how to best utilize these services, leading to varying success rates across different businesses like Central Department Store (burn rate: 200%) compared to Starbucks (<100%).

Looking ahead, key questions revolve around the potential applications of blockchain technology and Web3 for managing point currency supply-demand and real-time yield, coupled with the objective of simplifying the user experience to enhance clarity and ease of use for consumers.

Conclusion: Centralizing Life in the Digital Era

Central Group has realized exponential growth since its origins nearly a century ago as a humble Bangkok shop. Strategic expansions into real estate, hospitality, and online channels have enabled the diversified conglomerate to embed itself at the epicenter of daily living for Thailand's rising middle class.

Led by generations of the Chirathivat family, each evolution has built upon learnings from the last. As founding patriarch Tiang Chirathivat once wisely pronounced, "Progress lies not in enhancing what is, but in advancing toward what will be."

Indeed, Central Group has consistently looked ahead, cementing its positioning through acquisitions of prestigious brands and loyalty ecosystem cultivation via The 1 program. With over 20 million engaged members and partnerships spanning hospitals to gas stations, Central cannot be dethroned as Thailand's predominant retail centrality nexus.

What is interesting with The 1 is that they offer an alternative to all loyalty systems as they are currently designed either in the West or in the East, by mixing the need for profitability with a strong concern about customer privacy and rights. As a consequence, The 1 is an ecosystem that goes beyond Central Group’s own boundaries and becomes an asset as strategic as the other business units which are historical components of the group.

As the next generation pioneers ever-more immersive customer experiences through experiential stores, decentralized Web3 platforms and virtual reality, the company may realize the ultimate manifestation of its vision – “pioneering innovations that centralize life”.

Credits: IADS (Selvane Mohandas du Menil)

What: The American department store is facing decline, contrasting with the thriving nature of European counterparts.

Why it is important: This decline marks a significant shift in retail culture and business models, highlighting the need for American department stores to adapt. The comparison with Europe suggests that strategies around product selection and sales frequency could be key areas for revitalization, potentially saving this traditional retail format from further endangerment.

The op-ed by Megan McArdle draws attention to the endangered status of American department stores, a sentiment echoed by personal reflections on the vibrant department store scene in Europe. The writer reminisces about the past prominence of department stores in the Washington area and notes the stark contrast in foot traffic and product selection between American and European stores today. European department stores, with their broader product ranges and less frequent sales, seem to maintain a vitality that their American counterparts have lost. This observation raises questions about the business strategies of American department stores, particularly their reliance on constant sales, and suggests a need for a reevaluation of how these stores engage with consumers and manage their product offerings. The comparison implies that adopting aspects of the European model could help rejuvenate the American department store sector.

Save an endangered species: The American department store

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Nick Greenspan, the UK Retail and Consumer Products practices partner at Bain & Company has deep expertise in the digital environment, thanks to 35 years of consulting experience with many of the UK's leading online businesses. His focus is on helping clients with corporate transformations, strategy and vision development, customer-led repositioning and operational improvement.

IADS invited Greenspan to address member CEOs to share his expert opinion about major factors from 2023 that will continue to influence the retail and consumer industries going forward. Greenspan addressed these times of uncertainty and offered a bit of direction to weather upcoming challenging times, offering a bit of a playbook on how to win the future of retail.

How to maintain optimism in the current environment

Greenspan opened the discussion by asking the room: “If there was one capability for your business that you could have to help you thrive in the next 2-5 years, what would that capability be?” The answers ranged from collaboration, a crystal ball into the future to being able to predict what comes next, unlocking data, being adaptable, and delivering service as a differentiator. While all these points are relevant and real issues that retailers are currently facing, Greenspan proposed to see them in a positive manner: in turbulent times, the market share fluctuates the most, meaning there are ways for businesses to differentiate themselves and stand out as opposed to times when the market is stable. Gains made during periods of turbulence have the potential to be maintained throughout the next cycle.

However, Greenspan was vocal on the fact that the focus should not solely be on cost reduction as it is a seductive but limited lever. Instead, he proposed some elements to weather the storm during volatile times.

3 elements needed for businesses to thrive in uncertainty.  

Since the pandemic, the trajectories of each market position have become very different from each other, with pressure currently very strong on both value-end (with many players being disrupted and customers stopping buying for fear of the future) and high-end (where a shift from visible consumption into quieter areas of investment is taking place) segments. For that reason, instead of considering recipes that will not be able to be adapted to each specific situation, businesses should focus on what they need to address current challenges. Retail leaders need to reflect on how strong their businesses are across three key elements and should focus on strengthening areas of weakness to enforce their adaptability in turbulent times.

Greenspan shared three fundamental elements that are crucial for businesses not just to survive, but to thrive amidst uncertainty:

• Prediction: Interpreting data and maintaining a realistic outlook on the future are deemed essential. While the unpredictable nature of the market poses challenges, retailer leaders are encouraged to equip their teams with tools and strategies that enable them to anticipate and respond to changes proactively.
• Resilience: Businesses are encouraged to strike a delicate balance between resilience and efficiency, as Greenspan states that "a perfectly resilient business is also perfectly bankrupt." This highlights the necessity for businesses to be both low-cost and efficient, ensuring their ability not only to withstand sudden shocks but also to recover swiftly.
• Adaptability: Continuous investment in adaptability and the streamlining of services are key components of a successful strategy. Executives are challenged to foster adaptability across the organization, constantly assessing and correcting the course as the external environment evolves.

As a strategic call to action, retail leaders are prompted to engage in self-reflection, evaluating the strength of their businesses across these three vital elements. This strategic approach, tailored to the specific needs and challenges of each business, becomes the cornerstone for thriving in an environment marked by constant change and uncertainty.

What was going on in 2023?

2023 was a tumultuous year with pressure coming from everywhere. The US economy slowed down, there were many signs of local fatigue in Europe, the Chinese economy has not recovered, and there continues to be a lot of post-globalisation and political risk with the wars and unrest. These things led to higher labour costs, increased energy prices, increased commodity prices, disrupted supply chains and incited fear in consumers, thus slowing the economy.

At the same time, retailers were being hit heavily by inflation which increases operational costs and costs of goods sold, while also resulting in the pullback of customer spending. In most markets, no one has the experience of dealing with hyperinflation. So how can department stores equip themselves to prepare for this unknown territory going forward? For starters, it would be wise to ask department store players that are used to operating under such conditions such as Falabella in Chile or Beco in Venezuela. While no one has the innate instincts to handle inflation, a conversation with a business that is used to operating in such conditions could help other players understand what it is like to have inflation as a factor in the business as a whole. Retail businesses can no longer use like-for-likes as a reference in an inflationary environment and they need to be able to adapt and understand their business in different terms as this KPI is no longer relevant. Prediction is all about educating teams on what happens in an inflationary environment, especially as Greenspan predicts 2024 to be tougher than 2023.

The key themes for 2024 and beyond

Some interesting trends need to be considered by retail leaders in the 2 to 5-year scope and forecast in order to be predictable, resilient and adaptable.

Growing, elevating, and having a fluid customer base as new generations gain prevalence

Gen Z and Alpha, expanding at a rate three times faster than other generations, wield significant influence. Notably, Gen Z initiates luxury purchases as early as age 15, while older generations (age 70 and up) tend to stop buying luxury goods after a certain age. The younger generations are opting for online channels over traditional retailers such as department stores and showcasing loyalty driven by promotions rather than brand affiliations. Amidst these shifts, there's a strategic imperative for department stores to engage with luxury brands as department stores can offer a broader set of customers that are cross-shopping brands. Department stores also occupy the best locations in cities, giving a broader physical reach than luxury brands typically have. The challenge lies in avoiding the precarious middle ground (as seen by Debenhams or House of Fraser) and instead, fostering collaborations that extend the luxury brand's influence to offer a win-win partnership to capture the wallet share of these younger customers.

Products and experiences of desire

To cultivate irresistible products and elevate customer experiences, there is an imperative for department stores to triple down on creating immersive environments. However, a challenge arises as the investment in reserving physical space for experience tends to decrease sales per square foot opportunities, making it seemingly counterintuitive to remove products for the sake of theatrics and experience. Despite this paradox, not embracing experiential elements could make a store irrelevant in the ever-evolving retail landscape.

Striking the delicate balance between bringing theatre to retail spaces and maintaining optimal product presentation is crucial for sustained relevance. A strategic approach involves implementing a multi-channel proposition and arming sales assistants with the tools to help customers connect emotionally with the products. It's not an either-or situation; understanding customer behaviour is key to success. Take, for instance, Harrods' black card customers who, despite spending GBP100,000 annually, derive satisfaction from a seemingly irrational GBP20 rebate. Recognizing such idiosyncrasies is imperative for ensuring customer contentment. Additionally, ensuring seamless inventory management is essential to offer the right product, even if it's not physically present in the store. The focus is on driving exceptional experiences for VICs and creating an aura of exclusivity.

