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Christine Montard

IADS Exclusive: IADS White Paper -Middle managers, the heroes of retail transformation

IADS Exclusive

January 20, 2025

IADS Exclusive: IADS White Paper -Middle managers, the heroes of retail transformation

IADS Exclusive

January 20, 2025

Christine Montard

Access the printable exclusive and our full White Paper below.

IADS White Paper - Middle Managers

Since its inception in 1928, the IADS’ purpose has been to coordinate information between department stores worldwide and research their activities to help them address the many challenges they must face. This translates into many responsibilities carried out by the IADS, all solely intended to provide insights to its members and help them have a broader understanding of the shifting business environment.

Every year since 2020, the IADS has produced a White Paper on a specific topic perceived as important for its members. In 2020, the purpose was to collect the learnings from the pandemic and how to make sure department stores would be prepared for the next crisis. The 2021 White Paper was dedicated to digital transformation and its impact on the organisation. In 2022, it was all about the development of sustainability, CSR and ESG in retail businesses. The 2023 edition was dedicated to retail media.

In 2024, the White Paper was dedicated to middle management. The IADS believes that middle managers’ distinct blend of operational knowledge, leadership, and adaptability enables them to deal with retail challenges, but also address transformation and foster innovation. In an era of automation and AI, middle managers have strategic importance as they are pivotal in integrating new technologies, redesigning roles, and ensuring that human judgment and creativity complement technological advancements.

Introduction: middle managers, the overlooked pillars of retail

Middle managers in retail are often seen as cogs in a machine, tasked with implementing corporate directives while ensuring day-to-day operations run smoothly. As “managers of managers”, they have served as connectors between the C-suite and frontline teams, ensuring operational efficiency. Yet this perception fails to capture the depth of their responsibilities. They are not merely intermediaries but strategists, problem-solvers, and motivators who directly influence employee engagement, customer satisfaction, and financial performance.

However, decades of centralisation, cost-cutting, and technological advances have diminished their roles. Once seen as essential to a company’s heartbeat, middle managers were sidelined and perceived as bureaucratic overhead. In reality, middle managers are expected to juggle competing priorities from facilitating operations to managing teams and monitoring performance, productivity and financial effectiveness. They have dual accountability to both corporate leadership and frontline teams, making their role uniquely challenging and impactful.

As retail evolves into an omnichannel ecosystem where agility and innovation are paramount, the role of middle management continues to be questioned. The IADS believes their role will be increasingly critical in driving innovation, including AI, and organisations should equip them with the tools and authority they need to succeed. Finally, in the wake of the AI revolution, middle managers are best positioned to re-bundle roles, theirs and their teams.

The multifaceted role of middle managers in retail

Middle management scope is a mix of strategic and tactical responsibilities. As explained in the IADS white paper, middle managers wear many hats, making their role one of the most dynamic and demanding in the retail industry. Also, their duties are sometimes unclear: while they have clear objectives, it is up to them to decide the best way to achieve them. Their responsibilities can be broadly categorised into four key areas:

Facilitating operations: at its core, middle management is about turning strategy into action. They facilitate any needed changes in an organisation and create an effective working environment for day-to-day operations.
Monitoring performance, productivity and financial effectiveness: they monitor their department's performance and are responsible for reporting to the management above them. They build action plans to improve results or fix issues.
Communicating: perhaps the most overlooked aspect of middle management is its role as a communication bridge. Middle managers translate high-level corporate strategies into actionable plans for frontline staff while simultaneously relaying feedback from the ground up. This two-way communication ensures alignment between strategic goals and operational realities.
Managing teams: one of the most essential functions of a middle manager is recruiting, motivating, leading and inspiring their team. These tasks require emotional intelligence as much as technical skills. A McKinsey survey cited in the white paper found that 75% of respondents identified their boss as the most stressful aspect of their job. After all, employees leave managers, not companies. Conversely, supportive middle managers foster trust, psychological safety, and motivation among their teams. As a result, middle managers significantly influence employee satisfaction, directly impacting performance and productivity.

Another key aspect of the middle manager's role is that they rely on the contributions of their line managers and collaborate with other departments to achieve results, which means they depend on the results of others and not only on their direct contribution. Even if they tend to have a team of support personnel and a network of HQ contacts to help them do the job, they must be extremely good at relationships, communication and interaction with others. Middle managers must identify, understand, and harness their networks to drive performance and achieve goals. They become influencers.

Middle management empowerment and appreciation work hand in hand

Middle management is 80% leadership, and 20% is management. As leadership is crucial, organisations must empower middle management to unlock their full potential. To that end, companies should invest in leadership development by providing targeted training programmes to build skills such as conflict resolution, data-driven decision-making and change management. Organisations can also empower middle managers’ decision-making by granting them greater autonomy that can foster a higher sense of ownership.

Empowering middle managers means providing them with resources and granting them the authority and means to implement significant changes. The IADS believes empowering middle managers in retail can deliver tangible benefits for organisations, from better management capabilities to enhanced decision-making skills and higher staff engagement. Also, empowerment can lead to a culture of continuous improvement, as autonomy helps middle managers make decisions, implement changes and develop a unique sense of identity and belonging.

Retaining good middle managers is more difficult than for senior managers. As a result, the achievements of middle managers should be recognised to boost morale and retention. In that perspective, promotion is not always an adequate solution, and it does not mean taking a step higher on the company ladder. There are other options to recognise middle managers' performance:

Compensation remains a way to acknowledge performance and promote middle managers. C-suite executives traditionally have a higher salary than middle managers. Sometimes, giving a middle manager the same compensation as a C-suite member can show how much the company cares.
Giving stock and stock options is an interesting option for listed companies.
A bigger sphere: rather than promoting middle managers to a higher position or the C-suite, they can expand their scope without changing the essentials of their jobs.
Title changes can acknowledge a new level of seniority mirrored with increased responsibility and rewards.
Challenging assignments to test new ideas about how to make things better.
Autonomy and flexible work arrangements.
Involve middle managers in the company strategy, and important decisions can help them feel valued, trusted and empowered, which can, in turn, improve the quality of the decisions made.
Include them in a project outside their daily routine: a top head buyer could be involved and valuable in a warehousing project, for example.

Finally, mentoring middle managers is often an untapped practice for empowerment. As businesses navigate complexities, the IADS white paper explains how mentoring fosters a culture of continuous improvement by allowing discussion of challenges, sharing successes, and seeking guidance. It is also a way for middle managers to refine their communication skills, ensuring clear directives, constructive feedback, and optimised team collaboration. Also, mentoring provides insights into the company’s vision, mission, and strategies, empowering and guiding middle managers to make decisions that contribute to overall success.

There are many forms of mentoring, from traditional one-on-one to reverse or group mentoring. However, peer mentoring is a powerful and effective support system that truly harnesses the power of relationships. By building valuable relationships among peers, managers can share real-time challenges with colleagues in a safe space, allowing for mutual advice and feedback. Peer mentoring provides honest coaching on improving systems, processes, and people management.

Re-bundling roles: middle managers' impact on innovation and transformation

The rebundling of middle management roles through AI integration represents a paradigm shift for retail. This transformation is not about replacing their roles but amplifying their potential. The IADS believes middle managers’ roles can be redefined to ensure they can focus on their core responsibilities by reducing the amount of administrative work and low-added-value tasks and transitioning from task executioners to strategic leaders who drive innovation. By automating routine tasks and providing actionable insights, AI not only improves operational efficiency but also elevates the role of middle management into a pivotal force for business success.

With the AI revolution, middle managers should be seen as innovators. As automation and AI redefine the workplace, middle managers bridge technology and human employees by facilitating technology adoption. While AI can handle administrative tasks, the human judgment, empathy, and creativity that middle managers bring remain irreplaceable. This re-bundling of tasks will allow middle managers to focus on what they do best: connecting people, solving problems, and driving innovation. The very nature of their dual tactic and strategic role will allow them to understand the areas where AI will make a difference and how to reshape their team's role. Their experience in change management will make them perfect guides for teams to accept and use AI tools.

Generative AI can improve middle managers' managing capabilities. Emerging tools show a promising future, be it personalised training and capability-building programmes, recommendations based on individual needs and preferences or creating immersive role-playing scenarios. Generative AI could also boost a manager’s capabilities as a career counsellor, as AI-powered talent platforms could provide a broader range of potential career paths and the specific job experience and training needed to achieve them. Also, AI can optimise team performance by identifying team strengths and areas for development. Generative AI will also help middle managers better monitor performance as AI tools can automate the creation of reports and dashboards, freeing middle and frontline managers alike from data compilation and giving them the necessary time for analysis, more meaningful reports and relevant action plans allowed by refined data.

Conclusion: a call to action for retail leaders

Middle managers occupy a critical yet often underappreciated role. They are the glue that binds corporate strategy to frontline execution, ensuring that ambitious visions translate into tangible results. Middle managers are no longer just implementors or "managers of managers." They are connectors, innovators and change agents, essential for navigating the complexities of today’s retail. Their in-house relationship networks and ability to adapt to changing circumstances and drive operational efficiency will be critical to ensuring the organisation’s sustainability and growth.

While it is financially unrealistic to expect CEOs to grow the middle managers’ layer, they can recognise their importance. This can be done through various benefits and perks and even by offering the best middle managers a seat at the strategy table. It is also a matter of simple recognition: exchanging with them, walking around, asking questions, and having lunch with them are all measures to show gratitude and how they care.

Also, by investing in this pivotal layer of leadership, department stores can unlock new performance levels, agility, and innovation. Good middle managers are retail’s “unicorns”, rare, valuable, and vital to the industry’s future. It’s time to recognise their potential and empower them to lead the way.

The IADS believes retailers can transform middle management from a bottleneck into a competitive advantage by investing in leadership development, fostering open communication, granting autonomy, and leveraging technology to help redefine roles. In doing so, they enhance organisational agility and create a more engaged workforce. Middle managers may not always be in the spotlight, but they are undoubtedly the unsung heroes shaping innovation and excellence. For retail executives, the challenge is clear: rethink how middle management is perceived, supported and empowered.

Credits: IADS (Christine Montard)

Selvane Mohandas du Ménil

IADS Exclusive: the revamped John Lewis Oxford Street store

IADS Exclusive

January 13, 2025

IADS Exclusive: the revamped John Lewis Oxford Street store

IADS Exclusive

January 13, 2025

Selvane Mohandas du Ménil

new, sometimes non-retail related projects:

Last November, the IADS had the opportunity to visit the recently revamped Oxford Street John Lewis store with its higher management. This was the perfect opportunity to review John Lewis's recent history and see how this overhaul fits into a larger narrative of change for a company that has been going through difficult moments in its recent history.

John Lewis & Partners: the English Grand Old Lady

John Lewis was founded in 1864 as a drapery shop on Oxford Street by the eponymous businessman. He then acquired the Peter Jones store (opened in 1877 in Sloane Square) after Jones passed away in 1905. That was the beginning of the expansion: the Jessops & Son store in Nottingham was the first store outside London to be purchased in 1933. It was rebranded as a John Lewis store only in 2002 . Then, the company acquired the Selfridges Provincial Stores company in 1940 and a store in Reading, Heelas, in 1953 (here again, the name survived untouched until 2001).

Going beyond acquisitions, the department store company started in the seventies to build new stores to relocate city-centre units in the then-newfound malls: the Jessops store in Nottingham was relocated from its historic city-centre location to the Victoria Centre mall in 1972, the Bainbridge’s store in Newcastle (founded in 1838 and sold to John Lewis in 1952) was relocated to the Eldon Square shopping centre in 1976, for instance. Soon, the company started to build from scratch new units without a pre-existing base, such as London’s Brent Cross in 1976 (in a new mall), Milton Keynes store in 1979 (in the middle of a newly-erected city), the Cheadle store in Manchester (1995), Canary Wharf in 2011, or the White City store in the Westfield mall in 2018. Today, the company operates 34 stores exclusively under the John Lewis name across England, Wales and Scotland. The largest is the historical Oxford Street store (39k sqm), followed by the Glasgow store, which opened in 1999.

The department store group acquired a supermarket chain, Waite, Rose & Taylor (later shortened to Waitrose), in 1937. Today, Waitrose operates 329 stores in the UK, including 65 “little Waitrose” stores (a convenience store format) and several locations in the Middle East.

As a group (including Waitrose), John Lewis is special because it was designed as a “partnership” back in 1929: every team member is a de facto company shareholder. While the partnership constitution was published in 1928, promoted by John Spedan Lewis, son of the founder, it was not coming out of the blue: he had set up a staff council and a charitable donation committee as early as 1919, and in 1920, then de facto partners received their first bonus in the form of share promises. Caring for employees has been in the DNA of the company since its inception: John Lewis Partnership implemented a medical service in 1929, 19 years before the National Health Service was created in the UK, and in 1950 the partnership was secured through the Second Trust Settlement (ultimate control of the company was secured to Trustees). Finally, starting in 1970, partners began to receive their bonuses in cash rather than cash and shares.

Finally, the last iconic element about John Lewis & Partners is the pledge, made in 1925, known to every English citizen: “never knowingly undersold.” In effect, this meant that any customer seeing a price difference with the competition (national chains) during a period of 28 days after purchase could claim a refund of the difference. This was a very powerful marketing tool for 97 years until the pledge was retired in August 2022.

Recent ups and downs

John Lewis recent difficulties did not start with the COVID-19 pandemic as, in 2018, profits slumped to almost zero due to the cost of the Never Knowingly Undersold pledge. While Brexit did not foster a positive mood in terms of inflation, this situation came from the increasingly competitive landscape, including online, with pure players who had different cost structures. No wonder, therefore, that the pledge was changed in 2022 to “for all life’s moments”, to the country's dismay, a measure seen as vital to balance the business in the wake of a continuous online business progression (even though this was a costly £500m decision).

Leadership, as a consequence, was challenged: the fifth Partnership Chairman, Sir Charlie Mayfield (a company veteran, who joined John Lewis in 2000), stepped down in 2020 after thirteen years, to be replaced by Dame Sharon White, while then Executive Director, Paula Nickolds (who had joined John Lewis in 1994 and succeeded to Andy Street in 2017), was replaced the same year by Pippa Wicks, coming from Coop.

Facing a growing discontent, Pippa Wicks left in 2023 and Dame White became increasingly challenged. The same year, the CEO position was created to address the needed changes, with Nish Kankiwala appointed with the mission to cut costs, which generated much speculation about the Partnership’s specific structure’s future. After immediate measures (such as headquarter size reduction, jobs cuts, and the scrapping of non-retail plans), 2024 saw the appointment of a new Managing Director, Peter Ruis, the company’s former buying and brand chief, a new chairman, Tesco veteran Jason Terry as a replacement of Dame White (whose tenure was the shortest in the partnership history), and the “Never Knowingly Undersold” pledge return in September, with great success: 25 online retailers (including Amazon) are now systematically monitored in all categories, and customers are given a 7 days price guarantee, through cash refunds (not vouchers). The pledge return had immediate results within the two weeks following its re-implementation, in terms of sales, margin and NPS.

These changes coincided with a change in John Lewis’ fortune since the company posted a £42m pre-tax profit in 2023-2024, up from a £78m loss the previous year, which gave the company enough confidence to confirm their target of reaching £400m profit by 2027-2028. Under Ruis’ leadership, John Lewis focused on its retail assets to become relevant again, and this translated into team reorganisations and new investments, with the Peter Jones store slated for a massive overhaul, coming on top of a £800m budget dedicated to stores improvements, including £6.5m to immediately inject novelty in the Oxford Street store. In parallel, John Lewis improved its private labels, customer services (it recently announced a deal with Pay Now Buy Later operator Klarna) and additional sources of revenue (through, for instance, a retail media platform operated with Dunnhumby unveiled last October).

In its latest financial exercise (2023-2024, closed in January 2024), the John Lewis department store unit posted a total of 4,765£m in trading sales (-4%), a revenue of 3,644£m (down -4% vs. 2023, and from 3,961£m at its peak in 2018), and a trading operating profit of 689m£ (+2%), i.e. 14% on trading sales, and a net operating profit of £147m, up from a loss of £160m the previous year, and three years of continuous losses. These results were achieved through a total of 13.4m customers in the year, of which 53% used digital channels for their shoppers. The rest visited the remaining 34 department store units in the UK (completed by smaller format stores and community-centric units).

The loyalty program has 6m members, who spend triple the average clientele and are growing +15% year on year. A new app, co-developed with Dunhumbby (the Tesco Club card creator and John Lewis’ partner for retail media), has been launched with new, individualised services, such as individualized coupons and promotions or exclusive events.

What is new in Oxford Street?

The John Lewis Crown Jewel store is the company’s oldest and largest, covering 39,000 sqm on seven floors. It includes food in the basement, tech on the top floor and a roof garden with F&B options (the store boasts cafes, bars and restaurant options on each floor). Regarding traffic, the store welcomes 22,000 customers a week, primarily domestic (all the more since the tax-free shopping scrapping ), and coming with public transportation (the nearby car park does not seem to impact traffic), with an average conversion rate of 35% in regular weeks and 65% during peak times, mainly coming through the two main entrances on Oxford Street (one leading directly to beauty, the other one to fragrances).

To give a sense of comparison, the Peter Jones store is the third largest but posts half of the Oxford Street store’s turnover. Also, compared to the rest of the John Lewis stores, the Oxford Street one is rather specific regarding customer nature, younger and more affluent than the average John Lewis client. Therefore, it is no surprise that the new management focused on producing extremely quick results in this location to materialise the change (through new brands, new instore design, emphasis on quality, services and experience) and invested £6.5m in revamping specific zones in the store, such as the beauty hall, a long-time traffic magnet and now the largest in the country.

Given the store's size and the many categories presented, the below list of points of interest is a subjective selection based on what has been renovated and upgraded.

Ground floor: the beauty hall

The ground floor includes a rather disconcerting number of categories: beauty, hairdryers, women’s accessories and handbags, menswear and men’s shoes, and sunglasses.

The beauty zone (20% of the total business) was one of the main areas of focus for the store revamp: For the first time, John Lewis separated beauty from fragrances, introduced 75 new brands, teamed up with majors to renovate 90% of the 41 beauty counters in the past nine months, and launched a self-discovery area where customers can spot new beauty brands without salespersons’ assistance.

Make-up is located close to hair care; it is a new category per se, including brands such as Dyson. Finally, fragrances are presented in a new self-standing concept that will be reproduced in other John Lewis stores.

First floor: jewellery, watches and women’s shoes

The first-floor houses lingerie, nightwear, women’s shoes, womenswear and jewellery.

Initially located on the ground floor, the jewellery category was set up in an entirely new concept on the first floor. It uses a profusion of light and open space to give an impression of choice while focusing on the products. It also addresses profitability concerns (and leaves more space for more profitable categories on the ground floor). Open displays with small brand reminders allow for stacking more brands and easing their change when needed. It is interesting to note the attention to lighting: products are emphasised thanks to the ceiling spots and smaller, focused lights integrated into the tables themselves.

The piercing stand, a must for many Brittons, is strategically located nearby. This stand allows customers to select their piece of jewellery and wear it on the go (it is operated through a concession model). Interestingly, the personal shopper area is also very near, which allows customers to potentially complete their looks with shiny accessories while transitioning to the nearby womenswear area.

The “Shoe Room” is entirely new, with an open concept, a radical difference from the previous structure with “brand boxes”.

Womenswear (40% of the total business) has also evolved, introducing 100 new brands each half of the year, an unprecedented rhythm for the company, to become the “house of best brands”. Regarding the business model, the store dropped SOR and went into full concessions, allowing for more high-profile collaborations. This approach has been implemented in the 4 top John Lewis stores since September 2024. The department also emphasizes the John Lewis private label, which in the WRTW category represents 50% of John Lewis' total private label sales (which, in turn, represent 20 to 25% of the total store sales).

Second floor: Waterstones bookstore, Benugo Café

This floor houses bed, bath and linen products, home accessories, gifts, lighting, mirrors, the first Waterstone’s shop-in-shop, and the Benugo Café.

It took 6 months from initial conversations to opening a 200 sqm Waterstone bookstore on this floor, selling 20,000 titles. Due to the speed of execution, some crucial details remain to be fixed. For instance, the Waterstone cash desks cannot process John Lewis’ sales and vice versa. Teams are actively working on this crucial point, which prevents from mixing loyalty programmes in the store.

