What: An opinion piece on the performance of pure players in the US, which is less impressive than the one of traditional retailers learning fast.

Why it is important: Stores act as a billboard for a retailer’s website, while online-only rivals are forced to pour money into adversiting.

Coresight founder, Deborah Weinswig, reviews the performance of pure players in the US in 2020 and 2021 compared to the multichannel retailers’ one.

The latter had their online sales growing considerably faster than the biggest online-only rivals, including marketplaces. As a result, the online-only retail segment is losing aggregate share to the multichannel rivals:  the 10 biggest online retailers include now Best Buy, Home Depot, Kroger, Target and Walmart.

Coresight sees little reason for this pattern to change in the future, as customers will be probably keeping on looking for omnichannel services, including BOPI, curb side pickup and in-store returns.

Are digital-first retailers losing the battle for online shoppers? 

What is it: A perspective on the battle between Amazon and Walmart.

Why it is important: Each one is moving towards omnichannel as fast and efficiently as possible. One from online, the other from stores.

According to an article in The Economist, and indeed, the many reports posted by IADS online, Walmart has fared well recently. Thanks to its size and reach, it has chartered ships in order to cope with recent supply chain problems and added 200 000 jobs to its 2.3 million workers in the last few months in spite of labour shortages. However, analysts are showing scepticism. They still prefer Amazon, of course, but also Target and Home Depot. Are analysts missing a turnaround story or is Amazon really a threat to Walmart?

The Walmart turnaround consists of two main elements:

• Its stores which hoppers are beginning to return to, and its efforts online with the Walmart+ subscription service. It is introducing new brands as well as improving delivery through its Spark network.
• It is also addressing the lower profits problem of online by attracting third-party merchants, adding an advertising business and developing fintech.

The question is whether these measures will be enough to save it from Amazon when Amazon is growing its distribution centre network at an incredible rate. It is already larger than Walmart’s and is due to double with another 140 million sq ft. The idea is to shrink delivery times so much that customers will have no incentive to go to stores. Walmart’s defence for the moment is that half its sales are from groceries which are mostly bought in stores, while Amazon’s Wholefood and Fresh supermarkets have been a disappointment so far.

Walmart bites back

What: Neiman Marcus CEO publicly stands against the US e-commerce split-up trend.

Why it is important: So far, only analysts and media took position against what is a wave propelled by activist investors, eager to generate signicant ROI out of an industry seen as belonging to the “old world” by investors sandards.

During an investors’ call, Geoffroy Van Raemdonck, CEO of Neiman Marcus, dismissed the idea of considering an e-commerce split from the main department store activity, joining in saying so the likes of media such as Coresight, Financial Times or Forbes. While Macy’s or Kohl’s are under pressure from activist investors to consider doing so, Neiman Marcus has the luxury of being private and therefore being spared the pressure.

Even though the Saks Fifth Avenue precedent allowed them to secure $500m in private funding, the move is perceived by analysts as being mainly financial, and, for this reason, potentially creating operational hurdles. Van Raemdonck sees the move as potentially interfering with the smooth integration of all customer channels.

Neiman Marcus Group pushes back against e-commerce split 

What: The Korean capital city is the first one to enter the Metaverse with a selection of services that can help in real life.

Why it is important: There is a first entry dividend in entering the Metaverse quickly, and department stores should take note.

The Seoul Metropolitan Government has announced it was planning to enter the Metaverse by creating a virtual ecosystem for all areas of its administration.

It is expected to be completed by 2023 as part of South Korea’s Digital New Deal and will feature a virtual city hall with “avatar public officials” which will consult members of the public and allow them to engage with the government in ways currently only available in the physical city hall, such as making complaints.

Services for the socially vulnerable (safety, convenience) will also be available. Finally, a Virtual Tourist Zone will engage prospective visitors by introducing them to virtual reproductions of the city’s tourist destination and landmarks. Finally, festivals, such as the Seoul Lantern Festival, will also be held virtually, extending the audience to potentially the whole world.

