What: Due to rising interest fees and service charges for ‘Buy Now, Pay Later’ providers, retailers are questioning the profitability of this payment method for smaller purchases.

Why it is important: The pandemic brought a surge in customers to ‘Buy Now, Pay Later’ services, but a challenging mix of rising interest rates, borrowers missing payments, overcrowding of new players and growing calls for regulation threaten the current model.

Many BNPL companies like Klarna have posted significantly lower valuations compared to last year. BNPL companies, Klarna and Affirm both posted values that dropped by around 40 billion USD compared to last year. Last month, the Australian BNPL company Latitude also rescinded its offer to acquire another company’s BNPL business, citing market conditions. BNPL companies are also starting to lay off staff hinting at growing trouble.

BNPL services are most frequently done for fashion and beauty products making sellers take notice. There is reason to believe BNPL purchases pose a great challenge to the industry. As the BNPL companies profit mainly from charging the merchants, smaller transactions are questionable in terms of profit and new client acquisition.

Regulations could also put capital requirements in place, forcing retailers to put clearer disclosures about the consequences of late payments, inform clients about credit risks at the point of checkout or they may add stricter checks to ensure shoppers can afford to make payments.

BNPL isn’t going to disappear, but theories are appearing regarding the direction of its evolution. Fees might go up, new rules could add more friction to the check-out process, and BNPL providers may use it as a tool to lure customers into other purchases and services.

Inflation threatens the ‘Buy Now, Pay Later’ business

What: Saks opens pop-up and hosts a VIP event in Aspen with influencers, tastemakers and top clients.

Why it is important: First brands now department stores, pop-up shops continue to be a ubiquitous format for immersive client experiences.

Located at 516 East Hyman Avenue, the pop-up features women’s and men’s ready-to-wear, swim, accessories and jewellery. Saks will host a VIP Weekend in Aspen with influencers, tastemakers and top clients in the 2,000-square-foot pop-up that features a variety of luxury brands such as Alexander McQueen, Bottega Veneta and Missoni. Inside, clients have access to on-demand personal styling, fashion advice from Saks Stylists and access to digital touchpoints leading to saks.com.

This pop-up serves as a physical representation of Saks’ digital platform and aims to provide a curated assortment of luxury fashion, personalized customer service, ‘Instagrammable moments’ and unique and intimate events. Throughout the weekend the focus on luxury and adventure can be experienced not only through the Saks Aspen Pop-up but also through private shopping appointments, horseback riding, yoga, spa treatments, and special gifts.

Additional events will be available including a welcome party and mountaintop picnic with celebrities and designers.

Saks opens pop-up in Aspen 

What: As part of its Polaris strategy, Macy’s is set to open four new off-mall, small-format stores this fall.

Why it is important: Macy’s is repositioning its physical store footprint by delivering specific shopping experiences. Through its brand extensions, Market by Macy’s and Macy’s backstage, customers have the opportunity to discover new products with convenience or hunt for off-price and great value goods.

The innovative new retail format of off-mall, small-format stores plays a huge role in expanding Macy’s presence in current markets, maintaining their market presence by replacing underperforming locations or entering new markets.

The first dual Market by Macy’s and Macy’s Backstage store will open this fall in Chicagoland.

Macy’s small-format strategy

What: Walmart is integrating its subscription services to increase the rollout of its in-home delivery.

Why it is important: As a response to Amazon Prime and its expansion into restaurant delivery subscriptions, Walmart is increasing its Walmart+ subscription service to include in-home delivery options.

Walmart+ subscribers who opt for the InHome service allow a Walmart driver to access their home while they are out with a single-use code to put their purchases inside the customer’s home. Workers record the delivery process with a vest-mounted camera, and customers can access the footage for up to a week.

Walmart has also teamed up with tech startup HomeValet to offer an alternative in-home delivery by selling temperature-controlled storage units that can be placed outside a customer’s home. This will allow delivery workers to leave groceries securely without entering the premises.

