What: Macy’s is using a cocktail of tech and training to empower its customer-facing employees.

Why it is important: In-store staff are now here to contribute to 4 customer pillars: discovery, convenience, service and engagement.

Macy's has restructured its employee training and development programs to meet the changing role of stores and store employees (94,570 full- and part-time staff).

The US department store chain now focuses on two tracks: customer-facing front-of-house roles and backroom operational work, compared with spreading specializations across many different responsibilities, an approach which prevented them from “being able to meet the customer where the customer needs”.

Most customer-facing employees now receive generalized training, which provides greater flexibility for both workers and customers, with the goal to contribute to discovery, convenience, service and engagement.

The company has also introduced augmented reality technology in its beauty department, and uses IBM's Watson technology to provide product information on its website and in call centers.

Macy’s Store Officer on how the labour force is evolving

What: US department stores have reported concerning quarterly results, calling in for new decisions and strategies.

Why it is important: All eyes are on Macy’s, which has managed to increase their operating profit with a smaller store base, including smaller stores as well.

Department stores, including Kohl's, Macy's, and Nordstrom, reported declining sales in their recent quarterly earnings calls. The bad news was largely expected, which is why department store stocks did not fall dramatically after the reports. All three retailers reported a pullback in consumer spending across all income levels, with lower-income shoppers being hit harder. To clear out inventory, the stores relied on discounts, which hurt their gross margins. Also, Macy's and Nordstrom reported concerning trends from their credit card businesses, including higher credit usage, slower repayment rates, and increasing bad-debt levels.

Off-price giants Ross Stores and TJX expanded roughly 17% and 20%, respectively, while department stores saw a 3% decline in sales last fiscal year compared to 2019. In order to react, department stores are looking for solutions, including refocusing on their business model and reviewing the size of their stores.

Macy's and Nordstrom are already moving towards a smaller but more profitable business model, with Macy's having a smaller store base and Nordstrom winding down Canadian operations. Kohl's new CEO is pushing for existing initiatives to boost profits, such as adding Sephora shops inside stores and expanding the activewear assortment.

Macy's stock trades at a premium over Nordstrom and Kohl's, indicating investor appreciation for the smaller, more profitable model. A scale-back might be the only thing that fits department stores in the current consumer climate.

For US department stores, scaling down might be the future 

What: Retailers and brands are making plans ahead of pending textile regulations in the EU. But until green claims get approved by regulators in the European Union, retailers, brands, suppliers and customers are in a bit of a limbo.

Why it is important: Understanding how to prepare for compliance before it is pushed into effect is the big overlying question in the retail world. On March 23, 2023, the European Commission will reveal its proposed regulation for the Circular Economy Action Plan.

Textile laws are meant to be adopted over the next few years, but in the meantime there have been many delays due to attempts for increased clarity and accuracy.  The Circular Economy Action Plan ensures clothing sold in the EU is designed for longevity. Under the Ecodesign for Sustainable Products Initiative, by 2030 textiles sold in the EU market should be “long-lived and recyclable,” “free of hazardous substances,” and produced in “respect of social rights and the environment.”

A major area that will be addressed that impacts the fashion industry heavily will be on regulation regarding green claims. This can impact eco-labels, making sure that all claims are backed by data and are not vague, misleading, or unfounded.

What can companies do now while things get sorted out? Some state that it is important to show support by pledging to comply. The future will be digital, therefore traceability and sustainable initiatives will more than likely be backed by QR codes and digital passports. Overall fashion companies need to shift the focus to higher quality products and move away from fast fashion models in order to be ready for future regulation.

How to comply with EU textile laws

What: John Lewis employees are afraid that the minority stake sale might endanger their social model.

Why it is important: Even though the chairwoman strongly defended the model, it is hard to see how it can survive without controlling 100% of its shares.

Dame Sharon White, chair of John Lewis and Waitrose, has pledged to maintain the partnership status of the UK retailer for decades, despite considering selling a minority stake.

The company is grappling with heavy debts and increasing competition from online rivals, but White emphasized that the ownership structure would remain constant. Critics argue that bringing in outside investment could lead to demutualization, but White assured that any radical proposals would be discussed with the company's 74,000 employees first.

Last week, John Lewis reported a pre-tax loss of £234 million, and sales at supermarket Waitrose declined 3%. The company has increased its cost-cutting target to £900 million by 2026.

The John Lewis Partnership ownership model is not at stake according to Chairwoman 

What: Central Group now holds 49.9% of the KaDeWe shares. To date, KaDeWe was 100% owned by the Austrian real estate entrepreneur Rene Benko and his Signa Group.