Both Waterstones and Benugo are concessions (Benugo operates various shops in the store). Their rather surprising location (in front of beds and pillows, a rather quiet section) is simply due to the fact that they took a former back-of-store space that was available and ready for a productive upgrade. Waterstones has proven to be a real traffic magnet since then.

Third floor: furniture studio and the upcoming Jamie Oliver school

This floor is home to beds, bedrooms, furniture, a kitchen, sofas and seasonal stores (Christmas, with a stunning 85% sell-through rate).

While the set-up is inspirational and allows customers to project themselves, IKEA-style, John Lewis leaves much liberty to brands to fit their shops in shops, contrary to the lower floors. Here, the most striking is the profusion of customer promises, from free delivery to free return, the possibility of choosing every detail and customizing sofas, for instance, and the return of the 100-year-old pledge in a very visible manner.

John Lewis executives were excited to announce the planned opening of a Jamie Oliver café and cookery school next spring. This is obviously a very efficient way to signal all the ongoing changes at John Lewis and generate buzz.

Fourth floor: the Lego stand

This floor is home to baby & children wear, haberdashery and crafts, and everything kids. The most striking is probably the very large Lego shop in shop with a complete offer and decor, located at the exit of the escalator. Toys remain a very efficient category for John Lewis (a stark difference with other department stores in the world, and which shows also how John Lewis has managed to remain connected to its customers’ everyday lives). It struck a deal with Lego, trading a prime location in terms of visibility and traffic, for a complete revamp of the space at the brand’s expenses.

Fifth floor: computers

This floor houses TV, audio and everything tech (5% of the total business), sports, and travel goods.

John Lewis has put much effort into their tech space, reproducing a 1960’s IBM machine as a central display unit. The rationale was to upgrade the overall feeling to remain competitive with the nearby Apple concession (the second brand in sales for the whole store). Each brand is given demo space, screens, stools to allow customers to stay and test in actual conditions laptops… but the most intriguing is, here also, the repeat of customer promises as well as the educational effort: operating systems, screens and CPU capabilities are explained in simple terms to allow customers to make their choices confidently.

How does John Lewis cope with the promise of a superior standard of service?

To stand with its promises, John Lewis is counting on its app to measure in real-time its customers’ satisfaction, but not only. They also measure customers’ trust through a panel of 1,000 members that answer questions every month, coming on top of stores’ individualised NPS.

This goes hand in hand with new initiatives: for instance, in-store mobile payment was launched and generalised to the whole store in August 2024. To further differentiate from online competition, John Lewis also emphasizes its guarantees (visible all across the store). When it comes to online sales, stores are incentivised when sales are made from their POS (even though products are then shipped from the central warehouse).

Conclusion: what to think of the much-hyped Oxford Street store revamp?

*According to people familiar with its previous version, the store's changes bring a radically different experience during a visit. According to them, a visit to the basement, which has not been revamped in a similar fashion, gives a proper idea of what the store was like a year ago (or, from that perspective, the luggage section on the fifth floor).

From that perspective, this is, therefore, a success, even though it has to be euphemised by the fact that the relatively low investment (6.5m£ does not represent much to spend in a 39,000 sqm store) also meant that some aspects were left aside: what to think, for instance, of the fact that the escalators paintings were not retouched?

The new spaces (beauty, jewellery, womenswear) and partnerships (Waterstone, Benugo, Jamie Oliver) can instead be seen as “proofs of concepts” that change can happen even at John Lewis, and its materialisation to the general public and the associates (one must remember that they have gone through serious challenges in the past years). From that point of view, this is a total success, as a new type of energy was clearly palpable during the visit, with sales associates enthusiastic and proud to explain how they were doing things differently.

Another striking point was the transparency and reassurance given to everyone: customers on the sales floor (with guarantees in terms of price-matching, delivery delay, 25 years guarantee on sofas, free delivery upon a sales threshold, and return options) but also to staff, through clear, transparent explanations on how bonuses are calculated, for instance. It is difficult to know if this is a new initiative or a well-established tradition. Still, one must recognize that even visiting John Lewis’ offices gives an entirely different impression from its competitors not so far away. The new company management seems confident that their actions will bring concrete and quick results, and they might be right in thinking so.*

Credits: IADS (Selvane Mohandas du Ménil)

Anchita Ranka

IADS Exclusive: How non-grocery European retail is transforming, according to Eurocommerce’s State of Retail 2024 report

IADS Exclusive

December 16, 2024

IADS Exclusive: How non-grocery European retail is transforming, according to Eurocommerce’s State of Retail 2024 report

IADS Exclusive

December 16, 2024

Anchita Ranka

Last month, the IADS attended the presentation of the State of Retail 2024 - Europe: Transition and transformation in non-grocery retail, a report carried out by Eurocommerce in collaboration with McKinsey. Usually dedicated to grocery retail, this report addresses key trends shaping the specialty retail landscape in 2025 for the first time. It combines market data with surveys of 30 European executives and approximately 15,000 consumers across six European countries (France, Germany, Italy, Poland, Spain and the United Kingdom). The scope focuses on six retail categories: furniture and furnishings, DIY and hardware, consumer electronics, sporting goods, beauty and personal care, and pet care.

Introduction: trends and the European consumer

Eurocommerce presented the key numbers and trends in the European retail industry. While the industry’s nominal turnover increased by 2.3% annually, inflation-adjusted growth slowed by 1.8%, below 2019 levels. Real growth is projected to be 0.6% per year through 2028, however the dynamics vary by category and country.

Across Europe, the proportion of retail sales between grocery and non-grocery categories varies. For example, in Germany and the United Kingdom (UK), non-grocery items account for more than half of retail sales while French consumers allocate almost 60% of their budget to groceries. Furthermore, European households remain cautious about future spending post-Covid. Retail sales of discretionary items hinge on purchasing power, which varies across Europe. The challenge for retailers here is that the expected slowing of real income growth could undercut purchasing power gains. More than half of low-income households have saved as much as possible in the past 12 months instead of spending. The combination of cautious spending and eroding purchasing power suggests that consumer spending is polarising; adapting to the needs of both high- and low-income groups will be critical for retailers as the favour for discounter options and private labels continues.

The average European consumer has changed significantly:

Purchasing behaviour: omnichannel journeys are becoming increasingly prevalent, with more than 50% of consumers using online and in-store options to research and purchase non-grocery items.
Price sensitivity: transitioning from a focus on low-cost options, one in three consumers prioritise value for money. This characteristic includes promotions, discounts, a wide product range, trustworthiness, and a fun shopping experience.
Loyalty: with low levels of loyalty, more than 60% of consumers actively seek opportunities to trade down. Convenience is the top factor in purchasing decisions, both online and offline.
Approach to sustainability: consumers also have a paradoxical approach to sustainability where one-third cited it as their second-biggest concern, yet it hardly affects purchasing decisions.

The growing presence of omnichannel journeys

Following rapid e-commerce penetration during the Covid era, brick-and-mortar retail recaptured some of these gains post-pandemic. More recently, e-commerce has started increasing again but remains below 2019 levels. Given the growing presence of omnichannel journeys in consumers’ shopping habits, more than 50% reported using online and in-store options to research and purchase non-grocery items. The rise of omnichannel is evident in the context of other consumer trends, such as a preference for convenience, value for money and a general decline in retail sales. /nbsp]

Consumers decision journeys are now predominantly omnichannel. The first step is often beginning to research products online through brand, retailer, competitor, or third-party websites (social media and marketplaces). Next, they visit stores to get advice and experience the products. Finally, they return online to purchase the item at the best prices.

It is notable that brick-and-mortar retail plays an important role in the omnichannel journey. Over one-third of consumers choose physical retail for convenience and almost a third prefer it for the opportunity to experience products. Functioning as fulfilment centres, showrooms, and community hubs, physical stores provide unique experiences that cannot be replicated online.

Non-grocery retail channels (multi-brand and brand-owned) still capture the largest share of consumers’ declared spending. Consumers are motivated to purchase from non-grocery channels given the broad range of products and services retailers offer, the availability of specific items at the time of purchase, their trust in the retailers, and their love for the in-store experience. This trend is expected to persist, with net future purchasing intent in non-grocery retail channels at its highest over the coming years.

Despite this maintenance of spending intentions in these retail channels, department stores are increasingly challenged by online resellers, which are gaining ground across all surveyed countries. Specialised multi-brand and brand’s own stores capture the largest market share in all markets.

In the face of growing consumer polarisation, omnichannel retail caters to all groups and gives them the added value of convenience, the most important factor affecting purchase decisions. Investing in and providing a seamless omnichannel experience keeps consumer journeys within retailer-owned channels. This necessitates cross-channel harmonisation to meet the needs of different kinds of consumers.

Building new ecosystems to restore loyalty

Increasing diversity and fragmentation in the retail sector give consumers more choices. This results in lower customer loyalty, an increase in the variety of retailers visited and a decrease in the size of shopping baskets per visit. Furthermore, consumers’ focus on value for money includes promotions, a rewarding experience, a variety of products and trustworthiness. To take advantage of this, retailers must capture the consumers’ interest, both high and low spending groups, by going beyond products and traditional retail to services that enhance customer experience.

Retailers are creating ecosystems that include services to combat decreasing customer loyalty. These include retail media networks (RMNs), repair, maintenance, travel and insurance services. While travel and insurance services have become staples at El Corte Inglés, El Palacio de Hierro or Falabella, Macy’s media network has recently been expanded to include personalised post-purchase offers1. Creating a comprehensive ecosystem for customers’ needs can reward retailers with higher customer loyalty and a larger share of their spending, as shown by the predominance of El Corte Inglés in Spain. Introducing and strengthening private label capabilities can also enhance customer loyalty while affording the retailer better margins.

Existing assets can be leveraged to develop an ecosystem strategy, as suggested during the 2023 General Assembly by Michael Jacobides, strategy professor at the LBS (IADS Exclusive here). Tapping into all available tangible and intangible assets can drive growth and reduce investment needs. Brands, loyalty programmes, stores, applications, products, services, and expertise, can all potentially be used in the new ecosystem.

By putting customers’ needs at the centre of the retailer’s value proposition, they can build a portfolio of traditional retail and services that better serve customers while increasing revenue. Digitisation and advancing technologies have made it easier for retailers to explore segments beyond core retail to create a network of services.

Demanded sustainability won’t come out of the consumer’s pocket

Climate change and sustainability are still on the minds of European consumers. Thirty percent of survey respondents cited sustainability as their second-greatest concern. Consumers expect sustainability: across all segments, more than one-third of consumers reported paying close attention to environmental friendliness when shopping for non-grocery goods.

However, this awareness of sustainability has yet to influence buying decisions. When asked whether retailers offering a broad range of sustainable products is important in purchasing decisions, consumers ranked this driver at just 32 out of 40.

There is a gap between consumers’ declared priorities on sustainability without manifesting in purchasing decisions. They expect retailers to meet sustainability priorities without it coming out of the consumer’s pocket. In this vein, circularity as an alternative has worked well and is seeing gains as it meets cost considerations while enhancing sustainable objectives.

This explains the current momentum around circular models. Retailers with sustainable or circular offerings in certain categories experience strong growth. This is especially true in consumer electronics and appliances, where refurbished items allow consumers to get a better value for their money, and in sporting goods, where equipment rental and second-hand purchases are on the rise.

Overall, retailers are faced with a complex decision on sustainability. Focusing on these priorities could improve incremental long-term revenue growth by integrating new sustainability and circularity practices into their operations at the cost of short- to medium-term growth. More and more retail groups now focus on circularity (such as FNAC-Darty’s refurbished electronics and appliances offering) and sustainability (for example, cosmetics brand Davines) as key value propositions.

Note on CEO sentiment: cautious optimism

Most of the 30 European non-grocery executives surveyed by Eurocommerce expected market conditions in 2025 to improve or remain the same. Cautiously optimistic, the sector is adapting to ongoing economic challenges. Margin pressures and consumer downtrading, driven by rising costs and heightened price sensitivity, remain top concerns for CEOs in the coming year. Executives are prioritising investments in omnichannel experiences to meet evolving consumer demands, along with expanding private label offerings.

More than 70% of CEOs believe that by 2030, delivering a seamless omnichannel shopping experience will be the cornerstone of success. Approximately one in three executives also cite factors such as developing robust private label strategies and reinventing store formats to excite customers. On the other hand, only 20% of leaders believe improving the sustainability of products will be important to win in their segment by 2030.

Conclusion: omnichannel is key, sustainability is (unfortunately) not

The retail landscape is undergoing a significant transformation driven by polarising consumer spending. Retailers must cater to both high- and low-income groups to maximise their reach by adapting to omnichannel strategies that cater to all groups, offering a seamless shopping experience and giving them the added value of convenience which is the most important factor affecting purchases. Reduced customer loyalty driven by this fragmentation of consumers and the availability of large numbers of retailers, calls for the development of an ecosystem of value-added services and private labels to recapture consumers. The focus on value for money for consumers includes promotions, a rewarding experience, a variety of products and trustworthiness. As the sector navigates economic challenges, executives focus on enhancing omnichannel experiences and expanding private label offerings as key strategies for success.

There is a gap between consumers’ declared priorities on sustainability without it reflecting in purchasing decisions. They expect retailers to meet sustainability priorities without the cost being passed on to consumers. In this vein, circularity has worked well and is seeing gains as it meets consumers’ cost considerations while meeting sustainable objectives. This approach addresses consumer expectations and positions retailers for incremental long-term growth. While sustainability is not yet a top priority for many leaders, integrating these practices could become increasingly important as consumer awareness continues to grow.

Credits: IADS (Anchita Ranka)

Christine Montard

IADS Exclusive: a look at trends and consumers in 2024’s China

IADS Exclusive

December 4, 2024

IADS Exclusive: a look at trends and consumers in 2024’s China

IADS Exclusive

December 4, 2024

Christine Montard

*Known for its rapid economic growth during the past two decades, China is now navigating a period of moderated expansion. The current economic and societal landscape is marked by a complex interplay of challenges and opportunities: a significant real estate crisis, high youth unemployment rates, a shrinking and ageing population and newfound Asian pride. These factors are reshaping consumer behaviour and economic priorities within the country.

Despite these challenges, as stated by IADS’ partner NellyRodi in their What’s Up China conference held in Paris in October, there are sectors poised for growth, including sportswear, consumer health, and experiential travel. Understanding these dynamics and local macro-trends is crucial for businesses aiming to navigate the evolving Chinese market landscape effectively.*

China’s 2024 economic and societal context

It’s the economy, stupid!

China’s economic growth, once characterised by double-digit increases, has slowed considerably. While 2023 saw a modest recovery with a +5.2% GDP and a +7.2% consumption growth, there has been a -7.5% decrease in exports. The transition from rapid expansion to more moderate growth presents significant challenges illustrated by the 2024 economic landscape marked by a profound real estate crisis, slower consumption and an average 20% unemployment rate among the younger generations. Slowing down compared to 2023, China’s GDP only grew by +5% during the first half of 2024, while retail sales only increased by +3.7% during this period. The outlook for 2025 is both cautious and optimistic as GDP growth should resume. On its side, the IMF growth forecast sits at +4.5%.

Demographics: China is getting old

The demographic shift is another key concern. China has now become the second-highest population in the world (it was previously the first), and the UN estimates that the country will lose 100 million by 2050. As a result, the replacement of the Chinese population is not guaranteed anymore. Overall, the total population could decrease from 911mn in 2025 to 700mn in 2050. Even more than its shrinking, the main issue is China’s population ageing rapidly, with a declining and historically low birth rate and an increasing proportion of the population over 65 years old. In 2023, more than 20% of the Chinese population was over 60 years old, and this group should reach 25% in 2050. Government initiatives to address this issue have had limited success so far. They have been distributing child benefits, extensively communicating on the birth rate and, since 2021, allowing all couples to have three children. Also, to maintain the workforce, the government raised the retirement age for the first time since the 1950s, from 50 to 55 for women in blue-collar jobs and from 55 to 58 for females in white-collar jobs. Men will see an increase from 60 to 63. The Chinese demographic future is brighter, though: bigger than Gen Z, the generation aged 5 to 15 now, will relieve demographic pressure in the coming years.

Western lifestyle

The family structure is changing, with young people delaying marriage and parenthood, further complicating the demographic picture. The traditional family life model is challenged as the number of marriages decreased for 9 years, slowly rising again since 2023. Besides, the young population challenges the work status quo and no longer accepts the “9-9-6 model” (working from 9 am to 9 pm, 6 days a week). In 2021, the Supreme Court even ruled that this system was illegal. In reality, most of the Chinese population still works according to the model. Still, resistance is truly growing as people want a better work-life balance, with 76% of the population born after 2000 aspiring to a high level of flexibility. Freed time is dedicated to activities centred around well-being, sport and travel. Finally, 3-tier and 4-tier cities gain popularity among young adults as they offer a better lifestyle with less population and nature nearby.

Chinese consumer behaviour: myths and reality

The middle class is shrinking

Key to local consumption and once optimistic about the future, the Chinese middle class represented 400mn people in 2023. With 70% of family assets tied up in property, the current real estate crisis hits hard as 28,9% of the middle class lost 10% to 30% of their fortune, and 11.4% lost more than 30% of it. Now, many are even slipping back toward poverty. This is a significant issue for the Chinese Communist Party, which the middle class has always supported in exchange for prosperity.

Besides, Chinese starting salaries have declined by -1.3% during the 2023 fourth quarter, the most recent period for which data are available. Bonuses fell by -17.5% on average compared to the previous year (-27% in the internet and telecommunications sector and -35% in the financial sector), directly impacting consumption and luxury spending in 2024. It’s no secret that luxury brands face a major crisis, as illustrated by the latest LVMH results for 2024 third quarter: sales in Asia (excluding Japan) fell by 16%, while Japan — a key destination for Chinese customers leveraging a weak yen exchange rate — steeply decreased, growing 20% compared to 57% in the previous quarter.

Today, the middle class, whose aspirational customers once fueled the luxury growth, is more refined overall and has different needs and cravings, especially as they favour products and services that truly enhance their quality of life. As a result, other sectors benefit from the slowdown in luxury. The Chinese middle class invests in education, with an increase of +12.7% between 2022 and 2023. Quality food expenses grew by +8.5%, health by +9.2%, and travel by 7%.

The luxury shame impact on the HNWI and the UHNWI consumption

The Chinese government has targeted influencers who flaunt their wealth on social media, resulting in bans for high-profile personalities. This has contributed to the ‘luxury shame’ phenomenon, where HNWIs and UHNWIs refrain from displaying their wealth. However, the HNWIs did not stop spending; instead, they shifted brands. They are becoming more discerning and opting for brands offering classics that retain value over time rather than trendy products. This is why brands like Hermès and The Row don’t experience slowdowns.

Also, McKinsey & Company describes a more nuanced picture of the luxury sector. While luxury brands are seeing their sales decline in mainland China, Chinese overseas spending on luxury goods in the first half of 2024 has already exceeded the 2019 level. Chinese consumers might simply choose to make these purchases outside of China. In parallel, UHNWIs tend to relocate outside of China. Their number in China shows a slowdown, from 495 billionaires in 2023 to 406 in 2024. Singapore and Tokyo’s real estate is booming thanks to those tentative relocations.

Asian tourism rather than Western tourism

In 2023, with $196.5bn spent, Chinese tourists became (again) the highest tourist spenders, but they completely shifted their tourism habits. Exit Europe and welcome Asia! They favour local tourism, as it’s easier, cheaper, and supported by the government's push for local consumption. Having a newfound Asian pride, tourists' top destinations in 2024 were Korea, Japan, USA, Thailand and Hong Kong. Italy ranked 10 and France… 23. Compared to 2019, Lunar New Year tourism in China increased by +73.1% in 2024. 765 million domestic trips were made across the country during the Golden Week holiday in October 2024, a year-on-year increase of 5.9%. Expenditure by domestic tourists reached $99.30bn, a year-on-year increase of 6.3%. However, per capita spending was 2.09% lower than before COVID-19.

China’s opportunities for growth

It’s not all bad

Despite historically low consumer confidence, concerns over high living costs, job security and the property slump, consumption growth still exists. Sportswear, urban outdoor apparel, and consumer health have seen double-digit growth. The beauty and wellness sectors present significant opportunities. The hospitality sector, particularly experiential travel and personalised services, also shows strong potential. The food and beverage sector, including alcohol-free options and gourmet products, offers promising avenues for growth.

