What: BCG forecasts dramatic shifts in global trade patterns through 2033, with proposed US tariffs potentially reshaping supply chains while China's trade with the Global South surges by $1.25 trillion.

Why it is important: The projected trade shifts represent a critical turning point for retailers, requiring them to balance increased tariff costs against the need for supply chain resilience, while adapting to the growing economic influence of the Global South.

Global trade patterns are undergoing a significant transformation driven by geopolitical rivalries and economic security considerations. BCG's analysis reveals that while world trade will continue growing at 2.9% annually through 2033, the routes goods travel will change dramatically. A potential 60% tariff on Chinese goods could add $640 billion to US import costs, particularly affecting consumer electronics, electrical machinery, and fashion goods. North America is solidifying as a resilient trade bloc, with US-Mexico trade projected to increase by $315 billion and US-Canada trade by $147 billion by 2033. Meanwhile, China is pivoting toward the Global South, with trade expected to surge by $1.25 trillion, despite contracting trade with Western nations. The Global South itself is emerging as a significant force, with trade among developing nations projected to expand by $673 billion. These shifts are accompanied by strategic changes in the EU's trade relationships and ASEAN's growing role in global supply chains. For businesses, success will depend on developing agile supply chains and the ability to sense and react to geopolitical shifts in this new, fast-moving reality.

IADS Notes: The BCG report's findings align with significant shifts observed in global trade throughout 2024. As noted in November 2024, fashion brands were already restructuring their sourcing strategies in response to evolving trade policies , while December 2024 saw China implementing measures to streamline e-commerce exports despite Western regulatory challenges . The projected impact of US tariffs parallels broader trends in supply chain transformation, with January 2025 reports showing retailers abandoning traditional one-size-fits-all models in favor of more agile, regionally-adapted approaches . This shift is particularly evident in emerging markets, where India's retail sector is projected to reach $2 trillion by 2033 , and Southeast Asia is becoming a key battleground for retail expansion . The Global South's rising prominence is further validated by the establishment of Free Trade Warehousing Zones , offering new supply chain solutions as companies navigate these geopolitical shifts.

US tariffs set to accelerate landmark shifts in global trade flows, Press Release

BCG report: Great Powers, Geopolitics, and the Future of Trade

What: Latest consumer research highlights shifting retail dynamics in Asia-Pacific, where market-specific trends and omnichannel adoption are reshaping shopping behaviors across Australia, China, India, Japan, and South Korea.

Why it is important: Understanding these regional variations is crucial for retailers as they indicate fundamental shifts in consumer behavior, with omnichannel shopping becoming dominant in South Korea, while India shows unprecedented growth in experiential retail, requiring tailored market approaches.

The Asia-Pacific retail landscape demonstrates remarkable diversity in consumer sentiment and shopping behaviors across its major markets. Australia exhibits strong consumer optimism, with increased spending intentions across all income groups and categories. China shows resilience amid uncertainty, with Gen Z optimism rising despite overall cautious sentiment, particularly among older consumers. India's market reveals dynamic growth, with consumers embracing omnichannel shopping at unprecedented rates, though sentiment varies significantly by gender. Japan and South Korea maintain stable consumer behavior while showing strong shifts toward omnichannel shopping, with Korean consumers increasingly favoring online platforms. The research highlights how economic conditions, generational preferences, and technological adoption rates are creating distinct retail environments in each market. This diversity requires retailers to develop market-specific strategies while acknowledging the common thread of increasing omnichannel adoption across the region.

IADS Notes: Recent market data underscores the complex evolution of Asia-Pacific retail throughout 2024. In January, Coresight Research identified key trends in China's retail landscape, projecting sales to reach ¥44.2 trillion. India's retail sector demonstrated significant transformation with the expansion into Tier 2 and 3 cities, while emphasizing experiential retail and AI-driven personalization. A notable milestone was reached in South Korea, where online shopping surpassed in-store sales for the first time, capturing 50.5% of the market. These developments align with broader regional trends, as evidenced by Visa's Economic Insights showing a 20-25% projected growth in outbound visitor numbers for 2025, indicating strong consumer confidence and spending potential across the region.

Asia-Pacific consumer sentiment: A mix of growth and challenges

What: Retail organisations must balance AI agent autonomy with human oversight to maximise benefits while minimising risks, as excessive supervision reduces productivity gains while insufficient control threatens brand reputation and customer relationships.

Why it is important: The retail sector's leading position in AI deployment, marked by a 304% increase in AI-directed traffic, makes establishing appropriate supervision frameworks critical for sustainable technological transformation and competitive advantage.

The implementation of AI agents in retail requires a delicate balance between autonomy and supervision. Organisations face a critical challenge: too much oversight diminishes the productivity gains that make AI valuable, while too little control risks damaging brand reputation, customer relationships, and financial stability. The article presents a novel approach, suggesting that effective AI governance should be based not on the magnitude of risks but on their nature and our understanding of them. This framework categorises challenges into complicated problems suitable for high autonomy, ambiguous problems that benefit from data-driven learning, and uncertain problems requiring significant human oversight. The key to success lies in allowing AI agents enough freedom to learn from real-world situations while maintaining appropriate safeguards. This approach aligns with emerging trends in retail technology adoption, where successful implementation requires both strategic vision and practical risk management.

