What: TikTok seeks local alliances with e-commerce players to go around regulation.

Why it is important: TikTok growingly shapes culture and consumption, department stores have to follow suit and adapt.

TikTok is set to acquire a 75.01% stake in PT Tokopedia, the e-commerce arm of Indonesia's largest tech company PT GoTo Gojek Tokopedia, with a long-term investment of $1.5 billion. This move follows Indonesia's October ban on online shopping via social media, which led to the closure of TikTok's e-commerce service in the country. The partnership begins with a pilot period under regulatory supervision. With Indonesia's large and active social media user base, including 125 million TikTok users, this deal marks a significant expansion in the region for TikTok.

TikTok to invest in popular Indonesian e-commerce app

What: Returns are a retailer’s nightmare when it comes to e-commerce.

Why it is important: many solutions are being explored, from charging returns, asking customers to return items in stores, or letting them keep the goods.

Online retailers are grappling with high return rates, costing them significantly. Around 20% of online purchases are returned, resulting in a $642 billion annual expense. This issue is prompting retailers to explore various strategies to reduce these costs:

1. "Keep It" Policies: Faced with high return costs, 59% of major retailers, including Amazon and Walmart, are adopting "keep it" return policies. This approach, while cost-effective in the short term, is not sustainable due to potential abuse by customers.
2. In-Store Returns: Encouraging customers to return items in-store is another strategy. This not only saves on shipping costs but also increases the chance of additional purchases by customers and immediate restocking of returned items.
3. Charging for Returns: To deter excessive online returns, about 40% of retailers now charge for returns. This includes companies like JC Penney, Zara, and H&M. While effective in reducing returns, this approach may be unpopular with customers.
4. Enhancing Online Shopping Experience: Retailers are investing in technology to improve size and fit estimations. For example, Bershka collaborated with 3DLOOK for a virtual fitting room, significantly reducing return rates. Zara uses user-generated photos to give a realistic view of their products, enhancing customer satisfaction with their purchases.

These varied approaches reflect the urgent need for retailers to address the high cost of returns, balancing customer satisfaction with financial viability.

The billion dollar return nightmare: Why retailers are enabling ‘Keep It’ policies

What: In Singapore, rents become increasingly disconnected from the actual state of the business.

Why it is important: Is Singapore poised to become a new playground for regional players looking for new markets?

CapitaLand Integrated Commercial Trust (CICT), Singapore's largest private mall operator, has seen moderate business across various consumer segments recently, reflecting a wider retail slowdown in Singapore. Despite this, the company reported positive metrics in the first nine months of the year, including a 4% year-on-year increase in tenant sales per square foot, with higher growth downtown due to returning international tourists. Mall foot traffic and retail occupancy (99%) also increased, contributing to a 9.8% rise in gross revenue and 6.8% in net property income.

However, a slowdown is apparent in the third quarter, with lower growth rates in revenue and net property income. Turnover rents, which depend on tenant sales, could be impacted if sales continue to be under pressure. Retailers are facing rising occupancy costs, potentially affecting their margins.

Retail sales in Singapore appear fragile, with non-auto retail sales dropping in October. While food and beverage sales have been strong, there was a noticeable slowdown in October. CapitaLand's growth categories include shoes, bags, leisure, and entertainment, with food and beverages also performing well. Home furnishings, however, declined significantly, likely due to the broader economic slowdown and consumer caution.

Tourism, particularly in downtown malls, has been positive but has not yet returned to pre-pandemic levels. The outlook for Singapore's retail sector is cautiously optimistic, with expectations of a recovery in international arrivals by 2024 and moderate retail space openings planned for the next few years.

E-commerce remains steady, accounting for around 15% of retail sales. CapitaLand has been adapting its tenant mix to reduce vulnerability to e-commerce, focusing more on food and beverage, leisure, and entertainment offerings. Special events, or "proactive stakeholder engagements," are also part of their strategy to maintain consumer interest.

Singapore malls face high rents and stalled sales

What: Lotte Group has initiated the construction of an AI-powered Customer Fulfillment Center (CFC) in Busan in collaboration with UK's retail tech firm, Ocado.

