Fashion Network has quoted IADS in an article covering how department stores are focusing on the home and decor sector. The article covered how the tableware and furniture sectors are the best performing categories, and also included interesting home brands spotted by IADS partner, NellyRodi.

Read the article below:

Fashion Network Article (in french)

Mind Retail has featured IADS' GM, Selvane Mohandas du Ménil in an op-ed piece that discusses how European department stores are preparing for the new generation Chinese tourists. The article explains the current retail strategies after the reopening of the Chinese borders in January 2023.

Read the article below:

Mind Retail Article

WWD has quoted IADS in an article covering how department stores are focusing on the home and decor sector. The IADS General Manager, Selvane Mohandas du Ménil, shares insight on how this category experienced major growth due to COVID.

Read the article below:

WWD Article

Home & Decor: a stable business in department stores thanks to a few overperforming categories, with customers shifting focus to new products.

Still impacted by the consequences of the Covid-19 pandemic and related lockdowns in many ways, the global Home & Decor market in department stores remains dynamic and is now influenced by fashion trends.

Overall, the Home & Decor turnover share remained stable from 2019 to 2022 for IADS department store members, at 15%. However, research shows that companies actually found themselves in two different situations:

• A struggling business compared to previous record growth: after a Covid-related positive impact on sales, some department stores faced difficulties to achieve a similar level of sales in 2022 and to reach their margin targets.
• A stable or growing business in value: with inflation forcing retailers to increase their prices, other companies saw their turnover remaining stable even though they saw a decrease in volume. In addition, growth in a few categories supported their business and contributed to maintaining turnover.

In one way or another, the current Home & Decor trends reflect the post-Covid life: tableware and furniture are the most successful categories, with furniture being considered a strategic priority for the department stores' buying teams. Consequently, given the average size of these products, the optimization of omnichannel operations is a must for any company willing to harness this category without dedicating too much space in its stores' stockrooms, by relying on distant warehouses or marketplace agreements instead.

In the post-Covid market, the home and decor category is increasingly following the fashion pace and mood

The Style Pulse, an IADS partner, described to department stores' buying teams Covid's long-lasting impact on stylistic trends and market tastes. The product offering now reflects consumers' feelings and answers their aspirations as life returns back to normal: colourful and joyful aesthetics, inspiration from nature and travel, and objects enhancing comfort and at-home wellness.

The Home & Decor market increasingly follows the same logic as the fashion industry: according to Nelly Rodi, another IADS' partner, consumers replace home products more often than before (every 5 years for a sofa instead of 15), in addition to increasingly asking for fashion codes in terms of branding, motifs or collection merchandising.

Also, this fragmented and highly competitive market is diversifying both downwards and upwards, as distributors (including mass-market) propose more interior design services, while fashion luxury brands put effort into their Home & Decor offerings. Louis Vuitton's opening of a home goods store in Shanghai represents a significant example and shows that department stores are increasingly facing more intense competition not only on the product offer (whatever the positioning) but also on the range of services they recently developed to remain relevant.

The winning recipe: tableware, furniture and private labels

Nelly Rodi presented its exclusive scouting of up-and-coming brands in tableware and furniture, but also in the decoration, electronics and household appliances categories:

• Tableware: La Double J, Studio Arhoj, Marie Daâge, Artesanias del Atlantico, Maison Fragile, Minval Living.

• Furniture: Red Edition, Houtique, Maison Dada, Popus, Noma.

• Decoration: Papermint, Tekla, Anna + Dina, Marmi, Petite Friture, Mattina Moderna, Areta, Datcha.

• Electronics: Transparent, La Boîte Concept, Roberts.

• Household appliances: Amibot Tech, Steamery.

IADS members also highlighted the brands that were already performing well in their assortments: Bolia, Red Edition, Flamant, Salt & Pepper and Pols Potten.

The product category dispatch shares remain relatively stable: Home Accessories are dominating the business with an average of 48% of the department store category business, Electronics represent 21%, Furniture 15% and Household Appliances 13%.

The tableware market is booming thanks to consumers looking for trendy products. Using fashion reasoning, shoppers are not shy about buying multiple sets of plates and consider these items as fashion products. In stores, creating multi-brand themes and stories that change on a regular basis is the path to success: products sell quickly after hitting the shop floor, thus enhancing margins. Candles (including regular candles, scented candles, and candle holders) are also a booming category: with good margins and little space needed, multi-brand areas successfully develop.

Even though the category is more difficult to handle (as it requires space and operations are inherently difficult), furniture is a strategic component and priority of Home & Decor's growth. Post-Covid life also encourages its growth: convertible sofas are extremely successful at Galeries Lafayette and BHV, thanks to tourism resuming, fuelling Airbnb apartment renting. Craving for life in the open air, consumers continue investing in outdoor furniture at El Corte Inglés.

Finally, private labels are successfully positioned among the department stores' best Home & Decor brands. This is why department stores keep developing new product categories and plan on expanding existing ones in the near future.

Omnichannel business is growing and being optimized despite competition and inflation

Even with the growth of their online business at an average of 33%, it remains difficult for department stores to compete with pure players offering extremely fast and free delivery services. With inflation, price competition is a reality in all markets, leading to aggressive promotions from competitors.

