What: Central Group now holds 49.9% of the KaDeWe shares. To date, KaDeWe was 100% owned by the Austrian real estate entrepreneur Rene Benko and his Signa Group.

Why it is important: Signa Group, already working with Central Group, also announced the closure of half of Galeria Karstadt Kaufhof locations. The two real estate groups operate department stores in Switzerland, Ireland and Great Britain.

KaDeWe has a new shareholder 

What: Target is focusing on experimenting with new store formats, including smaller, closer to customers ones.

Why it is important: The strategy is fully centred on this store format even though, due to adjustments, some units will be closed this year.

Target experienced a nearly 3% increase in sales to $107.6 billion last year. Despite its success, the company constantly evaluates its store footprint, resulting in the closure of some locations. While the average Target store is 13,000 sqm wide, some 150 out of 2,000 are 5,000 sqm large.

Target will close four small-format stores, but the decision was based on individual performance rather than size. Analysts noted that store closures are not necessarily concerning, as good retailers routinely review their store portfolios: half of the stores Target plans to open this year will be smaller format stores, complementing its overall strategy.

Target's COO, John Mulligan, mentioned plans to invest in about 175 stores this year, including full remodels, shop-in-shop experiences, and retrofitted fulfillment spaces for same-day services. The company is also focusing on developing larger store formats in the future.

Target to close 4 small-format stores this spring 

What: Saks is hosting a weekend getaway for its invite-only loyalty program Saks Limitless.

Why it is important: The luxury retailer continues to deliver exclusive and personalized experiences for its top customers as they are important to its long-term strategy.

Saks Limitless clients and guests will be treated to complimentary luxury experiences in Aspen. The program currently includes more than 5,000 top clients across the Saks Fifth Avenue business with around 20 guests participating in the weekend.

The trip hosted by Saks Limitless demonstrates Saks’ commitment to providing high-value clients with exclusive experiences and how they bring the Saks experience to life in ways that are relevant to their customers’ lifestyles.

Saks to host weekend in Aspen for top clients and influencers

What: Inventory management has become an advantage for Macy’s in a tough retail environment.

Why it is important: Macy’s margins and profits fell last year with a small sales decline, but the impact was lessened thanks to their disciplined inventory management.

Macy’s CFO has pointed to inventory productivity as a value creation lever.

The department store leveraged data and analytics to better forecast sales demand, receipt timing, and flow across supply chain.

In the first quarter, the retailer saw signs of consumer weakness and a shift in category demand. As a result, they adjusting the timing, amount and composition of receipts by channel, category and brand.

They also adjusted purchasing accordingly as economic challenges didn’t let up during the year. During Q4, the department store bought closer to need, help open-to-buy reserves and bought into areas of strength.

Inventory levels at the US department store declined 3% last year and have fallen 18% compared to 2019. Inventory turnover was also down 4% last year but has improved by 19% since 2019.

The retailer has been relying more on data and analytics with plans for more inventory productivity initiatives for 2023, as more than two thirds of their USD 1.3 billion in capital expenditures last year went towards data and analytics or other supply chain modernization.

Disciplined inventory management helped Macy’s weather tough 2022

What: Harrods’ sales have overpassed their 2019 levels even though the Chinese customers are not back and the UK has been handicapped by the decision to scrap VAT refund for foreigners.

Why it is important: For the CEO, the question in 2023 is not to know if sales targets will be met when it comes to luxury brands, but rather to be sure the store will receive enough supplies from the brands, now that they have built their DTC capabilities.

The boss of Harrods, Michael Ward, has expressed confidence that the luxury department store will continue to prosper in an economic downturn. He believes that "the rich get richer in a recession" and that this will benefit Harrods. The store, which Ward describes as a "shop window to the world", has been trading ahead of 2019 levels despite being hit hard by the Covid-19 pandemic and a lack of tourists in London during lockdowns.

According to Ward, Covid-19 was a good opportunity for Harrods to refocus on local customers, which has been successful as British shoppers are now responsible for the majority of spending. This is in stark contrast to 2017, when Chinese nationals were the store's biggest spenders.

Despite the pandemic, the luxury goods sector is predicted to continue to grow by at least 3% to 8% in 2023, according to analysts at Bain & Co and Altagamma. French luxury group Hermès had an "exceptional" year, with a 23% jump in annual sales, and industry giant LVMH posted record profits for 2022.

Ward also commented on the UK's relationship with the EU, calling the Windsor framework, designed to reform Northern Ireland's post-Brexit trade rules, "a real step forward". However, he noted that an optimal arrangement is not yet in place.