Why it is important: Lotte seeks to differentiate its grocery services by adapting them to fit the Korean lifestyle, including eco-friendly delivery methods and strategies catering specifically to apartment living.  The company plans to utilize data and AI for efficient inventory management and automated processes, including delivery routes.

This endeavour marks Lotte's expansion into the online grocery market, aiming to compete with companies like Coupang and Kurly. The CFC, employing the Ocado Smart Platform, promises enhanced spatial efficiency and a doubling of product capacity compared to conventional centres.

The initiative also aims to enhance the online shopping experience, with up to 33 daily dispatches and a focus on analysing customer behaviour.

The project is expected to generate over 2,000 new jobs and is part of Lotte's larger plan to establish six OSP-based fulfilment centres nationwide by 2030.

Lotte breaks ground for its first AI-based fulfillment center in Busan

What: Fenwick has partnered with the football club Newcastle United, aiming to support local talent and creativity while putting the city and northeast region on the global map.

Why it is important: The collaboration signifies a significant development for Fenwick, reflecting its commitment to supporting the local community and expanding its global reach.

This collaboration includes benefits such as access to the hospitality box for football games and advertising opportunities. Fenwick's first advertising campaign, "Quiet No More," targeted at a younger audience, features moody images displayed across the U.K. Newcastle United's chief commercial officer expressed enthusiasm for the partnership, which extends to creating meaningful experiences to grow both brands internationally.

Fenwick named as luxury retail store partner to Newcastle United

What: SMCP enters India through a major deal.

Why it is important: The Indian gold rush has begun.

SMCP, the owner of French fashion labels Sandro and Maje, has entered a deal with Reliance to expand into the Indian market. The company plans to open stores in the Jio World Plaza mall in Mumbai, as part of a broader move by high-end European brands to establish a retail presence in India. SMCP's CEO, Isabelle Guichot, sees potential in India due to its growing wealth, young population, and lack of accessible luxury fashion labels. After initial experiences in luxury hotel outlets, SMCP, through its partnership with Reliance Brands, aims to open around 10 stores in India over the next three to five years, starting in Mumbai. The financial details of the partnership have not been disclosed.

France's SMCP strikes deal with Reliance to expand into India

What: J.C. Penney experienced a 10.7% decline in net sales to USD 1.5 billion in Q3, with credit card revenues decreasing by 18.6%.

Why it is important: There is a need for substantial time and no guarantee of success in turning the brand around given its position as a weak player in a declining retail segment, signalling the necessity for innovative and transformative strategies to ensure relevance and growth.

While merchandise gross profit improved by 270 basis points, the net loss widened by 76.5% to USD 30 million. The company's USD 1 billion turnaround plan, launched in August, showed positive results, with customer frequency up 300 basis points and average sales rising by 11% in Q3.

However, despite these improvements, the turnaround plan was regarded as modest in scale by GlobalData Managing Director Neil Saunders. The department store aims to overcome macroeconomic challenges and innovate to maintain relevance in a weak consumer economy. There's recognition that converting increased foot traffic into regular custom and harnessing it for sustained sales growth is crucial.

J.C. Penney Q3 sales decline, loss widens

What: Chinese tourists are back, but they now prefer experience and discovery over purchases that can be made online.

Why it is important: Department stores need to focus on experience, experience, experience (and know how to make money out of it).

Chinese tourists, once known for their shopping sprees in global luxury destinations, have changed their travel and spending habits post-pandemic. The new generation of travelers, mostly under 40, are veering away from traditional shopping-focused tourism, favoring unique experiences and places discovered through social media apps like Xiaohongshu (China's Instagram). This shift has impacted companies reliant on "travel retail," such as Estée Lauder and Shiseido, leading to a drop in shares and profit forecasts due to decreased spending by Chinese tourists in their preferred travel retail segments.

Luxury retailers, including Harvey Nichols, are feeling the pinch with reduced shopping by Chinese visitors in Hong Kong, prompting the closure of one of its stores. The pandemic has also accelerated e-commerce and luxury brand presence in China, reducing the price gap between China and tourist destinations, further influencing shopping behavior.