Next gen customer connection

In the same vein as upping products and experiences, there is a need to meet customers where they are. Brands are going DTC and using apps like WhatsApp to sell, thus cutting off retailers such as department stores. This means that department stores need to find similar ways to interact and engage with their customers with a focus on product and differentiation in order to stand out and survive as future consumers’ expectations evolve.

Delivering on the sustainability imperative

In the realm of sustainability, consumers continue to express a heightened concern, particularly regarding the removal of plastics. Despite a recent pullback in positioning sustainability as a primary differentiator—attributed to the prevailing political environment where humanitarian issues take precedence over environmental considerations—retailers face a delicate balancing act. The risks associated with discontinuing investments in sustainability initiatives are significant, potentially leading to a massive backlash from both customers and employees. This dynamic landscape is further complicated by changing consumer behaviours, such as the intentional shift towards buying less fashion or opting for second-hand alternatives. Initially, data did not align with vocalized intentions, as consumers expressing sustainability concerns continued purchasing from fast fashion retailers. However, recent trends indicate a growing alignment between consumer behaviours and their stated values.

To address this shift, many department stores are strategically introducing more circular products, with watches and jewellery proving to be more successful in this sustainable business model than clothing. The inclusion of sustainability and circular products not only opens a dialogue with customers but also presents an opportunity to explore these environmentally conscious offerings. While the demand for such products may be less than vocalized, positioning recycled items as limited and exclusive products creates a unique value proposition. Consumer scepticism towards certifications and labels remains, yet there is a clear desire for narratives surrounding second-hand products.

Tech-enhanced value chain

In navigating the evolving retail landscape of 2023 and beyond, the strategic investment in technology and data emerges as a cornerstone for success. Recognizing the significance of maintaining customer relationships in these unique market conditions, retailers are compelled to revisit foundational principles. While the current market climate differs significantly from the past, there is a renewed focus on core fundamentals, such as prioritizing the product and its shelf presence.

Simultaneously, safeguarding the front-line staff has become paramount—a critical yet often overlooked element in recent years. Amidst this backdrop, Artificial Intelligence (AI) stands out as a powerful enabler, offering retailers the means to decipher vast datasets for tailored customer experiences. The key application of AI lies in its ability to facilitate rapid changes in the retail experience. The imperative is not to pursue perfection but to engage in a process of iterative testing. AI's transformative potential extends beyond customer interactions to reinventing and optimizing supply chains and internal operations. The strategic decision for retailers involves weighing the extent to which they engage in these advancements independently versus awaiting plug-and-play systems from major suppliers. While certain aspects, such as accounting AI automation, may be outsourced to industry giants like SAP, there's a compelling case for retailers to internally pilot and build customer experience solutions.

Conclusion: Navigating a retail business across unknown waters

In navigating the complex landscape of retail's future, strategic insights from Greenspan underscore crucial imperatives. The trifecta of prediction, resilience, and adaptability emerges as paramount for business survival and prosperity. Reviewing 2023's challenges—from economic slowdowns to inflation pressures—these all called for a response from retail leaders, while many have never faced such obstacles before. Looking forward to 2024 and beyond, there are persistent themes of change that emphasize the imperative for department stores to engage with changing consumer demographics, prioritize experiential retail, embrace sustainability, and leverage technology for a resilient future. In essence, the roadmap provided advocates for a dynamic, customer-centric, and tech-enhanced approach as the cornerstone for success in the ever-evolving retail landscape.

Credits: IADS (Mary Jane Shea)

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Introduction: companies are far from done with digital transformation and now comes AI

For over a year, gen AI has been on everyone’s lips. Boards are pressing their CEOs to have a strategy for incorporating AI in the business even as many executives still don’t know where to start. The IADS organised a conference with Bain & OpenAI as early as July 2023 to explore the topic. In any case, 90% of commercial leaders expect to utilize gen AI solutions “often” over the next 2 years. They are cautious though, and are most enthusiastic about use cases in the early stages of the customer journey including lead identification, marketing optimization, and personalized outreach.

This article delves into AI developments that have the potential to impact and improve retailers’ operations, in order to define a non-exhaustive list of existing use cases already implemented. In CRM and marketing, gen AI helps to better target audiences and shift towards ultra-personalization. The impact of conversation tools has already been visible in copywriting and chatbot developments as AI has been influential in boosting creativity. When it comes to sales functions, AI tools have the power to increase sales thanks to better and tailored customer experiences. In terms of supply chains, AI has not been fully developed, but there is a lot of potential. Finally, AI has already impacted HR practices.

Gen AI for CRM and marketing: advancing towards ultra personalization

Enhanced audience targeting

Gen AI can combine and analyse large amounts of data (demographics, customer data and market trends) to identify additional audience segments which may have been overlooked in existing customer data. Gen AI can significantly reduce the time spent researching and creating these unique audience segments. Without knowing every detail about these segments, gen AI tools can automatically propose tailored content such as social media posts. Then, marketing (collaborating with sales) can use gen AI to create sales campaigns to reach prospects. This requires efficient data management: a comprehensive and aggregated dataset is needed (such as an operational data lake pulling in various sources) to train a gen AI model that can generate new audience segments and content.

Transitioning from personalisation to hyper-personalisation

Initially, personalization was limited to traditional market segmentation like gender, age and income. With AI, personalization has become more sophisticated, allowing retailers to understand and anticipate customer preferences more precisely and create tailored experiences able to foster loyalty. In that regard, AI technologies including deep learning and machine learning (ML) are used to analyze structured and unstructured data to create a complete view of each customer. Alix Partners sees the most significant AI potential in combining gen AI with ML to identify high-potential customers (based on customer lifetime value) and determine which ones are likely to make additional purchases. Together, ML can analyse complex data to identify patterns while gen AI can generate new content. This approach paves the way for real-time, highly personalized omnichannel experiences. For example, companies like Stitch Fix (online personal stylist) use gen AI to interpret customer feedback for product recommendations. The next step for companies is to transition from reactive to proactive personalization, providing 100% individualized content across channels. Here, the challenge will be about ensuring ethical data usage while protecting customer consent, privacy and security. Customers are increasingly expecting personalised experiences and relationships with their favourite retailers: as discussed during the IADS Operations Meeting dedicated to Chief Customer Officers in November 2023, the best way is to be as transparent as possible with customers and explain why and how their data will be used to help them get what they want.

AI conversation tools provide solutions for copywriting and chatbot

Gen AI’s capacity for producing natural-sounding language makes writing one of the tasks it’s wellsuited for. In addition to ChatGPT, start-ups like Jasper and Hypotenuse offer new tools. Jasper scales up marketing content like blog articles, social media posts, sales emails and website copy. By providing a few keywords, Hypotenuse users will instantly turn them into full-length articles and marketing content. On their side, tech providers such as Shopify, Salesforce and Amazon are adding gen AI copy options to their platforms to help companies streamline the writing of everything from marketing emails to product descriptions. In that regard, during the 2023 IADS Operations Meeting dedicated to Chief Customer Officers, El Corte Inglés noticed that AI product description is sometimes better than when done by people. While human oversight is needed, AI copywriting tools can already automate laborious and mundane work.

AI-powered chatbots (especially useful for platforms with a vast inventory) can enhance the shopping experience by understanding and responding to natural language and offering tailored product suggestions. Importantly, they create an iterative experience in which shoppers can respond to the results with feedback or additional questions, guiding the bot towards what they want. However, bots face limitations in providing accurate product suggestions and require a deep understanding of the retailer's inventory. Also, BoF made tests in spring 2023 and found that bots' replies can sound automated. So far, the best solution is to complement traditional search with a gen AI assistance.

A larger goal for many fashion players is to use customer data to personalise chatbot’s responses. The bot could use the data to offer specific sizes based on a customer’s preferences, for example. It’s an ambitious goal, though, and requires brands and retailers to have their customer data at hand and to be able to map it to their inventory. Google research showed that 46% of organisations think gen AI can address shopper enquiries with interactive responses beyond just product recommendations. Also, 43% want to use it to analyse emotional sentiments in customer feedback. When it comes to IADS members, Galeries Lafayette and Manor are currently fine-tuning their chatbots.

AI can boost creativity

It’s not a magic wand, but AI can support fashion design

Tools like DALL-E 2 and Midjourney have made it easier to create fashion content through generative AI. Whether it’s for branding purposes or to truly create design variations, some brands are already leveraging generative AI for product design. It provides designers an easy way to design countless variations of a piece of cloth, mixing inspirations to see what the outcome might look like. It does come with challenges. AI-generated designs still need manual edits and integrating the process into existing workflows can be difficult because it doesn’t consider real-world factors like fabrics and construction. Designs still generally require manual editing with separate software (for example to change a colour). Despite companies working on 3D gen AI, images are two-dimensional for now: the design only shows the front of an item, leaving the designer to create the rest of the garment. Finally, AI can produce concepts that are difficult or impossible to construct, making it impossible to translate them into finished products. Finally, intellectual property issues exist with AI-generated designs. Nonetheless, gen AI can represent a powerful tool to boost creativity which could help Private Labels design teams for example.