Overall, online commerce is seen as the main growth lever for the future and omnichannel services have been tremendously developing in all categories. When it comes to Home & Decor, in-store showrooming currently achieves good performance giving in-store consumers access to an extensive product offer. At the same time, department stores are increasingly curating their website to clear the product offer and to avoid online customers from feeling lost in an 'infinite aisle'.

Despite relative stability in the Home & Decor sales value, many factors are affecting the category. Fewer quantities are sold at some department stores, showing the impact of inflation on customer spending. On the other hand, some product categories are booming and supporting the business: tableware, furniture and private labels are considered key to maintaining and growing sales. As for other product categories, the online business remains a priority for department stores that are improving operations.

Read the full press release below:

IADS PRESS RELEASE HOME & DECOR

Read the full press release, in French, below:

IADS - Communiqué de presse - Maison & Décoration

Retail in Asia has written an article covering the World Retail Congress panel discussion on the future of department stores. The IADS General Manager, Selvane Mohandas du Ménil, hosted the discussion and was joined by retail leaders including Niraj Jain, CFO of Indonesian department store Matahari, David Wilkinson, CEO of Steen & Strøm in Oslo, and Rita Clifton, portfolio chair and non-executive director at John Lewis Partnership. The article includes the key takeaways from the conversation.

Read the article below:

Retail in Asia Article

Fashion Network has written an article based on IADS findings on department stores' omnichannel strategies driving profits. The article details how retailers are now focusing on adjusting the most relevant channels while maximizing return on investment.

Read the article below:

FASHION NETWORK ARTICLE (ENGLISH)

Fashion Network Article (French)

fashion network article (spanish)

300% more profitable: the most lucrative customers shop online and offline at the same time. To attract them, department stores are intertwining their most cost-efficient store features and e-commerce capabilities to become customer-centric omnichannel shopping and experience platforms.

While e-commerce is seen as the main driver for growth in the future, department stores continue to invest in their stores and are not ready to let them go, in the hope of combining experience with convenience. For that reason, becoming truly omnichannel is a crucial part of the transformation they must go through. After having tested many services in a constant work-in-progress mode, adjusting them and possibly concentrating them in a "super-app" is planned, provided it improves the financial bottom line.

Customers have been at the core of any department store strategy since the inception of this format. The rise of e-commerce and digitalization of the world have created a new breed of clients who indifferently purchase both online and offline: omnichannel customers. On average, such customers are spending 3 times more than strictly offline or online ones and, for that reason, are enthusiastically regarded by retailers.

On their side, department stores, which viewed themselves as multichannel retailers until not so long ago, have engaged in the journey to becoming truly omnichannel. This transformation, which involves moving from a traditional delivery model to a customer-centric model with multiple purchasing options, is still an ongoing process, with many new services and innovative sales channels being tested.

But now that the pandemic is over, and has been replaced with new challenges, such as the increased cost of operations, retailers need to ensure that their approach is relevant, efficient and measurable in terms of intertwined online and offline customer experience. After all, the very notion of channels is not a reality for consumers. As a result, the target is now to offer a seamless buying experience, not necessarily based on new services, but rather on fine-tuned existing ones, possibly merged into a "super app", as long as ROI is ensured.

No need to reinvent the wheel: sales channels are now all about integration and adaptation

The pandemic led to the multiplication of sales channels and services. Now is the time to rationalize. Department stores are individually reviewing the added value of their innovations both from the customer point-of-view and the financial aspects, to focus on efficiency:

-    Click & collect, the most widespread omnichannel service, is here to stay and represents up to 41% of all omnichannel transactions at Manor. While at the beginning some department stores located this service on upper floors to push customers to wander the store, the consensus now is that the best location for this service is on the ground floor, especially near the entrance, in the customer service area or close to the parking lot.

-    Click & express, a speedier version of Click & Collect, builds on the fact that some companies use their stores as fulfilment centres for their e-commerce operations, and as a consequence do have speedy logistics capabilities (Breuninger ships 15% of their online orders from its stores). For instance, at El Corte Inglés, customers can come in and pick up their order in 120mn, and even in 60mn at Manor.

-    Click & reserve, where the product is booked online without any guarantee for the retailer that it will be purchased, is more controversial, due to the high risk of cancellation or customer's no-show. For companies continuing to offer this option, the key to success is their ability to provide a quick answer to customers (at Breuninger, customers receive the confirmation that the product is reserved in the store of their choice in less than 2 hours).

-    In-store ordering is a new approach where customers have access to more products than displayed, through specific devices (iPads…) linked to other stocks. Manor and Breuninger are developing this strategy, with a 40% higher turnover compared to pre-Covid levels for the latter.

-    Marketplace services are developing. While purchases on marketplaces used to follow a specific logistics flow (brand to customer and customer to brand), Breuninger now accepts returns for merchandise ordered from third-party brands on their marketplace to their own warehouse, which considerably simplifies the life of their customers. On their side, Galeries Lafayette is running a test with 3 different marketplaces which offer customers in-store pickup services.

-    Personal shopping, now a staple service for all department stores, is expected to be available online for some of them. For instance, El Corte Inglés' website offers customers an 'ask an expert' button, leading to immediate advice via chat, phone and video call. Overall, it is worth the effort: the average basket of a customer being advised by a personal shopper is 4 times higher than a regular offline or online sale.

