What: Hong Kong is shifting in terms of appeal to local and Chinese customers. This is a reason for Harvey Nichols HK to close.

Why it is important: Hong Kong is not turning its back to luxury. But it falls on retailers to make sure they understand the dynamics to adapt to new consumption patterns and trends.

Hong Kong's luxury retail landscape is adapting to significant changes. The city, once a hub for wealthy Chinese shoppers buying high-end brands, is seeing a shift in tourist behavior. Visitors now show a greater interest in local culture and experiences over traditional shopping sprees. This change is partly due to the rise of new shopping destinations like Hainan Island in China, evolving consumer preferences, and an increase in online shopping.

The pandemic, along with the 2019 anti-government protests and strict COVID-19 regulations, has led to a decrease in Chinese tourists and overall visitor numbers, affecting retail sales. Luxury retailers, including Harvey Nichols, Valentino, Burberry, and Tiffany, have responded by closing stores in Hong Kong, where retail rents remain high despite a significant drop since 2019.

Despite this downturn, Hong Kong still leads in per-capita luxury spending and is expected to return to its pre-Covid sales levels by mid-2024. Some luxury brands like Louis Vuitton, Chanel, De Beers, and Bulgari are investing in the city, signaling a potential luxury renaissance. However, the challenge of competing with destinations like Hainan and changing consumer habits remains. Meanwhile, retail spaces are diversifying, with more emphasis on food and beverage outlets and less on high-end retail, reflecting the evolving market dynamics in Hong Kong.

Harvey Nichols’ closure highlights shifting luxury landscape in Hong Kong

What: J.C. Penney experienced a 10.7% decline in net sales to USD 1.5 billion in Q3, with credit card revenues decreasing by 18.6%.

Why it is important: There is a need for substantial time and no guarantee of success in turning the brand around given its position as a weak player in a declining retail segment, signalling the necessity for innovative and transformative strategies to ensure relevance and growth.

While merchandise gross profit improved by 270 basis points, the net loss widened by 76.5% to USD 30 million. The company's USD 1 billion turnaround plan, launched in August, showed positive results, with customer frequency up 300 basis points and average sales rising by 11% in Q3.

However, despite these improvements, the turnaround plan was regarded as modest in scale by GlobalData Managing Director Neil Saunders. The department store aims to overcome macroeconomic challenges and innovate to maintain relevance in a weak consumer economy. There's recognition that converting increased foot traffic into regular custom and harnessing it for sustained sales growth is crucial.

J.C. Penney Q3 sales decline, loss widens

What: Frasers Group's half-year results to October show a mix of sales and profit increases and decreases, indicating resilience in the challenging retail environment.

Why it is important: Frasers Group continued to open new elevated stores and expressed ambitions to be the leading sports retailer in EMEA.

Retail gross profit increased to GBP 1.12 billion, and group gross profit reached GBP 1.19 billion, with a margin rise to 43%. Retail profit from trading surged by 25.7% to GBP 364.7 million, primarily due to Sports Direct's success. However, group profit from trading fell by 6% to GBP 412.5 million.

Operating profit and adjusted profit before tax also saw increases, despite challenges like lower profits from property and subsidiary disposals, foreign exchange fluctuations, and a higher effective tax rate. UK Sports Retail and International Retail segments experienced revenue growth, while Premium Lifestyle revenue was affected by House of Fraser store closures and a softer luxury market.

CEO Michael Murray highlighted the strong performance and momentum heading into the Christmas period, driven by the elevation strategy and partnerships. He acknowledged the short-to-medium-term challenges in the luxury market but expressed confidence in the company's unique proposition and continued investment. Frasers Group remains optimistic about achieving its full-year adjusted profit before tax target of GBP 500 million to GBP 550 million.

Frasers Group is one of the winners in UK retail

What: Google Cloud has unveiled Gemini Pro, an artificial intelligence tool that provides partners with next-generation generative AI models.

Why it is important: Gemini Pro offers advanced AI capabilities that can be harnessed to develop innovative applications, enhance customer experiences, and streamline operational processes for the retail industry.

The tool enables the development of various applications, ranging from customer service chatbots to marketing strategies, across retail, fashion, beauty, and other sectors.

