What: Frasers Group owners of House of Fraser department stores have increased their stake in luxury brand Mulberry

Why is it important: House of Fraser group is shifting upmarket first through the development of its Flannels luxury format and second through its interest in luxury brands. Acquiring brands gives more control over distribution and potentially allows a degree of exclusivity.

Frasers Group has a position called “head of elevation” who announced that the group is increasing its share of Mulberry to 29% after acquiring shares from Icelandic bank Kaupthing. Mulberry has been present in House of Fraser for some time. Frasers’ increased stake means almost nine-tenths of Mulberry stock is in the hands of Mike Ashley, owner of Fraser Group and Challice, the vehicle for Singapore’s Ong family, which owns 56%.

Frasers has also taken a stake in Hugo Boss, although most of that is held through option agreements rather than directly through shares.

Frasers lifts stake in Mulberry

What: another digital initiative in retail and in beauty

Why it is important: with lockdowns still remaining in some parts of Europe and across the globe, retailers need to extend their digital presence in order to reach out to customers who cannot come in the physical stores

UK department chain Debenhams has opened a Virtual Beauty Room to offer customers access to expert advice and virtual consultations while stores remain temporarily closed. Working in partnership with a collection of premium beauty brands, costumers can book one-to-one virtual consultations on debenhams.com with leading skincare brand Shiseido and make up brands Givenchy and Bare Minerals. The 30-minute bespoke consultations are individual and focus on answering every beauty need. Debenhams also uses its social media platforms with social masterclasses featuring beauty experts sharing tips, tricks and expert techniques.

DEBENHAMS LAUNCHES VIRTUAL BEAUTY CONSULTATIONS [...]

What: a new company called Unified Commerce Group seeks to acquire brands to develop them globally on and offline.

Why it is important: might this be an interesting model for department stores to look at? Whatever it may be, it is acquiring already existing brands which is one way to ensure exclusivity without having to build them from scratch.

A new operating company has been formed called Unified Commerce Group with the ambition to acquire brands and scale them for the Asian market. Co-founded by an ex-Fung and Macy’s executive and a former managing director of Société Générale and Credit Suisse, acting as CEO and CFO respectively, the group aims to acquire around six or more brands and develop them in store and online. The advisory board includes Terry Lundgren, formerly Macy’s CEO as well as a mixture of business executives, influencers and “global celebrities”.

It has already acquired the bankrupt Canadian Frank and Oak brand with an online business and 16 stores of which 11 have been reopened. Also Radley, Lisa von Tang and Velveteen. It describes itself as a “tech-enabled platform which drives scale for our brands through unified services”. These include supply chain, marketing and digitisation, HR and finance, distribution, tech and stores.

Betting On Next-Generation Retail: New Company Is Shopping For Brands To Buy

What: Target keep exploring and investing in local small-format stores.

Why it is important: Dense urban neighbourhoods continue to perform.

Coronavirus may have driven people to move out of dense urban markets like New York, but Target still sees great opportunities across all the different trade areas. The company will continue to open small formats in many of the same areas that it’s opened them in historically, and plans to eventually open 40 new stores a year.

These small stores have been the fastest growing format of the company’s nearly 1 900 store fleet—mostly much larger stores. They have alone generated US$1 billion in sales last year and Target said it will also begin to explore sites for stores that are roughly half the size of its smallest small-format store, so that the company can reach even more consumers in urban neighbourhoods.

Target Bets On Small City Stores Despite People Fleeing To The Suburbs

What: The Bain Altagamma 2020 luxury report.

Why it is important: The pandemic pushes luxury to sharpest fall ever but catalyses industry’s ability to transform.

The core personal luxury goods market contracted for the first time this year since 2009, falling by 23% at current exchange rates to hit EUR217 billion. The drop is the largest recorded since we have been tracking the industry. The overall luxury market shrunk at a similar pace and now is estimated at approximately EUR1 trillion.

Scenarios for 2021 are varied and Bain forecasts growth that ranges from +10/12% to +17/19% depending on macroeconomic conditions, the evolution of Covid-19 and the speed of return to travel globally as well as the resilience and confidence of local customers.

The decline in revenue is taking a disproportionate toll on profitability – Bain expects operating profit to decline by 60% in 2020 vs. 2019 level (i.e. from an average of 21% margin to 12% margin). According to the study, in 2021 the market is expected to recover 50% of the profit loss of 2020 – still below 2019 levels.

