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Whole Foods Market is an organic food grocery company currently operating in the USA, Canada and the UK, which achieved a total turnover of $17bn in 2021. Founded in 1980 in Austin, Texas, the company has consistently grown both organically and externally, by the opening of stores and acquisitions of regional players, allowing a geographical expansion, learning and implementing new processes, and entering new product category markets. The company has been purchased by Amazon in 2017, after having posted a total revenue the previous year of $16bn in 2016, for a total value of $13,7bn, the largest external acquisition operation ever made by Amazon at the time, with a 27% premium on the share price.

In a post-pandemic world, crafting an inclusive culture able at the same time to bond together employees and act as an element of motivation and pride is more important than ever, especially now that retail companies start to feel the pinch when it comes to attracting new talents. The IADS had the privilege to listen to Walter Robb, the former Co-CEO of Whole Foods Market, during the World Retail Congress in April 2022, on the topic of “conscious capitalism” and how, when properly implemented, it could help fuel growth for the company by creating an adequate corporate culture. This is the reason why we invited him to share his thoughts and vision when it comes to leading with a purpose, as well as to share the lessons he learnt during his 26-years-long tenure within the company.

Introduction

Walter Robb, a graduate of Stanford University, is a connoisseur and ardent entrepreneur in the organic food business, an industry he joined in 1977. He is the founder of Stonewall Robb Advisors, which mentors and supports entrepreneurs, a Senior Executive Partner at S2G Ventures, and a member of the Board of various companies in food, health and hospitality. Prior to this, Walter Robb was the Co-CEO from 2010 to 2017 of Whole Foods Market, a company that he joined in 1991 as a local owner and operator before moving up the chain of command, until overviewing its acquisition by Amazon in 2017. Robb has been inducted into the World Retail Congress Hall of Fame in 2022 which honours retail’s most influential representatives whose ideas have shaped retailing through the businesses and brands they have created.

Interview

IADS – You started and operated your own grocery store for 15 years, prior to selling it to Whole Foods and joining the company in 1991. 31 years later, how would you say this experience influenced your career at Whole Foods? What would you do differently?

WR – I started my career from the ground up: I borrowed 2,000 dollars from my stepfather, bought 3,000 dollars of inventory and started a business. During my first day, I did 200 dollars of sales. We were in 1977, I was 17 years old and I was a retailer.

Would I do anything differently? Probably not: I am convinced that to be a good retailer you need to start from the ground. I made some mistakes (a bunch actually) but it was all about permanently learning. I learnt by watching the owner of a hardware store across the street, who was all about customer service and building relationships through interaction prior to any intent of selling anything. I integrated that approach and later on implemented it at Whole Foods, trying to create a business based on relations, not transactions. This is why in the stores whenever a customer was asking for a product, clerks were not simply pointing them out in the right direction but bringing them to the right location.

There is no replacement for learning by doing when it comes to understanding how a retail business operates.

IADS - The expansion of Whole Foods Market in the Northern Pacific Region in the 90s under your watch was meteoritic: what was the competitive advantage back then? Product, people, systems? Do you feel this could be the same today?

WR – I do not think the situation is the same today as we are in different times: there are many more organic food companies now and all retailers have included that segment in their offers: look at Walmart!

At the time, there was a great sense of purpose to bring natural food to the market: we were the first ones to do it, with all competitive advantages linked to being the first mover, and we had the wind in our back, even though we did not know exactly what we were building. So, definitely, the situation has changed.

I believe that our differentiating point was our philosophy, all about empowerment and based on the idea that every associate can, provided they get support from their leaders, make a difference in the way the business grows. We supported the idea of sharing the responsibilities to collectively make the best decisions possible. A few examples to show how it translated:

-    Store teams leaders had a yearly budget of $100,000 to invest, on their own decision, to improve their stores,

-    Team members had to vote when it came to accepting a new member to the team.

So looking back, it was a combination of right timing, having the wind in our back, and a strong sense of purpose, to give good reasons to people to come and work at Whole Foods Market.

IADS - You spoke at WRC in Rome about the importance of purpose and culture for a company. How did you drive purpose during your tenure at Whole Foods? How did it evolve? How did you make sure it matched business expectations?

WR – Let’s start by looking at the purpose: it is the reason why the business exists, the “why”. You do not exist to make money, but to serve your customer. Every company needs a purpose: this is the most powerful leverage we can have.

How to make the purpose actionable? First of all, you define one, you communicate it, you lead it, you make your decisions according to it, and you share it with your teams making sure that they can give their own form of the purpose. But what does this mean?  What is key is to see it as a living concept:

-    You have to constantly talk about your purpose to the teams,

-    Your actions need to be taken in order to reflect the purpose. For instance, Whole Foods Market was one of the first retailers to walk away from one specific fish species which was unsustainably exploited, in order to be true to our purpose. We were also the first to go to a fully recyclable paper bag. Each of these steps, however little they might seem, are noticed by teams who understand that you are true to your word, which is what matters in the end.

-    On their side, your teams need to have the opportunity to act at their level through an empowered culture, to give the purpose its own expression through their own actions. We as leaders need to set up a culture where teams have room to make decisions. Giving them authority and power, you help bring the purpose alive throughout the organisation.

Now, a note about what I mean by “culture”. The Whole Foods philosophy, that I call “conscious capitalism”, is based on 4 pillars:

-    A sense of purpose, which is “why” the company exists,

-    Empowerment and leadership,

-    Values,

-    Culture, a mix of the purpose and values in a living form: how people feel shopping or working with you.

The culture is where we invested a lot of energy, time and money at Whole Foods Market.

IADS - When Amazon bought Whole Foods, the price strategy drastically changed: how did loyal customers react? What was the impact on WF culture and what did it take to remain true to the original promise?

WR – Amazon changed a lot of things for Whole Foods Market!

In terms of pricing, in 2016, the market had caught up with the organic food trend and our shares were down from the high 50s to the low 30s: the analysts were disappointed with our inability to adjust prices quickly enough. We had not realized that we had gone from a market where we were the only ones selling our products and setting our prices, to a market with fierce competition. The reason why we did not adjust the pricing and margins soon enough, was probably because the culture could not be adjusted even though we had already started some initiatives. But our freedom to test was limited, being a public company with the obligation to report every quarter. Amazon, being a private company, had the ability to go faster in the price lowering process, and they maximized the gross margin through a series of investments which showed results within a year. This was a great example of Amazon’s power and positive side. They also allowed us to invest in cybersecurity and e-commerce, for instance.

When it comes to the limitations of the partnership, I would probably say that the culture, which was so precious and particular at Whole Foods Market, could not be understood and maintained by Amazon. For instance, when we started discussing with Amazon, both teams were asked what they learnt from each other. The Whole Foods Market team answered that they learnt about data management, decision-making tools, and tech. The answer from the Amazon people was: “we learnt how to hug”, which is disappointing because they could not manage to understand our specificities. As a result, many of the Whole Foods Market teams left as the culture changed too much.

But on a broader note, I would say that the acquisition by Amazon has been a good thing for Whole Foods Market because it allowed the company to grow, including by making the pricing more adjusted to today’s competitive market.

IADS – You used to be Co-CEO at Whole Foods Market. What is a Co-CEO and how does this work?

WR - You have to remember that John (Mackey) and I were friends for 35 years and that before being appointed Co-CEO, I had already served as President and COO so it was not something coming out of the blue but a natural progression.

John is an extraordinary thinker but not so much interested in details, which is my case. We were really complementary to each other, without a strict division of actions even though in reality it came naturally (for instance I managed the relations with Wall Street). It was a specific set-up of 2 people doing something together in which they believed very much.

I would say that the clear benefit was to have 2 perspectives and points of view, both wanting to win together, and the downside is that we had to take the time to work it through with each other.

For instance, one time we were trying to decide to raise some product prices, I woke up in the middle of the night and I realised that we needed to act and I wrote John a note, he wrote back straight away at 4 am thinking the same thing. There were also times when we disagreed, for example on investments and tech. This is where it became a challenge because we ended up agreeing on compromises, turning out not to allocate enough capital to the projects.

When it came to the teams, of course, they were probably playing the mom and dad game, but I had most of the direct reports, so most of the organisation ran through me, which made things simpler.

At the end of the day, even though analysts were criticizing our set-up, it was working well for both of us, and it lasted 8 years!  Keep in mind that we had been friends for 35 years before. It was a unique arrangement, specific to our company and our history. I would not rule it out for other organisations, but it was quite unique and specific based on our personalities and situation.

IADS – How do you see the role of the CEO now and how did it evolve?

WR – The most important quality for a CEO is that they set the vision, and use the strategic chops they have access to, to understand the market and figure out how to proceed.

Beyond that, for me, as a CEO you have to be authentic and empathetic, all the more that you have to work with multiple generations of employees. In the US, we had social situations forcing CEOs to talk, without playbooks as this was an entirely new situation. A lot of CEOs told me that they found these situations strenuous. We are all different, there will never be a playbook on how to be meaningful and empathetic, especially given the fact that a lot more is expected from CEOs today compared to in the past.

Another set of qualities is agility and curiosity: now CEOs have to be willing to move, discover and act quickly, especially when it comes to technology.

All in all, there has been a crack in the idea that CEOs are all powerful and that teams are working for them: the work from home trend, among others, has changed the way organisations are led.

A lot more is asked from CEOs today in terms of skill set and the qualities needed. I do not think that it is possible to be a CEO without being so on a 24/7 basis. It demands a lot from you as a person and requires a strong, and permanent, willingness to grow. One of the principles of conscious capitalism is that if as a leader you do not grow, you will not be able to make your organisation grow either.

IADS - In terms of Price / Quality / Experience, what works and does not according to you? How did you drive customers’ attention?

WR – The three components of retail are price, quality and service. You can have two of the three but usually not the three at the same time. We chose quality and service. We never aspired to be the cheapest but we wanted to provide the highest quality. Of course, this depends on companies and what they want to achieve.

We developed a set of quality standards that evolved with the years, laid out in full transparency with vendors and suppliers. Again, this relates to our culture, our goal was to motivate our store leaders by showing that we were true to our purpose. We were known to have the highest product standards on the market.

When it came to the service, we invested a lot in the workforce and how to constantly better serve the customer. Our model was based on interaction and we were known for the great customer experience when they were coming to the stores. We controlled that with mystery shoppers but that was almost superfluous given the strength of our culture at the time.

It is all about the role of the leadership: to take care of teams who in return can take care of customers.

IADS - With the current limitations (staffing, experience), what would be your view for department store food retailing: go with a partner or develop ourselves?

WR – I went to several department stores in Berlin and Amsterdam, and I loved the way they set up restaurants on the roof-top. Food is a great business to bring animation and traffic to department stores, but a very complex one too because fresh products have a very limited shelf life.

For that reason, I would say that having a partner would be probably easier, but, if I had the choice, I would rather go direct by recruiting someone from the food industry, leveraging his own contacts, as I truly believe that outsourcing leads to losing a part of the experience. Plus, you might make more money by going direct.

IADS - How did you deal with innovation at Whole Foods Market? By sequence? In parallel? How did you create a culture of innovation?

WR – This is getting us back to the power of culture, in our specific case the notion of individual empowerment: our team members were able to make their own decisions at their level. In our case, we expected our 500 or so stores to be all different from each other, so we did not centralize the store development function at the national level, but, at best, at the regional level. This allowed all store leaders to do their things, all the more that our culture included a right to do mistakes. In Denver for instance, a store displayed a full Mac & Cheese aisle. Nobody told him to do that, but he came up with the idea which was specific and differentiating. Another example is when for material reasons, a store started to over self-serve bakery whereas so far, we were serving ourselves bakery over the counter.

IADS - How do you deal with innovation-related investments within a company? And how can you mitigate risks?

WR – For the food industry, there is more innovation now than in the past, and this is only going to accelerate. It would be suicidal for any retailer to ignore this. There is no way to succeed by holding on to what you have in such a competitive market today.

In terms of my investments, everything starts by meeting an entrepreneur who at the same time has the ability to build a sustainable company, which shows his seriousness, and at the same time provides a truly different and differentiated offer which will fuel my unique value proposition in a new way.

***

Question – Going back to the notion of purpose: how did you deal with all stakeholders (board, team members, directors, shareholders…)?

WR – Purpose is a living thing. It is not like you say it and that’s it. You have to consciously invest in the process of reviewing your purpose and see how it can evolve, first because you are a bigger company now and you can do more things, and second because you are focusing on the right things.

We had a meeting every 5 years called ‘Future Search’ when we were gathering about 150 stakeholders, and we worked through a process where we looked at the past, present and future, including reviewing our purpose.

Also, remember: simpler is better than more complex, and this is true for purpose too.

Question – Going back to the notion of culture in Whole Foods Market, in department store companies, usually legacy companies, we need to move fast but at the same time also deal with company owners, usually members of a family. I am sure that you have gone through the same changes, but how to deal with the needed changes which might, at the same time, make them very nervous?

WR – Always remember that the culture of a company is a living thing, it is not set forever. We took some leadership principles from Amazon, for instance. Another example is that we opened a leadership academy as we realized that a lot of our store managers lost, with time, their ability to drive with purpose. It is all about growing an organic set of values and ideas.

In order to pilot this, we were asking our whole staff twice a year about our culture, where we had to invest, where we were strong, and what were their ideas too.

In the department store world, Nordstrom is a good example: they are all about serving the customers. And this is not going to change: even if the “how” changes, the “why” does not.

Now, when it comes to the reaction of owners and how to deal with this, this is an excellent question and I will ask Pete and Eric Nordstrom about that!

Question -  How do you inspire all teams with purpose and make sure they embrace it?

WR – Give the possibility to the teams to embrace the purpose and make it theirs, by granting them autonomy to test ideas (as long as they enter within the purpose framework of course). Give them the possibility to do so in full autonomy (for instance, we gave a budget of $100,000 to store leaders to spend on an annual basis on their store, they were accountable for the expenses but the decisions were theirs). And, most importantly, keep in mind, and remind them, that it is ok to fail.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the collection of pictures here

Printable Version here

Introduction

The IADS travelled to Turkey (now known as Türkiye) last June to meet with Cem Boyner, the CEO of Boyner Grup, a former IADS member, to get an update on his latest initiatives following the Covid-19 pandemic. Located between Asia and the West, often tarnished with its international policy decisions (to the shame of Turkish businessmen), and riddled with inflation (estimated at 78,35% for 2022, a 24-year high), it is easy to overlook the country and consider it done.

In reality, the retail market is buoyant, and many innovations are taking place, which made the trip all the more interesting as many of these innovations could be interesting for IADS members to look at. We review below our store visit, as well as the insights collected during the meeting with Hopi, Boyner Grup’s data venture.

Company history and background

Department stores capitalised on the expansion of Turkey’s ready-to-wear sector in the 1990s and a concurrent boom in large shopping centres that have continued further. Despite continuous unfavourable exchange rates making imported goods significantly more expensive, as well as extremely expensive customs fees (up to 35% for merchandise coming from some parts of Asia), fashion and luxury found their way throughout the country. On another hand, the growth of Turkey’s economy gave rise to a new middle class and more wealth among the already rich. This transformation led to increased foot traffic at premium department stores as people became more eager to try new brands and spend beyond basic necessities.

Among the significant players shaping up the market, Boyner Grup was founded in 1952 as a clothing manufacturer, by Osman Boyner. The first Boyner store opened in 1981 and was operated under the name of Çarşı (name converted to Boyner in 2004). Nowadays, it is led by Cem Boyner and is mostly addressing the middle class, operating under the brands Boyner, YKM, Boyner Sports, YKM Sports, and Boyner Outlets. They report 276,000 sqm of retail space in 97 stores spanning across 37 cities.

The merger with YKM, another department store company, was achieved in 2012, which ultimately led to Boyner’s resignation from IADS in 2016 (YKM was a member since 2003 and membership had been transferred). Business includes international brands (active sportswear, Men’s, Women’s and Kid’s footwear, accessories and RTW, cosmetics, home decoration) and a significant private label business (13 brands). Boyner also launched Boyner Home in 2017, with stores dedicated to kitchen, bathroom, home textile, and electrical household appliances.

In 2015, the group was composed of 2 main arms: the Boyner retail and textile activity, including the manufacturing capabilities and some private labels sold through their own retail network, and the retail branch, composed of Beymen (a luxury department store brand name founded by Boyner in 1971) and AY Marka. Cem Boyner increased his equity in Boyner Retail and Textile Investments, while Qatar-based Mayhoola (which also owns Valentino, Balmain and Pal Zileri) invested in the retail branch. This led to the restructuring of the group in 2019: Beymen and AY Marka are now owned by Mayhoola while Boyner Holdings remain the full owner of the textile retail and production unit, including:

• Boyner stores,
• Altinyildiz (textile manufacturing),
• BR Magazacilik (retail distribution of the Altinyildiz brand, in partnership with Ran Retailing – BR reports 200 stores in 60 cities in 2020, and 300 points of sales including wholesale),
• Hopi (mobile and telecommunications),
• Morhipo.com (online retailing, launched in 2011 and ranked 6th online retailer in Türkiye with a turnover of $172m).

No financial information has been officially released at least since 2018.

Visiting the store: A holistic department store

We visited the latest Boyner store, in the Cadde location (in a residential part of the Asian side of Istanbul), which opened in September 2021 on 4,200 sqm and 5 floors. This store, seen as a prototype for the new Boyner concept, replaced a much bigger unit which was, according to Cem Boyner, in a much better location, and which became a local meeting point for residents in the past 22 years in addition to being a cash machine, thanks to a private brand, Limin (not sold in the new store). Boyner made the decision to challenge all this (and make the most of a real estate opportunity) as the goal is to move from being a department store company to a “multi-brand lifestyle store”, positioned on the mid-range segment (the goal is not to compete with Beymen, which operates all international luxury brands in).

What is sure is that the store is highly visible: the entire façade is covered with a 38-meter-long screen displaying anamorphic art pieces (a technology allowing to have a striking 3-D feeling from the store entrance) and Boyner makes sure people see it, thanks to a Costa Café just nearby (they have secured the franchising agreement for the country). Art is basically everywhere in and on the store (this is unusual for Boyner) and every artwork has been co-developed with artists, to make sure they are interactive and echo what is going on in the store, to avoid giving a museum feel.

The basement, dedicated to sportswear, is striking: all walls have been built in recycled plastic and wood (the eco-conception is at the core of the store model, for instance, solar panels on the roof help power the store, and toilets are used with collected rainwater) and, in addition to an immersive décor and visual merchandising, many services are offered to customers: a cold room to try the garments (similar to Canada Goose in Toronto), bikes where customers can pedal to recharge their phones, free water fountains in the gourds section… all in the middle of an advanced VM set up (a step forward for the company according to the staff), using interactive LED-lit flooring and artworks, or 3D holograms on the shelves to animate the products. This selling space is working extremely well and generates 25% of the total store turnover.

The ground floor displays a space dedicated to sustainable goods at the entrance, and the cosmetics spaces (25% of the turnover).

The sustainable goods space, where many products have been developed in collaboration, also features artwork developed by artists concerned about sustainability (a common trait across the whole store) and collecting points, where customers can leave their unwanted items, which are then recycled and sold, financing grants to students. Art is only displayed and not for sale.

The cosmetic area is more classic, with the usual names (Clarins, Lancome, Estée Lauder…) displayed in their own concept boxes with white logo on black background, all operated in concession (even though the system is quite exotic in this store: brands pay for their salespersons, do not pay rent but Boyner collects 100% of the turnover, making this system a mix between wholesale and concession).

What is more striking is the 40m high LED screen that goes from the ground floor to the 4th floor, displaying artwork which interacts with customers through their cell phones (an astute way to collect data!). This proves that it is possible to use screens in a lively manner, and not just as a décor like in, for instance, the Nike House of Innovation in Paris.

The first floor is dedicated to Women’s fashion, with an upgrade in terms of brands presented compared to what Boyner has in its other stores: Lagerfeld, DKNY… (the retailer wants to remain accessible to its customers and not go full speed on luxury). They also promote local initiatives, by collaborating with influencers and artisans to produce and sell one-of-a-kind products at accessible prices. There are no cash desks: Boyner is testing on this floor mobile payments. When asked about how they were dealing with the antitheft tag removal and the gift wrapping, they showed a mobile unit where all these actions can be performed on the spot and moved very quickly from one side of the floor to another.

The second floor is dedicated to activewear and denim. There, the seating section has been developed by an artist whose artworks are displayed in the entrance, echoing what she does in her art, and is completed with videogame booths and the possibility to interact with the screen, which increases the time spent in-store.

The third-floor features men’s collections. Interestingly, and due to the nature of the market, the mannequins also display women’s products there, as many customers are females looking for gifts for their husbands.

Finally, the top floor is dedicated to homeware and kids offers, as well as the “customer relation” lounge, where customers can proceed to click and collect and ask for home delivery. The lounge seemed to be still under construction at the time of visit, and was very surprisingly uninviting, in stark contrast with the rest of the store.

In terms of F&B, in addition to the Costa Café at the entrance, the store is flanked with a new concept, “Vertical restaurant”, which is a must-see. The concept is to be entirely sustainable at 100% and self-sufficient in terms of energy, water and consumption (except the aliments). This goes through, of course, the decor (entirely recycled), zero plastic and carbon policy, the use of recycled and filtered water at the bar, but also specific partnerships with LG, Electrolux or Bosch to create kitchens that customers can rent or where they can follow lessons with chefs, as well as an upcycling workshop, a local vegetable growing unit, and the systematic recycling of 100% of the food waste into facial cream (from the coffee waste), soap (from cooking oil), compost and pet food. On 800sqm, the restaurant features a high-end and vegan Turkish cuisine restaurant, a pizza place, a Japanese place as well as 3 locations that are offered to up-and-coming Turkish young chefs or street food stars every week, to generate curiosity and traffic.

