Men's Fashion, which successfully recovered from the pandemic, even leading to the reshape of in-store layouts, will need a necessary improvement of the way the category is marketed to its customers, to fuel additional growth.

The IADS and NellyRodi regularly take stock of the retail trends through a series of product category workshops. Their last one was dedicated to Men's Fashion: overall back to pre-pandemic levels, the category is quickly evolving post-Covid leading to many innovations on the point of sale. The potential is high, the category has to find efficient ways to catch over-solicited consumers' attention.

The Covid-19 pandemic and its gradual disappearance has translated into a V-shaped trajectory for the Men's Fashion category in department stores. While sales first decreased in 2020, they picked up back as soon as 2021 to their pre-pandemic levels, reaching on average 14% of the total business. When it comes to online sales, which were favored during the lockdowns, and even though they tend to decrease with life going back to normal, they on average doubled in the pace of two years, from 3% of total sales in 2019 to 6% in 2021.

Department stores are currently adjusting their product offer to both match the long-lasting casualwear trend and the occasion wear revival. In parallel, they are also reinventing their store layout to include the new emerging trends such as genderless fashion. Interestingly, to harness future growth, retailers are aware that the category faces a marketing challenge as they cannot rely on social media to catch male consumers' attention.

Casualwear dominates sales, but occasion and workwear are picking up with life going back to normal

While the price segmentation was relatively stable between 2020 and 2021 - the High Street segment remained the most important with a 44% business share on average, the Premium segment accounted for 28%, luxury represented 13%, and the Entry Level was 15%-, casualwear was still the force driving the category in department stores, representing 59% of the category sales in 2021.

In parallel, with weddings resuming, occasion wear picked up to 9% of the business in 2021, a trend expected to continue at least during the fall-winter 2022-23 season. But this comes with issues as many brands are still facing supply chain issues: as a result, many products are sold out, this translates into missed opportunities to face the strong demand on some markets, especially at Breuninger and Magasin du Nord.

When it comes to workwear, this category accounted for 18% of sales on average in 2021. With people starting to return to the office, products such as jackets are selling very well at El Corte Inglés, and semi-formal styles are increasingly selling, especially at Sogo in Hong Kong.

NellyRodi presented its exclusive selection of up-and-coming brands illustrating the importance of casualwear and the rebirth of more formal options:

• New designers and emerging talents: Botter, Hed Mayner, Henrik Vibskov, Soulland, S.S Daley, Iso Poetism, M Works.

• Casual and streetwear: Frame, Drôle de Monsieur, Holzweiler, Sunflower, Uniforme, Palmes Society, Davi, Ouest Paris, Neighborhood, JJJound, Staple, Richardson, Raeburn, Ranra.

• Formal: Sillage, Berner Kühl, Sapio.

Sportswear, multi-brand sections, genderless fashion, second-hand: Men's Fashion store layout is evolving

Including some sportswear in the Men's Fashion section currently represents a safe bet for department stores. Depending on the market, it can be high performance golf products at Sogo, or outdoor tech products at **Magasin

du Nord**. Overall, such products represented 8% of the Men's Fashion business in 2021. While the lines are blurring between sports and fashion, this also questions the store layout.

And there is more: as for womenswear, multi-brand areas gathering more confidential brands are developing as a way to differentiate from competitors and to give more flare to the product offer. But this comes with a profitability per sqm issue: layout arbitrations are necessary to increase the efficiency of such sections mainly relying on a few fashion-forward customers. Galeries Lafayette answered the question by developing lifestyle multi-brand spaces changing according to seasons (swim, outdoor…), allowing the mix of small and more established brands.

Depending on markets, offering a genderless product offer becomes increasingly important to catch GenZ consumers' attention: finding the most adequate part of the shop floor (men or women?) for such products remains a question mark. Second-hand fashion will soon develop in the menswear department, also requiring layout adjustments.

Men's Fashion has a marketing problem that social media will not solve

Catching male consumers' attention is not easy as they do not spend as much time scrolling as female consumers do. For instance, 80% of Breuninger's Instagram account followers are female. To get around this issue, department stores are creating sport-related in-store events to catch male customers' attention: this also fits post-Covid cravings for live interactions. That is the case with Beco and Magasin du Nord, whether it is a biking or golf collaborations offering matching father and son products.

Surprisingly enough, events relating to the football world championship starting November 2022 will be mostly lowkey in department stores, sometimes only affecting the electronics department. Some retailers will not even celebrate the event as it is the case with Breuninger. Only Magasin du Nord will play the football card with pop-up stores and screens to watch the competition.

Men's Fashion is a steady category and should adjust to new trends to grow

The casualization trend, far from being over, profoundly reshaped Men's Fashion in all price segments. In parallel, buying teams now have to deal with a significant spike in occasion wear thanks to ceremonies resuming. Overall, boundaries between lifestyles tend to blur with a part of sportswear sometimes included in menswear, and workwear being more relaxed.

Department stores also question the store layout to take into considerations categories blurring as well as new trends. Marketing represents a challenge as retailers cannot really rely on social media to attract consumers. In-store events are a fair option: whether they are sport-related or not, creating 'moments" and experiences work their magic to answer consumers' need for human interactions.

IADS Press Release: Men's Fashion has high potential post pandemic (English)

Communique de Presse Mode Homme (Français)

FashionUnited has written an article based on IADS findings about department stores needing to strengthen their environmental commitments. The article highlights the necessity to take immediate action, CSR and ESG going hand-in-hand, and the execution of a successful stratgey.

Read the article in English and French below:

FashionUnited Article (English)

FashionUnited Article (French)

Fashion Network has written an article based on IADS' press release reporting the results of its CSR meeting. The article titled "Department stores facing growing CSR challenges" reveals key findings and trends that are highlighted following a meeting gathering the CSR directors of the member stores.

Read the article in French below:

Fashion Network Article (French)

Climate change and department stores: now that the more elementary steps have been taken, the growing accountability to more parties, the increasing complexity of the topic and the remaining questions to solve force retailers to learn how to navigate the

Climate change became very tangible this summer. Actively taking the right measures to reduce their footprint is no longer a question of choice for retailers, but speed of execution. This is not simple: now that Corporate Social Responsibility (CSR) became intertwined with the financial requirements embedded in the Environmental, Social and Governance metrics (ESG), strategies are becoming increasingly complex to design and execute. In addition, reducing emissions turns into a headache now that the easier steps were already taken in the past years. The upside is that this situation creates a perfect context for a more open dialogue with and between every retailers' stakeholders, both for transparency reasons and financial attractivity. IADS recently took stock of its members' initiatives when it came to addressing these topics.

Initially, Corporate Social Responsibility (CSR) was the framework for retailers' first actions. When investors began to require trackable metrics, Environmental, Social and Governance (ESG) emerged with a financial standpoint to make business efforts measurable and provide quantitative results. These measurements are now also demanded by other stakeholders (employees and customers). However, ESG does not replace CSR: the latter, less measurable, continues to coexist as it can be used to build ESG measurable strategies, and adds value in the eyes of consumers.