Walmart merges in-home grocery delivery service with Walmart+

What: Trading challenges have caused Burberry to close a second Hong Kong store location since the pandemic.

Why it is important: Burberry has closed a second store in Hong Kong. The flagship on Canton Road was too expensive for the brand estimated at around 6.5 million Hong Kong dollars, or 828,200 USD, a month for the prime location. In addition to high rent payments, Burberry has suffered from lockdowns and a lack of Chinese tourists in Hong Kong.

Since the introduction of broader controls between mainland China and Hong Kong in early 2020, in addition to waves of social unrest before that, luxury retail in Hong Kong has taken a big hit.

The brand admitted during its recent earnings call that trading in Hong Kong is “very challenging” because there are few Chinese tourists in the region.

Burberry will continue to invest further in China, position the brand for when the lockdowns lift and utilize the remaining 10 points of sales in Hong Kong to take full advantage of the rebound of tourism and China’s expected recovery.

Burberry closes Canton Road flagship

What: Designer department store Liberty is releasing an interactive print newspaper providing news, trends, practical advice, product reviews and recommendations.

Why it is important: Print media is returning with Liberty’s newest publication that targets their knowledge-hungry customer. The department store is engaging readers through printed QR codes, dynamic visuals, crosswords, and even horoscopes that are supported by their social media.

‘The Hall’ is the title of the London retailer’s biannual newspaper that is connecting all content streams into one. This return to a traditional form of media is aimed at engaging customers and providing them with a fun and convenient way to discover products through their trend edits and articles. With QR codes, the publication maintains the ability for customers to access products quickly online without the pressure from oversaturated digital targeting.

The release of Liberty’s newspaper comes after the success of ‘The Book’, the retailer’s collectable coffee table magazine.

Liberty releases biannual newspaper

What: From weather to discovery, to social media analytics, to predicting a customer’s lifetime value, data can be a key factor in improving performance for retailers.

Why it is important: The benefits of AI technology and analytics can improve the offer retailers provide to customers, ultimately winning client retention and improving sales.

AI has shown that as little as one degree of Celsius difference between cities is enough to affect customer behaviour. Weather forecasts have been shown to be an important predictor of shopper behaviour before important retail events. For example, unseasonably warm weather near a winter sale could alter what customers will purchase and necessitate an adjustment to selling suggestions.

Additionally, the data retailers have can assist in improving the assortment offered by analysing what clients are searching for but don’t discover. The gaps for product discovery could be found in price points across the assortment or simply a lack of products within private labels. Looking to TikTok can also help identify trends that retailers use to determine their product offers. As influencers and trends vary across Instagram and TikTok, forecasting which trends to capitalize on will require observation of both platforms.

Finally, investing in the right customer can greatly benefit retailers. Mytheresa has identified the importance of a client’s first purchase as an indicator of loyalty. The more high-value and ready-to-wear the item is, the greater chance the client will return for another purchase. Aside from looking at the first purchase, analysing which emails are opened and which payment methods they use can help companies direct marketing to the right place. Improving communication targeting will deepen the relationship and loyalty of these high-value customers.

Direct and personalized engagement with clients through the help of data software analytics can lead to a better assortment and sell-through rates while mitigating unnecessary spending on untargeted marketing.

The best data uses for retailers

What: An increasingly popular Web3 tool, “token-gating” limits access to certain spaces to blockchain token-holders, allowing brands to offer perks to select customers.

Why it is important: This can be a way for brands to move beyond the need for a log-in using email addresses or social media accounts; and for brands to provide special perks or features to select communities. Token-gating provides a more exclusive experience for clients and allows companies to manipulate who gets access to high-profile releases.

Some companies are looking to improve their customers’ experience by utilising token-gating, an emerging Web3 technology. Token-gating is most commonly done on desktop websites by connecting a crypto wallet to a site to verify ownership of the necessary token (NFT). To prevent people from using bots to resale products, each token-holder is limited in the number of items they can buy from each drop.