What’s great and what’s next

The Cadde store is delivering results: the average ticket is 27% higher than in other stores, thanks to a different brand selection and a lifestyle approach, with many places where it is great to spend time (time spent in-store increased from 30mn to 1 hour). This concept will be rolled over to 20 stores in 2023 and 30 additional ones in the next 5 years.

Overall, the bet to create a “multi-brand lifestyle store” is paying off, as the general feeling is an energetic store, full of great ideas, addressing a young clientele and giving them an immersive concept, which feels rich but not expensive. Is that to say that Boyner has developed a new concept store? When discussing with Cem Boyner, he confirmed that such a concept was to be deployed on 9,000+ sqm stores. Among the good ideas that we spotted:

-    The many fun services (cold room to try warm garments, bicycles to charge phones,

-    The collaboration with artists to make art part of the store (and not museum-like, for instance, Le Bon Marché in Paris) and with sustainability in mind,

-    The practical approach, for instance with the mobile wrapping and antitheft tag removal unit, which has been developed by salespeople themselves,

-    The ‘Vertical’ restaurant and its radical approach, which could be interesting for IADS members in their food offer.

Of course, we had some questions when it came to salesperson management: 60% of them are paid by the brands, and only 40% are managed by Boyner. In these conditions, given the fact that the store has a cohesive, holistic lifestyle concept, how to make sure that they are all working together and orientating customers, instead of only selling their own brands?

Moving forward, we were also introduced to the Boyner online business, which is currently representing 30% of the total group’s turnover, with 17m loyal cardholders (in a country of 85m people).

Boyner is launching a new delivery service, “Boyner now”, with a 90mn delay in the whole of the country. When customers use this service, a Boyner-branded delivery person comes to their house (including, in the case of fashion items, a +1 / -1 size unit, just in case), waits for the selection confirmation and retrieves payment (meaning that customers pay for what they keep and not during the order itself). With this new service, Boyner hopes to capture 60% of its turnover online. In terms of technics, this service is fulfilled from the 97 stores in the country, and customers have access to 4m references, vs. 10m on the “normal” e-commerce website, which is also going through a revamp in order to increase the length of stay online from 1mn and 1% conversion to 8mn and 4%.

This growth in digital is supported by Hopi, another venture that Boyner launched in 2015, and dedicated to data management for B2B (marketing solutions, digital transformation, payment systems solutions, BNPL solutions) and B2C (hyper-personalized services for their 13m app users), leading to a full ecosystem which is truly competing with what Amazon or Alibaba can propose to Turkish retail companies today. Boyner will be looking at international expansion for Hopi in 2023 and hopes to equip foreign retailers in the future.

Conclusion

Following the split with Beymen, Boyner Grup knew they had to reinvent themselves and the experience they wanted to provide to customers, so they initiated a sea of changes well before the Covid-19 pandemic. As a consequence, the pandemic acted as a catalyst and also allowed to speed up some of the planned changes.

Today, many boxes are ticked: a new approach to instore experience (which really competes with many higher-end world-class department stores), the use of art at the design level of the store to make sure it is echoed in the customer journey rather than just sitting there, a radical approach to sustainability with many innovative processes, and a clear vision when it comes to the use of tech and data in order to accompany today, and predict tomorrow, customers’ purchases. The setup of the Boyner Now delivery in 90mn in the whole country is a tour de force and it would be worth it for IADS members to go and see how this is actually performed in terms of systems and processes.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the collection of pictures here

printable version here

Introduction

The IADS was invited to take part in the 2022 Future of Retail Conference organised in Athens last May by the Hellenic Federation of Retail. The Association was interviewed on stage, along with Mr Dimosthenis Boumis, the CEO of Attica, the emblematic Greek department store, and invited to discuss the future of retail in city centres.

It was also the opportunity to reconnect with old acquaintances, since the former CEO of Minion, a defunct department store in Athens, used to be a member of the IADS and is now a member of the Attica board. Attica has gone through the Covid-19 pandemic with the same difficulties as other department stores in the world and came up with a new strategy designed to rely less on international tourists (even though they remain more than welcome) and more on the local Greek clientele, from every social class. If appealing to the rich Greeks is not a head scratcher, the current social and revenue structure in Greece makes it a bit more complicated to appeal the to lower classes without losing glamour or soul.

We visited the City Link flagship, in the heart of Athens, very close to the infamous Syntagma square, in order to see how the store is implementing and executing the new strategy.

Company history: just turning 17 and already a complicated story

The Attica department store (not to be mistaken with Attica Group, owner and operator of boats) has a recent and rather complicated history, since the company (and the brand) is only 17 years-old, in spite of the flagship City Link location in the heart of Athens being located in a historical building. Just like in other countries when it comes to the history of retail, it is mainly a story of powerful men and capital management, even though it is much more condensed in time in the case of Greece.

To fully get a grasp of it, one needs to have a quick historical approach to the Greek retail market, marked in 1934 by the opening of a small kiosk, called Minion, by Ionnis Georgakas. There, he only sold products in bulk, which proved so successful that just after WWII, he was able to buy a larger location in the city centre, increasing  progressively the surface until being able to sell 120,000 references in the 1950s, with 1,000 sales associates. Minion became a European-class department store and introduced escalators, air-con and computers to Greece, in addition to allowing Greek customers to become exposed to foreign fashion and tastes, generating queues in the streets to enter what would soon become an iconic location for any Athenian.

Georgakas, a wise businessman, understood early the role of seasonal discounts as well as TV and radio advertising,  and ruined the competition of the then-ubiquitous local bazaars. Unfortunately, the iconic 9-storey store was destroyed during a fire provoked by a criminal arson in 1980, and the company was ruined. Georgakas rebuilt the store but was not able to recover from the heavy losses, and the company was nationalized in 1983. Georgakas attempted a come-back in 1991 by purchasing back the company but failed and ultimately left the following year. The company survived until 1998, before being sold to another Greek company, Elmec, which in turn was acquired by Folli Follie, which had the project to renovate the store, a project dropped in 2018. The store, left empty for more than 20 years, has been sold in 2021.

Folli Follie was founded in 1986 by Dimitris Koutsoliotsos and is famous today for its luxury jewellery, watches and  fashion accessories, sold in 95 stores across the world. Koutsoliotsos, aware that the closure of Minion had left a hole in the Greek retail market (and before opportunistically acquiring it), founded the Attica department stores company in 2005 with the City Link location and the idea to replace Minion. Due to the nature of its business, Folli Follie was able to secure exclusive distribution rights for Greece (and other countries) for some brands, such as Shiseido, which were presented in the Attica stores. In 2018, Koutsoliotsos had to resign from his role at Folli Follie, but remains involved in Attica, where he appointed Dimosthenis Boumis as CEO. Boumis, who has a finance background, founded Cosmobrand in 2011, a joint venture between Attica and himself, dedicated to the import and distribution of cosmetics and food, as well as e-commerce. The CEO appointment came in 2021 and makes Attica quite special in the worldwide landscape, with a non-family-member acting at the same time as a major stake shareholder and CEO.

Today, Attica operates 4 department stores in total, including City Link (2005), Golden Hall (2008), Tsimiski (2014) in Athens, and a location in Thessaloniki (2012). All locations sell women’s, men’s, and children’s fashion wear, footwear, beauty and accessories and are recognized by customers and brands as true luxury hotspots. According to the Greek press, the company posted a total turnover of €140m in 2021, vs €98.8m in 2020 and €180m in 2019.

Visiting the store: a true and visible improvement from a year ago

The City Link store is located in a historical building that has been part of a city centre renovation project back in 2005, helping to preserve buildings that were built just before WWII. It is structured on 8 floors and 34,000 sqm, 4,000 of which have been added in 2021, mainly to house extensions of the Women’s Fashion and the sportswear sections, in addition to new services such as a VIP room, a hair & beauty salon, and new F&B points.

The large windows on the street are inspiring, quite efficient, and open on a space which is complex due to the structure of the store: the basement and the ground floor are narrow and the whole game is to make sure that customers are naturally going into the upper floors, which is the reason why the escalators are massive and just in front of the entrance, at the risk of overlooking what is left, right and down (to the point of not having visited the basement for this review…).

The narrow ground floor displays the cosmetics offer, with all brands having a shop in shop at their concept in the periphery, including a large Byredo location at the entrance. Circulation is not easy, but sales associates are omnipresent and willing to help. Security guards, too, are very visible and can be intimidating when it comes to entering the store. Interestingly, each floor displays the whole list of brands available, which suggests a certain effort to keep it up to date of course from season to season but also in season when popups and temporary collaborations are launched.

The first floor is dedicated to formal men’s RTW, shoes and accessories. The brands are high end, such as Hugo Boss, Zegna, Kenzo or Brooks Brothers (a company in which Konstantinos Tsouvelekakis, another significant shareholder of Attica department stores, has shares). The whole floor is closed, without windows, which can be somehow oppressing, and although all brands have their own concept,  some logos obviously produced on site are not entirely perfect.

The second floor is dedicated to Men’s casual fashion, and, contrary to the first floor, has all windows opened on the main avenue (a decision taken by Boumis when he took the job) which gives light and a real sense of depth since the building is narrow and long. Interestingly, all cash desks (for those not related to the shop in shops) are located at each end of the floor (this is the case for all floors) which can be painful as customers are obliged to go through the whole floor to pay for their purchases.

The third floor has been, just like the second one renovated, but also extended, with a very efficient sportswear section (the largest in Greece) on the other side of the building (the lower floors in that building are not part of the store as they belong to the Pyraeus Bank, and are under negotiation in order to re-structure properly the store for its basement, ground, first and second floors). The whole space has been imagined as a running track and this works extremely well given the structure of the building, with very large Nike, Lacoste and Adidas shop-in-shops. The “young fashion” space is also spectacular, including the Levi’s shop-in-shop of uncommon proportions. One caveat due to the structure of the building, is that the whole space feels like a tunnel, however immersive it might be, meaning that once customers have started their journey, they might have some issues in terms of circulation and finding the staircases to go up or down.

The fourth floor is dedicated to women’s fashion, and just like the third floor, benefitted from an extension which allows displaying, in addition to the traditional names (Max Mara and all its other lines for instance) a very wide selection of local Greek brands such as Forel. The hair salon is located just behind (not the old school salon, but a very spacious, well-lit and luxurious space), just near the jewellery and small accessories section. This floor also includes a very inviting bar (serving alcohol) and an interesting Carpo shop-in-shop. Carpo deserves a special mention, as it is somehow reminiscent of what Steen & Strom has done with headwear brand Varsity, by teaming up with a local partner and is making extremely good sales thanks to its premium positioning: Carpo is all about selling Greek nuts and chocolate in very nice boxes. The space, located in front of the bar and in a section where customers can not do anything but go through, is a must-see and very well decorated. Average ticket: €80 (literally for nuts).

The fifth floor displays contemporary fashion and lingerie, with a huge Zadig & Voltaire shop-in-shop, a smart sense of merchandising (for instance, Hei Poa cream is available just near the cash desk in the swimming wear section), but the execution of the lingerie space is somehow disappointing.

The sixth floor is dedicated to kids, duty free and also gives access to a rooftop café which, although it has a very nice view, is difficult to access (in terms of escalators and time to get there) and even to find on the floor itself.

What to remember and what is next?

Even though Attica used to be considered a second-class wholesaler by brands in the past, this is no longer the case. The brand selection is good (and improving) but above all, the new floors extensions show a very modern and acute approach to retail immersion, which also explain the dense traffic in these sections at the time of visit (noon, with a scorching 30°C  temperature outside) even though the building is difficult in terms of structure.

Also, the CEO is all about increasing omnichannel capabilities but also experience spaces, as shown by the extremely well-designed café and Carpo nuts store, which are both generating a fantastic return on investment.

In terms of what’s next, the company has announced a major and ambitious plan for the next 2 years, with new store developments taking place until 2026, and, of course, the relaunch of the e-commerce activities including full omnichannel capabilities.

The e-shop, launched in 2017, is to be relaunched during summer 2022, with, in addition to a new product curation, a new technical platform allowing the interaction with physical stores, i.e. picking products bought online in stores, or dealing with products purchased in store and exchanged online. In addition, while at the beginning the e-store will be limited to cosmetics and fashion accessories, RTW will be integrated at the end of the year. This development should contribute to connecting the department store with local customers.

However, we mentioned in the introduction that tourists are always welcome, especially the customers from the Balkan countries, who might not have the same exposure to international brands at home as, for instance, Dutch or French customers. For them, the offer sold in the Thessaloniki stores will be upgraded and amplified, in order to make the most of their appetite for international brands.

Finally, Attica is planning a new opening in the hip area of Ellinikon in 2025, near Athens, where rich Athenians either own a house or enjoy the beach, 25 mn from the city centre. The massive urban renovation project includes 2 retail areas, the Vouliagmenis Mall (“Ellinikon commercial hub”, on 185,000 sqm)) and the open air Marina Galeria, on 19.000 sqm. The new department store in Marina Galeria will display on 10,000 sqm an exclusive selection of brands, completed by a series of mono-brand stores that it will lease to international luxury labels.

Conclusion

The realisation that Chinese and Russian tourists had acquired a place too central in the business forced Attica to rethink its point of differentiation. But how to do so? Can you really compete for international tourists who are spoilt in their home cities and rushing through Athens to get to the islands?

This is why the nut stand is not as anecdotical as it might seem. Attica is well aware that it needs to differentiate in order to reach the customers it targets. This goes through providing experience, but also providing the right level of prices for the right luxuries: dry fruits delicacies for local customers who might want to treat themselves with something inspiring but not to the point of buying a Chanel bag (or being able to), or the right brands to tourists coming from zones where they do not have the same choice than in central European cities.

Even though this is an ongoing journey (which will be completed by the finalization of the omnichannel capabilities in Q3 2022), Attica has made a significant step up when compared to its pre-pandemic aspect and offer. The exciting and ambitious Ellinikon project will also be something to watch closely, as it will be all about experience and entertainment.

Attica company profile

Credits: IADS (Selvane Mohandas du Ménil)

IADS recently held a meeting all about the women’s fashion brands to look out for in 2022. Based on market research, IADS and NellyRodi presented the most innovative brands from different segments of women's fashion: DNVB, designer, contemporary, young talents and everything in between! Check out our selection of these brands!

DNVB

![salut

SALUT BEAUTÉ

Salut Beauté is an innovative and sustainable Parisian brand that creates

colourful, original, and comfortable sets for women. These sets are made

with different fabrics from second production circuits recovered from

luxury houses or manufacturers from there they are refurbished and made

into fashion forward yet powerful suits.

Check out the Salut Beauté website here

![never fully dressed

NEVER FULLY DRESSED

Never Fully Dress is a flattering effortlessly feminine fashion brand that was

designed for all shapes, sizes, and styles. The products are made with

premium quality materials without the premium price tag. They have

introduced recycled polyester and natural and biodegradable fabrics to

help reduce their environmental impact.

Check out the Never Fully Dressed website here

CONTEMPORARY BRANDS

![icicle

ICICLE

Icicle is a high-end fashion brand from Shanghai that presents a fine

elegance while still being made with sustainable materials with 100%

natural materials, vegetable dyes, recyclable packaging,

Check out the Icicle Website here

![LVIR

LVIR

LVIR is a modern and natural brand that can be enjoyed by all generations.

It is a flexible style that can blend with the attitudes and emotions of the

customer. It is refined women’s clothing for fashion professionals and

wants to focus on simple colors for a more comfortable and stereoscopic

style.

Check out the LVIR Website Here 

DESIGNER BRANDS

![MERYLL ROGGE

MERYLL ROGGE

Belgian brand curating an energetic medley of unexpected styles.

check out the MERYLL ROGGE website here 

![NENSI DOJAKA

NENSI DOJAKA

Albanian designer known for her lingerie-inspired dresses and cutout

pieces that reference '90s aesthetics.

Check out the NENSI DOJAKA INSTAGRAM here

NEW YOUNG TALENTS

![SUPRIYA LELE

SUPRIYA LELE

Led by her Indian heritage, British identity, and her passion for minimalism

in her creations she uses a deliberately vintage and subversive approach to

textiles, cutting and manufacturing, thus elevating them to the rank of

“new luxury”.

Check out the SUPRIYA LELE website here 

![HELIOT EMIL

HELIOT EMIL

The collections are unisex and monochrome, taking inspiration from

Scandinavian heritage and using different fabrics from around the globe.

Check out the HELIOT EMIL website here 

OTHER

![ELSE

ELSE

Elevated, everyday lingerie, loungewear, and swimwear brand for modern

women.

Check out the ELSE website here

![SPORTY & RICH

SPORTY & RICH

Collection of simple, yet thoughtfully designed products that emphasize

longevity over momentary relevance.

Check out the SPORTY & RICH website here

Check out Delipop's store front here

Introduction

The IADS recently sat down with Marek Piotrowski, Chief of Marketing Operations at Retail Robotics, a technology company that has been improving the efficiency and convenience of delivery and click and collect processes for e-commerce and e-grocery for more than 30 years. Marek Piotrowski has been involved in marketing and design for the entirety of his career working with top brands all over the world through advertising agencies where he utilized different successful strategies for a slew of brands. He joined the Retail Robotics team and oversees marketing, design, PR, and user experience at Delipop in France.

Delipop harnesses Retail Robotics’ click-and-collect multi-retailer smart parcel lockers that serves as multi-brand or single retailer pick-up points. Delipop recently opened its first locations across Paris, so the IADS team decided to use the opportunity to take a first-hand look at the ‘store front’.

An introduction to Delipop

The Delipop automated pick-up point locations have been created with customer experience at its core. As you are walking down the streets of Paris, your eyes are quickly drawn toward the colorful façade of the building which boasts bold blues, lime green, hot pink, and yellows. The entrance of the building is guarded by a keypad where customers can use a unique code to enter when they have a scheduled delivery. Inside the building, there are color-coded and numbered kiosks where customers are invited to scan a QR code to retrieve their goods. The machine registers the information and moments later, large, refrigerated drawers open to reveal the customer’s goods. Depending on the size of the order, multiple drawers can be used to fulfill the delivery. If the customer also has frozen items, they will need to scan another QR code at the same kiosk, which will then signal a separate frozen section that has numbered parcel lockers. The parcel with the item will light up in green and the door will pop open, then customers can retrieve the remainder of their goods.

The interior of the store is meant to help the customers disconnect from the outside world by offering soothing sounds such as birds singing as well as the specific use of colors, lights, and smells just like what other food retailers have started to do in their newest formats, such as Monoprix’s Monop’ iteration in Paris. As Delipop is committed to local communities, each Delipop offers a mural that highlights famous people and places in the neighborhood. This, however, is not particularly standard in terms of grocery retail, at least in Paris.

IADS: Can you give an overview of how Delipop came about, giving more detail about what the solution is and where it is going?

Marek Piotrowski: Parcel lockers have been around in e-commerce for a very long time, but they are gaining more importance as they consolidate flows and create a ‘hub effect’ which leads to improved economic benefits and sustainability. Retail Robotics is one of the biggest producers of parcel lockers in the world, and we believe that the concept of Delipop offers an interesting alternative to couriers and home delivery while also decreasing the limits of traditional e-commerce delivery options. On average, one courier could only deliver around 15 orders a day, but Delipop allows more orders to be fulfilled and reduces the cost of delivery.

Delipop offers a pickup point for e-grocery orders to local consumers. The pick-up point is equipped with smart parcel lockers that offer refrigerated and frozen sections. Before Covid, there were not too many issues with grocery deliveries, and the demand was growing slowly. But in the wake of Covid, it was almost impossible to get your grocery delivery scheduled and delivered. Delipop is now the only viable solution that can cope with the problem.

Partnership with Carrefour

*IADS: Delipop opened its first parcel location, in partnership with Carrefour, in Paris at the end of 2021. Can you explain the logic behind this partnership and what you have learned so far? What is the plan for the coming years and how are you going to achieve it?*

MP: Carrefour decided to join the network as the first partner because they like to show that they are the leader in retail and innovative solutions. The partnership has been in effect for over half a year, and we are satisfied. The most important thing we have learned is that once a customer starts using Delipop, they are very loyal. Over the last five to six months, we have had some clients use Delipop 50 times, which comes out to be almost 10 times a month. Now it is time to build the network and optimize logistics.

The two key factors that are important to our customers are location and price. We also set up Delipop to be user-friendly so that anyone can use it. Now we are planning on expanding partnerships as well as locations. The plan is to have 150 Delipop locations across Paris and to expand across France to be able to offer products locally and sustainably to more people.

IADS NOTE: Since the time of the interview, Delipop has added Monoprix as a retailer. Read their press release here.

Opportunities for departments stores

*IADS: What are some tangible takeaways from the Delipop solution that Department Store leaders should note?*

MP: Putting parcel lockers in stores will increase foot traffic, and 70% of customers that pick up a package from a parcel locker will stay and shop for other items. We are actually working on a project now to build a big network of parcel lockers in local convenience stores. This network of parcel lockers has no additional cost to the retailer, all they have to do is dedicate some space to a logistics partner and it will bring in additional foot traffic to the store. This helps retailers convert online traffic into physical in-store traffic.

(note from IADS: given the fact that for grocery pick up the parcel locker zone needs to be relatively accessible and easy going, which often implies ground floor locations, there is a hidden cost related to the missed turnover that is usually achieved on such locations)

Delipop and Sustainability

Delipop recently conducted a sustainability insight report titled ‘Sustainability in the last-mile delivery of groceries’ which takes a deep dive into how Delipop is addressing the challenges caused by scheduling e-commerce deliveries and changing customer habits. The report reveals that the growing demand for e-commerce delivery will result in 36% more delivery vehicles in inner cities by 2030. Delipop hopes to contribute to the 15-minute city concept developed by Professor Carlos Moreno where citizens can fulfill life necessities within a 15-minute walk or bike ride from their homes. The demand for last-mile solutions is growing rapidly and is expected to grow globally by 78% by 2030. The report suggests that a universal network of multi-brand hubs, such as Delipop, can solve many last-mile delivery issues from increasing costs to more sustainable operations.