In reality, department stores are pursuing two rationalization strategies at the same time. On the one hand, they are reducing services and options that either did not prove to be economically viable or recognized as useful by customers and on the other hand, they are further developing the ones that proved right and connecting them with each other (for instance Personal shopping with Click & reserve).

Are "Super Apps" the future of omnichannel?

At Manor, 70% of omnichannel traffic goes through mobile phones, showing the importance of a unified platform, or "super app", to provide all services and options to customers directly in customers' pockets. These super apps can be seen as shopping dashboards or interfaces combining all online and offline channels as well as services: at El Corte Inglés the app is both an e-commerce and in-store service platform, and at El Palacio de Hierro the app merges e-commerce with all services, such as Click & Collect, Car Pick-up, Scan & Go… The goal is to optimize the shopping experience and ensure a seamless transition between online and store modes for customers to shop anywhere, anyhow, anytime, and even possibly while talking with a staff member.

Department stores are currently working on how to enrich their apps with new features. For instance, AR and VR features are already in the works to guide customers through floors, for instance, enriching store maps, and even allowing each user to receive personalised offers in real-time, on the go.

To nudge customers or to begrudge free returns? The difficult financial question

With delivery and return costs taking a heavy toll on margins, should department stores incentivize customers into prioritizing cost-efficient order processes? For instance, Click & collect is cheaper for retailers than home delivery as they do not bear the cost of transportation. Taking the example of other categories (Amazon, Fnac) the key question they are currently pondering is to know if it is worth it, in terms of finances but also brand image, to offer a small discount or loyalty benefits to nudge customers in the right 'cost-efficient' direction. Such initiatives are, so far, purposedly made invisible to customers. For instance, Breuninger's customers living close to a store see the Click & collect option emphasized and more visible online to nudge them to use it rather than home delivery.

Another important topic for the future of the business is the possibility of asking customers to pay for their returns. While this initiative is not yet a common practice, the fact that Zara and others started to implement it influences retailers' decisions. Among IADS members, Manor already took a step towards cost efficiency, as returns in-store are free but returns to the warehouse are not. As a result, 66% of product returns are made in-store.

Department stores' digital transformation has not been fully achieved yet, as they still consider themselves as good multichannel retailers. Covid-19 accelerated the launch, development, experimentation, and adoption of existing or new sales channels and services. In their strategies, retailers now focus on fine-tuning the most relevant ones while maximizing their ROI, be it to enhance the customer experience or to maximize the business.

This doesn't mean that new services and sales channels won't develop in the future, but that the current strategy is really to intertwine the relevant ones to provide a truly seamless omnichannel experience, possibly through a super app, in order to capture the complete customer journey, anywhere, anyhow, anytime, with cost optimization as a Damocles sword upon them.

Read the full press release below:

IADS Press Release: Department stores boost profitability with omnichannel strategy combining online and in-store Shopping experience

Read the full press release, in French, below:

IADS - Communiqué de presse - Omnicanal

Italian media outlet, Distribuzione Moderna has written an article based on IADS findings on private labels, reporting that the market shares of private labels are growing, even in the most sought after department stores.

Read the article below.

Distribuzione Moderna article

Comparing department stores' 2021 financial results to 2019 numbers show stark differences according to the region:  -20% in Asia, -8% in Europe… and +10% in the Americas.

The IADS 100 monitor, launched in May 2021, observes and tracks changes in the department store retail format and how players in various markets adapt to challenges and change. Based on data and results captured from a selection of global department store companies (out of the 211 companies still operating in 2023), the IADS 100 aims to step away from the immediate and constant stream of news to analyse the situation based on actual and reliable numbers.

Department stores can no longer compare their recent businesses to 'normal times' as they hoped to with 2019 figures as they are operating in a new era of radical changes. Between 2019 and now, the amount of ground-breaking and disruptive global events has multiplied, thus impacting the business operations of retailers around the world. From a global pandemic, a war in Europe, supply chain blockages, to sustainability regulations and revolutions in tech leading to the emergence of new business models, department stores can no longer refer to their baseline figures when comparing annual results to 'business as usual' times. Therefore, decision-makers in the space are having to learn how to operate in such dynamic times in order to get ahead of the next block in the road.

2021: still considered a recovery year

While the impact of the global Covid pandemic seem to be in the rear-view mirror, other economic events have not paved an easy road ahead for department stores. Based on their fiscal results, here are how parts of the world fared by the end of 2021 results:

Asia (2021 panel average: turnover decrease of -20% vs. 2019): Many companies in the region struggled to get their feet on the ground due to repeated waves of Covid lockdowns and strict travel bans, particularly in Japan and Korea, with a -32% decrease of the business on average on the panel for those countries. It is worth remembering that in 2021, China was less prone to massive lockdowns throughout the year compared to 2020 and other countries in the area, even though Shijiazhuang (11m people) was closed in January and X'ian (8.5m people) in December. For that reason, and also thanks to local demand, high disposable income and the nature of the market (social commerce as a habit, high rates of smartphones among the population and logistical infrastructure), a number of Chinese department stores (BHG, Wushang Group, and Golden Eagle) were able to go against the tide and outperform 2019 numbers, IADS member BHG (owner of SKP in Beijing, X'ian and Chengdu) growing +62% vs 2019, and Wushang Group (formerly known as Wuhan) at +42% vs 2019.