Consumer segments worth watching

Despite high youth unemployment rates, the urban Gen Z remains optimistic about their financial future due to strong family support. They prioritise spending on dining out and cultural entertainment. Baby Boomers in tier-1 cities have benefited from past economic growth and hold positive consumption views despite low current consumption growth expectations. Millennials in tier-1 and tier-2 cities remain a significant growth engine for many companies but exhibit less confidence than their tier-3 counterparts. This confidence is attributed to lower living costs and better job security in tier-3 and tier-4 cities.

The macro trends identified by NellyRodi

These trends reveal a complex interplay of factors, including national pride, a growing focus on well-being, emotional shopping, personalisation, and digital technologies' influence.

Local pride: “Guochao”, a new and strong sense of national pride, is driving increased demand for domestically produced goods and services. There is a strong shift in the perception of “Made in China.” It has been perceived negatively for many years and is now a symbol of pride. This is particularly evident in the sports and beauty sectors. This calls for non-Chinese brands to adapt culturally to compete with rising Chinese brands. The “Guochao” market should reach $388bn by 2028. Another striking example comes from Chinese sportswear brand Anta: their turnover in H1 2024 outpaced Nike by 20% and Adidas by 160%.
The rise of women: contributing to the luxury market, Chinese women are increasingly entrepreneurs and members of company boards and, as such, become influential consumers, exhibiting independent spending habits and rejecting stereotypical marketing approaches.
Well-being and health: they have become a top priority for Chinese consumers, driving demand for premium healthcare products, services (including plastic surgery), and experiences. Health is considered the ultimate luxury, reflecting the growing interest in mental health, holistic wellness, and preventative care. Also, China is the digital healthcare global leader (doctor-patient platforms, online pharmacies).
Responsibility and sustainability: China’s CO2 emissions decreased by -65% between 2005 and 2023. Growing awareness of environmental issues drives demand for sustainable products (including second-hand) and eco-friendly practices, especially as consumers link durability to security and their aspiration for better times. Brands are increasingly incorporating sustainability into their marketing and product development strategies.
Escapism: A desire for escape and personal growth fuels demand for travel, outdoor activities, and experiences that foster self-discovery. ‘City walks’ and the ‘20 minutes in the park’ movement gain traction, highlighting the role of nature in relieving stress.
Ultra-digitalisation: China’s advanced digital infrastructure and the widespread adoption of online platforms are transforming the consumer landscape. The omnipresence of digital technologies in daily life impacts shopping experiences, brand engagement, and information access. There are countless platforms constantly evolving to increase innovation.
Entertainment first: immersive experiences offering more than products have become necessary to enhance consumer engagement and brand loyalty. The use of augmented reality, virtual reality, and gamification is creating unique shopping experiences. Short-term pop-up shops and events are becoming increasingly popular, offering brands a way to generate buzz and engage consumers.
Cultural and emotional elevation: a significant challenge for luxury brands is to define a specific ‘target emotion’ they want to evoke. Without this clarity, brands often resort to generic messaging that lacks impact. Brands should move beyond selling abstract dreams and instead focus on a precise emotional outcome. Emotional storytelling must be culturally relevant and shift from being brand-centric to client-centric. Brands should focus on authentic stories that resonate with their defined target emotion rather than relying on clichés like heritage or exclusivity.
Regression and nostalgia: a trend towards regression and nostalgia is evident in the popularity of products and experiences that evoke childhood memories. The feeling of comfort and security gains traction in the Chinese context. This is reflected in collaborations with popular characters and brands.
Service and personalisation: Consumers expect personalised service and unique experiences, which drive demand for one-to-one interactions, exclusive products, and customised offerings. 97% of Chinese consumers expect to be rewarded with special perks by brands during their shopping journeys.

China's economic environment presents notable challenges, and also offers opportunities for growth across various sectors. The evolving consumer behaviour highlights a shift towards quality of life improvements, with increased spending on education, health, and well-being. Moreover, the rise of national pride and sustainability concerns are redefining consumer expectations and market dynamics. As stated by NellyRodi, brands and retailers looking to succeed in China must adapt and understand that the value for consumers is no longer just determined by the products sold but by the brands’ ability to entertain, educate, anchor the brand in the culture, truly bring wellbeing and interact with consumers.

Credits: IADS (Christine Montard )

Selvane Mohandas du Ménil

IADS Exclusive: At the Drucker Forum, AI is the opportunity for a radical organisational change in the analogue world

IADS Exclusive

November 25, 2024

IADS Exclusive: At the Drucker Forum, AI is the opportunity for a radical organisational change in the analogue world

IADS Exclusive

November 25, 2024

Selvane Mohandas du Ménil

The Drucker Forum, held annually since 2009, is a yearly opportunity to review management practice and question the state of research, a favourite combination from “management guru” Peter Drucker (1909-2005). The IADS attended the 16th edition of the Forum this month in Vienna. The theme was “the next knowledge work," questioning how organisations can deliver new value creation and innovation levels.

AI was obviously a centrepiece of the conversations, given the impact it has had so far on knowledge and innovation. While the overall conference themes were oriented towards knowledge workers, including researchers, scholars, and academics, it was interesting to relate them to the current situation in retail, where AI is seen as a transforming force for business models. Taking on what was discussed during the conference, AI appears to be, in fact, a pretext for more radical organisational transformations.

Paradoxically, achieving such transformation also does not systematically involve ground-breaking technological or intellectual innovation, as, many times, speakers were calling for a “back to the basics”movement in an updated way.

Introduction: the concept of “next management”

The late Peter Drucker predicted that the challenge for the 21st century would be finding ways to improve knowledge work productivity like manual and factory work did during the 20th century. He was also famous for considering management as a foundational value creating capability, rather than a mere business role. However, most of the political, intellectual and cultural elites keep on considering management as a tool serving short term goals, rather than a true social innovation able to change society at large.

This is why this 2-days session started with Richard Straub, founder and President of the Forum, introducing the audience to the concept of “next management” (new to half of the room). This five-year research initiative aims to provide organisations with a holistic method to boost knowledge workers’ productivity by continuously injecting innovative practices (and not implementing them in an incremental way as has been done so far). In addition, this method aims at optimising human investments rather than increasing them in a world where resources are increasingly limited.

Due to its englobing approach, it challenges the traditional boundaries of management and questions many of the structural elements that every professional has grown to take for granted during the 20th and 21st centuries: organisation charts, hierarchy and processes.

In short, a world which has radically changed can not be seen through lenses that have not been updated, independently of any technological breakthrough such as AI. While AI is accelerating the tempo, defining the “next management” playbook goes well beyond adapting to this new technology as it is a way for companies to adapt to the realities of a new world that has become much more complex, in many aspects.

However, for the “next management” to be perfectly accurate, one needs to review first the nature of knowledge workers and understand how it has evolved in the age of AI.

Dealing with innovation and knowledge

Where does knowledge work stand today, and where is it going?

Giampiero Petriglieri, an associate professor at INSEAD, thought-provokingly opened the topic by stating that “knowledge work as we know it is dead, and this is not due to AI.” For him, current work organisations have killed knowledge work due to their inability to evolve past a productivity-oriented model, inherited from the 20th century using measurement tools created for the industry and then transferred to intellectual work, still in use after five decades. Not only is a mechanistic approach to knowledge work, prioritising efficiency and productivity over humanistic values such as inclusion and freedom, obsolete, but it also puts the job in danger because it creates the very wrong impression that AI is a replacement for it.

However, he points out that organisations are increasingly efficient but also struggling to innovate. For him, this relates to the fact that knowledge productivity is not so much of an issue anymore but the purpose of learning itself due to the emergence of AI. To counter this, he used the analogy of a "machine" versus a "home" to illustrate the difference between instrumental and humanistic approaches to organisations, leading him to call for creating efficient but safe and hospitable workplaces, fostering a sense of belonging. AI is not enough to enable companies to be a good “home” to knowledge workers: “The knowledge world is dead...because now we realise that even when we share those humanistic values...we often do it through an instrumental lens. Let's keep people more comfortable; let's make our culture more congenial so we can all be more productive.”

The fact that AI pushes companies to re-think their core purpose and how welcoming they want to be to their teams has become even more urgent due to AI: Alex Adamopoulos, CEO of Emergn, stressed the importance of maintaining a human-centric approach amidst the AI boom, cautioning against the hype and emphasising the need for practical knowledge and a common vocabulary around AI. This remark from a practitioner suggests that fostering home-like working environments where employees feel a sense of belonging and are encouraged to grow personally and professionally is key to dealing with all the changes AI is bringing to intellectual work in general and innovation in particular.

Such views go beyond the traditional interrogations on how to deal with innovation in legacy retailer organisations (through new business units, dedicated committees, or resorting to consulting companies…). The Drucker Forum speakers suggest that to become a truly next-generation structure, current retail players need to reinvent themselves by rethinking the value proposition they want to bring forward to all their knowledge workers to get the best from them and implement a generalised culture of innovation.

But do we have the right innovation frameworks within organisations?

All Drucker Forum speakers agreed that the existing innovation frameworks are outdated. Valla Vakili, Global Head of Innovation at Visa, highlighted that AI now questions the very notion of innovation itself in an era where organisation size does not matter to be the most innovative possible. While in the past, large organisations had an edge in innovating for a simple question of available resources, we now live in a time of potential “one-person unicorns” as coined by Bain & Co during the IADS AI Retreat from last June. AI also redefines what progress is: while in the past, innovation was often associated with disruption and a defensive, antagonistic approach (the “innovator’s dilemma), AI now allows innovation to be much more offensive and imaginative. Vaikili argued that AI offers new tools to overcome past constraints on innovation, enabling a shift from a scarcity model to an abundance model (in other words,while many companies are good at innovating in a forward-thinking model, backward thinking is often overlooked).

Jayshree Seth, Chief Science Advocate at 3M, echoed this sentiment, emphasising the need to move beyond one-off initiatives like hackathons and “ideathons” towards a culture where innovation is a foundational element. She explained that “hackathons are often internally viewed as very cool, teams present beautiful ideas to ecstatic management… and nothing happens.” Instead, she stressed the importance of employee empowerment and radical collaboration within and across the broader ecosystem, a view supported by Julie Teigland, Managing Partner at EY, who explained that true innovation could only stem from “a close connection with all stakeholders, customers, employees, shareholders.”

Organisational reinvention is inescapable

Companies have little choice but to reinvent themselves in a world shifting from expertise-based to skills-based learning, as this is the only way to ensure employees can adapt and contribute in an ever-changing environment. The implications include investing in employee training and development, fostering open communication, and promoting cross-functional collaboration. Implementation requires a concerted effort from leadership to cultivate a culture that values collaboration and continuous learning.

Going further, this framework review, accompanied by a new approach to employee empowerment, is the only way out of the current lacklustre in AI block building. Vakili suggested a shift from an experimentation-focused approach to one driven by imagination, truly leveraging the power of generative AI. Organisations need to release the constraints of legacy systems (whatever their nature) to unlock this imaginative potential. This echoes a remark made by Bain & Co during the IADS AI Retreat in Berlin last June: while they acknowledged that AI had a disruptive potential for retail, they also mentioned that, so far, all the use cases looked like the same from one retailer to another, suggesting that, due to a certain mindset, innovation capabilities were hitting a glass ceiling in all companies. Vakili concluded by stating that, from her Global Head of Innovation perspective, a radical change of business model was needed to unlock new opportunities in innovation.

What AI really changes

Timing is paramount, but identifying the right people to educate too!

Professor David Beatty from the University of Toronto was very clear on how AI was seen in North America, not just as transformative but as an existential imperative for businesses: "In the United States, we regard AI...not as transformative, but as an extinction event. If you don't get started on this as a business, you're dead.” Failure to embrace AI could result in rapid obsolescence.

He also made the very interesting statement that AI was already reshaping industries at an unprecedented pace, but this was not visible in mainstream business press. This point was echoed by Rainer Zahradnik, Country Head Switzerland at Tata Consulting Services, who highlighted the "hidden revolution" of AI, where its most successful applications are often invisible to the end-user. He cited examples such as energy optimisation in Formula E cars and compliance software for banks. He also emphasised the potential of AI to push boundaries, using the example of designing a new air plane landing gear with minimal human intervention. He noted, "It's almost a hidden revolution of AI. Nobody knows that in your American car there's software that's optimising it."

Beatty was very vocal about the hurdles potentially preventing legacy companies from embracing AI:

The average age of directors is 68 at the board level. Walmart only has 3 directors under 40. In the US, 41% of board directors are more than 70. However, this does not prevent boards from pressurising CEOs to move forward with AI; on the contrary, they are more active than CEOs. For instance, Marriott inked a deal with Alibaba only after significant pressure from the board of directors on the CEO, Anthony Capuano. CEOs have been resisting the change due to the necessity of ensuring “business as usual” was keeping the right pace. To overcome this, Beatty mentioned that an increasing number of companies were considering independent incubators, fostering innovation separate from established structures.
Regulation also impacts the level of innovation. Beatty contrasted the relatively light regulatory environment in the US with the more stringent regulations in Europe, suggesting that the latter might stifle innovation. However, the panellists agreed that this could not be the only reason: routine and bureaucracy are also major obstacles to AI adoption in large organisations, with a strong tendency to reinvest in existing processes. Also, for Beatty and Zahradnik, Europe's risk-averse approach stifles innovation, a major source of concern at a moment when US, China and India are moving forward.

The leadership responsibility and its needed evolution in decision-making

Beatty called for a clearer understanding of everyone’s rules: the role of any growing organisation is to create procedures helping to normalise operations, while their CEO’s role is to have a clear enough mind to be able to see what is coming and might disrupt the business if no appropriate course change is taken (AI in this case).

He also urged board directors to engage with AI actively, emphasising the need for directors with relevant skill sets to help and advise CEOs. He recommended a phased approach, starting with educating the chair, then the full board, and finally the management team. Having said that, the extensive use of AI at the management level, especially to help the decision-making process, also calls for a mindset reset if leaders want to remain honest and transparent.

Matthis Bitton, a Ph.D student at Harvard University, had a fascinating exchange with Liesje Meijknecht, partner at McKinsey, on that topic. They both reminded the audience that while AI is a tool to manage complexity (which has been, in the past, traditionally outsourced to partners such as SAP or Salesforce), it is, in essence, trained on sets of data that are not neutral, objective or even fair.

From that perspective, using AI to prioritise decisions implies the acceptance that the criterium of trust does not matter at all: AI does not have any ethics and is not able to. Instead, they raised the fact that AI should be used in fields where it surpasses humans much more, such as big data, mathematics, testing. In the decision-making field, AI raises more issues than what it solves, not to mention that the more it is used, the less transparent it becomes. Bitton and Meijknecht pondered over the dangers of over-regulation (which raises the question of knowing if algorithms should be more scrutinised than humans and if yes, why) and it's contrary, i.e. granting too much power to Silicon Valley.

All in all, the panel concluded, AI creates a moral dilemma, i.e. a choice where both options are problematic. Given that AI is unavoidable, the only way for leaders to make their way through it is to define what kind of pair of “ethical glasses” they want to wear and make sure they use them. Interestingly, that also led to the conclusion that this was the opportunity for businesses and academic institutions to focus again on human sciences rather than hard sciences and data. Mattis mentioned that the Harvard Business School had not hired a single philosopher in 20 years time. It is rather ironic that AI finally pushes us into becoming more human.

How questions about AI end up reviewing the old way of seeing the world

Artificial Intelligence raises questions that go beyond it, as it actually forces us to challenge some of the visions that have shaped the business world for the past years.

Rethinking the role of offices

The expansion of remote collaborative work that was favoured during the pandemic is now ending, with many companies asking their teams to return to their office (this applies especially to knowledge workers). Giampiero Petriglieri, from INSEAD, raised the topic when discussing the fact of “humanising” the workplace by mentioning that remote working was also a trap for junior profiles, who were growing with more limited access to experience than when in the office with their co-workers. He qualified the online meeting as being “a constant reminder of each other’s absence”.

This created some exchanges between practitioners: Pierre Le Manh, President and CEO of PMI Project Management Institute, described PMI's fully remote model, highlighting the benefits of increased access to a broader talent pool and reduced environmental impact. He emphasised the importance of intentional, meaningful in-person interactions rather than forcing a daily return to the office.

In contrast, Liz Cane, VP People at Palo Alto Networks, described Palo Alto Networks' approach, which encourages a return to the office for certain roles, particularly those involving early career development, R&D, and collaboration. She highlighted the importance of in-person interaction for fostering relationships, creativity, and innovation.

The discussion concluded with a call for a collaborative design process to determine the optimal work arrangement for each organisation, considering its specific needs and goals. In other words, the topic is not so much about coming or not coming to the office but adapting physical presence according to the projects and issues currently being solved.

Redefining success

With AI allowing the phenomenon of “one-person unicorns”, the size of organisations does not matter anymore, as previously said. Going further, Julie Teigland from EY argued that this also called for a redefinition of how we measure and assess success: it might not be measurable in market shares anymore. For her, “big is no longer beautiful”, as illustrated by Tesla, which is not the largest EV manufacturer in the world (BYD produces twice as much), but generates unprecedented levels of loyalty ,or companies such as Dyson or Patagonia, all seen as market leaders in spite of them not being the largest players. She argues that large operators are under cost pressure to keep the leading position, while being smaller and more efficient, a feature allowed with the generalisation of AI, allows to be more agile.

Keiishiro Nishi, Senior VP and head of CEO office at Fujitsu, provided an interesting example of this when he mentioned that Fujitsu, a tech company, willingly decided to close its PC business and halve its revenue to launch new higher-margin businesses.

Kill “zombie ideas”

A full session was dedicated to “zombie ideas”, defined as “good old recipes” that have resisted the test of time for the wrong reasons, as they appeal to an apparent common sense that is unproven. Now that AI allows a data-driven approach, such zombie ideas should be eliminated (even though human instinct and nuanced interpretation should be kept in the loop). Michele Zanini, co-founder of the Management Lab, Tammy Erickson, Leadership Advisor at the LBS, Lenka Pincot, Chief of Staff to the CEO at PMI , and Robin Speculand, CEO of Bridges Consultancy, together reviewed the following ideas:

“More control leads to better performance”: overemphasising standardisation, rules, and control stifles adaptation, innovation, and responsiveness to local conditions. Zanini highlighted the example of SAP riddled with 500 KPIs, demonstrating how over-standardisation can cripple a company. He advocated for mutual accountability, norms and principles over measurement.
“Top-down changes work”: engineered, top-down change initiatives often fail due to insulation of leadership, leading to incremental or overly risky changes. Zanini advocated for syndicating responsibility for change more broadly.
“Leadership is positional” (i.e., experience and wisdom are correlated with rank): Equating leadership with organisational rank discourages initiative and talent development outside the executive level. Zanini argued for recognising leadership competencies regardless of position.
“Planning is everything”: sticking to rigid strategic plans in a volatile environment limits agility and responsiveness. Pincot emphasised the need for "anti-fragility" and adaptability, citing the example of athletes training for a race with obstacles. Erickson cautioned against excessive planning, which can hinder flexibility and lock organisations into outdated trajectories.
“Strategy first, corporate culture second”: Speculand questioned the continued emphasis on strategy over culture, referencing Peter Drucker's observation that "culture eats strategy for breakfast."
Sticking to outdated management concepts: Speculand criticised the reliance on out dated management models and frameworks, comparing it to using Windows 95 in the modern era.
Consider that full-time employment is ideal and what all workers are looking for: Erickson suggested that work is increasingly chosen based on marketability and human asset value development rather than solely on compensation. She argued against paying based on hours worked, advocating for payment based on tasks, outcomes, and value creation. She also emphasised the need to treat employees as volunteers, recognising their autonomy and choice.

Such a conversation is not only theoretical: Speculand shared the example of DBS Bank, which successfully addressed the "zombie idea" of unproductive meetings through a structured approach, saving significant employee hours. Here, also, the panel was adamant that AI had the potential of both perpetuating and slaying zombie ideas. It concluded by emphasising the importance of thoughtful prompting and avoiding a "tyranny of data."

The 16th edition of the Drucker Forum highlighted how AI acts as a catalyst and a pretext for fundamental organisational transformations, extending far beyond technological innovation, including in the analogue world.