Delipop plans to offer a multi-merchant pedestrian drive that provides local customers with all the products they need from various retailers at affordable prices. Delipop also offers greater efficiency for couriers as well. With home deliveries, a single courier can deliver around 15 orders a day, but with Delipop’s network, they will be able to fulfill 200 to 300 orders a day. The Delipop concept claims to reduce emissions, enhance local business, respect traditional commerce, harness technology, and offer an efficient multi-brand network to contribute to the overall improvement of the communities it serves.

IADS’ take on parcel lockers and city centers

While Delipop is providing a solution that is more specifically focused on the grocery market, parcel lockers that can house a variety of products could amplify retailers’ BOPIS and e-commerce fulfillment options. Such solutions are introducing a “buy online pick up in locker” option which can potentially reduce various types of friction related to the transfer of goods between retailers and consumers. Contactless fulfillment options can also save retailers’ employee service time and they could provide more flexible solutions to customers. Parcel lockers can also provide an alternative option for returns, which is a major cost to retailers with the uptick in e-commerce sales.

Parcel lockers are also providing solutions that contribute to localization, and as department stores are typically situated in the heart of cities, this makes them the perfect candidates to offer such services to citizens. Last-mile delivery, especially in large cities, has become quite the challenge as governing bodies are starting to regulate how deliveries are made to reduce traffic and make deliveries greener. Between the rising costs of inflation and supply chain disruptions, parcel lockers could offer a more sustainable and affordable way for retailers to create top-notch experiences for their local customers, while also bringing in more foot traffic to physical stores.

It is interesting however to note that specialized companies, such as Delipop, focus on local supermarkets to plan their expansion and often take for granted the presence of a parking lot in their reasoning. One could see that there is an obvious possibility of collaboration with department stores, but it seems untapped so far. Is it due to the fact that profitability perspective is not in line with expectations, or simply because the said specialized companies also fall victim to the biased perception that department stores are not a format fit for the future?

Credits: IADS (Mary Jane Shea)

printable version here

Introduction

Last May, the IADS had the occasion to travel to Andorra to visit the local landmark Pyrénées department store and meet with its leading team to understand where the company was heading. In Andorra too, the Covid-19 pandemic left its mark and forced retailers to rethink their business approach and positioning, especially in such a landlocked country normally living on touristic flows.

*Even though the size of the business is relatively small when compared to other IADS members, the Pyrénées business case raises a set of interesting questions when compared to the rest of its local market:

-    What does loyalty mean for the Pyrénées customers? Is the game all about attracting local customers to the Pyrénées ecosystem, or making sure that tourists will return to the store? And what is the differentiation point: price, or selection?

-    How can a retail company stand out from the crowd in a country where the whole industry is based on duty-free product sales, from tobacco and liquor to fashion and accessories?*

Given the specificity of the Andorran market and operations, such a visit was extremely informative as it helped to see another approach to differentiation and segmentation. Interestingly, in Andorra too, the game is not anymore to sell products (even at extremely competitive prices) but to provide a new, fresh and compelling experience both in-store and online.

Company history: a very big fish, in a very small pond

The Pyrénées department store (whose original name is Grans Magatzems Pyrénées in Catalan) has been founded in 1930 by the Perez family, twenty years before the touristic boom that took place in the 50s. At the time, Andorra was an isolated country living in autarchy, selling wood and tobacco, and there was an opportunity for a retailer to bring in novelties and a taste of the outside world fashion. It is remarkable to note that the country is still rather difficult to reach, with no international airport or railway connection, and that, in spite of this, it has built its reputation among some travellers thanks to the low VAT level of 4.5% and good retail prices (up to a third of the French ones).

The Pyrénées group (which used to be an IADS member from 1979 to 2019) grew remarkably in just a generation, and entered many different markets: local wholesale distribution (for brands ranging from Samsung, Sony, Leica, to Ray-Ban or Montblanc, and including food such as Horeca), automotive distribution (from Mercedez, Citröen, Jaguar, Land Rover to industrial vehicles or motorcycles), travel agency, banking and credit, insurance, in addition to its retail activities. The Group operates, in addition to two department stores in Andorra-la-Vella and Pas de la Casa, the FNAC-Darty stores in the country, hypermarkets and other franchises such as L’Occitane, McDonald’s, or various hotel chains.

It now represents 9% of the national GDP, employs 3% of the Andorran active population (1,200 persons), and the name is a household name for many, if not all, Andorrans. Being privately owned and managed by the third Perez generation (who lives in a cult of secrecy, following some succession scandals that took place in 2010 and 2020), it is difficult somehow to have an idea of the turnover achieved by the department store itself, knowing that the group total turnover is estimated at €271m in 2019.

Visiting the store: Testing new ideas in a changing context

The Pyrénées department store, that every Andorran knows, is located in the heart of the city and can be considered quite accessible taking into account the difficult local geography and tiny roads. Rather massive, with a complex floor plan, the store has a total surface of 15,000 sqm on 5 floors. There are several entrances, and each of them has a very distinctive flavour: according to the exit, the store can feel like an international department store with a nice selection of accessories, or, on the contrary, one can feel as if they are entering in a typical duty-free store if taking the massive tobacco and liquors entrance.

Even though the store is divided into 5 floors, not all of them are dedicated to the department store in itself: the basement is operated by FNAC/Darty (it is necessary to go through the department store to access it, which reminds a bit the Inno/Mediamarkt partnership in Brussels), the third floor adds to a reduced retail space a level of carpark, and the fourth floor is dedicated to customer service and carpark.

The ground floor is large and provides different experiences: hard and soft accessories, cosmetics and beauty, men’s fashion, and tobacco products, with an impressive cigar lounge. The whole floor is designed with mobile display units, whatever the section and the category, with only the peripheral sections being fully decorated by the brands, suggesting flexibility if and when needed.

When it comes to the accessories section, the brand range is international and attractive, with Longchamp, Furla or Michael Kors in corners decorated with the brands’ concepts, and generic areas in the middle featuring Ralph Lauren, Moreau or Coach. The execution and feeling in the leather goods section is more qualitative and distinctive than in the watches and custom jewellery section, essentially due to the level of brands available and the fact that in the rest of the town, the competition in that segment is harsh.

The tobacco products space is just near the parapharmacy space, which is somehow intriguing. There, customers can buy cigarettes, luxury cigars, but also chocolates and souvenirs. A dedicated cash counter allows separating such sales from the rest of the store (where customers have to go to central cash desks, Pyrénées is not yet equipped with mobile cashing solutions).

Probably for the same competition reasons that limit the business on watches and jewellery, the cosmetics and beauty section is less impressive than in other international department stores, and takes much less footprint. Once again, here, the story is about having the category present to capture any potential sale and making sure that no opportunity is missed, but without having the possibility to fully differentiate from what one can find in stores in the rest of the city.

Finally, the men’s section is probably the more immersive, with a surprising selection of luxury and semi-luxe brands (Boggi, Ralph Lauren, Hackett…) in a very nice and well-executed environment, neighbouring a younger and more contemporary offer, from Rains to Tommy Hillfiger. It naturally leads, and without much of a transition, to the sports section which is mixed and includes international brands which have claimed to stop wholesale distribution, such as Nike and Adidas (but Andorra is a specific and small market).

The first floor is dedicated to women’s and kid’s fashion, as well as toys. Interestingly, on the whole floor, the feeling is much less generic as many brands do have their own concept all along the aisles, giving a feeling of shop-in-shop even though all purchases are also processed on central cash desks in the middle of the floor. This brand concept approach is not linked to a specific positioning such as in the Men’s luxury section a floor below, and goes for brands from IKKS to Scotch & Soda but also Tommy Hilfiger.

The lingerie space is large and impressive, and at the time of the visit, was one of the busiest sections of the store, entirely with female customers, which suggests that this section is more well-suited for local customers and their own consumption (probably for historical reasons as Pyrénées was one of the first retailers in the country) rather than being a duty-free location such as Victoria’s Secret airport stores where travellers can buy spicy lingerie on the go.

Interestingly, a portion of the floor is dedicated to a specific concept, called “Gallery”, where designer brands are available, such as Isabel Marant, Ganni, MSMG or Vince. Some kids’ fashion is also available here and also comes, just like the women’s selection, as a complement to what is available on the rest of the floor. This space feels like a laboratory where Pyrénées tests new brands or new processes, as some second-hand luxury handbags are also available. The space, equipped with carpets and sofas, is also somehow a bit more comfortable than the rest of the store, which is fitted with a cold luxury kind of approach (marble, generous lights…).

The second floor is dedicated to food but looks more like a supermarket than a gourmet food section. Aisles are pretty basic and advertising is more price-centred than product-centred. A click and collect service, “shop and go”, is available on this floor and works with a dedicated app.

The third floor welcomes customers with the reproduction of an old fountain, which can direct customers either to the food court, with a selection of a few restaurants (well suited for lunch but quite unappealing for dinner options), or home equipment, including pet accessories, a locksmith, and a dry-cleaning service. A spa is advertised but, in reality, is not much more than four massage tables in a private room, closed for Covid-19 regulations at the time of visit.

Customers can access the carpark from here, and this floor is the only one with all amenities, including toilets.

The fourth floor is dedicated to customer service, where all clients are accommodated in the intimacy of a private cabin with a customer representative. There, customers can deal with purchase pick-up, and returns, but also tax refunds, credit limit increases or other requests. Attention to the customer is maximal but overall feeling a bit vintage.

What to remember and what is next?

A duty-free store is not precisely expected to be the place testing and trying new full-price categories or services. Even though they are still at the very beginning of the journey, the leading team of Pyrénées is well aware that in a city like Andorra, the price point is no longer a competitive argument, however old or familiar the retailer’s brand name might be.

This is why they have started pre-pandemic to go upwards in terms of brand positioning, which explains the nice luxury spaces spotted in the Men’s section on the ground floor or on the first floor with the Women’s section. It also explains why the “Gallery” space acts as a laboratory of new ideas, both in terms of new brands (many of them are not sold elsewhere in Andorra), or categories (by mixing design with fashion, for instance).

Most importantly, Pyrénées has been working a great deal behind the stage, with the launch of My Piri, the loyalty programme boasting a subscription rate of as much as 80% of the total Andorran population, allowing the retailer to have a very good understanding of its purchase behaviour, and its data, which could turn up into a gold mine since Pyrénées is the only player on the market.

Is that to say that Pyrénées is now all about bringing “the best quality and the largest brand and product assortment in the country” to local customers? Not exactly: it also wants to reclaim its status of destination store for any tourist coming into town, which is the reason why the expansion plans include in the coming year the opening of a new floor entirely dedicated to wellness and spas (which also explains the reason why the current “spa” lounge space is closed) and a rooftop overlooking the roofs of Andorra-la-Vella.

Conclusion

Travelling to Andorra is fastidious, and long, as it can take up to 3 hours from Barcelona or Toulouse to get there. Now that customers can access good deals from the comfort of their homes (with some limitations to this claim as it is difficult to find cheap cigarettes online, if not illegal), they are asking for something more.

A good illustration is the fact that now, there are 3 distinct types of tourists travelling to Andorra: the travel retail tourism, aiming to take advantage of the prices which can be up to three times lower than in France or Spain, the “white” tourism, people coming to Andorra during winter for ski, and the “mountain” tourism, a new breed of travellers increasingly hungry for outdoor and rock-climbing experience, a population for whom smaller cities in Andorra are building equipment and designing trails in nature.

The Pyrénées department store has well understood that, in a city where the price point is a reason to come for a third of the tourists, selection, curation and experience were the best way to differentiate. The cherry on the cake is that this allows to killing two birds with one stone, as locals might also very well enjoy a place to hang out. The opening of an entire floor dedicated to wellness is, for sure, a major piece of news for the city of Andorra-la-Vella, and will deserve a review in a year or so to see how they executed their vision, all the more that some interesting benchmarks are coming to light at the same time, such as the new space at Galeries Lafayette.

All in all, a new destination within the destination is born in Andorra, proof that department stores all across the world, whatever their size or market, are alive and kicking, in spite of what some might say.

Check out the collection of pictures here!

Credits: IADS (Selvane Mohandas du Ménil)

Printable version here

Introduction

The IADS had the occasion to travel to Brussels and took the opportunity to visit Inno, the iconic Belgian department store celebrating its 125th year of activity this year and a founding company of the IADS. A new CEO was appointed in 2019 with a new plan, and this visit was the opportunity to take stock.

What can we learn from the Inno revamp? Where do they stand? To what extent the Belgian retail scene has evolved after the Covid-19 pandemic and where is the company heading?

Historical background: the many ownership changes added to the market difficulties

“A l’Innovation” (the original name of the company) was founded in 1897 by Julien Bernheim and the Meyer family rue Neuve, in Brussels. In 1928, the company was a founding member of the IADS, where it remained until 2011.

Just like many other department store companies, A l’Innovation was all about novelties and first times for the Belgian market, and developed a network of stores across the whole country, until becoming the largest retailing company in Belgium 40 years after being founded. After WWII, the market consolidated and A l’Innovation merged with its competitor Bon Marché to become Inno-BM in 1969, and then with GB Entreprises to become GB-Inno-BM in 1974 (also increasing the store portfolio).

However, difficulties increased with the evolution of new retail formats (mass distribution, specialty stores) leading to the purchase of Inno (a new name minted in the 90s) by German department store Kaufhof (another long-term member of the IADS, from 1930 to 2015), then the property of Metro AG, in 2001. When Metro sold Kaufhof to the Hudson’s Bay Company in 2015 for €2.42bn, Inno was part of the deal. History repeated itself in 2018 when Signa Holdings purchased Kaufhof (which had been renamed Galeria Kaufhof) to the Hudson’s Bay Company for an estimated €3bn, and merged it with the other German department store it already owned since 2014, Karstadt, into a new entity called Galeria Karstadt Kaufhof (the new name was released in 2019). On the same occasion, Inno was rebranded as Galeria Inno on the Belgian market.

This long and complicated story of ownership is not entirely unrelated to the difficulties of the company up to 2019: it has never been a priority for its successive owners, due to its isolated (and smaller) market, and its size when compared to its Canadian or German counterparts.

Bringing in the changes

A new CEO, Armin Devender (a Kaufhof veteran with 23 years of experience in the company, followed by a 3 years stint at the Hudson’s Bay Company), was appointed in October 2019 with the clear mandate of revamping the company’s appeal and increasing sales. Even though the Covid-19 pandemic obviously did not ease things for him, a strategic transformation plan was implemented and executed, with visible results.

The plan included 21 projects, among which:

-    The most visible part was the rebranding of the stores into Inno in April 2021. Devender was aware that Belgian customers did not recognize Galeria Inno as the original brand and he was eager to recreate a sense of proximity between the general public and the iconic store (the current tagline of the company is “Inno for you”),

-    Stores also had a makeover, both in terms of spaces (larger and easier circulation areas, opening of new lounge spaces, lighting, the opening of the windows on the outside…) and offer, with an increased range of brands sold (including younger or more upmarket ones) and new partnerships, especially in the F&B area with the opening of BON restaurants on the ground floors of the stores,

-    Somewhat more impressive, behind the stage the plan also included a technical upgrade. During the pandemic, Devender and his new management team have managed to implement a new ERP with SAP in only 7 months, which allowed them to relaunch a proper e-commerce website which also includes a marketplace, allowing them to test new product categories not sold in stores such as design pieces, furniture units or lights and either delivered via dropshipping or picked up in stores.

According to Devender, the results were quick, with an increase in the conversion rate noticed as early as in November 2021, and when the IADS met with him in May 2022, he mentioned that total sales were now almost back to pre-pandemic levels.

Strangely enough, however, the rejuvenation plan was first launched in secondary locations (Schoten end of 2020, Liège, Louvain and Waasland in 2021-22) and not in the capital city flagships. This has raised some critics about a strategy which requires capital and time to refurbish a 16-wide network of stores, in a very uncertain context, and questions about its realism and time needed to achieve it. For instance, the company had to put on furlough 50% of its overall staff, including HQ, in early 2022 due to liquidity issues.

The IADS visited the two stores in Brussels city center, in the posh location of Place Louise and the original one of Rue Neuve. The feeling, look and touch differ considerably from one location to another and even allows to have a “before / after” kind of understanding of the work done so far.

Place Louise store

This store is the place to go to have a taste of what the department store concept looked like prior to the arrival of the new CEO, as the revamp has not started yet. This retail unit is surprisingly out of synch with the immediate neighbors (the usual luxury brand suspects, Hermès, Louis Vuitton, Tiffany’s…) and looks at best dull, at worst unattractive.

Organized on 4 floors, the zoning is classical with a few surprises:

-    The basement is dedicated to lingerie, and visitors land immediately in the section from the escalator facing the entrance. This is somehow surprising as there is no boudoir nor intimacy feeling here, but this clearly reflects a practice from the past (many department stores in the Northern part of Europe used to display lingerie either on the ground floor almost immediately at the entrance or in the basement). One can wonder about the efficiency of such a set-up in modern times.

-    The ground floor is rather classical: cosmetics, accessories with multi-brand generic central displays, and walls with brand concepts, showing an assortment of local and international brands. The wholesale model seems predominant with no shop in shop with separate cash desks in view, but a large bank in the middle of the floor, flanked by a guard, where customers can line up and pay for their purchases under his close watch. The fact that customers are given their purchases in new concept packaging is destabilizing and shows that the store is about to be upgraded, which would explain why the barber space is closed and under construction.

-    On the first floor, the feeling is airier thanks to the large windows overlooking Avenue Louise, and customers can find access prices and contemporary RTW and shoe fashion. Construction is being carried out in the middle of the floor, with a sign “this is the right moment for a relooking” and workers are busy with the upgrades.

-    On the second floor, mature fashion is presented. A mannequin was lying on the floor unattended at noon, facing the escalator exit, which raises questions about the attention given to service and image.

-    The last floor is dedicated to Men’s and Kid’s Fashion. The height of the ceiling and structure of the walls makes it almost impossible for salespersons to see who is in the kid’s section, which is a problem and leaves customers being left alone there. The customer service space is under construction and without any type of hoarding or explanatory sign.

During the visit, sales assistants were either not in sight, or discussing between themselves. None of them were saluting customers, even at a moment when affluence was low, and they seemed pretty much left to themselves, as some of them were having surprising behavior (hiding behind a corner or spending time folding garments at a moment when customers were gathering in front of them with questions).

Overall, the visit was disappointing and far away from the promise implied by the new plan. The CEO latter confirmed that this store should be upgraded in S2 2022 / S1 2023.

Rue Neuve store

This location is a stark contrast to the posh Place Louise area: like many other areas in Europe, this area used to be a must-go during the 20th century, and gradually lower-range retail and restaurants started to get locations there and make the most of the traffic. As a consequence, the Rue Neuve location is rather mainstream with a concentration of fast foods and high street fashion boutiques.

However, the store, due to its historical status, has started to undergo a makeover launched in November last year. The new logo is proudly displayed on huge banners floating on the façade. However, they are made less visible from the street as Media Markt, the partner leasing the last floor of the store, has also displayed their logo on the building.

On the total 5 floors, 4 are occupied by Inno itself, from the basement to the third floor (the last one being entirely occupied by Media Markt):

-    The basement is dedicated to home products, design and decor. Even though it had been revamped in 2019, hence not with the current concept being deployed, the feeling is the antithesis of the Place Louise store, with perfect lighting, a feeling of space and the use of bright colors. In comparison, the cash desks are inviting and look like places where one can receive advice and help, rather than just paying bills. The way the floor is organized allows us to comprehensively measure and sense the dimensions of the store, and this is impressive.

-    The ground floor allows customers to enter directly through the main entrance into a cosmetic space which has been built with international standards: brands are properly displayed in their own shop in shops with their own concepts, with competent, welcoming and smiling staff, and this is clear that here, the floor is being looked after both by the retailer and by brands. The cosmetic area is then connected to the lingerie space (with a cozier feeling than in Place Louise) and bags and accessories. The brand selection is also a bit more upmarket than in Place Louise, with names such as Furla, Coach, or Calvin Klein, coming as a top up to the Guess or Liu-Jos of this world.

-    The first floor is dedicated to women’s fashion, organized in nice spaces with corners build with specific brand concepts. The whole floor is clear, and gives a sense of space with set ups and displays which are supporting the glance while not cutting it.

-    The second floor is dedicated to men’s fashion, with a similar sense. It was noted there that all sales staff were wearing their own looks, not uniforms, giving a sense of youth and credibility.

-    The last floor shows a bit of everything, from shoes, sportswear, gift, travel accessories and a restaurant that is a reminiscence from the 80s (not in a cool way). Here, the rebranding is still on going, with signage mixing both the old and the new concept. Again, the space gives a feeling of light and is quite welcoming.

Although both stores were visited on the same day, within 20 minutes of each other, traffic intensity and quality were incomparable, and seemed out of synch with the environment itself: the younger, cooler and apparently richer customers were not in the posh area location but in the more popular one, which suggests that the rebranding strategy is beginning to bear its fruits.

Online presence

It is interesting to see that even though the rebranding of the company now dates back more than a year, not every detail has been yet fixed: for instance, Google still displays “Galeria Inno” on its maps for the Rue Neuve location, which Place Louise is simply called “INNO Louise”. This is the kind of detail that can be confusing for tourists and people unfamiliar with the names, for instance.

