What: Mall owners are repurposing their properties with alternative uses and attracting tenants and experiences not typically found in shopping centers.

Why it is important: Department stores are increasingly leaving traditional mall formats in the US, leaving mall owners to get creative with their vacant space.

Diversification and densification are driving Maerich’s strategy, a California-based mall owner that expects 30 to 40 percent of its portfolio to be non-traditional use. Currently, that number is at 15 to 20%, as they repurpose square footage that was previously occupied by department stores and other retailers.

The California-based mall owner has transformed these vacant spaces and underutilized parking lots into residences, hotels, experiential concepts, fitness centers, and added more food and beverage options, as well as a variety of DTC consumer brands.

Malls and shopping centers need to continue to adapt as consumers’ discretionary spending goes more towards experiences and less on material goods, mall traffic decreases, and Amazon continues to be a top competitor.

To see success, the mall owner has been remerchandising and redeveloping its real estate with a differentiated, alternative mix of tenants in addition to adding square footage to existing assets that are productive.

Top malls today look much different than 10 to 15 years ago with the exit of department stores and other traditional retailers. Maerich is increasingly adding experiential-type tenants as they drive foot traffic and bring energy to the mall, which results in improving sales and better rent. Leasing volumes come from a mix of both traditional retail and nontraditional concepts like fitness centers.

The leasing environment is the strongest the company has ever had, with 93.6% of its malls leased a the end of the fourth quarter. The company is expected to see USD 56 million growth in annual rent income from store openings this year through the end of 2025.

In 2022, total revenues came to USD 859.1 million. Additionally, traffic is tracking 95% of pre-COVID levels and retail sales are closer to 115% of pre-pandemic levels.

Making the most of a mall

What:  A plan has been approved and should give the new CEO more freedom to transform the company

Why it is important:  Creditors are giving away 98% of the debt of the company, and half of the stores will close.

Galeria Karstadt Kaufhof's rescue plan has been approved by its creditors, bringing the German department store chain closer to safety.

The plan involves a major downsizing, with the closure of around 50 stores and creditors agreeing to drop an estimated 98% of their outstanding claims.

Under the leadership of its new Belgian CEO, Olivier van den Bossche, the company will focus on promising locations, rapid store conversion, digital investments, efficient processes, and localization.

The Belgian subsidiary, Inno, is not impacted by this plan as it has been profitable and not involved in the financial troubles. With the approval, the CEO now has more leeway to steer the company towards a positive future.

Galeria Kaufhof Kardstadt is getting out of trouble 

What: Ikea considers the US as a strategic market for their development.

Why it is important: The company has been extremely active on all continents, actively testing many different formats, as we continuously reported. The US iteration will certainly come with innovations once again.

IKEA is set to invest $2.2 billion in the U.S. market over the next three years, opening eight new stores and expanding its fulfillment network.

This move, which will create 2,000 jobs, defies the store-closing trend seen among other big retailers. According to IKEA US CEO Javier Quinones, the U.S. is a priority market and offers great potential for growth.

The company plans to open large-format stores, nine Plan & Order locations for design consultations, and 900 new pickup points for online orders. IKEA will also invest in digital innovations and improve fulfillment capabilities for its existing stores.

Despite predictions of a wave of store closures in the home furnishing sector, IKEA remains confident in its growth strategy, focusing on an omnichannel approach that combines physical and online retail experiences.

Ikea plans massive investments in the US 

What: The luxury conglomerate is focusing its investments on other booming Chinese cities as Hong Kong loses its relevance.

Why it is important: Hong Kong was previously Asia’s premium shopping hub, but interest has started to decrease as mainland Chinese consumers switch to shopping at home.

Mainland tourists were attracted to Hong Kong by lower prices and wide array of product offerings but anti-government protests in 2019 and the pandemic left Hong Kong devoid of tourists, causing major retailers to shut their doors.

As a result, post-Covid recovery in Hong Kong has been much slower in Hong Kong than elsewhere in China for LVMH. The conglomerate has already moved the regional headquarters of some of its brands and the group’s local office to Shanghai as well as relocated some senior executives to the mainland.

The portion of total luxury spending that’s done within the mainland is expected to almost double pre-Covid levels, with some of the biggest names in luxury already expanding their presence on the mainland as they reap the benefits of China’s reopening.

The duty-free island of Hainan and gambling hub of Macau are two emerging cities set to see success as luxury destinations. Hainan’s duty-free sales more than tripled in 2021 from 2019 and Macau’s visitor arrivals recovered to 62% of 2019 levels over the Easter holiday, only further accelerating Hong Kong’s decline as a luxury shopping mecca.