Europe (2021 panel average: turnover decrease of -8% vs 2019): In 2021, department stores started to bounce back from 2020 results, but were still feeling the effect of recurring lockdowns, decreasing local customer morale and the lack of tourists due to closed borders, preventing them from reaching 2019 levels (not to mention that the products sold during the lockdowns, such as food, home equipment or tech, provided lower margin levels than personal equipment products and fashion). Only Marks & Spencer, Coop Group, John Lewis, and NK outperformed 2019 results in 2021, suggesting that department stores with a grocery arm tended to perform stronger, while those that rely on tourism continued to suffer (NK being an exception due to the acquisition of a new business in 2021).

Americas (2021 panel average: turnover increase by +10% vs. 2019): The sampling of department stores from the US, Mexico, and Chile all reported positive sales trends between 2020 and 2021. However, the situation was more contrasted in the US when it came to recovering back to 2019 levels, as only Dillard's and Neiman Marcus managed to reach the target. In Central and South America, the situation was different: in Mexico (IADS member El Palacio de Hierro, and Liverpool) performances surpassed the 2019 reference, and in Chile (IADS member Falabella, and Ripley, Cencosud, owner of the Paris department stores) the target was significantly surpassed. While the pandemic did not hit this region as hard as it hit other parts of the world, the next string of challenges might be the tipping point for these retail players.

While department store leaders around the world have learned to pivot their businesses to remain relevant in volatile times, they need to remember the lessons learned during the recent challenging times (i.e., pandemic, war) and be ready for the next wave that might question their business model (i.e., regulation, recession, AI).

2022 and beyond

Currently, retailers are gathering and reporting 2022 fiscal results, but there were clear obstacles that presented themselves over the 2022 fiscal exercise that will be sure to impact retailers. In Asia, tourism was hurt due to extended border lockdowns and the ban of outside spectators at the 2022 Winter Olympics. With consumers stuck in China, European department stores that cater to Asian tourists also needed to rethink their strategy and target customers. Europe was also heavily impacted by the crossfire of the war between Ukraine and Russia as this impacted store operations, supply chains, and contributed to an energy crisis. Nearing the end of 2022, the world was looking at inflation with consumers keeping their spending money in their pockets with fear of a recession in 2023, thus resulting in questions about the 2022 holiday sales season. Finally, sustainability is becoming a more concrete topic as regulators impose new laws for businesses of all shapes and sizes to comply.

While these obstacles may seem daunting, difficult times can be eased for retail leaders by understanding how similar business cases have been dealt with by department store partners around the world. Expert bodies such as the IADS give global retail leaders an opportunity to ask hard questions when facing difficulty and share the lessons of their triumphs.

List of companies updated in the IADS 100 list:

|  |  |  |  |  |

| --- | --- | --- | --- | --- |

| Region | Country | Company | | |

| Americas | Chile | Falabella | | |

| Americas | Chile | Ripley | | |

| Americas | Chile | Cencosud Paris | | |

| Americas | Mexico | Liverpool | | |

| Americas | Mexico | El Palacio de Hierro | | |

| Americas | USA | Macy's |

| Americas | USA | Kohl's |

| Americas | USA | Nordstrom |

| Americas | USA | Dillard's |

| Americas | USA | Neiman Marcus |

| Asia | China | BHG |

| Asia | China | Wangfujing |

| Asia | China | Rainbow |

| Asia | China | Maoye |

| Asia | China | Parkson Retail Group Ltd |

| Asia | China | Wuhan |

| Asia | China | Golden Eagle |

| Asia | China | New World |

| Asia | Hong Kong | Sogo (Lifestyle) |

| Asia | Hong Kong | Wing On |

| Asia | India | Lifestyle (Landmark group) |

| Asia | India | Shopper's Stop |

| Asia | Indonesia | Matahari |

| Asia | Japan | Takashimaya |

| Asia | Japan | J Front (Daimaru Matsuzakaya) |

| Asia | Japan | H2O (Hankyu Hanshin) |

| Asia | Japan | Isetan Mitsukoshi |

| Asia | Japan | Tokyu |

| Asia | Japan | Marui (0101) |

| Asia | Japan | Tobu |

| Asia | Korea | Hanwha Galleria (Hanwha group) |

| Asia | Philippines | SM | |

| Asia | Sri Lanka | Odel (Softlogic Group) |

| Europe | Estonia | Kaubamaja |

| Europe | Finland | Stockmann |

| Europe | Spain | El Corte Ingles |

| Europe | Sweden | Ahlens (Axel Johnson) |

| Europe | Sweden | NK |

| Europe | Switzerland | Coop group |

| Europe | Switzerland | Jelmoli (Swiss Prime Site) |

| Europe | UK | Marks & Spencer |

| Europe | UK | John Lewis |

| Europe | UK | Selfridges group |

| Europe | UK | Harrods |

| Europe | UK | Fenwick |

| Europe | UK | Fortnum & Mason |

| Europe | UK | Liberty |

| Oceania | Australia | Myer |

| Oceania | Australia | David Jones (Woolworth) |

Download the full IADS 100 data sheet with FY2020 & FY2021 department store figures below:

IADS 100 DATA SHEET

Read the full press release below:

IADS Press Release: IADS 100: Comparing department stores' 2021 financial results to 2019 numbers

Read the full press release, in French, below:

IADS - Communiqué de presse - Moniteur IADS 100

LSA has quoted IADS' General Manager, Selvane Mohandas du Ménil, on the strategy behind Galeries Lafayette's sale of Le BHV Marais to Société des Grands Magasins (SGM), and the potential future for Le BHV Marais.

