What: Saks Fifth Avenue CEO Marc Metrick hosted a holiday dinner in Los Angeles to celebrate the upcoming opening of a new Saks store in Beverly Hills.

Why it is important: The event showcased the luxury and excitement surrounding Saks Fifth Avenue and its expansion plans, with a focus on fashion, style, and celebrity presence.

The CEO expressed excitement about the new store's expansion and dedication to personal shopping and styling. The event began with cocktails on the rooftop and featured notable guests like Mary Martin and Jonathan Simkhai. Guests dressed in glamorous attire, and the dinner took place in a private room at the Evan Funke Italian restaurant.

Saks hosts holiday dinner in anticipation of new Beverly Hills store

What: US department stores are reducing their size to face competition and remain relevant.

Why it is important: Basics of retail remain the same: location primes over store size.

In the U.S., the average store size is at its smallest in 17 years, a trend driven by the rise of e-commerce and a shift away from large department stores and big-box retailers. In the first three quarters of 2023, retailers signed leases averaging 3,200 square feet, the smallest since 2006. This change reflects a greater focus on experience and food and beverage outlets, with these types of companies signing nearly one-fifth of all retail leases, typically targeting spaces under 5,000 square feet.

Despite the shift to smaller stores, demand for retail space remains strong, with a low national vacancy rate of 4.8%. Retailers are adapting by using data analytics to tailor their inventory and infrastructure for local markets, enabling them to occupy smaller spaces, particularly in open-air shopping centres. Some fashion and luxury retailers, however, are expanding their store footprints.

As online shopping grows, representing about 15% of all retail sales, less store space is needed for basic commodities. Instead, service and experience-based businesses like nail salons, coffee shops, and yoga studios are filling retail spaces. The cookie company Crumbl, for instance, has opened over 900 small stores since 2017. Traditional apparel and big-box retailers are also downsizing their physical presence, with companies like Macy's focusing on smaller-format stores and closing larger department stores.

The closure of many big-box retailers and minimal new retail construction have contributed to low vacancy rates and rising rents. To cope with higher rent costs, retailers, including Crumbl, are opting for smaller, more profitable store formats. This trend signifies a significant shift in the retail landscape over the past decade.

The American store is shrinking

What: Department stores and popular stores in France recorded slight growth, while mass-market channels and hyper-supermarkets experienced declines.

Why it is important: The report reflects mixed fortunes in different distribution channels and a shift towards online sales in the fashion sector.

Sales of fashion items in November 2023 remained stable compared to the previous year, but down 4.9% compared to November 2019. Textile and clothing sales were flourishing online, with a 6% increase compared to 2022, than in physical stores, which saw a 1.4% decrease. The activity of fashion distributors, excluding online sales, increased by 0.3% from January to November 2023 compared to the same period last year.

The Fashion Institute (IFM) expects a 0.8% contraction in textile and clothing sales for the whole of 2023, with a stabilization of prices anticipated for the following year. Specialised chains continue to perform well, while multi-brand independents and hyper-supermarkets struggle.

Department stores in France celebrate growth while grocery stores lagged 

What: Sycamore Partners, a New York-based private equity fund, has shown potential interest in acquiring Macy's Inc.

Why it is important: The potential acquisition of Macy's could result in the sale of parts of the business to recoup costs, considering its real estate value is estimated to be between USD 6 billion and USD 11 billion.

The fund, with around USD 10 billion in committed capital, is reportedly considering a bid for Macy's, with the potential for an all-cash offer. Sycamore's possible interest stems from the opportunity to save on costs by eliminating Macy's board and dividends. The firm is also attracted to Macy's extensive real estate holdings, and unlike other private equity firms, Sycamore tends to hold onto retail brands for several years.

Sycamore has investments in other retailers, such as Staples, Torrid, and Hot Topic, indicating its active role in the retail market. Recently it acquired Chico's FAS Inc. and the  KnitWell Group comprising of Ann Taylor, Loft, and Talbots.

Who else could bid for Macy’s?

What: Macy’s Inc. reportedly received a USD 5.8 billion buyout offer, at USD 21 a share, by an investor group including Arkhouse and Brigade Capital Management.

Why it is important: If Macy’s were to accept the bid, it could face the challenge of balancing short- and long-term goals and objectives under new ownership, and its strategies might undergo shifts in alignment with the new owner's vision for the company.