Why it is important: Signa Group, already working with Central Group, also announced the closure of half of Galeria Karstadt Kaufhof locations. The two real estate groups operate department stores in Switzerland, Ireland and Great Britain.

KaDeWe has a new shareholder 

What: Online retailers are scrambling to keep free delivery from draining profits as costs climb and e-commerce contracts.

Why it is important: Experts state that the days of free delivery are numbered, as retailers look to lower shipping costs with retail margins shrinking.

Retailers like Amazon, Zara, Abercrombie & Fitch, and more are drawing the line at losing money on a service customers have come to expect. This has resulted in shipping cost reduction goals of up to 25%.

Many are adding fees for faster service, raising minimum purchase requirements, and making other changes that will shift more costs to consumers.

As a dominator in e-commerce, Amazon forced free and fast shipping in the industry and its latest moves are indicative of what’s to come. The online retailer hiked its annual Prime subscription, in addition to increasing purchase requirements to and charging for orders under the threshold.

Nearly three quarters of the top 1,000 US retailers offered free shipping on at least some orders, with 45% requiring a minimum purchase for that perk according to survey results from an industry research firm in August 2022.

Some retailers are dropping free shipping altogether or increasing product prices as they can’t compete with Amazon, meanwhile Amazon customers are questioning the benefits of Prime if they won’t receive free shipping.

Amazon, other retailers revamp ‘free’ shipping as costs soar

What: The Inditex group will remove its 'Join Life' sustainability "indicator" from all its garments, This decision seeks to pre-empt compliance with European legislation.

Why it is important: The company says it reached a point in the development of its strategy where it is no longer necessary to differentiate the products with this label.

The 'Join Life' label was introduced in 2015 as a tool to raise awareness among customers and staff about the use of raw materials and processes that have a lower impact on the environment. In 2022, the number of 'Join Life' items had risen to 61% of the 621,244 tonnes of items placed on the market.

In the last year, 50% of the fibres used by Inditex (88% of production) were of natural origin (i.e. naturally sourced filaments that can be spun into yarns, threads or cordage); while 40% of the remaining fibres were synthetic (made from polymers which are not produced naturally, but are produced entirely in a chemical plant or laboratory, almost always from petroleum or natural gas by-products) and 10% were man-made (formed from a natural component as a raw material which undergoes different transformations in a chemical plant or laboratory). In 2022, the company also leveraged recycling by bringing to market up to 78,675 tonnes of recycled materials, a 90% increase compared to 2021.

In order to continue advancing in its environmentally friendly strategy, Inditex is collaborating with the sustainability expert Quantis. This collaboration is aimed at conducting specific Life Cycle Assessments (LCAs) for the various raw materials used, as well as for the production processes involved in the manufacturing of the garments.

Inditex discontinues sustainability label 'Join Life'

What: An analysis looks at what’s changed between the two British department stores and where the two retailers have gone right and wrong.

Why it is important: The roles between John Lewis and M&S have reversed as M&S reports higher sales and profits, while JLP reports widening losses.

The department store model has morphed, as retailers move their focus from mono-brand businesses to offering multiple brands that they own, license, or stock on a wholesale basis, Marks & Spencer’s model has an advantage over John Lewis as they have a broader category spread.

John Lewis was an early mover in e-commerce, but as a store-based business, its success online meant physical stores generated less revenue. With this higher percentage of online sales, JLP sees more returns and higher fulfilment costs, while M&S is still enjoying online growth, as online only accounts for a third of sales.

Both department stores have been closing stores, with M&S being more radical and opening new branches. M&S is better positioned to take advantage of the recovery of physical shopping as they open key locations and have a network of 1,487 stores in comparison to JLP’s 34.

John Lewis doesn’t seem to be heavily affected by the cost-of-living crisis, as it launched its Anyday budget line and reports customers shopping across price ranges.  However, grocery plays a bigger role in its overall business and in an inflationary environment, customers are more likely to shop at discount grocers like Aldi and Lidl. M&S reported that its customers are resilient and able to keep spending.

JLP has seen more changes in management recently, with the appointment of a new CEO who comes from a background in food and is known for tough decision making. Marks & Spencer has seen management movements over the past several decades as well, but its big changes have been driven by insiders.

While John Lewis Partnership appears to be struggling, it still remains a key player as a retailer with its total sales reaching GBP 12.25 billion last year, with John Lewis sales reaching GBP 4.94 billion.

Analysis: as John Lewis mulls ownership tweak, why is it lagging rival M&S?

What: The Toronto-based company’s entire portfolio is now fur-free.

Why it is important: As North America’s oldest company, the retailer has deep roots in fur and will join other major retailers in going fur-free.