Overall, Ward's comments suggest that Harrods is in a strong position and will continue to thrive, even in difficult economic times. The store's focus on local customers has been successful, and the luxury goods sector as a whole is predicted to continue to grow.

For Harrods, there is no recession 

What: Nordstrom reported net earnings of USD 119 million for the fourth quarter and will be discontinuing its Canadian business operations.

Why it is important: Sales and earnings were in line with the retailer’s updated fiscal 2022 outlook and the department store will be entering 2023 with a healthier inventory position. However, the company is looking to drive profitable growth and enhance shareholder value with the closure of its Canadian operations.

The US-based retailer saw a decrease in net earnings and net sales but managed to stay in line with its updated fiscal 2022 outlook.

For fiscal year 2023, Nordstrom is focusing on enhancing the customer experience, improving Nordstrom Rack performance, increasing inventory productivity, and continuing to advance its supply chain optimization.

Right-sizing their inventory has positioned the retailer for greater agility in current economic uncertainty and closing its Canadian business will allow the department store to simplify operations and focus on driving long-term profitable growth in its core US business.

The wind-down of Nordstrom Canada is expected to result in an approximate USD 400 million decline in total company net sales and a USD 35 million improvement in total company EBIT in fiscal 2023, relative to fiscal 2022.

Nordstrom reports fourth quarter 2022 earnings, announces wind-down of Canadian business

What: Harrods increasingly sees itself as a dining destination.

Why it is important: This is not specific to Harrods. Restaurants and bars are an increasingly important part of department stores businesses as they need to provide experience and be a destination for their customers.

Harrods, the world-famous luxury department store in Knightsbridge, London, has seen a significant increase in revenue from its restaurants and bars since the start of the COVID-19 pandemic. Despite dining not being the first thing consumers think of when it comes to Harrods, the department store’s restaurants and bars are now becoming a revenue driver for the business.

Research by Harrods shows that when customers engage with the 26 store’s restaurants and bars they spend twice as long in the building and twice as much money (when compared with pre-pandemic period, this represents a turnover up +44%, and +49% vs. 2019). This has led to a focus on creating “destination dining” experiences, such as the new rooftop Studio Frantzén, to draw local, affluent consumers to the store. The goal is to provide systematic opportunities to convert shoppers into dinners and vice versa. 80% of Harrods Rewards card holders use restaurants now, vs. 29% pre-Covid.

Harrods sees dining as an experience as crucial for its future, which is why it also encourages brands to do so, such as Dior which has opened a café on its Harrods point of sale.

How Harrods built a booming restaurant business 

What: Luxury giant is reported to consider new partnerships in Korea, one of the most dynamic markets when it comes to luxury.

Why it is important: While the nature of the partnership is not discussed in the article, it is interesting to see that LVMH sees Korean department stores are relevant structures to talk to, and also raises the question on how they plan to share the market (revenue, data, customers) in the future with wholesalers globally.

LVMH CEO Bernard Arnault met with top executives from South Korean department stores, including Shinsegae, Hyundai, Hanwha Group’s Galleria, and Lotte Group, to discuss potential partnerships.

This comes as LVMH aims to strengthen its presence in South Korea, a significant market for luxury brands. South Koreans had the highest per capita spending on personal luxury goods in 2022.

The French luxury group, which owns brands like Louis Vuitton, Christian Dior, and Tiffany & Co., has previously collaborated with K-pop celebrities as global ambassadors for its brands.

LVMH is eyeing special partnerships with Korean department stores 

What: Central Retail is growing significantly on all channels and all markets.

Why it is important: Vietnam has been the goldmine for the retailer in 2022 and will be the next battleground for global retailers in the coming years given the level of investment planned in the country.

Thai Central Retail Corporation has recorded a $6.7bn revenue in 2022, +21% compared to 2021, with a net profit reaching $219m (+2.6%).

This has been fueled by domestic consumption, both in stores (+16%) and omnichannel (+12%). Thailand represents 23% of the business, while Vietnam represents 24% (and recorded +34% growth). Italy represents 5% of the business and grew +48%.

Central Retail reports record revenue

What: The president of the Canadian department store, Hudson Bay, is looking to find the sweet spot between leveraging new growth prospects and revamping brick and mortar.

Why it is important: As the industry faces many challenges, Hudson Bay’s CEO believes beauty can bridge the gap between leveraging digital innovation and revamping the in-store experience.

Hudson Bay’s CEO kept the existing leadership in place despite others advice to bring in her own team when she became president in September 2022. She has seen success, as the same team has seen sales growth in the fourth quarter with overall revenues climbing 5% and store sales up 22%.