Seoul will be the first city to enter the metaverse

What: Tesco is now selling data to advertisers.

Why it is important: Amazon racked in USD 25 bn of revenue with their ad business, and Tesco wants a similar business too. Department Stores should also take note.

Tesco, which is a pioneer in loyalty cards in the UK, has launched a media and insight platform in partnership with Dunnhumby. It is all about letting advertisers run targeted ads on its systems and letting them know which one worked.

Tesco is maximizing the insight it can gather from 20 m loyal customers, making the most of its leading retail position, and even delegating to suppliers the possibility to run their own analysis on their products performances.

Tesco Media & Insight Platform 

What: The third Harrods venture in the UK exclusively dedicated to high end cosmetics and fragrances.

Why it is important: Harrods is expanding outside its Knightsbridge footprint to balance for losses related to lack of tourism and make the most of its image and product curation capabilities.

Harrods opens a new H Beauty location in Edinburgh, which makes it the 3rd in the UK after the first locations in Essex and Milton Keynes (reported here), exclusively selling cosmetics and fragrances.

The store, which is 2,100 sqm wide, will support local brands in addition to bringing accessible luxury to Scotland, a premiere for Harrods as it has never been present in the country so far.

Harrods plans to open 2 more H by Harrods in the coming 12 months.

Harrods opens new H Beauty location in St James Quarter Edinburgh 

What: Walmart is extending its safety net to employees in the wake of the new covid-19 variant expansion.

Why it is important: In these times of retail talent shortage, such a policy is a wonderful PR stunt aiming at attracting the best people looking for care and attention.

Walmart has decided to extend its Covid leave policy through March 31, 2022, in front of the Omicron variant. It provides 2 weeks of paid time off if an associate contracts Covid-19, or if the associate has to quarantine for whatever reason.

In addition, Walmart maintains its vaccination incentive, by granting USD 150 to each associate who becomes fully vaccinated. 90% of the HQ staff is vaccinated now, and vaccines at available at Sam’s Club and Walmart pharmacies across the country.

Walmart extends COVID leave policy, brings back vaccination incentives

What: Quarterly revenue increased roughly 39% from a year earlier to USD 979 million but declined 6.7% from 2019. Fewer discounts helped the retailer grow its margins, and the growth in full-price selling is expected to continue in 2022...

Why it is important: With a new business plan completed last fall, there’s a three-year, USD 600 million capex budget including USD 90 million in supply chain improvements, and USD 250 million in store renovations. A portion of the capex budget will target optimizing websites and apps for improved navigation, product recommendations and enhancing the group’s Connect clienteling tool used by sales associates.

Financial results

The luxury department store chain’s gross margins rose around 855 basis points from 2020 and 537 basis points from 2019. Comparable sales for the first quarter jumped 51% year-over-year and increased 7.3% from 2019. Last quarter NMG’s gross merchandise value was up 13% compared to 2019, and full price selling was up 41%. Regarding NMG’s volume outlook for the fiscal year: “We’ll be at more than USD 4 billion at the end of our fiscal year, running up to fiscal 2019 when we were more than USD 4 billion”, says Geoffroy van Raemdonck, NMG’s chief executive officer.

Customers and clienteling

New customer growth was up 18% and 17% of those placed a second order within 90 days of their first purchase. At Neiman’s itself, sales of its top 20 brands rose 61% versus fiscal 2019. Bergdorf Goodman online is driving “significant growth” compared to 2019: new customers grew by 40% and the average order value of Bergdorf’s online was up 14% in Q1

“Our loyal customers [those spending USD 10,000 or more a year at NMG] are as engaged as in the past but they have shopped less frequently in the last nine months. To better engage with customers, Neiman’s organization of more than 3,000 selling associates is segmented into different classifications depending on how associates interact with customers, including mostly “client advisers” who assist in stores/remote and online, as well as 250 digital client advisers (there will be 500 by mid-2022) based in the stores to meet customers but primarily engaging with them digitally.