Brands can also target specific holders of different NFT collections to tailor the experience based on what’s in their digital wallet. Brands are largely leaning on these perks as a loyalty and retention strategy.

While some are concerned by the threatening anonymity meta-wallets pose towards big data, many brands like Gucci continue to gather emails and mailing addresses for token-holders who will receive physical products as part of their perks.

Brand exclusivity tied to “token-granted” websites

What: The phenomenon of customers abusing the e-commerce system is growing in China too.

Why it is important: Such a twist could lead to generating a significant amount of losses for many players including brands.

“Wardrobing” (‘fraudulent returns’ or ‘deshopping’), a phenomenon well known by Western e-commerce operators, is growing traction in China too: more and more customers order products, wear them once, and return them.

The phenomenon, thought to represent a total cost of $25.3b in the US in 2020, is favored in China for a series of factors:

• Return policies in China are still very generous,
• Lifestream sales are important in the country, and could also generate the temptation to feature the products and then return them,
• It might very well become more and more socially acceptable

Given the size of the market, such a trend is not good news for either e-commerce operators or brands.

“Wardrobing” is a threat in China 

What: A new format for merchandising skin care, dubbed the ‘Skin Care Center’, is CVS Pharmacy’s initial move toward prestige beauty.

Why it is important: Following other mass-market retailers like Target, Kohl’s or Walmart, CVS is using the shop-in-shop format to bring prestige beauty to its aisles.

Initially, the concept was intended to streamline product delivery for its consumers in a place they already feel comfortable. Leveraging consumer confidence in CVS for health and wellness, the company plans to primarily provide skin care solutions.

CVS teamed up with L’Oréal to develop the space’s service components with a deep focus on the customer needs to drive each offering. Starting small with three locations, CVS hopes to expand the prestige beauty offering with licensed estheticians and trained consultants to offer customers an experience not traditionally found in other beauty retailers.

CVS Pharmacy moves toward prestige beauty

What: National Retail Federation’s chief economist Jack Kleinhenz is not betting on a recession happening this year.

Why it is important: U.S. economic growth is slowing, and consumer confidence is lower than it was pre-pandemic due to a tanking stock market and conflict in Ukraine. The National Retail Federation’s research pegs the risk over the next year to be low. Forecasts for 2023 remain hesitant. Jack Kleinhenz says, “Regardless of a prospect of a downturn or whether it will meet the threshold of a recession, the consumer outlook over the next few months remains favorable.” Adding that consumers remain financially healthy.

NRF predicts a recession is unlikely for 2022 but forecasts a potential recession in 2023

What: Lifestyle retailer Fred Segal launches a private label brand under the name ‘Fred Segal.’

Why it is important: The launch of the private label brand reimagines the Fred Segal brand and logo to incorporate the retailer’s history by utilising the expertise of Alfredo Settimio who has developed products for Harley Davidson and Yeezy.

Settimio and Fred Segal CEO, Jeff Lotman, envision the debut collection of tees and hoodies as the first step to expanding the private label business and bringing the retailer up to date. Lotman boasts that the collection is created and produced entirely in Los Angeles using recycled cotton and a custom-fibre blend designed by Settimio.

In 2019, Lotman acquired the retailer and began heavily investing in e-commerce. The pandemic did not help Fred Segal’s digital performance like it did other companies, but the retailer plans to continue integrating e-commerce and building its omnichannel strategy.

Fred Segal is betting on the international awareness of the brand for a successful revival that will be developed through connecting customers in-store and digitally with the private label.

Fred Segal launches private label brand

What: Repair platform Save Your Wardrobe secures 3 million USD in funding for European expansion.

Why it is important: The technology-driven circular fashion startup is scaling its B2B activities by using 3 million USD from its latest seed funding round to build its domestic UK operation; expand into Europe (specifically in Germany and France) and grow its product and technology teams.

