What: The Neiman Marcus Group is actualizing its revolutionized work philosophy by constructing corporate hubs around the world to improve flexibility for employees.

Why it is important: The Neiman Marcus Group is advancing its progressive plan for establishing corporate hubs around the world, enabling associates to work remotely while also fostering collaboration and providing more convenient locations for meetings.

There is a clear focus on combining technology and flexibility to deliver employees an enjoyable and collaborative work environment. Neiman Marcus Group is exploring additional corporate hubs across the country and abroad with plans to establish hubs in Texas, New York and India.

The company believes that associates’ homes can act as their own “individual working hubs.” The retailer also considers each of its stores and distribution centres as hubs. Within their existing and new hubs, digital and physical spaces, meeting rooms and workstations instead of permanent desks are expected to improve productivity and satisfaction.

With the rise of employee departures increasing across the US, improving the working conditions of employees is a great strategy for Neiman Marcus Group. The retailer is seeing great results from this strategy with retention up and time-to-hire down in the fiscal year 2022 compared to 2019.

NMG’s philosophy allows the best corporate talent to choose where they live and work, which is setting them apart from competitors.

Neiman Marcus Group’s international work hub initiative - Source 1

Neiman Marcus Group’s international work hub initiative - Source 2

What: Macy’s plans to bring a Toys”R”Us shop into all American locations in time for the holiday shopping season.

Why it is important: Macy’s exclusive online distribution partnership with Toys”R”Us is moving in-stores due to record sales of toys being 15 times higher than in the pre-partnership period.

Beginning late July and rolling out through October 15th, the in-store shops will range from 1,000 sq. feet and span up to 10,000 sq. feet in flagship locations in Atlanta, Chicago, Honolulu, Houston, Los Angeles, Miami, New York and San Francisco. The footprint of stores may increase an additional 500 to 3,000 sq. feet during the holiday season to offer an even wider assortment of products. Opening celebrations will feature in-store events that will include family-friendly activities and daily giveaways.

Toys represent a growth category for Macy’s stores. Macy’s plans to use the opportunity to lure in millennial parents and others with attachment to the Toys R Us brand, who might then shop other departments at Macy’s.

Macy’s Toys”R”Us shop-in-shops - Source 1

Macy’s Toys”R”Us shop-in-shops - Source 2

What: Inflation and a return to classrooms are causing an increase in back-to-school shopping that’s coming earlier than expected.

Why it is important: U.S. consumers are likely to spend more on back-to-school shopping this year due to fears that prices will continue to rise.

The National Retail Federation and Prosper Insights & Analytics as well as KPMG conducted surveys of U.S. consumers regarding their back-to-school shopping plans. NRF and Prosper reported that back-to-school spending is expected to match 2021’s record high of 37 billion USD with families planning to spend an average of 864 USD on school items.

The pandemic plays a significant role in the increased spending on school-related purchases. Adapting to virtual and hybrid classes had normalized families spending more on computer equipment, home furnishings, chairs, desks, and lighting, so their kids could attend classes online.

Back-to-college spending is also expected to reach the highest in NRF and Prosper’s survey history, projected at nearly 74 billion USD. Prosper and NRF indicate that the top five shopping destinations are: online (50%), department stores (45%), discount stores (29%), office supply stores (27%), and college bookstores (26%).

According to KPMG, U.S. consumers spending on back-to-school shopping will go up 20% compared with 2021. 56% of consumers that were surveyed plan to spend more on back-to-school in 2022 compared to 2021. And 82% said this is because of rising product costs.

Consumer fear of inflation has contributed to the increased spending as well.  As of early July, 56% of shoppers had already started shopping for school and college supplies, with consumers figuring the longer they wait, the higher the prices could get. KPMG emphasized consumers getting out and physically shopping to search for the best deals and stretch their budget.

Consumers are indicating a heightened sense of consciousness around what to wear as offices and schools reopen and live events resume. As such, apparel and footwear will likely rank lower on the list of categories seeing spending cuts from consumers during the back-to-school season.

