What: another department store closing

Why it is important: the crisis has put pressure on retailers; and the less performing branches of department store chains are not spared by the restructuring plans

British retailer Marks & Spencer is closing its outlet at Raffles City Shopping Centre on 31 December, after 34 years of operations. The retailer’s 10 other stores islandwide will remain open. Marks & Spencer is part of the Dubai-based Al-Futtaim group, and so is Robinsons who also shut its Singaporean operations after 162 years earlier this year. The Marks & Spencer branch at Raffles City is the only one closing as the lease is signed under Robinsons.

Marks & Spencer shuts store in Singapore

Related items:

• Robinsons permanently closes stores in Singapore
• Robinsons at Jem closing down in August 2020

What: Takashimaya chases new identity as developer, starting in Vietnam.

Why it is important: Expanding the property development business is a top priority for the company.

With its mainstay department store business foundering amid the coronavirus pandemic, Japan's Takashimaya has turned to property development overseas as the company's next engine for growth. Its department stores in Japan accounted for less than 20% of total operating profit in fiscal 2019, despite making 80% of total revenue, a sharp contrast to the property development business, which generated about 40% of operating profit on less than 10% of revenue.

Takashimaya chases new identity as developer, starting in Vietnam

What: a retail group shutting in UK.

Why it is important: retailers have been hit hard by the pandemic, forced to close their doors for months, and Arcadia is one of the latest victims of the crisis that will be filling for administration

Arcadia Group, owner of eight retail brands (including Topshop), has filed for bankruptcy, putting about 13,000 jobs at risk. The group was struggling even before the pandemic hit, and avoided bankruptcy in June 2019 after it managed to renegotiate debt repayments and restructure the business. The collapse will tarnish even more the reputation of its owner Philipp Green, who has been surrounded by controversies these last few years -since the debacle around department store BHS.4

Frasers Group, led by Mike Ashley, offered a GBP 50 million "lifeline loan" that that Arcadia had declined.

Sir Philip Green’s Arcadia Group Files for Bankruptcy

Related item:

• The rise and fall of Topshop: what went wrong

What: brand cooperation to dress an already existing F&B space at Selfridges.

Why it is important: Could that be an idea for department stores to be more attractive to top tier luxury brands?

Selfridges has proposed Fendi to dress up its champagne bar, located in the middle of the luxury handbag section. Fendi has decided to review the décor according to its seasonal colours, to put its logo, and to propose selected and made to measure delicacies (cocktails, coffee…)

At a moment when department stores are rethinking the way to improve space productivity (an IADS meeting is organised on 28-29 January on this topic), when IADS members are refurbishing their spaces (Palacio de Hierro), this move is interesting for 2 reasons:

• BtoC: It smartly uses the brand appeal to market space and gives customers reasons to come and spend time.
• BtoB: for the department store, being able to propose such a partnership goes beyond the typical negotiation on rent and commission rate and allows the brand to explore new boundaries it might not be able to do outside of the store (for obvious real estate costs reasons).

Fendi Caffe Pops Up in Selfridges

What:  A talk from Marc Metrick at the CEO summit

Why it is important: a strong message in favour of sticking to what is done best by department stores and see how to improve it

Marc Metrick dismissed the idea to adapt the offer to the situation (by, for instance, selling essential products) by reminding that Saks Fifth Avenue is all about fashion. With this clear message in mind, he advocates for the implementation of Buy now Wear now, a heated debate that started 4 years ago between retailers and brands, in order to sell the right product to the right customer at the right moment. For him, it is time to get rid of this disconnection between seasons and customers.

Marc Metrick on Luxury Disrupted, Remaking the Matrix and Buy-Now-Wear-Now

What: Small “Showroom” stores to reinvent retail.

Why it is important: The exemplification chosen by WWD is less important than its implication: if small “showroom stores” are performing well, how could they be articulated into a department store offers, instead of renting street shops?

WWD points out that Nike, Comme des Garçons, Arc’teryx are planning to open a series of smaller, digitally-enabled stores, across Europe, instead of pursuing a flagship strategy.