As a result, for now, CSR and ESG represent the two sides of a necessity companies must deal with: CSR guides ESG strategy, and ESG measures the efficiency of CSR goals. Depending on how advanced they are, retailers are pursuing intertwined actions in both areas, but the challenge is to define a relevant long-term strategy in order to cope with many issues, for example, Scope 3 emissions and the associated regulations, social concerns, and governance.

In defining the adequate CSR strategy, retailers have to learn how to run fast, but one step at a time.

Knowing where to start is hard, and all IADS members agreed that top-down decision-making and execution cannot work for CSR: the most crucial (and delicate!) pre-requisite is to involve all stakeholders into defining and prioritizing CSR actions. The success of a strategy depends on the adherence of the whole company, from sales floor, distribution centres, to top management and investors, not an easy feat in complex organisations such as department stores. Endurance and persuasive power are therefore necessary: CSR requires all departments to be aligned and teams to be upskilled.

Listening also means involving people from outside of the company:

-    Conducting a materiality assessment is key and has proven to be more efficient with external consultants. Collaborating with NGOs (Oxfam, UNICEF, WWF, Red Cross, Sustainable Apparel Coalition...), trade unions, and industry and consumer organisations, helps learning what is relevant and which objective to prioritize, while also building trust and dialogue with such organisations in the long-term.

-    When it comes to suppliers, exchanging with fashion companies and other retailers helps as progress can't be made alone. Audits run by external organisations, such as Amfori, can be also shared.

-    Retailers also use the UN Sustainable Development Goals 17-point framework to build their actions, with a focus on recommendations referring to health and well-being, gender equality, reduced inequalities, sustainable cities, responsible consumption and production, climate action, peace and justice.

Occasionally, retailers will enter the CSR topic in an intuitive manner, and then build a strategy out of it. For instance, Galeries Lafayette created a dedicated department in 2012, which issued their first sustainable strategy in 2013, leading to the Go for Good label creation in 2018 in partnership with more than 500 brands. Breuninger started by internally publishing a CSR mission statement in 2019. Magasin du Nord used private labels as a starting point, then appointed an internal task force before entering the materiality assessment and strategy-building phases.

Communicating on CSR efforts is essential, but raises many questions. Expected to influence their customers' behaviour to purchase more responsibility while at the same time avoiding being accused of greenwashing, IADS members strive for a humble and honest communication, knowing they have to fight their stakeholders' wariness:

-    Towards customers: with Go for Good, Galeries Lafayette has been cautious to find the right balance between providing precise information and being simple, catchy and inspirational for both local and international customers, through a dedicated website.

-    Towards employees and partners: Breuninger created a dedicated video only available on their corporate website, to show the direction the company is taking.

Finally, omnichannel adds another layer of difficulties: CSR messages have to be both conveyed in stores and online, with consistent umbrella concepts adapted to all sales channels, which is an urgent challenge with e-commerce growing fast.

Lowering emissions: progress is increasingly difficult as supply chain is now under scrutiny

Covering direct and a part of indirect emissions, Scope 1 (company facilities and vehicles) and Scope 2 (purchases of electricity, steam, heating and cooling) are easier to control, and were the first steps taken by department stores, in regard to energy consumption and transport. 87% of El Palacio de Hierro's energy consumption comes from renewable sources, and the logistics fleet is now 100% clean. Compared to 2017, El Corte Inglés has reduced its Scope 2 emissions by 78% and plans to achieve zero emissions by 2050.

The story gets more complex when it comes to Scope 3 emissions (all other indirect emissions from the value chain, both downstream and upstream, a tricky issue for retailers selling a wide variety of products including their own), which represents 90-95% of department stores' total emissions:

-    Scope 3 upstream emissions are their suppliers' Scope 1 emissions, requiring retailers to be able to retrieve information from a wide variety of suppliers with different standards, thanks to tools such as the Higg Index,

-    Scope 3 downstream emissions include for instance reducing the amount of packaging, both internal and customer-facing. El Corte Inglés and Magasin du Nord are testing new packaging methods to remove internal plastics while ensuring perfect delivery and unpacking by sales associates. At the customer level, Galeries Lafayette has launched a circular packaging initiative with Hipli.

Collaborations and exchanges between retailers helps, but they are limited by the variety and complexity of national regulations, meaning there is not a single fit-for-all strategy, and also that by nature, all strategies will evolve over time.

It's not only about emissions: don't forget Social and Governance!

Social responsibility should not be overlooked, as shown by El Corte Inglés, which set actions in gender equality, harassment, LGBT diversity, health campaigns, and social and labour inclusion, or Galeries Lafayette, which promotes diversity, with the gender equality index at 94/100 and the share of disabled persons at 7.75%. In addition, there are regional and cultural differences: for instance, El Palacio de Hierro started the process by working on its social aspects more than on sustainability.

When it comes to governance, the question is not if ESG factors will affect credit ratings, but how. In order to be ready for the upcoming non-financial ratings (knowing that investors demand targets that are measurable, ambitious and aligned with the company's strategy) retailers work with non-financial rating agencies (Fitch Ratings, Dow Jones Sustainability Indexes…) in order to provide the financial community the maximum transparency possible. This is even more crucial now that loans can be linked to the achievement of sustainability targets. Retailers are forced to succeed as they will be fined if their commitments fall through. In such circumstances, reporting and KPIs are critical, they impact the whole organisation: it is a common practice to incentivize top executives on sustainable parameters.

Retailers have been struggling to design the right strategy and priorities. As their geographical and socio-political situations are different, IADS members' progress in implementing CSR and ESG strategies vastly differ from one another, from heavily-regulated European ones to countries with less obligations.

Involving all stakeholders in the strategy process is absolutely key as it encourages unprecedented exchanges with others (retailers, coalitions and NGOs) to get help on guidance and decision-making, especially regarding Scope 3 emissions. They have no choice: the scrutiny by the financial community shows that the topic is not a trend, but a major factor in the department store business strategy. Even though there is no international standard way to achieve sustainability objectives, actions related to climate change, diversity, inclusion, and socially responsible corporate governance are driving value-oriented investment. As a result, the usage of ESG criteria to determine which companies they invest in is growing, especially among Millennials.

IADS Press release: Climate change and department stores (English)

Communiqué de presse de catégorie: RSE et grands magasins (Français)

La Conceria posted about the findings from the study on the world of fashion malls conducted by IADS. The article talks about the weight of an accessory, finding the right mix in leather goods, and the interest of younger consumers.

Read the article below:

3 key things to know about the trend of accessories in departement stores (Italien)

Fashion Network has written an article based on IADS' press release reporting the results of its Leather Goods & Shoes meeting. The article titled "Shoes and leather goods: the right mix of niche labels and established brands, a challenge for department stores" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

Fashion Network Article (French)

Fashion Network Article (German) 

IADS press release - Leather Goods & Shoes

While Shoes are recovering faster than Leather Goods from Covid, two trends are being observed: logos for locals, and the need to balance niche and blockbuster brands.