Despite a dampened interest in shopping, there's an uptick in travel, with young Chinese tourists focusing on creating personal travel narratives rather than purchasing goods. This trend is partly attributed to China's weakened economy impacting discretionary spending, with more Chinese opting to shop domestically.

However, there are signs of a gradual return to travel, with a surge in travel package sales during China's recent Double 11 shopping festival. Companies like Samsonite are optimistic about the eventual full return of Chinese outbound travel, preparing for a resurgence by the end of 2024.

Chinese tourists are back. They just aren’t shopping like before.

What: Saks hosts a private pop-up shopping event in the Fouquet’s penthouse in New York.

Why it is important: The event offers a unique and luxurious shopping experience for top clients and hotel guests, showcasing a curated assortment of merchandise and engaging in a virtual event to showcase holiday styling picks.

This event is the first pop-up to be held in the penthouse and aims to offer the opulence and comfort of a Parisian apartment to top clients and hotel guests. Saks has curated an assortment of merchandise, including women’s ready-to-wear, shoes, handbags, accessories, beauty, and kids' items for this event. New York stylist Julie Heller will curate the pop-up, showcasing luxury designer goods from Saks.

Saks partners with Fouquet’s New York to host a private pop-up shopping event

What: Frasers Group has decided to back out of its planned acquisition of SportScheck after the retailer filed for administration.

Why it is important: The decision by Frasers Group to back out of the acquisition of SportScheck highlights the ongoing financial crisis surrounding Signa and the challenges faced in the European sports market.

Frasers cited the ongoing financial crisis surrounding SportScheck's owner, Signa Holdings, as the reason for its withdrawal. However, Frasers still believes that SportScheck is an attractive asset in one of Europe's key sports markets and intends to work with the appointed insolvency administrator to potentially acquire the retailer's business/assets. This comes as Signa Holdings itself filed for insolvency due to a lack of necessary liquidity and severe economic pressure.

Frasers pulls out of SportScheck acquisition as it seeks pre-pack deal instead

What: The National Retail Federation (NRF) has launched the NRF Center for Retail Sustainability to address the increasing consumer demand for sustainable solutions.

Why it is important: This centre aims to promote net positive impacts in environmental, social, and community aspects, as well as economic gains within the retail industry. It will focus on advancing the circular economy by reducing waste, enhancing recycling, and using recycled and regenerative materials. Additionally, the centre seeks to improve supply chain transparency and sustainability by incentivizing more sustainable choices. It also aims to deepen retailers' understanding of consumer perspectives on sustainability and align with their values.

The inaugural event for the NRF Center for Retail Sustainability is scheduled to take place at NRF 2024: Retail’s Big Show in New York City, including a workshop dedicated to strategizing the future of circular retail.

NRF introduces new hub for retail sustainability

What: Decathlon has initiated the sale of properties housing around 90 of its stores in France, Spain, Portugal, Italy, and Germany, with the transaction valued at over EUR 600 million.

Why it is important: This strategic divestment reflects the evolving dynamics within both retail and real estate sectors, marking a notable development for the French sporting goods group.

The properties, covering approximately 400,000 square meters, have been purchased by US investor Realty Income, marking their entry into France and Germany. This move is significant as Decathlon remains the owner of about 40% of its French stores' premises, with France being its primary market, where it operates 325 stores and generated EUR 4.7 billion of its EUR 15.4 billion revenue in 2022.

Under the leadership of Barbara Martin Coppola, Decathlon currently operates 1,751 stores globally.

Decathlon sells premises of 90 European stores

What: Sogo & Seibu open a new regional destination with Exchange TRX Mall in Kuala Lumpur.

Why it is important: Every Asian department store chain now aims to be a lifestyle destination (just like malls).

The new Seibu department store, the chain's third international outlet following two in Indonesia, has opened at The Exchange TRX. Occupying about 23,000 square meters over four floors, it hosts over 700 luxury and Japanese brands, such as Chanel, Dior, Mulberry, and Hermes. Notably, it features the country's largest Beauty Hall, showcasing 116 beauty brands. The store's design was crafted by UK architect Cardy Papa, known for his work on Selfridges, Galeries Lafayette, and Brown Thomas.