Generating unprecedented visual content

Visual content has emerged as another promising use of gen AI for fashion brands and retailers, which are under constant pressure to renew visuals for marketing, social media and e-commerce. Gen AI has the potential to provide more creative freedom and shorten production timelines as scouting locations, finding models and styling them are no longer necessary. For instance, Casablanca fashion brand used AI to produce stylized ad images, demonstrating AI's potential to revolutionize content creation. As AI-generated images are rapidly developing, Galeries Lafayette created amazing AI interpretations of its famous cupola. Besides unlocking additional creativity, using AI can offer cost savings and creative flexibility but may also impact traditional roles in image production. Also, there are potential sustainability benefits since AI eliminates the need to travel to shooting locations and reduces waste (multiple samples and sets discarded after use). Recent Google research shows that 39% of the surveyed organisations use gen AI to empower creative retail teams to curate bespoke images and creative content for campaigns and editorial placements.

To what extent can AI help develop sales?

AI to enhance customer experience and sales…

With its ability to analyse customer behaviour and preferences, gen AI can assist with hyper-personalized follow-up emails at scale. When thinking about clienteling, it can also act as a virtual assistant for each sales associate, offering tailored recommendations, a warm welcome to new customers, and reminders and feedback, which can each result in higher conversion rates. As a potential sale progresses with a customer, gen AI can provide real-time guidance and predictive insights based on an analysis of historical transaction data. Finally, AI can boost sales performance by automating mundane sales activities, allowing sales associates to spend more time with customers and leads (while reducing the cost to serve). The potential applications of gen AI and ML extend further, including matching customers with relevant sales associates. The integration of these technologies can significantly enhance outcomes, making it a promising investment for retail businesses. Some companies that are empowering this process are BSPK, Clientela, and FindMine.

As announced during CES and NRF in January 2024, Walmart's strategy is going big on AI with many different use cases proposed, showing the width of potential applications. One of the initiatives aims at making sure people’s refrigerators are always stocked. Using the example of a party a customer would throw for the Super Bowl, Walmart explained their AI-powered app will show everything people might need instead of having them search for chips, drinks or a new large-screen TV. Also, as explained during the third IADS CEO quarterly exchange of 2023,https://www.iads.org/web/iads/5747-iads-ceo-meeting-3.php Cyrille Vincey (Partner, Advanced Analytics and Retail practice, Bain & Co) explained how AI helps Carrefour in developing sales. For example, online shoppers can ask the chatbot for ideas for meals for a family of 4 for a week. In response, the chatbot provides recipes and translates them into a bucket list, and ultimately into a full basket. On its side, El Corte Inglés just launched an online ChatGPT personal shopper giving fashion advice and able to increase the conversion rate and hopefully the basket size. Overall, it has been an excellent learning experience, and the first results are promising.

… And reduce returns by solving fit issues 

Amazon Fashion has introduced new AI-driven features to address the fit problem in fashion e-commerce. The new tool aims to reduce returns and improve the overall shopping experience. The personalized size recommendations algorithm evaluates sizing relationships between brands, reviews, and customer fit preferences to recommend the best-fitting size. The AI-generated fit review summarizes customer feedback, helping shoppers make informed decisions about sizing. Also, Amazon has improved its size charts using AI to enhance accuracy and consistency, making them easier to follow and potentially addressing the variability in sizing systems across styles and brands.

AI-driven startup solutions addressing fit issues are developing quickly. 3DLook, a guest speaker during the 2023 IADS Operations Meeting dedicated to CIOs and CTOs explained how they help brands such as Bershka increase revenue and cut costs related to fit and sizing problems. AI and 3D engines deliver advanced body measuring technology for more intelligent fit experiences.

From forecasting demand to sustainability, AI has not fully transformed supply chains yet

Why do companies struggle with using AI for supply chains?

Companies have struggled to use AI to address fundamental supply chain challenges. Supply chain management is complex as it requires the participation of several functions (including procurement, manufacturing, logistics and sales) and sub-functions (such as demand planning, inventory planning and scheduling). Besides, organizational structures and incentive systems motivate employees to optimize the performance of their own function or subfunction rather than the end-to-end supply chain.

Companies often try to improve their supply chain performance by adding more people to a function. But the problem is typically a lack of knowledge, which cannot be solved simply by creating larger teams. High-potential performers often do not regard supply chain management as a preferred long-term career path and move to other functions after only 2 or 3 years. Because of the high turnover, institutional knowledge ends up dispersed across the company or escapes the company altogether.

The root cause lies not with technology but with how and where companies are applying it. Probably because they consider it is too risky, companies have not pursued the more valuable application of using AI to make recurring decisions by recognizing patterns in big data that humans cannot see.

It is too soon to rely on AI to predict what shoppers will buy

There are challenges in using AI to predict what shoppers will buy. Experts are cautious, emphasizing that the emotional nature of fashion purchases represents a significant hurdle. AI should be seen more as a support tool for experienced merchandisers rather than a replacement for human expertise. AI-driven services, such as in-season reorders and pricing optimization, are gaining traction though. Yet, brands are sceptic about AI-powered demand forecasting even though leveraging ML can provide more accurate predictions and allow inventory optimization by analyzing historic demand, supply data and trends. Although AI has the potential to provide more precise forecasts than historical methods by considering a multitude of variables, concerns remain about its readiness to entirely replace human decision-making.

Supply chain automation

Modern supply chain automation is not possible without AI. AI gives supply chain automation technologies such as digital workers, warehouse robots, autonomous vehicles, etc, the ability to perform repetitive, error-prone tasks automatically. Thanks to AI, automation can be fulfilled in the back office (document processing), logistics (companies like Amazon are investing in autonomous trucks), warehouse management (Ocado), quality checks and inventory management (thanks to AI-enabled computer vision systems).

Improving sustainability

Sustainability is a growing concern for supply chain managers since most of an organization’s indirect emissions are produced through its supply chain. AI can help improve supply chain operations to make them more sustainable. AI-powered tools can help optimize transportation routes by considering factors such as traffic, road closures, and weather to reduce the number of miles travelled. For instance, DHL uses AI to optimize vehicle routes and reduce fuel consumption, resulting in lower emissions and improved sustainability. Since AI-powered forecasts should help maintain optimal inventory levels, carbon emissions attached to storage and movement of excess inventory could be reduced.

Supporting functions: financial forecasting and transforming HR

AI for financial forecasting

After marketing, financial forecasting is the second area where retail and CPG executives will invest in AI tools. Algorithms can analyse large amounts of financial data and generate forecasts based on historical trends, market fluctuations and other factors. AI financial forecasting can also be used for a variety of purposes, such as predicting stock prices, forecasting economic growth, identifying potential investment opportunities and make better decisions about inventory management or pricing strategies.

From recruitment to job performance and professional growth

There is a growing use of AI in crafting job postings, shortlisting candidates, matching applicants to job ads and personalising communication with applicants, but also in specialized tasks like predicting the candidates' future performance. Companies like Skims are using AI platforms like Dweet for recruiting, which shows promising results in broadening candidate searches. On its side, Eightfold AI's platform is designed to predict the future roles an employee might be good for.

In that regard, Gen AI can help identify career paths and opportunities for employees, hence facilitating a more personalized career development journey. It can be particularly beneficial in visualizing career trajectories and identifying potential role models within an organization. In the future, AI could assist in identifying candidates for promotions and better role placements, reducing talent attrition costs. Also, the technology can be used as a productivity aid in performance reviews. It can assist in creating initial drafts of reviews by synthesizing feedback from multiple sources, thus allowing managers to focus more on individual development and growth.

Overall, gen AI could streamline administrative tasks for HR to focus more on strategic aspects of talent management. The technology should be first used to improve decision-making and performance management.

Navigating bias in recruitment

However, the success of AI in recruitment still heavily relies on human oversight to address its limitations and potential biases. The technology aims to reduce biases in hiring, but its early development stage means it's not fully reliable yet. For now, experts say AI could even amplify existing biases related to age, gender, and race. AI is not advanced enough yet to completely replace human involvement in hiring. However, some tools aim to create a "positive bias" by focusing on desired skills rather than disqualifying candidates. Dweet's software, for instance, highlights candidates with relevant experience and doesn't penalize gaps in resumes or lower educational levels.

Conclusion: first comes a clear vision for AI

Looking ahead, the potential of Gen AI in retail and fashion is immense and still unfolding. But for now, top executives are admitting they're far from ready to deal with changes brought by generative AI, according to a new global survey by Deloitte's AI institute. The problems may only get worse. Executives who reported the most investment and knowledge in generative AI capabilities are the ones most worried about the technology's impact on their businesses. Only 1 in 5 executives believes their organization is "highly" or "very highly" prepared to address AI skills needs in their company. Only 47% say they are sufficiently educating employees about AI. The majority of executives said their organizations were focused on the tactical benefits of AI, such as improving efficiency and cost reduction, rather than using it to create new types of growth.