Gemini Pro is currently offered for free and is touted to be cost-effective to run. It's positioned as a 'lite' version alongside other models, with a full-powered offering expected in 2024. This multimodal AI is designed to seamlessly understand and combine different types of information, including text, code, audio, image, and video. The release strengthens Google's AI efforts as part of its Vertex AI enterprise development platform.

Google’s next-gen GenAI hits the market

What: Sogo & Seibu open a new regional destination with Exchange TRX Mall in Kuala Lumpur.

Why it is important: Every Asian department store chain now aims to be a lifestyle destination (just like malls).

The new Seibu department store, the chain's third international outlet following two in Indonesia, has opened at The Exchange TRX. Occupying about 23,000 square meters over four floors, it hosts over 700 luxury and Japanese brands, such as Chanel, Dior, Mulberry, and Hermes. Notably, it features the country's largest Beauty Hall, showcasing 116 beauty brands. The store's design was crafted by UK architect Cardy Papa, known for his work on Selfridges, Galeries Lafayette, and Brown Thomas.

Seibu's opening aligns with the launch of The Exchange TRX, a significant retail and lifestyle hub spanning 1.3 million square feet and hosting 400 stores. This development marks the Malaysian debut of major retailers like Gentle Monster, Shake Shack, and Drunk Elephant. The Exchange TRX positions itself not just as a retail mall, but as a premier destination offering the best of Malaysia to both locals and international visitors.

Sogo & Seibu opens its first department store in Malaysia

What: Macy's Inc. is launching an elevated beauty concept at its Dadeland store in Miami.

Why it is important: Macy's aims to enhance the shopping experience with make-your-own-gift stations, in-store events, and a focus on beauty services and demonstrations, positioning itself as an authority in the beauty category.

The store will host a ribbon-cutting event to inaugurate the space, showcasing legacy and emerging beauty brands, including Jo Malone, Gucci Beauty, Yves Saint Laurent Beauté, Armani Beauty, Valentino Beauty, Sunday Riley, and Kylie Cosmetics.

Macy's strategy aligns with the growing focus on luxury in retail, as Gen Z gains purchasing power and the prestige beauty market continues to expand. The company has seen strong performance in the beauty category, particularly in lip products and fragrances, which are areas of focus due to their emotional connection with consumers. Macy's plans to complete about 39 of these beauty elevation doors in key markets by the end of the year.

Macy’s unveils luxury concept in Miami

What: Thanks to the macroeconomics, luxury is thriving in Japan while it is struggling in other markets.

Why it is important: Forget globalization, we are getting back to a fragmented world where macroeconomics generates contrary trends at the national level, making the fortunes (or not) of local players.

Major department stores like Matsuya and Takashimaya are experiencing record sales, with luxury brands like Gucci and Dior thriving.

Japan, with its affluent population and appeal to tourists, has become a hotspot for luxury shopping. This is further boosted by a weak currency and the return of Chinese tourists post-pandemic.

The luxury market's growth in Japan is broad-based but heavily relies on tourist spending, with foreign buyers contributing significantly to sales. Domestic demand remains solid, partly due to the weaker yen keeping Japanese spenders at home.

High-end brands are experiencing varying degrees of success. While some, like Gucci and Burberry, are thriving in Japan, others are facing challenges in different markets. Pricing strategies, particularly in comparison to costs in Europe, the US, and China, play a crucial role in attracting buyers, especially from China.

The current luxury boom in Japan is underpinned by a culture of brand loyalty and an increasing appeal of sustainable products. The luxury market is leveraging strategies like in-store appointments, personal shopping services, and marketing through platforms like WeChat to attract and retain customers.

Return of rich tourists and weak yen helps Japan escape luxury downturn

What: Central Retail opens its 28th location in Thailand.

Why it is important: This is the opportunity for Central to unveil their new store concept, based on a lifestyle approach.