This offer, viewed as low and offering a modest premium, has sparked a 19.4% spike in Macy's stock price, which closed at USD 20.77. The company's future value seems promising, with improved inventory control and the potential for a soft landing of the economy in 2024. The bid represents a 20.8% premium over Macy's market capitalization. The bid is about 5.4 times EBITDA, which represents a historically lower valuation.

The timing is less than ideal for Macy's, as it grapples with a low stock price, ongoing management transition, and soft business performance. The pending transition in leadership, with Tony Spring set to take over as CEO, adds complexity to the situation. An extended bidding war could lead to significant business disruption, posing a vulnerability for Macy’s.

Despite being labelled "a steal" by one source, it's unlikely that Macy's board would accept the reported offer at USD 21.A new owner could decide to break up the group by selling off pieces of the business, such as Bloomingdale’s or Bluemercury, to more than recoup what was paid for the whole company. Macy’s substantial real estate assets, valued between USD 7.5 billion and USD 11.6 billion, also adds to the complexity of the situation.

The advantage of going private is the higher profitability as expenses such as dividends and board member salaries could be cut.

Macy’s reportedly receives USD 5.8B buyout offer from Arkhouse, Brigade

What: Lidl reviews HR perks in order to attract and retain the workforce on a tough market.

 Why it is important: Can department stores compete in their human-intensive activities such as instore logistic and fulfillment positions for instance?

Lidl is set to significantly enhance its employee benefits from January 1, 2024. The company will offer 28 weeks of full pay for maternity or adoption leave, a substantial increase from the previous 14 weeks. Additionally, Lidl will provide paid leave for staff undergoing fertility treatments, allowing two full days off per treatment cycle with no limit on the number of cycles. The supermarket chain is also introducing five days of paid leave for those affected by pregnancy loss before 24 weeks and has expanded its compassionate leave policy to include five days of paid leave. These changes are part of Lidl’s commitment to supporting its employees' work-life balance and personal milestones. The company is also working towards becoming an accredited menopause-friendly employer.

Lidl doubles paid maternity and adoption leave

What: Google Cloud has unveiled Gemini Pro, an artificial intelligence tool that provides partners with next-generation generative AI models.

Why it is important: Gemini Pro offers advanced AI capabilities that can be harnessed to develop innovative applications, enhance customer experiences, and streamline operational processes for the retail industry.

The tool enables the development of various applications, ranging from customer service chatbots to marketing strategies, across retail, fashion, beauty, and other sectors.

Gemini Pro is currently offered for free and is touted to be cost-effective to run. It's positioned as a 'lite' version alongside other models, with a full-powered offering expected in 2024. This multimodal AI is designed to seamlessly understand and combine different types of information, including text, code, audio, image, and video. The release strengthens Google's AI efforts as part of its Vertex AI enterprise development platform.

Google’s next-gen GenAI hits the market

What: Shopping centers are shifting focus from retail to services and leisure to cater to changing customer preferences.

Why it is important: The move towards experiential offerings reflects a shift in consumer expectations, with a preference for leisure over pure commerce.

This trend is evident in France and other regions such as Spain, where the emphasis is on creating unique experiences for visitors. Developers are repurposing shopping spaces to include attractions like sports facilities, gaming arcades, and themed entertainment areas. Additionally, the redevelopment of shopping centers involves creating green spaces and free-access recreational areas to enhance the overall experience.

Leisure rather than shopping? Changing shopping centers

What: In a shift from pandemic necessity to strategic exploration, fashion and beauty brands are leveraging virtual stores as a hybrid of e-commerce and physical retail.

Why it is important: The goal is to attract and educate consumers, particularly Gen Z and millennials, ultimately driving brand equity and loyalty.

These virtual storefronts are designed to engage a younger audience with a gaming twist, recognizing the different approaches to shopping taken by consumers today. Brands like Bloomingdale’s, J.Crew, L’Occitane, and Laneige have introduced virtual stores featuring themed experiences such as ski slopes and chocolate wonderlands.

The success of these virtual stores is measured by factors such as time spent and social media mentions, with a focus on appealing to younger demographics. Gamification is a key strategy, with features like quizzes, treasure hunts, and mini-games boosting engagement and driving higher product click-through rates.

‘Gamified’ virtual stores target new generation of consumer

What: Harrods has introduced two new rooms – a holiday and swim room, as well as an evening and occasion-wear room, spanning a total of 10,000 square feet.

Why it is important: The introduction of Harrods' new holiday and swim room, as well as the evening and occasion-wear room, is significant due to the expansion of their offerings and the substantial revenue growth, reflecting the evolving consumer demand for luxury partywear and the strong performance of the company.