IADS Notes: The article's emphasis on balanced AI agent autonomy strongly resonates with current retail industry experiences. As noted in March 2024, while 93% of retailers have embraced AI for personalisation, nearly half struggle with effective data integration, underscoring the importance of supervised implementation. This cautious approach is validated by June 2024 findings showing the retail sector leading AI deployment with a 304% increase in AI-directed traffic, demonstrating the benefits of well-managed autonomy. However, November 2024 research revealed retailers still lose 4.5% of gross sales due to inefficiencies, while companies with properly supervised AI systems achieved 30% faster development and 60% higher user satisfaction. The implementation gap remains significant, with December 2024 data showing only 10% of companies successfully scaling their AI applications despite 70% planning implementation, reinforcing the article's argument for finding the right balance between AI autonomy and human oversight.

How much supervision should companies give AI agents?

What: Supply chain management is evolving from a cost center to a strategic differentiator as AI adoption, risk management, and infrastructure modernization reshape traditional operational models.

Why it is important: The shift from reactive to proactive supply chain management, supported by emerging technologies and data-driven decision-making, is reshaping how retailers approach inventory, logistics, and risk management, making it crucial for long-term survival in an increasingly complex market.

The retail supply chain landscape is experiencing a profound transformation as organizations move beyond traditional operational frameworks. The integration of Generative AI and advanced analytics is revolutionizing how companies approach decision-making, with successful implementations showing significant improvements in application development speed and administrative efficiency. This technological evolution extends beyond mere automation, encompassing sophisticated risk management strategies that address operational, geopolitical, and environmental challenges. The freight industry, despite historical resistance to change, is gradually embracing cloud-based solutions and AI-driven innovations to optimize operations at scale. This transformation requires a delicate balance between human expertise and artificial intelligence, particularly in strategic decision-making processes. Organizations are increasingly focused on building resilient supply chains that can not only absorb disruptions but also adapt to changing market conditions through intelligent systems and proactive risk management strategies. The modernization of legacy systems and the adoption of cloud-based solutions are becoming essential components of this evolution, enabling real-time visibility and enhanced operational efficiency.

IADS Notes: The supply chain landscape in 2025 is undergoing a fundamental transformation, driven by the convergence of technological innovation and operational necessity. As reported in November 2024 , the implementation of Generative AI has delivered concrete benefits, with organizations achieving 30% faster application development and 50% reduction in administrative tasks, validating the article's emphasis on moving beyond traditional algorithmic AI. This technological evolution comes at a crucial time, as July 2024 findings  revealed that conventional "one-size-fits-all" supply chain models are no longer viable in today's complex global environment. The integration of AI in supply chain management, highlighted in April 2024 , has proven particularly effective in enhancing inventory management and demand forecasting accuracy, supporting the article's prediction about the increasing role of data-driven decision-making. This transformation is further supported by major technology providers, as identified in Coresight's January 2024 Tech 25 report , who are developing sophisticated enterprise solutions to modernize supply chain infrastructure and enable the real-time optimization capabilities described in the article.

Supply Chain Trends for Retail in 2025

What: Growing anti-materialist movement forces retail industry to confront fundamental changes in consumer behavior and business models.

Why it is important: The movement signals a transformative moment in retail history where consumer values are fundamentally reshaping business practices, forcing retailers to reconsider their role in society and environmental impact. The anti-materialist movement, led by Gen Z and gaining traction across age groups, is challenging traditional retail paradigms. This shift extends beyond economic considerations to encompass broader ethical concerns about environmental impact and social responsibility.

The trend is amplified through social media and alternative platforms, where influencers promote conscious consumption and underconsumption principles. Organizations like The Freecycle Network and The Buy Nothing Project, with their millions of members, demonstrate the movement's growing mainstream appeal. The Netflix documentary "Buy Now!" further highlights the consequences of overconsumption, while former corporate leaders like Eric Liedtke and Paul Polman exemplify the industry's internal transformation. This cultural shift demands retailers move beyond greenwashing to implement genuine sustainable practices and adapt to a future where success may be measured by quality over quantity.

IADS Notes: The rising anti-materialist sentiment is driving fundamental changes in retail operations and consumer behavior. December 2024 data shows 41% of consumers now choosing to repair products rather than replace them, while 24% actively participate in secondhand shopping. Retailers are responding creatively, as demonstrated by Selfridges' May 2024 initiative to make circular retail playful and engaging. This shift aligns with broader consumer trends, as April 2024 research reveals 80% of US consumers now view sustainability as an achievable goal.

The industry's response is becoming more structured, with the NRF's June 2024 report outlining key strategies for implementing circular business models. Leading retailers are taking bold steps, exemplified by Peek & Cloppenburg's January 2025 launch of the world's largest green retail outlet. These developments suggest that the anti-materialist movement is not just a temporary trend but a fundamental shift forcing retailers to reimagine their business models and value propositions.

A look at the “buy less” movement

What: TikTok's imminent US ban threatens to disrupt USD 12.3 billion in advertising revenue and reshape how retailers engage with 170 million American consumers.

Why it is important: This regulatory action will significantly impact retailers' ability to reach Gen Z consumers, who control USD 360 billion in spending power and heavily rely on TikTok for product discovery and purchasing decisions.