LVMH is shifting out of Hong Kong as luxury shoppers stay home 

What: ChatGPT is already used in a very practical way by some retailers in specific use cases.

Why it is important:  It might be a solution for any retailer looking at fine-tuning its economic business model and grapple some productivity points here and there.

ChatGPT can revolutionize retail in various ways, including:

-    Writing product descriptions: By inputting product information, ChatGPT can generate multiple product descriptions, speeding up listing processes for retailers like Snipes and Shopify. Human intervention is still required for editing and quality assurance.

-    Providing real-time shopping assistance: OpenAI has partnered with companies like Instacart and Shopify to create chatbots that assist customers with recipe suggestions and shopping based on dietary restrictions.

-    Managing inventory: ChatGPT can analyze sales data and forecast demand, helping retailers optimize their inventory management. Some companies, like Night Shift Brewing and Coca-Cola, have even incorporated AI into their marketing campaigns to showcase their innovative use of technology.

The ChatGPT current use cases in retail

What: Showfields and Neighborhood Goods are examples of retail stores reinventing themselves through showrooming, which helps brands to develop and emerge.

Why it is important: Department stores are in need of interesting brands, often coming from the digital world, in order to attract younger customers. Such a model could prove able to bring at the same time such brands while also making sure the operation would be profitable to a certain point.

Showrooms in retail are physical spaces designed to showcase products rather than just serving as a transaction point. Showfields and Neighborhood Goods are examples of showrooms that assign spaces to brands, custom-building and designing shop-in-shops.

Showrooms provide an economical and flexible way to bring products to customers in real life, including shop-in-shops, which rent spaces to showcase products. Showrooms also benefit the brands they host, as they act as a marketing platform.

Babylist, an online marketplace and registry for baby-related products, tested the concept with two pop-up showrooms before opening its first permanent showroom in Los Angeles.

Showrooms are a cost-effective alternative to digital advertising, and more brands and marketplaces are likely to turn to showrooms for their marketing needs.

Is showrooming an option for retail? 

What: Oreo goes direct and opens an experiential space.

Why it is important: Could department stores collaborate with CPG brands in order to create excitement and traffic around experiential spaces?

The first Oreo Cafe outside the US and the first in an airport has opened at Hamad International Airport (HIA) in Doha.

The cafe is a collaboration between Mondelez World Travel Retail, HIA, and Qatar Duty Free. Spanning 116 sqm, the cafe offers various Oreo-based sweet creations, such as milkshakes, muffins, and cheesecakes, and also features live sweets production at the Oreo Creations Bar.

The Oreo Cafe's design incorporates the brand's distinctive colors and includes digital walls and a retail space. Earlier this year, Oreo introduced a limited-edition cookie pack inspired by the K-pop girl group BlackPink.

Oreo opens a branded café in an airport 

What: Weakened by Covid, but having given itself new impetus with its Italik extension opened at the end of 2021, the Italie 2 shopping mall is being taken over by the Swedish group Ingka. The Scandinavian group is also taking over the Apollo office complex located in the building.

Why it is important: This is the fourth downtown shopping hub acquired by the company, which already has a presence in the heart of London, Toronto and San Francisco.

Although still including traffic drivers Zara, Uniqlo or Sephora, Fnac and Printemps department stores left the mall. Cells that could eventually accommodate an Ikea store?

Inka acquires Parisian mall Italie 2

What: The Dallas-based company will be opening a boutique space in LA, making it the retailer’s fourth location and first in LA.

Why it is important: The next-generation department store is continuing to expand and bring its concept across the US.

Neighborhood Goods will be opening a boutique space with an Italian restaurant in LA’s Silver Lake neighborhood.

The company has raised USD 27.5 million in funding to bring its concept all over the US with locations in New York, Dallas, and Austin, with plans to open in Newport Beach and Los Angeles.

Neighborhood Goods to open first store in Los Angeles

What: US retail sales rose 4.7% year over year in March, with purchases largely shifting to necessities and experiences.

Why it is important: While consumers were still spending, the year ahead is expected to be bumpy as the pace slowed in comparison to previous months and sales gains shrink as the year progresses.

E-commerce sales were up 13%, in-store sales were up 2.8%, lodging rose 23.5%, restaurants rose 11.6%, and sales at groceries advanced 5.6% according to Mastercard. Home improvement, furniture, and electronics continued to see a decrease in year-over-year growth.

The NRF has forecast that retail sales will grow between 4 and 6% this year for a total between USD 5.13 trillion and USD 5.23 trillion which would be slower than last year’s 7% growth, but still above the pre-pandemic average of 3.6%.