When visiting the neat and very efficient website (where marketplace products are presented in an indistinct manner until the product page), the accent is clearly put on the loyalty program recruitment, using the anniversary celebration as a pretext to display the new perks according to the 4 levels of membership (‘Unique’, ‘Amazing’, ‘Exceptional’ or ‘Premium’: perks are quite classical and range from free parking, alterations or make up sessions, to access to special and VIP events, and including point-based vouchers, birthday date discount and extended return policy).

Even though the overall display is very simple (and somewhat unappealing for the younger generation), it is probably the best way to make sure existing customers start to use the online channel, and one might wonder if the current website is not simply a transitional one for a more sophisticated version once the customer based has evolved.

Check out the collection of pictures here!

Conclusion

It is paradoxically too early to know if the plan launched by Armin Devender in 2020 is bringing success, from visiting the flagship stores only. While the idea of testing new concepts and projects in the second-tier stores can make sense in order to limit risks, the current look and feel in the capital city stores suggests that this approach was too shy and timid given the timing. Now that tourists are coming back and local customers are looking for new experiences, the situation in Brussels is not on par with everyone’s expectations which is a shame given the fact that the corporate revamp has now been launched close to two years ago.

Also, even though the revamp in the Rue Neuve store is not finished yet, the progress made so far suggests that there is still a long way to go for Inno to get to international standards: while the offer is more attractive, there is no hint that the stores are becoming more experiential and able to generate new streams of revenue in the same manner than what we see in France, England, Spain or Germany. As a consequence, critics in the local press stating that the overall plan is too slow and not radical enough (especially in terms of restructuring and rightsizing the network) can be understood: there is no evidence that Inno is currently building the solid foundations it will need to succeed in the future.

Additional reading

Also see the press release (rebranding and new rue Neuve Store)

Credits: IADS (Selvane Mohandas du Ménil)

Printable version here

Introduction

The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This third part is dedicated to Steen & Strom in Norway.

Company history: the oldest department store company still in operations in the world

A former member of the IADS (1940 – 1992), Steen & Strom is one of the oldest, if not the oldest, department store company still in operation today as it was founded in 1797. The first department store, built in 1874 over four floors, was destroyed in a fire in 1929 and the current 6-storey store, of Parisian inspiration, was built and opened in 1930. Steen & Strom has been instrumental in introducing novelties to Norway, from fashion to technology, as well as innovations such as the first escalators.

The company went bankrupt in 1992 and from then, went from hands to hands of various owners, until being purchased by Soylen Eiendom in 2011 for €95m, who then sold the department store as well as the surrounding 11 real estate locations in 2015 to the Meyer Bergman investment company for €500m. Meyer Bergman, renamed MARK in 2020, still owns Steen & Strom to this date, through the Norwegian structure Promenaden Management which operates both the department store, the nearby Eggert shopping centre, and the luxury boutiques locations in the streets adjacent to the department store (MARK, based in London, is involved in maximizing the value of prime real estate assets such as The Whiteley in London, Richardstrasse 20 in Berlin or the Pershing Hall Hotel in Paris).

The Steen & Strom store owned and operated by Promenaden Management, is not to be mistaken with another Scandinavian company with the same name, owned by Klepierre and involved in managing 52 shopping malls across the region. To this end, the department store has rebranded into Steen & Strom 1797, also emphasizing its history and heritage.

Given the fact that the company is privately held and Promenaden Management a holding company, it is difficult to get actual numbers about the turnover of the store. Steen & Strom 1797 mentioned that they experienced record sales in Q1 2022 and claim a total footfall of 2.2m visitors, with the goal to increase that number to 5m in the coming years (the Karl Johans gate, where the store is located, is Norway’s most visited shopping street with 15.5 shoppers p.a. in normal times).

Visiting the store: a luxurious work in progress

The store, renovated in 2020 for a total investment of €29.5m, is structured on 6 floors and 12.500 sqm including the basement and a fully renovated entrance on Karl Johans gate, which allows to open the building on the outside, bringing in a lot of light and provide a spectacular space for events and marketing activations. It has already proved to be a success as the footfall and traffic have constantly increased since the opening of this section.

The department store’s revamp is timely: Oslo is ramping up its touristic attractivity, with the constant opening of luxury hotels, and fine dining restaurants, but also with the inauguration of impressive landmarks: after having opened the Opera House in 2008 and the Astrup-Fearnley contemporary art museum (in a building designed by Renzo Piano) in 2012, the city inaugurated the new Munch Museum at the end of 2021, and has just opened the new National Museum in May 2022, all located in different zones of the city, allowing to spread the development and investments. In order to be part of the game, Steen & Strom 1797 has worked on its visibility and recognition: the store is perfumed with its own recognized scent and equipped with a studio quality sound system, windows have been renovated and are at the same time promotional and educative, the visual identity has been modernized with the use of vivid colours, and the website will include e-commerce activity in July 2022.

The revamp of the store is still in progress, meaning that fully finished zones coexist with sections still under construction (at the time of visit). For instance, while the entrance on Karl Johans Gate is fully finished, spectacular and extremely inviting, opening up to the event space and giving a good view of the cosmetics section, the opposite entrance is still under process and opens directly to hoarded sections. The surroundings of the store are perfect, since Steen & Strom is adjacent to Louis Vuitton, Chanel, Saint Laurent, and houses the Gucci, Balenciaga or Burberry stores.

The basement is extremely immersive, with a series of entertaining food concepts, extremely well executed, which allowed generating a significant footfall at lunchtime with employees from nearby coming to experience the gourmet offer there (ranging from bars, restaurants, to delicacies and a deli). This floor represents 24% of the total business in the store, and upscale private labels are planned to be launched in 2023.

The ground floor is very different from what has been seen in the other Nordic department stores: while it houses cosmetics and the usual international brands, the choice has been to avoid having the classical white logo on black boxes approach, and replace it with the store’s own concept, all in low-rise white marble displays, lit with huge rounded lamps, and a space dotted with couches and activation zones including a lot of testers. As a consequence, the immersion in the store’s atmosphere works also extremely well here, and provides an enjoyable experience, completed by the atrium, which is a new space consecutive to the renovation of the entrance on Karl Johans gate, where small accessories such as Dior sunglasses and caps are sold (a small shop-in-shop in the entrance dedicated to high-end caps designed and produced by a local brand, Varsity, generates a €10,000 weekly turnover). Interestingly, the store, still in revamp and repositioning, does not sell footwear, lingerie or hard luxury accessories yet, but already outperforms its targets, convincing the leading team that the steps taken are the right ones.

The first floor is dedicated to “men’s new luxury” but, in reality, is still in progress when it comes to the offer. While all peripheral zones are at brands’ concepts, the central area is in a generic concept (but brands are not operated in wholesale as Steen & Strom 1797 is still a 100% leasing concept), including a more formal offer than what has been seen in Helsinki and Stockholm, and an underwear section located in the middle of the floor. There is also a multi-brand concept, “Collage”, which displays brands such as Givenchy, Celine, and Off White (some of them are also available in the city in their boutiques, or in other points of sales). Since the offer is a work in progress, the goal is to increase the size of the Collage space, and also go more upmarket and luxurious when it comes to the brand selection available in the generic area. Also, one must remember that the current structure of the store will be revised in the future, as the first floor is, according to the plan, to be dedicated to accessories and shoes (a category which is not yet sold at all in the store). This floor will also provide the click & collect service once activated.

The second floor is dedicated to “women’s new luxury”, and, here again, still in process, with a very large section dedicated to dummies, probably for lack of better. The whole building is structured according to 2 escalators at the opposites of the floors, allowing smooth and easy navigation on each of them. Here again, the brand selection is also a work in progress, with good visibility given to Scandinavian and Norwegian brands. There is also access, separated by a small bridge, to a very high-end hairdresser where customers can also buy beauty products, in double exposure to the ground floor. This floor also accommodates the personal shopper lounge.

The third floor gathers the “contemporary fashion” and the brand selection is quite adequate, echoing the trendy and young feeling of the floor. It is to be noted that, so far, there is no F&B space on any of the floors with the exception of the basement, and this is a topic that the leading team is currently exploring. It is possible, from this floor, to access a separate space via a small bridge where the outlet section can be found. Execution is very elegant.

The fourth floor is advertised as childrenswear and home lifestyle in the store maps, but, so far, is used as an exhibition space, just like the fifth floor, advertised as “events and services” but so far only housing the Promenaden Management offices.

All in all, the overall impression is a very good execution and attention to detail for the finished sections of the store, which conveys a convincing feeling of luxury and shopping appeal. The basement and ground floors are the zones which are closest to completion and give a very positive understanding of what the store is striving to achieve.

Interestingly, there are many internal debates in the company to take a similar road than the one taken by NK in Stockholm, namely operating directly with some multi-brand zones, by selecting, buying and selling specific brands. The rationale for this approach is to consolidate the fashionable positioning of Steen & Strom 1797 in a city where competition exists but has not coped yet with international standards.

The closest competitor in town is the Paleet shopping centre. Just like Steen & Strom 1797 (and NK in the region), it operates a business model based on leasing, including a historical fashion multi-brand, Hoyer (with brands such as Zadig&Voltaire or Anine Bing for women’s, and Burberry, Comme des Garçons, Heron Preston, Lanvin, Moncler, Nike or Off-White for mens). This is not the historical location of Hoyer, as they recently relocated to this centre, and they are said to have lost customers in route. Apart from the brand offer (which is not competitive when it comes to womenswear), the size, width and breadth of assortment presented there tends to validate Steen & Strom 1797’s thinking that they have an opportunity to become a fashion centre, in addition to already being an undisputed luxury hub.

Check out the collection of pictures here!

Conclusion

What to remember from Steen & Strom 1797? Since the store is still in work-in-progress mode, it is difficult to draw conclusions already. However, what has been striking during the visit was the fact that Oslo has considerably evolved when it comes to fashion, with a young and affluent clientele, seemingly immune to the European political events and worldwide economic woes, and eager to spend. Steen & Strom 1797 has understood that and the moves made to make the most of this opportunity have already been successful. The atmosphere, execution and quality of details in the store are all impressive and make it the most adequate place to shop in the city so far.

Of course, there are some challenges, such as making sure that the right brands are present (which implies that they realize the potential of the market, and this is not obvious as Scandinavia is often overlooked in terms of retail potential) and making a decision on the business model (leasing vs. buying) which will increase flexibility but will also imply new competencies and team structure in the company.

But whatever the decision made, it is already obvious that Steen & Strom 1797 is making all the needed steps to becoming a destination for all tourists visiting Oslo (a growing breed), in addition to entertaining the local, young and experience-hungry clientele. In addition to that, we also believe that the level of immersion and execution so far should also put back Steen & Strom 1797 on the international scene in the mid-range as it has all that it takes to become a reference for other markets too.

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

Introduction

*With Covid, the search for wellness has become increasingly important for consumers. In a survey from McKinsey, the global wellness market was estimated at USD 1.5 trillion in 2021, with a predicted annual growth of 5 to 10%. In this survey, 79% percent of the respondents said they believe that wellness is important, and 42% consider it a top priority.

As a consequence, retailers started to tip toe in this relatively unknown part of the business, in the intersection of beauty, sports practice, health products and services. Selfridges first launched a wellness program in February 2022. Dubbed “Superself”, the initiative included paid sex counselling sessions, confidence coaching sessions and other services to help customers live a “brighter lifestyle”. This month, they are transforming their Corner Shop into “The Feel Good Bar”, a well-being destination focusing on sex and sleep-enhancing products and services. The cinema at Selfridges will also be part of the program, converting into a sleep session area. Health-based experiences like acupuncture sessions, IV drips, bio-hacking, and oxygen therapy will become available later this year. Also in the UK, on top of a cosmeceutical space, Flannels partnered with Barry’s Bootcamp to open a gym in their new Liverpool store. In the US, mental health initiatives developed in the past months for instance at Walmart, CVS and Rite-Aid drugstores.

In France, last year, Monoprix launched “La Santé au Quotidien”, a new department dedicated to products that are in between traditional beauty offerings and medical treatments. In March 2022, Le Printemps Haussmann store also launched a new beauty floor gathering beauty services such as manicures, pedicures, brow services, hair products and a salon, dermo-cosmetics and food supplements, as well as a spa developed with the Face 2 Une beauty tech brand, proposing no gender services through manual massages and machines. Next September, using a more confidential approach, Le Bon Marché will also open a permanent 150 sqm beauty salon.*

Obviously, initiatives are plentiful but Galeries Lafayette goes further than any other department store in the wellness business. Last week, and after a year in the making, they opened the “Wellness Galerie” in their Haussmann store. On 7 July, Alexandre Liot (Haussmann Store Director) and Arthur Lemoine (Offer and Buying Director) unveiled the new floor. The IADS attended the floor visit for you, and we are delighted to report back this exciting member news.

Check out the a collection of pictures of the Wellness Floor here

The Wellness Galerie in a nutshell: sports, beauty, health, wellbeing, and more

This recent move is part of a larger modernisation plan which already witnessed the revamp of the floors: 2 and 3 (women’s fashion), 4 (women’s shoes) and 5 (kid’s wear). The Wellness Galerie is located on the -1 floor where women’s shoes used to sit, and one of the most important floors in terms of traffic. The idea behind such a space is to make wellness accessible to a larger part of consumers as it is still quite segmented to date in France.

With this new 3,000 sqm department, Galeries Lafayette has an ambitious goal: the holistic concept is set to become the destination for well-being in Paris, where people come to think about themselves and do something good for their body and mind. In a nutshell, the Wellness Galerie splits into 3 main areas: a gym studio and a fitness product offer, beauty and health  (services, and a care-oriented beauty store. Many brands are exclusive, and some are introduced for the first time in France.

In terms of architecture, the Wellness Galerie is full of rounded spaces, even using a reverse cupola to mirror the store’s famous one. Curved walls and ball-shaped private rooms echoing the 70s are emphasizing the impression. Walls are usually tiled with earth-tone ceramics. Hardwood and concrete floors come one after another depending on the area.

Galeries Lafayette gets physical

La Source, a Parisian bootcamp studio, is opening a 200 sqm workout space which will offer group coaching, as well as other classes, such as boxing and cardio starting at EUR 30 for a 50-minute class. With its direct access from the subway station, the gym can open outside of the usual operating hours, from 6:30 am to 9:00 pm (the store is open from 10 am to 8:30 pm). A large sitting area, thirty shower cabins, supplied with bath towels, body soap and lockers make the place a true gym.

This part of the floor also includes a trendy yet technical athleisure product offer, the “Fitness Store”. Some 15 responsible brands recognized for their expertise, from big names (Adidas, Under Armour, The North Face, Eres and Wolford) to emerging brands are gathered on a 200 sqm surface: Born Living Yoga and Alo Yoga (exclusive brands), Luz Collections and Girlfriend Collective for fitness and Pilates, Circle for running and Chlore for swimming are completed by Colorful Standard for loungewear and the latest yoga accessories from Bala and Athlé. Finally, Champion Spirit, sports accessories and equipment that connect digitally, are available to shoppers. The “Fitness Store” doesn’t sell sports shoes.

A wide array of services focusing on well-being, care, beauty, and fun

What makes the ‘Wellness Galerie’ special also lies in the plentiful service offers. First, through the “Lobby Wellness”, the “Wellness Team” welcomes customers and guides them in choosing the program that best suits their current objectives. The Wellness Team can also carry out a broader assessment of one’s physical, mental and emotional condition to guide clients toward the right treatment. A dedicated platform on Galeries Lafayette’s website is available to book any service.

When it comes to brands and partners, the space proposes unexpected pure health-related or well-being services such as Aantomik. Created by 2 osteopaths, services combining prevention and treatment such as cryotherapy, hyperbaric chamber, osteopathy, meditation, muscle strengthening, yoga and Pilates in group sessions are available. Many other services oriented towards well-being and beauty are also proposed: Belleyme offers sessions in their infrared saunas for detoxing, disconnecting, and regenerating your body. The famous Martine de Richeville combines Chinese medicine and psychology to remold the body through her special and renowned massage technique that targets fatty deposits, circulation issues, deep skin tissue, and internal organs. L’Institut Nathalie Duarte is a physiotherapist, masseuse, and official trainer of the Renata Franca method. Les Bains du Marais brings ancestral rituals for beauty and well-being thanks to a hammam and a collection of bathing products. And Alexandre de Paris will open a hair salon in the  Wellness Galerie in September.

To improve body figures, Skinneo delivers anti-ageing and silhouette-enhancing treatments by using exclusive technology to care for the face and body. Chronodiète offers nutritional coaching for diet and well-being using a methodology based on chronobiology and the glycemic index to adapt to the rhythm of each person for an efficient weight loss journey.

More oriented towards beauty, the Galeries Lafayette buying team recruited Chillhouse in New York to differentiate their manicure offer. The brand offers fun and accessible body, face, and nail services. Le Boudoir du Regard develops innovative bespoke eyebrow waxing, eyelash and eyebrow dyes, long-lasting eyelash extensions and permanent make-up services to provide structure and harmony to the face. Finally, Djula proposes piercing services with a trendy line of body jewelry made from 18 Carat gold, diamonds and other precious metals and gemstones.

Two “bubble spaces” are available for private bookings. In these two cocoons, customers can celebrate a birthday, a bachelorette or bachelor party, or any other occasion. Some treatments can be organized in the intimacy of the “bubbles” as they can be entirely personalized. Nutrition being a key aspect of wellness, a restaurant, the DS café, has been designed to offer healthy meals and juices, to stay or to go.

The Beauty Store is focusing on care

Central to the floor, the 600 sqm Beauty Store is divided into shop-in-shops and a multi-brand area. New names mix with famous ones that were previously available on the ground floor. The idea here was to leave the tri-axis brands such as Chanel or Dior, the perfume and makeup brands on the ground floor and to move the more care-oriented ones to the Wellness Galerie: for instance Augustinus Bader, Origins, The Ordinary, Clinique, Aesop, Shiseido, Kiehl’s, Aveda, Clarins, Dermalogica, LA:Bruket, Rituals. New brands are introduced such as Seasonly, the 100% clean and vegan French line of beauty products, benefiting from a large area. Sunday Riley provides innovative and exclusive formulas to see rapid results and rebalance skin for the long term. And 111SKIN which reproduces surgical and clinical treatments through innovative formulas.

Brands developing alternative products have also been onboarded. L’Officine Immortelle combines phyto-aromatherapy and grimoires to bring ancestral formulas up to date through its herbal teas, oils, treatments and elixirs all 100% organic and made in France. Aromatherapy Associates has been a leader in the wellness industry for over 35 years by producing handcrafted natural formulas using essential oils designed for physical and emotional health. Finally, a food supplement section with Sensiness and Maison Louno, and a book store gathering 500 books are also available for a 360° product offer.

Conclusion

Department stores recently entered a relatively new business: wellness. Being about beauty, well-being, ageing, nutrition, health and sport makes this holistic trend and the market coming with it difficult to be clearly defined. While the wellness trend remains unframed, retailers are experimenting with various options from traditional beauty treatments to healthcare-related services. Some department stores are even going further by offering injectable services like Saks Fifth Avenue in the US. In France, Galeries Lafayette certainly takes the lead in this area by devoting an entire floor to its Wellness Galerie. It also marks an additional venture into experience and service offerings.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

Introduction

*Among the many consequences for retail stemming from the Covid-19 pandemic, which we are exploring at length, a major one is the international tourism crash and the closure of China, which historically steadily contributed to department store companies’ growth in the past years. Even considering the recent closures taking place in Shanghai, Beijing and other Chinese cities, the business has flourished domestically for the past 2 years in China and the acceleration of retail digitization has also taken place there. The road seems to be still very bumpy, but there is definitively a light at the end of the tunnel. What can we learn from what took place in China and are there lessons to have in mind? To answer this question, we interviewed two specialists from Mobile Now Group and Clientela.

Mobile Now Group, founded in 2009, is a development studio with a focus on digital experiences, products, and platforms. With offices in Shanghai, Hangzhou, and Changsha, in addition to their Singapore office, they have a commanding understanding of the Chinese market and its evolution. They have worked on more than 100 projects with leading companies in the world such as Richemont, Cartier, IWC, Montblanc, Sephora, DFS, Hennessy, Lane Crawford, Shiseido, NARS, SMCP, La Samaritaine, and others.

Clientela, a software company based in New York founded in 2010, has developed a complete suite of acquisition, clienteling and retail operations for stores, in order to cater to customers’ needs through an optimal experience, while maximizing efficiency and profitability for retailers. They have developed solutions for several leading global brands, such as Cartier, Benefit Cosmetics, Marc Jacobs, Chloé, MaxMara, and Carolina Herrera, and they have led a pilot project with IADS member Magasin du Nord in Denmark.

Mobile Now and Clientela partnered in 2020 realizing that retail clients needed a global clienteling approach that brings together two important approaches:*

• The maturity and knowledge of global clienteling best practices,
• The specificity of the Chinese digital ecosystem, especially in mobility, social commerce, and O2O commerce.

We interviewed Thomas Meyer, co-founder of Mobile Now, and Arnaud Barbelet, COO and partner at Clientela. Thomas spent 20+ years in Asia (14 in China) and most of his career in tech and mobile development before co-creating Mobile Now Group 12 years ago, with experiences at Wunderman, OgilvyOne, and WPP among others. Arnaud has 18+ years of experience in start-up development centred on customer approach and understanding. He brings a complementary eye to what’s going on in China and helps draw conclusions for retailers from other regions.

IADS – With your combined experience, what are the key learnings and innovations that you noted over the past years in China? What should the rest of the world be aware of?

TM, Mobile Now - Social commerce, and how it became central for Chinese department stores and international brands, is on top of my mind and especially WeChat. Many players are operating in social commerce: Douyin (equivalent of TikTok), Little Red Book… They all work a bit differently and most of them are in reality engagement and branding platforms. For me, WeChat stands out from the crowd.