There are also 60 digital stylists who only serve customers digitally. Neiman’s also has 108 personal shoppers for appointments in fitting rooms. All the associates utilize Connect.

Sixty-three percent of the customers are Gen X or Millennials, between 25 and 56. It was 48% two years ago”.

Flexible working to attract talents

Like many companies, NMG has established a flexible hybrid workplace arrangement which has helped attract talent. “We believe our associates should work where they have the most impact. We have hired people who are not based in Dallas,” said van Raemdonck. “If you are a tech person based on the West Coast, that is where you spend most of your time. You interact digitally with your colleagues, and at times you come into the office not to check email but to collaborate with everyone.” Four of Neiman’s general merchandise managers and the Neiman’s fashion office are based in New York. Buyers are still based in Dallas, though they spend about a third of their time seeing shows and showrooms in Europe. For those residing in the Dallas area, “We don’t require them to be five days in the office. We encourage them to come in two to three days a week,” said van Raemdonck. Due to the flexibility, “We recruit people faster. It takes 32% less time to hire and our turnover rate is down 20%, compared to 2019.”

Supply chain improvements

A new 500,000-square-foot distribution centre is expected to open around January 2023. NMG is investing in information technology for the centres.

The new facility will reduce deliveries to stores and homes by two days and double the number of customers who can receive shipments within two days.

Responding to rumours

NM says they didn’t lose any of their top 100 brands, not seeing any decline in distribution. Unlike Saks Fifth Avenue, they have no intention of splitting up its dot-com and stores into separate companies.

Neiman Marcus Group Addresses Fiscal Q1, Perceptions and The Path Ahead 

What: Most retailers build new warehouses to strengthen their e-commerce businesses. Lotte Shopping is trying something different by leveraging its existing stores and utilizing technology so that they become the core of its logistics network.

Why it is important: Lotte On app, a latecomer to e-commerce, has not been able to achieve a strong presence in the online shopping market so far. Lotte On had just a 5% share in e-commerce at the end of last year, according to Kyobo Securities.

Lotte On, an e-commerce app made available in April 2020, currently offers two-hour delivery of groceries in limited areas and plans to roll out the service nationwide by the end of next year.

Coupang, the second-largest e-commerce operator after Naver Shopping, is steadily investing to build more warehouses. SSG.com runs three warehouses, and is currently looking for place to build a fourth one.

Lotte doing e-commerce its own way

What: An opinion piece against Macy’s considering splitting up its online and offline activities just like what Saks and Hudson Bay did earlier in 2021.

Why it is important: Investors’ interests are usually short-termed, as the idea is to cash in “trapped” value. This can go against the interests of the company on the long terms, as recalled in this article with the history of Sears.

Macy’s is under fire from activist investors to split up their business into online and offline, just like what Saks Fifth Avenue and Hudson Bay Company did earlier in 2021. The reasoning is that this would allow to unleash “trapped” shareholder value.

The Robin Report recalls that even though Macy’s was initially slow into growing its e-commerce activities, it still significantly innovated in many fields: robust omnichannel capabilities and innovations, being a leader in attracting younger shoppers, capturing data and using stores to fulfil online orders which allowed to reduce the end of season markdowns.

According to the author, this idea goes against the tide at a moment when Amazon itself is going physical, and clearly serves investors’ interests, not customers’.

What Is Macy’s Thinking?

What: For the first time in nearly a decade, e-commerce spending on Black Friday in the US fell from the previous year, dipping slightly to USD 8.9 billion, down from USD 9 billion in 2020, while sales on Thanksgiving day remained flat year-over-year, according to preliminary data from Adobe.

Why it is important: For many brands, consumers were encouraged to shop earlier than usual to reduce the strain on their supply chains. The strategy appears to have worked: Adobe says retailers are still on track for a 10% year-over-year increase in holiday spending.