With the example of Norwegian Rain, WWD is going a bit further by explaining that the “showroom store” (where customers can only find samples to try and then order online, therefore reducing the need for retail space) is a good alternative to traditional models of retail.

For us at IADS, the main question is to know if this kind of model could be attractive to both these brands (to be located into the main department store) and stores (to have a one of a kind offer without the logistic hurdles going along with it)? If so, what would be the financial mechanisms to make it profitable to both?

This Norwegian Rainwear Brand Is Testing Compact Stores 

What: our partner GDR reports a new store format for Apple.

Why it is important: a radical innovation in terms of square footage, implying a strong organisation beneath.

IADS’ partner intelligence consulting firm GDR reports the opening of a new Apple store format, the Express stores, across UK and US. They are considerably smaller than the flagships and propose only 2 services, pick up online orders and advice from the Genius bar.

Interestingly, they have been rolled over not only existing locations with a separate entrance but also in standalone sites. Interestingly enough, the pick up service supposes a strong logistical supply chain beneath to sustain the process.

Apple launches Express store format for appointments and collections

What: Foot traffic drops by half at U.S. stores on Black Friday.

Why it is important: Overall consumer spending had remained strong.

Traffic levels across the U.S. on Black Friday dropped about 50% year-on-year while older shoppers had shunned malls over concerns they might contract Covid-19. At the same time, a jump in ecommerce orders among those who had never shopped online before helped digital sales rise 22% from a year ago to US$9bn. Those who did visit stores were more likely to buy and the conversion rate increased 4 points from a year ago, while the average transaction value rose 5.9%, RetailNext found. Bricks and mortar revenues still dropped about 30% while in-store and kerbside collection increased 52 %.

Foot traffic drops by half at US stores on ‘Grey Friday’

What: The third renovation of  the Italian retailer  is completed

Why it is important: The rooting of the flagship into its territory is achieved through a special space dedicated to local artisans

After 2 years of works worth EUR 12,5 million, Rinascente unveiled its newly renovated Florence store, after Rome and Turin. Interestingly, the ground floor includes, side by side with the traditional luxury accessory brands, spaces dedicated to local artisans and brands, to maintain the bond with the local community. Category wise, the spaces dedicated to menswear and shoes also expanded. The flagship never closed during the works and reported a turnover of close to EUR 29 million in 2019.

Rinascente Celebrates Local Artisanship With Revamped Florence’s Store

Related items:

• Rinascente Milano renovates its women floors
• Phygital Christmas at Rinascente

What: the holiday season at Selfridges, Harrods, Lane Crawford, and Neiman Marcus.

Why it is important: Nothing comes up as unexpected, however, all the points we have been stressing up until now are beginning to be commonly executed across the board.

Vogue business is making a review of 4 top department stores’ actions on how they address the holiday season. Interestingly, there is no radical innovation, however a consistent adaptation to the new business trends we have been reporting for the past 6 months:

• Address local community with dedicated actions, such as Lane Crawford supporting local businesses, Selfridges hosting a film festival and Harrods with a new Gordon Ramsay restaurant,
• Use omnichannel to ease the purchase processes, such as Neiman Marcus offering an online gift service, Selfridges a one-stop-shop and ship service,
• Make sure there is a feeling of safety, with Selfridges proposing sanitising pumps on every corner.
• Enhance the digital shopping, with Neiman Marcus hiring consultants to upgrade its sales associate team with digital competences, Lane Crawford proposing Zoom calls, and Harrods striking a deal with Farfetch.

In terms of category, while Saks is booming on fragrances and jewelry (just like El Palacio de Hierro mentioned a few weeks ago), Lane Crawford reports growth on home, lifestyle and beauty, just like overall IADS members. This does not prevent the department stores from proposing discounted products, such as Harrods who had a very aggressive discounting approach this season.

How luxury department stores are navigating the holiday season

What: a look at American past and present difficulties and its options.