At successful companies, McKinsey found there is a clearly defined AI vision and strategy. Also, more than 20% of digital budgets are invested in AI technologies. Teams of data scientists are employed to run algorithms to inform rapid pricing strategy and optimize marketing and sales. Finally, strategists are looking to the future and outlining simple gen AI use cases. Such trailblazers are already realizing the potential of gen AI to elevate their operations. Players that invest in AI are seeing a revenue uplift of 3 to 15% and a sales ROI uplift of 10 to 20%.

While the application of gen AI in a retail business can seem overwhelming as it can fit into almost any piece of the business, the earlier that it is ‘plugged in’ is better as it only gets wiser with time and data. The time to jump in the AI train is now.

Credits: IADS (Christine Montard)

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Annual Department Store Results 

Assessing the concrete and measurable outcomes of the crises since 2019 and analysing the continued recovery patterns witnessed in the 2022 fiscal year.

In May 2021, Dr. Christopher Knee launched the “IADS 100 Report”, a first-of-its-kind report gathering the financial data and figures of 100 department stores around the world. This global observatory was created in a time of turmoil to create a benchmark for global department store players.

Since the release of the first report in 2021, it has been proven to be a difficult task to find relevant and comparable data for 100 or more consistent department stores as many companies change hands in ownership, decide to go private, or don’t break out results by business unit. To clarify the definition of this report, we have decided to rename it to “The IADS Global Department Store Monitor” to reflect that we are consistently reviewing the landscape and updating it with any important and relevant information.

Another area of important clarification is around what results are being captured in the report. Fiscal years do not always line up with some companies finishing their year with the calendar year and others ending their fiscal year in June or July. The 2022 fiscal results for this monitor have been considered as any annual report that closes from the end of December 2022 to those that end in June 2023. To compare yearly results, this pattern has been followed for all previous year’s results as well. This baseline allows a level of consistency in the events that have occurred in the years covered to be able to draw conclusions.

The entire reason the IADS 100, now the IADS Global Department Store Monitor*, was launched was to address the various amounts of disruptions that followed the Covid-19 pandemic and after, as it seems that disruption is now a norm in the retail business. Even now at the beginning of 2024, the baseline of annual results is still being compared to 2019 figures.

What does this say about the state of recovery? We are not out of the woods yet.

This report will attempt to detail some of the major changes across global retail markets and understand what a new turbulent normal could promise. Note: To make comparisons year over year, all exchange rates to Euros come from March 22, 2021, which was the date chosen during the initial IADS 100 release.*

Fiscal year 2022 to 2023: Navigating turbulence on the road to recovery

As retailers ventured into the new year, the challenges of the past two years continued to cast a long shadow, requiring an 'all hands on deck' response to manage the ongoing ripple effects of the Covid-19 pandemic. This period saw a combination of social and political unrest, supply chain disruptions, geopolitical conflicts, an energy crisis, and the looming threat of inflation. Despite the collective hope that 2022 would usher in a semblance of relief, the reality proved more complex.

The year unfolded against a backdrop of persistent global turmoil, including the invasion of Ukraine by Russia in February 2022, intensifying political unrest and reshaping the geopolitical landscape. Amidst these challenges, a significant demographic shift occurred, with India surpassing China as the world's most populous country in April 2023, adding another layer of complexity to the global economy and some foreshadowing as to what would occur in the future retail landscape.

However, amid the adversity, 2022 also brought forth exciting trends that promise opportunities for adaptation and growth. Advances in machine learning and AI (such as the public release of ChatGPT by OpenAI in November 2022) emerged as powerful tools for retailers to cut costs, build more efficiency and make strides toward sustainability goals. While governments continued to make progress on sustainability regulations and the demand for sustainable goods persisted among consumers, the prioritization of making progress on things such as Scope 3 emission tracking began to take a back seat as the world grappled with the sobering reality of the ongoing humanitarian crisis in Ukraine.

For department stores, the fiscal exercise in 2022 centered on a dual focus: generating revenue and gaining control over costs without compromising their core value proposition. In this intricate dance between economic recovery and global challenges, retailers found themselves navigating a terrain that demanded resilience, adaptability, and a strategic response to an evolving consumer landscape.

2022 results: the race to the 2019 starting line

Asia: an uneven playing field

In China, Rainbow (-1%), Wangfujing (-15%), Maoye (-22%), Parkson Retail Group (-23%), Wushang (-11%), Golden Eagle (-9%), and New World (-23%) all saw a slightly negative sales trend in 2022 compared to 2021. While some of these department store players saw positive results in the previous period between 2020 and 2021, not one has rebounded back to 2019 baseline figures. This could be explained by the continued “zero-Covid” restrictions that remained strictly in effect until November 2022 when Chinese citizens began to protest the lockdowns leading the government to eventually ease measures. In Hong Kong, Wing On (-8%) had similar results to those in China with a slight drop off from 2021 sales figures, still unable to return to 2019 results. It is also important to mention that Sogo (Lifestyle) went private in 2022, therefore there is no longer follow-up data on their results. In fiscal 2021, Sogo was operating higher than 2020 levels but still had quite a bit of recovery before meeting its 2019 baseline. Also, BHG’s 2022 results were not explicitly shared but saw strong recovery from 2019 results with 2020 at a +16% increase and 2021 at a +62.5% increase compared to 2019.

India, on the other hand, has become the country to watch in the retail world, especially as they have been able to pick up much of the market China has lost, and their results show their strength. Lifestyle (Landmark Group) (+46%) and Shopper’s Stop (+63%) both reported FY22 earnings that not only surpassed 2021 figures but also 2019 results.

Japanese department stores saw a range of results with H2O (+28%), Isetan Mitsukoshi (+11%), Tobu (+20%), Tokyu (+5%), and Kintetsu (+11%) reporting positive results from 2021 to 2022 while all remaining negative in comparison to 2019 figures with the exception of H2O (+4%) which had a slight uptick from 2019 results. Daimaru Matsuzakaya (-12%) and Marui (-5%) reported slight losses between 2021 results and 2022 results while Takashimaya (-49% due to closures and restructuring of some locations as well as reduced customer confidence with rising costs) and Sogo Seibu (-59% which has been struggling for years as more e-commerce players enter the market and with reduced store doors, Seven & I Holding company has now sold off the department store) showed much larger deficits each due to their unique situations.

The rest of Asia saw a variety of results. Matahari (+16%) in Indonesia reported a slight increase in turnover, this stays on its positive upward trend from 2021, but unfortunately still falls very short compared to 2019 results. In the Philippines, SM (+25%) and Robinson’s Retail (Rustan’s) (+61%) saw a healthy increase in results in 2022 with SM ultimately beating 2019 figures. In Korea, Hyundai (+40%) and Lotte (+12%) both reported an increased turnover in 2022 and in comparison to 2019, while Hanwha Galleria (-19%) reported a decrease in turnover in 2022. Finally, Odel (+12%) in Sri Lanka and Central Retail Corp (+21%) in Thailand both exceeded 2021 results.

To recap, with the goal being to outperform 2019 numbers, the only department stores in Asia that reported higher sales in 2022 than in 2019 are Lifestyle (Landmark Group) (+27%) and Shopper’s Stop (+16%) in India, H2O (+4%) in Japan, Hyundai (+128%) and Lotte (+3%) in Korea, SM (+4%) in the Philippines, Odel (+11%) in Sri Lanka, and Central Retail Corp (+6%) in Thailand.  Though the sample size is not all-encompassing, major players are included and it is very interesting to note that no players from China (that we can track) have been able to reach a 2019 rebound in 2022 suggesting that recovery in China might be a harder feat following all the disruptions from pandemic and lockdowns the retailers operating there have faced.

In Oceania, Myer beat 2019 results in 2022 with a +27% increase and also improved performance by +12% between 2021 and 2022. As for David Jones, the department store was sold by Woolworths therefore making 2022 figures unable to be retrieved, but the department store had surpassed 2019 levels in 2020 (+2%) before falling just below the 2019 baseline with a -3% fall between 2020 and 2021 results.

Europe: The 2022 recovery journey was both challenging and transformative

Across Europe, department stores in the sample all saw increased sales from 2021 to 2022. This includes Coop Group (+2%) and Jelmoli (+11%) in Switzerland, NK (+14%) in Sweden, El Corté Ingles (+8%) in Spain, Coin (+4%) in Italy, Stockmann (+10%) in Finland, and Kaubamaja (+13%) in Estonia. All of these retailers have also beaten 2019 benchmarks except for Coin (-33%), Stockmann (-17%) and El Corté Ingles (-6%).

The UK especially saw a lot of government and legal transition from a change of hand following the death of Queen Elizabeth II to the tumultuous change of 3 prime ministers in just three months from Boris Johnson to Liz Truss, who only lasted 45 days, to Rishi Sunak who now faces the task of steering the country through a recession with soaring inflation. Despite these changes, the Queen’s Platinum Jubilee at the beginning of 2022 and her funeral at the end of 2022, as well as the ease of travel restrictions, brought 2022 back to a strong year of tourism in the UK which in turn helped retailers recover.