Central Retail Corporation has unveiled its new Robinson Lifestyle Chalong shopping center in Phuket, located within the Robinson Department Store Chalong. This destination, spanning three floors and 43,000 square meters, features a Carnival Village theme and a 'Retailtainment' concept, providing a unique Eat-Shop-Play experience with over 300 brands and specialty stores. The department store, emphasizing community integration and sustainability, incorporates Phuket's tin mining and metal industrial heritage in its design, which includes vibrant colors, reduced finishing, recycled wood, and local handicrafts. This THB 1.3 billion (US$37.2 million) investment marks the opening of Central Retail's 28th location.

Central Retail reveals lifestyle destination at new department store

What: Retailers are evolving their stores into immersive environments, incorporating sensory elements like sound to enhance customer experiences.

Why it is important: The influence of music on the shopping experience is being explored, with observations that pleasant, soft music may encourage customers to linger longer, while more rhythmic music could expedite decision-making.

They are utilizing services and sensory triggers, such as audio content and unique soundscapes, to engage customers within the store. Agencies like Midi specialize in creating distinctive and innovative sonic atmospheres and are focused on evolving the use of music and sound in retail spaces. Additionally, retailers are experimenting with innovative technologies, such as using plant-generated electromagnetic energy to create sound and old rotary telephones for customer engagement.

Sound design as a differentiation factor 

What: TikTok seeks local alliances with e-commerce players to go around regulation.

Why it is important: TikTok growingly shapes culture and consumption, department stores have to follow suit and adapt.

TikTok is set to acquire a 75.01% stake in PT Tokopedia, the e-commerce arm of Indonesia's largest tech company PT GoTo Gojek Tokopedia, with a long-term investment of $1.5 billion. This move follows Indonesia's October ban on online shopping via social media, which led to the closure of TikTok's e-commerce service in the country. The partnership begins with a pilot period under regulatory supervision. With Indonesia's large and active social media user base, including 125 million TikTok users, this deal marks a significant expansion in the region for TikTok.

TikTok to invest in popular Indonesian e-commerce app

What: Globus is not doing bad, but is in danger following Signa’s bankrupcy.

Why it is important: More than the health of the company, its obscure relationship with Signa could be the kiss of death for Globus.

The Swiss company Signa Retail Selection AG, co-owner of the luxury department stores Globus, has been granted a provisional debt restructuring moratorium by a Zurich court.

The moratorium, managed by provisional administrator Eugen Fritschi from the law firm Bühlmann & Fritschi, will last four months, ending on April 5, 2024. This step aims to keep Signa Retail Selection AG independent from the insolvency proceedings initiated against its Austrian parent company, Signa.

Since being sold by Migros four years ago, Globus is 50% owned by Signa Retail Selection, with the remaining share held by Thailand's Central Group. Globus has restructured to focus more on the luxury sector, which is less impacted by retail industry challenges. The Swiss brand currently consists of nine stores, employing 1,700 staff and 1,400 people working for various brands in the department store, including Louis Vuitton and Moncler.

Globus has bought some time in the Signa procedure

What: Kingfisher expands its retail media activities.

Why it is important: it is done in collaboration with Citrus Ad, which has been a partner for a while now.

Kingfisher, a major player in the DIY sector, is launching a retail media platform with its subsidiary B&Q. This initiative, predicted to generate revenue amounting to 3% of the group's online sales, will be in collaboration with CitrusAd. It allows third-party brands to advertise on the e-commerce websites and apps of all Kingfisher's banners. Already implemented in France, this strategy will expand to the UK, Ireland, Poland, Spain, Portugal, and Romania.

The platform aims to give brands access to Kingfisher's extensive customer base, enabling targeted advertising throughout the customer's shopping journey. Marc Vicente, Kingfisher's group digital director, highlights the effectiveness of retail media and the opportunity for brands to utilize data for more relevant and timely advertising. Alban Villani, CEO of CitrusAd EMEA, comments on the potential to optimize suppliers' media strategies and enhance customer experiences. This move is part of a growing trend in retail where businesses leverage their digital platforms for advertising revenue.

Kingfisher launches retail media business

What: Zara and H&M are increasingly looking like department stores.

Why is this important: Customers are growing accustomed to a certain type of store, which forces department stores to rethink their own value proposition.

