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*Following the IADS CEO meeting in Mexico City last May, the IADS had the opportunity to travel to Panama to discover the Felix B. Maduro and Steven’s department store chains. The purpose was also to meet with the Felix B. Maduro leading team.

Small in size, but with a disproportionate GDP, Panama is an interesting country, standing both as a transit point between North and South America and as an entry gate (the country is dubbed “the Hub of the Americas"). While the Canal is a significant driver of the country’s economy, annually racking in $2bn and contributing 3% to the country’s GDP, it contributed to the development of a very dynamic service sector now representing 80% of the country’s economy.

Thanks to the service sector in a well-connected country, Panama was able to grow its GDP four times the regional average prior to the Covid-19 pandemic, at an average of +4.7% p.a., and in 2023 should grow +5.7%. As such, the combination of such dynamism with the fact of being a hub allows the country to attract regional and international money, which in turn favors retail.

We review our market visit below to understand how local department store companies have adapted to such conditions.*

Panama’s national retail background

The Covid-19 pandemic hit Panama’s economy hard, all the more that the country is reliant on global trade and tourism. As a consequence, the GDP contracted by 18% leading to an increase in the poverty rate. This led to a major deterioration of the labour market, impacting retail, with more than one out of five formal workers becoming informal.  Consequences remain visible today in terms of the quality of service in stores.

However, retail recovered rather swiftly, with sales growing in 2022 as high as in 2021. E-commerce took the lion’s share, as there is a growing middle class in the country, equipped with smartphones, and willing to make the most of the country’s advanced logistics and payment systems. Panama is the entry gate to Central and South America for many consumption goods, and as such, e-commerce has the advantage of being able to quickly present the widest variety of products to customers as soon as they are unloaded from ships and planes.

In addition, international brands are incentivized to open their own stores to make the most of the growing tourism taking place in the country (Panama is home to tropical beaches and temperate mountain regions, with tourism representing 15.9% of the country’s GDP in 2019), and the fact that they often already have logistic facilities there (either operated directly or via partners and distributors). Therefore, while the national airline, Copa, is clear about its ambitions to become a major regional player , tourists visiting Panama are now able to find any international brand they are familiar with, from Adidas, Lacoste, and Pandora to Chanel, Gucci and Louis Vuitton.

As a consequence, while in general retail looks promising for Panama, such perspectives are mostly about e-commerce and specialty stores, as well as the malls housing these businesses (Multi Plaza, Metromall, El Dorado, Multicentro). Unlike in other parts of the world where tourism is strong, Panama department stores do not house luxury brands, which operate by themselves their own stores. In addition, strong brands from other categories (sports, lifestyle) often do the same, forcing department stores to address B and C-level customers with a product offer which, at best, is made of relatively small brands sold in exclusivity, and at worse, a value proposition which mimics what is available elsewhere in the country and online.

Introducing Panama’s department store: Felix B. Maduro

Felix B. Maduro is the oldest department store in Panama (and one of its oldest companies), founded in 1877 by Esther Piza de Maduro under the name The Maduro Co. (then changed to Felix B. Maduro in 1928). The company initially focused on offering European imported perfumes, hats, and scarves and was the only store with an air-conditioned salon for displaying dresses, as well as the only business with windows to display products. Over the years, the company evolved and expanded its product offerings to cater to a broader range of customers: a second store was opened in Via Espana in 1972, a third one in 1985 and the first specialty retail units in 2001 (a toy store and an outlet, both under the department store name).

In 2015, after 138 years of family management, the retail chain composed of 4 stores by then was sold for $74m to Abdul Waked, a businessman who was later arrested for money laundering charges by the United States in 2016. As a consequence, the company was sold for $60m the same year to FBM Retail Corp, whose leading shareholder is Grupo Arrocha of Panama (which operates 33 pharmacies with 2,500 employees in the country), along with Grupo Diunsa, S.A. (the largest department store chain in Honduras), and A.F. International Corp (which has investments in supermarkets and real estate).

This sale allowed the department store company to continue operating (including its payment card and loyalty program schemes) and look at the future, with the objective to reach $120m revenue by 2020 and open 2 stores a year to reach 13 units. International expansion in Costa Rica and Honduras was also considered.

In 2019, e-commerce was launched, with a plan to increase the brand portfolio (including names such as Karl Lagerfeld, DNKY, Calvin Klein) and a partnership was inked with El Corte Inglés to expand its private label Sfera in Panama.