The US Supreme Court's scepticism towards TikTok's challenge against President Biden's legislation signals a significant shift in the digital retail landscape. The law, which would force ByteDance to sell or cease operations by January 19, threatens to disrupt a platform that has become integral to modern retail strategy. The immediate impact will prevent new downloads and updates of the app, while existing users will face gradual degradation of service without security updates. For retailers, this presents a complex challenge as TikTok's advertising platform has become a crucial channel for reaching younger consumers, with projected ad revenue of USD 12.3 billion in 2024. Content creators and small businesses face particular challenges, as exemplified by entrepreneurs like Nadya Okamoto, who leveraged TikTok's organic reach to grow her brand. While some users may attempt to circumvent the ban through VPNs, the long-term implications for retail marketing and social commerce are substantial, potentially forcing a fundamental restructuring of digital engagement strategies.

IADS Notes: The potential TikTok ban in the US comes at a critical juncture in retail's digital evolution. As observed in August 2024, major retailers had been increasingly integrating TikTok Shop into their core strategies, with companies like Asos reporting that 57% of their platform transactions came from new customers. The platform's effectiveness was further demonstrated in July 2024 when it captured 37% of Chinese e-commerce sales in the US during its "Deals for You Days" event, and by December 2024 , it had achieved a remarkable milestone of USD 100 million in sales on Black Friday alone. The ban's timing is particularly significant given that 23% of Gen Z purchases are influenced by viral TikTok trends , representing a substantial portion of their USD 360 billion spending power. This disruption will force retailers to rapidly recalibrate their digital strategies and find alternative platforms to maintain engagement with the crucial Gen Z demographic.

What retailers need to know when TikTok’s US ban comes into effect

What: Study reveals retailers should showcase human input behind AI systems rather than making AI appear more human-like to build consumer confidence.

Why it is important: This insight transforms how retailers should approach AI implementation, as recent data shows 72% of consumers expect AI enhancements in shopping experiences, but prioritise transparency and human oversight in these technologies.

The research challenges the common practice of anthropomorphising AI in retail settings, revealing that emphasising human expertise in AI development is more effective at building consumer trust. Through five comprehensive studies, researchers found that highlighting human input in AI development significantly improved users' perception of AI-generated feedback compared to both anthropomorphised and purely algorithmic presentations. The findings show that when companies clearly communicate the role of human experts in developing AI tools, consumers report better understanding and greater acceptance of the technology. This approach not only enhances perceived usefulness but also reduces resistance to AI adoption. The study suggests practical implementations across various sectors, from education to healthcare, where emphasising human expertise rather than AI humanisation can lead to better outcomes. The research also indicates that this strategy can provide a sustainable competitive advantage, as human expertise integration is harder to replicate than algorithmic solutions. For retail managers, this means reconsidering their AI messaging strategies to focus on the human element while maintaining authentic and transparent communication about AI capabilities.

IADS Notes: Recent market research strongly validates the article's emphasis on human-centric AI implementation in retail. As observed in March 2024, consumer acceptance of AI in retail has grown significantly, with Adobe reporting a 304% increase in AI-tool-directed traffic to retail sites. This trend aligns with the article's recommendation to highlight human expertise behind AI development, particularly as Bain & Co.'s November 2024 study revealed that three-quarters of consumers expect transparency in AI interactions. The business case for this approach is compelling, with an October 2024 Google Cloud survey showing that 87% of companies properly implementing AI experienced revenue increases of at least 6%. Furthermore, Coveo's June 2024 research found that while 72% of consumers expect AI to enhance their shopping experiences, they simultaneously emphasise the importance of maintaining human oversight and data privacy. These findings collectively support the article's central argument that success in AI implementation lies not in anthropomorphising the technology, but in emphasizing the human expertise that shapes it.

Consumers don’t want AI to seem human

What: Global retailers face urgent pressure to redesign their store networks as extreme weather events cause unprecedented operational disruptions and financial losses totalling USD 320 billion in 2024.

Why it is important: The convergence of physical climate risks, insurance challenges, and regulatory pressures is forcing retailers to fundamentally rethink their store network strategies, marking a pivotal shift in how the fashion industry approaches physical retail planning.

Recent climate catastrophes, from Los Angeles wildfires to European floods, are compelling the fashion industry to reassess its approach to retail store networks. The unprecedented scale of these events, resulting in global losses of USD 320 billion in 2024, has exposed vulnerabilities in traditional retail strategies. While retailers have historically relied on insurance to manage climate risks, this safety net is showing signs of strain, with some insurers in California already withdrawing wildfire coverage and similar trends emerging in Europe. The fashion industry's sprawling retail footprint, often concentrated in major cities and tourist destinations, faces particular exposure to these risks. A new sector of weather risk analysts is emerging to help retailers map climate risks and adapt their strategies accordingly. The European Union's mandatory climate risk reporting requirements, coupled with similar proposals in the US, are adding regulatory pressure to this challenge. This convergence of factors is pushing retailers to consider not just immediate physical risks but also long-term viability of store locations and network design.

IADS Notes: Recent industry data strongly reinforces the article's concerns about climate impacts on retail operations. In May 2024, Visa reported a significant drop in consumer spending due to severe weather conditions, while July 2024 saw Hudson's Bay forced to close multiple Canadian locations during an unprecedented heat wave that overwhelmed store HVAC systems. These incidents align with the article's emphasis on increasing weather-related disruptions to retail operations. The industry's response has been evident in strategic adaptations, as demonstrated by major retailers like Macy's announcement in December 2024 to close 150 stores and Kohl's January 2025 decision to shutter 27 locations. These moves suggest that retailers are not only reacting to immediate climate threats but are also fundamentally rethinking their physical footprint to create more resilient and adaptable store networks.

Faced with extreme weather, should fashion rethink its store network?

