What: Major Korean retailers revise loyalty programs with increased spending requirements and reduced benefits, sparking debate about customer retention strategies.

Why it is important: The changes reflect broader industry challenges in balancing exclusive customer benefits with sustainable business practices, while risking customer relationships in an increasingly competitive market.

Korean department stores are implementing significant changes to their VIP programs, with major retailers raising qualification thresholds while reducing benefits. Hyundai Department Store has decreased its luxury mileage brand coverage from 80 to 12 brands and reduced complementary services like café privileges. Shinsegae has established new VIP tiers, raising the diamond rating from 60 million to 70 million won and introducing a "Black Diamond" tier at 120 million won. Lotte Department Store has similarly restructured its system, reducing VIP tiers from 7 to 5 while increasing spending requirements. These changes have sparked customer dissatisfaction and led to the emergence of unofficial performance trading practices, where customers attempt to maintain VIP status through alternative means.

IADS Notes: The changes in Korean department store VIP programs reflect broader industry transformations. While August 2024 data shows department stores enhancing VIP experiences for high-spending customers, December 2024 research reveals growing challenges in meeting evolving customer expectations for loyalty programs. This tension is driving new approaches, as demonstrated by Hyundai's September 2024 partnership with Hankyu to enhance cross-border VIP benefits. The strategy aligns with August 2024 findings showing how Japanese and Korean department stores are transforming their customer engagement approaches. However, January 2025 data indicating increasing market polarisation in Korea suggests these program changes may further intensify the divide between customer segments. These developments show how retailers are struggling to balance exclusive benefits with customer satisfaction in an increasingly competitive market.

It is increasingly difficult to be identified as a VIC in Korean department stores

What: Major retailers demonstrate contrasting approaches to DEI initiatives, with some maintaining steadfast positions while others retreat under pressure, highlighting the challenges of balancing social responsibility with business performance.

Why it is important: The contrasting financial results of different DEI approaches demonstrate that the implementation method, rather than the principles themselves, determines market success, forcing retailers to reconsider how they balance social initiatives with business objectives.

The retail industry faces a critical juncture in managing diversity, equity, and inclusion initiatives, with major companies adopting markedly different approaches. Consumer-facing businesses inherently serve and employ diverse groups, making DEI an unavoidable reality of modern retail operations. However, the challenge lies not in recognising DEI's importance but in determining how to implement and communicate these principles effectively. Some retailers, like Target, have faced significant backlash for their highly visible DEI initiatives, while others, such as Costco, have maintained steady, low-key approaches focused on practice rather than proclamation. The article examines how companies' responses to activist pressure vary significantly, from hasty retreats to steadfast maintenance of established policies. This divergence in approaches has led to measurable differences in business outcomes, suggesting that the method of implementing DEI initiatives may be more crucial than the initiatives themselves. The text emphasises that successful DEI strategies require thoughtful implementation rather than mere public declarations, advocating for a balanced approach that considers both social responsibility and business sustainability.

IADS Notes: The retail industry's handling of DEI initiatives shows three distinct approaches in recent months. Costco maintained its established DEI policies despite activist pressure in January 2025 , while Walmart chose to modify its approach in November 2024, removing explicit DEI language but keeping core inclusion practices . Target's experience with Pride merchandise controversies led to significant financial impact, including a $10 billion valuation loss . Walmart's strategy proved most successful in market terms, achieving its best performance since 1998 , suggesting that a balanced approach to social initiatives resonates better with consumers than either aggressive promotion or complete withdrawal.

DEI: courageous efforts or cowardly responses?

What: Saks Global's USD 2.7 billion merger consolidates Neiman Marcus, Bergdorf Goodman, and Saks Fifth Avenue under unified leadership, triggering significant organizational changes and potential cultural challenges.

Why it is important: The transformation marks a critical turning point for department stores, as the industry grapples with preserving heritage brands while adapting to modern retail demands through consolidation and digital integration.

The landmark merger creating Saks Global brings together three iconic retailers under the leadership of Marc Metrick, who will oversee a combined portfolio of 78 flagship stores and a significant off-price retail presence. This USD 2.7 billion deal, backed by technology giants Amazon and Salesforce, aims to transform luxury retail operations while managing the delicate balance of maintaining distinct brand identities. The merger faces notable challenges, particularly regarding Neiman Marcus's Dallas headquarters and its 10,000 employees, as cultural integration becomes a crucial concern.