While AI offers unprecedented opportunities for imagination, creativity, and operational efficiency, it also underscores the importance of retaining human-centric approaches to foster innovation and adaptability. AI has an amplification effect that allows to challenge and review processes taken for granted for decades, as mentioned by Amy Edmondson, professor at the Harvard Business School. She explained that AI allowed businesses and individuals to fail more often, and take “smart risks”. AI ushered in the age of “intelligent failures” (different from “preventable failures” to avoid), which should be celebrated by “learn-it-all” teams willing to learn from every experience and learning opportunities.

As the discussions at the Forum emphasised, success in this evolving landscape will depend on adelicate balance between harnessing AI's potential and reinforcing the human values that underpin sustainable and innovative workplaces. Ultimately, redefining the role of knowledge work in an AI-driven world offers an unparalleled opportunity to shape a future that is not only more efficient but also deeply human.

Credits: IADS (Selvane Mohandas du Ménil )

Maya Sankoh

IADS Exclusive: Navigating the AI maze in retail beyond the black box

IADS Exclusive

November 18, 2024

IADS Exclusive: Navigating the AI maze in retail beyond the black box

IADS Exclusive

November 18, 2024

Maya Sankoh

Artificial intelligence (AI) is revolutionising retail, impacting everything from customer service to supply chain management. Yet, as outlined in our recent IADS Exclusive titled "AI in retail: why culture, values, and strategic goals matter more than tech," successful AI adoption involves more than simply implementing new tools. It requires deep alignment with an organisation's broader mission, culture, and values. This exclusive further addresses one of the most critical challenges in AI deployment—the "black box" problem, which refers to the challenge of interpreting or explaining how complex AI models arrive at their decisions. This piece explores how retail leaders can ensure transparency, accountability, and ethical use. Retailers can fully harness AI's potential by focusing on governance, explainability, and innovation while avoiding the risks of opaque decision-making systems. A lack of clarity can impact both customers and employees, undermining trust and creating potential issues with compliance and fairness. Our focus here is on bridging AI's capabilities with clear, human-centred governance by prioritising transparency and informed oversight to channel AI’s potential for people-first innovation.

Beyond the “black box”: accountability, explainability, and transparency

Cracking open the black box

AI’s promise lies in its ability to make decisions faster and more efficiently than humans. However, many AI systems operate in ways that even their developers cannot fully explain, creating what is known as the "black box" problem. AI algorithms work by analysing vast amounts of data through multiple layers of complex calculations, where each layer transforms the data in ways that are difficult to track. Although developers set the initial parameters, the system's learning process often results in decision paths that are nearly impossible to map or interpret in clear, human-understandable terms. This issue becomes especially risky in retail, where decisions like product recommendations, dynamic pricing, or hiring must be accurate and fair. Unlike industries where AI operates behind the scenes, retail relies on customer- and employee-facing decisions that are immediately visible, impacting trust, satisfaction, and loyalty among both groups. As a result, explainability and fairness in AI outcomes are fundamental concerns, they are vital to maintaining competitive advantage and retention.

Retail leaders must prioritise transparency at every stage of AI development and implementation to overcome this. Documenting data sources, algorithmic logic, and decision-making processes allows businesses to provide clear explanations when needed.1 Unlike in traditional systems, where a clear set of rules may guide a process, AI often uses complex, data-driven models that can be harder to interpret. This opacity raises concerns not only for internal governance but also for customer trust and regulatory compliance.

Retailers must ensure their AI systems are explainable to stakeholders at all levels, from customers and employees to regulators and internal governance teams. By documenting and understanding each decision made by AI systems, companies can avoid the risks of operating in the dark.

Human oversight in AI

As discussed in "AI in retail: why culture, values, and strategic goals matter more than tech," AI is not a stand-alone solution. Its success hinges on alignment with human oversight and strategic goals. AI-driven systems require ongoing human accountability to ensure they function as intended.

Leaders in retail need to establish clear governance structures for AI deployment, designating dedicated teams to oversee AI systems and address potential issues, safeguarding the interests of both employees and customers2. This was seen in Tesco's pilot program for AI-driven dynamic pricing, where IT teams and department heads collaborated closely to integrate AI without compromising existing business processes. Such coordinated efforts are critical for ensuring that AI-driven decisions align with operational goals and ethical considerations.

Keeping in mind that AI cannot operate effectively without human oversight, retail leaders should set up dedicated governance teams to monitor decisions made with the use of AI, ensuring they are both accurate and ethical.

Building trust through transparency

Retailers can no longer rely on opaque AI systems, especially as customers, employees and regulators demand greater transparency. In today's marketplace, trust is currency and ensuring that AI tools operate transparently is vital to maintaining it. Regular audits and assessments, such as Data Protection Impact Assessments (DPIAs) and conformity assessments, can ensure that AI systems meet legal requirements and uphold responsible practices throughout their lifecycle.

Marks & Spencer, for instance, conducts ongoing assessments of its AI systems to ensure they align with both customer expectations and ethical standards. These practices help maintain transparency and foster trust across stakeholders.

Regular, transparent assessments of AI systems, paired with continuous monitoring, ensure that AI tools remain aligned with business goals, legal standards, and customer expectations.

Positioning AI as a creative partner in personalisation and innovation

While AI has traditionally been associated with operational efficiency, its potential as a creative and inclusive tool is equally significant. AI agents have revolutionised customer interactions, offering personalised product recommendations and real-time customer support through chatbots and virtual assistants3. Retailers have the opportunity to use AI not just to improve processes but to drive innovation in areas like product design and customer engagement, fostering a more inclusive and sustainable future for retail. For example, some AI-powered digital labs are demonstrating innovative uses of AI creatively to generate custom visuals and personalised content, offering valuable strategies to amplify brand identity and foster impactful customer engagement. Additionally, AI platforms in custom jewellery create unique pieces tailored to individual specifications, blending luxury with personalisation on a scalable level. There is also untapped potential in applying AI to refine employee experiences, aligning training and support with personal strengths and brand values.

AI for inclusive fashion design

Fashion has historically struggled to cater to all body types and physical needs, but AI offers a pathway to change that. By analysing consumer data such as body measurements, feedback, and preferences, AI can help create clothing with a more inclusive fit. In the bra industry, for example, AI-driven platforms are transforming design by offering custom-made options tailored to each individual's unique measurements, promising a "perfect fit" that addresses both comfort and support. This technology not only enhances comfort but also addresses long-standing challenges in fit, design, and accessibility. As previously mentioned, parallel advancements in AI-driven customisation tools for jewellery mirror this trend, allowing customers to design pieces that reflect their personal style and requirements. Moreover, AI empowers designers to balance aesthetics with accessibility, supporting the creation of inclusive pieces that retain quality and appeal. This approach can be transformative, ensuring that new products meet functional needs and offer greater comfort and accessibility.

AI as a catalyst for sustainability

Sustainability is an area where AI can make a profound impact. Beyond optimising supply chains, AI can help discover new eco-friendly materials, minimise waste, and predict customer demand more accurately to prevent overproduction. IKEA, for instance, uses AI to track real-time customer preferences, allowing it to fine-tune inventory and reduce excess stock, thereby cutting waste. Additionally, some digital content labs employ sustainable practices by reducing waste in production, and AI-powered augmented reality (AR) shopping solutions help consumers make more precise purchase decisions through virtual try-ons, which decreases returns and supports more sustainable consumption.4

Moreover, AI can simulate the environmental impact of materials and operational decisions, guiding retailers toward more sustainable practices. By integrating sustainability into AI-driven innovation, retailers can meet both customer demands and environmental goals, positioning themselves as leaders in responsible technology use. Overall, AI remains a powerful tool for driving sustainability in retail, from optimising supply chains to minimising waste and promoting eco-friendly choices.

The future of retail spaces: creating the "third place”

AI can help retailers move beyond traditional shopping experiences by designing spaces that function as "third places"—spaces where customers can shop, relax, and engage with their community. AI tools that analyse foot traffic and customer behaviour enable retailers to create environments that cater to families, young professionals, and other demographics. For example, Nordstrom uses AI to enhance customer service and design spaces that foster interaction and loyalty. Retailers can use similar insights to create experiences that go beyond transactions and resonate emotionally with customers.

Increasingly, retailers are integrating extended reality (XR) technologies—comprising augmented reality (AR), virtual reality (VR), and mixed reality (MR)—to transform in-store experiences further. Each of these technologies provides unique enhancements: augmented reality overlays digital elements onto the real world, virtual reality immerses customers in fully digital environments, and mixed reality combines the two, allowing for real-time interaction between physical and virtual elements. With these tools, customers can try on products virtually, explore gamified store layouts, or engage with product details in 3D, adding new layers of interaction that make shopping both dynamic and memorable.

Moreover, gamification strategies supported by AI and XR deepen these connections by transforming shopping into an interactive journey. AI-driven rewards, achievements, and challenges motivate customers to engage more fully, creating a dynamic and memorable in-store experience. This gamified approach not only draws customers back but also shifts the retail experience from a routine task to an enjoyable, impactful activity. Together, these innovations create an atmosphere where shopping is functional, immersive, and personally engaging.

Multigenerational workforce: Millennials, Gen Z, and Gen Alpha bridging the AI gap

The rise of AI in retail is not happening in isolation. It is unfolding in an era where the workforce is becoming more multigenerational than ever before, spanning Boomers, Gen X, Millennials, Gen Z, and, in the coming years, Gen Alpha. The younger generations—Millennials, Gen Z, and soon Gen Alpha—are not only shaping consumer trends but are also at the forefront of AI adoption in the workforce. Their digital fluency allows them to bridge the gap between traditional retail practices and AI-driven innovations.

Millennials and Gen Z: leading the charge

Millennials and Gen Z employees bring a unique set of skills to the table, particularly in understanding how AI can enhance customer and employee experiences.5 These generations are digital natives, comfortable with using AI tools to create more personalised and efficient shopping experiences, ranging from tailored customer interactions to streamlined employee training and support systems. Their affinity for innovation makes them ideal candidates for roles that involve AI governance, strategy, and implementation. In many organisations, these generations are the bridge between leadership’s vision and the practical application of AI solutions on the ground. In some organisations, interns play a crucial role in advancing AI initiatives by experimenting with AI tools innovatively. This open approach allows retailers to test and refine straightforward, adaptable solutions, often achieving quick wins and practical insights into AI’s application in retail environments.

Gen Alpha: the future of AI in retail

Looking ahead, Gen Alpha—those born after 2010—will be the most AI-native generation yet. As they enter the workforce in the coming years, their expectations for seamless, tech-driven environments will push retailers even further toward AI adoption. Retailers must prepare now by fostering a culture of continuous learning and adaptability.  Unlike previous generations, Gen Alpha is growing up in an environment where AI, XR, and interactive digital interfaces are the norm. This digital immersion will likely lead them to prioritise seamless, personalised, and ethically aligned AI applications as they enter professional roles.

Gen Alpha’s digital-native perspective positions them to lead retail innovations, especially in personalisation, transparency, and sustainability. As this generation enters retail roles, their advanced tech skills and commitment to socially conscious, transparent practices will further push the industry toward robust AI adoption and integration. Preparing for this workforce shift involves fostering a culture of continuous learning, with Gen Z and Millennials guiding Gen Alpha as they begin taking on leadership roles.

Governance done right: legal and ethical compliance

AI in retail must adhere not only to business goals but also to legal and ethical frameworks. Retailers need to recognise that while AI can enhance operations, it must operate within the confines of privacy laws, consumer protection standards, and intellectual property rights. Effective AI governance requires a solid grasp of multiple disciplines, including AI, data science, law, risk management, and ethical standards. Given the rapid evolution of this field, governance frameworks and policies developed today will likely require updates and adaptations in the near future. Pragmatism is essential, as well as understanding that not using AI can pose greater risks than using it responsibly.

Staying ahead of the regulatory curve

As AI evolves faster than the law, retailers must be proactive in understanding and complying with existing legal frameworks. For instance, AI systems used for hiring or pricing must adhere to anti-discrimination laws and consumer protection standards. The U.S. Federal Trade Commission (FTC) has made it clear that AI tools cannot violate existing regulations, and failure to comply can result in significant penalties. Implementing governance frameworks like the EU AI Act or ISO 42001 can provide structure, but governance professionals must remain adaptable to navigate the changing legal landscape effectively.

Successful AI governance is not limited to enforcing rules but involves fostering a culture of ethical responsibility. This requires a mindset that balances risk with opportunity. Companies must work closely with legal teams to ensure that AI systems do not inadvertently breach regulations. This requires continuous legal oversight, particularly as AI evolves and new use cases emerge. Being proportionate in AI governance, focusing on high-risk areas and scalable oversight, is critical to effectively balancing AI’s benefits against potential risks. Retailers need to ensure that AI systems comply with existing laws and regulations, working closely with legal departments to mitigate potential risks, protecting both customer data and employee rights in the process.6

Navigating intellectual property challenges

As AI supports the creation of new designs, marketing strategies, and other innovations, intellectual property (IP) issues will become increasingly important. For example, recent rulings on AI-generated content raise questions about ownership rights. Retailers need clear policies regarding IP ownership for AI-driven innovations, ensuring they are legally protected while avoiding conflicts with third-party rights. This challenge requires AI governance professionals to understand not only the technology but also the intersections of IP law, ethical standards, and commercial pressures. A perceptive approach to AI governance (building a shared language around AI and data science) facilitates mutual understanding and credibility, strengthening governance practices across the organisation.

Continuous governance for continuous innovation

AI governance is not a one-time effort but a continuous process that requires regular updates and audits, as well as alignment with organisational values. This is particularly important when addressing dimensions such as bias, data privacy, and fairness. Retailers must adopt governance frameworks like ISO 31000:2018 Risk Management Guidelines or the NIST AI Risk Management Framework to ensure AI systems comply with legal and ethical standards. Regular audits will help navigate the complexities of AI and maintain responsible use.7

As retailers face the complexities of AI deployment, they must prioritise thoughtful planning, structured governance, and continuous adaptation to ensure successful outcomes. Here are the key practical steps for integrating AI, which serve as essential takeaways:

Conduct a formal needs assessment: Start by understanding where AI can add the most value, ensuring alignment with both operational challenges and broader business objectives.
Align AI with organisational goals: AI must not operate in isolation. Leadership should set a clear vision and develop a roadmap with prioritised use cases that target strategic impact.
Develop proof of concept and pilot programmes: Test AI through controlled pilots, refine based on real-world data, and involve key stakeholders across departments to ensure AI integrates smoothly with existing systems.
Iterate and improve before full-scale deployment: Do not rush into full implementation. Learn from pilot results, iterate, and document decisions to create a responsible and transparent AI framework.
Plan thoroughly for full-scale deployment: Ensure detailed planning, resource allocation, and ongoing performance monitoring to mitigate risks and avoid AI becoming a “black box.”

Beyond technical steps, continuous adaptation and monitoring are necessary to keep AI systems aligned with business objectives and ethical guidelines. By continuously evaluating and refining AI systems, retailers can unlock AI’s potential as a strategic asset that drives innovation, inclusivity, and sustainability. At its best, AI governance becomes a key enabler of long-term value. Retailers who embrace governance frameworks and standards, coupled with transparent, accountable practices, will be well-positioned to succeed and thrive in a future shaped by AI, ultimately benefiting both employees and customers with a responsible, human-centred approach.

The "black box" challenge highlights the dual impact of AI in retail: AI systems shape customer experiences in areas like personalised shopping and dynamic pricing, and they influence employee-related decisions, such as hiring and resource allocation. Yet, these systems must themselves be shaped and guided by human oversight. This interdependence calls for transparency and accountability, ensuring that AI-driven decisions are effective and aligned with the core values and needs of employees and customers. AI operates as a "socio-technical system"—meaning it blends both technical processes and human influence. This requires a strong foundation of ethical, human-centred governance where AI complements company culture by prioritising people and data integrity over purely algorithmic outcomes.

AI is best used as a tool to support, rather than replace, human judgment, helping decision-makers make informed choices through simulated insights. Such a foundation ensures that AI complements organisational culture, expanding possibilities while adhering to human-centred values. A purpose-driven approach to AI integration paves the way for sustainable growth and innovation, allowing technology to amplify human values and propel the retail industry toward a future rich with meaning and resilience.

Credits: IADS (Maya Sankoh)

Selvane Mohandas du Ménil

IADS Exclusive: Manor details its new concept and strategy

IADS Exclusive

November 11, 2024

IADS Exclusive: Manor details its new concept and strategy

IADS Exclusive

November 11, 2024

Selvane Mohandas du Ménil

Last October, Manor gathered its business partners to introduce them to its new Men’s and Women’s fashion concept, unveiled in the newly refurbished Basel store and supported by a press release issued the same day. It was the first time that Manor conducted such an event, which reminded of what Boyner does to keep connected with its local suppliers and partners in Turkey./nbsp]

For Manor, an IADS member since 1968, it was, however, an excuse for a much more comprehensive update about every category, the company itself, and where the CEO, Roland Armbruster, sees it in the coming years. This is why the format took the shape of a keynote, modelled after tech companies, with Armbruster, CMO Sandra Kottenauer and CFO Thomas Stocklin, taking the stage solo one after another to discuss product strategy, omnichannel updates, belief in more stores, retail media, and enhanced cooperation with brands and suppliers. The session ended with a Q&A with the three top executives, moderated by Sandra Kanzig, Communications and Marketing Director.

The grand event was complete with a staged visit to the revamped Basel store, so the audience could discover the new ground floor (cosmetics, perfumes and accessories) and the first and second floors (men’s and women’s fashion).

In the aim to become Switzerland’s fashion destination, Manor goes lifestyle

As Manor seeks to solidify its role as a compelling brand within Switzerland's retail landscape, it emphasises fashion, a key driver of the retailer’s brand identity. Over the next three years, Manor will invest in refurbishing its top 12 stores’ fashion areas, i.e. 20,000 sqm (which account for over 50% of the company's turnover), to create a consistent, nationwide brand image, particularly through enhanced lighting concepts.

A critical aspect of this strategy involves clearer segmentation of Manor's fashion offerings, moving from a disorganised shopping experience to a well-defined lifestyle segmentation, focusing on classic, contemporary, and casual styles. This shift acknowledges the evolving nature of consumer preferences, where lifestyle takes precedence over age in fashion choices. To support this, Manor is introducing 20 new brands tailored to regional preferences, reflecting the diverse fashion tastes across Switzerland, sometimes in exclusivity (in Basel, American Vintage, Someday, Hugo, Michael Kors, Liu Jo, G-Lab or Ted Baker were not represented before). The accessories segment is also receiving significant attention, to offer consumers a complete lifestyle experience.

Manor's private label will align with these segments, ensuring coherence and appeal alongside premium international brands through astute in-store positioning. This strategic alignment extends into digital realms, where Manor is poised to take significant strides in retail media, leveraging digital assets to enhance brand communication and consumer engagement.

In the beauty sector, where Manor holds a strong market position, the focus remains on innovation and customer experience. Manor aims to maintain its leadership by continuously introducing new brands and services, particularly in emerging wellness and green beauty areas. Deeper collaborations with brands like Rituals and Sephora exemplify Manor's commitment to co-creating unique in-store experiences that cannot be replicated online, emphasising the value of personal service and exclusive offerings.

In the non-food categories, Manor is strategically refining its sports and toys offerings, focusing on key areas that align with customer interests. By concentrating on training and outdoor apparel instead of bulky items like skis, Manor adapts to the logistical realities of city centre locations. In toys, the opportunity lies in creating interactive, experience-driven spaces that serve as family-friendly destinations, enhancing in-store engagement and online growth.

The food sector remains a pivotal traffic driver for Manor's physical stores, distinguished by a market-like atmosphere offering personalised service and ultra-fresh, homemade products. This unique positioning helps attract a steady flow of customers, benefiting all store categories. Significant investments are planned for Manor's supermarkets and restaurants, particularly in major locations like Geneva, which will undergo refurbishments to enhance the food shopping experience further.

Marketing efforts are also being revamped, with a new centralized team and a fresh visual identity to deliver consistent brand expression across all channels. Manor is embracing a more modern, approachable aesthetic and plans to leverage brand ambassadors like Olympic champion Wendy Holdener to enhance local relevance and trust. Regarding technology, new investments in CRM have already bolstered customer acquisition by over 20% annually. Now, the focus shifts to customer activation, leveraging data to enhance basket sizes and customer engagement through targeted marketing based on purchase affinities. This approach is expected to double the value of CRM-linked customers.