American retailers saw 21% fewer visits to stores between Friday and Sunday compared with the same period in 2019, according to RetailNext, an analytics company. In-store sales fell just five%, reflecting higher prices.

But some of those missing dollars were spent earlier in November. Between 1 and 28 November, consumers spent USD 99 billion online, up 13.6% year-over-year and 47%compared to the same period in 2019.

Some retailers did see a Black Friday bump though. Sephora and Ulta saw their traffic spike more than 20% and 10%, respectively, compared to Black Friday two years ago, according to early traffic data firm Placer.Ai, while off-price chains like T.J. Maxx and Ross Stores posted single-digit increases.

Meanwhile, Kohl’s and Nordstrom Rack were among the brands that saw traffic fall compared to 2019. Overall mall traffic dipped as well.

The lack of inventory and ensuing high prices have resulted in the lowest levels of promotions in years. Average markdowns among mid-range luxury fashion retailers so far this quarter dipped to 28% from 55% in the fourth quarter of 2019, research firm Cowen found.

Making Sense of This Year’s Black Friday Sales 

What: The RealReal has opened a pop-up shop running until 28 February within Saks Fifth Avenue’s Brickell store in Miami.

Why it is important: Customers will have one-on-one access to The RealReal experts for complimentary valuations and consignment appointments. To reward customers for recirculating their luxury items, every first-time consignor at the Saks x The RealReal pop-up will also receive a USD 100 Saks gift card.

In addition, customers can shop for rare watches, coveted pieces, and one-of-a-kind jewellery.

Saks x The RealReal pop-up opens in Miami

What: Nordstrom Rack is increasing its use of pack and hold inventory by 2 or 3 times to mitigate supply chain disruptions into 2022.

Why it is important: Nordstrom Rack will buy larger quantities of relevant items when they are available and hold a portion of it for deployment in periods with high demand, tight supply, or system constraints.

The retailer expects its inventory levels to remain elevated through the end of the fiscal year as it invests in pack and hold at Rack and ships products earlier to meet holiday demand. The company will also pull volume forward for spring products in the next two quarters.

Nordstrom had used the pack and hold tactic to build inventory during a period of aggressive store expansion. Now the company will use the strategy to bolster its ability to maintain sales despite supply chain disruptions.

Nordstrom leverages pack and hold inventory to mitigate supply chain risk

What: The Dillard’s 83-year-old department store business skyrocketed over 300% this year, making it one of the best-performing stocks on 2021.

Why it is important: The market capitalization of the 280-store chain has quadrupled to more than $5 billion since Jan. 1, far outpacing gains seen by much larger chains like Macy’s (up 138%), Kohl’s (up 25%) and Nordstrom (down 33%).

The Little Rock, Arkansas-based Dillard family – who own 7.5 million shares, giving them a 39% stake in the company – have seen the value of their shares go as high as $3 billion in November, up from $400 million a year earlier.

Dillard’s was founded in depression-era America by William T. Dillard, who got his introduction to the retailing business when he went to work at his father’s general store at age 12. After collecting a bachelor’s degree at University of Arkansas and an MBA from Columbia, he borrowed $8,000 from his dad to open his first store in Nashville, Arkansas in 1938. Before long, Dillard was opening stores all over the South, often in shopping malls, which were quickly gaining popularity among suburbanites. The chain went public in 1969, offering two classes of stock, meant to keep the family firmly in control. Five decades later and the company is still run by the family.

Analysts view Dillard’s as one of the survivors of the department store consolidation trend, as the founding family is very much still involved. Although Dillard’s stores may be considered old-fashioned, they are well cared for with a lot of attention to detail.