The chief economist for NRF stated that this year’s retail forecast was among the most difficult to prepare, as the economic environment in the US is anything but normal with historically low unemployment rates, consumers having excess savings, and the banking and financial markets being unsettled.

Consumer spending holding up but fragile 

What: The CEO shares the department store group’s initiatives for Milan Design Week and upcoming projects for its various branches.

Why it is important: Milan Design Week is one of the most important weeks of the year for Rinascente as the entire Milan store turns into a venue celebrating the world of design.

The department store restyled its Kartell and Vitra concessions, opened Poltronova and Klevering pop-up stores, and had Farm Rio take over the store’s Air Snake display installation for Milan Design Week. The store is also launching a new amaMI capsule collection for its Rina Shop homeware line.

Saint Laurent will be taking over Rinascente’s Duomo shop windows with a different installation for each of the store’s eight window displays.

Rinascente is revamping and renovating some of its other branches, investing EUR 28 million in its Roma Fiume store, its Turin and Florence locations to be completed next June, and the renovation of the men’s floor in Milan is set to be complete in May.

The Italian department store group closed fiscal 2022 with a total revenue just under EUR 800 million, on par with pre-pandemic levels. The Milan store accounted for over half of the total, while the Rome Tritone store generated EUR 150 million, and Florence, Turin, and Rome Fiume about EUR 50 million each.

Revenue composition has looked different in the last few years, as the share of business generated by local customers has significantly increased and tourism revenue has changed with customers from the Americas leading the ranking.

Rinascente CEO reveals Italian department store group’s new projects

What: Frasers Group is launching Frasers Plus, a membership program and flexible payment solution combined into one platform.

Why it is important: Frasers’ new platform will provide customers with unique access to offers across its brands and unify data in one place for the retailer.

The membership program and flexible payment solution will include all of the group’s brands, allowing customers to earn points and choose payment plans up to 36 months.

Frasers created the product through its acquisition of Studio Retail which had a proprietary and regulated flexible payment solution already established.

The platform will allow the group to better understand its consumers and keep its data in one central location.

The group stated that it would be looking to sell the platform as a white-label product to other retailers.

Frasers to launch own version of Amazon Prime with membership and flexible payments rolled into one

What: February retail sales in Hong Kong grew 31.3% to HKD 33.1 billion (USD 4.22 billion).

Why it is important: This is the biggest percentage rise in 13 years, a result of economic sentiment improving, visitors returning, and low figures earlier in the year.

As tourists continue to return and private consumption recovers, the retail sector in Hong Kong will continue to benefit.

Tourists’ arrival in Hong Kong in February increased nearly 557 times from the year earlier to 1.46 million, exceeding 1 million visitors for the first time in 3 years. Among visitors, mainland visitors jumped to about 1.1 million in February from 280,525 in January.

Jewellery, watches, clocks, and valuable gift sales, which were mostly to tourists from mainland China before the pandemic, were up 128.6% from 2022.

In volume terms, retail sales increased 26.9% from last year. Sales of clothing, footwear, and accessories in February grew 104.1% on the year after a 15.6% increase in January. On the contrary, online sales were down 4.1% year-on-year in value terms, compared with a 3.4% drop in January.

In January, retail sales increased 6.9% to HKD 36.2 billion and sales volume grew 5.1% in comparison to 2022.

Hong Kong monthly retail sales post biggest growth in 13 years

What: The luxury retailer is opening a new store in Bolzano, Italy that combines retail and fine dining.

Why it is important: Franz Kaler has partnered with fine dining destination, Meta, proving its commitment to experiential shopping.

The company is relocating its Bolzano store to a bigger space inside the Palais Campofranco, a 14th century estate that already serves as a shopping destination.

The all-white space covers 1,614 square feet, with contrasting beige carpet and arches that frame big screens for video projections. The store will carry a selection of luxury brands, including Gucci, Valentino, Fendi, and Christian Louboutin.

The retailer has also partnered with the fine dining destination, Meta, with a location on the top floor of Palais Campofranco and a Meta Suite opening on the second floor above the store.

Kraler also plans to add a Michlein-starred restaurant to its ski-slope lodge in Cortna d’Ampezzo in addition to refurbishing the location for lodging, as the 2026 Olympics will be held close by.

Franz Kaler is among a roster of multibrand stores in Italy who are redefining the wholesale business model, with 2021 sales of EUR 53.8 million.

Franz Kraler’s new store in Bolzano adds fine dining experience

What: Chileans chose Falabella as the most valued brand in the multi-store category based on the annual ‘Chile3D’ study carried out by Growth For Knowledge.