Some consumers did indicate shifting their shopping to lower-priced channels. Many turning to off-price stores as their first choice for ‘brand agnostic’ items like notebooks and pens.

Increased spending for back-to-school shopping season - source 1

Increased spending for back-to-school shopping season - source 2

What: First-half reports show a decline in gross margins for apparel brands in China.

Why it is important: The apparel sector is struggling in China, but international brands, DTC channels, and flexible product lines can help improve agility in this difficult first half of the year.

Throughout China’s apparel sector, companies with a high proportion of physical retail have been affected by factors such as lack of customer flow and weakened desire to shop in stores after repeated lockdowns. In addition, enterprises with more direct-to-consumer channels have better cost control in a market that is seeing ongoing declines, which helps to stabilize gross profit margins. At the same time, a flexible product line for large apparel groups is one way for them to grow even during adversity.

Firms have been squeezed between declining sales and rising costs of operation, supply chain and raw materials. A sharp drop in profits in the first half appears to be the inevitable result for apparel groups focused on physical stores, either in direct-to-consumer or in traditional retail business models. Looking at many apparel brands present in China; their net profit year-over-year shows a tremendous decline with some companies reporting 60-80% drops for the first half of 2022.

Despite these reports, some categories remain resilient, particularly the activewear segment.

International brands in China appear to be doing better than local apparel brands and retailers, leading to new market dynamics and a hopeful outlook for the second half of the year.

Apparel in China continues to struggle

What: Scrutiny on Amazon linked to its scaling back on the number of items sold under its private label.

Why it is important: Congressional investigators framed Amazon’s own brands as a conflict of interest for the company as its private labels are often in direct competition with others selling on its site.

Members of a House of Representatives subcommittee accused Amazon executives of lying about whether the company has used specific data from other brands on its platform in its own private label business, and whether it prioritizes its own brands in web search algorithms. However, Amazon’s private labels have not necessarily dominated its site. Marketplace Pulse has found that some categories of Amazon’s private labels represent less than 1% of sales. The biggest exception found apparel to represent 9% of Amazon’s sales.

Similarly to other retail giants, Walmart and Target, Amazon has been trying to refocus around its most popular private label products after the e-commerce specialist in past years worked to broaden and diversify its private label goods.

Amazon scales back private label business

What: UK retail footfall continues to be well below the pre-pandemic period with no signs that this summer will get it back into positive territory.

Why it is important: Retail destinations are more dependent on visitors from abroad and from dedicated UK shoppers rather than their former key clients of local office workers.

The latest numbers from the Ipsos Retail Traffic Index show that in the week to 10 July, UK footfall dropped as much as 19.9% compared to 2019 in the non-food sector. Ipsos also said that in addition to the 20% fall compared to 2019, against the previous week, the seven days saw a 5.9% footfall drop.

Towns were better off with a drop of 16.8% compared to 2019 and 5.8% compared to the previous week. Retail parks remained the best performers on a three-year comparison with a drop of 17.3%, yet they performed the worst on a one-week basis with a 7.2% drop.

High streets were down 20.4% against 2019 but were only down 4.4% week on week. Shopping centres had the worst of both worlds with a 21.7% drop against three years ago and a 6.3% drop against the previous week.

UK footfall still below 2019 levels

What: Americans are predicted to spend 109.6 billion USD on their pets in 2022 alone.

Why it is important: The expanding pet market relates to customer loyalty as owners are in need of trustworthy brands and retailers that can provide an elevated assortment of products.

The pandemic saw a spike in pet adoptions which has expanded the market for the pet category. While these customers can be difficult to please, they are passionate and ready to invest in quality products that can help bring their pet into every aspect of their life. For example, the easing travel restrictions has shown an increase in searches and purchases of travel accessories and equipment within the pet category. There has also been a visibly increased demand for convenient methods of care towards the long-term health and wellness of pets, be it supplements or organic treats.

Pet owners are overwhelmed by the abundancy of products and are looking for a curated assortment of quality goods so they can care for their pet in the same way they care for themselves.

Pet category leads customer loyalty

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