How A Sleepy Southern Chain Became One Of The Pandemic's Top Performing Stocks

What: Facebook Hong Kong has launched its first pop-up store in the territory, introducing its ‘Your Profile, Your Home’ campaign. The pop-up store aims at educating consumers on how to personalise their experience using the Facebook app while maintaining their online privacy and safety.

Why it is important: Social media are challenged in many ways. In response, Facebook aims to teach customers the app’s privacy control and settings.

The store also houses Instagrammable spaces with interactive AR filters. An on-site quiz is also available for visitors to participate. Facebook Hong Kong pop-up store is scheduled to open until December 7.

Facebook opens in Hong Kong its first pop-up store in Asia 

What: A new, well document article on the ultra fast fashion phenomenon Shein.

Why it is important: Shein shows that new business models can successfully compete in the fashion segment, which is a point not taken for granted by investors and bankers. It also shows that new players can acquire a dominant position in a very short period of time provided it has the right production and business model, as well as the adequate price point.

The Financial Times follows suit after BBC and The Economist and explores the business model of Shein, the Chinese ultra-fast fashion phenomenon that is rapidly growing market shares in the West. Based on a low price range (only Primark has lower average retail prices), ‘test and repeat’ approach with algorithms evaluating in real-time the success of some 6,000 daily new items launched in small batches, Shein grew its market share from 13% in January 2021 to 28% in June 2021, even surpassing Zara (20%) which used to be the uncontested leader. One must say that Shein made some fruitftul bets, especially by focusing on TikTok instead of Instagram. In addition, Shein benefits from a local ecosystem of suppliers able to sustain its demand on short series potentially being expanded provided the demand grows, as well as the capability to ship internationally without being affected by international taxes and duties thanks to its very low retail prices.

The FT focuses as well on the environmental issues that Shein is facing, even though it denies any wrongdoing, but most importantly, concludes on the fact that the rapid rise of such a prominent actor in such a short period of time implies that other or more disruptive players might very well appear on the fast fashion segment in the future, further increasing the competitive pressure.

Shein the Chinese company storming the world of fast fashion

What: Von Maur is a relatively important, albeit not so famous, department store chain in the US.

Why it is important: They have a capital structure which is similar to many IADS members’, as well as an approach which is quite different from the other US players from this market.

WWD interviews Jim Von Maur, CEO of the 150-years-old Von Maur US department store chain and representative of the fourth generation of the founding family. The company has had 4 CEOs over 150 years.

According to him, such a longevity is due to the avoidance of overexpansion, over-reliance on sales, and avoidance of debt. It represents today 36 department stores and 70 “Dry Goods” women’s specialty chain, and claims to achieve $1 bn in sales with $200 per square foot (i.e. $20 per square meter, on average), all in Midwest and South of the US.

The company relies on “good old recipes” to keep the business sustainable: sales associates nurturing a direct relationship to customers (in a low-tech mode), limited markdown policy (raising the question of the e-commerce competition), strong curated selection, and digital expansion (10% of sales, to be compared with 40% at Nordstrom).

Von Maur A Family Business With Tradition, Service and 150 Years of History

What: Amazon harnesses the power of AI enabled products to offer an experiential and interactive Christmas window display.

Why it is important: Amazon's offering points to a potential role for customized experiences driven by smart technology.

Amazon has created the “world’s first smart holiday window” enabling visitors to ask Alexa to turn on holiday smart lights, call Santa, and play seasonal music. The window displays Amazon products such as Alexa, Echo, Fire TV, and Kindle.

Amazon's holiday window showcases Alexa-enabled experiences

What: Forever 21 has found a new perch at JCPenney.

Why it's important: The move is intended to draw more teens and young adults to the retailer and bolster its cred as a “generational shopping destination.”

Forever 21’s assortment at J.C. Penney will include tops, bottoms and dresses that are “rooted in West Coast style and composed of new, neutral must-haves and trending design aesthetics like lush velvet and chic floral.

Forever 21 Landing in J.C. Penney

What: Sears used to be the most important department store chain in the US and is now being stripped away.