The IADS and NellyRodi regularly take stock of retail trends through a series of product category workshops. Their last one was dedicated to Leather Goods & Shoes categories, a key category for retailers. It is all about attracting local customers via a renewed brand mix, special services or partnerships, and the ability to react quickly.

Greatly suffering from lockdowns, the Leather Goods category saw its share of the total business slump from 10% in 2019 to 8% in 2021. Even though e-commerce sales tripled in the same period from 2% to 6% of the category business, it did not help compensate for the business lost due to the lack of touristic clientele in department stores. However, the luxury segment (including the affordable luxury offer) remained the biggest segment in 2021, with 36% of the sales, followed by the mid-range price point products (33%).

On the contrary, the Shoe category resisted better during the pandemic and remained at the same level in 2019 and 2021 (6% of the total business), even noting a slight increase in 2020. Similar to the Leather Goods category, e-commerce sales increased, doubling from 5% in 2019 to 10% of the category business in 2021. Luxury products were less important in terms of share of the business for this category, since the majority of the business was done with the mid-range segment (55%), the luxury segment being second with 23% of the total category business.

The challenges department stores are facing are mainly related to the business and traffic decrease. In such circumstances, their strategic priorities revolve around attracting more local customers, especially the younger generations. To that end, finding the right brand mix and matching new consumer trends is key, which, in the case of Leather Goods, is not easy given the weight of the global and well-established brands.

Leather goods: looking for the right balance between volume-driving and niche brands

Since there is not much brand renewal in the Leather Goods department, especially for Mid-Range and Premium brands able to generate large volumes (such as Michael Kors once did), local brands offer an interesting option to draw local customers' attention, especially in terms of price point and at a time when tourism hasn't fully resumed.

But introducing new or niche brands is a challenge for department stores as they are usually hardly profitable. Still, they are necessary to enhance the overall store offer, balanced with the usual players known by everyone and help the store differentiate from competitors. To be more efficient, department stores tend to gather niche brands in multi-brand areas, mixing them with other product categories (shoes, ready-to-wear and other accessories), such as the Le Labo space at Galeries Lafayette.

Another option to differentiate is to team up directly with brands to present exclusive products, such as the collaboration between El Palacio de Hierro and Versace, presented in dedicated popup spaces.

NellyRodi presented its exclusive selection of up-and-coming brands in the category: Yuzefi, Destree, My Style Bag, Medea, RSVP, Bonastre, Audette, Camille Vost, Michino, Ozias, Talel Paris, Studio Reco, Aswad, Aesther Ekme, Verwicht.

Shoes: sneakers and show-off are the new normal

In terms of trends, casual is still key in the Shoe department, with the sneakers category driving the business. But this trend also brings issues with Nike and Adidas withdrawing from department stores to fulfil their Direct to Customer strategies. Besides, department stores usually do not have access to the most attractive styles. In such circumstances, they have to find replacements: Asics, New Balance, Veja and On Running are listed as successful or promising brands. An interesting option could also be to partner with third-party vendors selling top-tier and collectible sneakers: this is what Manor is currently doing with local partner HideOut. In addition, such an initiative also represents a great opportunity to attract Gen Z consumers.

In parallel, as people are going out again, they are more prone to show off by wearing styles bearing logos. NellyRodi witnessed that the demand for such products is supported by local consumption and growing +8% compared to 2019. In the logical continuity, it is expected that occasion pieces will also rise as customers are eager to dress up again.

NellyRodi presented its exclusive selection of up-and-coming brands in the category: Miista, Hereu, Reike Nen, Rombaut, Claris Virot, Vibi Venezia, Viron, Jacques Soloviere, Yume Yume, Ilio Smeraldo, O.T.A, Moea, Tabitah Ringwood, Umoja, MLLN.

New customer's needs, adapted answers

With Covid, consumers got used to shopping distantly with the help of personal shoppers. Such a new habit is still flourishing now and the turnover generated by personal shopping continues to grow: for instance, El Palacio de Hierro more than doubled this business, while also making the store more appealing thanks to this service. It is also a way to compensate for the increased competition from both lower price point pure players (such as Farfetch) and the growing direct-to-customers online activity from larger luxury brands.

Interestingly, for these categories, sustainability is not a marketing argument to GenZ customers: for bags and shoes, the demand for sustainable products is still small, and not coming from the younger generation, but from the 25-to-35 year-old customers.

When it comes to the price point, leading in most cases to the private label business, most department stores are greatly suffering from supply chain disruptions. On top of the costs increase in raw materials and transportation, and the longer delivery delays, they are now facing additional woes due to the recent lockdowns in China. As a result, they are looking for alternatives to China for the production of private label products.

For both categories, the light at the end of the tunnel is close, but stores are not there yet

To increase the Leather Goods and Shoe business and draw more traffic in-store, finding the right brand mix able to generate high volumes and balance niche and big brands remains a head-scratcher for buyers. Department stores are also dealing with new trends induced by Covid: the sneakers trend is still very strong and more brands are needed to answer consumers' appetite.

While Covid is not over and is still a source of concern, its consequences are still very much impacting the business: the supply chain disruptions represent a threat to the business, whether it's about the costs increase, the delivery delays and the stock availability. The war in Ukraine only adds uncertainties and concerns.

IADS Press release: Leather Goods & Shoes category (English)

Communiqué de presse de catégorie: Maroquinerie et Chaussures (Français)

What: International retail press asks for IADS' opinion on the plan for expansion to come in the fall.

Why it is important: Printemps Doha, which marks the French group's return abroad, opens this fall in Qatar, a year late and with the challenge of establishing itself in a promising but competitive region.

The store is located in the renovated historic center of the capital, in the heart of a brand new complex that includes a five-star hotel and an amusement park. Its 40,000 square meters on three floors makes it the group's second largest store, after the flagship on Boulevard Haussmann in Paris.

Announced in May 2019, the opening was part of an expansion strategy that calls for five to 10 stores to open abroad by 2030.

In France, the Covid-19 crisis has deprived Printemps of its foreign clientele and the brand has scaled back, closing three Printemps stores. Nevertheless, as for Galeries Lafayette already established in Qatar, "an international expansion strategy does not seem out of place", says Selvane Mohandas du Ménil, of the International Association of Department Stores, IADS.

IADS quoted about the expansion of Printemps Doha in Qatar (in French)

IADS QUOTED ABOUT THE EXPANSION OF PRINTEMPS DOHA IN QATAR (IN FRENCH)

Fashion Network has written an article based on IADS' press release reporting the results of its Women's Fashion meeting. The article titled "Women's fashion: how have department stores adapted since the crisis?" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

Fashion Network Article (French)

IADS press release - Women's Fashion

Women's Fashion in department stores: forget about Covid, and deal with consumers' contradictive expectations and habits.

The IADS and NellyRodi regularly take stock of retail trends through a series of product category workshops. Their last one was dedicated to Women's Fashion. Strategies are being reviewed and streamlined, in order to attract the younger generations. The main challenge remains in the ability to address their wide expectations while remaining profitable.