Save Your Wardrobe helps users to access a range of on-demand local aftercare services such as alterations, repairs, eco-cleaning, customisation and upcycling of clothes. It also uses artificial intelligence to allow garments to be easily scanned, identified and stored in users’ virtual wardrobes. The combination of AI and aftercare services is responsible for reducing unnecessary repeat purchases and extending the life of garments, according to the company.

It launched a B2B offer in October 2021, in partnership with Zalando which launched a care and repair initiative, to help the retailer meet its 2023 goal to extend the life of 50 million garments. The service connects Zalando’s customers with a network of aftercare specialists across Berlin and provides the retailer with data and insights on customer behaviour and wardrobe preferences.

Save Your Wardrobe scales B2B services

What: Le Bon Marché is addressing the wellness trend with an intimate salon for face and body treatments.

Why it is important: While other luxury department stores are opting for large spaces dedicated to wellness, like Galeries Lafayette’s recent 3000-meters squared space, Le Bon Marché is unveiling a 152-meters squared salon focused on intimacy and services in partnership with their brands.

The new beauty centre, L'Institut, is on the top floor of Le Bon Marché, in the extension of the Salons Particuliers, installed in 2019 in place of former offices to welcome customers during private style advice meetings. Soft colours (beige, water green, etc.) and warm materials (light wood, velvet, carpets, etc.) were favoured.

This new space will be put into service on September 1, while treatment reservations will be possible on the e-shop. The Institute houses six treatment cabins dedicated to beauty and well-being, equipped with heated beds and adjustable lighting, in which teams of experts from partner brands will work throughout the year.

Le Bon Marché beauty salon

What: The John Lewis Partnership has become the first retailer to launch its own Chef Academy to help address the current shortage of qualified chefs in the UK.

Why it is important: A joint survey released last week by UK Hospitality, the British Institute of Innkeeping, revealed that staff shortages in the hospitality industry are reaching critical levels. The survey found that 76% of operators within the sector currently have chef vacancies.

The Partnership will be taking on up to ten apprentices this year with the potential to increase that number in the future as part of a long-term commitment to support the hospitality industry. They will spend a year learning and working in the kitchens of the Partnership’s head offices and hotels.

John Lewis launches a chef academy

What: Neiman Marcus Group is outperforming pre-pandemic sales levels, thanks to luxury demand boosting business.

Why it is important: Bergdorf Goodman reported that it saw comparable sales growth of over 30% compared to this period last year, surpassing pre-COVID benchmarks.

Strong full-price selling also contributed to a strong margin expansion of over 300 basis points. Healthy US luxury customers, a surge in occasion dressing, and a recovery in New York City and tourism have led to NMG’s Bergdorf Goodman beating 2019 sales numbers. NMG said it plans to invest in four specific arms to further its growth: Experimental store concepts and renovations, online performance, a loyal and new luxury customer base and its internal working culture.

At Neiman Marcus, sales of the top 20 brands grew 70% over pre-pandemic levels. Men’s growth exceeded 60%. Women’s shoes grew by over 50% and handbags grew by over 70%. Handbags were up almost 80% and shoes netted a 60% increase. Fine apparel up was over 30%.

Neiman Marcus is outperforming 2019 benchmarks

What: Retail success can be obtained through risk management from the weaknesses previously overlooked in modern global supply chains that were illuminated by the pandemic.

Why it is important: Business of Fashion compares the drop in cotton exports during the Civil War to the overlooked supply chain issues of today as a way of demonstrating how companies can avoid loss.

As it has been in the past, distributors continue to allow their economies and labour forces to be dependent on a single industry, commodity and/or source of supply. In today’s case, many retailers and brands rely heavily on the low costs provided by producing, sourcing, and manufacturing in China. 80% of Walmart’s non-food inventory is made in China. And 75% of Amazon’s new marketplace sellers, in its top four markets, are also based in China.

While low cost has been previously perceived as the optimal method for competitiveness, supply chain expert John Thorbeck warns of the extraordinary risks. It becomes increasingly more important to consider addressing risks as supply chain issues will become more frequent and profound as we become increasingly interconnected as a global community.