Key takeaways:

• Bain expects the recovery to gather pace over the next three years, with the market returning to 2019 levels by the end of 2022/early 2023.
• Mainland China has been the only region globally to end the year on a positive note, growing by 45% at current exchange rates to reach EUR44 billion.
• The regional shifts mark an acceleration of a rebalancing of where luxury purchases  are made as tourists shift to buy in their home markets.
• In the luxury market, online sales made up EUR49 billion in 2020, up from EUR33 billion in 2019. The share of purchases made online nearly doubled from 12 percent in 2019 to 23 percent in 2020.
• Bain expects no growth in the number of stores operated directly by brands in 2020 and possible decline in store networks in 2021.
• Younger generations – who are set to drive 180% of the growth in the market from 2019 to 2025 – place an unprecedented emphasis on tackling social and racial injustice. These “activist” consumers seek brands that align with their vision and desire for purpose.

“By 2030, this industry will be drastically transformed. We will not talk about luxury industry anymore, but of the market for insurgent cultural and creative excellence. In this new enlarged space, the winning brands will be those that build on their existing excellence while reimagining the future with an insurgent mindset. Luxury players will need to think boldly to rewrite the rules of the game,” said Federica Levato, a Bain & Company partner and co-author of the study.

Covid-19 crisis pushes luxury to sharpest fall ever but catalyses industry’s ability to transform

What: a new private label for the US department store who just exited bankruptcy

Why it is important: JCPenney is entering a new phase with its recent buyout and responds to new recent consumers’ needs with a new stylish and comfortable collection

The department store launches a private brand called Stylus, which mixes style with comfort to suit the new living habits of customers. The retailer insists that it is not an athleisure brand, but a “styleisure™ apparel line […] designed to comfortably elevate your everyday”. It reflects on how the consumers live today, mixing working from home and working from office, physical meeting with virtual gathering. It is a fashionable collection that offers also comfort thanks to ultra-soft fabrics. The affordable inclusive label ranges from XS to 3X, with pricing from USD 26 to USD 89.

With the new living habits (see IADS Exclusive article on the new consuming habits), accelerated by the pandemic, people want to spend time in casual, comfortable yet stylish clothing for the new hybrid lifestyles that are emerging: riding, biking, remote working … US rival Kohl’s recently launched a new casual private label and has opened several shop-in-shops dedicated to wellness, also following that trend.

All-New Styleisure™ Brand at JCPenney Promotes Equal Parts Style and Comfort [...]

Related items:

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• Kohl’s bets on athleisure; launches new private brand
• Kohl’s continues its shift with new Wellness Market

What: Saks Fifth Avenue has remodelled its online store

Why it is important: the race to online shopping has sped up since the pandemic and even luxury retailers are concerned. With many brick-and-mortar stores suffering the lack of customers, Saks offers a better digital experience to boost sales. Easiest accesses, personalisation and focus on fashion are the motto on the new ecommerce.

The project to redesign the webstore was on the way before the pandemic, in order to make it a better, more personalised experience for shoppers. Indeed, saks.com re-platformed with Salesforce Commerce Cloud, allowing for better data gathering on users. The new website now has two homepages: one for women and one for men, giving an easiest access to content. Among the other new features are a “New Arrivals” section updated every week, an expanded “Edit” section with shoppable looks and content presented in a magazine-style, and new filtering options such as items available for same-day delivery in New York City. The enhanced search functionality allows for shoppers to view recent searches, the most popular searches, and bestsellers.

Saks Fifth Avenue chief marketing officer Emily Essner said : “I really do think the site sets the standard for luxury e-commerce, particularly in the way it engages in a personalized, easy way, and is very much centered on fashion.”

Saks Fifth Avenue Reconstructs Its E-commerce Experience

What: Hammerson mall is exploring a new rent model including online sales.

Why it is important: could it be a new inspiration for department stores to propose more competitive models to brands?

Hammerson reported that only 38% of its UK tenants paid rent in Q4 2020, adding up to the difficulties of the retail giant, which is leading to a €912m refinancing, through a €610m fundraise and the rest by selling assets. As a consequence, and also following suit to many retailers complaints, the rent model is reported to be reevaluated by Hammerson, into a threefold approach, including in-store sales, footfall and online sales (collected instores).

This change would probably induce new behaviours in the future, with tenants and landlords cooperating together to increase the efficiency of their marketing strategies, working hands in hands to propose at the same time interesting experiences and competitive services.