As department stores have faced many pressures over the past 5 years, the new CEO is looking to transform the retailer by reclaiming the department store’s brick and mortar roots and leaning deeper the beauty opportunity.

Finding the balance between digital innovation and company’s brick and mortar roots, Hwang-Judiesch sees beauty as an important bridge between leveraging new growth prospects and revamping the in-store experience.

When it comes to the beauty space, the physical experience of discovering and playing in the beauty space resonates with customers and is something the retailer can leverage across multi-generational shoppers.

One idea the retailer has been discussing is brand agnostic beauty experts who can help consumers shop a range of products instead of brand-specific sales associates.

Applying lessons from the beauty industry to a department store turnaround

What: The option of environmentally friendly deliveries is appreciated by international online buyers but is constrained by the issue of costs, especially with inflation.

Why it is important: The use of more environmentally friendly deliveries is increasingly considered by online consumers, particularly French, Italian, Spanish, and German internet users according to a survey.

Up five points year-on-year, 79% of international buyers reported that they appreciate green delivery options.

34% of respondents stated that they are ready to make use of out-of-home deliveries that limit traffic, using automatic lockers, relay businesses, or click & collect in stores.

However due to costs and inflation, green delivery remains at the bottom of the list regarding the most important delivery criteria, with the cost of delivery being the top priority for 32% of respondents, followed by speed at 22%.

E-commerce: the desire for more responsible delivery hampered by high prices

What: Continued improvement in metro traffic data, which could be an indication of shopping mall traffic improvement, signals a fast-tracked recovery for China.

Why it is important: The world’s second largest luxury market is expected to grow by 19% in 2023  and travel retail will continue to recover according to Barclays

Traffic in major Chinese cities, such as Beijing and Shanghai, has almost returned to pre-COVID levels while Shenzen and Chengdu have significantly passed pre-pandemic levels already.

Travel retail is expected to return to normal as tourism is returning and excessive savings support consumers’ spending.

According to one of the largest luxury shopping mall operations in China, VIP customers had already resumed their spending abroad, but they expect more Chinese to travel during the year and buy luxury goods abroad. Around 15% of Chinese spending is expected to occur abroad this year.

Additionally, Chinese shoppers are ready to spend their COVID-19 savings, which reached 2.1 trillion euros in 2022.

Barclays suggests that Swatch Group could gain the most from China’s reopening as they had the greatest exposure to Chinese consumers before the pandemic, with 50% of sales from China. Richemont is also well positioned as they saw 40% of sales coming from China before the pandemic. Other brands mentioned include Cartier and Van Cleef & Arpels, as consumers may turn to watches and jewelry as an alternative asset that can hold value during inflationary times.

Traffic rebound signals fast-tracked China recovery

What: Alibaba’s empire is being split into new entities.

Why it is important: While this might signal some political will from Chinese government, this might also mark the beginning of a more aggressive international strategy for Tmall, as it will be not restrained anymore and limited to the national operations of the mother group.

Alibaba, one of China's largest private-sector companies, plans to split itself into six different companies that could seek separate IPOs, effectively dismantling the business empire that charismatic entrepreneur Jack Ma built over two decades. Alibaba was once valued at over $800 billion, but it is now worth about a quarter of that. The restructuring comes after Chinese authorities signalled that they were winding down a sweeping regulatory clampdown aimed at reining in the country's powerful tech sector.

Under the restructuring, Alibaba's various businesses will be split into six major areas, including cloud computing (Cloud Intelligence Group), Chinese e-commerce (Taobao Tmall commerce group), global e-commerce (Global Digital Commerce Group), digital mapping and food delivery (Local Services Group), logistics (Cainiao Smart Logistics Group), and media and entertainment (Entertainment Group). Each business group would have its own CEO reporting to a board of directors and be fully responsible for the group's performance. Alibaba Group will become a holding company overseen by Daniel Zhang, the Chairman and Chief Executive.

Those business groups will be allowed to raise external capital and seek initial public offerings when they are ready, Alibaba said. However, its domestic commerce business will remain a wholly owned unit of Alibaba. The power of tech titans like Jack Ma and their influence over society caused unease in Beijing. Companies like Alibaba have a grip on data of more than a billion users and investments across a range of companies in China.

Alibaba to be split into 6 different groups

What: Saks Fifth Avenue stylists are becoming brand ambassadors for Inspirato, a subscription travel service that crafts exclusive holiday packages.

Why it is important: The luxury retailer continues to deliver an assortment of experiences that are tailored to its customers’ unique lifestyles, helping them establish lasting relationships.