Fashion retailers are revamping their physical stores to enhance customer experience, drawing inspiration from Apple's successful store design. As e-commerce grows, brands like H&M and Zara have closed many outlets to cut costs. The remaining stores are being transformed into larger, more inviting spaces offering additional services such as beauty salons, repair stations, and coffee shops. These stores are becoming destinations in their own right, focusing on customer engagement and experiences rather than just sales.

H&M's redesigned store on London's Regent Street exemplifies this trend. It features a large TV screen, a beauty bar, and a rental section for high-end clothing. These changes have led to an increase in the average duration of customer visits. The focus is on creating a brand affinity, with many customers later purchasing online.

Similarly, Zara, under its parent company Inditex, has reduced its store count but increased the size and quality of remaining outlets. New Zara stores are designed to be more spacious and incorporate high-tech features like automatic return points and self-checkout areas, along with a mobile app for inventory checks.

Macy’s and Best Buy, however, are adopting a different strategy by opening smaller stores in convenient locations.

Despite reducing their overall number of stores, both H&M and Inditex are investing heavily in store modernization. H&M, for instance, has increased its capital spending by 43% for 2023 to modernize stores. These redesigned stores not only offer traditional shopping but also feature unique elements like secondhand areas, Lego sculptures, and event spaces for exclusive brand events.

Uniqlo, another major player, is also focusing on destination stores in Western markets. Its Covent Garden store in London is a notable example, featuring a Japanese tea shop, a rooftop balcony, and a repair station, making it more than just a shopping location.

Overall, the transformation of these fashion retail stores into engaging, experience-centric spaces reflects a strategic shift in the retail industry, focusing on creating memorable in-store experiences that complement online shopping.

Zara and H&M are adding beauty salons and new digital features

What:  Nordstrom appointed Nicole Ford, an experienced IT strategist, as the chief information security officer, taking over the role from Irwan Tjan.

Why it is important: Ford's appointment reflects the growing importance of cybersecurity in the retail industry amidst the evolving threat landscape.

Ford's new position involves supporting Nordstrom's security and governance, risk, and compliance teams. She brings a wealth of experience in guiding complex organizations through security transformation journeys and creating best-in-class cybersecurity programs.

With advancing technologies such as AI, retailers, including Nordstrom, face increasing threats to their cybersecurity, such as phishing and ransomware. Concerns have been raised about retailers not investing enough in cybersecurity, as evidenced by incidents involving security breaches at Nordstrom and other retail companies. These incidents have underscored the need for companies to educate employees on using strong passwords and detecting malicious links.

Nordstrom hires cyber security exec

What: Deloitte believes that there is more than AI for CEOs and they should make sure to focus their attention on other topics.

Why it is important: AI is great… when the retail basics are already mastered and good.

Deloitte's annual Tech Trends report suggests a balanced approach to adopting AI in business, cautioning against overemphasis on this technology at the expense of other critical areas. The report acknowledges AI's potential but warns of the risks associated with poor data quality, potentially leading to amplified errors and biases. Deloitte advises companies to focus first on their strategic goals before determining how AI or other technologies can be used to achieve these objectives.

Additionally, the report highlights the evolving relevance of AR and VR in the workplace, noting improvements in network speeds, processor capabilities, and battery life that make these technologies more viable. It also points out the expanding application of AR and VR beyond gaming to practical workplace uses, such as in industrial settings.

A key concern outlined in the report is cybersecurity. As technology integrates more deeply into business operations, the threat from cybercriminals, including the use of deepfakes and phishing, grows. Companies are encouraged to employ advanced technologies themselves to counter these threats.

Overall, while bullish on AI, the report emphasizes a cautious, holistic approach to technology adoption, considering both its potential and its pitfalls.

Deloitte’s chief futurist warns against letting AI blind CEOs to other priorities

What: Self-checkout solutions are great for saving on human costs… but have also hidden issues.

Why it is important: Forget about the tech cost or the retail theft rates: customers do not really like it in the US.

Self-checkout technology, initially aimed at enhancing customer convenience and reducing labour costs, has faced mixed responses since its introduction. While self-checkout usage doubled from 2018 to 2021, representing 30% of transactions, it has also led to customer frustrations due to technical issues and error codes. Workers, instead of being relieved of repetitive tasks, now monitor both customers and machines, often dealing with increased customer anger post-pandemic.