Why it is important: All ‘stakeholders’ (read our White Paper on this topic) are progressively understanding that no retail structure is too big to fail, and any failure would have a social cost much bigger than just financial debts

After 15 years of construction, financial issues, and unplanned glitches, the American Mall opened in East Rutherford, New Jersey in October 2019. It progressively opened its sections until the pandemic hit, and the shutdown 6 months after the opening, in March 2020. As a consequence, traffic, experience, retailers were affected and question the future of a shopping complex that had never its chance yet to operate a full capacity. Questions on its financial stability worry not only bankers but also the mall’s stakeholders, especially the city of East Rutherford, which is realizing that such a big venture could also simply end up in closure if it is not able to weather the pandemic issues.

New Jersey’s American Dream Mall Is Still Waiting to Fully Open

What: Felix Capital Frederic Court’s view on the future of e-commerce.

Why it is important: Some major behavioral changes are on their way, which complement (not replace) physical retail.

Felix Capital has financially backed ventures such as Farfetch or Goop. Frederic Court thinks that the customer’s need for inspiration, once fuelled with perfect execution in-store, is still here, but is now delivered via a screen. Therefore, brands need to adapt by having the right approach to digital, the perfect product, and operational excellence.

Why is it important? Court mentions groups of young women, gathering to spend time together and visit stores. Now, they do the same, but digitally, by having lunch or dinner together and visiting sites on their phone at the same time. The new social shopping experience is delivered via a digital approach, but not at all costs: profitability must prevail. In addition, for Court, retail will come back, to deliver an elevated experience.

‘E-commerce as entertainment’: An investor behind Goop predicts the wild future of retail

What: another department store chain closing.

Why it is important: department stores have been struggling for your to keep up with newcomers and the pandemic, forcing all stores to close for months, has just been accelerating the most declining ones. Now UK chain Debenhams is closing.

Debenhams filed for administration last April, and couldn’t find a bidder to save it. The department store is now set to enter liquidation, putting 12,000 jobs at risk. Debenhams has been struggling financially since before the financial crisis, but successive restructurings have failed to find a solution to save it.

The news comes just after UK retail group Arcadia Group fell into administration too, which was the largest concession holder at Debenhams, stocking the shop floors with clothing brands such as Wallis, Burton and Dorothy Perkins.

Shoppers will be able to buy items in stores and online, until all the stock is sold. The closures will not impact Magasin du Nord in Denmark, which continues to operate independently.

Debenhams: the rise and fall of a British retail institution

What: Uniqlo to close at the end of this month its flagship in one of the best retail locations in Seoul

Why it is important: this closure, happening on a thriving retail market, is the consequence of political reasons and might show a return to regional, or national, retail.

Uniqlo is a very visible Japanese symbol in Korea and fell victim of the Korean customers’ boycott that started in July, following Japan’s decision to restrict exports of chipmaking materials to South Korea.

Uniqlo’s Seoul flagship to close

What: a department store offering tests to employees to ensure safety

Why it is important: many businesses had to deal with their teams and employees’ safety this year and protect them from the virus, whether through isolation and remote working or by providing them protecting gear. Now John Lewis is going further by implementing a test centre at one of its distribution centre.

Thanks to a partnership with the Department of Health and Social Care, John Lewis Partnership was able to introduce rapid covid testing at Milton Keynes distribution centre. Testing is voluntary and provides results within 30 minutes that are directly recorded into the national testing database.

The centre is full of employees as the end of the year is a busy timing, with Black Friday and the Christmas orders. With around 1 in 3 individuals with Covid-19 not displaying symptoms, testing helps to protect staff and customers by identifying those that need to isolate.

If this pilot project turns into a success, it should roll out to more John Lewis and Waitrose centres including supply chain sites, customer fulfilment centres, textiles factory and some shops.

JOHN LEWIS PARTNERSHIP BECOMES ONE OF THE FIRST UK BUSINESSES TO ROLL OUT NHS TEST [...]

[video] John Lewis Partnership Rapid Covid-19 Testing

What: A new board for Neiman Marcus.

Why it is important: 7 members, including only one incumbent from the department store world.