Why it is important: The recognition demonstrates the retailer’s commitment to customer satisfaction through its constant product offerings and service innovation.

The study was based on 4,800 people who evaluated 312 brands in 64 categories with a focus on consumer expectations in terms of digitization and trust building, as well as other variables relevant to the brand evaluation.

Falabella Retail is the most valued brand in Chile within the multi-store category

What: The UK retailer has launched a new kids offer with a collection targeting kids age 7-12.

Why it is important: The collection is a significant expansion for the retailer’s childrenswear offer and is the first time it has designed a collection specifically aimed at the tween market.

The company is looking to grow its share of the market cross a wide age range, including a range of external labels as well as its own brand. The retailer has added 10 new fashion brands for the spring season and is focusing on a more trend-led selection.

The children’s clothing market is estimated to be heading towards a value of GBP 7.3 billion by 2027 according to Mintel. In 2022, the market was worth GBP 6.8 billion.

The retailer has been focused on children younger than the toddler stage, as they have a 16% share of the UK nursery clothing market and are also the source of 34% of all strollers sold in the UK. Now, they are better positioned than ever to meet the needs of families as their children grow up.

John Lewis targets tweens with new kidswear deep dive 

What: The retailer’s chair has emphasized that she will preserve what makes John Lewis unique and listening to customers’ needs.

Why it is important: The business has a deep understanding of customers’ needs as a nearly a third of the UK population shop at the retailer.

The cost of living is at the top of UK consumers’ minds, followed by concerns about the environment which is changing their habits as they look to live more sustainably while also manage their spending.

A third of consumers are only buying clothes they need, with three in ten buying fewer treats for themselves according to White.

The retailer is testing fashion rental and also offering discounts to customers who recycle unwanted clothes and used beauty packaging.

The partnership’s mantra remains ‘value within values’ which has prompted Waitrose to cut prices by GBP 100 million while staying committed to fresh food counters and high welfare standards.

The group also plans to launch a new loyalty program next year, which will provide financial benefits, special experiences, and member events and rewards that encourage customers participate in recycling schemes.

Additionally, the partnership has hired a new head of loyalty and partnered with customer loyalty and marketing experts to deepen its relationships with customers and provide more benefits.

John Lewis boss Sharon White: ‘it’s critical we listen and act on what our customers tell us’

What: Retailers are facing the end of cheap loans as central banks around the globe are increasing interest rates as they fight the highest inflation in four decades.

Why it is important: Higher interest rates are forcing retailers to make tough decisions on what projects to pursue and where to make cuts.

In the US, the Federal Reserve set its benchmark rate at 4.75% to 5%, a level not seen since 2006, and in the UK, the Bank of England has increased its interest rates to 4.25%.

For consumers, this means less discretionary spending as mortgages are higher and interest rates on credit card balances increase. Retailers are already feeling the pain from this change in consumer behavior, in addition to facing the impact of higher rates themselves.

Debt payments are now a much bigger factor when deciding to open a new store, launch a new advertising campaign, or enter a new market as retailers will either have to scale back their plans or compensate for the high interest payments elsewhere.

An analyst from investment bank William Blair stated that it’s all about capital allocation, as running a levered balance sheet with debt frees up capital to invest, but when debt costs more, the upside isn’t there.

It’s critical for companies who have debt that is due in the near term to assess and understand the needs of the business as they have two main options: refinance at a higher rate or pay down as much as possible. Allocating free cash flow towards debt means less money to go towards growth and improvements, while refinancing can protect cash flow to fund investments which could result in higher returns. Borrowing more is also an option, especially for an urgent problem or can’t-miss opportunity.

Other alternatives to using cash to pay down a loan are debt-for-equity trade, restrictive covenants, or tying favorable loan terms to business performance.

Preserving cash in an economic downturn is critical. One way to increase cash flow is through reducing the amount of inventory commitment. Even a small inventory reduction, 5% or less, can result in saving tens or hundreds of millions of dollars.

Most importantly, retailers need to drive profitability while keeping operations as efficient as possible, as being a good performer makes the questions regarding financing easier to solve.

How retailers can navigate rising borrowing costs

What: The 159-years-old department store chain is built as a partnership, a very specific structure in the industry.

Why it is important: While such a capitalistic structure has been an asset in good times, it also needs to be properly managed in the current turnaround, in order to make the most of it.

Nish Kankiwala, the first-ever CEO of John Lewis, faces challenges like surging inflation, poor consumer sentiment, a £234mn annual pre-tax loss and a group net debt of £1.7bn. The retailer's partnership structure, which includes 74,000 employees, limits its financial options.

