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

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

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

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

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

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

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

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

What: Brands under pressure to generate profits are looking for ways to reduce costs without losing customers as they revamp their return policies.

Why it is important: 41% of the top 200 brands and retailers in the US charged a fee for customers to make returns by mail, up from 33% the previous year.

Returns have become even more costly for companies as the costs of freight and labor have gone up, while growth in e-commerce has slowed. Additionally, online return rates went up more than 5% in 2022.

As brands feel the pressure to cut expenses and improve their bottom lines, they are opening up to the idea of charging customers to ship their purchases back.

While brands have to share the burden of costs with consumers, they also face losing customers as a study found that 34% of 2,000 consumers surveyed stopped shopping with a brand after it started charging for returns.

Introducing features in the purchase journey to increase the likelihood of customers keeping their purchases or encouraging shoppers to buy more items rather than asking for a straight refund is key to retaining customer loyalty.

One example of this is offering incentives for exchanging their items. One activewear seller introduced a USD 6 handling fee while also increasing the credit it offered to customers who returned an item but purchased something new in the same transaction. The brand was able to keep 33% of the revenue it would have lost in returns and its retention rate has remained at 70% with the new fee.

Other brands have no plans to change their free returns policy, but are still looking to reduce the rate orders are shipped back at. This includes increasing the number of photos and using videos to better display item’s features and dimensions.

Should brands stop offering free returns? 

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

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

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

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

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

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

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

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

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

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

Struggling department store group Galeria Karstadt Kaufhof hires former director

What: Q4 sales were down 3.3% while fiscal year 2022 sales were up 0.3%, with inventory levels down 3% in comparison to 2021 and down 18% versus 2019.

Why it is important: The department store was able to remain agile, meet customer demands, and elevate its approach to inventory management despite the volatile macroeconomic climate.

Macy’s has reported a strong balance sheet, with ample liquidity and no-near term material debt maturities which will provide the retailer flexibility to navigate the current macroeconomic uncertainty.

Macy’s department store sales were down 3.3% from 2021, with its top performing categories being beauty, men’s tailored apparel, dresses and shoes, while categories such as active, casual, and soft home saw a decline.

Bloomingdale’s sales were up 0.6 percent with beauty, men’s and women's contemporary and dressy apparel performing well, and handbags and textiles seeing a decrease in performance.

Bluemercury, Macy’s luxury beauty and spa retail chain, saw sales up 7.2% with results being driven by strength in skincare and color, partnerships, and its new initiative which curates the lasts emerging brands.

Looking at 2023 and beyond, the retailer believes that its five growth vectors which include reimagining private brands, off-mall expansion, online marketplace, luxury brand acceleration, and personalized offers and communication will solidify its modern department store positioning.

Macy’s Inc. reports fourth quarter and full-year 2022 results

What: Online sales are decelerating and foot traffic is up, resulting in retailers investing in technology and improving their supply chain.

Why it is important: As consumers increasingly seek out in-store experiences, retailers should dig into technology and data to better meet customer demands.

Retail is at an inflection point as online sales decrease and foot traffic increases in physical retail stores.

Retailers are increasingly more trusting of the data and technology available to them as they see this change in consumer behavior.

Analyzing this data has allowed brands to rationalize their footprint and analyze their brand performance. With this, brands have learned that closing an underperforming store results in e-commerce suffering in that geography. Additionally, retailers have increasingly looked at strip centers and freestanding stores as mall performance declines.

Technology has also assisted in the uptick of in-store shopping. Localized inventory is encouraging foot traffic as customers can see if an item is in store before going. Consumers now know to buy products quickly due to supply chain issues and retailers are getting smarter about having less inventory.

Frontline retail workers also play a vital role as consumers return to physical retail. We are in a human connection time and employees become a reflection a brand. Retailers should focus on the  technology available to employees and creating a positive work environment to ensure the success of their brand.

Retailers dig into data to rethink locations, footprint

What: The retailer is reporting progress on its multiyear social purpose platform with several accomplishments in 2022.

Why it is important: Macy’s is investing heavily in suppliers, people, and products that help create a more equitable and sustainable future.

Macy’s Inc. launched Mission Every One in 2022,which calls for Macy’s to invest USD 5 billion through 2025 on vendor and service partners, products, people, and programs that foster equality, sustainability, and inclusiveness.

The retailer reported several accomplishments last year with approximately USD 1.4 billion of the USD 5 billion being spent to support diverse-owned businesses, diverse sellers and brands representing 30% of the enterprises on Macy’s online marketplace, 29% jobs at the director level being ethnically diverse, and many other notable achievements.

Macy’s also reported that it expects more than half of its cotton products within private brands to be sustainably sourced by the end of this year.

Macy’s Inc. issues progress report on corporate citizenship

What: A southern department store chain is experiencing a stellar growth in terms of stock share value.