The Women's Fashion category represented on average 16% of the total 2021 turnover for the IADS members, down from 17% in 2019. However, it was noted that there was no unified pattern among all department stores globally: while some saw the share of sales decreased due to the Covid pandemic, others saw a steep increase. This is directly linked with their uneven situation when it comes to e-commerce, with some retailers lagging behind with a 1% share of business made digitally, while best in class have reached up to a share of 69%. However, the progression of e-commerce for the category is clear overall: while it only represented 10% of the business in 2019, digital sales were up to 17% of sales in 2021.

In terms of price positioning, the Mid-range segment remained the most important in 2021 and accounted for 52% of the total Women's Fashion turnover, reflecting the department stores' wide customer base especially in a period where tourists, usual contributors of luxury goods shopping, were scarce. This is also why Premium and the Entry Level segments accounted respectively for 25% and 14% of the total sales, while Luxury (including affordable luxury brands) represented only 8% of the sales. This polarization was also explained by a shift in terms of usage back in 2021: with limited social events, casual wear was still the biggest segment in 2021 even though it decreased from 63% in 2020 to 52% of sales.

In 2021, department stores' challenges and strategic priorities were all about matching their offer segmentation to consumers' expectations while also securing a healthier business to recuperate losses made in 2020.

Simplify the segmentation and become less addicted to discounted sales

It is all about matching the new consumers' habits. Customers are shopping fast fashion, Direct-to-Customer brands, and on e-commerce and luxury resale websites, therefore retailers find it increasingly difficult to anticipate their needs. This is especially the case in exceptional contexts (Covid pandemic for 2 years, and now an increasingly uncertain world) which also impact consumers' optimism. As a result, the brand matrixes used by retailers so far to organise the offer and present it in their stores (online and offline) are outdated as the usual "boxes" to fill are too numerous and too tight for versatile customers. The evolution towards a simpler brand matrix allows department stores to be better equipped for the new sales floor reality (for both customers and sales staff), including e-commerce.

This brand matrix renewal is also seen as a way to reduce the need for discounts. Since the offer is deemed to be more granular and closer to customers' expectations, their experience is improved and chances are that their purchases are less based on the search for a good deal and more on the perfect encounter with the right product. This is enhanced by the fact that retailers are also reducing their initial purchases, creating an effect of scarcity and preventing customers from waiting for end-of-season discounts. Last but not least, department stores are also increasingly teaming up with brands to improve their sales efficiency. For instance, they swap worst-sellers for best-seller products in season, or organise more product training sessions with brands to make sure their sales associates feel fully confident.

The key to younger customers' hearts? Great brands, metaverse and sustainability

Appealing to GenZ is quite a challenge, as they do not follow many brands outside of the fast fashion sphere (from Shein to Zalando). Consequently, building the right assortment and space can be tricky (how to find the right brands?) and can even slip into creating a contemporary fashion offer, far from being the strong differentiation point every retailer is looking for. In order to overcome this difficulty, there are some options:

• Harness the metaverse opportunities, especially by using Non-Fungible Tokens as an incentive. Manor in Switzerland for instance is planning to launch NFTs which will grant customers early access to collections and products in exclusivity,
• Deal with sustainability expectations, by opening second-hand spaces in stores (Breuninger, Galeries Lafayette). However, this raises new questions, the first being the profitability of such a business, and the second being the relationship with brands. The equation is difficult to solve: the highest second-hand product margins come from luxury brands such as Chanel, Louis Vuitton and Dior. But these brands deny department stores the right to sell cheaper second-hand products as they see them as competition to their full-margin business in the same store. In the mid-range, this issue could question the very purpose of the second-hand business.

However, the most difficult part is really dealing with opposite trends in the category. While casual wear is still dominating, dressy styles are growing extremely fast especially in markets where Covid is a long gone memory (at Magasin du Nord in Denmark, customers are eager to invest in themselves and their wardrobes). As a consequence, there is a strong polarization and a clear gap between either basic items or strong fashion statement styles, which obviously creates angst within retailers about being able to spot the right statement pieces.

NellyRodi presented its exclusive selection of up-and-coming brands in the category:

• DNVBs: Salut Beaute, Mirae, Chufy, Never fully dressed,
• Contemporary Brands: Shrimps, Icicle, Facon Jacmin, Ester Manas, Lvir, Private Policy, Knwls, Meryll Rogge, Kwaidan Editions, Nensi Dojaka,
• New Young Talent: Roisin Pierce, Supriya Lele, Weinsanto, Celine Kwan, Heliot Emil,
• Other Segments: Sporty & Rich, Else, Athleta.

Women's Fashion is going through a reinvention when it comes to what customers want, and retailers are learning to live with a permanent uncertainty

Brand matrix revamps towards simplification is an illustration of the Women's Fashion department answering to consumers' new shopping habits. Strategies are also about finding ways to rely less on discounts. In a state of permanent evolution and constant challenges, the product and brand offer will include more second-hand products even if the economic equation remains to be solved, with the hope to draw GenZ customers' attention.

In parallel, and adding up to the tension on margins, while Covid is not over, its consequences on the supply chain seem to be here to stay. Most members are greatly suffering from price increases in raw materials and transportation, and also from longer delivery delays. Increasing retail prices is an option on the table but it is difficult to predict how customers will react to this.

The recent uncertainties caused by the war in Ukraine are also piling up, adding sources of concern for department stores, as some customers don't feel like shopping at the moment. Most European department stores have a pessimistic outlook for Q2 and Christmas 2022, even if they are currently selling extremely well. Post-Covid confidence didn't last long and feels a waning feeling.

IADS Press release: Women's Fashion category (English)

Communiqué de presse de catégorie: Mode Feminine (Français)

IADS' Selvane Mohandas du Ménil participated in the IESE event and was interviewed on stage with Dimosthenis Boumis, CEO of Attica on the topic of "The Department Store is here to stay".

Read the article below:

Notice Greece BnB Daily Article (Greek)

BeautyNury has written an article based on IADS' press release reporting the results of its Cosmetics & Beauty meeting. The article titled "Cosmetics accounted for 13% of global department store sales last year" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

BeautyNury Article (Korean)

IADS press release - Cosmetics & Beauty

Fashion Network has written an article based on IADS' press release reporting the results of its Cosmetics & Beauty meeting. The article titled "The beauty world, a growth driver for department stores" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

Fashion Network Article (French)

IADS press release - Cosmetics & Beauty

In 2021, the Cosmetics & Beauty business blossomed to new heights in department stores, mainly thanks to luxury and premium brands, as well as the care segment.

The IADS and NellyRodi regularly take stock of the retail trends through a series of product category workshops. Their last one was dedicated to the Cosmetics & Beauty category. The business is vibrant, and retailers are focused on dynamizing their product offer, onboarding exclusive brands and products, and developing digital features.

In 2021 and in parallel to Covid-19 starting to withdraw, the Cosmetics & Beauty business increased its share out of the total sales level in department stores, from 11% before the pandemic in 2019, to 13%. Customers also increasingly bought their products online: 13% of the total category business was made online, more than doubling the sales of this channel when compared to 2019.