Retailers are grappling with theft, as self-checkout systems can tempt even law-abiding citizens to dishonesty or lead to accidental losses. Some stores are revising their approach, adding restrictions or removing self-checkout options altogether due to customer backlash and concerns over theft.

Despite these challenges, self-checkout isn't disappearing, especially with ongoing labour shortages. Some customers enjoy the autonomy and efficiency it offers. Advanced technologies like Amazon's Just Walk Out and Uniqlo's RFID-powered systems are being explored for more seamless shopping experiences. Yet, the transition has not significantly eased the workload for store employees, who now face different challenges in managing self-checkout stations.

Self-checkout challenges prompt some retailers to pivot

What: While the month of November 23 was rather good for US retail, department stores did not get a piece of the pie.

Why it is important: Calls for US department stores reforms are growing each day, as shown by the Macy’s buyout proposal issued earlier this week.

The November sales report from the U.S. Census Bureau indicates a mixed start to the holiday season in the retail sector. While overall consumer spending showed more vigor than expected, department stores experienced a decline, with sales dropping 5.2% compared to the previous year. This downturn highlights ongoing challenges in the sector, exemplified by a reported low-ball buyout offer for Macy's Inc. In contrast, apparel and accessories specialty stores saw a modest 1.3% increase in sales, though this was still behind the broader market trend.

Significant growth was observed in other retail segments, with electronics and appliance stores leading the way with a 12% increase. Additionally, food service and drinking places, non-store retailers, and health and personal care stores all saw notable sales gains.

The overall market sales slightly rose by 0.3% from October, surpassing economists' expectations of a 0.2% decline. This suggests that heavy promotional strategies employed by stores to attract holiday shoppers were effective. Despite a solid November, there's no guarantee for a successful overall Christmas retail season, but it's a more favorable outcome than the alternative.

The industry, facing a traditional December slowdown, is hopeful for a strong finish, with projections of a 2 to 4 percent holiday gain, aligning closely with the current inflation rate of 3.1%. The National Retail Federation anticipates a surge of nearly 142 million consumers shopping on December 23, hoping to capitalize on the last Saturday before Christmas.

US: Department stores miss out on solid holiday start

What: Shopping centers are shifting focus from retail to services and leisure to cater to changing customer preferences.

Why it is important: The move towards experiential offerings reflects a shift in consumer expectations, with a preference for leisure over pure commerce.

This trend is evident in France and other regions such as Spain, where the emphasis is on creating unique experiences for visitors. Developers are repurposing shopping spaces to include attractions like sports facilities, gaming arcades, and themed entertainment areas. Additionally, the redevelopment of shopping centers involves creating green spaces and free-access recreational areas to enhance the overall experience.

Leisure rather than shopping? Changing shopping centers

What: SM keeps on expanding in their home market.

Why it is important: the Department Store division has grown +18% on the first 9 months of 2023 compared to 2022

SM Prime, the Philippines' largest mall operator, has expanded its presence by opening two new malls in Southern Luzon, increasing its domestic shopping center count to 85, in addition to eight in China. These new malls, SM Center San Pedro and SM City Santo Tomas, are part of the company's strategy to focus on less retail-saturated provincial areas. The malls offer a mix of local and international fashion brands, department stores, supermarkets, and various retail outlets.

SM Prime is a key player in the Philippines' highly professionalized mall industry, dominated by conglomerates like Ayala Malls and Robinsons Land. These companies integrate their malls into the community fabric and emphasize environmental sustainability.

SM Prime, part of SM Investments Corporation, generates significant revenue from its mall development and leasing business. 22 of its malls are large mixed-use 'lifestyle cities', combining retail with residential, office, hotel, and convention facilities.

Beyond malls, SM's retail business, originating from a shoe shop in the 1950s, now encompasses thousands of department stores, supermarkets, and specialty stores. The retail sector has seen substantial growth, with increases in revenue and same-store sales across various segments.