Why it is important: Traditional retail skills are still central when it comes to maintaining profitability.

Dillard's Inc., a family-run department store chain in the US founded in 1938, has seen its shares soar by more than 1,500% since April 2020, making it one of the best-performing stocks of recent years. Despite having a market value similar to that of Macy's Inc., Dillard's has less than a third of Macy's annual revenue.

The company, which owns the majority of its 280 stores (mostly in the South), has avoided chasing growth and opening hundreds of stores, buying internet startups, or selling its real estate. Dillard's focuses on smart merchandising, shrewd financial management, and personalized customer service, resulting in a loyal following.

Dillard's doesn't host quarterly conference calls or disclose how much of its $6.9 billion total revenue is derived from online sales. The company’s inventory is down 23.5% in the fiscal year that ended Jan. 28, compared with 2019. Meanwhile, profits totaled $891.6 million in the latest fiscal year, up more than 700% compared with the same period in 2019—far outpacing rivals.

The department store company with soaring stocks 

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

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

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

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

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

What: Industry experts question whether opening a casino inside Saks Fifth Avenue flagship store would drive traffic for the business or negatively impact the brand’s image.

Why it is important: While the proposal may seem absurd, retailers need to be considering bold initiatives to stay relevant in the marketplace as consumers become more interested in experiences.

After opening a casino on the top three floors was proposed by Saks’ parent company, HBC, experts throughout the industry are discussing the impact it could have on the luxury department store’s business.

The marketplace is moving quickly and demographics are changing consumers become more interested in experiences. As retailers try to engage more in the lives of their customers and create more unique shopping experiences, a casino could drive traffic and attract a larger luxury audience.

The former president of Saks noted that luxury is about quality experiences, not just quality products, and a casino could achieve that if handled correctly in addition to opening up new kinds of partnerships with hotels and airlines.

Other retail experts disagreed with the idea, stating that the luxury department store should stick to what it knows as a casino wouldn’t be compatible with the department store’s hours or business model.

Several sources state the plan should be viewed as a real estate play as HBC greater productivity out of its flagship real estate. The top three levels currently house clothing, the L’Avenue restaurant, Saks Works, and offices.

A Saks casino: gauging the impact to the luxury brand

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

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

This report is technical and extensively reviews the following topics:

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

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

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

Changes in the Card payment game in the US 

What: Frasers Group has completed the acquisition of Luton’s The Mall Shopping Centre which spans 900,000 sq. feet and houses over 150 retailers.

Why it is important: The move further demonstrates the retail group’s commitment and ongoing investment in physical retail.

The shopping centre was put up for sale by Capital & Regional last year and is a key retail destination in Luton.

The acquisition will provide attractive opportunities for the Group to introduce new elevated store concepts and displays their confidence in the future of the UK high street.

Frasers buys Luton shopping centre for GBP 58 million as it commits to physical retail

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

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

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

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

Jd.com begins largest ever promotion 

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

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

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

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

BUSINESS OF FASHION ARTICLE

VOGUE BUSINESS ARTICLE

What: The department store is revamping its flagship store on Piccadilly by revamping its third floor as a Food and Drink Studio.

Why it is important: The retailer is looking to attract a wider range of shoppers through an experiential food hub where customers can eat, drink, and learn.

The Food and Drink Studio will have a multiuse kitchen where customers can attend workshops, take part in conversations, experience tastings, attend live cooking demonstrations and supper clubs.

Fortnum & Mason plans to invite emerging and established chefs and culinary pioneers from around the globe to hose live and virtual events. Additionally, more than 100 Fortnum & Mason chefs will be using the space to test and refine the food that is sold at the store.

A gin distillery will also be on site, where Customers have the opportunity to choose a personalized small batch of “Made in Piccadilly” Gin.

The space will also feature a dedicated area for Fortnum’s signature hampers, with luxury wicker liners, bespoke luggage tags and personalized labels available.

On the lower ground floor, the department store will have a cook shop offering ingredients, utensils, and cookware, as well as a library and bookshop, wine tasting area, a butcher and fishmonger, and gourmet fresh food.

Fortnum & Mason stated that it’s looking forward to a new era with sustainability, innovation, and customer experience at its core.

Fortnum & Mason to open an experiential food and drink hub

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

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

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

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

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

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

For US department stores, scaling down might be the future 

What: A new feature developed with the warehouse retailer allows to specifically target prospective customers who did not confirm their purchase yet.

Why it is important:  Is that the future of AI in retail? Interestingly, it seems that there is no tech provider on the market, as each and every retailer is developing their own technology with the help of tech companies, in order to tailor-make their solutions.

Sam’s Club leverages AI in its retail media offering in order to provide to advertisers with real-time intelligent advertising targeting. The combination of their first-party data with these intelligent capability allows them, among other to specifically customize advertising for customers who have not yet confirmed their purchase.