Product categories have shifted when compared to the pre-pandemic period: skincare was the most important one, showing the strength of the "care" trend and the persistence of the need for customers to take care of themselves. Fragrances slightly increased sales. Due to the continuation of Covid-19-related constraints in 2021 and the obligation to wear masks in several countries, make-up did not recover to pre-Covid levels.

In terms of pricing, luxury brands took the lion's share, with 43% of the total business, followed by the premium segment (30%). Prestige and Mass Market segments each accounted for 13%, and a new price segment appeared, even though it remained small: Ultra-accessible prices (1% of the business). It shows that the price stretches increased when compared to last year, from very high to ultra-low values. This unprecedented price bandwidth is expected to be an asset in the 2022 context of the expected inflation and the rising cost of living.

However, this price stretch, combined with an increased number of Direct to Consumer brands and the predominance of specialized groups (such as Sephora) implies that in order to retain their position in an increasingly competitive market, department stores have to work on their differentiation. This goes through a renewal of their product and brand assortments, the maximization of their digital capabilities, and finding an alternative to price promotions, in order to also protect their margin levels.

The assortment challenge, or the race to find the right balance between larger and emerging brands

This point is a key component of the Cosmetics & Beauty business. While partnering with bigger brands comes with its own challenges, onboarding new ones can be a struggle as it is more difficult to find new brands not partnering with specialized groups. Therefore, some IADS members such as Magasin du Nord overcame the problem by inking partnerships with Sephora and using it as a brand provider.

Another way to address the brand and assortment question is to dynamically develop new segments and categories, based on what is trending (care, fragrances):

• Dermo-cosmetics: when displayed in a 'medical' atmosphere, these products, perceived as safer, allow at the same time to increase the average basket size, and encourage customers to switch from mass-market brands. Manor rolled over 10 "Derma Centres" in partnership with L'Oreal across Switzerland.
• Men's cosmetics and hair care are attracting attention from younger generations and driving traffic, which is why El Corte Inglés is designing and crafting new spaces, products, appliances and services for these categories.
• Alternative fragrances are identified as an opportunity for growth, leading El Palacio de Hierro to focus on niche perfumes.

Across the board, sustainability remains a strategic priority with a focus on clean and vegan brands presented in dedicated multi-brand areas. Interestingly, the price point does not seem to be an issue for customers so far.

NellyRodi presented its exclusive selection of up-and-coming brands in the category:

• Skincare: Eadem, Peach & Lily, Inde Wild, Youth to the People, La Rosee, Ouate, TiL, L:A Bruket,  Laboté, Pleasing, Cosmic Dealer, Horace, Temple.
• Makeup: Alleyoop, Martine Cosmetics, Pat McGrath, Claropsyche, Axiology, Dries Van Noten, Yolaine, Westman Atelier, Boy de Chanel, War Paint, Mattias.
• Haircare: Cut by Fred, Pattern, Baby Tress, Sachajuan, Gisou, Act + Acre.
• Perfume: Vilhem, Colekt, Carlotha Ray, D'Orsay, Matière Première.
• Other categories: Holidermie, Les Miraculeux, Evolution Botanicals, Hygee, D+ for Care, Lightinderm, Solaris Labs.

Beauty becomes digital: new features for an increasingly popular sales channel

Covid has accelerated the digitalisation of the business, which raised questions about how to enable customers to test and sample products. While brands' apps offer new AR/VR technologies to test products and make diagnoses, El Palacio de Hierro developed a "magic mirror" on its website providing customers with recommendations: this digital feature highly contributes to the growth of the conversion rate.

When it comes to digital communication & marketing, it is all about doubling down on solid and proven tools: product efficiency-focused newsletter at Magasin du Nord, live shopping sessions at Galeries Lafayette with influencers such as Kylie Jenner, and sales through WhatsApp at El Palacio de Hierro.

Fight more on the exclusivity or services, less on the price point and promotions

Most IADS members are trying to rely less on price promotions: not only are they a threat to the margin, but they ultimately bring customer fatigue. Offering exclusive products via as many pop-up stores as possible, like Galeries Lafayette, is one of the most profitable strategies to attract customers in stores. Gifts with purchases are also a good alternative to promotions. Some members also limit the impact of price promotions by implementing them only online during a very short period of time, in "flash sales" generating traffic and additional purchases.

Beauty services are also part of department stores' upcoming strategies. Manor is developing medical treatment services offering light procedures, El Palacio de Hierro performs well with services such as laser hair removal and nail salon, and Galeries Lafayette has announced the opening of a new wellness floor in July 2022 with exclusive services.

Beauty and Cosmetics remain central in department stores' business and require attention and investments to maintain sales and address competition

While stores' Beauty & Cosmetics business remains steady, the stakes are high when it comes to attracting customers and competing with specialized groups. A relevant product offer is obviously key to differentiation, but it also needs to evolve quickly by integrating new products and trends, with sustainability in mind. Strategies are also being reinvented by shifting focus from price to exclusivity, services and curation. On the digital side of the business, new features and sales channels represent additional growth engines but raise the question of the relationship with large international brands, whose presence on members' e-commerce platforms remains crucial to the business.

IADS Press release: Cosmetics & Beauty category (English)

Communiqué de presse de catégorie: Beauté et Cosmétiques (Français)

After a buoyant turnover growth cycle boosted by lockdowns, the Home & Decor category is eyeing new options to maintain sales levels now that customers find again many alternative consumption options at reach, far from their homes.

The IADS and Nelly Rodi regularly take stock of the retail trends through a series of product category workshops. Their last one was dedicated to the Home & Decor category. After having benefited from Covid, retailers should anticipate a potential decrease in the business: they can do so by tweaking the product offer, developing experiences, and expanding their omnichannel capabilities.

The global Home & Decor category business share increased by +20% in 2020 and was expected to continue doing so in 2021, as lockdowns, which naturally encouraged customers to focus on their interior equipment, kept on being implemented across the planet. However, the category plateaued and represented only 15.9% of the IADS members' average turnover in 2021, compared to 16.3% in 2020. This is independent of the channel, as the category represented 27.8% of online sales in 2021, compared to 27.1% in 2020. Explanations were multiple:

• Home equipment items (Home accessories, electronics, appliances, furniture) have a long life cycle and cannot be replaced every year,
• Lockdowns in 2021 were lighter than the initial wave in 2020, with alternative out-of-home activities (restaurants) available to vaccinated customers,
• Home office has stabilized, with some employers reducing the number of days at home, leading customers to change focus.

IADS members' buyers expect the Home & Decor business share to decrease even more in 2022 as Covid-19 restrictions are relaxed, local tourism is starting to stir up again and outside activities are not only possible but highly desired. In order to anticipate that evolution and set up a soft landing, they exchanged about their various initiatives:

• New product proposals with a combination of brands addressing niche needs and private labels leveraging the category,
• Strong focus on omnichannel practices, to bring convenience, entertainment and practicality to the customer journey,
• Repurpose stores into maxed out spaces dedicated to brand experiences.