Hudson Bay made the decision to go fur-free in 2021 and stopped selling the merchandise this month. Its other entities, Saks Fifth Avenue and Saks Off 5th also followed through on their commitments.

The Canadian retailer’s heritage started in fur trade, two centuries before Canada was formed, with making this a big shift for the company.

Hudson’s Bay company officially goes fur-free 

What: A pretty long article summing up what is going on in the US when it comes to card payment processors and fees.

Why it is important: Visa and Mastercard are very well alive.

This report is technical and extensively reviews the following topics:

-    It compares Signature vs. PIN debit networks, including some context on market structure and potential savings for merchants from online debit routing;

-    It review the ‘Network tokenization’ — the ultimate siren song of Visa and Mastercard — and discuss why it was an unsuccessful strategy to stave off competition.

-    Finally, it also discussed why large merchants and the old school merchant acquiring giants are the big winners here.

Changes in the Card payment game in the US 

What: The German department store group has hired Olivier van den Bossche, former head of the Kaufhof chain, to take charge after the judicial receivership is over.

Why it is important: The new CEO is uniquely qualified to make a fresh start for the group as they come to the conclusion of the receivership procedure and look to come out of their financial difficulties.

The current CEO of Galeria, Miguel Müllenbach, has become CEO of Galeria’s parent company, Signa Retail and is also now a member of Galeria’s supervisory board.

Olivier van den Bossche was formerly the CEO of the Kaufhof department store chain for two and a half years, then worked the Dutch cosmetics producer Rituals, before returning to the department store sector last June as Galeria’s head of sales.

Struggling department store group Galeria Karstadt Kaufhof hires former director

What: KaDaWe Group and Signa Real Estate have begun the conversion of Carsch-Haus and the redesign of Heinrich-Heine-Platz

Why it is important: The upgrading of this central location will create an attractive shopping experience, making the department store a shopping destination for Düsseldorf.

Signa Real Estate will act as landlord of the space, which spans 10,000 square meters and has seven floors.

The completion of the entire project is expected at the end of 2024, with the opening of KaDaWe’s fourth department store in 2025.

The renovation of the historic building considers the wishes of Düsseldorf’s urban community, creating a high quality of stay and giving the central location an important role in the social life of Düsseldorf. With more space being made available through the elimination of a road, pedestrians and cyclists will have more room and people are invited to linger as seating and greenery will also be added.

KaDeWe Group is taking into account the local spirit of Düsseldorf while combining the new and established as well as the luxurious and progressive to offer a variety of brands and services to make the most digital department store in the world at this new location.

Signa Real Estate and KaDaWe Group celebrate groundbreaking in Düsseldorf

What: Despite the current economic pressures that are impacting consumer spending in the US, the National Retail Federation expect sales to grow between 4 and 6% this year.

Why it is important: The prediction is down from the 7% gain last year, but above the 3.6% average annual growth rate from pre-pandemic years.

Non-store and online sales are expected to grow between 10 and 12% this year, with brick and mortar stores accounting for about 70% of total retail sales despite omnichannel becoming the option for most consumers.

While inflation is continuing to drop, it is expected to remain between 3 and 3.5% this year. These price increases will be felt the most by lower-income consumers while higher-income consumers are expected to spend on traveling and dining.

The NRF also expects a deceleration in job growth in the coming months, with a projected unemployment rate of more than 4% by 2024.

NRF expects sales to grow between 4 percent and 6 percent this year

What: Harrods’ sales have overpassed their 2019 levels even though the Chinese customers are not back and the UK has been handicapped by the decision to scrap VAT refund for foreigners.

Why it is important: For the CEO, the question in 2023 is not to know if sales targets will be met when it comes to luxury brands, but rather to be sure the store will receive enough supplies from the brands, now that they have built their DTC capabilities.

The boss of Harrods, Michael Ward, has expressed confidence that the luxury department store will continue to prosper in an economic downturn. He believes that "the rich get richer in a recession" and that this will benefit Harrods. The store, which Ward describes as a "shop window to the world", has been trading ahead of 2019 levels despite being hit hard by the Covid-19 pandemic and a lack of tourists in London during lockdowns.

According to Ward, Covid-19 was a good opportunity for Harrods to refocus on local customers, which has been successful as British shoppers are now responsible for the majority of spending. This is in stark contrast to 2017, when Chinese nationals were the store's biggest spenders.

Despite the pandemic, the luxury goods sector is predicted to continue to grow by at least 3% to 8% in 2023, according to analysts at Bain & Co and Altagamma. French luxury group Hermès had an "exceptional" year, with a 23% jump in annual sales, and industry giant LVMH posted record profits for 2022.