Against this backdrop, UK department stores, including Marks & Spencer (+10%), John Lewis (+0.3%), Harrods (+192%), Selfridges Group (+29%), Fenwick (+31%), and Liberty (+42%), demonstrated positive growth between 2021 and 2022. Marks & Spencer (+17%), John Lewis (+2%), Fenwick (+13%), and Liberty (+25%) even surpassed 2019 figures, indicating a robust recovery. Although the fiscal year 2022 results for Fortnum & Mason and Harvey Nichols are undisclosed, Fortnum & Mason (+34%) had already exceeded 2019 levels in 2021, while Harvey Nichols (-29%) continued to grapple with recovery challenges.

To dive deeper into some of these UK department stores, Selfridges navigated a transition year in 2022 under new owners, Central Group and Signa, overcoming challenges such as increased debt, staff restructuring, and rising interest rates. Despite these hurdles, the department store experienced a turnover increase. Harrods staged a remarkable recovery, surpassing 2019 levels. The store's ability to operate throughout the fiscal year without closures and with fewer global travel restrictions contributed to its success. Fenwick returned to profits, driven by the sale of its New Bond Street store. The company's future strategy involves significant investment in digital platforms, recognizing them as a growth driver, and enhancing their physical stores, especially the Newcastle location. While all these achievements in 2022 are noteworthy and a great recovery back to 2019 benchmarks, fiscal 2023 and beyond will be a challenge of their own as the country undergoes inflation pressures and rising costs amidst changing consumer behaviours. UK department stores are encouraged to think ahead and invest in their future, which is what Fenwick is trying to do. But will it be enough?

Americas: a gradual push towards 2019 benchmarks

As opposed to the positive growth trend seen across the board from the Americas department store sample in 2021, 2022 results were less promising. Chilean retailers Falabella (-13%), Ripley (-8%), Cencosud Paris (-7%), and US retailers Kohl’s (-7%) and Macy’s Group (almost flat at -0.1%) all saw a downward trend in department store sales from 2021 to 2022. Alternatively, Mexican retailers El Palacio de Hierro (+23%) and Liverpool (+16%), Ecuadorian retailer De Prati (+15%), and US retailers Dillard’s (+6%) and Nordstrom (+5%) reported growth. Neiman Marcus did not share 2022 results but did state that the business in the fiscal year was ‘relatively’ flat compared to the previous year.

Those surpassing 2019 benchmarks included all of the sample minus Kohl’s (-9%), and coming in almost flat, but just below 2019 figures were Macy’s Group (-0.5%) and Nordstrom (-0.3%). The rest of the department stores in the Americas reported a recovery compared to 2019 with results as the following: Ripley (+32%), El Palacio de Hierro (+30%), Liverpool (+25%), De Prati (+14%), Dillard’s (+11%), Cencosud Paris (+10%), Falabella (+7%). Also, it is once again important to mention that Neiman Marcus’s results are unknown for this comparison.

Retailers in Latin America continue to face a political shift to the left that started in 2018 and which has continued to impact the political landscape in the region. Despite political changes, Latin American retailers are experienced in operating during inflationary periods, which is something the rest of the retail world is not used to doing. Thus, Latin American players may be able to weather the next few years better than other areas of the world. In 2022, countries like Chile saw a drop in total retail spending, a shift from the recovery in 2021 driven by increased consumption. The more cautious spending in 2022 was influenced by a reduced money supply, a new government, and a significant global and domestic inflation increase. While in Mexico sales growth in 2022 slowed compared to 2021 but remained positive thanks to surging consumer prices and top-line inflation. Across Latin America, e-commerce and digital channels are continuing to be developed while store redesigns are also being put at the forefront.

In the US, a major topic that continued to be addressed following the pandemic was around inventory and supply chain management with excess inventory and shifting customer behaviours. To address this inventory, US department stores had to heavily rely on discounting in 2022 which in turn impacted gross margins. Off-price retailers saw a lot of growth during the period, which made department stores rethink their business model and sizes of their physical stores allowing them to offer a smaller and more profitable footprint.

Macy’s Group has tested this type of footprint revamp with smaller format stores but is still trying to find the right physical store mix by expanding their Market by Macy’s and Bloomies concepts (this is a major strategy going forward for the business) while in parallel closing underperforming stores, exiting failing centres, and improving store experiences. Finding the right balance between making physical stores profitable and reacting to the deceleration of digital channels impacted the business in 2022. Nordstrom is showing similar results to Macy’s when comparing 2022 to 2019 and has also expanded its smaller format concept (Nordstrom Local) but it is their discounted store (Nordstrom Rack) that is a solid investment as they produce returns that exceed the cost of capital in a short period. This is why Nordstrom has carried out the expansion of Nordstrom Rack in 2023 and will continue the growth of locations in 2024. So why is it that Macy’s and Nordstrom are reporting losses in 2022 and compared to 2019 while Dillard’s, which has not begun to offer smaller local formats, has reported growth in 2022 and against 2019 baselines? Could this mean that Macy’s and Nordstrom just need some time to figure out the right store mix? Or does Dillard’s have some kind of secret to beating 2019 baselines that the other US department store chains have not figured out?

What to expect from the 2023 fiscal year and beyond

A major trend seen from fiscal year 2022 and which has continued into 2023 has been the number of department stores that are either changing hands, going private or in talks of such a change. In Asia, Japan’s Seven & I Holdings decided to sell Sogo & Seibu in mid-2023 to Fortress Investment Group, while Hong Kong’s Sogo (Lifestyle) announced it would be going private at the end of 2022. In Europe, France’s Galeries Lafayette Group sold BHV Marais in early 2023, and Sweden’s Ahlens was sold by Axel Johnson to Ayad Al-Saffar. At the end of 2022, South Africa’s Woolworths sold Australia’s David Jones unit to a private equity fund. In the US, Kohl’s was being put under pressure by shareholders in 2022 to sell as they were not meeting profit expectations and Macy’s reportedly received a USD 5.8 billion buyout offer in December 2023 to go private. All of these changes and moves to go private can be attributed to the fact that operating in a public market in these times is very difficult, and going private allows companies to have more freedom and access to levers to make faster changes which can in turn offer a narrowed focus on reshaping the business for the new market conditions.

The global landscape has become increasingly intricate both geopolitically, with escalating conflicts such as those involving Israel and Ukraine, and economically, contributing to sustained challenges in supply chains. The ongoing escalation in global transport and energy costs is further fuelling inflation across various regions. This inflationary trend is expected to persist and exert continued influence on business outcomes. As consumers exercise caution and restrain from making non-essential purchases, there is a potential for fiscal 2023 performance to be adversely affected compared to 2022. In response to such economic uncertainties, private label products are gaining traction as a viable alternative, perceived as a cost-saving measure.

New markets are emerging, especially India, as the country has been able to capitalize on the loss of Chinese business due to the country’s late release of Covid restrictions. India’s retail scene is growing with a surge of retail square meters increasing by +46% in 2023. Luxury department stores such as Galeries Lafayette announced expansion into India in 2023 and now Walmart is importing more goods to the US from India and reducing its reliance upon China.

When it comes to consumer behaviours and shopping trends, department stores across the world have to better understand how to manage their inventory and services across their omnichannel. Covid brought on major investments and developments into e-commerce platforms and online sales hit record highs. But now consumers want to come back to physical stores and have in-store experiences, but the traditional large formats are not what they are looking for. This has encouraged department stores to test smaller formats and off-mall locations. As department stores work out the right mix between online sales and the sweet spot of physical retail sizes and concepts, profitability will be a key indicator of decision-making going forward.

Speaking of profitability, in the coming years, retailers will pivot their attention towards achieving heightened profitability and efficiency. The accessibility of AI technology is reaching unprecedented levels, prompting retailers to reassess which facets of their business can benefit from more efficient AI integration. Just as the pandemic reshaped consumer behaviour, retailers must now respond adeptly by reintroducing customers to stores, offering products and services that align with their evolving demands. Amidst economic pressures, these challenges become even more intense, requiring strategic innovation and adaptability.

IADS Note

While department store diversity can be a strength, it also makes comparisons difficult. It is clear, for example, that data concerning revenue, profits, selling space etc. will often not be available from privately held companies. If the IADS obtains such data privately and confidentially, we will not publish it.

Credits: IADS (Mary Jane Shea)

Printable version here

What skills will we need in the future and how to attract those talents?

The IADS Academy programme, a 28-year-old tailor-made mentoring workshop open only to our members’ high potentials, promotes cooperation and future orientation. Over the years, the IADS Academy has trained 180+ executives from 28 companies in 21 countries, some of whom reached top positions in member and non-member companies (for IADS member companies alone, 4 CEOs). The following is an attempt to report all insights the Academy group considered and worked on during the journey to their final presentation shown to the IADS member CEOs.

Table of contents

Transverse skills are key to enabling technical skills

Technical skills are more important than ever and impact organisations

Skills: moving from curriculum vitae to curriculum personae?