Why it is important: Once flamboyant department store buildings are kept for their symbolic and sociological function, but repurposed. Some IADS members have shown that they were also ready to repurpose some of their stores (even partially in the same building) to follow the trend while also reduce the operational losses.

Sears which for decades covered the USA with its properties, including the highest tower in Chicago (which does not bear its name anymore today) and used to be the largest department store chain in the 80’s, now is operating only a combination of 35 stores and a website. Every month or so, they are announcing store closures, including the last store in Illinois, its home state, in November 21.

They are now selling their former stores to developers, who are repurposing the buildings instead of destroying them, after buying them on average at a price of $64 per sqm. This is due to either the lack of financial benefit to destroy the stores and rebuild them, or, more simply, due to the will to preserve the architecture and make the most of their structure, location and accessibility. New fates of these stores can include housing medical offices and apartments in a shopping district, with the calculation that patients’ relatives can go shopping while waiting, or even a weapon production plan near a US army fort.

Sears, Struggling to Sell Goods, Markets a Valuable Asset Real Estate 

What: Tech investors are backing up ghost kitchens that they see as an uber-like natural expansion.

Why it is important: Given the low margins of the sector, disruption might not be around the corner.

Reef, a US-based ghost kitchen operator, is facing issues at a moment when it is expanding nationwide, with many incidents taking place in its points of production, while its business model is to build kitchen in warehouses or trailers, which are cheaper than storefronts. Other food operators, such as KFC, Wendy’s and others, are also looking at the concept.

However, while these models appeal to digital investors, they have to face real-world issues: logistics, people, supply chain. The most important issue is that the ROI can not, by definition, top up what tech investors are used to. Analyst Benedict Evans reminds that in such an industry with low margins, massive scaling is needed, which in turn requires investors’ patience.

Ghost Kitchens Are Proving to Be a Messy Business, as Reef Global Shows

What: Openpay inked an agreement with American Express to offer instalment payment options to participating health care and auto repair/maintenance merchants. The retailers will use Opy’s 2.0 version of buy now, pay later (BNPL) called “buy now, pay smarter (BNPS).”

Why it is important: While the BNPL payment method is currently challenged and criticized, the BNPS solution is supposed to differentiate from traditional pay-in-four BNPL plans thanks to fair, transparent and fixed fees.

BNPS method extends up to USD 20,000 with plan lengths of up to 24 months.

American Express Teams Up with Opy to Offer BNPL Options 

What: Iguatemi opens a popup to display the brands it sells in its own digital channel, at the heart of its stores.

Why it is important: Following the need to go omnichannel, Iguatemi is testing its own capabilities (logistics, product management, etc..)

Iguatemi, the largest luxury brands operator in Brazil and which also operate department stores, has open an e-commerce brick & mortar store, called Iguatemi 365, spanned over 555 sqm within the Iguatemi Sao Paulo store.

It displays the whole online offer, including 62 brands (Re/Done, Chiara Ferragni, Smythson and others) of which 18 do not have a physical presence in Brazil. According to the CEO, this launch aims at delivering the excellence of the Iguatemi experience across all channels.

Iguatemi Has Opened E-commerce Brick-and-mortar Pop-up in São Paulo

What: J.C. Penney continues to deepen its relationship with Authentic Brands Group as the company unveils its exclusive new collection “Sports Illustrated for J.C. Penney”.

Why it’s important: Penney’s held a half-time fashion show to unveil its new collection during the Sports Illustrated Awards in Florida. The athletic-themed lifestyle collection for men, women and children will hit Penney’s stores on Jan. 6.

ABG and J.C. Penney teamed up in September to launch the “Juicy by Juicy” Couture collection of women’s and children’s apparel, footwear and accessories. Forever 21 is expected to be added to the mix later this month with additional ABG brands coming on board next year.

Penney’s to Launch Exclusive Sports Illustrated Collection