Read the article below.

LSA quotes IADS about Galeries Lafayette's sale of BHV Marais

LSA has written an article based on IADS findings on private labels. The article reports IADS' findings that the private label business has accounted for 16% of total member turnover of the IADS in 2022, compared to 9% in 2019.

Read the article below:

LSA covers findings from IADS' private label meeting

Fashion Network has written an article based on IADS findings on private labels. Research suggests that private labels are a key competitive advantage for department stores that could prove to be very profitable, provided they receive the right amount of investments and attention.

Read the article below:

Fashion Network Article (French)

FASHION NETWORK ARTICLE (ENGLISH)

FASHION NETWORK ARTICLE (German)

Fashion Network article (Spanish)

Research suggests that moving upmarket their private labels could be a way for department stores to kill two birds with one stone: increase profitability and recognition in the eyes of customers. Thanks to business rationalization and the ability to deal with CSR complexity, tapping into the competitive advantages of private labels could be a strategic move for the department store's business model.

On average, the private label business represented 16% of total IADS members' turnover in 2022, up from 9% in 2019. This increase stems from the pre-pandemic efforts to improve this product category, and the impact of Covid-19, which nudged price-conscious customers to switch from national brands to private labels.

Aware that this part of their business could be improved and can contribute to regaining productivity points, IADS members constantly re-evaluate their private labels: El Corte Inglés reduced the total number of labels with the ambition to transform them into brands (Sfera and UNIT in the young fashion segment are good examples), El Palacio de Hierro launched a 5-year plan combining brand recognition ambitions and new organisation, while Galeries Lafayette and Manor doubled down on targeting specific categories (for instance, the home category, or mono-product segments such as cashmere or men's shirts).

Although there is no one-size-fits-all strategy or internal organisation, all companies pursue the same goals: review their business organisation, move towards more sustainability, revise price points to improve margins, and contribute to the retailer's brand recognition. This is why the IADS dedicated its 2022 Academy research program to this strategic topic, as private labels are key in department stores' economic equation.

Private labels' supply chain objectives: deliver, de-risk, re-deploy… and dilemmas

Last year, the IADS identified the supply chain as the most critical topic for private labels. 2022 brought a number of new uncertainties (war in Ukraine, energy shortage, Covid-19 impact in China…), resulting in a longer production lead time. As a result, late deliveries were an issue for the Spring-Summer season, for instance, some companies only received 70% of their expected stock by March 2022 compared to 90% in 2019. The answers were swift: materials were pre-booked well in advance, production planning started earlier (which saved 2 months on the overall schedule), and reliance on Chinese suppliers was reduced, sometimes by up to 6%, in favour of Southeast Asian countries (+6%) and the Euromed zone (+1.5%).

Interestingly, nearshoring redeployment in the Euromed zone remains shy. Taking into account production and shipping, delays are reduced by up to 8 weeks, which considerably improves operations. However, this comes at a price: production costs can vary by as much as +3% when switching from China to Euromed, while they can decrease by -4 to -8% in other Southeast Asian countries. Given the rise in the cost of materials, additional product costs obviously raise the question of the retail price point and how much customers are ready to pay for these brands.

Sustainability and private labels: the compliance complexity

In Europe, the constant and complex changes in regulation add costly difficulties to the compliance process. As shown in France with the AGEC law (anti-waste and circularity law), enforced since the 1st of January 2023, providing transparency and traceability is really complex, and this affects private labels in the same manner as international brands.

For all members, the goal is to pursue already engaged sustainable efforts and increase the share of sustainable products, knowing that reaching full transparency is the biggest challenge and expectation from customers. The ambition is to reach 100% sustainable collections by 2024 or 2025 (Go for Good already accounts for 68% of Galeries Lafayette's private label products), while also pursuing other structural efforts, such as reducing the amount of packaging used.

When it comes to social compliance, it is all about auditing, de-risking and teaming up: Breuninger helps its suppliers become 'BSCI-compliant' (Business Social Compliance Initiative), while Galeries Lafayette audits its suppliers' production facilities and teams up with third parties such as Emmaüs.

In any case, finding the right way to clearly communicate sustainable and social efforts as well as legal information remains a headache. Initiatives such as QR codes tagged on each product and linking to the website are on the way, however, once again, all these efforts come at a price when it comes to production costs.

Raising the price point: an obligation, or a strategic choice?

In order to maintain viable margins, private labels retail prices increased in line with the general price inflation. However, this opened the debate of going premium to be able to justify a new price point. Across the board, motivation is different: some department stores see it as a way to compete with some international brands, while others are pre-empting the high-quality basics segment. In the US, Target is a good example of this strategy, as the price is no longer the primary factor for customers when buying private labels, but rather quality and value for money. In addition, the IADS Academy's research argues in favour of brand premiumization by showing that high discount rates did not improve sell-through. In other words, price point is not a sales argument for private labels as important as initially believed. As a matter of fact, among the IADS members' private labels roster, it appears that the ones with the highest gross margins have better sell-through rates.