UK retailers’ rents could soon be based on online sales

What: a ecommerce giant make a push into physical retail

Why it is important: as the pandemic has forced an increase in online retail, such moves show that physical retail still remain relevant and essential for retailers

Chinese retailer JD.com plans to expand its brick-and-mortar reach and aims for a network of 5 million physical stores in the next 3 years, as a response against online Chinese competition. The retailer won’t open 5 million units but will rely on its partner stores to reach its objectives. Through this aggressive physical push, JD wants to reach out to all customers, including the ones in smallest cities that are courted by competition, including rival Alibaba.

JD.com wants a network of 5 million stores as e-commerce battle heats up

What: a US department store partnering with a successful DTC brand

Why it is important: the home category has been expending fast since the beginning of the pandemic and it is important for department stores to keep developing this category in order to respond to consumers’ needs. It is also a demonstration that department stores are still a relevant marketplace for digital players

US department store Nordstrom is partnering with direct-to-consumer sleep company Casper Sleep. The brand will be available at selected Nordstrom store and at nordstrom.com. Casper already operates its own stores and ecommerce, and has partnerships with divers retailers.

The home category has been expanding rapidly in retail given the new consuming habits speeded up by the pandemic and the new stay-at-home reality, and retailers need to bet on this category to stay relevant and answer to their costumers’ needs.

Emilie Arel, President and Chief Commercial Officer at Casper, said: “Partnering with a premier retailer like Nordstrom is another step towards advancing our multi-channel distribution strategy to reach more customers wherever they prefer to shop […] As we are spending more time at home, people are seeking out a better sleep experience more than ever. The combination of these two loved, trusted and authentic brands is a win for both partners and customers alike.”

“As we redefine our Home category, we’re excited to be partnering with Casper to bring their award-winning assortment of bedding to Nordstrom,” said Olivia Kim, Vice President of Creative Projects and Home at Nordstrom.

Casper Partners With Nordstrom to Bring Its Mattresses and Sleep Products to Customers [...]

Related item:

• IADS Exclusive - Adapting to new consuming habits

What: Shinsegae eyes on taking over Hanjin's logistics unit.

Why it is important: Access to logistics is becoming key for retailers.

Shinsegae is looking to buy Hanjin Group's logistics unit to bolster its delivery service infrastructure to cope with the rapidly growing e-commerce business.

The company, which is focusing on expanding its online business through SSG.com, showed interest in purchasing Logen Logistics when it was put up for sale last year, but decided its 7 percent market share was too low. Hanjin Logistics, on the other hand, has a 13.2% share of the parcel delivery market, just 0.6% smaller than that of No. 2 player Lotte Global Logistics.

Shinsegae's main rivals in the online business are Naver, Coupang and Lotte, which have either their own delivery service firms or strategic partnerships with local logistics companies.

 Shinsegae eyes on taking over Hanjin's logistics unit

What: Printemps group issues a recovery plan which includes the closure of several stores.

Why is it important: in order to avoid losses, respond to market requirements, and ensure its long-term sustainability, the Printemps group is now obligated to transform its shop network and its organisation.

The French market has been structurally challenged for some years and aggravated by a number of economic disruptions (attacks, yellow jackets, strikes). Now, the Covid-19 crisis is the latest challenges retailers have to face. In order to reduce cost structure, French department store group Printemps has decided to close four of the group's 19 department stores (Paris Place d'Italie, Le Havre, Strasbourg, Metz) and three Citadiums stores out of 8 (Paris Champs Elysées, Paris Nation, Toulon) meaning the layoff of 428 employees.

The group decided to free up significant investment capacity in order to:

• Improve their digital presence and make their omnicanality an essential lever for growth
• Strength the differentiation offer and reinvent the retail experience
• Redevelop its customer base

LE GROUPE PRINTEMPS ANNONCE UN PLAN DE RELANCE POUR ASSURER LA PÉRENNITÉ DE SES ACTIVITÉS

South Korea’s retail giant Shinsegae Group will open a new mega shopping mall complex Starfield in the country despite the growing demand for non-face-to-face shopping trend. Starfield Anseong, that is jointly invested by Shinsegae Property and U.S. shopping mall developer Taubman Centers commands a total floor area of 240,000 square meters, significantly larger than other rival shopping centers nearby. The three-story complex with two underground floors has parking capacity of 5,000 cars. The mall offers visitors not only extensive shopping experiences but also a wide range of cultural experiences with diverse eatery locations, cinema, culture centers and library.