What: Alibaba Cloud expands its AI capabilities with enhanced language models and a comprehensive platform for training and deployment, positioning itself as a major competitor in the global AI landscape.

Why it is important: This strategic move challenges Western AI dominance while democratising access to sophisticated AI tools, particularly beneficial for retailers seeking to expand their global presence through multilingual capabilities.

Alibaba Cloud's latest AI developments mark a significant evolution in the retail technology landscape. The cloud division has introduced several large language models, including Tongyi Qianwen and Tongyi Wanxiang, alongside the ModelScope platform, creating a comprehensive ecosystem for AI development and deployment. The Qwen model, initially released in April 2023, has evolved to support 29 languages and now features versions ranging from 0.5 to 72 billion parameters, making it more energy-efficient while maintaining high performance.

The latest iteration, Qwen2.5-72B, outperforms prominent open-source models in benchmarks and demonstrates enhanced capabilities in coding and mathematical problem-solving. Since its launch, Qwen models have achieved over 40 million downloads and spawned more than 74,000 derivative models. The proprietary Qwen-Max model has shown particular strength, surpassing GPT4-o in eight benchmarks. Complementing these developments, the ModelScope platform provides a user-friendly interface for accessing and implementing these AI tools, making advanced technology accessible to businesses regardless of their technical expertise.

IADS Notes: Alibaba Cloud's latest AI developments align with significant industry trends observed in late 2024, when the company launched its "Partner Rainforest Plan" to democratise AI in retail during a period that saw retail AI adoption in China reach 230 million users . Earlier that year, in May, the company's partnership with LVMH demonstrated practical applications of the Qwen model in luxury retail , coinciding with broader industry momentum as nearly half of retailers reported increased revenue from AI initiatives . These developments collectively validate Alibaba's strategic focus on developing sophisticated AI models for global retail applications.

How Alibaba Cloud is transforming to keep pace with generative AI

What: China's retail landscape is experiencing a strategic shift towards digital innovation and service consumption, backed by government initiatives to create a unified national market.

Why it is important: The developments highlight the growing importance of balancing digital advancement with sustainable practices while maintaining competitiveness in both domestic and international markets.

China's commercial sector is undergoing a significant transformation, characterised by the integration of digital technologies and evolving consumer preferences. With retail sales projected to reach ¥44.2 trillion in 2024, the market demonstrates remarkable resilience despite economic challenges. Digital innovation stands at the forefront, with 230 million users embracing AI-powered retail solutions and major cities allocating 16% of retail space to digital experiences. Consumer behaviour is shifting notably towards experiential retail and sustainability, with 85% of shoppers prioritising eco-friendly practices. The government's commitment to creating a unified national market has streamlined commerce while supporting domestic consumption growth. Traditional retailers are adapting to intense competition through innovative business models, while e-commerce platforms engage in strategic expansion both domestically and internationally. The integration of online and offline channels continues to evolve, with service consumption emerging as a key growth driver, particularly in sectors like tourism, culture, and health services.

IADS Notes: Recent market developments underscore China's retail transformation throughout 2024. In January, Coresight Research identified digital innovation and meaningful consumption as key trends , while April saw major cities dedicating significant retail space to entertainment zones . The sector's evolution continued with SKP's successful expansion in Wuhan in August , demonstrating the viability of integrated online-offline models. By December, China's retail AI adoption reached 230 million users , while cross-border e-commerce showed remarkable growth despite regulatory challenges . These developments align with broader trends in experiential retail and digital transformation, suggesting a mature market increasingly focused on innovation and consumer experience.

Ten higlights of China’s commercial sector in 2025

What: Major retailers demonstrate contrasting approaches to DEI initiatives, with some maintaining steadfast positions while others retreat under pressure, highlighting the challenges of balancing social responsibility with business performance.

Why it is important: The contrasting financial results of different DEI approaches demonstrate that the implementation method, rather than the principles themselves, determines market success, forcing retailers to reconsider how they balance social initiatives with business objectives.

The retail industry faces a critical juncture in managing diversity, equity, and inclusion initiatives, with major companies adopting markedly different approaches. Consumer-facing businesses inherently serve and employ diverse groups, making DEI an unavoidable reality of modern retail operations. However, the challenge lies not in recognising DEI's importance but in determining how to implement and communicate these principles effectively. Some retailers, like Target, have faced significant backlash for their highly visible DEI initiatives, while others, such as Costco, have maintained steady, low-key approaches focused on practice rather than proclamation. The article examines how companies' responses to activist pressure vary significantly, from hasty retreats to steadfast maintenance of established policies. This divergence in approaches has led to measurable differences in business outcomes, suggesting that the method of implementing DEI initiatives may be more crucial than the initiatives themselves. The text emphasises that successful DEI strategies require thoughtful implementation rather than mere public declarations, advocating for a balanced approach that considers both social responsibility and business sustainability.

IADS Notes: The retail industry's handling of DEI initiatives shows three distinct approaches in recent months. Costco maintained its established DEI policies despite activist pressure in January 2025 , while Walmart chose to modify its approach in November 2024, removing explicit DEI language but keeping core inclusion practices . Target's experience with Pride merchandise controversies led to significant financial impact, including a $10 billion valuation loss . Walmart's strategy proved most successful in market terms, achieving its best performance since 1998 , suggesting that a balanced approach to social initiatives resonates better with consumers than either aggressive promotion or complete withdrawal.

DEI: courageous efforts or cowardly responses?