The debate remains open, as many questions around private labels still need to be answered: how can the price limit be gauged? Is premiumization a question of upgrading the brand itself, or targeting a new audience? How can retailers create a strong brand identity that can co-exist with the overall company brand without dedicating too much overhead and resources? Indeed, unlike Marks & Spencer, one of the business cases analysed by the IADS Academy, not all department stores have a namesake private label brand. Also, in the case of Target, promoting awareness of its private labels usually goes hand-in-hand with opening shop-in-shops and conducting advertising campaigns, which can prove to be very costly, and risky.

Conclusion: private labels have everything department stores need to keep going and growing

Since Covid, supply chain disruptions have continuously impacted the private label business. After dealing with the cost increase for raw materials and transportation, most members are now trying to anticipate production lead time and favour near-importing to reduce their dependence on Chinese suppliers. Such a major shift implied increased costs, and by extension, increased retail prices.

While the efforts in CSR are continuing, they create an additional and major extra value to the private labels supporting brand awareness and attracting customers. Going further, the IADS Academy's overarching theme centred around the importance of transforming private labels into real, independent brands. Department stores have a reputation and resources, so they benefit from competitive advantages provided they are able to overcome internal price resistance, (based on the traditional belief that private labels are competing on low price points), and, by extension, align priorities, investments and scale across all departments (general management, private label teams, merchandising and marketing departments, stores and space allocation).

Despite the difficulties private labels are facing, they have a generous margin level when compared to other business models that can be found in department stores. For that reason, private labels remain a key competitive advantage that could prove to be very profitable provided they receive the right amount of investments and attention.

IADS Press Release: Private labels: the future of luxury department stores? (English)

IADS - Communiqué de presse - Marques Propres (Français)

Mind Retail has quoted IADS' General Manager, Selvane Mohandas du Ménil, on the strategy behind Galeries Lafayette's sale of Le BHV Marais to Société des Grands Magasins (SGM).

Read the article below.

IADS quoted about Galeries Lafayette's sale of BHV Marais (In french)

No longer a must-have but rather a bare necessity, sustainability is a chance for department stores to reinvent their business model, provided they find profitable ways to overcome the remaining unresolved challenges.

While the sustainability topic is not new in retail, customers have been facing the actual impacts of climate change and are increasingly asking market players to act and adjust, to the point of turning sustainability into a major factor in business decisions and investments. However, to the dismay of retail leaders, sustainability also reveals itself to be Pandora's box, with a seemingly infinite list of complex questions. The difficulty lies in the nature itself of a challenge in perpetual motion, making sustainability "a framework rather than a destination".

Department stores, due to their size which involves dealing with many suppliers, their central position in cities and customers' lives, and their complex business model often including historical practices, are on the frontline of the needed changes. While they have already proven their ability to adapt to business disruption, they now face a much more holistic problem, of either radically reinventing themselves or becoming irrelevant.

In its new White Paper, "Reinventing department stores through sustainability", the IADS extensively reviews the sustainability topic from department stores' point of view, including where they stand, their initiatives and remaining challenges. Hard questions are raised, and potential directions are identified, keeping in mind that while sustainability is not a trend but a true structural change, the solutions built by department stores cannot be cosmetic but need to efficiently and financially address the topic if they want to survive.

The variety of stakeholders complexifies an already fuzzy question: what does sustainability mean in retail?

At first glance, the situation looks overwhelming as even just defining where to start is hard. Retailers started moving by defining a Corporate Social Responsibility (CSR) framework, soon completed by trackable metrics compiled in Environmental, Social and Governance (ESG) reports. However, they quickly realised that properly addressing sustainable issues required more than reports or guides of good conduct. Simply being able to track greenhouse gas emissions requires nothing less than re-engineering the entire supply chain systems. To make things more complicated, retailers also must deal in real-time with many stakeholders with different views:

-    Customers, who require immediate and impactful actions, but do not always align intentions with their purchasing behaviour, especially in an inflationary context (not to mention that the very notion of sustainability has a different interpretation according to the age group or socio-economic cohort),

-    Pressurised governments, accelerating regulatory efforts without global coordination, leading to a variety of constraints that retailers must comply with, sometimes in a record time (the French AGEC law was enforced in 9 months) leading to the multiplication of non-scalable short-term compliance investments,

-    Suppliers, nudged by retailers to heavily invest to make their production output sustainable, in addition to auditing their carbon emissions to help fill in retailers' Scope 3 tracking (a titanic task for department stores working with international brands contracting factories dotted across the planet).

Finally, shareholders and employees are worried that retailers will end up paying for the transformation bill, estimated from €315bn to €615 bn between now and 2030, in a shrinking profitability context (-6.5% in the past 6 years in France).

Travelling a long and winding road: an overview of department stores' initiatives so far

Aware of their social role and seeing a transformative opportunity in this inescapable challenge, department stores have already initiated their journeys towards sustainability, despite not being all at the same stage of progress due to different local geographical and political situations. To document and draw a dynamic picture of these efforts, the IADS used its privileged ties with its members to conduct several studies, the first one just at the beginning of the pandemic, in March 2020, then another one in June 2021, followed by one in 2022.