DoorDash, the delivery platform best known for delivering takeout from restaurants, has announced it would be working with Macy's to offer same-day and next-day delivery for the department store. The service will be available at 500 Macy's and Bloomingdale's stores across the U.S. Orders placed by noon at Macy's and by 1 p.m. at Bloomingdale's are eligible for same-day delivery, while orders placed after that will be delivered by DoorDash's driver fleet the next day. There are no minimum order requirements or time slots for the service, which is being run through DoorDash Drive, the company's last-mile delivery platform. It can be accessed on Macy's website and app. Being able to offer shoppers convenient options will likely be key to this holiday season, which is looking to be unlike any other before due to disruptions caused by the coronavirus pandemic. The announcement comes as the retail industry gets the holiday shopping season started, weeks ahead of its usual schedule.

DoorDash Partners with Macy’s to Power Same-Day Shopping Nationwide [...]

What: JC Penney is accelerating its sale process before holiday seasons

Why is it important: in addition to being ready on time for holidays, meaning having purchased the goods to sales, JC Penney is currently facing another issue, as there is a conflict between its debtors.

JC Penney’s plan is to continue the activity by selling itself to its debtors. The company shall be divided into 2 entities, the operating company (including stocks and 70,000 headcounts), to be sold to property owner Simon & Brookfield, and the real estate, which would give way to a credit to the rest of debtors. However, they are contesting this arrangement and asking for their share of the deal, in spite of not having yet proposed a plan to the judge in charge of the liquidation in disguise.

JC Penney Revs Up for Sale as Lender Faction Looks to Join the Fray

Since its debut on the high street, British department store Marks & Spencer has only been selling its own fashion brands. Now the retailer has announced a partnership with eco-conscious fashion label Nobody’s Child; it is the first time in M&S history that it partners with an external brand. Available on the website, the goal is to broaden appeal. M&S had previously announced that it would open its website to complementary brands, and Nobody’s Child is the first brand to test this model, selecting a curated range from its wider offer for M&S.

What: a new business unit for Canadian HBC

Why it is important: an investment in property to create new opportunities for the group

Canada’s Hudson’s Bay Corp. has launched HBC Properties and Investments (“HBCPI”), a dedicated real estate and investments business. The aim is to capitalise on the company’s robust portfolio of assets, and to eventually convert some of Hudson’s Bay’s real estate into mixed-use developments combining workplace, retail, residential and entertainment categories.

HBC controls 40 million square feet (approx. 37 square meters) of gross leasable area across North America; which includes retail banners Hudson’s Bay, Saks Fifth Avenue and Saks Off 5TH.

This is the latest step forward for the company to “shift to a […] structure with distinct portfolio businesses that operate at the intersection of retail and real estate.”

HBC Unveils HBC Properties and Investments

What: the pitch this year is not the timing, but the claim: sustainability.

Why is it important: by being the first to launch its Christmas campaign, and by stressing the fact that the brands, decorations, and products sold are all sustainable, it is at the same time pre-empting this positioning, and commoditising sustainability in customers’ minds (by making it a basic expectation). All this at a moment when IADS members are also thinking to launch in advance their Christmas season.

Selfridges claims that this year’s Christmas range is the largest and most sustainable to date. It includes local brands (UK-based), recycled decorations, and eco-friendly produced items, in addition to a customisation workshop. All wrapping material is either FSC or recycled. The selection is available on Oxford Street, online as well as in Manchester and Birmingham stores.

SELFRIDGES BRINGS ‘ONCE UPON A CHRISTMAS’ TO LIFE WITH EXCITING DESTINATIONS IN STORE AND ON SELFRIDGES.COM

Brookfield Property Partners wants to redevelop 100 of the 125 malls in its recently acquired GGP portfolio into what it calls mixed-use “mini cities.” Brookfield estimates that it will invest between $800 million and $1 billion annually over the next few years as it adds on office and residential space to the properties. The firm will redevelop and sell the remaining 25 malls.

Deprived of rental receipts, Brookfield has for months been struggling to stay on top of the debt owned on its retail properties. At least seven of its malls had defaulted on their mortgages by the end of June. Some 20% of jobs will be cut by the group. According to management, the job cuts and property divestitures as part of a long-term strategy to reduce the size of its retail portfolio.