What: Trump's proposed tariffs of up to 60% on Chinese imports threaten to disrupt the US beauty industry's USD 2.6 billion trade surplus by forcing supply chain restructuring and price increases across 25,000 mass-market products.

Why it is important: As beauty retailers already grapple with supply chain reorganization and rising costs, the proposed tariffs could accelerate industry transformation, particularly affecting smaller independent brands and potentially reducing market diversity.

President-elect Donald Trump's proposed tariff policies signal a significant shift in US trade relations, with far-reaching implications for the beauty industry. The proposed measures include a universal tariff of 10-20% on all imports and a substantial 60% duty on Chinese goods, with potential increases targeting Canada and Mexico through USMCA renegotiations. These changes threaten to disrupt the beauty sector's established supply chains and manufacturing processes, potentially affecting over 25,000 products in the US mass beauty market. The Personal Care Products Council emphasises the industry's significant contribution to the US economy, including a USD 2.6 billion trade surplus, which could be at risk. Smaller independent brands face particular challenges due to limited financial flexibility, while larger conglomerates may better weather the transition. The prospect of reshoring presents both opportunities and challenges, with only 7% of beauty products currently manufactured domestically. Higher labour costs and limited raw material availability in the US pose significant hurdles for brands considering local production, though some companies are already adapting through hybrid approaches and strategic supply chain diversification.

IADS Notes: The beauty industry's response to Trump's proposed tariffs builds upon significant shifts already observed in the sector. As noted in January 2025, BCG's analysis shows that a 60% tariff on Chinese goods could add USD 640 billion to US import costs , forcing beauty retailers to reconsider their supply chain strategies. This aligns with trends seen in November 2024, where major retailers like Ulta Beauty began implementing regional fulfilment centres to enhance supply chain resilience. The industry's vulnerability was further highlighted during the October 2024 port strikes , prompting brands to explore alternative manufacturing locations. Mexico's emerging potential as a manufacturing hub is particularly noteworthy, with its beauty market growing 17% to EUR 7 billion in 2024 , suggesting a viable nearshoring option. However, as revealed in April 2024, changes to de minimis thresholds in both US and EU markets indicate that beauty brands must navigate an increasingly complex regulatory landscape while adapting their manufacturing and pricing strategies to maintain competitiveness.

How US tariffs would hit beauty

What: Major retailers abandon century-old inventory accounting method as modern technology enables more accurate cost-based approaches.

Why it is important: This transition represents a fundamental shift in retail operations, enabling more accurate inventory management and better decision-making through modern technology, while addressing long-standing issues with traditional accounting methods.

The retail industry is moving away from the retail inventory method (RIM), a century-old accounting practice that relies on retail prices to estimate inventory value. Despite its widespread use by major retailers including Target, Walmart, and Kohl's, RIM's limitations have become increasingly apparent in the digital age. The method's reliance on retail prices for inventory valuation can distort business metrics and influence merchandising decisions, particularly around markdowns. Modern retailers like Macy's and Nordstrom are transitioning to cost accounting, which leverages current technology to provide more precise inventory tracking and valuation based on actual costs. While this transition requires significant operational changes, it promises better inventory visibility, more accurate financial reporting, and improved decision-making capabilities.

IADS Notes: The industry's move away from the retail inventory method (RIM) reflects broader retail modernisation trends. This shift aligns with Macy's November 2024 three-part strategy emphasising operational modernisation and technology integration, though the recent discovery of hidden delivery expenses highlights ongoing challenges in financial controls. The transition comes as retailers seek greater operational efficiency, with October 2024 data showing promising results from Macy's innovation strategy in modernising operations. The urgency for change is underscored by a March 2024 report identifying 4.5% average revenue loss due to inventory inefficiencies. December 2024's Q3 results from Macy's further demonstrate the complex balance between transformation initiatives and maintaining operational oversight. The shift from RIM to cost accounting represents a fundamental change in how retailers approach inventory management, reflecting the industry's broader evolution toward data-driven, technology-enabled operations that provide greater accuracy and transparency.

Nordstrom and Macy’s abandoned the ‘retail inventory method’ after using it for decades

What: Fashion's resale and rental sectors show signs of growth heading into 2025, with The RealReal's stock surging 444%, Nuuly expanding its subscriber base, and P180 introducing innovative inventory management solutions through rental partnerships.

Why it is important: These developments highlight the increasing viability of circular fashion business models, as companies refine their strategies to balance consumer demand with operational efficiency.

The fashion resale and rental landscape demonstrates promising growth, with The RealReal's stock performance leading the industry with a 444% increase to $10.93. Under new CEO Rati Levesque, the company sees potential for $200 billion in untapped luxury resale value in the U.S. market alone. Meanwhile, Nuuly has emerged as the world's largest fashion rental company, with sales up 53.9% to $265.9 million and 297,000 active subscribers. The company's success in attracting first-time renters, with over two-thirds of new subscribers never having rented clothing before, suggests market expansion. P180 introduces a new approach by converting potential markdowns into rental inventory, recently demonstrated through investments in Elyse Walker and Altuzarra.

IADS Notes: While The RealReal's stock surged 444% and Nuuly grew to 297,000 subscribers, the broader market faces profitability challenges. P180's innovative approach to managing unsold inventory through rental represents a new model for addressing industry-wide challenges with inventory monetisation.

Resale and rental show signs of life headed into 2025

What: Middle managers face increasing burnout risks as they balance senior management demands with team leadership responsibilities, leading organisations to develop targeted solutions from early talent identification to continuous development support.