WeChat has a multilayer spectrum:

• There, brands can build their apps (Miniprograms) hosting the whole product catalogue, acting like websites or native apps we know in the West. In addition, these Miniprograms include WeChat Pay and easy user identification.
• It is at the same time a livechat platform, used by brands and sales associates for anything: pre-sales, sales and after sales, making appointments in stores and reserving products.
• It also offers retailers a wide range of analytic data, through WeCom (a professional sister app) to track KPIs and perform additional analyses.

Not all brands have jumped onto WeChat online-to-offline (o2o) commerce and in some way, this is what seems to differentiate losers from winners in China. For customers, the possibility to use WeChat customer service and Miniprograms now make a difference between good and bad service.

AB, Clientela – For me, international department stores willing to attract Chinese shoppers once the pandemic restrictions end have no choice but to invest in WeChat or other significant national super apps (such as Kakao for Koreans or Line for Japanese customers). However, China has crafted this business model, we see WeChat as a sort of digital lab for social o2o commerce. The Korean and Japanese examples show that this model might very well happen in other countries as well (for instance, India).

IADS – Thomas, e-commerce in China is extremely different, and much more competitive, than in other markets. How have Chinese department stores adapted to the digital ecosystem and what were their main innovation points?

TM, Mobile Now - E-commerce in China is a completely different ecosystem, and structural changes are constantly happening, which complexifies the picture. The way the different platforms work changes over time, which can be disorientating for outsiders.

For instance, many brands heavily invested in Alibaba’s TMall without taking a broader look at the whole ecosystem, and forgot to build brand awareness and engagement prior to these heavy investments.

To avoid this, WeChat really stands out as a Swiss Army knife: it is at the same time a platform for brands, their omnichannel commerce enabler, bridging online to offline and vice versa. By acting as a DTC platform for brands, WeChat has been central for Chinese department stores, and probably for others located outside the country and who wanted to catch the train.

In any case, investments need to be made step by step, and with thorough due diligence: WeChat is not the only option. For instance, when it comes to dynamic marketing and engagement, Douyin, Weibo or Little Red Book (aka XiaoHongxu) are adequate platforms for social PR and Communications teams and agencies. To make a parallel, this is more or less the difference between Facebook and Instagram outside China.

IADS - What is your understanding of the Chinese customers’ expectations now that they have everything available at home at the same price (Hainan…)? How have they evolved?

TM, Mobile Now - Hainan has indeed gone through an amazing development for home-based Duty-Free business in China in the past couple of years. But this situation may not last, as Chinese consumers can’t wait to also be able to travel again internationally.

Many brands are still cheaper to buy in Europe, US or Australia than in Hainan due to other costs than taxes or pricing policy differences. And Chinese consumers know very well that brands are usually cheaper in their original market andoffer more choice and improved experience.

Once the restrictions stop, we believe, and analysts do so as well, that the Chinese will be heavily travelling again.

AB, Clientela – Actually we expect a massive revenge travelling and shopping behaviour to take place. As the Chinese have waited a long time for this to happen, they are comparatively richer than prior to the pandemic, they have more savings, and prices are higher in China (even in Hainan) than in most international brands’ home countries. So, we expect a wake-up call and surprise revenge shopping spree.

IADS - How can department stores in the rest of the world prepare to welcome Chinese tourists again? To what extent are we talking about a shift in terms of the offer, store experience, or anything else?

AB, Clientela –The Covid-19 pandemic took marketing and IT departments by surprise as they had to identify and set up new digital solutions quickly, such as e-consultations and masterclasses, but also with queuing and online booking solutions. Department stores can’t afford to make any new mistakes, especially by waiting for Chinese tourists to ask employees to install WeChat. By “install WeChat” I mean to set up a new technical environment, teach sales associates how to use it and define new business flows to collect data, better prepare boutiques visits and provide results.

In addition, there is a trend for department stores to differentiate themselves according to the audience they want to serve (international travellers vs local crowds, such as La Samaritaine vs. Le Bon Marché, or Les Galeries Lafayette Haussmann vs. Champs-Élysées in Paris) and we expect it to continue.

This positioning differentiation (international vs local) will be paramount in defining traffic generation strategies, leading to strategic decisions to make. International travelers-focused stores will probably double down on Chinese tourists once they are back, and will need to re-activate and refresh their plans very quickly.

For us, the key steps to efficiently preparing the Chinese travelers’ return are:

• Brand awareness and reputation,
• Chinese focused product/brand assortment and overall experience,
• Chinese-speaking sales staff and consultants,
• Mastering Chinese platforms and delivering above expectations on omnichannel and clienteling services, (and that’s clearly WeChat first and foremost, but also other social media platforms as well) to optimise their customer experience and journey. This is paramount as it naturally drives word of mouth, creating a virtuous circle.

IADS – And what about international department stores’ digital tools and ecosystem?

AB, Clientela – It is important for department stores not to miss the Chinese revenge shopping spree we expect to happen eventually. This is why Clientela and The Mobile Group have teamed up to help our partner clients, mono brands, and department stores to be ready to welcome Chinese customers.

They use WeChat to prepare for their trip, book their shopping experience, pay, reserve products, share with friends, and ask questions to the Sales Associates they are bonded with. They expect a truly o2o shopping experience. Like what they have at home. It is crucial for department stores to be ready for that. And like in China, there will be international winners and losers.

IADS - What would be needed which is not yet implemented outside China?

AB, Clientela – Provide a differentiated and relevant experience including a product catalogue, Customer Service, the ability to reserve products, book their shopping visit and enjoy their VIP experience with other perks and services. They come with very high expectations. The trip is like the realisation of the dream, and the risks of disappointing them are therefore very high.

TM, Mobile Now – Such an approach based on WeChat will help customers to ensure a direct connection with Chinese-speaking sales associates. In turn, sales associates and retailers will have access to tools helping them to better manage this customer flow, help them, and know them or track them in a more efficient manner.

IADS - Can we expect Chinese tourism to be the same kind of fuel for growth for department stores as it used to be in the past? And how can it be combined with local customers that have been (successfully) courted for the past 2.5 years?

AB, Clientela – Eventually, borders will reopen, and I am personally convinced that the return of Chinese travellers will totally and positively surprise flagship retail and related tourism business. I think it is clearly going to be even stronger than before.

TM, Mobile Now – Of course, the tricky topic is to define the nature of the Chinese tourists who will come back. But keep in mind that change is constant in China and during the 14 years I spent in China I have been surprised every year to see how fast decisions could be made, right from the top, and how impactful they can actually be for business. When I talk to Chinese friends, I hear how eager they are to travel back across the world (Europe included, of course) and I personally believe this will happen sooner than most people think.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the review of NK in pictures here 

pRINTABLE VERSION HERE

Introduction

*The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This second part is dedicated to NK in Sweden.*

Company history: a leaser learning the art of retail

A founding member of the IADS (1928-1991), Nordiska Kompaniet was founded in 1902 in Stockholm by Karl Ludvig Lundberg and Josef Sachs, who wanted to bring a store with the same level of service that what Paris or London has to offer at the time. The Stockholm flagship store opened in 1915 and took its inspiration from American department stores, with a steel structure and a granite façade (which still contributes to the dramatic aspect of the store today). The emblematic circular neon sign was installed on the façade in 1939 and is still a well-known sight in the city today. NK is reputed for having brought both innovation (for instance, the first escalators) and fashion to Sweden: it was for instance visited by Mr Dior who decided to open a salon there.

Today, the company operates 2 stores (Stockholm, Gothenburg) and is owned by Hufvudstaten, a real estate company, which posted total net revenue of €168m in 2021, down -4% vs. 2019. An interesting point, however, is that until 2020, NK was exclusively operating under leasing agreements and, therefore, was only focused on the maximization of the assets. During the pandemic, one of their operators, an importer of fashion, cosmetics and jewellery brands, went bankrupt. Given the fact that this operator represented 25% of the total offer (turnover 2019: €72m), NK made the decision to repurchase its activities for €5.5m in February 2021 (the value of the inventory) and launched a new division, NK Retail, which generated an additional turnover of €59m and a profit of €9m from February to December 2021.

As the President, Bo Wikare, put it when the IADS met with him, “before the pandemic I was running a real estate company with 40 people, now we are collectively learning the retail job and how to manage 450 people”. Mr Wikare joined Hufvudstaten in 1994 and was appointed CEO of Hufvudstaten and President of NK in early 2020. Q1 2022 showed promising trends as turnover (both from property management and retail activities) already exceeded the same period back in 2019.

Visiting the store: a true temple to luxury

The monumental entrance, fully covered with granite, still works its magic more than a hundred years after its opening: the store is spectacular and can face even the most modern competition, as during the visit, the impression made was probably on par with La Samaritaine which re-opened two years ago. It displays, on 5 floors including the basement, a spectacular assortment of Swedish art de vivre and international luxury brands, all organised around a central well of light, just like what La Rinascente has done in the Via del Tritone location, but significantly bigger, giving a true sensation of space.

The monumental ground floor is dedicated to international luxury shop-in-shops (Hermès, Loewe, Balenciaga, Burberry…) including the newly opened Saint Laurent space, near a high-end café and restaurant. The space then unfolds on the cosmetics, shoe, accessories, jewellery and watches sections, all sold in multi-brand zones by third parties, meaning that each zone has its own cash desk and anti-theft system (an incongruous sight for anyone more familiar with continental department stores). The cosmetics area features all international brands with their own concept and is a first taste of the offer that continues in the basement. Finally, a space dedicated to cultural exhibitions, at the time of the visit displaying the collaboration between NK and Monsieur Dior, finished bridging the glorious past of the store to its future.

What was striking during the first minutes was truly the quality of execution: the store felt really spacious, airy, well-lit, and luxurious, thanks to the quality of the materials used, but also the attention to detail (the toilets are remarkable, for instance).

The basement is dedicated to the beauty lounge (including a hair and nail bar), the home and design offer as well as a café (very inviting and looking very artisanal), a restaurant, a pharmacy, a library, a candy shop, and a baker. From this section, customers can join a pharmacy and the subterranean network to the rest of the city. Here also, the execution is perfect, with one caveat related to its connections with the ground floor, as there are not many escalators and their locations can make them hard to find when visiting the store.

The first floor gives a good feeling of what Hufvudstaten has excelled at for the past 50 years, leasing, as the neat alignment of perfectly executed branded shop-in-shops is a reminiscence of the Asian luxury department stores operating according to the same leasing business model, such as Lotte in Korea. The only, but significant difference, is that all the retail units are displayed according to a very airy store plan, including around the atrium space, on which edges a café is being built, which gives more a feeling of a department store than a mall. The floor is dedicated to Women’s fashion and lingerie and dotted with very welcoming and smiling sales persons (the visit was done at the opening of the store). 3 zones popped up during the visit:

• The Seazona space, a partnership with a local online marketplace, is entirely dedicated to promoting, Swedish designers. A good way for NK to promote local creativity while limiting the stock risk,
• The second-hand space, which has been played according to a very different line when compared to Stockmann: here, no treasure hunt feel, and products are presented in a very exquisite way (mostly accessories) thanks to dedicated podiums and lights, making them stand out of the crowd and feel very special. The setup is perfect, and features an astute selection of luxury and affordable luxury items,
• The “NK stage”, a space dedicated to popups allowing also to generate a permanent animation on the floor (goods are purchased by NK).

Also, all across the store, dedicated zones, dubbed “NK designers”, “NK international fashion”, and “NK Wedding”… show a selection of brands that have been purchased by NK Retail and sold directly.

The second floor is dedicated to men’s RTW, accessories and shoes, as well as luggage, through a series of shop-in-shops. NK also displays its own multi-brand selections in the “NK Street” and “NK Design” points of sales, all equipped with specific cash desks, separate from the other retailers’ shop-in-shops’. This sales organisation is somehow complicated for anyone not familiar with the store, and also suggests complex systems behind the scenes to retrieve the sales data (we did not test a purchase within a third party shop in shop, but salespeople at NK spaces are systematically asking if customers are NK loyalty card holders).

The third floor, dedicated to sports and home, adds drama to execution and selection: aside from the sports brands shop-in-shops, the multi-brand spaces operated by NK for both categories are spectacular. The sports section is divided into the female, male and exhibition (called gallery) sections where all products are mixed: garments, equipment, and devices… giving a sense of freedom and space which is remarkable. The home section is extremely immersive and well set up. This floor is also, just like the others, dotted with many F&B spaces, many of which are around the atrium, which is treated as a sight to be seen in the store (a feature that is not achieved, for instance, by La Rinascente in Rome).

The fourth floor is dedicated to kids, books, restaurants and customer service (wardrobe, click & collect). Interestingly, it is at this moment of the visit that we realized that there are only two floors equipped with toilets, the basement and this one, while at Stockmann every floor is equipped.

What about the competition?

There is another major department store chain in Sweden, Ahlens, which was founded in 1899 first as a mail-order business. It ventured into the department store business in 1932, and the flagship store, Ahlens City, opened in the heart of Stockholm 500 metres away from NK in 1965. Today, the company manages 57 department stores and claims a total turnover of €450m, which makes it the biggest retailer in the country. It was rumoured in 2009 that Ahlens offered to purchase NK for a total value of €41m.

The feeling offered by Ahlens is radically different than at NK: in addition to being more mid-market, the model seems in its vast majority on a wholesale basis, leading to structural differences (lack of anti-theft systems from zone to zone, sections more intrinsically mixed together, navigation from one section to another less abrupt, less shop in shops) which impact the customer experience:

• Windows are not dedicated to one brand in particular, but mix different products, indicating where to find them in the store,
• The ground floor, dedicated to cosmetics, fragrances and accessories have a traditional setup with international brands shop in shops in the central zone and multi-brand spaces in the periphery. If the cosmetics offer is rather classical and repeats brands already on display at NK, the accessories section has a lower positioned offer: Furla, DKNY, Sandqvist… The space is delimited into sections through walls which are not so much of an issue for the sight thanks to the very high ceiling height. Coming as a strong difference from NK, customers have to queue to pay at central cash desks with are regrouped in specific sections of the ground floor.
• The first floor is dedicated to women’s fashion and lingerie. Here again, one can find corners with brand concepts, but only Malene Birger seems to be sold in a shop-in-shop. The central “Ahlens Studio” section displays cooler and younger brands such as Stine Goya and Jeanerica, but apart from this section, the feeling is less luxurious than NK,
• The second floor is not dedicated to men’s, but to kid’s, home decor and lights. Cash desks are visible from afar, and customers are also invited to wander through “Sally & Voltaire”, a restaurant which also sells the products used in its dishes,
• The third floor is dedicated to the whole men’s offer, including RTW, accessories, shoes, sportswear and services (barber). A personal shopping space and a dry cleaner are located behind the underwear and socks section (a surprising location choice) and a burger restaurant is located right in the middle of Lacoste and Ralph Lauren Polo, giving the location a distinctive smell.
• The fourth floor is leased and dedicated to Muji just like what Illum has done in Copenhagen. It is possible from there to access the rooftop restaurant which provides a great view of the city.

All in all, Ahlens presents a more classical approach when compared to NK, for anyone familiar with department stores across the world. The notion of “everything under one roof” is clearer there, even though the range of the offer does not approach luxury, contrary to NK where the message is clear. As a consequence, both department stores are really contrasted and it is highly probable that customers at Ahlens are much more looking for a bargain or a good deal, and less looking for an experience or the latest or most fashionable product.

What to remember from NK?

The transition from a purely real estate model to a hybrid one, which has been decided out of necessity but is extremely convincing on the sales floor, one year after its inception. This evolution perfectly follows the retailer’s vision of remaining a destination store for both the local customers looking for an international and luxurious offer, and tourists coming to Stockholm: it goes through curation, differentiation and a point of view, only achievable when the offer on display is managed one way or another.

The quality of execution and a perfect mix between retail and F&B makes NK a perfect place to hang out, and could be considered a good and relevant example by many other retail companies across the world. Visitors feel pampered and privileged when walking along the aisles and are encouraged to shop (it is extremely difficult not to feel in the shopping mood).

The capability to permanently create surprise and animation on all floors, not only by relying on brands’ own capabilities, but by mixing the business models: own operated popups, specific seasonal zones rented to brands, partnerships with a fashion marketplace, and own retail zones with superior execution such as the sports section.

Conclusion

*NK has long been seen from the brand point of view as a true luxury hub, only accessible to the most established companies able to deal with local retail operations, or to the ones with the adequate relationship with the relevant local agents able to operate on their behalf.

Now that NK has a retail arm, following a trajectory that has been taken by others already (see SKP for instance), this is going to be probably helpful to widen the distance with Ahlens and contribute to its international reputation. Already designed to be a place of leisure and discovery, NK is on the right way, at least in Stockholm, to become a regional standard and maintain its status of an unmissable destination when visiting Stockholm in the coming years.*

Credits: IADS (Selvane Mohandas du Ménil)

Check out the review of Stockmann in pictures here 

PRINTABLE VERSION HERE

Introduction

*The IADS had the occasion to travel to Finland, Sweden and Norway to visit Stockmann, NK and Steen & Strom respectively. All those three venerable companies, true institutions in their countries, have started a transformational post-pandemic journey in order to become destinations again in their respective cities.

At a moment when tourism is starting again and the three countries seem relatively immune to the difficulties created by the war in Ukraine, we review where they stand, their innovations worth noting and why their transformation is far more than just a revamp or a digital reset: for at least two of the three companies, they are challenging their own business model to the point of admittedly literally learning a new job.

Let’s embark north of the 60th parallel to see what is going on!

This first part is dedicated to Stockmann in Finland.*

Company history: a former real estate magnate turned tenant of its own previous properties

A former member of IADS (1950 – 2020), Stockmann was founded in 1862 in Helsinki by Georg Franz Stockmann and is credited for having introduced revolving doors, soda fountains and escalators in Finland. The company grew to the point of adding, aside from a significant store fleet in Finland, stores in Tallinn (Estonia), Riga (Latvia), and 4 stores in Moscow and one in St Petersburg at the peak of its history. However, business was challenging, and Stockmann separated its retail operations from real estate in 2014 and started selling under a lease-back scheme its assets in 2015. Divestment in Moscow was achieved in 2016 (operations started there in 1989) and in St Petersburg in 2019. Difficulties accelerated during the Covid-19 pandemic, forcing the company to apply for corporate restructuring in 2020, to sell off Tallinn and Riga properties in 2021, and the Helsinki flagship property in Q1 2022 for €400m.

Today, the company operates 5 stores in Finland in addition to Riga and Tallinn, all of them under a lease agreement in buildings that used to be the company’s properties. Stockmann conglomerate also owns and operates Lindex, a Swedish fashion chain representing 475 stores in 16 countries, which has fared so far much better than the department store division.

For the department store division, full-year sales in 2021 represented €291m (of which €226m was achieved in Finland, growing +3%, the rest being achieved in the Baltic states), with an operating result of €11.6m vs. a loss of €-48.2m in 2020 during the pandemic. Q1 2022 grew +27% vs. 2021 to €196m and operating profits to €9.8m from a loss of €-27.6m in the same period last year.

A new CEO, Mr Jari Latvanen, joined the company in August 2019 with the mission to help the company to exit the difficult situation at the time. After an all-time-low in 2020 leading to the near bankruptcy of the company, the sale of the property helped the company clear off debts in a record time and revert to a near-healthy situation, in spite of a new customer structure (in 2019, 20% of the business was done with Chinese and Russian customers, two groups which have both totally disappeared and replaced by locals).

Visiting the Helsinki flagship, the largest department store in the Nordic countries

The historical store spans over 50,000 sqm and 8 floors. Due to the fact that it is constituted of two different buildings, navigation can be somehow tricky as there are intermediary floors on the ground floor, and +1, +2 and +3 levels. As a consequence, for some categories such as women’s and men’s fashion, the offer is fragmented in different spaces, making product discovery difficult.

The basement is at the same time a service area, a recreational space and an event zone:

• A pharmacy is accessible from the parking space before entering the store,
• A deli, several restaurants and a bar are available. One of the restaurants is managed by a local chef offering set menus for lunch, helping business customers to come back into the store after having lost the habit during the pandemic (stores were never forced to close in Finland, Sweden or Norway, however the stay-at-home instructions and remote working were implemented),
• The event space, for instance used for Christmas, was used at the time of visit for “Stocklet”, a smart way to liquidate stocks while avoiding cluttering the regular selling areas. It is all about efficiency: products are gathered by size and customers are invited to hunt for a good deal (no inspirational trick here).

The ground floor is dedicated to cosmetics and accessories in addition to a small flower stand.

• For the cosmetics, the usual international suspects are all present, in the spectacular atrium (all brands have their own concept) and also includes related products (Dyson) and services (hair bar, nail bar). It is notable to remark that local brands are also present in abundance and a lot of space is dedicated to them.
• The women’s accessories zone is the most appealing one in the store (and most differentiated), as it has been refurbished very recently. All windows have been open and let natural light come in, with plants and trees giving a feeling of nature (they are changed according to the season), and low rise furniture giving full sight of the space. International brand names are cleverly mentioned on the floorplan, but this can be somehow deceptive as in reality, the products are simply put on small tables just like any other generic area, while one would have expected to find a shop in shop (the only shop-in-shop on this floor so far is Longchamp with its own cash desk, the rest is operated in wholesale. Overall, 5% of the business is made in concessions, with Dior Cosmétiques, Longchamp, Hugo Boss and the brands on the 6th floor).

The first floor is dedicated to men’s fashion on several sub-levels, including some kind of mezzanine. This is not helping to embrace the whole offer at once. According to the CEO himself, the men’s business has considerably evolved and it is now almost impossible to find a formal offer in the store, as Finns (known to be extremely formal) are not looking for these products anymore.