The evening and occasion wear area features four large fitting rooms and accommodates 38 brands, aiming to meet the growing demand for eveningwear, with a remarkable 50% category growth in 2021. The new brands joining Harrods include Koltson, Alex Perry, Celia Kritharioti, and Rodo, along with exclusive designs from Maria Lucia Hohan, Pamela Rolland, and Taller Marmo. In the holiday and swim room, permanent offerings from Missoni, Zimmermann, Eres, and Anya Hindmarch will be featured, alongside long-term pop-ups such as Pucci and Le Double J.

Harrods opens dedicated swimwear and eveningwear spaces

What: The WSJ has a look at the Executive Order issued by the US about AI and how it should be interpreted by companies.

Why it is important: AI can be either used as a painkiller (to reduce costs) or a vitamin (to enter new markets) - it is only a question of approach.

The White House has issued an executive order involving artificial intelligence, using the Defense Production Act, which has raised some eyebrows. This move is part of an effort to address the rapid evolution and potential impacts of AI, which has seen significant growth and development since OpenAI's ChatGPT was released 11 months ago. There is a mix of excitement and concern over AI's capabilities, with discussions on whether it will lead to job displacement, human obsolescence, wealth creation, or stringent regulation.

AI is viewed as a tool that could potentially automate a large portion of current jobs, with predictions suggesting it could take over 80% of the tasks within 80% of jobs. However, it's also expected to create new and better jobs. To understand AI's impact, it is likened to either a painkiller that reduces costs by eliminating lower-end jobs, or a vitamin that generates revenue by creating new markets and services.

The AI industry is at a stage where its capabilities and future impact are still uncertain, but it's expected to significantly reshape productivity and the workplace. The advice given is to approach AI with fundamental analysis, categorizing each application as either a painkiller or vitamin, while being cautious of overhyped expectations that could lead to disappointment.

Is AI a painkiller or a vitamin for companies?

What: Amazon is shutting down its two high-tech specialty apparel stores, known as Amazon Style. The company plans to focus on its online fashion shopping experience instead.

Why it is important: The closure of Amazon Style stores shows the company's shift towards prioritizing its online fashion shopping experience.

The stores, which opened in 2022, offered a unique retail approach, allowing customers to personalize their shopping experience using the Amazon app. However, the stores struggled to attract regular customers and faced challenges with their complex automated fitting room system. Despite the closure of the physical stores, Amazon remains committed to its retail ambitions and will continue to invest in its grocery stores business.

Amazon's fashion business, which includes both first-party and third-party sales, is estimated to be worth USD 67 billion. The company is looking to enhance its fashion offering with services like virtual try-ons and fit recommendations.

Amazon is closing its high-tech fashion specialty stores

What: The tourist boom, which has stopped in Europe this summer, is still flying high in Japan.

Why it is important: Department stores in Japan are taking the lion’s share with an uninterrupted growth for 20 months.

In October, tax-free sales in Japanese department stores reached a record high of approximately 257 million dollars (38.3 billion yen), the highest since 2014 and a 178.9% increase from the previous year. This surge is attributed to spending by foreign tourists. Officials anticipate continued growth in duty-free sales towards the year-end, fueled by robust inbound tourism spending. Overall, department store sales in Japan last month amounted to about 3 billion dollars (453.1 billion yen), marking a 6.1% year-on-year increase and the 20th consecutive month of growth.

Tax-free department-store sales in Japan hit record in October

What: EBay has launched a streetwear pop-up store called "Canal Street Wear" in New York City.

Why it is important: This offline presence complements eBay's efforts to attract customers in-person, such as previous pop-up shops and authentication events.

The store sells authenticated products from top-rated eBay sellers and allows customers to verify the authenticity of their own streetwear items. It features brands like Nike, New Balance, Louis Vuitton, Bape, and Chrome Hearts.

EBay has seen a significant rise in consumer interest in streetwear, with worldwide searches increasing by over 150% since the beginning of 2023. The company aims to make eBay the most trusted destination for streetwear by expanding its Authenticity Guarantee program.

The pop-up store is located on Canal Street, known for its counterfeit goods, and eBay has been combating fakes by expanding verification services and acquiring a digital identification and authentication firm.

EBay opens streetwear pop-up in New York City

What: The situation in Chile is tense for all retailers.

Why it is important: In many markets, we should expect large players selling off family jewels in order to maintain finances in the black.