Why it is important: As retail organisations navigate complex transformations, effective middle management becomes the critical link between strategic vision and practical implementation, making their development and retention essential for business success.

Recent research highlights the growing challenges facing middle managers in retail organisations, with nearly three in four feeling overwhelmed at work and 40% of new managers actively seeking new positions. The article outlines comprehensive strategies for supporting these crucial team leaders, beginning with early identification of potential managers based on interpersonal skills and problem-solving abilities. Essential support includes structured leadership training covering self-awareness, team coaching, performance management, and mental health awareness. The emphasis on reducing administrative tasks and maintaining engagement through development opportunities demonstrates the need for a balanced approach to middle management roles. Regular feedback mechanisms, including 360-degree reviews and open discussions about career progression, are identified as vital tools for retention and growth. The article stresses the importance of proactive talent management to prevent flight risks and maintain organisational stability.

IADS Notes: Industry research confirms the mounting pressures on retail middle managers. Gartner's early January 2024 study revealed that 75% of middle managers feel overwhelmed, with luxury retail seeing 51% of employees considering departure. Central Retail Corporation's mid-July 2024 approach to multigenerational workforce management demonstrated how flexible leadership development can address these challenges, while Harvard Business Review's January 2025 analysis emphasized the critical balance between strategic understanding and implementation.

How to support middle managers

What: Asian markets are leading a fundamental transformation of global trade patterns, with 18 of 20 fastest-growing business corridors creating unprecedented opportunities for retail expansion and innovation.

Why it is important: This shift represents a pivotal moment for global retail, as evidenced by recent major investments like Central Retail's USD 665 million expansion and MM Mega Market's strategic entry into Vietnam, demonstrating how retailers are capitalising on Asia's emerging corridors to drive future growth.

Asia stands at the epicenter of a major transformation in global business corridors, where geopolitical shifts and structural realignments are creating new opportunities for growth and innovation. The region's dominance is clear, hosting 18 of the 20 fastest-growing business corridors and 13 of the 20 largest, positioning it as a crucial driver of global economic development. This transformation is characterised by five distinct growth highways: new and renewed partnerships, China-to-world connections, technology corridors, services expansion, and green initiatives. The evolution is particularly significant given Asia's projected share of the global middle class, expected to reach two-thirds by 2030, and its 60 percent contribution to global growth. Companies operating in the region are adapting to this new landscape by reimagining interconnection rather than retreating from it, developing strategies that balance growth with resilience. The shift from a "just in time" to a "just in case" mindset is reshaping value chains, while increasing sophistication in Asia's skills and capabilities is creating new opportunities for local, regional, and multinational companies to emerge as global leaders.

IADS Notes: Recent developments in Asian retail strongly validate the text's analysis of emerging business corridors. In November 2024, MM Mega Market's USD 20 million investment in Vietnam exemplifies how retailers are capitalising on the region's growth potential, with Vietnam's market alone projected to reach USD 350 billion by 2025. This expansion trend is further evidenced by Central Retail's USD 665 million investment announced in February 2024, focusing on AI integration and ecosystem development. Cross-border partnerships have become increasingly strategic, as demonstrated by Hyundai Department Store's collaboration with Thailand's Siam Piwat Group in February 2024, leveraging K-culture to attract younger demographics. The technology corridor's significance is highlighted by Central Retail's August 2024 Alipay+ partnership, enhancing digital transactions for international tourists. These developments align with the broader transformation of Asian retail, as seen in January 2025 when Korean retail giants Lotte and Shinsegae began aggressively expanding into Southeast Asian markets, demonstrating how established players are adapting to the new business landscape while maintaining their competitive edge through technological innovation and strategic partnerships.

Asia’s emerging business corridors: New highways to growth

printable version

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

Introduction: trends and the European consumer

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

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

The average European consumer has changed significantly:

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

The growing presence of omnichannel journeys

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

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

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

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

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

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

Building new ecosystems to restore loyalty

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

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

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

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

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

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

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

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

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

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

Note on CEO sentiment: cautious optimism

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

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

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

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

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

Credits: IADS (Anchita Ranka)

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

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

China’s 2024 economic and societal context

It’s the economy, stupid!

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

Demographics: China is getting old 

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

Western lifestyle 

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

Chinese consumer behaviour: myths and reality

The middle class is shrinking

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

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

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

The luxury shame impact on the HNWI and the UHNWI  consumption

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

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

Asian tourism rather than Western tourism

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

China’s opportunities for growth

It’s not all bad

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

Consumer segments worth watching

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

The macro trends identified by NellyRodi

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

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

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

Credits: IADS (Christine Montard )

What: The struggle between retail transformation and real estate monetisation intensifies as department stores like Macy's face activist pressure to unlock property value, while HBC's Richard Baker demonstrates how real estate assets can finance acquisitions but rarely produce retail success stories.

Why it is important: This tension exemplifies the broader challenges facing department stores as they balance the immediate financial gains from real estate monetisation against the need for sustainable retail transformation and long-term viability.

Department stores' valuable real estate holdings have become both an asset and a liability in their transformation efforts. Activist investors Barington Capital and Thor Equities are pressuring Macy's to create a separate real estate subsidiary to monetise properties valued at over $9 billion, while simultaneously pursuing store closures and stock buybacks. Meanwhile, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions, including the recent $2.65 billion Neiman Marcus deal backed by $2 billion in junk bonds. However, historical examples like Lord & Taylor and Sears demonstrate that real estate monetisation alone doesn't ensure retail success. The sale of Lord & Taylor's Manhattan flagship to WeWork for $850 million in 2017 preceded the chain's eventual closure, highlighting the risks of prioritizing property value over retail operations.