When it came to defining objectives, retailers answered to mounting legal pressure by teaming up and exchanging ideas and experiences with an unprecedented degree of transparency. This took place through organised bodies, such as the 2030 Breakthrough Initiatives, various retail associations and federations, such as the IADS, helping department stores exchange with strict respect of antitrust guidelines, but also by talking with new third parties (NGOs, trade unions or consumer associations). Such a degree and scale of openness from notoriously secretive department store organisations is new and considered critical in order to help them set goals and update them in real-time.

This cooperation allowed department stores to take control of their Scope 1 and 2 emission rates rapidly, as shown by El Corte Inglés' reduction of its Scope 2 emissions by 78% between 2017 and 2021, Breuninger's offer of CO2-neutral shipping or Galeries Lafayette's entire store electricity consumption being 100% renewable. Dealing with Scope 3 emissions (95% of the total emissions) proved trickier. Collaboration groups and think tanks helped review market initiatives, such as Macy's reducing its use of virgin plastic by 50%, or Selfridges' plan to achieve 45% of its sales through a circular economy by 2030. It is also widely understood that the next area of focus is the supply chain, seen as the second most beneficial area of investment after digitalisation in terms of ROI.

Department stores are also experimenting with their own private labels, which in turn raises the painful question of the lack of a relevant global standard applicable to all brands and marketable in a simple way to customers. For that reason, Green Pea in Italy, "the first 100% sustainable department store in the world", can provide some ideas of what the answers could be. In addition to finding new ways to deal with the environmental impact of their real estate footprint, normally estimated to contribute up to 60% of a retailer's total emissions, Green Pea educates their customers by openly sharing simplified, but brutally honest, information about their own consumption impact.

The head-scratching has just started

The unprecedented collaboration between companies does not overcome the fact that there is not a one-size-fits-all solution for all department stores, as their customers and markets are by nature extremely different. As a consequence, the sustainable journey is a collaborative and solitary trip at the same time. In addition, each department store must figure out how to deal with problems that come on top of environmental issues and that are linked to their own social contexts, such as diversity and inclusion.

This raises questions on what to communicate and how, and above all, on what platform. The comparison of actions in 2020 and 2022 showed that department stores, always attentive not to be accused of greenwashing, also discovered that umbrella concept consistency across channels (stores, e-commerce) and partners (suppliers and brands) was necessary, but also that messages had to be adapted in each case to maximise reach and clarity.

The other question is the nature of the organisations guiding sustainability efforts. There is a wide variety of options, from a Chief Sustainability Officer to a dedicated ESG committee, also including partnerships with third parties or responsibilities dispatched between departments. Whatever the chosen option, leaders will have to be careful not to add an extra layer of complexity to their organisations, as has been the case in department stores in the past.

Finally, the most pressing topic is obviously the business itself and how to make sure that sustainable efforts are not an additional financial weight, but, on the contrary, contribute to new revenue flows thanks to the necessary reinvention of the model. While it is relatively easy for new companies such as Green Pea to propose innovative approaches, the situation is different for heritage companies, as they must be creative to into addressing the future in a sound financial manner.

Don't judge a book by its cover: sustainability is not a constraint, but a chance to be seized fast

Even though addressing sustainability might be painful, costly, and even hazardous, retailers do not have the choice and must follow the trend if they want to survive. Just like for digital transformation, they need to start their journey as soon as possible, as passing time is definitively lost and could rapidly become a competitive disadvantage. In addition, they should not be troubled about not having a perfect plan: the most important thing is to get started, and then the learning process will take place bit by bit in a non-linear progression. We identify two phases in the approach, the short-term one being to fully focus on the sustainable transformation of the supply chain, as the needed technology is already here, and the longer one being to increase collaboration between retailers to accelerate the pace of innovation. This is proof, if needed, of the relevance of collaboration groups and think tanks such as the IADS, which has been actively helping its members since 1928 address the most pressing business issues.

White Paper: Reinventing department stores through sustainability - IADS Press Release (English)

livre blanc: Le developpement durable pour réinventer les grands magasins - IADS Communiqué de Presse (Français)

Buy the white paper (in english) here

Acheter le livre blanc (en francais) ici

To help its members in their digital transformation processes and give them access to the latest technologies, the IADS signs a strategic partnership with The Retail Hub, the only innovation platform dedicated to retail in the world.

Digitalization is reshaping department stores on the front line (smart stores, e-commerce, omnichannel capabilities…) and behind the scenes (supply chain optimization, smart sourcing, advanced demand prediction capabilities…). This often involves a significant tech upgrade of heritage systems. In addition, system evolutions are more often a human question than a tech one. To support department stores in their upskilling processes and provide them support in tech sourcing, a strategic partnership has been concluded with the innovation platform Retail Hub. This synergy will provide IADS members exclusive benefits, in addition to confirming the unique status of the IADS in the world of retail associations.

Initiated in 2020, the transformative upgrade of the IADS is now taking a new dimension with the partnership signed with The Retail Hub, to provide department store members with a competitive advantage in terms of tech identification and sourcing.

According to McKinsey, on more than 100 advanced analytics use cases, 10 (including category management and supply chain management) account for 80% of the potential gains in the value chain. Even though the transformation has begun, it is expected that the pace of changes will accelerate with the maturity of new technologies (automation, advanced analytics, artificial intelligence, among others). Department stores must identify the right suppliers to harness the potential productivity gains such technologies could bring.