However, the difficulties created by the Covid-19 pandemic forced Felix B. Maduro to restructure its $70m debt in December 2020 by going through a bankruptcy process, which lasted until early 2022.

Numbers are not available; however, the turnover is estimated to be below $10m and today the company operates 5 locations: Via Espana, Multiplaza Pacific, Albrook Mall, Altaplaza Mall, Town Center.

A regional competitor: Steven’s

The history of the department store is more recent: in 1948, Samuel Eskenazi founded in a city outside Panama City a small shop, El Campeon, which grew to become a 9-large department store chain competing exclusively on the price point, operated by its holding, Grupo Tova. The group also opened Steven’s in 1999, and Madison Store in 2006 (7 stores in the country, also targeting the price-conscious customer).

Steven’s, contrary to its two sister companies, is competing in the same segment as Felix B. Maduro, in fashion, cosmetics, accessories and lifestyle, combined with elevated basics sold under private labels. The store chain has 5 branches and offers various services such as a loyalty program, Be You, which claims to have 135,000 members, and S Wedding, a wedding service.

It is extremely difficult to find any information about the group, which does not communicate about its financial performance.

All in all, both Felix B. Maduro and Steven’s compete in the same categories (luxury cosmetics, fashion, beauty, perfumes, makeup, toys, video games, accessories, homeware), at a similar price point, with a relatively similar brand offering.

Visiting Felix B. Maduro in Via Espana

Via Espana is the second-oldest location for the department store in Panama City, which opened in 1972 in a big box format (there is little to no architectural effort put into the building). The area was up-and-coming at that time, as Panama City has been sprawling for the past decades, and today includes many upper-end hotels located on large avenues.

The store's look, however, reflects its age: it has been built as a closed box, without windows but with large perspectives inside, reflecting the taste in terms of shopping in the 70s and 80s. As such, it looks relatively worn down today, all the more so with its surprising store zoning.

The ground floor represents the largest part of the store, and the transitions between categories can be sometimes brutal: the entrance leads the visitor directly to the men's ready-to-wear section (including a mix of brands like Jack & Jones, Nautica, Brooks, Dockers, and Levi's) and the women's shoe sections.

Both sections are very limited in terms of brand signage with a few exceptions (Ralph Lauren, and Brooks Brothers, which the group used to operate in free-standing stores in the past). Shoes are organized by brand with minimally branded wall units and lack visibility.

Then, cosmetics and Women’s RTW sections appear. Cosmetics present a selection of international brands in a very classical way (individual units with retro lit logos on black background), while women’s fashion (Michael Kors, Vero Moda, Ralph Lauren Esprit or Naf Naf ) is presented on flexible displays, just like the accessories nearby (Michael Kors, Kate Spade, and Calvin Klein). On the sides, lingerie shares the space with contemporary fashion and children's clothing.

The first-floor offers houseware items and an extensive toy section strangely separate from children’s clothing and which feels more like a supermarket display (which would suggest it is operated by a partner). A small food & beverage area managed by another partner can also be found alongside a beauty salon situated near restrooms—an odd zoning choice.

There is no Wi-Fi available within the store, making navigation difficult for foreign customers potentially visiting the store from a nearby hotel.

Visiting Felix B. Maduro in Multi Plaza Pacific Mall

The Multi Plaza Pacific mall belongs to the Salvadorian Grupo Roble company, which operates a total of 27 units in the region, but only one in Panama under the name Multi Plaza (there is another mall, Metromall, also owned by the group). Multi Plaza Pacific was built on the premises of a former airport and was designed as a “tourist mall”, including a luxury avenue including names such as Hermés, Chanel and Dior. It hosts more than 500 stores and features amenities such as valet parking and free Wi-Fi across the entirety of the premises.

The Felix B. Maduro store in this mall offers a stark contrast from the Via Espana store and is in line with its immediate environment (Saint Laurent, Dolce & Gabbana, Ferragamo), with attractive windows displaying Longchamps and Kate Spade.

The store is on two floors, and just like Via Espana, the zoning is somehow disconcerting. The entrance on the main avenue of the mall leads directly to the Accessories section, with dedicated and customized corners for brands such as Kate Spade, Longchamp, Vera Bradley and Ralph Lauren. The transition to the Women’s RTW section is more seamless than in the other store and gives brands an appealing visibility, be it through the space they are allocated, or the signage.

The floor also houses men’s RTW and accessories, as well as children’s wear, however, the transitions are often confusing from one universe to another. In spite of this, the floor has a lively atmosphere with ample lighting and is populated by efficient and accessible salespersons.