Seibu's opening aligns with the launch of The Exchange TRX, a significant retail and lifestyle hub spanning 1.3 million square feet and hosting 400 stores. This development marks the Malaysian debut of major retailers like Gentle Monster, Shake Shack, and Drunk Elephant. The Exchange TRX positions itself not just as a retail mall, but as a premier destination offering the best of Malaysia to both locals and international visitors.

Sogo & Seibu opens its first department store in Malaysia

What: John Lewis will close all its stores for Christmas.

Why it is important: How do you balance employees’ well being with the need for profit?

John Lewis has announced that it will close all 34 of its stores on both Christmas Day and Boxing Day, joining several other retailers in giving staff time off during the festive period. While John Lewis stores will operate normally from December 27 to New Year's Eve, individual store hours may vary. Its sister brand, Waitrose, will also be closed on these days. Other retailers like Aldi, Home Bargains, Iceland, Lidl, Poundland, and The Range will similarly shut their stores on Christmas Day and Boxing Day, with some extending closures to New Year's Day, as part of an effort to give employees a well-deserved break.

John Lewis to close all 34 locations for two days over Christmas to give staff time off

What: Ikea is launching a 19-piece limited-edition fitness collection called Dajlien.

Why it is important: The collection aims to bridge the gap between home and active life while recognizing that training can take many shapes and forms.

With products ranging from $4 to $135, the collection includes training weights, an air purifier, an exercise mat, and a belt bag. It was developed to address the trend of women and teen girls dropping out of sports and fitness activities. The products are sleek and designed for small-space living, with storage units for the equipment. The items feature unique geometric shapes and are intentionally designed to look different from typical fitness gear.

It is set to launch in January and will be available for six months or until sold out, and it's intended to offer at-home fitness options for everyone, regardless of space or level of fitness.

Ikea launches limited-edition fitness collection

What: For the BCG, implementing AI mainly means transforming minds.

Why it is important: Tech usage is not a decision, it begins with people.

The promise and complexity of implementing generative AI can delay adoption. Leaders need clarity on where and how it can enhance productivity and transform processes in their organization. BCG's diagnostic provides this clarity so companies can set the right ambitions, define a roadmap, make key choices, and orchestrate the AI-enabled transformation to capture value quickly.

The BCG evaluates the potential productivity impact of AI on every function and activity level. This shows the highest value pools, ensuring companies prioritize the most promising uses of AI. It also assesses how jobs and skills need to evolve to optimize results. This shapes workforce strategy and change management to equip people to harness AI's potential.

With diagnostic insights, companies can set realistic yet aspirational goals for AI, map deployment waves starting with quick wins, make decisions on tracking success and driving adoption, and orchestrate the transformation through coordinated upskilling, workflow redesign, and change management. This creates maximum enterprise value. Without a diagnostic, even digitally mature firms risk wasted investment and missed competitiveness from AI.

BCG's diagnostic cuts through the complexity, so companies can confidently leverage AI to enhance productivity, reimagine processes, support their workforce through the transition, and lead in their industries.

The path to generative AI begins with a workforce diagnostic

What: LLMs come with inherent limitations that leaders need to understand.

Why it is important: The transformative nature of LLMs and GenAI is too important for the mechanisms to be ignored by decision-makers.

Large language models (LLMs) like ChatGPT are transforming businesses with their ability to generate detailed, humanlike responses in plain language and code. ChatGPT rapidly gained 100 million users, and in the first half of 2023, AI startups received over $40 billion in investments, indicating significant interest in LLM applications.

Despite their capabilities, LLMs can be misleading due to their humanlike text outputs, which can be mistaken for human intelligence. Understanding their mechanics and limitations is crucial for effective application in businesses. LLMs predict text sequences using machine learning, with advancements like neural network transformers allowing for more context-aware responses. The model’s size, training data quality and volume, and context window size are key to its performance.