The deal's success hinges on preserving the unique customer relationships that have defined these luxury retailers whilst implementing technological innovations. Richard Baker's ambitious vision for Saks Global includes leveraging a USD 7 billion real estate portfolio and combining data resources to enhance customer experience, though questions remain about maintaining brand distinctiveness and vendor relationships in this new retail landscape.

IADS Notes: The completion of the Saks-Neiman Marcus merger in December 2024 represents a pivotal transformation in luxury retail. The deal's significance was first highlighted in March 2024 when Saks' flagship received a USD 3.6 billion valuation, underlining the real estate portfolio's crucial role in the merger's financing. By July 2024, the merger's impact on corporate culture became evident through significant organizational changes, particularly affecting Neiman Marcus's successful relationship-driven business model.

The merger's approval in August 2024 reshaped the competitive landscape, while December's radical restructuring demonstrated Saks Global's commitment to technological integration while attempting to preserve distinct brand identities. This evolution mirrors the challenges outlined in the current situation, particularly regarding cultural integration and the potential impact on Neiman Marcus's traditional operations and Dallas presence.

What Happens To Neiman Marcus After The Saks Merger?

What: Tech companies and retailers are developing AI "agents" capable of performing complex shopping tasks autonomously, with companies like Perplexity, Amazon, and OpenAI leading innovations in personalised shopping assistance and product discovery.

Why it is important: This innovation signals a fundamental change in online retail, where AI agents could transform the traditional search-and-browse model into a more efficient, personalised shopping experience, though success in categories like fashion and beauty remains uncertain.

AI shopping agents represent the next breakthrough in retail technology, offering capabilities beyond simple product recommendations. Perplexity's recent launch demonstrates these agents' ability to provide curated selections with detailed product information and, in some cases, complete purchases directly. Companies like Amazon are exploring agents that can suggest products and add them to shopping carts, while AWS aims to provide agent services to brands and retailers. Industry leaders, including Sam Altman and Vince Koh, envision agents that can understand style preferences through visual data and create seamless shopping experiences. While these agents show promise for commodity items, questions remain about their effectiveness in fashion and beauty, where emotional factors and brand perception play crucial roles in purchasing decisions.

IADS Notes: The emergence of AI shopping agents marks a significant shift in retail technology. While Perplexity's AI shopping assistant demonstrates early potential, broader industry adoption through partnerships like Amazon's AWS initiatives signals growing momentum. However, as highlighted in consumer behavior studies, the success of these tools in fashion and luxury retail depends on their ability to understand emotional and personal preferences beyond basic product matching.

AI agents to reshape finding and buying products online

What: A flourishing shadow supply chain of personal shoppers and cross-border traders enables wealthy Russians to continue purchasing luxury goods above EUR 300 sanctions threshold.

Why it is important: This shadow supply chain exposes significant vulnerabilities in luxury retail sanctions enforcement, while highlighting how grey market networks are becoming increasingly sophisticated global distribution channels.

Wealthy Russians are successfully circumventing trade restrictions on luxury goods through an elaborate network of personal shoppers and resellers operating via social media platforms. Despite EU sanctions limiting legal sales to items under EUR 300, Russians continue to access the latest Western collections through a flourishing shadow supply chain. Instagram and Telegram have become hubs for resellers promising to source high-end items from Europe and the UAE, with some personal shoppers earning up to EUR 6,000 weekly in commissions. Customs records reveal the scale of this trade, exemplified by a September shipment of over 300 Bottega Veneta bags averaging USD 1,800 each, routed through Dubai.

Some brands have adapted by adjusting their pricing strategies to meet sanctions thresholds, while others maintain their presence through third-party channels. The impact is particularly notable on middle-class shoppers, who face increased prices and limited access, while wealthy consumers continue their luxury purchases through these alternative channels.

IADS Notes: The emergence of Russia's personal shopping networks mirrors broader shifts in global luxury retail distribution throughout 2024. As noted in September 2024, China's grey market has become a dominant force in luxury sales, demonstrating how trade restrictions often lead to alternative distribution channels. This pattern is further evidenced by March 2024 data showing Japan's record-breaking duty-free sales, as consumers seek new markets for luxury purchases. The Russian case study particularly resonates with June 2024 findings showing how economic pressures and restrictions reshape consumer behavior.