First IADS Academy take: company culture and leadership are the foundations

Company culture: psychological safety and leadership

Leadership: strength-based management, communication and mentoring

Second IADS Academy take: a different approach to recruitment and retention

Employer branding requires the same tactics as for loyalty programmes

Recruiting outside but also inside the company

Development and succession planning to build tomorrow’s talent

Third IADS Academy take: fostering flexibility

Differentiating bonuses, incentives, benefits and perks

Developing flexibility in location and hours to offer a better work-life balance

Introduction: the only constant in this world is change

First, department stores were renowned for their disruptive business model, then for their ability to adapt to the countless changes happening since their inception. Their heritage, skills and strong ability to build strategies and master plans have been the recipe for success but the rapidity and magnitude of changes have escalated in the past years making uncertainty and volatility CEOs' top concerns (followed by talent, inflation, managing stakeholders and supply chain).

Change is everywhere, outside and inside of companies. While VUCA (Volatile, Uncertain, Complex, Ambiguous) could illustrate what happened in the past years, it seems it is now too weak of a word to express CEOs’ top concerns. In that regard, BANI (Brittle, Anxious, Non-linear, Incomprehensible) has replaced VUCA. To navigate in such a world, companies need a new set of skills. Threats and change also come from inside companies and 71% of CEOs said labour shortage is their biggest existential threat. It is a consequence of COVID-19 but also of the difficult adaptation to the generational tipping point, with Gen Y and Z already accounting for 50% of the labour market in 2020 (and to account for 70% in 2025). Companies now understand how their approach to work is different from the previous generations. However, a new approach to talent management has not been implemented yet.

Today, companies face a paradigm shift: not only are technical skills more important than ever, but transverse skills are key to making the most of them. It means that companies might be moving from curriculum vitae to curriculum personae when considering talent. When it comes to attracting and retaining talent, there are interesting common practices in the retail industry, but the IADS Academy offers its own take: company culture and leadership are the foundations of everything, and the group proposed a different approach to recruitment and retention.

Transverse skills are key to enabling technical skills

Technical skills are more important than ever and impact organisations 

Whether it’s about legacy or new jobs, technical skills are critical to the department store business. For instance, the sales associate job now requires working with new and digital tools. Also, the department store business model is increasingly complicated and requires more data, business intelligence and project management skills. On their side, logistics functions are becoming more customer-centric with the rise of e-commerce and product returns, also requiring new technical skills.

New jobs have entered the department store business and play a strategic role in today’s organisation. Data functions are no longer about 1 or 2 people in the organization as the data topic has grown both in size and complexity to provide relevant information for analysis and decision-making in all departments. In that regard, data is sometimes still limited to some key users and usage. To change this, retailers are currently building single data platforms: this requires investments obviously, but also high technical skills.

E-commerce functions also grew and require highly skilled teams. While department stores are on the right track to compete with pure players, e-commerce is de-prioritized today and the question of "where should e-commerce sit in the organization?" has not been cracked yet. This impacts both the organisation and the talent pool. Some retailers such as Galeries Lafayette split e-commerce functions between IT and marketing: it is an interesting approach but the risk is that decisions are based on IT capabilities rather than on business needs. Besides, this organisational model doesn’t answer the question of "P&L ownership". On its side, Magasin du Nord considers e-commerce as a store but it needs to get closer to the physical stores to create a true omnichannel business. Finally, Manor’s e-commerce is under the Chief Digital Officer who is a ComEx member so e-commerce and the omnichannel business are priorities.

Tech and IT functions are still too centralized making it difficult to have quick wins. A more hybrid model between external and internal resources as well as a more decentralized approach could help. Interesting initiatives such as Galeries Lafayette’s "low code/no code" programme enable non-IT employees to develop their own tools using very basic code and foster quicker innovation. Also, many IT organisations such as Manor’s are currently reorganizing using agile methods.

Finally, CSR transformation represents additional pressure. Prioritised by top management and high on companies’ strategic agendas, the topic is truly technical and tough regulations impact the entire organization. CSR requires specialized profiles to build up new capabilities.

Skills: moving from curriculum vitae to curriculum personae?  

The macro trends are paving the way to a different approach to skills. Consider the sales associate role again. It now requires a true omnichannel mindset, an open mind to working with new and digital tools, the curiosity of knowing what is happening online and even the will to encourage online shopping. Besides, the rise of online shopping and the impact of COVID-19 have had an important impact on physical shopping with customers expecting more than just transactions. Also, retail-tainment is now a common practice among retailers which means front-line workers should envision the entire shopping experience, be able to offer more than just selling products and participate in in-store events. The consequence is an increase in personalisation and relationship-building with customers.

Also, skills last less than before as jobs are changing at a faster pace. CVs, which recruiters spend an average of 10 seconds on anyway, are less relevant and precise than before. So, a paradigm shift is needed: moving from relying on the traditional hard and soft skills to considering technical and transverse skills instead. Transverse skills are increasingly considered as the only ones helping employees in navigating a BANI world. As stated by the Academy cohort, soft skills used to be the icing on the cake. Now transverse skills are a fair part of the cake.

While technical skills are (and will remain) key, transverse skills will make a true difference in making the most of the technical skills. The Academy group listed the following key transverse skills: teamwork, strategic vision, adaptability to change, communication, emotional intelligence, time management, resilience, critical thinking and empathy. While they can be perceived as hard to define and detect, transverse skills can be evaluated through personality tests. Department stores are increasingly considering transverse skills. For instance, Galeries Lafayette launched a toolkit mapping 12 behavioural skills to achieve performance at an individual or a group level. The goal is to have a common language: it helps describe professional expectations and develop competencies and careers. This toolkit can be used throughout a career (recruitment, evaluation, career development) and for all types of jobs. The 12 behavioural skills have already been added to the yearly review for some cohorts. The next steps are to continue to develop this tool for recruitment, in all yearly reviews and career development.

On its side, with highly specialized profiles, Magasin du Nord is looking for a data-driven mindset, leadership skills, creativity and diplomatic skills to be able to work together with other departments. El Palacio de Hierro focuses on the eagerness to learn, to self-train and to share knowledge, on the ability to quickly learn technologies, to foster change, to simplify processes and to analyse data and prioritize through it. Adaptability, open-mindedness, emotional intelligence, and being result-oriented are also considered key skills. Willingness to learn is also listed by Sogo. On its side, Manor defined 3 broad types of skills:

• Professional skills: digital skills, data-driven decision-making, ownership, entrepreneurship, and problem-solving skills.
• Social skills: interdisciplinary collaboration and communication skills.
• Personal skills: emotional intelligence, creativity, courage, risk tolerance, team spirit, self-responsibility and agility.

First IADS Academy take: company culture and leadership are the foundations

Department stores as well as many other industries recently witnessed a dramatic shift in recruitment: it is not about ‘Tell me why we should hire you?’ anymore but about ‘Tell me why I should work for your company?’. Companies have to meet new and unprecedented demands which requires a rethink of the way they look for, find, attract and retain talent. The Academy cohort reviewed some common practices and offered their own take.

Company culture: psychological safety and leadership 

By using the famous quote by Peter Drucker “culture eats strategy for breakfast”, the Academy group strongly highlighted company culture as the most important foundation. Lack of company culture represents one of the main reasons for employee disengagement. When asked “If you could make one change at your current employer to make it a great place to work, what would it be?”, 41% of respondents say engagement or culture. The topic is far more important than pay and benefits (28%) and wellbeing (16%). Post-pandemic, company culture increasingly means that companies should build psychological safety and a culture based on trust instead of fear, allowing employees to share ideas, raise concerns and even make mistakes. The Academy group found out that Maslow’s Hierarchy of Needs also applies to employee engagement: feeling safe and having all the tools to work is the mandatory basis for higher levels of engagement. Besides, $600 bn a year is lost on employee turnover. In contrast, companies offering high psychological safety experience many benefits: a 27% reduction in turnover, 76% more engagement, 50% more productivity, 74% less stress, and 57% workers more likely to collaborate.

The Academy group made clear that culture is everyone’s responsibility, and not only the CEO’s. They set the tone and embody the company culture. They also should increase interaction with the employees which will contribute to showing them they work in a safe environment. CEOs are not alone. As mentioned by The Art of Leadership Studio, a guest speaker during the Academy programme, 70% of the variance in team engagement is down to the team manager. Managers have a pivotal role in conveying culture to the employee base so that they feel empowered, included and engaged. Changing the culture is difficult but some initiatives can work their magic: conducting regular engagement surveys can serve as the base for a more efficient attraction and retention strategy. CEOs should be ready to face the results and to allocate resources for action. Companies should be transparent about the reasons why surveys are conducted. Action plans should be built with HR and management teams, and then communicated using marketing tools. Then new initiatives will be incorporated internally and also benefit the employer branding.

Leadership: strength-based management, communication and mentoring 

Leadership has tremendously evolved since the manufacturing economy where the manager served to increase productivity. The service and then the tech economy brought a new breed of managers: the leader, who was supposed to increase commitment, retain and engage. Post-pandemic leaders become people leaders and are here to infuse empathy.