However, LLMs have significant limitations:

1. Reasoning: They struggle with complex logical reasoning, often producing errors in multistep logical tasks.
2. Knowledge/Expertise: LLMs are limited by their training data and can generate outdated, incorrect, or "hallucinated" information.
3. Understanding: They may not fully grasp the context or details of prompts, leading to incoherent or disjointed responses.
4. Planning/Execution: LLMs can suggest impractical or naive actions due to limited understanding and reasoning capabilities.

In business, these limitations can lead to unreliable outputs. Effective application requires complementing LLMs with human oversight and other technologies. Keeping humans in the loop is essential for validating AI-generated content and translating complex business problems into effective prompts.

To enhance LLMs, researchers are working on augmenting them with reasoning engines, domain-specific training, and reinforcement learning from expert feedback. Businesses should stay informed about these advancements and carefully consider the context in which LLMs are deployed, especially in high-stakes or logic-intensive scenarios. Proper understanding and application of LLMs, combined with complementary technologies and human oversight, can maximize their potential while mitigating risks.

The Working Limitations of Large Language Models

What: The Financial Times reviews the reasons why Farfetch is facing a reckoning now.

Why it is important: The disappearance of Farfetch could induce new opportunities for agile department stores, but also new threats if they are late to react and if another player does.

In 2018, Farfetch, led by founder José Neves, went public on the New York Stock Exchange, initially achieving a high valuation with strong investor interest. However, five years later, the company's situation has drastically deteriorated. Farfetch's shares have plummeted by over 97% from their peak, reducing its market value from around $24bn in 2021 to about $220mn. The company now faces a critical choice: to find a "white knight" investor or to go into administration.

Despite initial success and interest from major investors, Farfetch has struggled to become profitable. The company's business model, focused on online luxury retail, has faced challenges in securing products from top brands, which prefer direct control over their sales channels. The company's diversification efforts, including acquisitions like New Guards Group and ventures into different sectors, have not stabilized its financial woes.

Farfetch's financial struggles are compounded by a significant debt repayment schedule and a downgrade by Moody's to a deep junk status. The company's future is uncertain, with potential impacts on the wider luxury e-commerce industry and the many boutique retailers it supports. The industry fears that Farfetch's collapse could lead to widespread inventory issues, discounting, and pressure on larger retailers. Even if Farfetch survives, doubts remain about the sustainability and value of its business model in a luxury market increasingly moving towards direct-to-consumer sales.

Where did Farfetch go wrong?

What: The retail sector experienced a reduction in jobs during November, with department stores and apparel/ accessories stores shedding positions.

Why it is important: The decline in temporary jobs pointed to fundamental changes in the market, such as the subdued outlook for the holiday season and the continual growth of online shopping.

Overall employment growth exceeded expectations, with non-farm payrolls expanding by 199,000 jobs and the unemployment rate dropping to 3.7%. Factors contributing to this growth included the return of striking workers and stronger-than-expected employment expansion. It was observed that while seasonal layoffs in November and December led to job losses, these would likely be recovered in January and February. The data suggested that the labor market was gradually returning to normal, with the November gains reflecting a rate typically seen as necessary to keep up with U.S. population growth.

Retail jobs fall ahead of the holiday season

What: Boots is reportedly testing an AI-powered 'personal shopper' chatbot for its website to enhance the customer shopping experience, particularly in the beauty products segment.

Why it is important: There is a growing trend of AI utilisation among UK retailers to enhance customer engagement and drive operational efficiencies.

The chatbot is expected to offer product recommendations, with a focus on beauty items, although Boots has yet to officially confirm this development. The retailer has a longstanding partnership with Microsoft and utilises ChatGPT in other areas of its business.

Notably, UK retailers are at the forefront of incorporating artificial intelligence into their operations, with 54% of global e-commerce professionals indicating current or future AI use. Shop Direct, a major British fashion e-tailer, is set to introduce a sophisticated chatbot within its MyVery app and intends to integrate AI into decision-making processes related to offering credit terms. Luxury e-commerce platforms like Net-A-Porter are also leveraging AI to personalise the shopping experience for high-spending customers.

Boots is testing an AI personal shopper

What: Globus is not doing bad, but is in danger following Signa’s bankrupcy.