Saks knows that its customers are excited about travel. As the retailer’s Luxury Pulse report found,  luxury consumers are traveling and steering their spending towards clothes and accessories related to their planned vacations.

Stylists will receive training on Inspirato’s offerings and will be supported by their sales team to offer the service to their clients starting in May.

Saks will receive a fee from Inspirato based on the number of subscriptions purchased by Saks customers, with sales associates receiving a cut of that fee based on their referrals.

Additionally, Inspirato members will be encouraged to apply for the SaksFirst Card to receive Saks rewards, giving them status level based on their annual Inspirato spend upon approval.

Saks Fifth Avenue encourages the travel lifestyle 

What: The department store group’s creditors have approved its insolvency plan by a large majority.

Why it is important: The approval paves way for the restructuring of the retail chain and will allow around 12,000 employees to keep their jobs.

Experts have emphasized that is now crucial that the plan be implemented quickly and consistently by leadership.

If the plan had been rejected, the closure of all branches and termination of all employees would have been inevitable. However, the planned closure of 47 branches means around a quarter of of the group’s workforce will be losing their jobs.

The approval of the plan results in creditors receiving only 2 to 3.5% of the money owed to them, forgoing more than 1.3 million euros.

Around 30 Galeria works councils from all over Germany demonstrated in Essen during the meeting, setting up a symbolic coffin with signs that listed the closing branches. There is still uncertainty among employees about the resiliency of future promises, as many experts have stated that they don’t have confidence in the future plans.

Perhaps the last chance for Galeria Karstadt Kaufhof

What: Nordstrom is optimizing its supply chain as one of three priorities outlined in its “Closer to You” strategy to improve financial performance.

Why it is important: After its Q4 net sales fell 4.1% year over year, Nordstrom is hoping to improve its customer experience, increase sell-through and reduce markdowns by placing the right assortment with the right depth closer to the customer.

The US-based retailer has connected the company’s store and supply chain inventory in individual markets to increase product availability while reducing shipping speeds and allowing customers to receive orders in a variety of locations.

Its second priority is to increase inventory productivity after weathering issues related to stock levels, receipt flows, and more.

The company's third priority is improving Nordstrom Rack’s performance as its sales declined 8.1% year over year in Q4.

Supply chain optimization is a top priority for Nordstrom this year

What: Linc CX platform launched a new integration with the AI-powered ChatGPT at the Shoptalk conference in Las Vegas.

Why it is important: A new breed of customer service is coming to the retail industry with AI-powered tools like ChatGPT.

It has been less than a month since OpenAI released the software tools allowing it to integrate into other companies’ systems, however Linc has been testing the feature since the beginning of the year.

Product inquiries, questions about service policies and brand stories are a few areas that were highlighted where generative AI dramatically improves conversation quality.

Linc platform users can leverage generative AI models where it fits, but still have control over the conversations and be able to automate workflow applications that OpenAI models aren’t designed for within one solution.

Linc noted the need to step in and fill the gaps that ChatGPT can’t address, as the technology is still basic in some areas that humans are better at. Fully automated customer service would be a disaster presently, which was demonstrated through tests with customer service requests that the bot couldn’t understand due to vague phrasing.

While customer service in the retail industry has been transforming significantly as brands leverage AI, businesses should be cautious and not be too complacent when it comes to technology, as tools like ChatGPT are only one ingredient to successful customer experience automation.

OpenAI’s ChatGPT heads to retail customer service via Linc

What: Inflation and the cost of living crisis limited spending in America as mall retailers and department stores reported sluggish growth in 2022 and set cautious forecasts for 2023.

Why it is important: Middle tier and department store retailers are seeing the biggest impacts from unpredictable consumer demand and limited spending in the US.

Kohl’s reported Q4 revenues of USD 5.8 billion, missing analyst estimates by USD 210 million with the retailer’s full year report being down 7.1%.

However, big box and clothing retailers were able to see more success as Target reported fourth quarter revenues of USD 31.4 billion and Abercrombie reported USD 1.2 billion for Q4.

US consumers are lowering their discretionary spending and being more deliberate and mindful with how they spend their money, looking for bargains and value as their wallets feel the pressure of inflation. Beauty, occasion wear, and higher-end luxury are the higher performing categories while luxury customer trends have proved more difficult.

As the US economy remains unpredictable for the coming year, American retailers are taking a  cautious and conservative approach to their forecasts, with first quarter sales expected to remain flat or see low single-digit change.

US retailers prepare for ‘new normal’ in 2023 after rocky year

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