The system is based on a technology co-developed with The Trade Desk and Liveramp.

Sam’s Club uses AI to improve its retail media capabilities 

What: M&S is looking into expanding its ‘Brands at M&S’ e-commerce concept as it looks to compete with other British department stores.

Why it is important: The heads of the company believe the new additions could eventually amount to GBP 1 billion in sales.

The British retailer is planning to sell more high street brands along with its own clothes, increasing its number of third-party brands from 60 to 100.

While the main focus of growth is clothing, other categories such as beauty, sportswear, and homeware may also be pushed through the platform.

The plan is being led by ex-Amazon fashion leader, Nishi Mahajan, who joined M&S last month and comes amid a major restructuring at John Lewis, one of the retailer’s top competitors.

Marks & Spencer plans to grow high street brand offer to compete with rivals

What: According to reports, the creditors of Galeria Karstadt Kaufhof should waive billions in the ongoing insolvency proceedings.

Why it is important: If creditors reject the concept, business operations will have to be stopped immediately.

The insolvency plan is set to be voted on March 27 by creditors.

The leadership requires landlords, suppliers, and other creditors to waive a large part of claims to enable Galeria to start over. However, if creditors reject the concept, business operations will be stopped immediately.

The restructuring consultants expect insolvency claims entitled plan payments totaling 1.4 to 2.36 billion euros.

Creditors without collateral should only receive 2 to 3.5% of the amount owed to them if the insolvency plan is accepted while those with collateral face fewer losses.

The state economic stabilization fund (WSF) has supported Galeria with EUR 680 million in recent years and should receive around EUR 88 million from the sale of inventory and will also be involved in the sale of Galeria subsidiaries such as the Belgian chain Inno.

Galeria creditors should waive billions

What: Frasers Group has officially acquired the primary retailing location in Dundee, Scotland.

Why it is important: The group has now acquired over 1.3 million square feet of retail space with The Mall in Luton and Overgate in Dundee, strengthening their commitment to future of physical retail.

The shopping centre measures 400,000-square-feet and is expected to offer multiple opportunities for Frasers to implement its elevated group concepts.

Frasers Group acquires Overgate Shopping Centre in Dundee

What: The Consumer Confidence Indicator reached an increase of 0.5 points in February and increased 1.7 points in comparison to February 2022.

Why it is important: The annual rate of the Consumer Confidence Indicator continues to rise annually in addition to seeing annual increases in almost all other components.

The National Survey on Consumer Confidence is carried out during the first 20 days of each month and is based on a sample of 2,336 households in Mexico.

February 2023 closed with an annual increase in almost all components of the Consumer Confidence Index, with the current economic situation of household members and of the country compared to 12 months ago growing.

Additionally, members of the household reported being more likely to purchase furniture or other household items in comparison to last year.

Consumer confidence in Mexico remains positive and accelerates in February 

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

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

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

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

Hudson’s Bay company officially goes fur-free 

What: Department stores are using art from international names in order to generate traffic

Why it is important:  While this practice is not new and can be traced back from the beginning of retail, there is a sharp acceleration from both brands (Dior in Venice, Saint Laurent in Miami, for instance) and retailers around to globe to use art as a traffic driver.

Major South Korean department stores like Shinsegae, Lotte, and Hyundai have been incorporating art into their customers' shopping experiences since 2020.

The trend emerged as more people took interest in art during the Covid-19 pandemic for home decoration and investment purposes, particularly among the MZ Generation.

Although some criticize this practice for lacking coherent themes and reducing art to everyday products, proponents argue that it offers greater public access to art and enhances brand image.

Department stores are also collaborating with existing galleries and participating in art fairs, aiming to improve themed exhibitions and work closely with the art community.

Korean department stores showcase high-end art to attract attention 

What: The RealReal is closing down several flagship locations in the world.

Why it is important: Will the second-hand market ever find the way to profitability or shall department stores definitively consider it as a marketing stunt?

Luxury resale market is competitive, with The RealReal announcing lay-offs and store closures to trim costs, resulting in a loss of 80% of its share value in the past year. The company had a 'growth at all costs' strategy, but profitability is now the priority. The market rewards now companies that are trimming costs, moving towards profitability, and offer unique treasure hunt experiences.

The RealReal’s business model faces complications due to the high cost of authenticating luxury items, broadening category mix, and fierce competition from similar companies. Furthermore, the company faces the dichotomy of closing brick-and-mortar stores despite signs of in-store shopping's return.

However, the luxury resale market has untapped potential, with a projected growth of 20% between 2020 and 2025 and reaching $67 billion. The RealReal's competitors seem to be performing better, and a profitable business model is critical. Circular economy is seen as the future, and brands will seek to control the customer experience of resale of their own branded goods. Companies that enable this effectively may emerge as winners.

what the real real closures say about the second hand