Ward also commented on the UK's relationship with the EU, calling the Windsor framework, designed to reform Northern Ireland's post-Brexit trade rules, "a real step forward". However, he noted that an optimal arrangement is not yet in place.

Overall, Ward's comments suggest that Harrods is in a strong position and will continue to thrive, even in difficult economic times. The store's focus on local customers has been successful, and the luxury goods sector as a whole is predicted to continue to grow.

For Harrods, there is no recession 

What: The UK department store is trading ahead of 2019 levels as leadership is confident in the retailer’s performance amid the economic downturn.

Why it is important: Despite economic downturn and threats of a recession, Harrods has seen an increase in customers purchasing premium items from super brands.

The managing director of the department stated that the rich get richer during the recession, fueling his confidence that the retailer will remain successful during the economic crisis.

Shoppers are increasingly purchasing goods from superbrands like Louis Vuitton and Hermès at the department store and the retailer is also seeing a trend of customers going for more premium items, making the middle ground of the market tougher.

Harrods trades ahead of 2019 levels

What: The Italian luxury brand will launch two new initiatives, Gucci Continuum and Gucci Preloved as part of its circularity strategy.

Why it is important: Gucci is experimenting with how to maximize its reach, value, and potential for environmental impact with as it experiments with the deadstock market.

Gucci is making the necessary systemic changes to create a circular economy with its current efforts. In addition to these two new programs, the luxury brand has also expanded its agriculture and cultural heritage programs and launched Gucci Hub last month, with hopes to become a resource for other brands to use.

Gucci Continuum is a platform that will showcase products made from Gucci deadstock materials with designs from a series of creative partners. The program is an opportunity for the brand to empower creativity while also giving deadstock materials a new meaning.

The upcycling market is an unproven marketplace, with various ways to give new life to deadstock materials. Gucci wants to experiment with the upcycling model to become more knowledgeable about different upcycling models and as a result, become more intelligent on how they implement waste reduction into their business model.

The resale program, Gucci Preloved, is an extension of the brand’s partnership with Vestaire Collective. The new initiative is more strategic than its previous resale market endeavors, with the hopes of educating customers and curating their own resale space.

The new programs offer further evidence to customers that the brand is building circularity into its business model. Gucci says that its trying to ensure that the impacts of its individual efforts add up to a bigger unified whole, with its circularity efforts having one coordinated strategy that leads to creating circularity and reducing impact.

Gucci launches new deadstock and resale programs as part of bigger circularity efforts

What: Saks is hosting a weekend getaway for its invite-only loyalty program Saks Limitless.

Why it is important: The luxury retailer continues to deliver exclusive and personalized experiences for its top customers as they are important to its long-term strategy.

Saks Limitless clients and guests will be treated to complimentary luxury experiences in Aspen. The program currently includes more than 5,000 top clients across the Saks Fifth Avenue business with around 20 guests participating in the weekend.

The trip hosted by Saks Limitless demonstrates Saks’ commitment to providing high-value clients with exclusive experiences and how they bring the Saks experience to life in ways that are relevant to their customers’ lifestyles.

Saks to host weekend in Aspen for top clients and influencers

What: Nordstrom is optimizing its supply chain as one of three priorities outlined in its “Closer to You” strategy to improve financial performance.

Why it is important: After its Q4 net sales fell 4.1% year over year, Nordstrom is hoping to improve its customer experience, increase sell-through and reduce markdowns by placing the right assortment with the right depth closer to the customer.

The US-based retailer has connected the company’s store and supply chain inventory in individual markets to increase product availability while reducing shipping speeds and allowing customers to receive orders in a variety of locations.

Its second priority is to increase inventory productivity after weathering issues related to stock levels, receipt flows, and more.

The company's third priority is improving Nordstrom Rack’s performance as its sales declined 8.1% year over year in Q4.

Supply chain optimization is a top priority for Nordstrom this year

What: The company requested a safeguard procedure in an attempt to overcome significant financial difficulties.

Why it is important: The chain, already shaken by the pandemic in 2020 and 2021, was unable to recover in 2022, with households limiting their spending on clothing, in a context of high inflation. The troubles at Peek & Cloppenburg Düsseldorf add to a list of struggling retailers in Europe, including Galeria Karstadt Kaufhof which announced the closure of a large number of establishments.

Peek & Cloppenburg has 2 independent entities, the Düsseldorf branch and the Hamburg branch, the latter not being affected by the triggering of the safeguard procedure. The 67 Peek & Cloppenburg Düsseldorf’ department stores – all in Germany – as well as its e-commerce remain open.