Neiman Marcus appointed Pauline Brown as non-executive chair of its board of directors. Brown co-founded Inspire Brands, a restaurant company, in addition to having a track record at Hilton, Expedia, McKinsey and the BCG. He will chair a board composed of:

• Pauline Brown, former LVMH, Estee Lauder and the Carlyle Group
• Pamela Edwards, from CitiTrends and L.Brands
• Kris Miller, coming from Bain and EBay
• Meka Millstone-Shroff, from BuyBaby
• Scott Vogel, managing partner at Vogel Partner
• Geoffroy van Raemdonck, CEO of Neiman Marcus

Neiman Marcus Names Paul Brown Non-Exec Chair

Based on a report from the Center for Global Policy and corroborated by Reuters and others, a number of international media have been reporting the issue of forced labour of the Uighur population in the cultivation and processing of cotton in Xinjiang province, a source of around one-fifth of world cotton production.  Media reports have been published over the last 6 months alleging that major brands were tainted by forced labour in their supply chains including Adidas, Amazon, C&A, Calvin Klein (PVH), Gap, H&M, IKEA, Marks & Spencer, Nike, Patagonia, Ralph Lauren, Puma, Tommy Hilfiger (PVH), Uniqlo (Fast Retailing) and Zara (Inditex).

It has been argued by representatives of the apparel industry that the scale of the issue is such that the consequences could disrupt the global apparel supply chain. Indeed, once cotton from the region is mingled with cotton from other sources, it could show up in final products made all over the world including Bangladesh, Vietnam, Cambodia, Indonesia, Ethiopia, Kenya and even Haiti and Centra America. Now the BBC has published video footage which would appear to confirm the link between large detention centres and huge factory production sites in the Xinjiang Uighur Autonomous Region.

M&S in the UK has been targeted partly because it is large but also because it publicly prioritises “ethical buying” as part of its brand and image. Boohoo, H&M and Nike have recently denied using cotton produced by forced labour.

reuters: UK to big brands: do more to avoid forced labour in China's Xinjiang

[video] BBC News: New evidence of Uighur forced labour in China’s cotton industry

Related items:

• IADS Exclusive - Sustainability series #2: The Higg Index
• IADS Exclusive - Sustainability series #1: the cost of being good
• IADS Exclusive - Sustainability: department stores’ destiny

What: fashion retail I.T. Group to follow suit to Lane Crawford, Joyce and Swank, and delist from the HK Market.

Why it is important: the long-time partner of Galeries Lafayette in China has been struggling to cope up with a declining brand image

I.T has proposed, in partnership with CVC Capital Partners, to buy back its floating stock at a price of HKD 3 a share, leading to a total deal of HKD 168 m. Mr Sham, founder, will retain 50,65% of ownership, while CVC will own 49,35%.

I.T. has not been able to follow the online trend, led by Alibaba and JD.com, be it in HK or in PRC. They need to pivot the business in a significant way, which may explain why Mr Sham needs to regain control of the company in order to pursue these changes while limiting the pressure.

I.T Group founder and CVC plans to delist from stock market 

What: in an interview, Adidas CEO announced a new retail concept and opening plan to be unveiled in March 2021

Why it is important: Although Adidas online sales increased, stores are seen as a complementary, and necessary, tool to online, as customers need to see and feel products.

Adidas posted a 51% increase yoy online on Q3 2020, following a +93% on Q2. Overall, estimates for 2020 are at EUR 4 billion, to be compared to EUR 1 billion in 2016. These excellent results do not change Adidas CEO Kasper Rorsted’s opinion on stores: they are needed as a place to see and feel the products. He hinted at a new retail concept to be unveiled and rolled out next March.

Adidas will keep opening new stores despite Covid e-commerce surge

What: a major deal between US department store Kohl’s and French beauty giant Sephora

Why it is important: following the new consuming habits, Kohl’s has been reviewing its assortment to become a “destination for active, casual, and beauty for the entire family”, betting on casual wear and beauty & wellness

The long-term strategic partnership will create a new era of elevated Beauty at Kohl's. The "Sephora at Kohl's" will be a fully-immersive, premium beauty destination of approx. 230 sqm. 200 corners are slated to open in fall 2021; and the partnership should expand into at least 850 stores by 2023 and on kohls.com. The news comes out while Kohl’s is completely rethinking its business, shifting toward a lifestyle and wellness segment, and while Sephora is phasing out US department store chain JCPenney.