IADS Notes: While Macy's faces pressure from activists to monetise its $9 billion property portfolio, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions like Neiman Marcus. However, as seen in cases like Lord & Taylor and Sears, focusing solely on real estate monetisation often fails to address fundamental retail challenges, highlighting the need for balanced transformation strategies.

US department stores’ real estate strategies reveal divergent approaches 

What: Luxury retail faces critical workforce crisis as 51% of employees plan to leave, highlighting urgent need for industry-wide transformation in employee experience and retention strategies.

Why it is important: This workforce crisis threatens the foundation of luxury retail's personalized service model, potentially disrupting the industry's ability to maintain customer relationships and drive sales, particularly as brands report that 68% of VIC clients follow their advisors to new employers.

The luxury retail sector is confronting an unprecedented workforce challenge as a global survey reveals 51% of employees plan to leave their current positions. This crisis emerges as retail staff face expanding responsibilities, requiring mastery of both traditional sales skills and digital fluency while maintaining high levels of emotional intelligence. The impact extends beyond mere staffing concerns, as research indicates 68% of Very Important Clients follow their advisors when they change employers. Employee dissatisfaction stems from multiple factors, including lack of empowerment (40%), feeling undervalued (33%), and poor work-life balance (61%). The situation is particularly acute in the USA and France, where 60% of staff are planning departures. Industry consultants suggest a shift from pure commission-based compensation to hybrid models that consider customer satisfaction and loyalty metrics. This crisis comes at a critical time when the luxury market is experiencing its first contraction since 2008, with Bain reporting a 2% decline.

IADS Notes: The luxury retail sector's workforce challenges identified in the CXG survey align with significant industry developments throughout 2024. While the survey reveals a concerning 51% turnover intention rate, proactive responses are emerging across the industry. In January 2024, luxury brands began implementing comprehensive training programs and retail academies to address the growing shortage of high-caliber sales associates. This approach was validated by Neiman Marcus Group's successful "Magic Makers" strategy, which achieved a remarkable 34-point increase in employee engagement while simultaneously driving $1 billion in remote selling. The industry's transformation is further evidenced by Central Retail Corporation's focus on adapting to a multigenerational workforce through flexible, individualized approaches. However, the challenge extends to leadership stability, as demonstrated by multiple CEO departures across major retailers in October 2024, suggesting that the industry's workforce challenges span all organizational levels and require comprehensive solutions that balance traditional retail skills with emerging digital requirements.

Luxury brands face a retail labour crisis as 51% of employees plan to leave their jobs

What: Major department stores implement diverse transformation strategies in 2024, with Saks and Neiman Marcus moving toward a USD 2.65 billion merger, Macy's closing 150 stores while expanding Bloomingdale's and Bluemercury, and Nordstrom showing improvement amid potential privatisation plans.

Why it is important: The diverse approaches to transformation highlight how department stores are reimagining their business models through consolidation, store optimisation, and digital integration to remain relevant in an evolving retail landscape.

Department stores are pursuing varied strategies to address market challenges, with luxury retailers leading significant changes. Saks Fifth Avenue owner HBC has secured a USD 2.2 billion junk bond to finance its acquisition of Neiman Marcus Group, while simultaneously reviewing its store portfolio. Macy's is implementing its "Bold New Chapter" strategy, closing 150 underperforming stores through 2026 while investing in 350 "go-forward" locations and expanding its Bloomingdale's and Bluemercury brands.

Nordstrom shows signs of recovery and increased privatisation potential, while other mid-tier retailers like Kohl's and JCPenney adapt through leadership changes and value-focused strategies. These transformations come as consumers increasingly prioritise travel and experiences over material goods, forcing retailers to reimagine their value propositions.

IADS Notes: While Saks and Neiman Marcus near their merger with secured USD 2 billion funding, Macy's implements its "Bold New Chapter" strategy, and Nordstrom shows signs of recovery. The luxury segment particularly struggles as consumers shift spending to experiences, forcing retailers to adapt through store closures, digital integration, and strategic partnerships with technology companies.

How US department stores tried to reverse market share losses in 2024

What: Bulgari leads luxury retail's strategic pivot from China to India, launching digital operations and expansion plans as China's luxury market shows signs of maturity.

Why it is important: The initiative represents a pivotal moment in luxury retail's geographical rebalancing, as brands respond to changing consumer demographics and economic dynamics between Asia's two largest markets.

Bulgari's strategic expansion into India marks a significant shift in luxury retail dynamics, as the brand seeks to balance its portfolio amid China's changing market conditions. The Italian luxury house has launched its first digital boutique in India through a partnership with Tata CLiQ Luxury, while simultaneously addressing the slowdown in Chinese consumer spending, where luxury brands face challenges from housing market issues and growing second-hand markets.The move comes as China's luxury market experiences a notable transformation, with even prestigious brands offering significant discounts and facing competition from grey market sales. Meanwhile, India's luxury market shows promising growth potential, driven by rising disposable incomes and an expanding affluent class. Bulgari's CEO Jean-Christophe Babin emphasizes India's unique position, suggesting its potential surpasses other emerging luxury markets.This strategic pivot reflects broader industry trends, as luxury brands adapt to evolving Asian market dynamics, with India's ultra-high-net-worth population growing rapidly and Chinese consumption patterns normalizing to single-digit growth. The initiative could set a precedent for other luxury brands seeking to diversify their Asian market presence.