Thorbeck highlights the back-end costs that come with chasing the lowest fees. For example, massive orders and long lead times make responding to fluctuations in demand almost impossible. Consumer preference is shifting at an even faster rate with viral trends on social media platforms making products outdated before they even reach the rack. As a result, companies must face deep markdowns, slow turnover, write-offs and overflowing inventory in warehouses, much of which will end up in landfills. Changes in climate are disrupting seasonal weather which throws demand into chaos. And as the pandemic demonstrated, one issue at a single factory on the other side of the world can spur weeks of supply shortages.

Thorbeck attacks the very nature of supply chain structure criticizing the negotiations between companies as risking a cascade effect due to the loose connections between the parties involved, their planning and their motivations. Instead of simply shifting risk, Thorbeck recommends that brands should aggressively work to transform their supply chains into digital ecosystems where members share risk and work collectively to reduce it for everyone.

Part of this new supply chain ecosystem will require transparency between partners to avoid the risks generated from a lack of visibility regarding the suppliers’ suppliers. This can also help to address CSR which is becoming an ever more important expectation for consumers.

AI is also becoming increasingly important in the strategy of planning for supply chain issues. With AI,  companies can analyse weather patterns, industry sales projections, consumer trends, geopolitical strain and macro-economic indicators.

Finally, rebuilding one’s supply chain can lead to better company performance through collaboration, CSR, risk management, and trend projection that all help deliver the best offer to customers.

Retail’s new era of risk

What: Innovation in catalogue-based search shopping has created a new application combining elements from Pinterest, Instagram, and Farfetch.

Why it is important: The goal of the app is to connect brands, shoppers, and tastemakers for a new kind of shopping experience.

Sept follows a fashion marketplace model similar to other digital shopping apps but lets users interact with each other by sharing their shopping baskets, purchases and wishlists. For now, Sept’s biggest demographic is the Middle East, a market that engages heavily on social media. Al Dhaen, the creator, focuses on building the brand by bringing together macro- and micro-influencers to connect with customers via special activations which are promoted on other social media platforms.

To date, Sept works with 70 different brands and includes vintage luxury products in partnership with The Luxury Shopper, a personal shopping and product sourcing service that’s available to all users.

New shopping app Sept

What: Online beauty sales drop in 2022 as customers return to brick-and-mortar shopping.

Why it is important: The trend of wellness and beauty continues to rise as 1010Data reveals that the 14% drop in online beauty sales is connected to the return to in-store shopping.

The beauty industry remained resilient during the pandemic and likely will continue despite inflation, supply chain issues and tight labour markets. Retailers continue reporting positive year-over-year earnings showing growth in the beauty category.

Online beauty sales remain up 36.3% over pre-pandemic levels, per 1010Data’s findings.

Online beauty sales drop 14%

What: Tiktok abandons the deployment of its project in the face of the weak returns encountered by the process.

Why it is important: Despite Tiktok’s abandonment of bringing “live shopping to the West”, the market remains in the line of sight of many players like Amazon or Twitch.

After being one of the most downloaded apps during the pandemic, Tiktok’s addition of short or live videos onto the platform led to the ambition of bringing live shopping in the West. Live shopping has indeed experienced unprecedented growth in Asia since 2017, 280% per year until 2020, according to a report by McKinsey.

Live shopping still arouses ambitions at Facebook, Twitter, Pinterest, and Ebay which deployed a platform dedicated to direct sales this year.

Tiktok abandons Europe and U.S. "live shopping" project

What: Neiman Marcus and Bergdorf Goodman owner seeks to revolutionise luxury experiences through digital innovation.

Why it is important: Fashion brands are leading the charge in boosting their investments in technology, estimated to grow from 1.6% and 1.8% of sales in 2021 to between 3 and 3.5% by 2030.

For brands and retailers, the focus of digital investments is revolving around technologies that offer the greatest impact to clienteling, their sustainability impact and back-of-house operations, to best position their businesses for the opportunities to come and see a measurable impact on their bottom line.