Kankiwala must address the company's net debt pile while investing in the business and returning it to profitability as part of Chair Dame Sharon White's turnaround plan (already well started with 16 store closures, thousands of redundancies, and new ventures, especially in housing). The company must repay a £50mn loan in December and two bonds worth £300mn each in 2025 and 2034.

Despite the challenges, John Lewis executives are confident in their ability to pay their debts, and the company is in robust financial health with a strong balance sheet and low net debt.

Why John Lewis’ specific structure is both an opportunity and a threat 

What: Experts in the retail technology space believe that physical stores will soon employ less people and rely on technology like avatars and robots.

Why it is important: The rise of technology in the retail space could be an answer to staff shortages and offer a better customer experience.

“Avatarizing service people” is how one German software development company is approaching it as they argue that self-service kiosks aren’t friendly or intuitive. The company, Humanizing Technology, offers a full-service experience with its cartoon avatars. From welcoming and directing customers, to recommending and up-selling products, as well as speaking multiple languages, the avatars can easily act as salespeople within the retail space.

Verizon offers Proto, a holographic human, which can pose and twirl just like a showroom model as well as communicate through body language and a voiced narrative that talks through the outfit. The 3D hologram gives a full body effect and shows how fabric falls and how items fit while also allowing customers to customize products on the screen. Burberry is currently rolling out Verizon’s Proto across its flagship stores and sees it as a way of bringing their VIP clients closer to their brand.

Hyservsn holograms offers products that can be custom scaled to suit any environment, with a large scale product being ideal for larger spaces like department stores. Their avatar allows 2-way interaction with a digitally rendered human avatar that has real-time conversations with users. The company also offers a high definition product display that can make a product appear to be floating in midair.

The retail space is becoming more phygital as these tools become more accessible and common within the industry.

The retail store of tomorrow will be staffed with avatars, robots, and holograms

What: The retailer has appointed Jason Morris chief technology and information officer.

Why it is important: Nordstrom sees opportunities to invest in new technology and continues to enhance its digital capabilities to better serve customers.

Morris will oversee the company’s technology functions, including engineering, data science, and analytics. He previously led Walmart’s global enterprise technology as senior vice president of enterprise business services and has more than 25 years of technology experience in the retail industry.

Nordstrom is rolling out radio frequency identification corporate-wide this year to better track and replenish merchandise. They have also been improving their data technologies to better understand their consumers and reflect that in their communication and services.

Nordstrom names new chief technology and information officer

What: Ikea is launching a virtual experiment able to show all the retailer’s product catalogue.

Why it is important: 10,000 products are visible in real size 3D as well as 60 room settings. Clicking on a monitor gives shoppers access to prices. QR codes give access to the Ikea website.

In Paris, a full Ikea store within 9 square-meters?

What: Research from SML Group found that a third of retailers say they are spending too much time manually processing returned items.

Why it is important: The rise in returns and finding impactful solutions has been an ongoing issue for retailers as 26% of retailers cite lack of staff as the main cause of the issue.

In 2022, retailers claimed that 30% of items are returned, with 47% of those returned items being sold at full price, 42% being sold at a discounted price, and 12% not being resold.

42% of retailers reported that they don’t have enough staff on the sales floor and 30% said that staff are spending too much time on mundane tasks.

Investing in item-level RFID technology is one solution suggested, as it can streamline back-end operations and send items back to floor quickly which then allows staff to be on the sales floor and help customers.

Retailers are spending too much time processing returns

What: Some Japanese department stores are starting to reap the fruits of their efforts when it comes to cost-cutting and rationalisation.

Why it is important:  Japan is a market where department stores started to feel the pinch years ago. The fact that they are able to turnaround is a sign that the format remains relevant in the country.

Three major Japanese department store operators, Takashimaya Co., J. Front Retailing Co., and Matsuya Co., reported significant increases in net profits for the fiscal year through February, as customer traffic rebounded following the easing of the COVID-19 pandemic.

Takashimaya's profit rose 5.2-fold to ¥27.8 billion, driven by luxury brand goods sales and cost-cutting efforts.

J. Front Retailing, operating Daimaru and Matsuzakaya stores, saw a 3.3-fold increase in profits to ¥14.2 billion, while Matsuya Co. experienced a 4.3-fold profit surge due to high-end goods spending by foreign tourists.

However, Sogo & Seibu Co., a Seven & i Holdings subsidiary, reported a fourth consecutive year of net loss, impacted by store renovation costs.

Industry executives anticipate a rise in customers from mainland China following the relaxation of Japan's pandemic-related border controls, but J. Front Retailing's president urged caution in overestimating the current situation.

Japanese department stores are increasing their profits