To support them, The Retail Hub is the ideal partner for the IADS, as its team of experts continuously source, stress-test and list every innovative company in the retail vertical, covering 26 different sectors, 10 groups of technologies, through more than 2,500 identified start-ups.

In addition to granting access to the Retail Hub's exclusive features, both IADS and The Retail Hub teams will be working together to provide department store members an exclusive made-to-measure support, answering a growing need and helping them to save time. Since November 2020, IADS members can ask operational questions to the Association, as a result, questions related to systems and tech suppliers represented 10% of the IADS activity in 2022, doubling from 5% in 2021.

The Retail Hub partnership comes as the latest element completing a one-of-a-kind palette of services that makes the IADS truly stand apart in the world of global retail associations.

IADS Press Release: IADS' Partnership with The Retail Hub (English)

IADS - Communiqué de presse - Partenariat Retail Hub (Français)

The IADS contributed to this issue with an article on the acceleration and uncertainty in the latest World Retail Congress 2022 end of year issue. The report brings together retail experts from around the world to share trends from 2022  that are continuing in 2023. You will also find beautiful Christmas window displays from IADS members in the issue.

Read the report below.

IADS contributes to WRC's Retail World 2022 issue

To provide its department store members a leading edge in brand discovery and curation, the IADS signs a strategic partnership with The Style Pulse, a B2B platform operated by Lambert+Associates.

The IADS regularly takes stock of retail trends through a series of product category workshops organised with its members' buying teams. To further support department stores in their offer curation, a strategic partnership has been established with The Style Pulse, providing IADS members exclusive access to the best independent labels, and confirming the unique status of the IADS in the world of retail associations.

Initiated in 2020, the transformative upgrade of the IADS is now taking a new dimension through the partnership signed with Lambert+Associates and their digital venture, The Style Pulse, to provide department store members with a competitive advantage in terms of brand sourcing and merchandising insights.

Department stores' ability to identify emerging labels is more crucial now than ever to better serve information-rich customers who are hungry for the latest trends and are able to scout every sales channel. The Style Pulse, with its international reach, expert team, and close relationship with brands, is the perfect hub to provide IADS members with a rich, efficient and time-saving solution to help them focus on curation and uniqueness. The six categories covered by The Style Pulse (Women Fashion, Accessories, Men Fashion, Lifestyle, Beauty and soon Kids) represent the core department store businesses and the information provided will prove invaluable to the category buyers, enabling them to closely follow the trends.

In addition to granting access to the "Style Pulse Pro" exclusive features to IADS members, both IADS and The Style Pulse teams will be working together to provide department store members exclusive made-to-measure support, answering a growing need. Since November 2020, IADS members can ask operational questions to the Association, and as a result brand-related requests represented 25% of the IADS activity in 2022, up from 12% in 2021.

The Style Pulse partnership comes as the latest element completing a one-of-a-kind palette of services that makes the IADS truly stand apart in the world of global retail associations.

IADS Press Release: The IADS teams up with The Style Pulse (Lambert+Associates) (English)

IADS Communiqué de presse: Partenariat Style Pulse (Français)

Mind Retail wrote an article based on Selvane Mohandas du Ménil's findings on how London will be affected by the cancellation of the VAT-free shopping scheme in the UK. Mulberry shared that international customers, who used to represent 45 to 50% of sales in Bond Street, now account for 5%. The brand's sales in the UK fell -10% for the past 6 months, while in locked-down China they are up +6%. At Selfridges, the scene was filled with shopping bags, suggesting tat for department stores, local customers are definitively a must-have.

Read the article in French below:

Mind Retail covers IADS member's findings on the cancellation of VAT free shopping in the UK

Ghalia Boustani invited Christine Montard to reveal details about the universe of department stores and their current status in the retail environment. During the exchange, Christine shared the place of department stores in an omnichannel context, how department stores have adapted during current retail challenges, the opportunities and threats of the store format, and the experience of customers in department stores.

Watch the video below:

Ghalia Boustani interviews IADS member about department stores' current status in the retail environment

Business News has written an article based on IADS findings on the role of technology in retail and the enhancement of online and offline experiences. For example, in Turkey there is a store that can deliver any of its products to any part of the country within 90'.

Read the article below:

Business News Article 

The Power Game has written an article based on IADS' participation in the Prodexpo fair in Athens. They talk about the role of technology in retail and the enhancement of online and offline experiences. Department stores have been in a permanent crisis for the last two years due to the pandemic and have used the new technology to have their sales exceed pre-Covid levels.

Read the article below:

The Power Game Article (Greek)

Fashion Network has written an article based on IADS findings about how the men's fashion offer is undergoing several transformations that department stores must integrate. Casual wear is still on the rise, but we are also seeing the return of a reinvented formal style, and sportswear is making its way into men's fashion spaces more than ever, while non-gendered fashion corners are a new key to attracting Generation Z.

Read the article in French below:

Fashion Network Article (French)

InsideRetail has written an article based on IADS findings about how department stores are refocusing their menswear offer. Department stores are now having to balance meeting consumer demand for the long-lasting casualwear trend with the revival of occasion wear in the post-pandemic market.

Read the article in English below:

InsideRetail Article (English)