IADS Notes: Bulgari's strategic pivot towards India in November 2024 exemplifies a broader transformation in global luxury retail dynamics. This shift is supported by Kearney's September 2024 ranking of India as the most attractive emerging retail market , while Chinese luxury malls simultaneously face double-digit sales declines . The contrasting consumer behaviors are particularly noteworthy - while Chinese luxury consumers increasingly gravitate towards second-hand markets worth $8 billion , India's luxury market is projected to grow 15-25% annually. Bulgari's digital-first approach through Tata CLiQ Luxury aligns with India's expanding affluent consumer base, expected to reach 100 million by 2027 . This transition is further validated by McKinsey's projection of India's ultra-high-net-worth population growing 50% by 2028 , suggesting that Bulgari's India strategy could serve as a blueprint for other luxury brands seeking to diversify beyond China's maturing market.

Will Bulgari show brands the way from China to India?

What: Japan announces a JPY 2 trillion (USD 12.8 billion) stimulus package to revitalise its semiconductor and AI industries, aiming to rebuild domestic tech capabilities and support economic digitalisation.

Why it is important: This strategic investment addresses Japan's critical need for tech autonomy while supporting the retail sector's digital transformation, as Asian retailers have already demonstrated significant returns from AI implementation, with companies like Intime achieving 15% sales growth through AI adoption.

Japan's government is set to deploy a substantial JPY 2 trillion stimulus package to reinvigorate its position in the semiconductor and artificial intelligence markets. This initiative builds upon previous investments, with the government having allocated more than 4 trillion yen over the last three years under former Prime Minister Kishida Fumio. The package introduces medium-term support measures, including new bridging bonds and enhanced interest rates on treasury notes, while the Bank of Japan will utilize government bonds to support AI and semiconductor investments.The stimulus specifically targets domestic capacity building, offering continuous financial backing for new production facilities even if private sector support wavers. This approach aligns with Japan's Economic Security Promotion Act of 2022, which emphasizes stable semiconductor supply chains as a national priority. The package will support Rapidus, a coalition of eight major Japanese companies, in achieving ambitious goals including 2nm AI-enabled chip production by 2027 and the training of over 20,000 engineers in advanced semiconductor design.Despite potential challenges, including public skepticism toward digitalization and cultural resistance to technological change, the package represents a strategic move to reclaim Japan's historical leadership in sophisticated AI and chip development.

IADS Notes: Japan's ambitious JPY 2 trillion AI stimulus package aligns with successful AI implementations already transforming Asian retail. In July 2024, Lotte Department Store demonstrated the potential of such investments by reducing manual task time by 90% through AI chatbots , while Intime Department Store reported a 15% increase in counter sales after implementing AI systems . The stimulus package's focus on semiconductor development and AI infrastructure could accelerate similar transformations across Japan's retail sector, particularly relevant given the successful deployment of AI-powered customer service solutions by Shinsegae Department Store in October 2024 . This investment strategy mirrors the broader industry trend of moving away from traditional systems toward AI-driven solutions, as evidenced by global retailers' shift from Excel-based operations to intelligent automation . With Japanese department stores already adapting to demographic challenges through technological innovation , this stimulus package could provide the necessary foundation for widespread AI adoption in retail, addressing both workforce challenges and customer experience enhancement

Japan’s 2 Trillion Yen AI Stimulus

What: Visa's latest retail monitor reveals sustained growth in both in-store and online holiday sales across five key markets, demonstrating strong consumer spending.

Why it is important: These findings demonstrate how improved payment technologies and AI-driven solutions are enabling retailers to capture increased consumer spending across channels, setting new benchmarks for holiday season performance.

Visa's Consulting and Analytics Retail Spend Monitor has documented significant growth in holiday retail sales across five markets, encompassing both physical and digital channels. The comprehensive analysis reveals robust consumer spending patterns, with retailers successfully leveraging integrated payment solutions and digital technologies to enhance the shopping experience. This growth trajectory spans multiple retail sectors and demonstrates the effectiveness of retailers' omnichannel strategies during the crucial holiday period. The data underscores the increasing sophistication of retail operations, with merchants effectively utilising digital tools and payment technologies to meet evolving consumer preferences. The growth in both in-store and online sales indicates strong consumer confidence and highlights the successful integration of physical and digital retail experiences. This balanced performance across channels suggests that retailers have effectively adapted their strategies to capture spending across all customer touchpoints.

IADS Notes: The 2024 holiday shopping season marks a pivotal moment in retail's digital transformation. The record-breaking USD 74.4 billion in global Black Friday online sales demonstrates the increasing sophistication of digital commerce, while the growth in physical store visits to 126 million reflects successful omnichannel integration. This evolution is particularly evident in the widespread adoption of AI technologies, with 38% of shoppers utilizing AI tools for deal-hunting, fundamentally changing how consumers discover and evaluate offers. The projection of U.S. holiday retail sales reaching USD 1 trillion underscores the effectiveness of retailers' more nuanced promotional strategies, while Stripe's processing of USD 31 billion during Black Friday weekend highlights the crucial role of secure, efficient payment systems in supporting this growth. These developments collectively indicate a retail landscape where digital innovation, physical experiences, and financial technology converge to create more sophisticated and seamless shopping journeys.

Five global markets experience increase in holiday retail spending