The group warns that a significant reduction in administrative staff, including at the management level, will be necessary. At this stage, there should be no redundancies in the 67 points of sale.

Peek & Cloppenburg Düsseldorf bought Magasin du Nord in May 2021.

Peek & Cloppenburg Düsseldorf is in difficulty

What: Bloomingdales has named Denise Magid as its very first chief merchant.

Why it is important: The retailer has added a layer of management in a structure that’s more aligned with competitors’ senior ranks.

Despite competitors long having chief merchants in place, Bloomingdale’s has never had anyone in the role. The appointment is timely as their merchandising and buying are rapidly changing and getting more complex through the adoption of additional channel formats.

The new role is intended to drive the strategic direction and performance of the retailer’s merchandising initiatives, be responsible for new partnerships and enhance existing ones, expand the brand matrix and product assortment, and influence the future growth of the Bloomingdale’s brand.

Magid has been serving as the department store’s executive vice president and general merchandise manager for ready-to-wear, center core, concessions, and outlets.

Denise Magid becomes Bloomingdale’s first chief merchant

What: The improvement of the private labels offering in the US has encouraged customers to drop name-brand CPGs.

Why it is important:  A similar upward trend has taken place within most department stores having food private labels. It is significantly contributing to the recognition of the retailer’s name.

While during the pandemic, famous name-brand CPGs were winning market shares, the post-pandemic supply chain issues as well as the poor growing season paved the way for private labels as customers started to hunt for bargain. Inflation and higher prices finished to encourage customers into buying private labels.

According to Retail Dive, in the US, 73% of current private labels shoppers plan to keep on buying them even as the economy improves, now that most American retailers have improved both the quality and selection of their private label offerings. In reaction, name-brand CPGs have decided to stop raising prices to spur demand.

75% of US grocery shoppers plan to stick to private labels 

What: In China, large e-commerce players are triggering a price war in proportions never seen before.

Why it is important: What happens in China does not stay in China anymore, and this might give ideas to other large e-commerce players in the rest of the world, in order to boost demand and get rid of stocks.

JD.com, a Chinese e-commerce giant, has launched a subsidy campaign worth RMB 10 billion ($1.4 billion) to compete with rivals Alibaba and PDD Holdings. The promotion covers a range of items, including iPhones, earphones, air conditioners, and groceries like milk.

JD.com is also offering double compensation to customers who can find the same product at a lower price on competitor sites, such as Pinduoduo and Alibaba's Tmall. This is JD.com's largest sales promotion event in history.

Jd.com begins largest ever promotion 

What: The French luxury giant is betting on higher prices and a suite of emerging supply-chain initiatives to help keep growing its business while cutting total greenhouse gas emissions.

Why it is important: Kering is focusing on exclusivity and higher-priced products that lean into the idea of "value over volume" are one way Kering is aiming to decouple business growth from environmental impact.

In its original positioning, Kering’s environmental targets were focused on reducing impact relative to sales, but that means as long as the business is growing, so is its footprint. Therefore, the company adjusted their targets to focus  on an absolute emissions reduction of 40 percent across the supply chain by 2035.

Kering’s adjustment proves that brands and retailers will need to think differently about production and consumption as there is a direct relationship between the amount that brands produce and environmental impact. This is why Kering is focusing on ‘value over volume’ and plans to focus on quality and exclusivity while improving raw material sourcing, efficiency in supply chains, and sales channels and services.

BUSINESS OF FASHION ARTICLE

VOGUE BUSINESS ARTICLE

What: Linc CX platform launched a new integration with the AI-powered ChatGPT at the Shoptalk conference in Las Vegas.

Why it is important: A new breed of customer service is coming to the retail industry with AI-powered tools like ChatGPT.

It has been less than a month since OpenAI released the software tools allowing it to integrate into other companies’ systems, however Linc has been testing the feature since the beginning of the year.

Product inquiries, questions about service policies and brand stories are a few areas that were highlighted where generative AI dramatically improves conversation quality.

Linc platform users can leverage generative AI models where it fits, but still have control over the conversations and be able to automate workflow applications that OpenAI models aren’t designed for within one solution.

Linc noted the need to step in and fill the gaps that ChatGPT can’t address, as the technology is still basic in some areas that humans are better at. Fully automated customer service would be a disaster presently, which was demonstrated through tests with customer service requests that the bot couldn’t understand due to vague phrasing.

While customer service in the retail industry has been transforming significantly as brands leverage AI, businesses should be cautious and not be too complacent when it comes to technology, as tools like ChatGPT are only one ingredient to successful customer experience automation.

OpenAI’s ChatGPT heads to retail customer service via Linc