What: 520sqm dedicated to retail cosmetics and skincare in an enhanced way

Why is it important: such a surface needs strong novelties to be profitable and more than a gadget. Many attempts have already been done by L’Oreal (owner of Lancome) across the years and on various brands, but the fact that they are launching these new technologies on their top brand, within the top location of Lotte Duty-Free, aiming at the only customers that will support growth, Chinese travelers, says it all on the degree of maturity of such a reflection and might be inspirations for department stores.

In addition to virtual cataloging and browsing, Lancome is proposing an augmented reality make up try-on service, Modiface (call Dream face in Korea), following the acquisition of a same-name startup in 2018. It allows us to use screens as virtual mirrors and try in very realistic manner shades and colors without actually touching the products. In these times of restricted interactions, it is a time-saving, potentially sales-enhancing move.

Lotte Duty-Free posted a turnover of €7.7bn in 2019 (+25% vs. 2018) and the Myeongdong location where this new store opened is its flagship, located near the town hall of Seoul, with 3 entire floors dedicated to duty-free business. The L’Oreal luxury division, to which belongs Lancome, posted a turnover of €11bn in 2019. Almost a quarter of it is performed by Lancome itself.

Lancôme takes centre stage with Smart Store at Lotte Duty Free Myeongdong

What: China has significantly started recovering in the domestic tourism market.

Why it is important: Signs are showing that customers are not yet ready in terms of the trust to travel internationally, which is an issue to deal with by European players, as the rebound of the pandemic is making headlines. Furthermore, one might read in between the lines that the Chinese customer is changing in nature, confirming its transition towards a more individualistic, hedonistic one. This will also have consequences on retailers regarding the way they deal with these customers once markets are fully reopened.

McKinsey had conducted a survey in May 2020 about Chinese travels, concluding that the domestic travel would recover quickly (as a reminder, the global tourism market is expected, according to Visa, to shrink by 67%, for a value of €733bn, to get back to 2002’s levels at €362bn globally, from €1,095bn). They are now updating this story to identify lessons for other countries. As the key features of their study:

• In September, demand for domestic travel is back to last year’s level, while international tourism demand is still very low,
• Domestic travel demand is valid for all types: local leisure trips, domestic short and long haul, domestic business travel. For leisure, an important element is that more and more respondents are asking for self-guided or self-driving experiences, rather than group visits,
• In spite of this enthusiasm, the trust in travel is still hesitant, which probably explains why high-end travel is booming,
• The recovery of international travel is likely to be gradual, according to the establishment of “travel bubbles” in the region. However, the trust factor remains to be seen.

Very expectedly, the report concludes that, for other countries, key steps now are to rebuild demand, via promotional activities, before enhancing the value proposal once trust has been reinstalled, focus on domestic consumption, and accelerate the digital transformation.

What can other countries learn from China's travel recovery path?

What: Former El Corte Inglés president Dimas Gimeno will open first-ever WOW store in Madrid next year.

Why it is important: The project shows the remaining consistency of the multi-product inner-city flagship model.

Dimas Gimeno has returned to retail with his own project: a multi-product store that will rival the likes of Primark, Amazon and El Corte Inglés. Selling everything from homeware to fashion, the flagship will open in the Summer 2021 on Madrid’s Gran Via and will occupy 5.500sqm. The store is hoped to be the first of many, and the company also plans to open pop-up stores in the meantime.

Former President of El Corte Inglés to launch new bargain brand

What: Ikea is disrupting its own business model before it is disrupted.

Why it is important: In the face of competition, as well as crises, retailers need to experiment and test, even if this challenges their traditional business model. Ikea is doing it, Walmart is doing it, Amazon is doing it, as is Alibaba; department stores need to do more of it.

The Financial Times looks at the Ikea city centre Planning Studio format as one example of the relentless experimenting taking place at the company. It argues that Ikea is disrupting itself before being disrupted. A lesson for all retailers. The last of the Studio formats to open in Oslo is taken as a case: apart from allowing customers to plan their rooms while seeing the total range of materials and furniture, seminars and events will be hosted at the shop, for example, while the Studio will also offer inspiration through product news and season-related products. The customers can receive help with planning rooms and homes and get inspired by the solutions on display.

Ikea faces increasing competition from online retailers and the Covid pandemic closed up to three-quarters of the stores with group sales falling 4% in the year ending August 2020.

Ikea seeks to disrupt itself before it is disrupted

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