Chilean retailer Falabella is initiating an asset sale valued between USD 800 million and USD 1 billion. This move, announced during a call discussing third-quarter results, is designed to strengthen the company's financial position. Falabella recently reported a reduction in net losses for the quarter, although it still operated at a loss, primarily due to decreased sales in its stores. The sale will focus on non-core assets, predominantly real estate, but specific details were not provided due to market regulations. The asset sale process is expected to take 12 to 15 months. Falabella has been facing challenges due to high inflation and reduced consumer spending, which have impacted earnings, especially in its largest market, Chile.

Chile’s Falabella has started a $800m asset sale to consolidate finances

What: Marks & Spencer has opened a new store at the Lakeside shopping mall in Essex, increasing its visibility at this popular centre.

Why it is important: The Lakeside store is one of the nine new M&S openings in November, representing a total investment of GBP 80 million and creating over 2,200 jobs across the UK.

The store has undergone a reconfiguration with a new, enlarged entrance as part of a GBP 20 million investment. It features spacious departments for Clothing, Home & Beauty, a 140-seat M&S Café, and highlights various M&S customer favorites and popular brands.

M&S Lakeside opening boosts visibility at key mall

What: Lotte, Shinsegae, and Hyundai have been fined by the Fair Trade Commission (FTC) in South Korea for unfairly passing marketing costs onto their store tenants without prior notice.

Why it is important: The fines highlight the significance of protecting tenants' rights and preventing retail operators from unfairly shifting marketing costs onto their store tenants.

The fines totalled KRW 648 million won (USD 420,230). This is the first time the FTC has uncovered such an illegal act between outlet operators and store tenants. Lotte Shopping received the highest fine of KRW 337 million. Shinsegae Simon and Hyundai Department Store were fined KRW 140 million and KRW 120 million, respectively. The outlet operators shifted a total of KRW 588 million in costs to tenants during special sales promotion events between 2019 and 2020. The FTC plans to increase monitoring of major retail players to protect tenants' rights.

Lotte, Shinsegae, Hyundai fined for unfairly shifting marketing costs to tenants

What: Galeria Karstadt Kaufhuf has reached an agreement with the United Services Union (Verdi) to secure a special payment for about 12,000 employees before Christmas.

Why it is important: The Verdi labour union has made significant progress in their lengthy negotiations with Galeria management.

The terms of the agreement includes a EUR 500 bonus in November, comprising a EUR 400 inflation compensation and a EUR 100  goods voucher. Part-time employees will receive these bonuses proportionally. Additionally, 50% of 2023's time credits will be converted into a one-off payment, with the rest turning into extra vacation days.

Further negotiations on wages and collective bargaining are set to continue in January 2024.

Galeria and Verdi reach special agreement before Christmas

What:  Neiman Marcus Group reported a decline in both revenues and profitability in Q1 compared to the previous year.

Why it is important: Neiman Marcus’s financial decline in its fiscal first quarter highlights the challenges in the luxury sector.

EBITDA dropped to USD 95 million from USD 112 million in the prior-year period. Sales also decreased to USD 948 million from USD 1.034 billion in the previous year. Same-store sales fell by 8% in the last quarter. The company attributes the decline in cash to working capital needs and deliberate investments in store improvements, digital upgrades, and strategic initiatives. Neiman Marcus Group remains profitable and has a healthy inventory position.

The CEO of Neiman Marcus Group expects a steady Black Friday weekend and acknowledges the challenges of a volatile macro environment and increased promotional activities in the luxury sector.

Neiman Marcus Group cites slowdown and cautious luxury consumers in Q1

What: The recent Altagamma & Bain report on luxury shows that physical stores are making a comeback at the expense of mutlibrand online players.

Why it is important: Department stores remains important places of interaction and discovery, especially in the luxury market, and have a card to play here.

After the pandemic, physical luxury retail stores are experiencing a resurgence, overshadowing online purchases, particularly from multi-brand e-tailers, which are now in decline. The pandemic initially boosted e-tail, favoring multi-brand platforms. However, as life returns to normal, physical mono-brand stores are thriving due to increased socialization and tourism, while digital channels are plateauing.

Luxury brands are opening fewer new stores, instead expanding and enhancing existing ones, turning them into experiential, cultural destinations. E-tail is now more a digital service supporting physical stores, with integrated online and offline customer experiences.

This renewed interest in physical stores is notably strong among younger consumers, especially Millennials, who are driving the duty-free luxury goods market through in-person shopping. Gen Z, a growing segment in the luxury market, also shows a preference for experiential, in-store shopping over online purchases.