Manor's strategic transformation: a call for enhanced partnership models

Manor is leveraging its unique market position to drive increased footfall in urban centres while enhancing brand value across physical and digital platforms. A 200+ million Swiss franc investment backs this strategic initiative to optimise its value proposition, including major store refurbishments in Basel and Lausanne (2024), followed by Lugano, Vevey, and Geneva (2025).

The strategy presents a compelling mutual benefit proposition: through co-investment, both Manor and its partners stand to maximise returns. While selective store closures are occurring in underperforming regions like Ticino, Manor's commitment to physical retail remains robust with over 50 locations maintained and enhanced. A cornerstone of this commitment is the planned 13,000 sqm flagship store in Zurich, set to open by 2027, featuring innovative concepts across fashion, home, beauty, and dining segments.

Manor also plans to invest in its sales teams, enhancing customer service skills and brand knowledge, provided partners play the game and decide to move in with new models (such as concessions) at Manor. This aligns with broader retail trends where transitioning from wholesale to concession models has shown a 25-30% sales increase. This is why Manor’s top brass tactically emphasised the importance of a collaborative approach, inviting partners to contribute meaningfully across three main pillars, offerings, story, and operations:

Offerings improvement: ensuring premium product assortment in urban locations and digital platforms, primarily through concession models designed to optimise partner offerings,
Brand storytelling: enhancing brand visibility across all touchpoints to strengthen consumer mindshare,
Operational excellence: implementing seamless operations that showcase innovation while delivering powerful joint marketing messages through Manor's new Retail Media platform.

These collaborative initiatives are designed to maximise in-store and online opportunities for suppliers, streamlining the supply chain to enhance consumer-facing value. By ensuring high-quality products are delivered on time and optimising digital data exchanges, Manor aims to minimise time-to-store and reduce warehouse durations. This improves stock flow and accelerates product availability across all sales channels, leading to increased full-price sales and decreased discounts through shared inventory risk management.

Furthermore, they insisted that Manor is a solvent partner, facilitating sustainable investments in the retail sector. Unlike the market average payment period of 50 days, Manor has reduced this to just 25 days. Together with their parent company, Maus Frères, they have introduced a supplier financing option poised to enhance financial flexibility for partners further. That was also a way to kill the tenacious rumours that have spread for years suggesting that the company was for sale.

How is the Basel store delivering its promises?

The Basel location serves as a prototype for Manor's transformation under new artistic director Volker Kächele, who joined in February 2024. His 360° approach ensures brand consistency across all customer touchpoints—from store windows to digital platforms—creating a unified, customer-centric experience. Everything has been de-siloed: he also supervised the brand revamping, which is visible at the cash desks. The dynamic and relaxed seasonal campaign, displayed on kakemonos and in-store screens, also caught the eye.

Consequently, the first answer is yes, the promises are delivered. The new atmosphere is immediately felt when entering the store, thanks to the overall colours, the lighting, and how the new Manor brand identity is subtly present everywhere.

It also gives much more space for third-party brands to express themselves through 2 approaches:

Either by maximising the visibility that concessions allow, as exemplified on the ground floor by the massive presence in entry-price jewellery given to Phantasya, Pandora and Swarovski, or, in the cosmetics section, the hard-to-miss Sephora stand.
Or through the work done with all furniture suppliers to rethink the display units, with lower, more accessible and perspective-friendly units that focus on products and brands.

Consequently, the gaze runs freely on all floors, and visitors feel that the space is clear, with visible and identifiable sections.

Some elements are thought out in detail and show to what extent Manor aims to be a place to visit and live, not only a place to purchase. For instance, the watch stand, operated with Hirsch, a watch strap manufacturer, is also a service point where customers can have their items revised, repaired, or customised. It also sells accessories, such as electric storage boxes for automatic watches, fully representing the watch universe.

Another point that caught the attention during the visit was the notion of partnership that Manor’s top management was calling for during the presentation. Some brands are already playing the game, such as Saint Laurent, which offers its “Vestiaire Olfactif” exclusive collection on the ground floor, in addition to the more commercial lines. For now, it is the only luxury brand to present its high-fragrance line, but it clearly shows the shift that Manor is making.

Finally, while Manor’s CMO tackled the topic without deep-dive into it, Manor’s private labels’ upgrade is also very visible now, not only through their increased coherence with the general store environment but also through astute zoning: for instance, Manor’s contemporary line is adjacent to Levi’s, while in sportswear, it is near Nike. The idea is clear: Manor’s private labels are not by-products or second thoughts but a desirable component of the store's offer.

Under Roland Armbruster's leadership, Manor is executing a rapid and comprehensive transformation that defies stereotypes about Swiss conservatism. The pace and scope of change demonstrate a bold vision for retail innovation, setting new standards in the Swiss market.

In the coming weeks, Manor will engage partners individually to explore transformation opportunities and review contributions. This means that the Basel and Lausanne renovations mark just the beginning of Manor's ambitious journey toward retail excellence, and more changes should be expected in every aspect of the business in the coming months and years. Stay tuned for news from Switzerland!

Credits: IADS (Selvane Mohandas du Ménil)

Selvane Mohandas du Ménil

IADS Exclusive: How Singapore’s new shopping experiences give a glimpse of the future of retail

IADS Exclusive

November 4, 2024

IADS Exclusive: How Singapore’s new shopping experiences give a glimpse of the future of retail

IADS Exclusive

November 4, 2024

Selvane Mohandas du Ménil

Singapore, officially known as the Republic of Singapore, is a member of the world’s exclusive club of city-states, along with Vatican City and Monaco. Singapore was even identified in 2015 by the Financial Times as “the world’s only fully functioning city-state”, with its currency, a large airport acting as a worldwide hub, one of the busiest maritime ports, and fully fledged armed forces (a feature that the other two do not have). Singapore’s numbers are astonishing: it was the 4th most competitive economy in the world in 2023, one of the world’s very few countries to be rated AAA by S&P, Moody’s and Fitch altogether (and the only one in Asia), the second densest city in the world after Monaco, the second country in the world in terms of being a business-friendly place. 100% of its citizens are equipped with smartphones (a feature that even South Korea, an ultra-connected market, does not reach).

Singapore’s reputation in terms of productivity is well-established. Still, combined with tourism (Singapore is the 5th most visited city in the world and the second in Asia, thanks to its “City in Nature” positioning promoting sustainable tourism), it becomes a natural destination for anyone versed in retail. The state in its current form is 107 years younger than the first department store to have opened there, Robinsons in 1858, when Singapore’s population was 80,000, of which 50% were Chinese.

Today, retail represents 3% of the national workforce and 1.4% of Singapore’s GDP, serving nearly 6m inhabitants. Most of its iconic department stores are located on Orchard Road, which gives visitors the feeling of seeing double, given the ubiquity of luxury and fashion labels there. This situation raises some serious questions regarding the still-operating department stores (Robinson’s closed for good in 2021): how are they differentiating? What is up-and-coming in such a competitive retail landscape?

Are department stores in Singapore a disconcerting picture of the past?

Strolling down the 2.2 km-long Orchard Road is an authentic luxury experience, in a literal way: the whole location and its street furniture were revamped in 2010 for a total of $40m, to be on par with the retail tenants: more than 50 luxury flagship stores, 5,000 fashion and retail lifestyle stores, 800 restaurants, bars and cafés, and at least 4 department stores, all over more than 8m sqft of retail space. It is a culture of plenty, and one might see the same logos repeatedly, from Louis Vuitton to Gucci, Chanel or Dior. Every retailer preempts as much visual space as possible to be louder and more attractive than its competitors, including luxury brands.

It is stunning to see so many different department stores in such a small area, in a densest way than in other international shopping hubs such as New York, Paris or London: customers have the choice between 4 different department stores, all located less than 3 minutes from each other. Differentiation is, therefore, key to making sure they stand out, and, in earnest, the mission is not accomplished: even though Tangs, the now-oldest Orchard Road department store, has implemented some very nice ideas to create loyalty and a sense of belonging, it is difficult to feel excited by the department store scene.

Among foreign operators, Indonesia-based Metro Department Stores is the oldest in Singapore. It opened in 1957 to sell overseas labels to wealthy housewives. The first store on Orchard Road opened in 1965 and relocated when the Paragon Mall (in front of the first location) opened in 1987. After having up to six stores in the 2000s, Metro now only operates the Orchard Road flagship and the suburban location of Causeway Point. It focuses on private labels to complete an international offering.

The Paragon Mall was refurbished in 2008 for $82m, including opening new retail spaces. This allowed it to go upmarket and attract luxury brands such as Tod’s, Prada, Miu Miu, and Gucci, as well as Marks & Spencer and Toys”R”Us. It offers upscale dining options such as the Imperial Treasure Peking Duck, a supermarket, and the expected array of services in such a location: concierge, free Wi-Fi, members’ lounge, and EV and phone charging./nbsp]

In such a context, anyone would expect an upscale experience when visiting the anchor department store, which is far from the case. A major issue comes from Metro's location within the mall, at the back and up one floor, forcing customers to use escalators to visit a store that lacks both efficient in-mall frontage and outside views and windows. Consequently, the department store has low visibility and cannot entice international visitors without prior knowledge of the mall to come in and visit.

The store is developed on three floors in a very classical manner: cosmetics, fragrances, and women’s shoes on the first floor, women’s and men’s apparel and accessories, and services on the second, while home, kids, and lifestyle can be found on the last floor.

When arriving in the store, the experience in the cosmetics and fragrances area is luxurious and efficient, with branded counters without walls, allowing a sense of space. The shoe area is similarly wide open, providing perspectives and a sense of plenty. The apparel floor feels less luxurious, as fewer luxury labels and many more mid-market names are displayed in a generic setting, therefore not providing a memorable experience. The feeling gets more present on the last floor, where the purpose is clearly to sell products rather than propose a special experience. Some decisions are surprising:

The store is offering suitcases on every floor, even though they are officially displayed on the last one according to the floor maps,
Similarly, the transitions between categories can sometimes be unsettling, such as the second floor, where lingerie is mixed with luggage and men’s apparel on sale.
Lego is advertised on the floor plans and suggests a significant shop in the shop with a branded display, while in fact, the products are on shelves near other brands without a specific effort to promote the brand.

Traffic was satisfying at the time of visit, which suggested that the department store succeeds in attracting a crowd of loyal locals. However, it is difficult to understand Metro’s selling point to international customers apart from discounts and rebates.

Japanese department store Isetan entered Singapore in 1983 with a store on Parkway Parade (the store was closed in 2022), in Wisma Atria on Orchard Road in 1986 (Isetan closed the store in 2015 and converted it into rental units keeping the Isetan umbrella name), in Orchard Road’s Shaw House in 1993 (the current flagship), as well as in 2 other suburban locations in 1995 and 2010. Today Isetan operates 3 locations in Singapore.

The Shaw House was built in 1993 on the old Lido Cinema and sits at the crossroads of Orchard Road and Scotts Road, leading some locals to dub it “Isetan Scotts”. The store is expanded on 5 floors: a basement with a supermarket and gourmet restaurants, the first floor dedicated to cosmetics, beauty and jewellery, the second floor dedicated to women’s apparel and accessories, the third floor dedicated to “lifestyle” including men’s fashion and gadgets, as well as golf apparel, and the last floor devoted to home and kids. Like in the Shinjuku location in Tokyo, each floor offers food and beverages, which encourages spending time in the store.

Overall, the feeling is extremely luxurious, and the highlights are the spectacular grocery store in the basement (which could easily compare to the Isetan Tokyo experience or Le Bon Marché’s Grande Epicerie in Paris) and the atrium on the ground floor (first floor), which structures the whole building.

The first floor, dedicated to cosmetics and fragrances, is beautiful but empty at the time of the visit. However, the only moment when a salesperson initiated contact was on this floor, while it did not happen at any point in any other store visited on the same day. Store execution is spectacular, and a “Café de Muse” coffee shop completes the product offering.

This overlap of food and retail is also felt at the second floor and is quite effective. However, women’s fashion offerings are toned down by the fact that brands are not visible, creating a strange experience in which the food points stand up. The same feeling takes place at the third floor where the Sushiro restaurant feels almost part of the Bang & Olufsen stand and is almost too visible, shadowing interesting spaces such as the one dedicated to golf. Finally, the fourth floor (technically the fifth as there is an intermediary floor operated by another retailer and not accessible from within the store) displays kids and home. It gives access to the McDonald’s restaurant and the cinema.

While the overall experience was clearly more luxurious than in Metro, and the effort to provide a series of food options during the visit was notable, the feeling, here again, was that this store was selling products rather than experience, questioning the very reason why one would come specifically to Isetan and not another department store.

Its Nippon competitor Takashimaya entered Singapore in 1988 when they signed a joint venture deal with real estate developer Ngee Ann Kongsi, which opened the two-towers-strong Ngee Ann City building in 1993 on what used to be a cemetery. Takashimaya occupies 37,000 sqm in Tower B and used to compete with Tangs in Tower A until it closed for poor results and was replaced by a series of luxury flagship concessions.

The store is structured according to Japanese retailers’ playbook: a basement with a Japanese supermarket and a food hall, a ground floor dedicated to cosmetics and accessories, international designers on the first floor, ladies’ and men’s apparel and accessories on the second floor, then kids on the third, and home appliances on the top floor./nbsp]

The second basement, which includes Japanese food and restaurants, was bustling when visited at 3 p.m. on a weekday, suggesting that the place is recognised as a meeting point and a landmark for locals. A selection of international and Japanese food labels completed the offering and gave a sense of elevated shopping despite the noise, excitement and intense crowd. The first basement, dedicated to homeware, home appliances and kitchenware, offered a stark contrast, as the traffic was lower and the experience poorer: just like at Metro, products are stacked rather than desirably displayed.

The first floor (ground floor) is Japanese department store retail at its best, with a series of international luxury cosmetic brands alternating closed-wall units and open ones, all surrounded at the periphery of the floor by mid-market accessories brands shop-in-shops such as Kate Spade, Coach, Bally or Marc Jacobs. Luxury names can be found on the second floor, where the likes of Bottega Veneta and Manolo Blahnik neighbour Issey Miyake, Ba&sh, Ganni and Kenzo, and regional names such as Bora Aksy and Maryling. A section was under refurbishment at the time of the visit, with Mulberry and Burberry due to open and the Hermès space temporarily relocated to the third floor. The first floor also houses a Club 21 multi-label boutique, a legendary name in Singapore regarding fashion, with 7 locations in the city, including a second one on Orchard Road.

The third floor is dedicated to women’s and men’s fashion, accessories, a selection of tech, and luggage. The space is much more fragmented regarding retail units and feels more crowded. While the women’s section could claim to be the most agreeable experience, thanks to a mix of international brand stores (Maje, Sandro, the temporary Hermès unit), the floor felt overall rather poor in terms of experiences, with a strange floor plan, locating customer services near lingerie and men’s gadgets, and a very significant and unappealing luggage area near the escalators in a very high-traffic zone. The service area (which includes the VAT refund) works with a ticket system, and customers wait on tired seats, making the experience unappealing.

The fourth floor is dedicated to sports, kids, and restaurants. Toys are appealing (all units are branded), childrenswear does not stand out (most brands are in generic display), and the sports section is spectacular, thanks to a space operated under ‘Sports Central’. Again, some store zoning choices are questionable, such as the fitting rooms near the lifts. The shopping options are completed with the top floor offering home appliances sold by a business partner, “Best”, under different branding.

The experience at Takashimaya ranges from exciting and bustling at the food level to classical and “déjà-vu” on the ground floor and disappointing on the top floors.

The notable exception of Tangs…

Tangs, an iconic name often compared by locals to Bloomingdale’s and Selfridges, was founded by C.K. Tang, a Chinese national, in 1932 on a first location in Singapore. He was one of the first to identify the potential of Orchard Road, from an old dirt road to a major traffic magnet. He relocated there in 1950, opening his store in front of what used to be a cemetery and initiating a spectacular real estate boom in that part of the city. Today, the group also operates a 7,900 sqm unit in another mall, VivoCity, that opened in 2006 and was fully renovated in 2022.

The Orchard Road location, which spans five floors and more than 15,000 sqm, was renovated in 2012 for $35m and is currently undergoing a new set of renovations announced last July, starting with the basement. The store is modelled after the Chinese Imperial Palace and is flanked by a tower, the Tang Plaza, which was purchased in 1982 and houses a Marriott hotel.

The basement is dedicated to home, wellness and gifts, while the first floor (ground floor) accommodates beauty, the second floor women’s and kids, the third floor homeware, gadgets, tech and men’s, and the fourth floor beauty services. Food options are available across the building except for the third floor.

The basement, while not dedicated to gourmet food like in its Japanese competitors, feels very luxurious regarding how products are displayed, with an effort given to VM and product visibility. Consequently, brands seem more desirable because they have more space for expression, such as Miele or the large Dyson space in front of the escalators. The atmosphere is quiet, without music, which allows operators to diffuse promotional advertising without being too oppressive. What also stands out is the TANGS-branded space dedicated to glassware, tableware and appliances, emphasising the notion of curation and selection.

The first floor (ground floor) feels extremely luxurious and quiet during the visit, despite the passing crowd in front of the store (and even when compared to the traffic in the basement). Brands are organised by semi-closed units, creating perspectives but avoiding giving the visitor a sense of the (relatively) small surface of the store. A bakery producing croissants on site is available, and interestingly, it is completely glass-walled to allow visitors to see but avoid spreading smells in the store.

The second floor is dedicated to women and kids. Again, the presentation is extremely luxurious. Similarly to the basement, a TANGS-branded space proposes a curated offer with exclusive brands such as Suncoo or By Malene Birger. It is strategically located near the food point, allowing here again to create synergies. Messaging is all about caring for the community: wall advertising mentions that “TANGS loves local” and promotes Singaporean-based fashion.

The third floor is well executed, especially regarding homeware and beds. Some product zonings are surprising (men’s underwear is located between luggage and beds). Still, overall, the feeling of luxury remains present, even if the visitor is now on the higher floors. A large Sunglass Hut stand and an overrepresentation of luggage also stand out on this floor. The shoe concept is very coherent, and when it comes to sports, it makes it obvious that Tangs has managed to maintain its partnership with Adidas but lost Nike. A common point to the second and third floors is that Tangs seemingly focuses on mid-market brands, which are often private labels or new and unknown names when it comes to fashion.

The fourth floor is dedicated to beauty salons, including a Chanel Privé, and a “museum,” which is a wall displaying historical pictures of C.K. Tangs, his belongings, the company's history, and repeating the company’s commitment to serving the local community.

There is a clearer path towards more experience at Tangs. It does not go only through the offering of many food and beverage points but also through the expression of the retailer’s name in a very specific (and desirable) way from the point of view of the community, emphasising its local commitments and rooting, as well as real attention given to details and execution at all floors of the store. It is therefore telling that a new round of upgrades is starting to increase the level of experience during the visit even more.

…but wait, there is more!

In Singapore, department stores might not be the ones writing the future of the retail experience, as they are entangled in a competition to retail the best brands (which are otherwise tempted to go solo), in a declining market (retail sales decreased by 2.3% in July 2024 and department stores slid by -11%), where customers are strangled with inflation and ask for more promotions, while leases and rents are increasing. As a consequence, innovation is coming from unexpected places.

In the Isetan Wisma Atria mall, on Orchard Road, a bank, OCBC, has opened a remarkable space worth visiting. The OCBC space is a whole retail unit, accessible both from the atrium (connected with the food court) and the escalators, and is special in the sense that it is much more than a bank.

While customers have access to a series of ATMs at the entrance and dedicated desks for all customer tiers (from personal to private and “premier” banking), as well as a customer service desk, OCBC offers them to spend more time on-site by offering retail activities:

A visually appealing and functional spectacular library allows people to spend time reading books. They can also purchase them, which echoes OCBC’s cultural positioning since the bank also offers to view a part of their private art collection in a gallery next to the library.
A café is based in the library space, where customers can enjoy vegan food,
A retail space offering sustainable and locally produced items allows to shop from a variety of categories, from tableware to gadgets or clothing,
Finally, a sushi restaurant is also available.