The second floor is dedicated to women’s fashion and is better lit, more engaging and spacious than the men’s section. All brands are displayed with their own concepts on murals, which makes them more outstanding. 3 elements were worth being noted:

• Fitting rooms are surprisingly uninviting. At the time of the visit (morning), a rack with unsold items was displayed in front of them, not precisely an encouragement to buy, in addition to the cabins themselves, which are rather disconnected from the overall feeling of the floor,
• Customers also have the occasion to shop in dedicated lounges, which have been recently opened along with the revamping of the private shopping activity. Such spaces are significantly more attractive.
• On the side, a “Relove” café has been open, astutely mixing racks of second-hand items with a café, giving a charming boudoir feeling to the space, which was crowded (unlike the rest of the floor) at the time of the visit.

The third floor is dedicated to contemporary fashion, sportswear and, curiously, lingerie, which is displayed just near men’s garments and women’s sportswear coats and shoes. Lingerie space execution is poor.

The fourth floor is dedicated to home accessories including the Casa Stockmann private label. Overall, private labels cover home and fashion RTW and accessories. For fashion, private labels (an activity which is made easier for Stockmann thanks to Lindex production capabilities) represent 15% of the business, including at the same time an inspirational offer and lines designed to complete missing prices and functions.

The fifth floor mixes Stockmann’s own operations with kids RTW, sneakers and toys (the space is supposed to be redesigned in the coming months), spaces leased to Halti, a Finnish outdoor brand, and Isku, a furniture brand. Transitions from space to space are abrupt. Recycling spaces (garments, electronics) are available on this floor only, which is not particularly handy.

The sixth and seventh floors are hybrid spaces:

• On the sixth floor, customers can find every service they might need: a bridal salon, a hairdresser, a perfume shop (not clear if operated by Stockmann or not), a medical and dental clinic, a dry cleaner, and a Solaris optical shop. This zone is not as appealing as the rest of the store and looks like a mall more than a part of the department store. Last but not least, a lounge is available, closed at the time of the visit and looking like an old-fashion gentlemen’s smoking lounge.
• The seventh floor is dedicated to services, but is not accessible from all lifts or staircases. There, customers can come to pick up products or have their purchases delivered through partners, but the overall feeling is that the zone is not inviting and a significant amount of space is empty. A champagne bar and a terrace complete the floor.

What to remember?

The store is getting ready for tourists to come back: it is clear that the Helsinki store is good at addressing tourists, information is provided in English (including promotional audio messages), in a clear way, and a strong push is set on local brands. However, the consequences of the Covid times were still felt at the time of the visit, with the tourist information desk on the ground floor only open from noon to 6 pm, and some specific cash desks curiously closed (such as the one near the flower stand). In addition, salespersons are still managing sales through central cash desks (no mobile payment) which, given the structure of the store, can be troublesome if someone has to go a few steps up or down to pay.

A smart approach to second-hand and outlet: the “Relove” café is a clever move: Stockmann teams up with local socialites and influencers to sell their wardrobe, creating a one-of-a-kind effect designed to attract a younger crowd to the store. It works, as there is a significantly different demographic in the Relove space compared to the rest of the Women’s fashion floor. Also, the way the outlet is presented, in the basement, helps to keep the display coherence and cleanliness in the rest of the store.

In spite of uninviting dedicated spaces, it is all about superior customer service: with the exception of the private shopping lounges, the customer service physical spaces are disappointing in the store (a feat that the CEO is aware of). However, Stockmann has implemented a new tool to cater for the needs of its Mystockmann loyal customers (1.3m out of a total of 5.5m Finnish citizens, with an active rate of 50%, generating 73% of the business) to replace the Net Promoter Score: the Emotional Value Index (EVI), which has been co-developed with a local Finnish start-up. This system gathers in real-time actual wordings from customers, evaluates their satisfaction, and gives the tools for the relevant teams to address their issues or receive their congratulations.

Conclusion

*Where is Stockmann going? Even though renting its store locations could be dangerous, this option allowed them to recuperate from a very difficult financial situation. The changes in the store feeling, customer approach and online services are truly perceptible and make a real difference from what the store used to be in the past (the accessories zone on the ground floor, now well-lit, is inviting and open on the outside, but was in the past used to sell rugs, for instance).

The IADS only visited the Helsinki store and it seems that it is getting more and more well-equipped and ready to welcome customers in large quantities, be them tourists (increasingly growing) or local customers, who have already increased their average shopping basket, just like in the rest of Northern Europe. We only wonder if operating a store fleet of 5 stores in Finland and 2 overseas is still relevant as it might not allow the company to fully focus on becoming a destination name in three capital cities, at a moment when competing companies from other countries in the same zone, such as NK and Steen&Strom, are also reconsidering their strategy and revamping their offer, taking a more luxurious and international fashion way than what Stockmann seems to be doing at the time.*

Credits: IADS (Selvane Mohandas du Ménil)

PRINATBALE VERSION HERE

Introduction

In Europe alone, subscription models and paid memberships account for EUR 350 billion, dominated by information and technology (think Microsoft or Adobe software), as well as media and content (Netflix obviously). Consumer goods ‘only’ represent 15% of the total business.

According to a McKinsey study, consumers attached to paid membership programmes are 60% more likely to spend, compared with only 30% for free loyalty programs. Purchases are said to be more frequent and average baskets bigger, transforming paying members to extremely valuable customers. While the footprint of paid loyalty programmes still remains small, it has expanded with Covid. Why? Firstly, with stores closed, subscription services offered a convenient way to keep needed products on hand. But that’s not the only reason as offering the usual discounts and free delivery through a basic 3-level (bronze, silver, gold) free membership feels somehow basic to the consumers who find other ways to access such table-stake perks anyway.

With the war in Ukraine and Covid locking down a part of China, inflation is skyrocketing. As a result, consumers are forced to lower their discretionary spending, and they tend to discontinue their subscriptions whether it’s for Netflix or goods.

But still, brands and retailers need to pimp their loyalty programmes, and paid membership remains an option to consider for funding more interesting and exclusive perks that customers agree to pay for as soon as programmes match their expectations. Firstly, customers want high benefits that balances out or exceeds the fee amounts. Secondly, they want benefits that can be used immediately and as frequently as possible. Finally, with everything else in retail right now, they want experiences. Illustrating such expectations and following up with last year’s Exclusive about subscription retail, the IADS gathered the latest initiatives in paid membership.

Higher benefits

Pret A Manger has a subscription service and it’s not new: customers pay a EUR 20 fee per month and can benefit from up to 5 beverages per day. Whereas it’s unlikely that all subscribers will extensively use their 5 beverages every day, the perks of the programme are way higher than the fees. It shows that attracting new members comes with strong benefits clearly outweighing fees. In fact, consumers expect to receive at least a 150% return in perks when compared to the subscription fee. As a result, brands and retailers considering a paid program must make their value extremely visible.

In US pharmacy retail, the CVS CarePass programme charges a USD 5 monthly fee and offers its members 20% off on all CVS Health brand products in addition to services like free shipping and a 24/7 pharmacy helpline. Knowing the high price point of drugs in the US, the discount rate is really appealing compared to the reasonable monthly fee.

Some recent initiatives like renting fashion are a great push to the subscription business. In the luxury department store area, the Japanese group owning Daimaru-Matsuzakaya launched in March 2021 a new subscription-based rental service to try to escape the traditional inventory-based business model. The new service allows customers to rent up to 3 high-end women’s clothing items from brands such as Marni or See by Chloé, for a monthly fee of approximately USD 103. Fees are rather low when compared to the cost of 3 items from premium or luxury brands. While acquiring more loyal customers, the department store hopes to achieve a USD 55 million turnover by 2026 thanks to a projected 30,000 customer base.

Whereas it’s too soon to know if such a business can be profitable in itself, it will be interesting to check if the Financial Times is right: in an article from September 2021, they argue that the subscription model works best for higher priced-items. Anyway, it seems like a win-win deal: for the department store, it’s about increasing customer loyalty while reducing inventory. On the customer’s side, it represents a new access to luxury products, and an answer to sustainability concerns.

Now and always

Customers want to use their membership perks immediately upon sign-up, and very frequently: 50% of cancellations occur within the first year of membership. In that case, the main reason is that they are not using the benefits enough to justify the membership fees.

Walmart launched a membership programme in September 2020 primarily designed to compete with Amazon, the ultimate champion when it comes to immediacy and recurrent usage. Walmart+ members pay a USD 98 annual fee and are offered perks like an app allowing them to skip the checkout line, unlimited free deliveries with no minimum, member-only game console releases, up to 85% off on prescription drugs, discounts on gas, and special promotions and events. Also, at a time when customers were afraid of potential product shortages, they have enjoyed a true competitive advantage: early access to the 2021 Black Friday deals. Now accounting for 32 million members, Walmart+ can boast about amazing statistics: Cowen analysts estimate 12 million US households have a Walmart+ membership and 69.6% use it at least once a week. Members currently account for about 13% to 14% of the total Walmart.com business.

On the brand side, On Running sports shoes released a running shoe monthly subscription in April 2021. Dedicated to serious and frequent runners, they pay GBP 25 per month to subscribe (rent) their pair. When the shoes are worn-out, the customer can stop the subscription or request a new pair. Once it arrives, customer can send their old shoes back to On Running, who takes care of recycling, an additional perk answering customers’ environmental concerns.

In fashion, Ralph Lauren launched a rental subscription service in March 2021, a first for a luxury brand. The service aims to be a new channel for customers to engage with the brand. Starting at USD 125 per month, subscribers can access a constantly renewed range of clothing. Members curate their own online closet before receiving their shipment. Once they are done with the clothes, they can choose to either send them back and have them replaced by new styles or purchase them at exclusive member prices. On top of creating loyalty, the ‘Lauren Look’ is also a great opportunity to generate direct customer feedback and gain a better understanding of their expectations. As for On Running, the initiative also answers the growing consumer concerns about overconsumption.

Still, offering discounts remains a mandatory perk. In that perspective, Vasquiat is an interesting alternative free membership model when it comes to immediate discounts. Founded by Spanish influencer Blanca Miro, Vasquiat is defining itself as “the marketplace for discovering the most exciting emerging brands in the world.” What’s more important is that they “disrupt the traditional model by creating a new category: the discounted pre-order.” Vasquiat’s members can pre-order styles from the next season's collections at up to 40% off. The sooner they buy, the less they pay, reversing the usual end-of-season discount model. Then, the closer the collections are to their official release date, the smaller the discount is, until eventually reaching the full retail price.

Experience and emotion

Even though they remain table-stake perks, free delivery and discounts are not enough to lure and retain customers for paid membership programmes. Consumers are looking for differentiation. In that sense, they are expecting exclusive offerings, personalized and more emotional experiences, or member-only content.

In that perspective, Volvo launched a new car dealership concept inspired by clubhouses in 2021. Opening first in Amsterdam (now available in 6 other cities across Northern Europe), Lynk & Co is more than just a car dealership. The club house is the promotional face for a hybrid SUV that members can rent starting at EUR 500 per month (including insurance and maintenance service). The brand's strategy is simple: focus on car sharing through a subscription system (which is especially relevant in a city like Amsterdam where people don’t need a car on a full-time basis), and attract new customers through the services offered by the clubhouse. It includes a lounge area with a bar to host DJ sets, exhibitions, as well as workshops, film screenings, etc… These events are of course reserved to members who feel nurtured with the emotion of being part of an exclusive club.

In an attempt to compete with Amazon, Best Buy launched a USD 199.99 membership programme in April 2021, designed to basically offer great customer service. Among various perks (such as free 2-day deliveries, up to 24 months of product protection, dedicated phone teams, extended 60-day return and exchange window), the 24/7/365 tech support and product installation in particular offer a security sentiment and a safe product experience to members. The membership, called ‘Totaltech’, also includes ‘My Best Buy’ programme perks (including reward points and exclusive deals).

Food is highly about experience and emotion. Shinsegae department store in Korea came up with an interesting initiative: a fresh fruit subscription service which has proved very popular since its inception in April 2021. As part of the “VIP Gold” loyalty program, customers can subscribe to the service for a monthly fee of approximately USD 194 and they have a selection of seasonal fruits delivered to their door on a weekly basis. Tips on how to store and eat the fruits are also included as part of the package. This new service follows up the launch of a bread subscription service: subscribers can pick up bread in store every day for a monthly fee of approximately USD 42. Shinsegae’s goal is obvious and clear: “attract people to the store, which could lead to the purchase of other products.”

When it comes to paid memberships, the wholesale club model in groceries is also a true lever to loyalty. But it can do more: it can help create a sense of belonging, which will give customers more reasons to visit and push them to significantly increase their purchases. It’s the case with Store X supermarkets (a division of Alibaba in China). With its USD 40 yearly membership, Store X targets a group of young, affluent, digitally savvy shoppers expecting to be treated differently, and willing to spend more for better services and shopping experiences. The first Store X opened in Shanghai at the end of 2020 and became profitable within two months.

Conclusion

So far department stores are sticking to free membership through their loyalty programmes, but they have been revamping them for a few years now. A few months ago, Harvey Nichols in the UK did so with a 5-level ‘classic’ programme where money spent equals reward points. Depending on the level customers will reach, points are converted into benefits revolving around discounts and (more interesting than in other programmes) experiences appealing to many different customer groups: 10% off food & wine, bars & restaurants and beauty & grooming, 15% off fashion vouchers, double points booster, free drink in store, ‘kids eat free’, pamper hamper, birthday gift, dining or beauty school experience, wine or crafty beer box.

While it would be very costly for department stores to design perks and experiences worth a paid membership, the model needs to be considered anyway (and despite the recent subscription model setbacks), especially if focusing on big spenders that are not really impacted by inflation and who are always expecting additional reasons to visit stores. In that sense, the Soho House business is a model to look at as experiences are part of the equation: at Bloomingdale’s, the Loyalist programme has been redesigned to include a new shopper segment, the ones spending more than USD 15,000 per year. Representing less than 1% of the customer base and mostly women in their forties, these ‘Top Of The List Unlocked’ status members receive elevated benefits such as a 2-star Michelin cooking class at the Baccarat hotel, and even have a private Instagram account to reserve the latest designer styles.

Credits: IADS (Christine Montard)

PRINTABLE VERSION HERE

*Best Buy is one of the most recognized examples of successful company turnarounds in the past decades. In 2012, the company was ailing, sales were declining (although the company was not yet in the red) and a sense of common purpose was missing within the teams. The turnaround was not executed via a purely financial approach, cutting costs and increasing profitability, but took another standpoint, betting on the human side of each and every employee to reinject meaning and will to achieve something bigger than them, together.

The ongoing digitization of department store companies involves integrating new and very different teams, reinventing the jobs of the existing ones, and finding a common motivating purpose for all of them. In that sense, there are some similarities between what Best Buy went through and what IADS members are currently trying to achieve. This is the reason why we invited Mr Hubert Joly, CEO of Best Buy from 2012 to 2019, to share with us his experience and retrospective understanding of what he achieved during his tenure.*

Introduction

Hubert Joly, a graduate of HEC Paris (business school) and Sciences Po (political sciences school), is a senior lecturer at the Harvard Business School and the former Chairman and Chief Executive Officer of Best Buy from 2012 to 2019. Before this experience, he has held various CEO positions at Vivendi and Carlson Companies, after having been partner at McKinsey for 13 years. Under his leadership at Best Buy, the share value rose from $20 to $70, the company had 5 uninterrupted years of growth and the online share of the business doubled, reaching 17% of the total sales for a turnover of $6.5bn (post-pandemic, online sales  have tripled, and represent 40% of the business). He was also instrumental in redesigning the management team structure, by helping the Board of Directors increase the proportion of female leaders. He has been ranked as one of the top 100 CEOs in the world by the Harvard Business Review, top 30 CEOs in the world by Barron’s, and top 10 CEOs in the US by Glassdoor. Hubert Joly released his book, “The Heart of Business – Leadership Principles for the Next Era of Capitalism”  in 2021, which was sent to IADS members prior to the exchange.

Interview

IADS - When you took over Best Buy, things looked bleak – tell us what it was like and why you accepted this position?

HJ – In 2012, everyone thought Best Buy was going to die in a context where brick & mortar retailers were considered dinosaurs. In addition, I did not have any background in retail at the time. However, after making my due diligence, interviewing Best Buy alumni and employees, and making my own mystery shopping visits, I understood two things:

• Customers needed Best Buy: they wanted to touch, feel, see, and experience the products,
• Vendors needed BB, as it was a great way for them to showcase their R&D investments.

I also realized that all of Best Buy’s problems were self-inflicted: incoherent pricing, poor customer experience, and deteriorating infrastructures (stores). This meant that it was possible to have a grip on these problems, and fix them.

IADS – You have turned around the company in a few years. What do you think was key to this success while so many others in the retail industry tried and failed?

HJ – There were actually two phases to turn around the company and generate growth.

The first phase, “Renew Blue”, was all about the turnaround itself. We are not talking about strategy or vision here, but pure execution: we were fixing what was broken. We pinpointed all the issues and addressed them one by one: matching Amazon prices, investing in customer experience, offering better shipping experience including next-day delivery, investing in stores or partnering with vendors…

This is what we did. The “how” part is more interesting though! The usual recipe involves cutting costs, especially reducing the headcount. In our case, this would have meant closing stores, when a lot of them were profitable. We preferred to have a human-centric approach. This meant two things:

• Listen to the frontliners and see what was wrong. I spent the first week on the job visiting stores and talking to teams, to understand what was going on. All I had to do was to listen and make sure they had the right answers and tools from the leading teams.
• Create positive energy within teams by showing them that they are placed at the centre and listened to.

For me, headcount reduction was really the last resort, I preferred to focus on reducing non-salary expenses (for instance, finding ways to reduce the rate of TVs being broken during handling!),

The second phase, “Building the New Blue”, was launched once we knew the foundations of the company were solid again. We reflected together and defined what company we wanted to be, and how to accelerate our growth. This can only be done by pursuing a noble purpose and putting people at the centre. That’s my idea of leadership.

IADS – To what extent the turnaround was a 100% human adventure, or a human adventure supported by systems? How did you manage this transition from an infrastructural point of view?

HJ – In electronic consumer goods, 90% of the shopping decisions involve a digital touchpoint at some stage, or even start digitally, so of course, emphasising digital solutions was the long-run approach. Every meeting I led always started by discussing e-commerce and digital, and we increased investments in the website. But systems are human-powered, and decisions must be made by someone, so we also invested in employee tools to adopt agile ways of working and spread a digital mindset within the company. That was a true asset for Best Buy during Covid-19 and allowed us to easily transition to contactless pickups and other solutions when stores were closed.

IADS – How did you prioritise the adoption of solutions and make decisions on investments?

HJ – The two phases were different.

The first phase was about eliminating pain points, understanding what was not working and fixing it. For us, that was the search engine, which we redesigned. Then, we worked down the list of remaining pain points and prioritised them by how important they are to the customer journey and business impacts.

In the second phase, the lens was different. We had defined our purpose: enrich people’s lives through technology, and that meant that we were not anymore only addressing tech fans, but also people who needed help with tech. That meant pivoting on several angles: from B to B, to B to C, from being a retailer to something else. Partnering with vendors was key, as they understood that it could be beneficial for them too, and that helped co-fund the needed investments in stores and systems.

IADS – You diversified your leadership team, the board – why did you feel it was important and how did you do it?

HJ – Simply put: I do not think we could have done anything without diversifying the teams. How do you want to address the world if your teams do not reflect its diversity, from a gender, ethnic, background or education perspective? Leaders need to create an environment where they can leverage diverse team members. For example, in Chicago, if your sales team doesn't speak Polish then you might not sell much. Same thing in Orlando for Portuguese, to address Brazilian customers.

For me, diversity is a business imperative. As leaders, we know how to sell business problems: how to attract, develop, and retain customers. These same methods need to be applied to employee retention and attraction. If there is not enough diversity represented within the organisation, you need to understand why it is not drawing these types of profiles, because that is putting you at risk.

IADS – How did you trickle down the changes until the base of the pyramid? How did you share, in a concrete manner, your Noble Purpose with frontliners?

HJ – It did not trickle down. Many companies have worked on defining a purpose.  But let’s be honest: a company’s purpose is corporate speech that doesn’t mean much to frontline workers. Frontline workers need motivation, not corporate speeches. And motivation comes from within, it is intrinsic.

This is what I call the “human magic”. I give you an example: in 2018 a young boy came in with a broken dinosaur toy. He didn't want a new one, he wanted a cure for his dinosaur. Two employees understood what was happening and they started a ‘surgical procedure’ to make the dinosaur feel better. In reality the toy was swapped with a new one, but the boy believed that it was still his original toy and was happy to have it repaired. To be honest, I can’t teach employees how to “cure” a dinosaur, and I do not know about KPIs measuring the number of cured dinosaurs per quarter. So, these employees did that just out of pure motivation. They wanted to make customers happy.

Once again, the “how” is key: how do you make sure that all your employees share the same approach? Not by having a top-down Power Point presentation. Our strategy was to be an inspiring friend to customers, but also to ourselves. So, one day, we closed all our stores on a Saturday morning, and broke the teams into small groups, asking each employee to share their own story and a story of an inspiring friend. Everyone understood, independently of their hierarchical level, that the others were more than employees or co-workers: they were human beings with their complexity. They realised that they needed to treat each other and the customers as human beings and as inspiring friends, rather than walking wallets.

Also: training is important, but it does not work if you return to a poisonous environment. Top-down scientific management approaches don’t work. Bottom-up and inside-out approaches should be prioritised. Here are the ingredients that worked for us:

• Allow every employee to connect to what drives them and connects them to their work,
• Create an environment where there are genuine human connections and where people feel seen.
• Allow for autonomous work.
• Offer a learning environment with individualised weekly coaching.
• Provide psychological safety.

We need to move away from the model where the leader is seen as the superhero who knows everything. Today’s leaders should show signs of authenticity, vulnerability, empathy, humility, and humanity!