Social and environmental responsibility was identified last year as a basic expectation from customers, and systematically embedded in the growth strategies set up by the IADS members.

The product offer should respond to new needs and diversify with new brands

Now that customers' homes are equipped, it is all about reflecting on their evolving lifestyle and helping them fine-tune their homes. In that perspective, adding new niche categories, such as art toys, smart home devices, and flexible home office solutions, to make the offer more versatile, seems to be a safe bet. Two categories already stand out in terms of results: living plants which are performing at Galeries Lafayette and Manor, and pet supplies which are a new venture at El Palacio de Hierro. Going upscale, as Breuninger is doing with luxury brands displayed in inspirational and experiential displays rather than in the brands' shop-in-shop, is also another way to generate additional sales (however, this often implies refurbishing stores).

75% of the IADS members are planning to strengthen or launch private labels dedicated to the Home & Decor category, especially in home textiles, bath accessories, kitchenware and tableware. El Corte Inglés, for instance, is planning a cross-category brand allowing it to make the most of the brand recognition.

All of those initiatives also help to relieve the tension induced by supply chain disruptions, by multiplying the product sourcing and allowing retailers to monitor and address CSR concerns, especially in categories where wood and plastic consumption is high.

Nelly Rodi presented its exclusive scouting of up-and-coming brands in the category:

• Home Accessories (56% of the IADS members' business): Ago, Helle Mardahl Studio, Cookut, Joseph Joseph, Selency, Quinsai, The Citizenry, Nordic Knots, Magic Circus Edition, OYOY, KJP, East Fork, Lucas Du Tertre, Dusen Dusen Home, Proba, Maison Poterie and La Romaine Edition.
• Electronics (16% of the business): Mirror, Human, Yoto, Gomi, Por-ject and Netatmo.
• Household Appliances (15% of the business): Daan Tech, Lifefuels, Waatr, Lema, Volant and Chamberlain Coffee.
• Furniture (10% of the business): Vestak, Hem, Plum, Tediber and Liu Jo Living.
• Other categories: Brack Drop, Somnox, Therabody and Boy Smells.

Re-enchanting shopping thanks to omnichannel capabilities

In general, members are improving their tech capabilities to develop and strengthen their e-commerce business. Omnichannel is about easing the customer experience: Breuninger and Manor both developed a 'click & collect express' service allowing customers to see the stock availability, pay and collect their purchase within 60 minutes.

Considering the success of fashion and beauty live shopping on Instagram, IADS members are also venturing into that area. Magasin du Nord started with kitchen products for Christmas with great sales results and El Palacio de Hierro launched a 'Shop the Room' service where customers can buy all items they see.

Redesigning the store space with experiences in mind is an opportunity for additional business models

Partnerships with specialized retailers (Fnac, Apple, Samsung, Dyson…) allow department stores to maximize both product offers and store space. It is considered a quick and easy way to include new brands and additional products in the assortment, as well as to avoid distribution and inventory issues. But since the margin on such products is lower, department stores are selling ad spaces to brands on all available supports (pop up stores, screens, windows, catalogue highlights, newsletters...) upping the brand experience on the sales floor as a consequence.

When it comes to experiences, courses such as plant maintenance, chef master classes and others remain a great way to draw traffic and differentiate from competitors. Building stories makes a difference: for instance, BHV is increasingly working with countries' tourist offices, generating many lifestyle animations throughout the store. Design collaborations are also successful, such as Breuninger organising a customer event with AD, or El Corte Inglés organising a very successful craft market highlighting small local companies.

The Home & Decor business is currently in a state of uncertainty and highly depends on the evolution of the pandemic. As Covid begins to withdraw, it's unlikely that consumers will continue to heavily invest in at-home activities. In that perspective, new strategies to maintain and grow the business will include strong creativity in the development of the product offer and the repurposing of the store spaces: trying new business models to create additional sources of revenue and emphasize experiences to boost traffic are crucial strategies. As far as omnichannel business is concerned, capabilities are still developing to propose more activities and ease the customer journey.

IADS Press release: the Home & Decor category (English)

Communiqué de presse de catégorie: Maison & Décoration (Français)

Working in retail has radically changed after the Covid-19 pandemic, and companies are responding by improving attractiveness to both traditional candidates and tech talents.

Now that consumers are coming back to stores and business is rising again, retail functions are under tension, leading to staff shortages. In addition to these difficulties, which are far from over, talents from inside or outside of the companies have new expectations in terms of work purpose, leadership and work environment. IADS recently took stock of its members' initiatives when it comes to attracting and retaining talents.

New work-from-home practices, organisational digitization and flexibility in terms of locations and schedules have left a durable mark on all types of retail jobs. Be it in digital, store operation, food and restaurant roles, but also in logistics, marketing and merchandising, all functions are under pressure. In addition, the employment market has evolved and so have candidates' expectations. IADS members are therefore adapting and reviewing their approach to recruitment, talent retention and career management.

For most of them, the game-changer is not how much jobs are paid, but how to up the game in terms of non-financial benefits, to attract talents from outside traditional retail recruitment pools.

Non-financial benefits: it is all about flexibility, permanent learning and individualization

Post-Covid, companies offering a good professional and personal life balance, as well as flexible options in terms of work location and schedule, have a true competitive advantage in candidates' eyes. This is especially the case when it comes to attracting talents from tech companies, recruited to lead the digital transformation. Although the question of remote working is complicated for retailers, they are setting up new rules to both offer flexible conditions and guarantee work efficiency, through several solutions:

• Avoid the reliance on a 100% digital approach and organise periodic real-life interactions,
• Make sure that strategic issues are addressed in the office,
• Delegate to team managers of the responsibility to decide where their team is working.

This approach remains a work in progress as the productivity measurement can still be a question mark.

In parallel, IADS members are investing in their corporate training programmes, complemented by external training methods, to fully develop their teams. This is needed for all types of talent:

• Existing employees who need to be trained to follow up with the evolution of their positions, as exemplified by sales associates who see their role becoming more complex,
• New talents with previous experience in tech who, when working for retail companies, often spend more time explaining and disseminating knowledge to their team and/or peers, than learning new skills, at the expense of their knowledge or competitiveness on the market.

Permanent training has therefore become a basic expectation from all employees, and personalised development plans are enhanced to offer perspectives and retain talents. This is achieved through mentoring, leadership programmes that increase empowerment, and an appropriate performance measurement matrix.

Finally, large retail companies can sometimes be weighed down by their history or structure: executives from the tech world join retail to expand their horizons and expect to have access to more topics and functions, which is not easy for companies organised in silos. Organisations are therefore redesigning themselves to set up the right environment, more efficient and seamless, interlinking departments and ensuring the creation of links between team members and a desirable working atmosphere.

It's all about employer branding!