Interestingly, OCBC is very clear about the notion of customer data: every credit card holder has priority over other customers for all categories and a 10% discount, while non-holders, including foreign ones, are invited to choose between either opening a bank account on the spot or simply apply to the loyalty programme. The space overall stands out in terms of experience and creates a true attraction: during the visit, many bank customers were coming from all parts of the mall to settle a bank question and stayed there, having a snack or reading a book, in a relatively quiet, relaxing and welcoming environment. Isetan owns the space: leasing it to OCBC is a smart way for a retailer with a non-productive space to rent it to a new operator, bringing a fresh perspective on the retail experience.

At the Singapore Changi airport, another approach was taken at the Jewel Airport mall to generate interest and curiosity. This mall is not just another airport mall: it was clear since its opening in 2019 that, to be profitable, the 137,000 sqm-large, $1.2 bn-worth mall should address local customers first, well before tourists: the plan involved having 60% of local customers and 40% of international ones. In 2023, footfall increased 26% over 2022, and 70% of it was from local customers. The Jewel is extremely special as a mall:

The mall focuses on new-to-market brands, such as the first Shake Shack, Burger & Lobster, Pokemon, or Make Hero, a Japanese make-up brand, stores and restaurants.
Also, well-known brands are invited to display a distinctive experience: Apple has developed a store centred around photography, given the picturesque, inverted fountain that has become The Jewel’s most famous picture. Bacha Coffee, a new coffee chain, has developed a truly experiential store, while Bengawan Solo, a Singapore-based bakery, has opened its largest store (out of more than 50) in the airport. Overall, local brands are invited to show off and are given prime locations in order to showcase Singapore to the world.
The Jewel has also managed to become a landmark thanks to their Rain Vortez and Forest Valley, which have become places to visit when staying in Singapore in the same way that tourists want to come and see the world-famous Gardens by the Bay. The Jewel has become more famous than the Gardens by the Bay and Universal Studios.

In addition to these retail essentials, The Jewel offers a double reward programme through a collaboration with CapitaStars: both travelers and local residents can capitalize on points and enjoy benefits that can differ according to the population: travellers are offered early check-in, baggage storage or access to the lounge, while locals can enjoy attractions such as the Changi Experience Studio, the Canopy park, or even behind-the-scenes experiences such as Backstage, which explains how the airport works.

Singapore's department store scene on Orchard Road presents a paradoxical landscape. While the area boasts an impressive concentration of luxury retail and diverse shopping options, the department stores struggle to provide truly differentiated experiences. Despite their long-standing presence, Metro, Isetan, and Takashimaya face challenges in creating memorable shopping environments beyond their ground floors. They often fall into the trap of merely selling products rather than curating experiences, with inconsistent zoning and a lack of cohesive brand narratives throughout their multi-level spaces. Tangs emerges as a notable exception, demonstrating a clearer path towards experiential retail. Its focus on local community engagement, curated offerings, and attention to detail across all floors sets it apart. The ongoing renovations at Tangs suggest a commitment to further enhancing the customer experience.

However, the future of retail experiences in Singapore may not lie within traditional department stores. Innovative concepts like OCBC's multifunctional space in the Isetan Wisma Atria mall and The Jewel at Changi Airport are redefining customer engagement. Both sides of the same coin give access to the future: retail spaces can be redesigned to bring something new and unexpected to customers while not often having to go with a decrease in direct revenue (however, the nature of the revenue will change). In the same manner, even in a 100% concession model such as an airport, brand curation, rooting in the local ecosystem and being able to provide distinct privileges to both locals and tourists remain key to being attractive and interesting.

Department stores have always excelled at those activities, so there is no reason for them not to catch the train while it is still there. Singapore is, in that sense, the perfect reminder that, while it is possible to be swamped by the “business as usual” and the necessity to be profitable today, the mere idea of still being around tomorrow requires a strong vision and will to move the lines in a very significant manner. The path forward for department stores involves reimagining their roles as curators of unique experiences rather than mere product sellers.

Credits: IADS (Selvane Mohandas du Ménil)

Christine Montard

IADS Exclusive: Nike, a cautionary tale on the DTC business model

IADS Exclusive

October 21, 2024

IADS Exclusive: Nike, a cautionary tale on the DTC business model

IADS Exclusive

October 21, 2024

Christine Montard

Department stores have experienced a decline in sales and prominence over the past decades. This decline is attributed to changing consumer habits and the rise of e-commerce, which has provided consumers with more convenient shopping options. Many department stores have struggled to adapt to these changes, resulting in financial difficulties and store closures. On the other hand, direct-to-consumer (DTC) brands have revolutionised the retail industry by cutting out intermediaries and selling directly to consumers. This approach has allowed some of them to offer better prices than regular brands, personalised experiences, proximity with their community of customers and greater convenience. Many global brands have also considered adopting a DTC approach to grow margins and control their image and prices without withdrawing from department stores and multi-brand retailers altogether. However, this new business model puts additional pressure on department stores. Nike is the best example of the success and limits of the DTC business model, showing how partnering with multi-brand retailers is still very much relevant and efficient.

Going DTC: the tumultuous relationship between Nike and multi-brand retailers

In this past decade, Nike has significantly transformed its distribution strategy. In 2017, the brand embarked on a DTC strategy, cutting half of its multi-brand partners by 2021. As reminded by BoF, at the time, DTC brands were top-rated by consumers and seen as a smart business model. Startups like Allbirds were expected to become unicorns on the single assumption that they wouldn’t need department stores or multi-brand retailers to reach consumers, instead recruiting them online and on social media. Shareholders and analysts celebrated Nike’s move as they saw it as a way to increase control over customer data and personalise marketing efforts. Nike's DTC strategy impacted big US names such as Sporting Goods, Dunham’s Sports, Urban Outfitters, Dillard’s, and Zappos. Nike maintained relationships with major accounts like Foot Locker and Dick’s Sporting Goods, though. However, in 2022, demonstrating complex relationships, Foot Locker reported a significant decline in its Nike inventory.

Focusing on direct sales through its ecosystem composed of its own stores, website, and app, Nike’s DTC approach was designed to strengthen customer relationships, control prices and customer data, and capture higher margins. The brand’s DTC strategy reached new heights when Nike started focusing on localised and experience-based retail concepts, such as Nike Live stores. Typically located in urban neighbourhoods, hyper localised, this small-format (from 1,000 to 3,000 square feet) retail concept was designed to provide a personalised shopping experience based on the preferences and behaviours of local NikePlus members. Nike Live stores are integrated with the Nike app, allowing customers to reserve products, access exclusive content, and enjoy seamless checkout experiences. These stores also serve as community hubs, hosting events, workshops, and training sessions. The product assortment is tailored to the local market needs, with new products often introduced to keep the selection fresh and relevant. This strategy showed success, with Nike’s DTC channels seeing strong growth. In the third quarter ending in February 2023, direct sales reached US$5.3 billion, a 17% increase year on year.

The relationship with Nike became increasingly complex for department stores, including the IADS members. The brand increased its pressure on department stores in every way possible: total withdrawal as a conclusion for a complicated business relationship, complex price negotiations, refusal to supply best-selling top-tier fashionable sneakers, and hectic and incomplete deliveries. Nike was still the world’s most valuable apparel brand in 2023, showing how popular it is and how vital it can be for department stores to carry it, especially to attract younger customers.

While it was complicated for department stores and multi-brand retailers alike, this shift was not entirely beneficial to Nike. The sportswear behemoth lost customers by pulling back from wholesale. While Nike continued to prioritise DTC, it became evident that maintaining wholesale channels was critical to reaching more consumers.

Following a more rational strategy, the brand slowly re-engaged with department stores and other wholesale partners in 2023. Macy’s CEO announced that Macy’s stores and website would resume selling Nike apparel in October 2023. Foot Locker's CEO also discussed a renewed relationship with Nike, planning for growth in their Nike business in 2024. Excess inventory issues also influenced Nike’s decision: reintegrating US retailers like DSW, Foot Locker, and Macy’s helps Nike clear over-stocks faster, making room for new products. Re-engaging with wholesale partners is even more critical at a time when more shoppers focus on essentials over discretionary products like apparel and footwear: a broad distribution becomes essential as the consumer economy tightens. Scepticism about the effectiveness of its DTC strategy also influenced Nike’s move, which aimed at stabilising and potentially growing Nike’s market presence amid a forecasted revenue decline for fiscal year 2025.

In July 2024, marking a new step in revitalising the wholesale business, Nike rehired a former executive as vice president of marketplace partners (Tom Peddie spent 30 years working for Nike, culminating as North America's vice president and general manager). Also, in October 2024, they rehired a long-time Nike Veteran, Eliott Hill, as CEO and President for his deep understanding of the industry and partners. The 2025 fiscal first quarter revenues are down 10% compared to the prior year; direct revenues are down 13%, and wholesale revenues are down 8%. Considered a Nike lifer, Hill has a big job in front of him.

The DTC’s limits

While it has limits, Nike's DTC strategy is not the only factor explaining the current headwinds the brand faces. They somehow lost their focus on products, heavily cutting on R&D. Also, they focused marketing investments on sales activations rather than on brand enhancement, providing great ROI in the short term and poor results in the long term. Finally, regarding e-commerce, Nike saw COVID-19 as the start of a new era that would forever change consumers' habits and not as the bubble it was.

Still, the DTC strategy weighs in on Nike’s performance. The brand now recognises the importance of being present wherever its consumers are, including multi-brand retailers, to maintain its market dominance. But in such a competitive market, you snooze, you lose. Nike's pulling back from wholesale prompted new brands to populate empty shelves. Multi-brand retailers had no choice but to develop relatively new competitors' presence, give them more space and communicate on their products. This explains, at least for a part, how On and Hoka boosted their sales, especially in the running categories where Nike and Adidas are traditionally dominant. Heritage brands such as New Balance, Converse and Reebok, responsible brands such as Veja, edgy brands such as Rombaut and more technical brands such as Salomon have also become increasingly successful, making department store and sports retailers’ assortments more dynamic than ever before.

The surge in comfort dressing during the pandemic also accelerated the newcomers' success. On Holding, backed by tennis star Roger Federer, and Decker Outdoors' Hoka have capitalised on this trend. For example, On Running's market share at Dick's Sporting Goods in the US jumped from 0.8% in early 2023 to 6.1% at the end of the year, while Hoka's share rose from 4.2% to 8.7% over the same period. While On and Hoka’s success is primarily attributed to their innovative designs resonating well with sneaker enthusiasts and everyday runners alike, these challenger brands pursued a pragmatic development plan and used wholesale distribution to fuel their growth. As a result, at the end of 2023, they were securing more shelf space at major US retailers, impacting Nike and Adidas's market share.

Also, when it comes to pure DTC brands, there is a limit to the number of digital transactions they can reach without having a physical presence to help them gain new customers. Besides, customer acquisition online has become way too expensive, making the DTC model less relevant. Finally, according to BMO Capital Markets, brands working DTC have not seen a relative revenue or profit margin increase. DTC brands and brands that had pivoted towards a DTC strategy should not overlook multi-brand retailers but work on the right balance between owned and wholesale channels.

Balancing DTC and wholesale

Nike's success relies on its ability to balance channels effectively, using insights from both DTC and wholesale to drive growth and stay ahead of competitors. Despite its DTC strategy, wholesale remains a significant part of Nike's sales, contributing US$25.6 billion in 2022 compared to US$18.7 billion from direct sales.

Nike's renewed focus on wholesale partnerships offers several benefits. It allows the company to leverage retailers’ store networks and tap into their existing customer bases, reaching consumers who prefer shopping in multi-brand environments. The brand’s 2023 new wholesale deals, such as those with Dick’s Sporting Goods and Zalando, are designed to be more collaborative, providing Nike with valuable customer insights and enhancing its market reach. For instance, Nike’s partnership with Dick’s Sporting Goods includes linking customers' Nike membership programme, which benefits both the retailer and Nike by sharing sales data and fostering loyalty.

Having a physical store presence is crucial for emerging DTC brands. They can use department stores to test new markets and products. By entering department stores in specific regions, brands can assess consumer interest before committing to opening their stores. This strategy allows brands to minimise financial risk, gather valuable data on shopping habits, better understand local market dynamics and test new ideas and products without significant upfront investments. Activewear brand Vuori, for example, partnered with Selfridges and Harrods in London to establish a presence before opening its own store.

Collaboration with department stores can also go in another direction. After opening their first store on London’s Regent Street in 2022, Gymshark debuted a permanent store at Selfridges in March 2024 (both in the women’s and men’s departments). Maximising visibility, the DTC brand used Selfridges rather than its own store to launch its first premium athleisure collection, ‘everywear’, with a month-long exclusivity for Selfridges. Gymshark chief brand officer said: “When we were developing […] ‘everywear’, we realised we had to launch it somewhere exciting. That’s why […] this first line will exclusively launch at the UK’s most prestigious retailer, Selfridges, both online and in-store.” Partnering with a department store like Selfridges is also a way for Gymshark to make the brand visible to tourists and develop brand awareness and appeal ahead of their second free-standing store opening in London.

Department stores traditionally attract aspirational customers, and their customer base is different from that of brands’ own stores. Brands have a unique opportunity to access different customers and leverage department store data to inform their marketing and product strategies. By understanding which products perform well with certain customer groups, brands can tailor their offerings and marketing efforts to meet consumer preferences. Brands can collaborate with department stores to create exclusive products and curated collections. These collaborations help differentiate their offerings in the competitive retail environment and attract more customers.

Many DTC brands are now embracing hybrid distribution models, selling through multiple platforms, including pop-up stores, permanent locations, wholesale partners, and their own websites. This flexibility allows them to capture and retain customers in a post-pandemic world where online growth has slowed. By forming wholesale partnerships and opening brick-and-mortar stores, DTC brands can expand their distribution and reach new customers.

As seen with Nike, the relationships between DTC-oriented brands and department stores are complex and multifaceted. By embracing hybrid models, forming partnerships, and focusing on customer experiences, brands and department stores can thrive in this new retail environment. Despite challenges, department stores continue to play a vital role in the retail landscape. Brands can leverage department store presence for market testing, getting customer data and collaborating on exclusive offerings. Department stores provide brands with a platform to reach a broad audience, which is particularly valuable for gaining brand exposure and accessing new customer bases. Being selective in their partnerships and balancing DTC and wholesale channels effectively can lead brands to sustained growth and profitability, ensuring that both channels complement rather than cannibalise each other.

Credits: IADS (Christine Montard)

Maya Sankoh

IADS Exclusive: AI in retail: why culture, values and strategic goals matter more than tech?

IADS Exclusive

October 14, 2024

IADS Exclusive: AI in retail: why culture, values and strategic goals matter more than tech?

IADS Exclusive

October 14, 2024

Maya Sankoh

The rapid evolution of artificial intelligence (AI) technology represents a dual-edged sword for the retail and department store sectors. While AI promises to revolutionise operations, its integration into the corporate fabric demands more than mere technological upgrades—it requires a strategic alignment with each organisation's unique culture, values, and broader objectives. As data becomes the new "gold" and advances in hardware capabilities make previously inconceivable AI applications possible, retailers are presented with tremendous opportunities and significant challenges. This article looks at how department stores can effectively use AI to boost operations and support their mission while considering the financial and risk challenges involved.

Understanding the strategic importance of AI in retail

What’s your problem?

AI in retail is more than a technology for automating operations—it addresses core business challenges through classification, creation, recommendation and regression systems. However, defining the business problem AI should answer before diving into AI implementation, whether it’s an opportunity to generate growth or reduce costs, is crucial, as a tool is here to solve an issue, not the other way around.

Retailers must consider whether AI is the most suitable solution or whether existing systems or alternatives could address the problem more effectively. AI's success standards should often be measured against current solutions rather than an ideal, flawless system. To help identify these problems, user interviews and market research become essential tools. By speaking directly with users, retailers can gain insight into what issues are most important to address. Market research can reveal existing AI systems, their uses, and how they fit within the organisation’s needs. With this knowledge, department stores can better associate AI initiatives with strategic goals, ensuring AI is both a problem-solving tool and a growth driver. Fundamentally, understanding and addressing business problems starts with recognising that AI systems are data-centric. Even the most sophisticated AI solution can fall short without accurate and sufficient data. Therefore, the planning phase of AI development should involve assessing data availability and quality to ensure the AI system’s performance meets business expectations.

A panorama of how retailers use AI so far

AI is shaking up retail, typically solving four key business problems:

With data readiness established, the first problem AI often addresses is classification. AI’s power to organise data is a game changer. Take Sephora’s Virtual Artist1: it uses AI chatbots to classify customer queries, delivering fast, efficient responses that streamline operations and elevate service. Department stores are very advanced in using AI for their chatbots as customer queries are all very similar, making them easy to classify.
Next is content creation, where AI’s potential truly shines. Amazon's AI-powered video ad generator for holiday marketing slashes production costs while generating high-quality, engaging ads from simple text inputs. Similarly, Depop has introduced a generative AI tool that creates product descriptions from photos, making the listing process faster and easier for users. Automating tasks like generating product descriptions, SEO metadata, and imagery for retail platforms can reduce costs by up to 90%. AI helps brands scale operations while keeping content personalised and data-driven, delivering messages that resonate with their target audiences. This approach boosts customer engagement, increases conversion rates, and further reduces production costs.2
Recommendation systems are another AI powerhouse, as seen in Amazon’s product suggestions. These engines personalise shopping experiences based on customer behaviour, while AI-driven size recommendations reduce returns and boost confidence in online purchases. AI doesn’t just make suggestions; it is transforming the entire shopping journey.
Finally, AI tackles regression for tasks like sales forecasting. Macy’s leverages AI to predict future trends, though forecasts based on historical data still carry risks due to market volatility.

However, beyond automating tasks, AI supercharges efficiency. Target’s AI streamlines supply chains, cutting costs and improving logistics, while Tapestry uses AI-driven insights to tailor offerings based on customer preferences. H&M and Amazon personalise customer interaction in real-time, while Google’s virtual fitting room reduces returns by showing customers how clothes fit differently on different body types. These innovations drive loyalty and repeat business. AI is not just a tool for operational efficiency; it strategically enhances customer and employee experience, drives innovation, and maintains a competitive edge, transforming organisational performance when integrated with a clear strategic vision.

Shaping AI around people, organisation, culture and purpose

Engaging employees at every level

CEOs set the tone, but engaging employees at all levels is essential for successfully integrating AI. Education and training help ensure that everyone understands the purpose of AI initiatives and their role in the process. Without this engagement, AI initiatives may face resistance or fail to achieve their full potential. At the CEO level, strategic leadership from the CEO is crucial for successful AI integration, and the CEO must articulate a sharp vision for how AI aligns with the company’s broader goals. This top-down approach ensures that AI becomes a strategic priority, receiving the necessary support and resources to drive success. Walmart’s CEO, Doug McMillon, exemplifies initiative-taking leadership by calibrating AI initiatives with strategic business objectives, setting a solid precedent for top-level advocacy in AI adoption.

At the C-suite and executive level, AI literacy among executives is vital for successful AI integration. Executives must develop a deep understanding of AI’s capabilities and limitations to make informed decisions that coordinate AI initiatives with business goals. Target’s leadership exemplifies this commitment by investing significantly in AI education, ensuring that it supports its omnichannel strategy and enhances the customer experience across all touchpoints.

Middle managers and managers play a compelling role in AI initiatives, bridging higher management and front-line employees. At Lowe’s, AI training programs empower middle managers to critically assess where AI can be most effective and advocate for its adoption within their teams. Managers are key to the day-to-day management and operationalisation of AI initiatives, making it essential for them to be well-prepared to oversee these technologies. Companies like IKEA offer AI training programmes that empower managers to identify opportunities for AI integration within their departments while ensuring that non-AI solutions are considered when appropriate. This balanced approach ensures that AI is implemented effectively without overshadowing other valuable tools.

Regarding employees and associates, it is essential to onboard them, and bottom-up ideas should be encouraged. Front-line employees must be trained to understand how AI can enhance their roles and optimise daily operations. Proper training minimises potential resistance or misunderstandings. Starbucks, for instance, provides comprehensive training for its baristas on using AI-driven tools like the "Deep Brew" system, which helps manage inventory and personalise customer recommendations.