Conclusion

**IADS – What is your view on retail after the pandemic? Where are we?

HJ –** 10 years ago, the debate was all about the dichotomy between online and brick-and-mortar. That is not the case anymore. For me, the dichotomy is now between great and mediocre retailers, and their purpose.

Purpose is an intersection of what the world needs, what you are uniquely good at, what you are passionate about, and how you can make money. The crucial question retailers should have to ask themselves to be successful is to know if they would be missed, and why, if they did not exist. Retail is being completely reinvented around purpose, people, and great execution.

To conclude, I remember my conversation with Tim Cook in 2012 about the bad press Best Buy had then. He told me to focus on doing my things and being successful, without minding the press. Department stores are in the same situation today. Keeping the focus is key.

I would also add that I believe that we, as business leaders, have a huge role to play in the society. We cannot predict the business environment or the future, but we can decide what kind of leader we want to be and how we want to contribute to the world. I have 3 guiding ideas:

• Having a purpose,
• Being clear on my principles - key ideas we have about how we want to lead and drive the business,
• Doing our best- we control what we do and how we lead our teams

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

Nordstrom announced on the 1st of March the launch of their own Retail Media Network (RMN) with the “Nordstrom Media Network” initiative. Trade marketing and side advertising revenues from brands are not new to retailers. So why is this piece of news interesting for department store companies? Let’s look at the US grocery market to draw some learnings.

What are we talking about?

Retail Media Network (RMN) is a vehicle for retailers to market to brands with individualized advertisements to customers at a chosen point of interaction with the retailer’s ecosystem. The concept is not new: “traditional” retail media, which includes product sampling, in-store displays and featured placements in catalogues, initially focused on increasing shopper engagement and sales for the benefit of the retailer, which was often asking brands to pay to have their products shown at or near the point of sales, to increase the likelihood of a sale.

However, the concept significantly evolved in 2021 with the digital acceleration as an answer to some of the challenges created by the Covid-19 pandemic, for the following reasons:

• Brands, when going direct due to the pandemic, realised that their marketing initiatives could lead to a waste of investments: with no option to sell their products (both their wholesale and retail networks were closed) brands had to digitize fast, and quickly realized that they could create a direct relationship with customers without having to rely on retailers. However, they also realized that the advertising and marketing investments needed for such a strategy, especially online, were quite heavy and also posed questions in terms of ROI offered by the existing providers.
• Retailers were in need of compensating the Covid-19-induced margin loss:  they found themselves with traffic-building brands going direct to customers and leaving their premises, while also witnessing their margins shrinking, due to several factors, either structural (cost of free shipping, price-related competition from massive online pure players, investments in sustainability as requested by customers or regulation) or contextual (inflation, rising logistics and raw material costs due to the 2021 supply chain bottleneck, worsened by the 2022 Ukrainian-Russian war). As a consequence, they were eager to create new streams of revenue.
• A natural opportunity arose from this context: Retailers also digitized (or increased their digital competencies) and realized that, with the knowledge of their own customers they were able to amass (shopping habits, buying patterns, all collected from both online and offline points of contact), they could create such new stream by monetizing this first-party data to brands, who in turn saw an opportunity to improve the ROI of their marketing and communication investments.

Why did it start in the US grocery market?

Pre-pandemic, Food & Beverage and Consumer Pre-packaged Goods brands were struggling to grow in a saturated market (grocery brands’ average growth in the US in 2018 was +1.9% and average profit growth was +3.2% p.a. over the last 10 years). In terms of advertising, they were also lacking both connection and understanding of their customers (Dunhumbby evaluates that the top 10 brands spent $800m on advertising in 2021, with a cumulated customer database 90% smaller than their retailers’ ones) leading to a low ROI on advertising and communication investments.

The future was also looking bleak, as Google plans to remove cookies in 2023, which will prevent advertisers to implement audience targeting on 99% of Chrome users (2/3 of worldwide internet users). In a world where it is expected that post-Covid, the shifts in terms of grocery spending might stay, especially in terms of online buying (9% of the total UK grocery market in 2020, +54% in growth in the US the same year), that means that they would have to spend more, for the same result than before.

Benefits for all

In parallel, retailers, looking at the precedent set by Amazon (77% of the US-based CPG brands work advertise on Amazon, generating a total revenue for Amazon of $21.33 bn in 2020 and $31 bn in 2021), saw an 80%-like margin offered by retail media a welcome lifebuoy as their margins, structurally slim, were even weaker due to the massive increase of online sales during the pandemic (coming on top of the pandemic related costs themselves, in terms of payroll, benefits, incentives…).

This was a match! Brands saw in this new proposal the possibility to create highly-specific and objective-based campaigns around real shoppers and not personae, using a variety of touchpoints, and being able to measure the contribution to sales of the marketing investment made. Retailers recognized a possibility at the same time to create a new source of revenue but also a way to improve and reinforce relationships with key brands.

Benefits of Retail Media (Emarketer, Coresight)

![Coresight exclusive

![coresight exclusive 2

The Retail Media Network market value is estimated by Emarketer at $31.49 bn in the US only, and forecasted at $41.37bn in 2022, $50bn in 2025 (20% of the total digital ad spend). The worldwide market is estimated for 2022 at $50bn by Forrester and $100bn by Boston Consulting Group.

Now, most of the major US grocers (but not only) have or are venturing into Retail Media Networks activities: Albertsons, Best Buy, Carrefour, Dollar Tree, Gopuff, Lowe’s, Kroger, Sainsbury, Target, Tesco, Walgreens or Walmart. They all use the size of their loyalty program membership to push forward opportunities sold to interested advertising brands.

This trend is extending to the department stores world, as Macy’s and Nordstrom now also operate in this field (respectively from 2020 and 2022).

A use case example: Mondelez and Carrefour

Mondelez realized that, while pre-pandemic they were focusing on children and teenager biscuit brands, representing 68% of their online sales, the Covid-19 crisis favored the online emergence of a new category of customers, aged over 55 and sensitive to other products. These new customers represented half of the 2.8bn new households using Carrefour’s drive-thru offering in 2020 (quite an opportunity!).

Mondelez teamed up with Criteo (a Carrefour partner) to ensure the campaign visibility throughout the whole buying process: promotions on e-shelves and dedicated locations, targeting by keywords or context of the aisle visited by the relevant e-shopper (for instance, having their products visible when customers were using ‘coffee’ or ‘hot drinks’ as keywords).

As a result, they had a Return on Ad Spent exceeding 3 (1€ spent led to 3€ earnt in sales), with a 30 to 40% higher visibility when compared to the former target, and a conversion rate 14% higher than for customers who were not exposed to the campaign.

Is that the perfect opportunity for department stores?

When looking at the numbers published by the various players (additional revenue of $1.55b in 2021 for Walmart and $105m for Macy’s) one could conclude that this new business is a silver bullet for department stores looking to generate new streams of revenue.

However, McKinsey identifies 3 main risks with the implementation of a retail media network:

• Brand’s allocations to retail media networks can cannibalize the funds that they would normally allocate to trade marketing, which would in the end go exactly in a reverse direction in terms of the retailer-brand relationship than where a good retail media relationship strategy is supposed to lead./nbsp]
• A shift in the business relationship: retailers become clients to brands, which also would have serious consequences in terms of retailers’ organisation and their team’s self-perception (including the loss of a sense of purpose),
• Lack of core capabilities to properly meet CPG brands’ needs and maximize their spending.

Should all department store companies follow the lead of Nordstrom and launch their own retail media network initiative? While such a venture might be helpful and full of promises, CEOs need to remember that, while many of their companies are already major advertisers, retail media network initiatives require a completely different set of tools and skills to excel at it:

• Ability to provide advertisers access with a clean customer database (size does not matter, but its quality, and the number of active customers do),
• Closed-loop measurement and the ability to fine-tune the offer in real time according to the ever-evolving data privacy regulations are also key for the long-term,
• The behind-the-scene tech is also, of course, crucial, both in terms of reach (operations on multiple locations and channels) and scalability.

In reality, RMNs are a very interesting perk which could contribute to improving companies’ profitability, but such an implementation is neither easy nor painless: just like the topics of digital transformation and sustainability, we are witnessing here an additional layer of (optional) disruption which will require new teams, new systems and additional investments (see Dr Christopher Knee’s comments on how to respond to disruption here) at a moment when CEOs have many other options when it comes to put their organisations’ focus and allocate resources.

Credits: IADS (Selvane Mohandas du Ménil)

Check out the retail review in pictures here

PRINTABLE VERSION HERE

*The IADS visited Rome for the World Retail Congress early in May and took the occasion to visit La Rinascente and Coin Excelsior, among others, for a store review and an innovation spotting session.

To what extent has the Covid-19 pandemic forced local department stores to evolve, in the same way that Paris, Madrid, London or Milan had to follow suit? Has Rome, which is usually lagging behind the economical capital of the country, managed to take that opportunity to upgrade its department store scene?*

La Rinascente

La Rinascente, a former IADS member from 1959 to 2008, takes its origins as early as 1865 with the Bocconi brothers opening a clothing store in Milan, soon followed by branches in Rome, Genoa, Trieste, Palermo and Turin, under the name Alle Città d’Italia. When purchased in 1917, the new owner, Senator Borletti, asked the Italian poet Gabriele D’Annunzio to find a new name, and he came up with La Rinascente, reflecting its rebirth and new approach: a “democratic” approach to luxury appealing to high and middle-income classes./nbsp]

The company teamed up with UPIM in 1928 (as well as Jelmoli in Switzerland which remained a business partner until 1965) and increased its retail footprint across Italy in terms of store numbers (5 La Rinascente, 150 UPIM stores, and 105 supermarkets at its heyday in 1970) and partnerships or acquisition (JC Penney Italia, Auchan..) until it split in 2005. La Rinascente s.p.a. was then created and later purchased by Central Retail Corporation in 2011.

The group now operates 9 stores in Italy, including 2 in Rome (of which the Via del Tritone store opened in 2017), the Turin location opened in 2019 and the Florence location opened in 2020, each different and designed to be destinations by themselves. The latest public information about its total turnover is €800m in 2019, and the 2020 performance is estimated at -30 to -40% of that number. E-commerce has also been launched in the wake of the pandemic in 2020.

The IADS visited the Via del Tritone store in Rome. It opened in 2017 after 11 years and a total investment of €200 mn. It spans over 8 floors including a 2-floors terrace at the top, with an unusual floor plan:

• Exhibition area in the basement,
• Luxury accessories at the entrance on the ground floor,
• Cosmetics on +1,
• Women’s and Men’s fashion on +2 and +3,
• Shoes and contemporary accessories on +4,
• Home goods and food on +5 and access to the terrace.

Initially planned to open in 2012, the delays were due to the findings of major archeologic treasures, that are now on display in the basement of the store: the remains of a Roman aqueduct. This is the reason why La Rinascente decided to take advantage of that to set up its exhibition area there (usually used for commercial popups rather than cultural shows). At the time of the visit, an immersive and very well-executed pop-up dedicated to vintage design was on display.

What is striking in the building structure (apart from the fact that it also incorporates the remains of the Palazetto, a building from the early ‘900s) is the cavedio (a courtyard) which acts as a well of light and spans across the whole height of the building from the ground floor to the top floor. As a consequence, even though this is an invitation to go from one floor to another, circulation can feel somehow a bit cramped as each floor is organized with this empty volume in its middle. It also allows to embrace almost the totality of the department in one glance, but this can also be a drawback too, as there is almost no possibility to surprise customers with the pleasure of discovering something that was not seen when arriving on the floor. As a consequence, visibility is key for brands, and they are all rivaling to make sure they can be spotted from the escalators or the floors, leading sometimes to an overwhelming feeling.

The execution of the food floor and the access to the terrace is extremely well done: all products are presented in a manner which makes them very attractive, and one must say that the terrace is among one of the best available in the city (and advertised as such in Roman hotels to tourists).

For anyone with the habit of larger and probably more traditionally-structure department stores, the feeling left after the visit is the one of a well-executed store, with a very good array of brands, but somehow with a difficult circulation and an offer which is hard to read. This is mainly because of the dual structure: a ground floor and an underground which are easy to navigate and quite clear, while the top floors, which are all organised around the light well, propose an entirely different experience, navigation and product offer reading.

Coin Excelsior

Coin was founded in 1916 in the Venice region and evolved into various formats until becoming a department store per se in 1957 in Trieste, in a former Ohler department store location. It then expanded across the country and now operates 39 stores of various formats, including the Coin Excelsior one which is more upmarket than the traditional Coin stores (mixing the Coin brand name with Excelsior, a concept store owned by the group and specialized in high-end fashion). The group also owns OVS (midmarket apparel department stores) and UPIM, which was bought following its split with La Rinascente in 2010.

The IADS visited the Coin Excelsior located in via Cola di Rienzo, a “contemporary department store” which opened in 2014 with an investment of €8mn and spans over 3 floors and 4.300 square meters.

Although during the visit it was clear that the store reflected its age (on this positioning, 8 years seem a lot), one must say that the way it is structured and merchandised is quite surprising, with a few interesting innovations.

First of all, this is, like El Corte Inglés and other IADS members, a department store which includes a supermarket in its basement, even though it is quite small. What was striking however was the use of technology in a simple way and with clear incentives for the customers:

• Cash desks are fully automated, with a steward navigating to help customers. Payment points are very visible and designed in a way that they come naturally as a conclusion to the shopping journey (allowing to clearly define a navigation direction, which is quite useful in the Covid-19 context).
• An app, heavily advertised on-site, also allows an evaluation of the savings made by proposing to compare the prices.

Even though the supermarket zone is small, it allows to draw a certain type of customer in the store and connect it to the neighboring populations.

Rather surprisingly, upon exiting the supermarket, customers have to cross a food zone where they have the option to either eat on site or pick up their meal. They have no other possibility than crossing it to go to the rest of the basement, which mixes Home & Decor, kids’ fashion, lingerie and toys. For each category, the set up is well executed (end even very immersive in the case of the Home & Decor offer, sold under the Coin Case private label name), but the transition between them is quite abrupt and even disorientating.

Similarly to the basement, the ground floor mixes different categories:

• Cosmetics and perfume with the usual suspect brands, all displayed with their own branding in light shop in shop structures,
• Jewellery, including a Tiffany’s store which has a separate entrance on the street in addition to the in-store connection,
• Lifestyle, with Nespresso and Dyson, both of them with significant spaces and which are, according to Coin, quite successful both in terms of driving traffic and sales. Coin is increasingly entering partnerships (similarly to Manor and others) to expand its offer and access new customer bases,
• Jewellery and leather goods, with low and mid-market brands,
• A “Lifestyle hub” which includes tech, gadgets and even electrical cars. The name of this zone is not properly displayed and can be somehow confusing, which is all the more surprising that Coin advertises it as its new experiential showroom / concept store / space of discovery designed to attract a younger clientele (this new space has been launched in nationwide Coin Excelsior stores as a new concept in 2021).

The overall impression left on the ground floor is a profusion of brands expressing themselves on dedicated spaces, with an interesting (and surprising) curation and juxtaposition, but, just like this is the case in the basement, transitions between unrelated categories give the feeling that this spatial organization was made out of necessity rather than with a specific store planning vision in mind.

The first floor is dedicated to Women’s and Men’s Fashion, displayed both in shop-in-shops (including an impressive All Saints space) and in corners, and mainly in the mid-market segment. The Men’s section is displayed with floating furniture suggesting that the offer constantly evolves, while the Women’s one is structured with fixed fixtures. Also, the space and mezzanine allow giving a great view of the concept store part of the ground floor, as well as the Art Deco architecture of the building.

When leaving the building, the impression that is left is somehow confusing: there are many great ideas and brands or categories juxtapositions in the store, but ultimately it is difficult to identify who is the actual target customer or even the positioning of the store: while the Coin Casa, bakery on the basement or the fashion offer suggest that this is a store addressing a classical and middle-market customer, the Tiffany’s store at the entrance or the co-operated Dyson and Nespresso stores give the impression that Coin Excelsior is trying to stretch itself to the luxury category, and therefore trying to address all customers with one bait.

*Is Rome a Dolce Vita for department stores? While it has been an obviously historical touristic hotspot, when it comes to retail, Rome is more famous for its local and family-owned stores, rather than its department stores.

La Rinascente Via del Tritone, the second flagship of the company after the Milan store, addresses international luxury customers according to a robust playbook, but, due to the structural efforts it had to make to adapt to the city’s specificities (especially the archaeological treasures hidden in its soil), the result is somehow disappointing when compared to other players located in other cities, including Milan.

Coin Excelsior, on its side, displays many innovative concepts and initiatives, however, the store organization and difficulty to understand its positioning makes it a store that is difficult to understand.

It seems that, unlike in other European cities which took the opportunity of Covid-19 to work on their offer, positioning or brand perception, there is still some way to go for players in Rome in that perspective.*

Credits: IADS (Selvane Mohandas du Ménil)

PRINTABLE VERSION HERE

IADS recently held a meeting all about the cosmetics & beauty sector. Based on market research, the IADS team presented the most innovative brands from different segments of the cosmetics & beauty brand industry: skincare, makeup, haircare, fragrances, and everything in between! Check out a selection of these brands!

Skincare

Peach & Lily

The top destination for the very best curation of Korean Beauty productsand innovations from cult-favorite Korean Beauty brands. Spa-grade,toxin‑free, delightful, and accessible, K Beauty-inspired skincare with noharsh chemicals, dyes, alcohol, parabens, or sulfates.

Check out the Peach & Lily website here

Peach & Lily Instagram

Laboté

Laboté cosmetic treatments are made from medicinal plants andpharmaceutical ingredients selected for your skin through diagnosis.Treatments are certified vegan and cruelty-free. Take your skin diagnosisonline to discover your tailor-made treatment protocol.

Check out the Laboté website here

Laboté Instagram

Horace

Skincare line of natural products co-created with customers for men. Whena need is expressed, we formulate a treatment. Horace products areeffective, easy to use, good for all skin types, skin tones and hair.

Check out the Horace Website here

Horace Instagram

OUATE

Skincare line for little ones because children love to learn while having funand feel that joy that overwhelms them as they walk on the path toautonomy, OUATE transmits them the essential care gestures to take careof their fragile skin.

Check out the Ouate Website Here 

OUATE Instagram

Youth to the People

Consciously-sourced, nutrient-dense premium superfood blends and pairthem with clinical, pro-grade vegan actives, all made in California for thebenefit of skin’s health. All initiatives support non-profits and activistsworking to amplify diverse voices and increase inclusivity, build a more justworld, and save the planet.

check out the youth to the people website here 

Youth to the People Instagram

Makeup

Claropsyche

A makeup brand that seeks to saturate, liberate and inspire creatives. No Rules. Art supply inspired makeup products.

Check out the claropsyche website here

claropsyche Instagram

Dries Van Noten

Dries Van Noten clashes couture with streetwear. Refillable lipsticks, withmix-match cases in clashing top and bottom prints inspired by fashion collections.

Check out the Dries Van Noten website here 

Dries Van Noten Instagram

War Paint

A makeup line helping men feel confident in themselves using cruelty-free,vegan ingredients. Light & comfortable to wear looks natural & incrediblyeasy to apply.

Check out the War Paint website here 

War Paint Instagram

Pat McGrath Labs

The world’s most influential and in-demand makeup artist formulated andperfected her must-have collection of high-performance cosmetics,culminating in the launch of her eponymous brand.

Check out the Pat McGrath website here

Pat Mcgrath Instagram

Haircare

Pattern

Pattern - Meet your hair where it is & empower your curl pattern bynourishing your hair with affordable and effective products & safe ingredients.

Check out the Pattern website here

Pattern Instagram

Gisou

A haircare line that’s key ingredients are sustainably sourced from theMirsalehi Bee Garden by founder Negin Mirsalehi and her father. Honeyis the key to healthy, shiny, nourished hair. Rich in vitamins, minerals,amino acids and antioxidants, honey deeply nourishes and moisturizes torepair and restore dry, damaged locks.

Check out the Gisou website here 

Gisou instagram

SACHAJUAN

Haircare inspired by Scandinavian philosophies and powered by OceanSilk Technology. Simplify haircare by reducing superfluous products,ingredients, and routines.

Check out the Sachajuan website here

Sachajuan Instagram

Fragrances

Vilhelm

A fragrance line where each perfume is the culmination of a broad,creative and collaborative process, a blend of vintage and new that sparks recognition but not familiarity. It brings together around twenty fragrances conceived as olfactory stories.

Check out the Vilhelm website here

Vilhelm Instagram

D'Orsay

Fragrance line where the scents are inspired by exploring the state oflove through to carnal desire, speaking of feelings and intimacy.

Check out the D'Orsay website here

D'Orsay Instagram

Other Categories

D+ For Care

Natural, scientific, and French, designed by women for women. D+ forcare is the well-being brand for women that provides dietarysupplements for beauty, well-being, stress, sleep, slimming, menopause,menstruation, hangovers, and more.

Check out the D+ for Care website here

D+ For Care Instagram

Lightinderm

A unique deep skin regeneration system, usable at home, combining aphotobiomodulation device and capsules of serums concentrated inphoto-active ingredients. A triple stimulation: light, serum & massage toact effectively. 1 device 5 targeted programs: wrinkles and firmness,imperfections, redness, and radiance.

Check out the lightenderm here

lightinderm Instagram

Holidermie

Holidermie created products and tools to accompany active women ona daily basis so that they remain beautiful and radiant for longer, bypreserving and beautifying their skin from the inside out, bycontributing to their physical and mental well-being and by allowingthem to take care of their style even in the bathroom.

Check out the Holidermie website here 

Holidermie Instagram

Solaris Labs

Inspired by massage techniques and modalities that have been aroundfor hundreds to thousands of years they created tools that are holistic,modernized or high tech to optimize your routine and skin health.