Why it is important: More than the health of the company, its obscure relationship with Signa could be the kiss of death for Globus.

The Swiss company Signa Retail Selection AG, co-owner of the luxury department stores Globus, has been granted a provisional debt restructuring moratorium by a Zurich court.

The moratorium, managed by provisional administrator Eugen Fritschi from the law firm Bühlmann & Fritschi, will last four months, ending on April 5, 2024. This step aims to keep Signa Retail Selection AG independent from the insolvency proceedings initiated against its Austrian parent company, Signa.

Since being sold by Migros four years ago, Globus is 50% owned by Signa Retail Selection, with the remaining share held by Thailand's Central Group. Globus has restructured to focus more on the luxury sector, which is less impacted by retail industry challenges. The Swiss brand currently consists of nine stores, employing 1,700 staff and 1,400 people working for various brands in the department store, including Louis Vuitton and Moncler.

Globus has bought some time in the Signa procedure

What: Rinascente has launched a lavish Chanel Wonderland takeover, marking a significant holiday season event.

Why it is important: The collaboration with Chanel signifies a pinnacle in Rinascente's strategy as a media company and a remarkable achievement in driving record sales.

The Chanel Wonderland concept encompasses multiple store floors, windows, facade, and arcade, featuring a captivating light show using Twinkly mapping technology and thematic decor. The lower floor is transformed into a dedicated Chanel Beauty universe, boasting an immersive pop-up boutique featuring makeup, skincare, and fragrance products, as well as a temporary café with a French-inspired menu. Various Chanel activations are dispersed throughout the store, including a dedicated shoe corner, an eyewear space, and a permanent Chanel Beauty corner.

Rinascente on track to hit EUR 1b in sales and unveils Chanel takeover

What: Central Group adds a new activity to its retail ventures: wholesale B2B business.

Why it is important: Diversification is a way to ensure dominance when it comes to final customers when a retailer becomes a cultural brand

Central Retail Corporation (CRC), a major Thai retail conglomerate, is entering the wholesale market with its new venture, Go Wholesale. This move is seen as a direct challenge to CP Axtra, the parent company of Lotus's and Makro, which is currently the dominant player in the Thai wholesale market. CRC plans to open over 40 Go Wholesale units in the next five years, starting with a large store in Srinakarin, followed by another in Chiang Mai, and more in Pattaya and Amata City.

Go Wholesale differentiates itself from Makro by being member-based (currently free membership) and primarily targets customers in the HoReCa sector (hotels, restaurants, catering) as well as food providers in institutional settings. CP Axtra, with its Makro stores, is a strong competitor, operating 164 units and generating significant revenue and profit in the Thai market.

CRC is not solely relying on wholesale for growth. The company anticipates a boost in its retail sector from recovering tourism, expecting 30 million international visitors to Thailand by year-end. However, challenges such as a downturn in tourism compared to pre-pandemic levels, a residential real estate crisis in Vietnam, and a slowdown in external trade impact CRC's diverse operations, which include fashion and hardline sales through Robinsons, Central department stores, and Nguyen Kim appliance stores.

Despite some areas of concern, such as a slight decline in food sales and the impact of rising interest rates on big-ticket purchases, CRC's problems are viewed as cyclical rather than structural. The company remains optimistic about its growth prospects, buoyed by its robust retail model, vibrant mall business, and the new wholesale venture.

In for a penny, in for a pound: Thailand’s Central bets big on wholesale

What: Ikea has injected GBP 35m into a pay rise and bonus scheme to support staff through the ongoing cost-of-living crisis.

Why it is important: Ikea believes that when its co-workers grow, so does the company, so further investment aims to enhance the financial stability and security of the employees.

Ikea has pledged to meet the new Real Living Wage, with hourly-paid staff within London stores receiving the new rate of GBP 13.15 per hour and employees outside of London will receive GBP 12 per hour. Hourly-paid workers will receive a 10% increase and salaried co-workers will see their pay jump by 5% from January.

The GBP 35m investment into pay follows a GBP 12m cost-of-living support package shared in January.

Ikea staff receive pay rise in GBP 35m investment