Infrastructure, financial considerations and strategic alignment

To successfully integrate AI, retailers must carefully assess their infrastructure, financial resources, and long-term business goals. Whether opting for in-house AI development or third-party solutions, considerations like scalability, security, and cost-effectiveness are paramount. In-house systems offer customisation but require significant investments, while third-party solutions offer quicker implementation but need to adapt to existing infrastructure.

Precise planning is essential to avoid wasted resources and misaligned AI initiatives. Retailers must ask critical questions upfront: What outcomes are expected? What improvements are needed? Which resources are available? By tailoring AI solutions to department-specific needs, organisations can secure buy-in, align AI with strategic goals, and ensure initiatives are purposeful. Successful AI deployment requires more than technological alignment; it demands an approach that integrates with the organisation's culture, values, and objectives. Companies like Nordstrom demonstrate this by using AI in inventory management while maintaining human-centric customer service, ensuring that AI enhances, rather than replaces, the customer experience. Beyond that, companies should establish clear guidelines that define how AI is developed, used, and monitored, ensuring alignment with the company's core values. For instance, Patagonia’s integration of AI into its supply chain reflects how aligning AI with organisational values—in their case, environmental sustainability—can enhance brand integrity and customer trust. This approach allows retailers to leverage AI’s potential while fully maintaining company standards, be it consumer rights, sustainability or promoting social responsibility.

Monitoring, coordinating, and purpose-driven AI implementation

AI implementation requires continuous monitoring and coordination across all departments to ensure that AI tools are leveraged effectively and remain uniform with the company's objectives. AI’s scale, speed, and scope can lead to unforeseen risks if not carefully managed, including reputational, economic, legal, and regulatory risks. Robust oversight ensures that AI initiatives do not become fragmented, leading to inefficiencies and lost opportunities.

Effective risk management is imperative to address these potential pitfalls. With AI’s transformative power, identifying and mitigating risks such as unfair bias, privacy violations, and cybersecurity threats from the outset and throughout the AI lifecycle is fundamental. Failure to do so can have catastrophic impacts, from reputational damage to regulatory fines. As AI technology evolves rapidly, it is necessary to build internal governance structures that actively monitor AI systems and their societal implications.

One example of purpose-driven AI implementation is Walmart’s dynamic pricing strategy, which demonstrates how aligning AI initiatives with specific business objectives can drive success. By adjusting prices in real-time based on demand and competitor pricing, Walmart optimises operational efficiency and customer satisfaction. This strategic use of AI highlights how AI solutions can be tailored to enhance business performance and customer experiences.

However, balancing AI deployment with human expertise is crucial to avoid over-reliance on technology and maintain the human touch. For instance, Best Buy uses AI for inventory management but relies on human expertise for customer interactions. This balance ensures that AI augments, rather than replaces, the human touch in customer service. Similarly, department stores must assess where AI is necessary and where human input adds unique value, thereby optimising the use of both AI and human resources.

To support effective coordination and monitoring, forming cross-departmental committees can help oversee AI deployment and integration. These committees facilitate sharing insights and best practices across departments, ensuring AI initiatives remain consistent with business strategies. As seen at JCPenney, cross-functional coordination is necessary to ensure AI projects remain aligned across departments, preventing siloed efforts and maximising value. Continuous monitoring ensures that AI systems remain transparent, explainable, and aligned with the company’s evolving objectives and societal expectations, fostering a unified approach to AI adoption.

By enhancing monitoring strategies and balancing AI and human interaction, retailers can optimise their AI implementations to meet business objectives better and adapt to evolving market conditions. This approach ensures that AI initiatives are not only practical but also sustainable and in line with the broader mission of the organisation.

AI and ethics

Fostering a responsible AI culture

As the final critical consideration, fostering a responsible AI culture is essential. Companies should ensure that all AI deployments are conducted within the framework of the established ethical guidelines. This approach mitigates data privacy and bias risks, ensuring that AI integration across the organisation remains responsible, privacy-conscious, and parallel with the company's core values.

This begins with integrating ethical principles into AI training programs, focusing on privacy, fairness, and transparency. By doing so, organisations can ensure their AI initiatives align with legal and ethical standards while minimising risks such as data misuse. Training should teach employees how to identify and mitigate biases in AI systems while exploring AI's broader impact on social responsibility and ethical standards. By combining technical skills with moral considerations, companies ensure that AI tools are used responsibly and align with their values and compliance requirements. Real-world scenarios and case studies further help employees critically assess the ethical dimensions of AI, positioning it as a positive force within the organisation while mitigating risks such as data breaches or biased algorithms. Together, these layers of engagement form a robust foundation for successful AI integration within the organisation. Situating the entire workforce—from the CEO to front-line employees—with the company's AI vision and providing them with the necessary skills and understanding cultivates a cohesive and innovative environment. This comprehensive approach ensures that AI initiatives are implemented effectively while fostering a culture of continuous improvement and adaptability. As AI reshapes the retail landscape, this commitment to holistic employee engagement will be crucial in achieving sustained success and maintaining a competitive advantage.

Lessons from Amazon’s failed AI recruitment tool

The need for a well-thought-out program is exemplified by Amazon’s experience with its AI recruitment tool, which was scrapped due to its inability to operate without bias. Continuous monitoring, coordination, and a clear understanding of AI’s purpose in each specific application are required to avoid similar pitfalls. Their failed AI recruitment tool is a cautionary tale of AI’s potential pitfalls. The tool developed biases against women due to flawed training data. This incident highlights the need for continuous monitoring, rigorous testing, and readiness to recalibrate or halt AI projects if they deviate from ethical standards. It also underscores the importance of incorporating diverse datasets to mitigate bias and ensure fairness in AI applications.

Incorporating AI into business operations requires strict adherence to ethical guidelines around data privacy, fairness, and transparency. AI systems must respect personal data and comply with global data protection laws, while continuous auditing helps prevent biases and ensures fairness in automated decisions.

Transparency is essential in sensitive areas like recruitment, where biased AI can cause harm, as demonstrated by Amazon’s experience. Clear communication of AI usage and constant monitoring help organisations build trust and ensure that AI solutions fit within both ethical standards and business goals.

Lessons from Patagonia’s AI privacy lawsuit

While Patagonia has set a positive example of ethical AI integration, it now faces a class action lawsuit for alleged privacy violations involving its customer service operations. The lawsuit claims Patagonia used AI software from Talkdesk to intercept, record, and analyse customer communications without informing customers or obtaining their consent, violating California privacy laws.

This incident highlights the dual-edged nature of AI, as mentioned earlier. While AI can bring about operational efficiencies, improve customer service, etc., its misuse or lack of transparency can lead to severe legal and reputational risks, requiring organisations to manage AI cautiously and embed it within their cultural and ethical frameworks.

The key lessons from the Patagonia lawsuit are:

Transparency and consent: organisations must disclose when AI is used in customer interactions, ensuring that customers are informed and consent to data monitoring.
Ethical AI use: even companies with firm ethical commitments, like Patagonia, must ensure their AI tools align with privacy laws and ethical standards.
Continuous monitoring: regular audits and strong governance are essential to ensure AI systems comply with evolving legal and ethical requirements.

Patagonia’s case serves as a reminder that AI must be implemented responsibly, balancing innovation with privacy and transparency to avoid legal risks and protect customer trust.

AI is poised to revolutionise the retail industry, offering immense potential to transform operations, enhance customer experiences, and drive innovation. However, its true impact comes when it is thoughtfully integrated into a company’s culture and aligned with strategic goals. Rather than adopting technology for its own sake, retailers must ensure that AI addresses specific business challenges, relies on reliable data, and has the support of employees at all levels. Clear leadership, continuous oversight, and adherence to ethical standards are essential for managing risks and ensuring transparency. AI’s real power lies in how carefully it’s integrated into a company’s unique culture and values rather than being hastily adopted to keep up with competitors. The key to success is implementing AI and shaping its use to reflect the organisation’s goals and mission. Before integrating AI, businesses must take a meticulous approach, ensuring it aligns with what truly matters to the organisation. This begins with fostering a culture that understands and embraces AI rather than rushing in recklessly.

AI should be seen as a tool that requires safety precautions—like a seat belt in a car—to ensure it’s used responsibly and sustainably. By taking the time to assess whether AI fits into your long-term vision and building a solid foundation, retailers can harness its transformative potential in a way that leads to lasting success as both the market and the technology evolve. This measured approach helps companies adapt to challenges and handle risks, preventing a “black box” mentality. Ultimately, the heart of the organisation must guide AI’s implementation, creating a foundation for sustainable growth and innovation.

Credits: IADS (Maya Sankoh)

PRINTABLE VERSION HERE

IADS

IADS Exclusive: Brand Roundup: Sportswear 2024

IADS Exclusive

October 7, 2024

IADS Exclusive: Brand Roundup: Sportswear 2024

IADS Exclusive

October 7, 2024

IADS

IADS recently held a meeting all about the Sportswear brands to look out for in 2024. Based on market research, IADS and NellyRodi presented a curated selection of 17 brands that are trending right now.

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

OUTDOOR

MAMMUT

Mammut is an iconic Swiss brand with over 150 years of heritage, renowned for its high-quality outdoor gear. Mammut collaborates with top athletes and influencers like Adam Ondra to promote its products. The brand is committed to sustainability, implementing various environmentally responsible initiatives in its production processes.

Check out the mammut website here

CHECK OUT mammut's INSTAGRAM

GORE-TEX

Gore-Tex is a pioneering, weatherproof technology known for its waterproof, windproof, and breathable properties. Partnering with over 400 brands like North Face and Nike, Gore-Tex is used in outdoor clothing and gear, offering unmatched durability and comfort for adventurers and professionals.

Check out the gore-tex website here

check out the gore-tex instagram here

GRAMICCI

Gramicci designs functional and comfortable clothing for adventurers and nature enthusiasts, embodying a free-spirited rock-climbing vibe inspired by California's pioneering Stonemasters. The brand integrates Japanese design influences for a unique and innovative touch, offering climbing apparel with a 90s aesthetic and vibrant colors.

Check out the gramicci website here

check out the gramicci instagram here

GOLDWIN

Goldwin offers highly designed and practical sportswear with a minimalist aesthetic and top-of-the-range features. Known for ultra technical items like the Infinium Down Jacket, capable of withstanding extreme weather at high altitudes, the brand also collaborates with innovative startups like Spiber. Goldwin's versatile and technical clothing is perfect for multiple environments, reflecting a symbiosis with nature.

Check out the GOLDWIN website here

Check out the GOLDWIN instagram here

OSTRYA

Ostrya promotes a progressive aesthetic mission, blending the fun of outdoor sports with Quebec roots. Known for its playful spirit and strong design identity, Ostrya offers versatile collections suited for both natural and urban landscapes. Ostrya's unique identity appeals to niche communities and committed outdoor enthusiasts, making every adventure more enjoyable.

check out the OSTRYA website here

check out the OSTRYA instagram here

ACTIVEWEAR

RAPHA

Known for stylish and refined cycling apparel and accessories, Rapha combines style and functionality with technical innovations like breathable fabrics, ergonomic cuts, and reflective details. As a partner of prestigious cycling competitions such as the Giro and Tour de France, Rapha promotes a positive and encouraging vision for maintaining a cycling routine.

Check out the RAPHA Website Here

check out the RAPHA instagram here

LI-NING

As the second largest sneakers brand in Asia and a national favorite in China,Li-Ning combines 21st-century design with Olympic heritage. Collaborating with NBA superstars, Li-Ning showcased its fashion forward, ultra-technical "MYVERSE" collection at Paris Fashion Week, epitomizing high-end streetwear for men and women.

check out the LI-NING website here

check out the LI-NING instagram here

WILSON

Wilson is a popular, family-friendly brand for tennis players, known for its vintage-inspired, classic athletic fit. Offering accessible prices and fostering a strong community, Wilson empowers everyone to live like an athlete. Famous for high-quality tennis rackets, balls, and shoes, Wilson has been a key player in the sports industry since 1914 and sponsors prestigious tournaments like the US Open.

check out the WILSON website here

check out the WILSON instagram here

SATISFY

Satisfy, founded to pursue the runner's high and inspired by freedom, blends passion for running with cutting-edge fabric technology. The brand's innovative designs, like CloudMerino, provide lightweight comfort and temperature regulation. Satisfy collaborates with brands like Crocs and Oakley and fosters a global community of athletes, merging the codes of fashion with high-performance gear.

checkout the SATISFY website here

checkout the SATISFY instagram here

ATHLEISURE

FEAR OF GOD

Fear of God Athletics, founded by Jerry Lorenzo in 2013, incorporates affordable luxury with a sleek aesthetic. Known for its cutting-edge designs and collaborations with Nike, Vans, and Adidas, the brand blends sportswear, workwear, and streetwear. Celebrated by celebrities like Zendaya and Ja Rule, the new Adidas line showcases a couture approach to sportswear, perfected over three years for style and performance.

Check out the FEAR OF GOD website here

Check out the FEAR OF GOD instagram here

BORN LIVING YOGA

Born Living Yoga promotes an active lifestyle with seamless, eco-friendly garments made through smart production, reducing raw material consumption. The brand offers innovative and timeless products and supports a large community of yogis with coaching, tips, and talks.

Check out the BORN LIVING YOGA website here

check out the BORN LIVING YOGA instagram here

REIGNING CHAMP

Reigning Champ embodies "Respect the Details. Master Simplicity." by blending traditional production methods with high-quality materials and manufacturing processes. The brand offers genderless, timeless, and elegant looks with a sense of luxury, using performance fabrics and innovative craftsmanship. Known for its culture of sports, Reigning Champ creates apparel that is both functional and refined.

check out the REIGNING CHAMP website here

check out the REIGNING CHAMP instagram here

NAGNATA

Nagnata celebrates women with inclusive, versatile designs that honour cultures and communities. Combining modern luxury with functional sportswear, the brand emphasizes conscious and sustainable design. Nagnata challenges industry standards, promoting sustainability beyond materials and manufacturing.

check out the NAGNATA website here

check out the NAGNATA instagram here

TECH-IPMENTS

DISTRICT VISION

District Vision develops performance eyewear and tools for athletes, suitable for cyclists, hikers, and fashion influencers. Known for technical products designed for optimal performance, the brand collaborates with names like New Balance and Suunto. District Vision combines sports and wellness, offering a burst of color in their collections and a focus on inner peace.

Check out the DISTRICT VISION website here

Check out the DISTRICT VISION instagram here

HYPERICE

Hyperice, founded in 2015, specializes in high-performance sports recovery and injury prevention solutions. The brand offers innovative products like massage tools, vibration plates, compression garments, and cryotherapy for muscle relief and quick recovery. Partnering with top athletes and international clubs like the NFL and NBA, Hyperice empowers users to move better and live better.

Check out the HYPERICE website here

CHECK OUT THE HYPERICE instagram here

TONAL

Tonal is a smart home gym system designed by Silicon Valley engineer Aly Orady, using electromagnetic weights to replace conventional gym equipment. It offers a compact, sleek design that makes weight training less intimidating for all fitness levels. Tonal provides technology, guidance, and community support to help users effectively reach their fitness goals.

Check out the TONAL website here

CHECK OUT THE TONAL INSTAGRAM HERE

YETI

YETI designs and distributes innovative outdoor products, from coolers to backpacks, built for diverse adventures. Their "Mapping the Gaps" campaign features ambassadors exploring unmapped trails and sharing them on Google Maps. With 200 ambassadors from 15 communities in 2023, YETI promotes high-quality, durable gear that helps customers stay out longer and explore more.

Check out the YETI website here

check out the YETI instagram here

Christine Montard

IADS Exclusive: Nouvelles Galeries in Annecy: a case for tier-II cities department stores

IADS Exclusive

October 1, 2024

IADS Exclusive: Nouvelles Galeries in Annecy: a case for tier-II cities department stores

IADS Exclusive

October 1, 2024

Christine Montard

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

A new project for a new neighbourhood

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

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

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

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

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

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

Building a community besides shopping requires significant marketing investments

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

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

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

The new Galeries Lafayette store: rejuvenated offer and concept

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

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

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

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

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

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

Is it working?

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

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

Credits: IADS (Christine Montard)

Selvane Mohandas du Ménil

IADS Exclusive: Boyner evolves its new store concept in Istinye Park

IADS Exclusive

September 23, 2024

IADS Exclusive: Boyner evolves its new store concept in Istinye Park

IADS Exclusive

September 23, 2024

Selvane Mohandas du Ménil

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

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

Introduction: about Istinye Park

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

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

The complex is composed of three main elements:

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

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

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

The Cadde store concept’s initial pillars

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

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

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

The Istinye Park store: an evolution rather than a revolution

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

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

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

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

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

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

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

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

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

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

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

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

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

Istinye Park: Boyner's retail laboratory

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

Key elements amplified in this iteration include:

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

Looking ahead: Tersane flagship

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

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

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

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

Key areas to watch include:

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

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

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

Credits: IADS (Selvane Mohandas du Ménil)

Selvane Mohandas du Ménil

IADS Exclusive: how Tmall fosters a new approach towards ultra-personalisation in luxury

IADS Exclusive

September 16, 2024

IADS Exclusive: how Tmall fosters a new approach towards ultra-personalisation in luxury

IADS Exclusive

September 16, 2024

Selvane Mohandas du Ménil

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

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

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

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

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

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

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

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

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

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

Tmall embodies the very notion of omnichannel retail

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

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

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

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

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

Understanding the partnership with LVMH

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

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

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

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

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

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

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

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

Credits: IADS (Selvane Mohandas du Ménil)

Elisabetta Falco Beccalli

IADS Exclusive: Sustainability in fashion

IADS Exclusive

September 9, 2024

IADS Exclusive: Sustainability in fashion

IADS Exclusive

September 9, 2024

Elisabetta Falco Beccalli

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

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

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

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

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

Case Studies: brands that have emerged as sustainable leaders

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

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

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

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

Below are five case studies of sustainable brands:

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

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

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

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

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

The role of department stores

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Credits: IADS (Elisabetta Falco Beccalli)

Christine Montard

IADS Exclusive: The road to retail excellence still means getting the fundamentals right, even in 2024 Magasin du Nord's latest improvements

IADS Exclusive

September 2, 2024

IADS Exclusive: The road to retail excellence still means getting the fundamentals right, even in 2024 Magasin du Nord's latest improvements

IADS Exclusive

September 2, 2024

Christine Montard

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

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

New services: BOPIS and on-demand staff

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

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

Service lounges gathering all store services

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

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

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

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

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

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

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

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

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

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

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

IADS

IADS Exclusive: Brand Roundup: Womens Fashion 2024

IADS Exclusive

August 26, 2024

IADS Exclusive: Brand Roundup: Womens Fashion 2024

IADS Exclusive

August 26, 2024

IADS

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

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

MUST HAVE

GANNI

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

Check out the Ganni website here

CHECK OUT ganni's INSTAGRAM

STAUD

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

Check out the staud website here

check out the staud instagram here

RAINS

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

Check out the rains website here

check out the rains instagram here

SEA NEW YORK

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

Check out the sea new york website here

Check out the sea new york instagram here

BARRIE

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

check out the barrie website here

check out the barrie instagram here

ON TREND

COURRÉGES

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

Check out the courréges Website Here

check out the courréges instagram here

SAKS POTTS

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

check out the saks potts website here

check out the saks potts instagram here

CASABLANCA

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

check out the casablanca website here

check out the casablanca instagram here

LOW CLASSIC

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

checkout the low classic website here

checkout the fara low classic instagram here

RISING TALENTS

LA VESTE

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

Check out the la veste website here

Check out the la veste instagram here

ESTER MANAS

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

Check out the ester manas website here

check out the ester manas instagram here

CARO EDITIONS

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

check out the Caro editions website here

check out the caro editions instagram here

TIME

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

check out the time website here

check out the time instagram here

HIDDEN GEMS

BITE STUDIOS

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

Check out the bite studios website here

Check out the bite studios instagram here

RUS THE BRAND

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

Check out the rus the brand website here

CHECK OUT THE rus the brand instagram here

VALENTINE WITMEUR LAB

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

Check out the valentine witmeur lab website here

CHECK OUT THE valentine witmeur lab INSTAGRAM HERE

HIDEMI

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

Check out the hidemi website here

check out the hidemi instagram here

EN VRAC PARIS

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

check out the en vrac paris website here

check out the en vrac paris instagram here

Mary Jane Shea

IADS Exclusive: Hunkemöller’s CEO on the importance of staying agile to keep up with digital retail trends

IADS Exclusive

July 22, 2024

IADS Exclusive: Hunkemöller’s CEO on the importance of staying agile to keep up with digital retail trends

IADS Exclusive

July 22, 2024

Mary Jane Shea

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

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

Hunkemöller: A lingerie brand with reinvention at its core

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

Marketing and brand building: A strong DNA

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

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

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

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

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

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

Omnichannel: Returns, wholesale, and third-parties

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

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

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

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

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

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

Challenges as a risk-taking retail CEO

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

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

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

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

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

Credits: IADS (Mary Jane Shea)

Christine Montard

IADS Exclusive: Paris’ Champs-Elysées, luxury, sportswear and the Olympics, a case for opportunistic retail

IADS Exclusive

July 22, 2024

IADS Exclusive: Paris’ Champs-Elysées, luxury, sportswear and the Olympics, a case for opportunistic retail

IADS Exclusive

July 22, 2024

Christine Montard

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What to expect from the Olympics?