Recognising the significance of technological advancement within the industry, Neiman Marcus has dedicated over USD 200 million to digital innovations, with a focus on in-store and supply chain investments. To meet its customers’ expectations to access retail anywhere, any way they choose, the company is strategically advancing tech programmes across its stores, e-commerce platforms and digitally assisted remote experiences.

Neiman Marcus recently partnered with Farfetch Platform Solutions (FPS) to replatform the Bergdorf Goodman website and mobile app, and open it up to international expansion. Farfetch has also made a USD 200 million minority common equity investment in Neiman Marcus to further accelerate the company’s growth and innovation through investments in technology and digital capabilities.

Neiman Marcus has reimagined its technological approach from the bottom-up, doubling down on its commitment to integrated luxury retail by equipping its workforce on the shop floor with digital selling tools such as the “Connect” platform, powered by the SaaS programme Stylyze. Stylyze provides product attribution data, as well as digital outfit and room builders. Within its digital expansion strategy, Neiman Marcus has opened a hub in India to support the group’s daily operations.

Neiman Marcus is looking to plug in other external technologies that ultimately support the brand experience they are trying to create.

Neiman Marcus Group optimising its digital transformation

What: Luxury brands and startups are betting on the growth of pickleball, padel, rugby, boxing and skiing to inspire a new appetite for sportswear.

Why it is important: The activewear industry has seen tremendous growth over the past two decades. Brands like Lululemon or Gymshark have gained huge success through catering to emerging sports trends like yoga or strength training which allowed them to grow with the momentum of the once niche sport and helped them to compete with larger brands like Nike or Adidas who cater to multiple sports.

Today brands are looking at niche sports yet to be associated with established apparel companies. The sports that have been identified as having promising growth include pickleball and other racket-based sports, skiing, rugby, and boxing. Supporters of these emerging trends highlight the importance of community motivating consumers to buy sport-specific gear. Instead of reusing yoga or tennis gear, consumers are enticed by an in-group mentality.

The next big category for activewear

What: Bath & Body Works is operating a 360 U turn on the return policy.

Why it is important: The days of liberal policies and generous returns are over. Will customers understand such a change or will that translate into a lower loyalty?

Bath & Body Works have decided to significantly restrict their once-liberal return policy: in a selection of stores, customers will be limited to returning $250 of non-receipted returns, within 90 days maximum, and customers will have to show an ID document.

This is quite a long way from their initial posture, part of the retailer brand’s promise, which allowed to return “anything, anytime and for any reason”. The system was probably too permissive: customers were able to return products that were mostly or completely used. Now, products showing wear and tear will not be accepted anymore.

Bath & Body Works change their return policy 

What: Kohl’s returns to previous strategies after negotiations with The Franchise Group fall through.

Why it is important: As negotiations with The Franchise Group collapsed, Kohl’s chief executive officer, and chairman Peter Boneparth returned to the company’s earlier strategy of monetizing real estate to avoid selling the company. Kohl’s owned real estate was valued at around 8 billion USD by activist investor Macellum Advisors, though Kohl’s has not disclosed the value of its real estate. Kohl’s owns about 400 of its more than 1,100 stores.

At various times during this year, preliminary offers were around 60 to 70 USD a share, but the stock market’s volatility, the changing retail environment, and, possibly, Kohl’s financial performance, brought the price down. The list of potential buyers of Kohl’s has been exhausted.

With reduced spending, Kohl’s has expressed preparations for increasing promotions and flexible spending. Kohl’s continues to open new small-format stores throughout the U.S. Kohl’s is also betting on a strategy of implementing “zones” designated for female-owned and emerging brands.

To date, there are nearly 600 Sephora shops inside Kohl’s, and 850 should be operating in 2023. The company has acknowledged the risks of potential unemployment, declining health of their lower-income consumer, decreased savings rates, and the overall promotional environment posing a challenge to their Sephora partnership strategy.

The future of Kohl’s after collapsing negotiations