The wider Philippine mall industry is experiencing similar growth, with major players like Ayala Land and Robinsons Land also reporting increased revenues. This growth contributes significantly to the country's GDP, with the Philippines expected to have one of the highest economic growth rates in ASEAN, despite high inflation rates. Malls, deeply integrated into the country's culture, are central to this economic success, with developers continually investing in this sector.

SM opens two new malls in Philippines

What: In a shift from pandemic necessity to strategic exploration, fashion and beauty brands are leveraging virtual stores as a hybrid of e-commerce and physical retail.

Why it is important: The goal is to attract and educate consumers, particularly Gen Z and millennials, ultimately driving brand equity and loyalty.

These virtual storefronts are designed to engage a younger audience with a gaming twist, recognizing the different approaches to shopping taken by consumers today. Brands like Bloomingdale’s, J.Crew, L’Occitane, and Laneige have introduced virtual stores featuring themed experiences such as ski slopes and chocolate wonderlands.

The success of these virtual stores is measured by factors such as time spent and social media mentions, with a focus on appealing to younger demographics. Gamification is a key strategy, with features like quizzes, treasure hunts, and mini-games boosting engagement and driving higher product click-through rates.

‘Gamified’ virtual stores target new generation of consumer

What: Boots is reportedly testing an AI-powered 'personal shopper' chatbot for its website to enhance the customer shopping experience, particularly in the beauty products segment.

Why it is important: There is a growing trend of AI utilisation among UK retailers to enhance customer engagement and drive operational efficiencies.

The chatbot is expected to offer product recommendations, with a focus on beauty items, although Boots has yet to officially confirm this development. The retailer has a longstanding partnership with Microsoft and utilises ChatGPT in other areas of its business.

Notably, UK retailers are at the forefront of incorporating artificial intelligence into their operations, with 54% of global e-commerce professionals indicating current or future AI use. Shop Direct, a major British fashion e-tailer, is set to introduce a sophisticated chatbot within its MyVery app and intends to integrate AI into decision-making processes related to offering credit terms. Luxury e-commerce platforms like Net-A-Porter are also leveraging AI to personalise the shopping experience for high-spending customers.

Boots is testing an AI personal shopper

What: Amazon experiments a new service for Prime members.

Why it is important: is that something department stores operating gourmet sections and loyalty programs should look at?

Amazon is piloting a new grocery subscription service for Prime members in Denver, Sacramento, and Columbus. For $9.99 per month, this service offers unlimited free grocery delivery for orders above $35 from Whole Foods and Amazon Fresh, along with unlimited 30-minute pickups for any order size. This is a part of Amazon's efforts to make shopping more convenient and affordable, contrasting with the existing fee structure where Prime members pay $6.95 to $9.95 for Fresh orders below $100.

Amazon trials grocery subscription service for Prime members

What: The National Retail Federation (NRF) has launched the NRF Center for Retail Sustainability to address the increasing consumer demand for sustainable solutions.

Why it is important: This centre aims to promote net positive impacts in environmental, social, and community aspects, as well as economic gains within the retail industry. It will focus on advancing the circular economy by reducing waste, enhancing recycling, and using recycled and regenerative materials. Additionally, the centre seeks to improve supply chain transparency and sustainability by incentivizing more sustainable choices. It also aims to deepen retailers' understanding of consumer perspectives on sustainability and align with their values.

The inaugural event for the NRF Center for Retail Sustainability is scheduled to take place at NRF 2024: Retail’s Big Show in New York City, including a workshop dedicated to strategizing the future of circular retail.

NRF introduces new hub for retail sustainability

What: Saks Fifth Avenue CEO Marc Metrick hosted a holiday dinner in Los Angeles to celebrate the upcoming opening of a new Saks store in Beverly Hills.

Why it is important: The event showcased the luxury and excitement surrounding Saks Fifth Avenue and its expansion plans, with a focus on fashion, style, and celebrity presence.

The CEO expressed excitement about the new store's expansion and dedication to personal shopping and styling. The event began with cocktails on the rooftop and featured notable guests like Mary Martin and Jonathan Simkhai. Guests dressed in glamorous attire, and the dinner took place in a private room at the Evan Funke Italian restaurant.

Saks hosts holiday dinner in anticipation of new Beverly Hills store