The employer's brand is more crucial than ever, as candidates often make their decisions not only on the prospects offered by the potential career but also on a series of other criteria. As a consequence, retailers are polishing their career platforms, cultivating their relationships with universities, and also increasing their social media presence. Instagram, mostly appealing to sales, catering and logistics functions, is great to show inspiring examples and to inform about the company culture and benefits, while LinkedIn targets IT employees. Influence goes beyond social media: rewarding existing employees that give referrals with gift vouchers or bonuses is extremely successful and allows to target recruitments. Brand ambassadors will also be considered in the future.

Company culture and values can be a deal breaker. It is particularly critical when it comes to attracting non-retail tech executives. Given their background, they are expecting authenticity, a feeling of belonging, sustainable engagement, a purpose from the company they are working with, an impactful job, and an entrepreneurial mindset. However, despite the company values themselves, the retail industry can somehow lack attractiveness. It is all about conveying the message that retail companies have evolved and are much more tech-oriented than in the past.

Creatively redesigning financial benefits

Benefits remain an important competitive advantage and many retailers recently raised their basic salary, offered sign-on bonuses, extra bonuses to employees staying long-term, or increased pay during peak hours. Offering a competitive health and insurance plan is also a crucial advantage. Some are also rethinking their compensation structures to both improve them and decide whether online sales should be included in the sales associates' bonuses, to encourage an omnichannel mindset.

Perks also show companies are caring. Employee personal discounts are a must and can be used to reward high performers. However, money is not the only lever: some retailers are offering mobile phones, Spotify subscriptions, free gym memberships, life insurance, or free access to an online physician and prescription service.

Being attractive to talents requires structural changes to make benefits competitive, set up relevant career management strategies, and improve the attractiveness of the company culture itself. For sure employees are expecting their jobs to be rewarding, but the non-financial part is progressively becoming more important than before. People also want to be part of a community and be proud of their workplace. Despite the company culture and values usually being very strong inside of department store companies, they are not always visible and 'sexy' enough from the outside to attract talents. The current reassessments and shifts in HR strategies are key to solving the current talent management issues, but also to prepare the future of leadership.

The role of HR in department stores Press Release (English)

The role of HR in department stores Press Release (French)

IADS was recently referenced in article from Fashion Network titled "Ukraine urges international fashion industry to boycott Russia".

Read the article below:

Fashion Network Article (French)

Fashion Network Article (English)

DEFI has written an article based on IADS' press release reporting the results of its Private Labels meeting. The article titled "Pandemic benefited department stores' own brands, says IADS report" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

DEFI Article (French)

IADS press release - Private Labels business is changing

Fashion Network has written an article based on IADS' press release reporting the results of its Private Labels meeting. The article titled "Department stores are ramping up their own brands" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

FASHION NETWORK ARTICLE (ENGLISH)

Fashion Network Article (French)

Fashion Network Article (Spanish)

Fashion Network Article (German)

IADS press release - Private Labels business is changing

Fashion United has written an article based on IADS' press release reporting the results of its Private Labels meeting. The article titled "The pandemic period benefited private labels" reveals key findings and trends that are highlighted following a meeting gathering the buyers of the member stores.

Read the article below:

Fashion United Article (French)

FASHION UNITED ARTICLE (English)

IADS press release - Private Labels business is changing

Department stores' Private Labels are navigating between successful strategies boosted by the Covid-19 pandemic, and supply chain woes

The Private Label business has been part of the department store business model since its inception. Once a year, the IADS takes stock on its members' Private Labels to understand the issues they are facing and review their strategic evolutions.

On average, the IADS members' Private Labels increased their turnover share from 9% of the company's total business in 2019 to 11% in 2021. This is due to a combination of several factors:

• They benefited from the Covid-19 pandemic consequences, with newly price-conscious consumers switching from international or national brands to private labels,
• They also reaped the fruits of strategies launched in the previous years to make this part of the business more profitable and efficient.

Strategies initiated in the pre-Covid era are proving successful in boosting the Private Label business

The first step consisted of the brand portfolio clean-up to bring clarity to the offer. It often came with the cancellation of labels, as some department stores now operate one category per brand, such as Beco,  or even several product categories under one umbrella brand, such as Manor or Magasin du Nord. In addition to clarifying the product proposal, this approach contributes to generating scale economies by leveraging investments on one brand name instead of several like it could happen in the past.

The realization that private labels could offer an opportunity to enhance the store name itself also led department stores to see them as a branding asset, rather than a low price point proposal completing their national brands' assortments. Such an approach is key now that, for some IADS members, up to 50% of their Private Labels customers are a member of their loyalty programmes. This is why, whether it's towards fashion & sustainability (Galeries Lafayette), high quality (Breuninger) or targeting a specific customer group (luxury customers in the case of El Palacio de Hierro), members defined clear brand values to position their Private Labels, in accordance with their corporate brand strategy.

As a consequence, organisations have been reviewed and optimized towards more agility, for instance separating the collection structuration (merchandising) from its commercial display in stores. As a consequence, while private labels used to be developed and displayed by the same siloed teams in the past, now they are presented to the department stores' buying teams, equal to international and national brands.

The next steps: increase the distribution efficiency, pursue sustainability efforts and attract younger customers

The variety of strategies observed within IADS members suggests that there is no one-size-fits-all solution or strategy. Three problematics were identified as common among all respondents.

First, collections, with their new and clear positioning, now have to be sold in a desirable manner in adequate stores. The store design and visual merchandising are instrumental to enhancing and elevating the brand message but they require important financial investments, potentially coming as a conflict at a moment when department stores also need to focus on digital growth, including for their Private Label business, and finance it.

Second, even though they are not standing at the same level, all IADS members have strong ambitions when it comes to sustainability and progress has been quite fast. But on top of the cost of sustainable materials and sourcing issues, conveying the message is difficult as certifications can represent an issue: they are confusing for customers and they might not be relevant in the long haul. In that perspective, own-store certification labelling (such as Go for Good in Galeries Lafayette) seems to be an efficient and worthy investment to convey a simple and impactful message.

Finally, the average age of Private Label customers (usually around 50 years old) is higher than the average department store customer, even though for some members they are rejuvenating (2 years younger in 2021 compared to 2019). A more fashionable positioning has proven to be successful in lowering the customer's average age, in complement to launching online-only category-specific products, such as Falabella, with specific maternity, occasion wear, +size and niche fashion items developed specifically for the digital channels.  This also implies communicating in new ways: adapted ways of communicating about Private Labels are implemented by members, such as including them in social media, newsletter programmes, ad campaigns, and working with influencers. In short, Private Labels are increasingly treated as brands per se, and not category commodities like they used to be.

The most urgent challenge: the supply chain

The current supply chain disruptions imply a fast rethink of the planning and sourcing with adjustments in organisations: earlier product developments coming with a new buying calendar, nearshoring sourcing to balance the rise of transportation costs, pre-booking of materials, ordering of higher quantities to get better prices and anticipated orders. As the supply chain issues are evolving quickly and are far from finished, members are also elaborating tactics to mitigate margin loss and increase the retail prices in the seamless possible way.