Check out the Solaris Labs website here

Solaris Labs INSTAGRAM

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IADS recently held a meeting about on the home and decor sector. Based on market research, the IADS team and NellyRodi presented the most innovative brands from different segments of home and decor: furniture, home appliances, home accessories and electronics. Check out a selection of these brands!

Furniture

Vetsak

Produced locally and sustainably with an innovative design from South Africa. One-of-a-kind, modular, quality, practical furniture, that brings life a little extra comfort.

Check out the Vetsak website here

Vetsak Instagram

Lapalma

Balancing craftsmanship, industrial techniques, efficient production, and a focus on details, Lapalma produces and sells its quality design aimed at creating innovative solutions that interact with each other. Lounge, Light Office, Outdoor, Cafè and Home, all customised environments, by extending the range of finishes.

Check out the Lapalma website here

Lapalma Instagram

Home Accessories

Ago

Korean design studio specialized in lighting, that searches for a balance between beauty & function with light. With the line between residential and commercial space becoming increasingly blurred, Ago values simple, honest and refined aesthetics.

Check out the AGO website here

AGO Instagram

Helle Mardahl

Helle Mardahl is an artist and designer with an eccentric and contemporary aesthetic. Playing with forms and materials, she playfully combines strength and fragility, crafting pieces that bring life to  spaces. Creating a dreamy universe of richly coloured quirky glass designs.

Check out the Helle mardahl website here 

Helle Mardahl Instagram

Cookut

Cookut is a brand of kitchen utensils, which also offers accessories for storing and transporting food, as well as hygiene and care products. Their goal is to reduce plastic and daily waste, reduce CO2 emissions while using natural raw materials, promote eco-design and produce responsibly and transparently.

Check out the Cookut website here 

Cookut Instagram

The Citizenry

Citizenry believes homes deserve designs with a soul, a story, and a purpose. Country by country, they partner with master artisans, blending modern style with different cultural time-tested techniques.  The products reflect a collective of individuals from different cultures and backgrounds who rally together to create something beautiful.

Check out the Citizenry website here

The Citizenry Instagram

Boy Smells

Highly spirited scented candles, fine fragrance, and intimate wear for all or neither gender. Boy Smells wrap traditionally masculine scents in a prettier bouquet, made with natural oils, all-natural coconut wax, and beeswax blend and are hand-poured in a reusable glass vessel and hand-labeled.

Check out the Boy Smells website here

Boy Smells Instagram

KJP

Colourful homewares, cheerful print & pattern-focused textiles and lifestyle goods that spark joy.

Check out the KJP website here 

Kjp instagram

Lucas du Tertre

Creating a bridge between India and France and between tradition and modernity. Colourful and printed collections created in the Parisian workshops and printed or woven in India according to ancestral know-how.

Check out the Lucas du Tertre website here

Lucas du Tertre Instagram

Dusen Dusen

Bold, original prints on versatile, textile and home goods products that includes bedding, throws, pillows, and towels.

Check out the Dusen Dusen website here

Dusen Dusen Instagram

Electronics

Mirror

A mirror that is also the ultimate home gym with the most workout variety that actually looks good in your home. 10,000+ classes on demand, 50+ genres, and new live classes daily.

Check out the Mirror website here

Mirror Instagram

Yoto

Carefully connected speakers that puts kids in control of their listening, learning and play. Packed with features for day and night and without any cameras, microphones, or ads.

Check out the Yoto website here

Yoto Instagram

Gomi

Wireless mag chargers, portable chargers and speakers, made out of non-recyclable plastic bags, and powered by 100% repurposed e-bike batteries.

Check out the Gomi Website here

Gomi Instagram

Home Appliances

Netatmo

Aesthetic smart home devices with a variety of products including various security cameras, personal weather sensors, and an internet-connected smoke detector.

Check out the Netatmo website here 

Netatmo Instagram

Daan Tech

Customisable dish washer with 24 colors to choose from that washes daily dishes for one or two people in just 20 minutes. Bob the dishwasher is the world’s most advanced autonomous and eco-friendly dishwasher thanks to its integrated water tank.

Check out the Daan tech website here

DAAN TECH INSTAGRAM

Lema

Lema Air Cleaning System uses nanotechnology and a special UV lamp to generate a photochemical reaction within the wardrobe that naturally destroys viruses, bacteria, odours and mould, improving the customers’ well-being, reducing allergies and respiratory problems. The wardrobe is entirely sanitised, including internally and at the back, without air resistance.

Check out the Lema website here 

Lema Instagram

Somnox

Somnox Sleep Robot is a soft-robotic that enhances the quality of sleep and uses breathing regulation and audio to help fall asleep faster, get deeper sleep, and wake up at the optimal time through a smart alarm.

Check out the Somnox website here

Somnox Instagram

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In early 2021, the IADS Academy participants were set the task by their CEOs of suggesting ways to develop a truly omnichannel P&L and related KPIs relevant to department stores. Their proposals covered several areas including KPIs and data sharing (see Presentation to CEOs at IADS General Assembly, 28 October 2021; and IADS Academy 2021 report). One of the proposals called for the development of “omni-clusters” of customers. The IADS has attempted to develop this idea.

Imitate or innovate?

In the early days, many omnichannel department stores in effect created a separate and competing business within their companies: e-commerce, which started as an “add-on”, often an experiment, was operated on the same principles as the traditional stores, with the differences that selling took place on a website rather than in physical stores, and that customers were delivered at home instead of carrying their purchases away with them.

As e-commerce began to include more merchandise categories, department stores saw the format as competition, just as they had seen big-box and discount retailers, then fast-fashion companies enter their market and address their customers. It was supposed that by getting involved in e-commerce, the danger could be fended off and those customers tempted by pure online retailers could be brought back to the fold. However, online retail proved to be bigger than expected, customers integrated it quickly into their retail habits and department stores found themselves running to keep up with the trend. Today, it is more of a scramble to adapt to the pandemic new normal. The puzzle of profitability of e-commerce was not solved, even by the pure players.

Integration into the traditional business has been unfortunately very expensive. The original business was not adapted and e-commerce was generally loss-making. Department store companies have had to operate simultaneously two business models: one in which the main cost centres have been real estate and people, as well as the new one requiring significant investment in systems, fulfilment and marketing. In spite of efforts to the contrary, the traditional department stores found themselves competing not only against new online companies but also being cannibalised by their own creation, at first a modest separate pilot but which soon grew into a Frankenstein monster. The admittedly complex model of the traditional department store was clearly inadequate for the job of operating online, and a fortiori inappropriate for an omnichannel retail operation. One consequence is that, under pressure from activist shareholder groups, some US companies have already or are considering spinning off the high growth dot.com part of the business to increase market valuation such as Saks Fifth Avenue and Hudson’s Bay, and also illustrated by the speculations on Macy’s, even if this approach sparks controversies. This suggests that they believe there is no answer to the omnichannel conundrum.

Struggling with channel conflict

Part of the problem has been, of course a shift in customer behaviour and expectations. It is clear that any business model which does not start from the customer is doomed to failure in what has been called “the age of the customer” (from say 2010). Starting from the belief that online customers were different from store customers, department stores operated two separate channels and only slowly came to the realisation that there was such a thing as an “omnichannel customer” (with higher spending than the single channel customer they had been dealing with).

But then the challenge of merging two business models with very different cost structures became apparent. Against the traditional conversion ratios of 40% plus, the online part of the business was confronted with rates as low as 1%-2%; against sales per square metre, online invoked profit per transaction; against shareholder expectations of bottom-line profit, online was operating as a start-up expecting no profit for at least 5 years but demanding rapid growth during that time; against B2B logistics based on store deliveries, online required quick and efficient B2C fulfilment.

As long as the online part of the business represented 5% or less of the total, then it was monitored separately in order to determine its profitability, return on investment and its longer-term future. As time passed, it became clear not only that online was here to stay, but also that it was contributing to store-based business (and vice versa) in a complex and organic way making it almost impossible to isolate online P&L from store-based P&L. (See for example how Macy’s is claiming to “scale omnichannel thinking across the entire customer journey”.)

The question then becomes how to determine the profitability of various parts of the business, how to attribute costs and sales. Furthermore, it has become clear also that the “best” customers are “omnichannel” customers, making full use of all the opportunities available to them across channels to search, gather information, purchase, pay, get delivered and return merchandise. However, it remains unclear to what extent they are the most profitable, as they “consume” expensive services which are implemented through expensive platforms.

Omnichannel means integration

And yet… many department stores are locked into the double P&L model and struggling to determine how to attribute sales and costs. Partly because so many employees are assessed on a series of inappropriate KPIs which actually discourage an omnichannel approach. And partly because data is unavailable to track customers, inventory, fulfilment, returns etc. in sufficiently granular form to allow appropriate attributions.

Integration of channels means first and foremost the integration of data allowing all channels to be under the same control and distribution system. For example, all data on any particular customer must be available in one accessible place whether it concerns purchases or returns in all channels, preferences, hard data as well as unstructured data.

Similarly, inventory data should be updated in real time, any priorities for particular channels need to be clearly set out in order that channel conflict does not develop from limited inventory.

At the same time, traditional KPIs which have been focussed on transactional records are no longer able to evaluate the sometimes complex drivers of customer decisions. It has been suggested that omnichannel KPIs should fall into four main categories: awareness, engagement, conversion, and loyalty. Thus, such KPIs might cover traffic and visits, recommendations and conversion rates, cross-channel conversion and baskets, and advocacy, lifetime customer value, revisit rate and frequency, for example. (See KPI suggestions.)

A new idea: “omni-cluster”

Since the customer journey has become omnichannel, it has arguably become necessary to use management tools and financial statements which reflect this development rather than struggling to attribute revenues and costs to different channels. The notion of “omnicluster” is a proposal in this direction.

Clustering in itself is not a new idea for department stores. Different clusters as applied to department stores include clustering by store capacity (space for example); by attribute (traffic, location, income profiles…); by sales (revenue, inventory turn…); productivity (revenue or gross margin per square metre); price (price profile, elasticity); multi-dimensional clustering; and more.

In the same way, customer clustering is also common. Using algorithms and AI it is generally defined as an improvement on rule-based segmentation since it allows clustering over many more dimensions; allows only small variance within each group; and can be made dynamic and reflecting the current state of data.

The proposal made by the IADS Academy was to bring the two ideas together to create customer clusters who shopped at stores, online, or both. This would potentially avoid the difficulty of separate or overlapping P&Ls for stores and online. The only rule is that any customer can belong to only one omni-cluster even if they occasionally shop, return, or collect in several physical stores. All revenues, returns and costs associated with a customer would belong to that omni-cluster.

It has been often remarked that not only does online bring customers to stores (and vice versa), but most online customers are more dense around an existing store (while this was a surprising discovery in the early days of omnichannel, it is now fairly obvious since most customers now shop online and stores are situated in the most important markets). In this case, it is clear that an omni-cluster may consist of one or more stores and the online customers residing around that store. This is the simple omni-cluster model as favoured by Magasin du Nord for example.

If, however, a number of online or omni customers have a preference for direct contact with a distant store (say a flagship store, or a store closer to their office rather than their residence), then one mixed omni-cluster might include a store, its geographically close online customers as well as online customers geographically closer to a different store. This may happen also if the stores are clustered by size as they are at Manor, for example.

If store customers are very mixed (tourists and locals, for example), then one can imagine an omni-cluster made up of local store customers plus online, and another partial omni-cluster made up of tourists and the much smaller online tourist customers. A business which involves franchised stores might include its own stores and all online customers in its omni-clusters but not include the franchised stores. These cases may be more appropriate at, say, Galeries Lafayette.

A series of ecosystems

As these examples show, the criteria for omni-cluster membership may obviously vary from one company to another according to its history, its organisation, its market etc. It is a flexible model. The definition criteria of omni-cluster will be a function of the particular circumstances of each company and its history as well as of the omnichannel strategy pursued by a company (aggressive online growth, new store openings or potential store closures etc.).

The aim is primarily to group revenues and costs into a number of omnichannel P&Ls which cover total operations of a cluster which can serve to manage operations (through the related KPIs), and which can be consolidated into a total business P&L. While the different omni-clusters can be compared, it is clear that none will be exactly comparable to any other. For example, geographical location or the number of stores in a cluster may have an impact on fulfilment costs.

However, the advantage of this model is that it highlights the profitability of the customers in any one cluster (for example how much they spend in all channels, frequency, rates of return, margin per customer etc.). Clearly the costs of store personnel also do not relate only to store customers, which distorts store-only P&Ls. Potentially it also allows the evaluation of the true loss of revenue through a store closure.

The kind of integration referred to above moves closer to an “ecosystem” perspective of the retail business. Indeed, a degree of “unbundling” will be necessary to evaluate the costs attributable to an omni-cluster. When that exercise is pursued, then it becomes possible to find potentially more appropriate, more efficient or more effective solutions before rebundling these into an omni-cluster ecosystem.

Warnings, dangers and the way forward

However, such a move would make it quasi-impossible to spin off the dot.com part of the business as has been done recently by HBC with Saks Fifth Avenue and Saks.com. There are currently some reports of Macy’s considering a similar move. It is clear, however, that these examples are financially motivated and a result of pressure from activist shareholders. They are also more appropriate to larger companies. A smaller omnichannel department store following the integrated omnichannel route will be capitalising on its unique status as what Bain has called a “regional gem”. Once established, an ecosystem can no longer be dismantled and split up into its original component parts. It competes as a whole, not as a multi-channel entity. However, this commitment is no more risky than the spin-off of the dot.com part of the business may turn out to be for larger companies which choose this way.

The omnichannel route might also imply considerable reorganisation of the traditional bricks and mortar assets as illustrated by the John Lewis case which is closing and shrinking so many of the stores it (perhaps unwisely) opened while it was expanding its online business (now around 60% of total revenue). It also sold its Ocado stake in 2010 for £250m which would be worth nearly £2bn today. Rather than spin off the online business, it is reshaping the total business under a new team, focusing on own brands, convenience, high productivity, sustainability, and the integration of formats.

John Lewis raises the question of how to implement the shift towards real omnichannel in today’s retail landscape. Clustering, new KPIs and rejigged P&Ls cannot be put in place in a day. The question therefore is: What would a transition phase towards omni-cluster P&L look like? Who should guide the transition, and how can investors be won over to support this longer-term shift?

Credits: IADS (Dr. Christopher Knee)

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At a time when travel is continuously restricted for many of our members, the reopening of the US borders before Christmas, as well as the NRF event in January, to which the IADS attended, felt like the perfect occasion to prepare a special retail review to give you a glimpse of what’s happening in New York retail, including comments and pictures for your review.

Are brands still innovating in New York, the city once seen as the retail mecca? What are the most interesting stores to visit? While Covid has had a major effect on retail everywhere, what are the impacts of the pandemic in New York?

Great and immersive experiences

Fashion and beauty

Gucci in Soho, is an immersive and impressive store that comes off as ultra-luxe and ultra-cool at the same time. On the second-hand side of luxury, TheRealReal Soho store is also impressive, thanks to staff competence, product curation, and a feeling of being in a “real” luxury multi-brand store with perfect presentation. It seems the concept is a success as it was one of the most crowded locations, with people buying and not just browsing. Interestingly, the store staff focuses on inviting customers to sell their belongings more so than to return for another purchase. LVMH recently invested in Aimé Leon Dore, the new cool kids brand. The store, perfectly located in Nolita, includes a café and a terrace outside. The store is usually crowded, giving off a great impression, and looks like a mix between Ralph Lauren and rap lifestyle. On the beauty side, Ulta in the Upper East Side feels very bright compared to Sephora thanks to the all-white atmosphere. More importantly, the perception is more immersive than Sephora, as Ulta provides a full beauty appliances section and a beauty salon.

Sports goods 

Nike stores are all about experience. Nike studio was closed however, both Nike midtown House of Innovation and Flatiron locations were extremely crowded with waiting lines filled with local shoppers willing to buy full price goods. Overall, the staff was welcoming, polite and competent. At the REI store in Soho, although the impression is quite messy due to click & collect, the immersion feeling is very strong.

Tech and home goods

The Google store in Chelsea is also immersive and almost better than Apple in terms of experience and comfort. The organisation of their cabins to experience products is effective. Bed Bath & Beyond offers another kind of immersion, with a great revamping in the home goods area, including large and clear sections and alleys, easy circulation, a huge space allocated to cash registers and click & collect areas. It is great but one can wonder if the trimming process was a bit too radical as it seems there was less inventory and choice than before.

Kids

Camp store near Union Square is impressive with a playground located in a hidden location behind the counter. This store is also an inspiration in terms of VM in the kids’ sections. The “kid’s shopping” initiative where kids are given fictitious money to make purchases (with a set limit by parents, charged at the end) is very intelligent.

Other concepts

Because of its size, Neighborhood Goods in Chelsea is more of a concept store than a “department store”. The curation of local brands and price point is very effective, attracting the right customers and a nice coffee shop completes the offer. Shopify store in Soho is an interesting marketing space for the brand. The welcome and service are great however, retail is a real job: which includes maintaining stores in perfect condition, and this is not Shopify’s top competence.

Retail disappointments

Fashion

Kith store in Nolita is well merchandised and even though visitors were buying high price tags, the women’s selection is quite disappointing and overall the store is not impressive. In Soho, Galeria Melissa‘s immersive environment and window set up are impressive but the store was either closed or empty, with sales associates looking at her phones and standing in the middle of the entrance… The Webster was impossible to visit as it was partially closed most of the time. The surroundings look terrible and the building itself is under renovation.

Sports goods

On Running store in Nolita is attempting artificial “coolness” by asking customers to line up and wait for the next available sales associate… who are just chatting together in the back of the store. Once in the store, there are good display ideas (shoe storage drawers) and the number of people on the street wearing On Running shoes was quite impressive. Although greeted with a warm good welcome at the Allbirds store in Nolita, there was no real follow up once inside. Customer education on sustainability was visible, although nothing compared to what Green Pea in Torino does for instance.

Tech

B8ta “Retail as a service” store in Hudson Yards is a showroom demonstrating and selling tech and lifestyle brands. It may have an interesting business model and help people find novel items however, people in the store are more looking than buying, which questions the efficiency of such a concept./nbsp]

Another concept

Even with an interesting brand curation, Showfields was an odd experience. The store does not really reflect the missions the concept intends to represent (vegan, sustainable, women-led…), the sales associates were too pushy, the store was empty, the Magic Wand feature did not work and overall, the store lacks cleanliness.

What about department stores?

New Nordstrom Men’s and Women’s stores near Columbus Circle were by far the most impressive out of all of the visits. Their flexible format and fixtures allow them to change layouts throughout floors without taking a toll on brands’ presentation and desirability (though, sometimes a bit odd with luxury brands). During Christmas, there was a great gifting assortment and wrapping services. Overall, the product presentation was good during sales. In the Men’s store, the “floating” cash registers (right in the middle and designed more as stations, not booths) are interesting, as well as the way click /amp] collect is nicely displayed and even used as a feature visible from the outside. In the Women’s store, the ground floor is energetic, airy, and combines a great cosmetic section with the feeling of a concept store. The ground floor area dedicated to home products offers great product curation, which contributes to the concept store impression.

Nordstrom Local is conveniently located, well attended and had many customers at the time of the visit. The way the services are displayed and visible (as proof of competence) is interesting. The store also sells a very limited number of items (snacks, small items & accessories) though not enough to sustain the store itself. The staff was great and competent.

Saks Fifth Avenue’s ground floor is great and impressive, with the escalators going down to the fine jewellery section and overall, spacious, modern and bright. The rather simple idea of colourful escalator “wrapping” really inspires customers to visit the upper floors. Traffic was slow and SaksWorks on the last floor was closed. The Barney’s floor is a gimmick with no added value.

As usual, Bergdorf Goodman had great Christmas windows and displays, but the impression was not so positive. During Christmas they offered “presales”: customers were charged at the time and were to receive the product at a discounted price later. The 7th floor which used to feature stationery is now dedicated to BG merchandised products. The traffic is low, apart from the shoe floor.

Bloomingdales in the Upper East Side feels a bit old. Still, the store offered a gift-wrapping service with customised-printed gifting paper in partnership with Klarna. The new Men’s shoe floor is not revolutionary but nice, with brand corners and multi-brand areas organised by style/functions (sport and sneakers, casual and weekend, classic and work shoes). Service counters are emphasized.

Macy’s in Herald Square feels old and not well maintained (floor maps are not all correct), however it was overall busy. The home floor has been redesigned with a lifestyle approach. On the ground floor, there is an interesting mix of cosmetics, tech (including Apple) and light travel goods.

Is New York still worth a retail trip? While there are always interesting stores to visit, the city didn’t feel the same as before due to the lack of traffic and energy, even if it was a bit busier during the holidays. The impact of Covid on retail was felt in all areas. It was particularly visible on Broadway around Macy’s, with closed flagships (Victoria’s Secret and empty >500 sqm locations) and even more so in Soho, in the Mercer St. / Greene St. area where there are many “available” retail locations advertised. The slow traffic is both due to the heavy travel restrictions and to the local affluent consumers relocating in their secondary residences. For instance, it led Bergdorf Goodman to achieve a fair share of business by sending trucks every day with goods to the Hamptons and other locations in 2021.

Another common feeling from two separate visits was the impact of staff shortage (Macy’s advertises for recruitment on zones and screens normally dedicated to products) leading to a feeling of poor maintenance (Visual Merchandising, product visibility, overall maintenance and attention to details, even cleanliness) and poor customer service (among department stores only Nordstrom sales staff gave a sense of welcome and product-related competence). During Christmas week, there was a striking contrast between stores that were either fully closed (Mejuri in Nolita, Melissa Galeria in Soho), partially closed (The Webster, On Running) and the ones that were inaccessible due to long queues at the entrance (Louis Vuitton, Prada, Chanel, Nike…).

Credits: IADS (Christine Montard)

Check out the retail review in pictures here