To double down on this change of role, companies should develop a culture of feedback. Four out of 10 workers are actively disengaged when they get little or no feedback. 82% of employees appreciate positive and negative feedback. 43% of highly engaged employees receive feedback at least once a week as opposed to 18% of low engagement employees. Recognition is also part of the feedback culture and requires taking a moment to recognize a good job. This doesn’t cost and helps to create loyalty and trust. It implies the development of strength-based management instead of assessing feedback and development plans solely based on weaknesses.

Being a great leader also means interacting and communicating with employees. In that regard, IADS members have developed best practices. Manor has regular “CEO Connect” events where the CEO explains the strategy and does a transparent Q&A with employees and hybrid town hall meetings with various departments. There is also an open-door policy for ComEx members and leaders. At El Palacio de Hierro, “Talking with Juan Carlos” sessions are regularly organised. Breuninger makes a weekly 60-second video available where the CEO discusses a specific topic. Finally, Galeries Lafayette’s CEO kicks off every year with a video available to all employees. The Academy also stressed the importance for CEOs to get closer to the teams by visiting stores more often or having informal lunch breaks with employees as Magasin du Nord’s CEO is doing daily.

As stated by Quadra Consultants, a guest speaker during the Academy programme, mentoring can also be a powerful tool. As an individual guidance method, mentoring can help achieve personal or professional success. On the contrary to coaching, mentoring typically involves a long-term, informal relationship and is focused on sharing knowledge, skills, and experience. It also aims to provide emotional support and guidance. The benefits of mentoring are wide-ranging. From leadership mentoring to personal development and employee retention, the benefits to the mentee are self-confidence, self-awareness, job satisfaction, aspiration, and the likelihood of promotion. Besides, 89% of those who have been mentored will also mentor in turn, and so will contribute to this cycle of learning and development in the organisation. There are also many positive benefits for those doing the mentoring. Studies have shown an increase in self-confidence, communication skills, job satisfaction and loyalty to their company. Harvard Business Review conducted a study researching the positive effects mentoring can have on the mentors themselves and found that people who served as mentors experienced lower levels of anxiety and described their jobs as more meaningful than those who did not mentor. Also, mentors play a pivotal role in leadership development. They provide guidance, support, and valuable insights, helping mentees navigate the complexities of leadership. Through sharing experiences, facilitating networking opportunities, and holding mentees accountable, mentors contribute to the personal and professional growth and empowerment of aspiring leaders.

Second IADS Academy take: a different approach to recruitment and retention

Employer branding requires the same tactics as for loyalty programmes 

To be an attractive employer, companies have to understand employee needs and wishes when it comes to their job and work environment. In theory, the employer brand is considered one of the most critical aspects of getting the right talent. But in reality, the Academy group realised there are little to no strategies and measures in place. Employer branding might seem obvious as a combination of internal factors (such as what it’s like to work for the company, benefits and evolution potential), and external factors (such as the brand identity and purpose). Department stores are masters at attracting and retaining customers with improved loyalty programmes but don’t apply the same tactics with talents. Today, the responsibility of employer branding falls into HR alone. The Academy group came up with an interesting idea of both HR and marketing departments working together on building true employer branding: marketing skills and techniques and HR knowledge (and a budget) would serve the company's recruitment needs.

Recruiting outside but also inside the company  

Recruiting is expensive in terms of time and money. Companies also lose knowledge when employees resign, not to mention stress for the manager losing a team member without having visibility on when someone will take over. Regularly conducting casual interviews through social media proved to be efficient in building a potential employee base, anticipating needs and getting to know candidates better. In that regard, Magasin du Nord’s recruiting team is spending 20% of their time informally approaching potential candidates. Candidates like this individual approach: instead of HR trying to fit them into a job ad, the discussion is more about their ideas, dreams and career paths for the future. As a result, 30% of recruitments are made this way. For now, the casual interviews happen on LinkedIn: collaborating with the marketing department could allow the HR team to reach out to candidates on TikTok or Instagram in the future. Today, the best candidate for a job might be the one with a great Instagram profile and a poor resume.

Also, getting closer to schools and universities provides significant results, not to mention building employer branding. In that regard, fashion companies are creating their own college environments by partnering with existing schools to create tailored programmes and train students to match their organisations’ needs. In the ‘80s and ‘90s, department stores like Bloomingdales, Sears and Macy’s were known for their executive and merchandising training programmes teaching the basics of operations, product development and retail strategy, as well as soft skills like effective communication, organisation and multi-tasking. Such courses, which could last up to 18 months, also helped participants gain an awareness of the value and longevity of a retail career. Macy’s current CEO, Jeff Gennette, graduated from Macy’s executive training programme in the 1980s. Over the past decades, many of these programmes have fallen, often a victim of cost-cutting. However, many companies have instead relied on fashion and retail programmes at universities to supply new talent.

Early 2023, SMCP (Sandro, Maje, Claudie Pierlot) launched the SMCP Retail Lab. It is a year-long programme built in partnership with Ema Sup Paris school and IFM (Institut Français de la Mode) to train selected participants on clienteling, live streaming and styling. It aimed to boost recruitment by making the sales associate role more exciting and modern. At the end of the year, participants receive a certification and are offered opportunities to work in the group’s brand stores. In the US, the Capri Holdings Foundation for the Advancement of Diversity in Fashion8, (the group is the home of Versace, Jimmy Choo and Michael Kors), sponsored a 5-week footwear and accessories masterclass at Pensole Lewis College of Business and Design and paid for the students’ room and board. At the end of the course, the company offered internships.

Recruiting inside the company should also be developed, but do managers know their own employees to start with? It seems they don’t, or at least don’t know them enough to identify potential talent and specific skills. Several existing tools assessing behavioural, personality and leadership styles can help companies close the gap: HOGAN, PDA or DISC to name a few. Companies can also do internal surveys to learn more about their employees. This is what El Palacio de Hierro recently put in place, starting with the executive level. Also, retailers usually welcome interns and students working short time. They could become a key resource as they are probably studying disciplines of some interest to department stores. The Academy group suggested department stores build a plan to identify what interns and students study and create a lasting relationship to potentially onboard them later on.

Employees come and go. When we see a customer buys less and might leave us, we will send an attractive offer and try to reactivate them. Why don’t we systematically keep in touch with people leaving companies? Those people will go work at competitors and gain great knowledge, so it is just a smart move to try to keep them close to us. Of course, some managers already offer to keep in touch, but it is not done systematically. It requires to be conceptualised. The answer proposed by the Academy is building a company alumni group. Investing in an HR platform would be necessary for such a venture. The group advocated for a yearly alumni informal reunion with the CEO where recruiting deals for the future could be made.

Development and succession planning to build tomorrow’s talent 

First, companies have to make sure that all employees have access to the same information regarding development and careers in their company. Most HR systems can be complex (SuccessFactors, Workday for instance9) and some of them require a desktop to access. All job descriptions should be accessible and easy to find for all deskless employees, but also for the next generation of talents, the interns and students working part-time.

Second, transparency in succession planning should also offer interesting results if planned. Examples of employees recruited for short-term contracts, staying in the company and evolving to higher positions exist (there were 2 out of 8 Academy participants that had this experience at their respective department stores), and they could be numerous if companies have better succession plans.

Third IADS Academy take: fostering flexibility

Differentiating bonuses, incentives, benefits and perks 

Gone are the days when simply focusing on compensation was enough to keep most of the workforce satisfied. Money still counts as shown in the Career Builders 2022 survey listing the top 4 motivators for job-seeking applicants: providing a higher salary, flexible schedule, better benefits, and the ability to work remotely.

While bonuses and incentives are usually defined by job groups and hierarchy levels, department stores tend to have a generalist approach to other benefits and perks. A solution tackled by the Academy group during the programme would be to consider different levels:

• Common perks for the entire company: salary range, common variable incentive scheme based on profit-sharing, employee discount, parental leave policy for instance.
• Perks based on job specificities and competition: performance-based variable scheme, organisation of working hours, work-from-home policies, etc.
• Perks based on individual needs with options to choose from: flexible working hours and work shifts, possibility to change the days off, 4-day planning, childcare solutions, training programmes, medical insurance, etc.

Such differentiation could be an answer to applicants’ needs while limiting the investments implied by the systematic enforcement of benefits and perks. Differentiated benefits and perks could evolve with the employee lifecycle (for instance switching from childcare benefit to another benefit when it is not needed anymore). The Academy group didn’t keep this idea as part of their final answer to the CEO's question, but this could represent some ‘food for thought’ for companies to truly assess what they should offer employees depending on who they are and what they do. There are risks attached to this idea as it questions equality, and it might be difficult to apply in some countries. But this would certainly enhance fairness and equity. Besides increasing personal and professional satisfaction, matching benefits to employee needs could help attract candidates. Finally, matching needs with various benefits and perks would be remembered and could enhance the company's reputation.