Members have engaged in the transformation of their Private Labels, and they can already account for results especially when it comes to the rationalisation of the brand portfolio and the clarification of the product claim. While guaranteeing sustainable and profitable growth is still a challenge, the supply chain issues have critical consequences on margins and are obviously on top of all members list of concerns. This is the reason why the 2022 IADS Academy programme will focus on the Private Label business and its productivity, to define and make new options available to its members.

IADS Press Release : the Private Label business is changing (English)

Communiqué de presse des Marques Propres en pleine transformation(Francais)

Fashion Network has written an article on IADS' White Paper, identifying the essential elements to adapting to successive market evolutions.

At a time when department stores are in the process of a major digital transformation and are anticipating the adaptation to a more sustainable world, these organizations must respond with increased management specialization and organizational inflation.

Fashion Network article (French)

Department stores' human organisations: their historical and constant capability to adapt to an increasingly complex world might only partially answer the need of their radical reinvention

In its "Smarter department store organisations" White Paper, the IADS offers an unprecedented review of department stores' internal organisation evolution from 1928 to the current digital age.

This structural dissection aims to look at how these complex business models have adapted to successive market evolutions. At a moment when department store organisations are in the midst of digital transformation, and already anticipating the adaptation to a more sustainable world, this study suggests that continuous structural reengineering is intrinsically at the core of their model. Department stores answer to an increasingly complex world by an increased C-suite specialization and organisational inflation.

However, recent evolutions, both theoretical and implied by new digital business models suggest that more radical changes might be needed in the mid-range to stay competitive.

Organic reinvention has been an organisational feature central to department stores from their inception, helping them to deal with an increasingly complex world

"Department stores are decathletes". This sentence encapsulates the challenges embedded at the core of any department store in the world: their model concentrates a vast array of complex activities, and, in these days of omnichannel competition and digital unbundling, they have to be good at every one of them. This permanent necessity has translated into constant adaptation and the acquisition or generation of new and appropriate competencies. While such transformations have been relatively invisible from the customers' point of view, each new iteration has left its mark on companies' organisations.

While organisation charts are not an exact reflection of how companies work, they provide insight into a company's perception of itself, as well as its formal internal power structures. They also allow comparisons, and the tracking of change over time. This is why the IADS has put together snapshots of store organisations during 4 key dates: 1928, 1994, 2015 and 2021.

In 1928, when the IADS was created, department store structures were already extraordinarily complex, in order to address the number of categories and products sold. In addition, all stakeholders were taken into consideration (customers, employees, partners, shareholders), leading to the juxtaposition of many activities and competencies. This created a fertile ground for a subsequent complexification: with time, the C-suite progressively increased according to managerial evolutions and technological progress, without significantly altering a template that became increasingly anachronistic. With time, organisations became costly, complicated and difficult to transform.

This became particularly visible after 1994, the year when Amazon was created. While a few companies foresaw the danger and followed suit by launching e-commerce ventures (Macy's in 1997, Nordstrom in 1998 and John Lewis in 2001), the rest of the department stores were still trying to solve the space productivity equation through a highly centralised organisation at the buying level. Even though a few IADS members looked for other approaches, this struggle persists today, and partly explains why adapting to a digital, highly-fragmented and individualised world has taken so long for department stores.

The temptation to answer complexity with increased specialisation and organisational inflation

2015 is the year most iPhones were sold in volume to this day. It triggered the development of m-commerce, a complement to e-commerce, adding to the difficulties of those retailers who were struggling to keep up with customer behaviour changes and the end of the boomer generation majority. Despite this, organisations remained mostly unchanged, with 4 to 6 direct reports to the CEO, covering "traditional" areas of the activity (Finance, Merchandising/Buying, Real Estate, Operations/Sales, Marketing and HR). It is striking that digital capability (whatever its name: digital, e-commerce, omnichannel) was not considered as a strategic feature per se at the time, but was rather integrated into a broader department. This difficulty of acknowledging e-commerce from an organisational point of view is a reason why one IADS member already had a Chief Transformation Officer, a fairly unique position at the time, to address this challenge.

The Covid-19 pandemic and the total reset of the retail industry that took place in 2021 accelerated the need for department stores to change and rapidly acquire the new competencies needed to strive in an omnichannel world. It explains why they responded to the increased complexity of operations by increasing the number of direct reports to the CEO, with one company for example increasing from 11 reports in 2015 to 18 in 2021. This organisational inflation also reflects a lack of clarity about the meaning of "digital transformation": the answer will be radically different if approached through each of its components (platforms, channels, technology, products…) rather than through a more holistic approach.

Does structure always follow strategy? The digital transformation case

Should organisations have an individual dedicated to digital change, or re-engineer their structure into a "digital mindset"? Examples from other industries (mass distribution, water supply, luxury) suggest that a digital transformation officer position is easier to implement than totally resetting and transforming an often century-old structure. However, the scope of these new positions rarely includes resetting the organisation as a whole, and often consists merely of injecting technological innovations, only contributing to increased complexity or worse, the creation of an additional silo.

The fact that different solutions are adopted is a signal that companies are probably in transition mode. Each of them has to make defining choices, between transforming the organisation as a whole or solely focusing on the customer-facing structures, and between creating a dedicated position at the top, or seeking to digitally pivot the whole organisation (and if so, how).

Two IADS members have set up a new approach to this question in 2021, by addressing the problem from the customer-journey perspective. Both of these approaches are radically different. The first one delegates the power to change organisations at the store level, by creating a new position with increased prerogatives and possibilities to change operational methodologies. The second one has created a new position at the HQ level, whose role is to detect potentially interesting ideas from within the company and implement them in a test & learn process, allowing, when successful, the definition of a new customer journey.

These examples suggest that there is a middle way and a soft method to answer this question. It also confirms that there is room for organisational innovation within the existing frameworks.

Simplifying organisations is key, but may not be enough in the future

These marginal improvements might not be enough. The recent new appointments at the Macy's board of directors, namely the CEO of The Michaels Companies and the president of Zipcar, both experienced in organisational transformation, shows that department stores are well aware of the difficulty. Historically, department store organisations have been responding to immediate problems, by trying to adapt to the current "iceberg", perfectly aware that other ones were coming but, understandably, unable to dedicate the necessary resources to deal with all of them at the same time.

This never-ending race is impossible to win. Even though their margin structure has allowed them to avoid icebergs so far, the market-changing conditions are now putting department stores at risk of running out of possibilities if they do not manage to radically reinvent themselves. This radical reinvention requires courage and obstinacy from the leading teams, as it involves long-term vision (strategic planning), radical questioning (unbundling of century-old activities), and the capability to change machine-like organisations into more organic social bodies.

2021 White Paper Press Release (English)

2021 Livre Blanc Communiqué de presse (Francais)

Download the White Paper (in English) here

Telecharger le livre blanc (en francais) ici

Vogue Business interviewed IADS to gain a better understanding of the luxury market in Mexico for their market insight report. Selvane Mohandas du Menil shares how players such as El Palacio de Hierro are thriving in the North American market and details how their approach leads to success.

Read the report here