Luxury brands are increasingly promoting their own e-shops, reducing reliance on multi-brand e-tailers and discount resale markets. This shift has impacted the profitability of e-tailers, who are also facing the burden of promotional costs previously covered by traditional retailers. Some e-tailers like MyTheresa remain successful, but others, like Farfetch, have seen significant declines.

To adapt, pure-play e-tailers need to revise their business models, focusing on cost control and flexible, innovative purchasing solutions through digital tools.

Luxury: the decline of multi-brand e-tailers

What: Hyundai is renewing 3 CEOs within its retail subsidiaries including the department store one.

Why it is important: Hyundai feels the urge to inject fresh blood in their structure in order to adapt faster to new market conditions.

Hyundai Department Store Group has undertaken a significant leadership reshuffle, affecting 40 high-ranking executives across its subsidiaries, including appointing Jeoung Ji-young as the new President and CEO of its department store division.

The changes, which are smaller in scale than the previous year's, are aimed at introducing change within a stable framework, focusing on areas essential for future growth.

This move comes after a two-year period without major changes in subsidiary leadership. The reshuffle reflects the broader sense of urgency within Korea's "Big 3" retailers to adapt to a retail landscape transformed by the rise of e-commerce and altered consumer behaviours post-Covid. Shinsegae Group has already made substantial changes in September, and Lotte Group is anticipated to follow suit with its own executive changes to tackle performance issues.

Hyundai retail division reshuffles its leadership

What: Central Group has acquired majority control of Selfridges, following the restructuring of its joint venture partner Signa Holdings.

Why it is important: Central Group exercised its right to convert a loan into equity, subject to regulatory approvals. This move solidifies Central Group's position as the owner-operator of the largest European luxury department store group, including Selfridges in the UK, Brown Thomas and Arnotts in Ireland, and De Bijenkorf in the Netherlands.

The company is also continuing the support of the properties it owns with Signa: the Selfridges group of stores in the UK, Ireland and the Netherlands, as well as KaDeWe in Germany, and Globus in Switzerland.

The deal for Selfridges was made in partnership with Signa two years ago, with each company taking a 50% stake in the retailer. Central Group's focus now remains on obtaining regulatory approval and completing the takeover.

Central Group takes control of Selfridges following Signa restructuring 

What: Liz Rodbell has been appointed as the President and CEO of the Hudson's Bay division in Canada, returning to the company after working as a consultant and serving as Steve Madden's group president of retail.

Why it is important: Liz Rodbell brings her extensive retail experience and success, signalling a focus on customer satisfaction and driving growth.

During her previous tenure at Hudson's Bay, she drove a 22% increase in sales. According to Richard Baker, the governor and executive chairman of HBC, Rodbell's focus will be on providing a relevant assortment, strong brand partnerships, and an inspiring shopping experience for customers.

Michael Culhane has also been appointed as the Chief Operating Officer and Chief Financial Officer of Hudson's Bay.

Liz Rodbell named President and CEO of Hudson’s Bay

What: A US asset management company foresees that Hong Kong will recover in the next 5 years.

Why it is important: Hong Kong has many strategic assets as a shopping destination which explains why there is still a lot of room for clever retailers there.

Hong Kong's prime retail rents are expected to grow by at least 3% annually over the next five years, the second-highest increase in the Asia-Pacific region, according to a PGIM Real Estate report. This growth, led only by Tokyo's projected 4% increase, is anticipated due to a rebound in tourism and steady economic growth in Hong Kong. In the first nine months of the year, retail sales in Hong Kong surged by 18.6%, and tourist arrivals skyrocketed, with a significant portion coming from mainland China and a growing number from Southeast Asia.

Despite this growth, the recovery in tourist spending lags behind arrivals, with spending in the first half of the year only at 55% and 18% of 2018 levels for overnight and same-day visitors, respectively. This lag contributes to Hong Kong's main shopping districts falling in global retail rent rankings. Tsim Sha Tsui remains the most expensive retail destination in Asia-Pacific but has dropped to third globally.

The report suggests that the recovery in mainland China's economy will positively impact Hong Kong's retail sector. However, risks such as a potential slowdown in China's economy and geopolitical tensions could impede the sector's growth. The strength of the US dollar, to which the Hong Kong dollar is pegged, also affects tourist spending patterns.

Hong Kong retail rents to see one of the highest increases in Asia over next five years