Kohl’s and Sephora Announce Major Long-Term Strategic Partnership [...]

Related items:

• Kohl’s continues its shift with new Wellness Market
• Sephora wants out of JC Penney stores

What: an interview with Selfridges Group CEO Anne Pitcher

Why it is important: Anne Pitcher discusses the future of Selfridges, and of retail globally. She talks about emerging trends and the repositioning of the company

In an interview with BoF, Selfridges Group CEO Anne Pitcher talks about the opportunities she sees for the group and for retail after the pandemic. She strongly believes that it is time to bet on the local community, especially for flagship stores located in big cities (see IADS Exclusive articles: The rebirth of local retail and Adapting to new consuming habits).

She also acknowledges that customers’ shopping habits will continue to evolve toward a more responsible consumption and therefor the retailer will reinforce its commitment to sustainability through its sustainable initiative Project Earth launched last August, with plans to change the way we shop by 2025.

Selfridges’ Anne Pitcher on the Sudden Pivot to Local Shopping

Related items:

• IADS Exclusive - The rebirth of local retail
• IADS Exclusive - Adapting to new consuming habits
• IADS Exclusive - Sustainability series #2: The Higg Index
• IADS Exclusive - Sustainability series #1: the cost of being good
• IADS Exclusive - Sustainability: department stores’ destiny

What: Nordstrom sees earnings decline but remains focused on future growth.

Why it is important: Like other retailers, the company has been hurt by the lack of store traffic.

Third-quarter net earnings at Nordstrom dropped to US$53 million from US$126 million in the year-ago period, though the company cited sequential improvement in sales and earnings from this year’s second quarter. Earnings before interest and taxes came to US$106 million, a decrease from US$193 million during the same period in fiscal 2019, primarily due to lower sales volume, partially offset by realized expense savings. Total company sales decreased 16% to US$3 billion last quarter, from US$3.56 billion in the year-ago period. Sharing the results, CEO Erik Nordstrom emphasized that the company remains focused on its three priorities for growth:

• Building a market strategy that links store and digital assets to provide greater services, faster deliveries, more pickup options, and greater merchandise choices in key metropolitan areas.
• Fuelling growth of Nordstrom Rack, which represents one third of Nordstrom Inc.’s total business.
• To increase the velocity of digital sales (digital sales of US$1.6 billion represented 54% of total sales and increased 37% last quarter).

Nordstrom Sees Net Decline; Cites Improving Trends

What: Neiman Marcus partners with Affirm to give customers a new way to pay.

Why it is important: Offering a new flexible alternative for customers.

Neiman Marcus announced a partnership with Affirm that will bring a more flexible and transparent alternative to customers shopping for luxury products. Eligible shoppers can now access their favourite designer fashion or accessories online, and enjoy paying overtime on a schedule that best fits their needs and budget. When shopping online, eligible shoppers can select Affirm at checkout and split the total cost of any purchase over US$50 into simple payments with terms from six weeks to 36 months depending on the cart size.

Neiman Marcus joins more than 6 500 Affirm retail partners. In 2019, merchants using Affirm reported 85% higher average order values than other payment methods. And in the first half of 2020, nearly 70% of Affirm loans were from repeat customers.

Neiman Marcus and Affirm Give Customers a New Flexible Way to Pay for Luxury and Designer Fashion

What: Farfetch rolls out ambitious 2030 sustainability plan.

Why it is important: The company is ready to reimagine how it does business.

By 2030, the retailer wants to see its circular business outgrow sales in the primary market, and to sell nothing but “conscious” products. Achieving carbon neutrality, centralized fulfilments and “embedding a consciously inclusive” company culture are also part of the plan. The goals have been divided among four pillars: Circularity, inclusion, conscious products and carbon neutrality, as one of the key issues the retailer is facing is the high amount emissions from shipping and returns of its sellers around the world.

Farfetch Lays Out Ambitious 2030 Sustainability Goals

Related items:

• IADS Exclusive - Sustainability series #2: The Higg Index
• IADS Exclusive - Sustainability series #1: the cost of being good
• IADS Exclusive - Sustainability: department stores’ destiny