Developing flexibility in location and hours to offer a better work-life balance 

Flexible schedule and ability to work remotely are part of the 4 motivators for job-seeking applicants. However, communication and learning can be partially lost with remote working. In response, companies need to rethink what should be done in terms of team building. What are offices for in a post-pandemic world? Companies should offer reasons for the employees to come to the office. Social aspects are key as employees are looking for collaboration, friendly interactions with colleagues (workplace relationships account for 39% of employees' job satisfaction) and the commute should be as short as possible. This implies investments for companies as the workplace now competes with home and other locations. But with work-from-home and flex-office (shared desks), office space can be reduced resulting in saved costs.

Companies are increasingly giving access to amenities inside and out (cafés, bars, restaurants, gyms, etc.). The new workplace should be designed to allow "me time" (phone calls, etc.) and "we time" (meetings, collaboration, fun). Companies must invest in engaging, user-friendly and smart technologies to support flexible work: laptops and video conference devices in meeting rooms for hybrid meetings. There should be a clear differentiation between the tasks done in the office or at home and the home-office ratio should be flexible. Working in the office should be favoured to exchange with other stakeholders, ideation, solution finding, workshops, meetings and lunch dates. Work-from-home should be more to work on or answer emails and participate in virtual calls or webinars. Finally, days in the office should be occasions for social gatherings and mingling. In that regard, Magasin du Nord emphasizes Friday drinks and office parties for instance.

Manor is a fair example of the efforts put into making the office attractive. They created a dedicated collaboration zone called "Atelier" for collaborative work and spontaneous encounters. They offer a cafeteria with a barista for coffee breaks. They have regular company lunches and celebrations (successes, farewells, etc.). Flexibility is a matter of work-life balance and has different meanings from one region to another. Uniqlo is a pioneer in the Asian market as they offer 2 days off per week to front workers. On its side, Breuninger is quite advanced and offers the “B Abroad” programme: assuming that it is feasible, employees can work 30 days per year from abroad (European countries).

There has always been a gap between front and back employees. However, the Academy group also mentioned the importance of flexibility for store employees. Term-time working offers different shift models to choose from. Mothers can work during the time kids are in school (e.g. female pilots at EasyJet and Marks & Spencer). Companies could also offer different work stints in different stores to reduce commutes. Home office could also be offered to store administrative roles. Job sharing could be proposed to moms after maternity leave like Marks & Spencer is doing. Finally, sales associates could also work from home if they are equipped with a cell phone and a clienteling tool.

Conclusion: a paradigm shift is necessary

When it comes to skills and talent, department stores are undergoing a significant transformation. Companies are now recognizing the importance of a holistic approach to talent management, valuing skills that encompass both technical proficiency and interpersonal capabilities. This evolution is not just about adapting to the changing market demands. It's about reshaping the workforce to be more agile, innovative, and responsive. The integration of new technologies and e-commerce, along with a heightened focus on CSR and sustainability, further highlights the need for a diverse skill set in employees. The IADS Academy underscored leadership and company culture as pivotal elements in driving this transformation. The emphasis on psychological safety, employee engagement, and a strength-based approach to management signifies a shift towards a more inclusive and supportive work environment. Moreover, the new recruitment and retention strategies highlighted by the IADS Academy, such as building strong employer branding and fostering a flexible work culture, are essential in attracting and retaining the best talents. These strategies not only cater to the immediate needs of the workforce but also anticipate future trends, ensuring that department stores remain competitive and relevant.

Finally, the IADS Academy recommend focusing on transverse skills to change the talent management approach, evaluate company culture with engagement surveys and reassess flexibility models. Bringing HR and marketing teams together is also seen as a game-changer in recruitment. Efficiency in talent management comes with the development of casual interviews, an increased focus on interns and part-time workers and an open door to alumni.

Credits: IADS (Christine Montard)

What: This white paper explores the integration of generative artificial intelligence (gen AI) into the fashion industry, highlighting its potential to revolutionize various aspects of the sector, from design and product development to marketing and supply chain operations.

Why it is important: With gen AI poised to add up to $275 billion to the operating profits of the apparel, fashion, and luxury sectors, understanding how to effectively incorporate this technology into the workplace is crucial for businesses aiming to enhance productivity, creativity, and competitiveness.

Generative AI is rapidly becoming a transformative force within the fashion industry, offering unprecedented opportunities for innovation across the value chain. McKinsey & Company's research suggests that gen AI could significantly boost the operating profits of the fashion sector by enhancing functions such as marketing, design, and product development. Despite the high expectations, only a small fraction of fashion executives feel prepared to leverage gen AI effectively, pointing to a significant skills gap within the industry.

To bridge this gap, businesses must adapt their job requirements and invest in upskilling their workforce to include competencies in gen AI programs like Midjourney and ChatGPT. This shift necessitates a reevaluation of workplace culture and technical support systems to ensure employees can maximize the benefits of gen AI tools.

The white paper features insights from global experts, including Rhianna Cohen, Jessica Couch, Cyril Foiret, Holger Harreis, Carl-Axel Wahlström, and Dr. Katia Walsh, who discuss the implications of gen AI for creative processes, equity promotion, and operational optimization. They emphasize the need for a digitally competent workforce and a supportive work environment that fosters innovation and adapts to the evolving digital landscape.

In conclusion, the successful integration of gen AI into the fashion workplace requires a strategic approach that includes skill development, cultural adaptation, and the implementation of supportive technologies. By addressing these areas, fashion businesses can harness the full potential of gen AI to drive growth, enhance customer experiences, and maintain a competitive edge in the digital age.

White Paper: incorporating generative AI into the fashion workplace (Article)

BOF White paper PDF

What: Macy's is undergoing another restructuring effort under new CEO Tony Spring amidst challenges from activist investors and declining relevance in the retail market.

Why it is important: The retailer's struggle to appeal to consumers, especially younger ones, and to differentiate itself in a competitive landscape highlights the broader challenges facing traditional department stores in adapting to changing consumer behaviors and the digital marketplace.

Tony Spring, the new CEO of Macy's, faces significant challenges as he steps into his role, including pressure from activist investors like Arkhouse Management, which has launched a proxy fight following Macy's rejection of a USD 5.8 billion take-private offer. Despite Macy's storied history and once-dominant position in the retail sector, the company has seen a decline in relevance, with revenue 15% lower than a decade ago and one of its lowest full-year net incomes in two decades.

Spring's restructuring plan, "A Bold New Chapter," aims to close 150 Macy's stores, expand the Bloomingdale's and Bluemercury chains, invest in smaller format stores, and sell off real estate holdings. However, critics argue that the plan lacks originality and fails to address the core issues of product appeal and competitive positioning. Macy's is caught between luxury retailers and discount chains, with leading brands increasingly selling directly to consumers. Additionally, its lucrative credit card business faces potential challenges from rising delinquency rates and regulatory changes.

The interest from potential buyers in Macy's is largely driven by the value of its real estate holdings, rather than a desire to revitalize its retail operations. Analysts estimate the value of Macy's property portfolio to be significantly higher than its market valuation, with the flagship Herald Square store being particularly valuable. However, selling real estate to go private could expose Macy's to rising rent payments and limit its ability to invest in its core business, as seen in the case of Sears' bankruptcy.

In summary, while Macy's rejection of the take-private offer may be justified, the new CEO has yet to present a convincing strategy to shareholders that addresses the fundamental challenges facing the retailer.

Macy's turnaround efforts: a challenging path ahead

What:  Coresight provides a panorama of how AI can enhance dynamic pricing.

Why it is important: Dynamic pricing is going to be paramount in the future for department stores in order to tailor-made their promotions to each and every customer.

The report "Precision Pricing in Retail: AI-Driven Pricing Decisions for 2024 and Beyond" by Coresight Research highlights the challenges in price setting in the current volatile macroeconomic environment. It emphasizes the importance of achieving precision in price planning and setting to attract and retain customers while ensuring profitability. The global retail pricing optimization software market is expected to reach $1.6 billion in 2024, growing at a CAGR of 16.5% between 2023 and 2028[1].

Key points from the report include:

• Increased Macroeconomic and Geopolitical Volatility: Economic volatility, exacerbated by events like the Covid-19 pandemic, inflation, and supply chain disruptions, heightens pricing challenges. Retailers need dynamic pricing strategies leveraging technologies like AI to adapt to shifting shopper needs[1].
• Complexity of Pricing as a Connected Business Function: Effective price planning depends on integrating merchandising functions like promotion management and demand forecasting across sales channels and store locations. Lack of mature integration across these functions can hinder optimal price planning[1].
• Role of AI in Precision Price Planning: AI and machine learning can address challenges such as rule-based pricing limitations, inaccurate inventory planning, and rising costs. Leveraging AI enables retailers to analyze vast amounts of data in real-time for better understanding of shopper preferences and demand patterns[1].
• Structured Approach to AI-Based Pricing: Retailers can benefit from AI-based pricing software by managing end-to-end pricing throughout the product lifecycle. Following a structured approach involving clear pricing strategy, data integration, overcoming operational silos, and technology integration across functions is crucial for successful implementation.

The report underscores that retailers adopting advanced pricing solutions with a long-term strategy will be better positioned to navigate market dynamics, enhance competitiveness, and drive profitability amidst increasing input costs and demand volatility.

How AI can enhance dynamic pricing