The first floor is confusing: here again, a large space is dedicated to a toy section near a home section and a café which is not particularly inviting. The confusing part comes from the fact that there is another Women’s RTW section, displaying brands also available on the other floor, such as Esprit, Vero Moda or Sfera (El Corte Inglés’ private label). According to the sales persons, this part of the store was dedicated to emphasizing both newness and large sizes, which sounded paradoxical.

While the Via Espana store gave the impression not to be tourist-ready by simple lack of Wi-Fi, here, purchasing a product proved difficult for anyone not speaking Spanish at the central cash desk.

Visiting Steven’s in Multi Plaza Pacific mall

Paradoxically, and contrary to what was expected, the Steven’s was not significantly different from the Felix B. Maduro store. The entrance leads to a luxury cosmetics section which displays the same international selection with the same type of display units. The ground floor is also home to the men’s fashion department, which has an elevated feeling with brands such as Givenchy, Perry Ellis, Carven and Oscar de la Renta. While brand signage is clear and visible, the general feeling is confusing due to crammed visual merchandising: for instance, shoes are presented in stacked boxes which gives an outlet feeling.

The Accessories and Shoes section, also on the same floor, gives the same elevated feeling with brands such as Kenneth Cole and Guess.

A buy-online pick-up instore stand was remarked during the visit, which was not spotted at Felix B. Maduro, suggesting that this service is not offered by the latter.

On the women’s floor, while the visual merchandising is as confusing as in the men’s section, brands are well put forward and the general feeling is very similar to Felix B. Maduro. The kidswear is probably a bit more chaotic. Interestingly enough, the size of the toy space is as large as in the Felix B. Maduro stores, suggesting that this is a very important market in Panama, however, the biggest difference is that in Steven’s, toys are organized and presented in branded corners, which at the same time suggests that brands are more involved, and also give a more international feeling to the store.

The home section is larger than at Felix B. Maduro and somehow ‘cleaner’, which is probably only due to the fact that a larger section of the store is dedicated to showing a similar range of products. The only true point of differentiation is the Pets section at Steven’s, a category not carried at Felix B. Maduro.

What can be remembered from such visits?

*Answering this question is complicated, and this is probably the biggest issue department stores in Panama face. Not only in both cases was the product offer, at best, standard, with a rather mainstream selection of brands available everywhere in the world, but the impressions, feelings and experiences were very similar from one to another. Neither Felix B. Maduro nor Steven’s were able to stand out of the crowd and differentiate from each other.

At the same time, it was clear when visiting the city that with tourism came an international crowd, not only from the US but also from Europe, and that this crowd was looking for surprises and different experiences no local department store was able to offer. As a consequence, both stores in the Multi Plaza Mall were rather empty during the visit while the mall itself was rather crowded (it was clear from the visit that the Felix B. Maduro store in Via Espana was a tier-2 location and treated as such).

This creates a vicious circle: by not taking risks or looking for a different positioning, none of these companies give themselves the means to attract interesting brands, which do not see the point in being in the retail environment they propose. As a consequence, the type of traffic they attract is mostly qualified in terms of price expectations, but neither in terms of expectations about selection nor brand curation, putting these companies at risk of having to face a competition better armed in the price war.

In short, both companies are swimming in the same pond of blandness with a very similar selection of brands, which is not enough to attract a new type of clientele. In addition, their lack of differentiation does not particularly encourage loyalty to one name or another. If Panama was an inaccessible country, or isolated from the rest of the world like how Chile has been in the past, this would not be an issue, but at a moment when, on the macro level, it is expected that Central and South America grow thanks to their structural strength, and on the national level Copa is determined to transform Panama City in a world-class hub, this is seems strategically dangerous.

This is why the partnership that Felix B. Maduro has inked with El Corte Inglés in 2019 to promote and develop their fast-fashion private label, Sfera, was a strategic step. It seems clear that there is a maximum ceiling in terms of price point that department stores can sell in their premises (both due to the nature of local demand and traffic, but also due to the fact that luxury brands are, so far, not incentivized to join them). For that reason, developing an exclusive fashion offer, with desirable labels at the right price point only available in their stores, is key. It addresses a growing demand from local customers that we have witnessed in the whole region, for new fashion labels at the right price. In that perspective, Felix B. Maduro has a card to play with Sfera, and, why not, could also benefit from a deeper collaboration with El Corte Inglés in order to sell more of their privately-branded products, including the El Corte Inglés homeware line (that Almacenes Siman in Salvador started to sell with great success).*

Credits: IADS (Selvane Mohandas du Ménil)