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

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

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

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

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

Credits: IADS (Christine Montard)

Selvane Mohandas du Ménil

IADS Exclusive: What to ask ourselves, when considering the Saks / Neiman Marcus merger?

IADS Exclusive

July 15, 2024

IADS Exclusive: What to ask ourselves, when considering the Saks / Neiman Marcus merger?

IADS Exclusive

July 15, 2024

Selvane Mohandas du Ménil

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Is it about real estate…

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

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

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

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

Interestingly, Hudson Bay will remain separate from Saks Global.

…or the money…

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

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

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

…or the tech?

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

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

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

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

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

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

So, what’s really in store for Amazon?

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

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

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

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

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

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

Credits: IADS (Selvane Mohandas du Ménil)

Selvane Mohandas du Ménil

IADS Exclusive: K11 and The Hyundai demonstrate that reinventing the retail experience is not enough, as proper communication is crucial

IADS Exclusive

July 8, 2024

IADS Exclusive: K11 and The Hyundai demonstrate that reinventing the retail experience is not enough, as proper communication is crucial

IADS Exclusive

July 8, 2024

Selvane Mohandas du Ménil

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

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

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

Korea: presentation of the Hyundai Department Stores company

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

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

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

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

The Hyundai Seoul

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

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

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

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

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

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

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

How The Hyundai Seoul highlights innovation

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

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

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

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

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

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

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

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

Hong Kong: presentation of K11

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

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

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

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

K11 Musea

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

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

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

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

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

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

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

How K11 emphasizes innovation

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

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

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

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

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

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

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

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

Credits: IADS (Selvane Mohandas du Ménil)

Christine Montard

IADS Exclusive: JD Sports’ new flagship store on Paris’ Champs-Elysées Avenue: how to make a difference in a crowded area?

IADS Exclusive

July 1, 2024

IADS Exclusive: JD Sports’ new flagship store on Paris’ Champs-Elysées Avenue: how to make a difference in a crowded area?

IADS Exclusive

July 1, 2024

Christine Montard

In the last few months, brands have been rushing to open stores on Avenue des Champs-Elysées, hoping to catch a chunk of tourist wallets, especially the ones coming for the 2024 Olympics. Sports brands are no exception and tend to settle in retail spaces in the avenue’s central and lower sections. England-based retailer JD Sports chose another option and opened its new global flagship store in the avenue's upper section (number 118), across the street from the Louis Vuitton flagship store and not far away from Saint Laurent and Cartier. While the store was opened by Brazilian soccer legend and Nike brand ambassador Ronaldinho in April 2024, the group said it will be “continuing its run as the globally recognised king of the high street. JD’s new store offers the brand's latest innovations in digital technology and merchandising and will provide visitors access to all the hottest brands and latest launches.”

JD Sports was founded in 1981 in Bury, in the North West of England, with one shop, John David Sports. The JD group now accounts for more than 3,300 stores worldwide, including 100 in France and 29 JD Sports stores in the Paris region only. In terms of sales, JD Sports claimed in March 2024 to outperform a challenging market with a 4% like-for-like sales growth in the financial year ending 3 February 2024, reaching £10.5 billion, with an 8% organic growth. The profit before tax is expected to reach £915 million.

The retailer’s new flagship store aims to provide an immersive shopping experience to customers and establish itself as one of the sports champions on Champs-Elysées. Who will be the customers visiting the store? What will they find there to differentiate themselves in the crowded area?

Who is the store made for: JD Sports’ young customer base

According to GlobalData UK, JD Sports’ shopper base predominantly comprises male shoppers (61.3%) due to the retailer’s focus on sportswear and lifestyle brands. JD Sports caters to various customers, from sports enthusiasts and sportswear fans to trendy comfort-wear seekers. While they have been able to attract customers from all income groups, JD Sports aims to appeal to a wide range of customers, especially those between the ages of 13 and 35 who are interested in sportswear and streetwear:

In 2021, Millennial and Gen Z customers made up 51.6% of JD Sports' UK shopper base: 22% were aged between 18 and 24, compared to 11% for its competitor, Sports Direct.
38% were from 40 to 59 years old, compared to 41% for Sports Direct customers.

These shares show that JD Sports cracked the code to attract the younger generation: they embrace all the youth culture codes, not just sportswear. With memorable slogans, eye-catching imagery, and partnerships with well-known athletes and celebrities, the brand’s advertising campaigns and social media channels are clearly focusing on this young demographic. During the store visit, the campaign was about ‘Nouvelle Ere’, translated to ‘New Wave’ as a slogan. Through this five-country campaign (UK, Germany, France, Spain and The Netherlands), JD Sports aims to “cultivate emerging talent from key regions” across the brand’s music, sport, community and youth culture pillars.

JD Sports is considered strong both offline and online as it succeeded in becoming an omnichannel retailer that offers a seamless journey to its young customer base, who live with their phones in hand. They show a great understanding of these customers by focusing on trends, backed up by solid data and insights.

What does the store look like: sportswear retail codes and GenZ flare

The store spans 1,500 sqm. The two-storey store window features mannequins and dynamic screens on the first floor, while sneakers wall displays serve as windows visible from the outside on the ground floor. The leading brands sold in the store have their logos on the ground floor windows: Under Armour, The North Face, EA7, On, Puma, Fila, Reebok, Supply & Demand, Ugg, Crocs, Nike, Adidas, Lacoste, New Balance, Asics, Vans, Converse, Juicy Couture, Hoodrich, Columbia, and McKenzie. Not all brands, such as Fred Perry and Tommy Hilfiger, are mentioned on the windows.

Progressing from the entrance to the back of the floor, the ground floor is mainly dedicated to sneakers and articulates as follows:

Men’s shoes (90% sneakers),
Women’s shoes (90% sneakers),
Socks, caps and lifestyle shoes (Birkenstock, Crocs, for example),
Cash desks and 3 fitting rooms (which were closed at the time of the visit),
The back of the floor is split into 2 parts: a soccer section (mainly offering team jerseys) and a teen and kids shoe section.

Not surprisingly, the ground floor was crowded with young customers. Quite empty at the time of the visit, the first floor is dedicated to textiles and displays a product offer well-balanced between sports, streetwear and lifestyle clothes:

For women, the product offer is mainly oriented towards tracksuits, leggings and athleisure wear, balanced with lifestyle brands such as Juicy Couture.
For men, the offer seems more streetwear-oriented than performance-oriented. It concentrates on daily-wear branded T-shirts, NBA shirts, and bathing suits. For example, The North Face equally offers technical and lifestyle products.
A similar balanced offer is available for kids and teens.
2 fitting rooms and cash desks are also available on this floor.

With various stone and metal types, JD Sports’ store concept is mainly black and grey, the usual colour codes sports retailers use. Touches of yellow are used to catch the customer's attention, especially for direction purposes. The lighting is only made with neon. To cater to the younger generations (at the time of the visit, most store customers were under 20 years old), the concept includes many screens (on the walls and ceilings) promoting the retailer ad campaigns and customer app and the brands they carry. These screens bring additional touches of colour, making the store more appealing. The screens on the ceilings also serve as transitions between sections. The music, pop and rap hits, is loud.

Store services and key features

The sales staff is very young, reflecting the customer base. They are well-trained, smiling, and systematically greet customers from the store entrance and throughout the journey. They wear uniforms: black JD Sports-labelled t-shirts and cargo pants, as well as yellow badge and phone holders, matching the store concept and making them very visible. During the opening month, the store included features like sneaker customisation and clothing embroidery, showcasing JD Sports' commitment to a personalised shopping experience.

All shoe sections are equipped with small TV screens hanging from the ceiling. When customers ask to try a pair of sneakers, sales associates can scan a QR code on products. Depending on the item's availability, the screen informs the sales associate that the required pair is ready to pick up at a specific counter (each item has a picture, reference, store section and requested size). This allows the sales staff to be fully dedicated to customer service instead of going back and forth in the stock room. Despite the many customers in the store, there were not many to try shoes on. It shows the store might be more of an occasion to socialise and browse products for the younger generation than to shop.

BOPIS options are available in the store. On both floors, through a specific ordering kiosk, customers can access the entire product catalogue, order and pay for their order to be delivered to the store of their choice or at home, and retrieve these orders, as well as click-and-collect orders, at the cash desks. At the time of the visit, customers were not using these kiosks.

There are very few fitting rooms in the store. At the time of the visit, only 2 were open, on the first floor, where ready-to-wear is located and where the traffic was relatively low compared to the busy ground floor. This shows again how the young generations use physical stores for experience and inspiration and e-commerce for ordering. Similarly, the cash desks were not busy with customers.

Finally, the soccer section on the ground floor offers a free FIFA Nintendo PS5 game console for small groups.

Sportswear fans know JD Sports’ “Undisputed King of Trainers” slogan. So will Champs-Elysées. The prestigious avenue is getting ready for the Olympics and will be packed with sports brands. Nike has been there since 2020 with its 4,300 sqm House of Innovation. Adidas' flagship store is currently relocated (and should be improved) from the lower to the mid-section of the avenue, with a 2,800 sqm space. On and Salomon are currently under construction. Lululemon opened last year, and Lacoste has a 1,600 sqm flagship store since 2022. How will JD Sports make a difference in this crowded area? JD Sports’ new location is in the more luxury-oriented part of the avenue compared to the other sports brands settled in the lower part with which they compete. As location can make a difference, in good or in bad, JD Sports is the second multi-brand sports retailer on the avenue, after Foot Locker, located in the lower part of the avenue. With a wider choice of sneaker options and a store designed for teens, JD Sports seems poised to attract more younger customers.

Credits: IADS (Christine Montard)

Katie Clark & Morghan Pollard

IADS Exclusive: Department Stores: Commercial Revolution, Women’s Liberation, and Modernization

IADS Exclusive

June 24, 2024

IADS Exclusive: Department Stores: Commercial Revolution, Women’s Liberation, and Modernization

IADS Exclusive

June 24, 2024

Katie Clark & Morghan Pollard

The rise of department stores in the mid-19th century marked the beginning of a commercial revolution that shaped retail and consumer culture as we know it. The world's first department store, Au Bon Marché, founded by Aristide Boucicaut in 1852, introduced groundbreaking commercial innovations and created a capitalist business model that birthed unique and effective marketing techniques still commonly used by retailers today.

The IADS had the opportunity to visit the “Birth of Department Stores” exhibit on display from the 10th of April to the 13th of October 2024 at the Musée des Arts Décoratifs in Paris. The exhibition's second part (IADS is a partner) will be presented at the Cité de l'Architecture et du Patrimoine from November 2024 to April 2025. It will place the emergence of department stores in a broader context, looking at the history of these institutions over time and in an international context.

Such excitement around the topic of department stores called for a piece on their history, reminding us why we love this model so much. From the seven hundred pieces on display, ranging from posters to clothing and toys to furniture, the exhibit allows visitors to understand the evolution of commerce and department stores from 1852 onwards. The long history of department stores underscores their lasting impact on both the commercial landscape and societal norms, prompting reflection on future innovations that will define the next era of retail.

We connect in the below piece the most recent initiatives spotted around the planet to their origins, and try to see if modern department stores remain true to their original groundbreaking role.

Department Stores started a commercial revolution

The exhibit outlines the rise of department stores in Paris, France, where the first-ever department store was born, becoming the new template of modernity and consumerism in the 19th century.

The rise of department stores in the mid-19th century started a commercial revolution that fundamentally transformed retail and consumer culture. Au Bon Marché’s Aristide Boucicaut laid the foundations of modern commerce with major commercial innovations like the invention of sales, fixed prices and seasonal exhibitions, children as a new commercial segment, and even mail-order sales.

Each of these innovations answered a specific question. Seasonal sales solved the question of extra inventory and were an occasion to attract less affluent customers willing to shop at Le Bon Marché despite limited means. Exhibitions helped maintain customer interest throughout the year and reduced slow periods. By organising events for products like household linens and fashion accessories, department stores could sustain a steady flow of customers. The use of free advertising calendars given to customers and posters by prominent illustrators further enhanced the appeal and visibility of the store, creating a culture of regular shopping events that encouraged consumerism.

Including children's sections in department stores marked a significant shift in retail strategy. As societal views on childhood evolved, children became a new commercial target and an additional way to attract female customers. Stores began offering a variety of children's clothing and toys, reflecting the growing importance of children in the family unit. Since then, department stores always maintained kidswear and toy sections, sometimes making them a strength in their business, as is the case at Manor, especially with toys. Despite ongoing challenges with kids-related products, department stores continue to find ways to represent this segment, showing the importance of an extensive product offer catering to their primary customers, women. Department stores show great agility in mitigating the impact of kids' product slowdown. For example, in May 2024, Galeries Lafayette Haussmann partnered with US famous retailer FAO Schwarz: the company took over the existing toys department to create a 620 sq. meter new toy area featuring iconic elements like toy soldiers and a giant piano. Differently, Boyner has embraced this trend with their new "Dynamic Teen store" at Boyner İstinyePark in Istanbul, which focuses on sports and entertainment for Gen Z and Gen Alpha. Department stores can create lifelong customers by introducing children to shopping alongside their mothers, appealing to them as teenagers, and retaining them as young adults.

Mail-order sales were another revolutionary aspect introduced by department stores. Boucicaut's colourful catalogues helped Au Bon Marché reach people outside of Paris, making its products available to more customers. American retailers like Sears and Montgomery Ward in Chicago later perfected this model. Unlike the earlier French mail-order businesses, which targeted niche markets or elite customers, Ward's model was designed for the general public, particularly those in rural areas. He issued the first general merchandise catalogue in 1872, which was simple and easy to use, listing 163 items on a single sheet of paper. Ward also introduced innovative product return practices with the "satisfaction guaranteed or your money back" policy in 1875, which built customer trust and loyalty. This innovation was significant in the United States, where distance had previously made it hard for people to access various products. Department stores were indeed at the forefront of distance ordering and delivering customers to their homes.

Today, this foundation has transformed into e-commerce. Even though some department stores were late in the digital commerce race, the COVID-19 pandemic forced them to transform rapidly. They now offer options such as ordering in-store for home delivery and same-day delivery services that cater to the demand for instant gratification. Omnichannel strategies like "Buy Online, Pick Up In-Store" (BOPIS) blend the convenience of online shopping with the immediacy of in-store pickup. At the same time, integrated approaches ensure seamless transitions between online and offline experiences. By constantly observing their customers and sticking to their needs, these innovations provide convenience and satisfaction, prompting us to wonder what new innovations will define the next era of retail.

By putting women at the centre, department stores started a social revolution

Department stores played a significant role in the liberation and emancipation of women, transforming public spaces and social norms during the late 19th and early 20th centuries. These establishments offered women a socially acceptable venue to step outside their homes, facilitating a new form of public participation that was previously limited or entirely restricted.

Historically, women's presence in public spaces was heavily regulated and often frowned upon unless a man accompanied them. Middle-class women, in particular, faced societal scrutiny if seen unaccompanied in public, as this was associated with scandalous behaviour. The emergence of department stores began to change this dynamic. These retail palaces were designed to be inviting and luxurious, featuring elaborate displays, comfortable lounges, and various departments catering specifically to women's needs and desires. The store wasn’t just about shopping; it was about creating a space where women could socialise, explore, enjoy cultural events and assert their presence in the public realm without needing male accompaniment. Department stores' architectural design and marketing strategies were crucial in promoting this new public role for women. Stores like Le Bon Marché in Paris and Macy’s in New York were true social hubs.

Department stores also played a pivotal role in employing women, marking a significant step towards economic independence for women. Positions such as saleswomen allowed women to work outside their homes in a respectable environment, breaking away from traditional roles confined to domestic, agriculture and/or factory work. Despite extremely difficult working conditions and a highly patriarchal culture, this employment provided financial independence and fostered a sense of self-agency and personal growth. Like men, women could also occupy management positions. Overall, cities became more attractive as they transformed into job centres, another aspect of the social revolution department stores were part of.

In essence, department stores acted as catalysts for social change. They gave women unprecedented freedom to explore public spaces independently, engage in economic activities, and participate in the booming consumer culture. This newfound public presence was a first step towards gender equality, challenging and gradually altering the misogynistic norms that confined women to private, domestic spheres. So, the rise of department stores was a commercial revolution and a social one.

From shopping palaces to modern consumption and cultural landmarks

The department store in the late 19th century stood as a monument to the new bourgeoisie class and used its members' entrepreneurial drive to accelerate growth and create a profitable business model. The middle class of that time fed off of the material world; the wide variety of garments and surplus of goods catered to the bourgeoisie, who would flock to put themselves on display at these stores.

Department stores became the symbol of modernity, not only through their innovative architecture but also by pioneering a new commercial system that laid the groundwork for contemporary marketing. Large, vibrant advertising posters were on display at the exhibit, showcasing elegant dresses that embodied the desired lifestyle of the time — depicting scenes like women strolling on beaches and in city streets while dressed in their finest attire. Making department stores visible outside of their premises was crucial: for the first time in history, these ads showed the act of shopping driven by desire rather than necessity, creating what was later called consumption.

Also, department stores developed techniques based on the notion that customers are not merely buyers but visitors who have come to experience the grandeur of the store. Usually featuring unique and innovative architecture and located at the heart of cities, these stores transformed shopping into a leisurely activity akin to attending the theatre, portraying department stores as attractions first and shopping destinations second. Nowadays, retailers are increasingly curating experiences to attract and retain consumers. Despite changes in the retail landscape, they continue to employ strategies that emphasise their role as destinations, leveraging stunning architecture and interactive displays to create engaging environments.

Historically, department stores have been architectural marvels designed to impress and entice visitors, contributing to reshaping city centres. This tradition continues as modern department stores often feature innovative and beautiful designs that draw people in, creating a sense of wonder and luxury. For example, this is the case at the Hyundai Seoul, which has a large atrium filled with trees, and Birmingham's stunning Selfridges store building. In addition, window displays and in-store pop-ups remain central to the department store experience. These visually captivating presentations are designed to inspire desire and imagination, transforming shopping into an event. Interactive elements, such as live demonstrations, themed displays, and experiential zones, enhance this immersive experience, as is the case at SKP-S. Over time, they expanded their influence and revenue potential thanks to new ventures outside their original premises. Most expanded to secondary cities, with stores becoming the new city centre landmarks.

Department stores emerged as cultural landmarks, blending innovative architecture and immersive shopping experiences to attract and retain consumers. Today, they continue to adapt to modern retail challenges by integrating digital advancements and maintaining their status as cultural and social hubs. The focus on creating a memorable experience as a primary marketing strategy ensures that department stores remain relevant and enticing to a new age of consumers. They encourage repeat visits and customer loyalty by offering a unique environment that combines shopping with entertainment and leisure. In the modern landscape, where department stores compete alongside e-tailers, positioning themselves as cultural and social hubs is more than ever pertinent to maintaining their appeal. The development of the department store from the early days of Le Bon Marché in Paris to today’s global retail giants shows their resilience and ability to adapt, innovate, and thrive in the dynamic industry. Reflecting on the rich history and impact of department stores on society, it is apparent that their evolution over time has shaped not only the retail sector but also cultural norms, paving the way for future innovations in commerce and retail. Their story is one of continuous change, a testament to their foundational role in the commercial and social fabric of society.

Credits: IADS (Katie Clark & Morghan Pollard)