These parallel developments suggest a global trend where luxury retail adapts to restrictions through sophisticated networks of personal shoppers, resellers, and cross-border trade, effectively maintaining product flow despite regulatory challenges. This evolution highlights the resilience and adaptability of luxury retail distribution systems, even as traditional channels face disruption.

Russians turn to ‘personal shoppers’ to smuggle luxury bags

What: A Harvard Business Review discussion explores how mid-level managers can effectively implement corporate strategy, emphasising their unique position to demonstrate business acumen, mobilise teams, and ensure successful execution through proactive engagement and clear communication of strategic goals.

Why it is important: As organisations face complex transformational challenges, mid-level managers' capacity to understand, translate, and execute strategy while maintaining team engagement becomes essential for successful implementation.

The discussion emphasises that mid-level managers should avoid immediately "hitting the ground running" after strategy announcements, instead taking time to thoroughly understand the strategy's motivations and objectives. Strategy execution presents both challenges and opportunities, particularly in addressing team skepticism and resistance to change. The key to success lies in proactive communication, including regular team meetings with transparent discussions about progress and obstacles. When strategy isn't working, managers must balance accountability with problem-solving, focusing on early identification of issues and proposing solutions. The approach to communicating success is equally important, requiring managers to frame achievements in the context of broader organisational goals rather than individual accomplishments. This balanced approach helps maintain team motivation while ensuring alignment with strategic objectives.

IADS Notes:

The evolving role of middle managers in strategy execution reflects broader retail transformation trends. As department stores implement major changes, mid-level leaders must balance corporate vision with ground-level realities. Recent examples show how successful transformations depend on managers' ability to translate high-level strategy into actionable plans while maintaining team engagement. The challenges of executing strategy amid resistance highlight the critical role of middle managers in bridging corporate goals with operational realities.

A middle manager’s guide to executing strategy - Transcript

What: The US luxury department store landscape undergoes significant transformation in 2025, marked by the Saks-Neiman Marcus merger and Nordstrom's privatization, amid broader industry uncertainties and changing consumer behaviors.

Why it is important: These transformations highlight the evolving dynamics of luxury retail, where traditional business models are being reimagined through strategic mergers and private ownership to better compete in a challenging market environment.

The luxury retail sector faces a pivotal year of restructuring, with Saks Global's USD 2.7 billion acquisition of Neiman Marcus Group creating a powerhouse backed by Amazon and Salesforce's technology capabilities. Simultaneously, Nordstrom's USD 6.25 billion privatization deal with El Puerto de Liverpool aims to provide greater operational flexibility. These moves come as industry sentiment remains cautious, with only 20% of executives expecting improvement, while 41% anticipate stagnation and 39% predict decline. Key concerns include eroding consumer confidence, geopolitical instability, and economic uncertainty. The transformation reflects a broader industry shift toward technology integration, operational efficiency, and enhanced customer experiences, particularly focusing on the underserved over-50 demographic.

IADS Notes: The transformation of US luxury retail reflects broader industry challenges. While the Saks-Neiman Marcus merger creates a USD 10 billion powerhouse backed by technology partnerships, Nordstrom's privatization aims to facilitate long-term strategic decisions. These moves come as McKinsey's report indicates mixed market sentiment, with only 20% expecting improvement, highlighting how traditional department stores are seeking new operational models to remain competitive.

Major changes to reshape US luxury department store landscape in 2025

What: MDRi's China Luxury Consumer Forecast 2025 reveals five transformative trends reshaping China's luxury sector, highlighting a shift towards experiential luxury, sustainability, and digital integration across emerging urban markets.

Why it is important: This comprehensive analysis provides crucial insights into China's evolving luxury landscape, where the convergence of experiential retail, sustainability concerns, and technological integration is reshaping consumer behavior and market dynamics across different city tiers.

China's luxury market continues to evolve with significant shifts in consumer behavior and preferences. According to Bain & Company, the sector is expected to maintain mid-single-digit growth in 2024, following a robust 12% year-on-year growth in 2023. The forecast reveals that 56% of surveyed consumers plan to increase their luxury spending, with Tier 2 and 3 cities emerging as key growth drivers. The research identifies five major trends: the rise of experiential luxury, with 68% of consumers increasing wellness-related spending; Sanya's emergence as a strong competitor to Shanghai in luxury retail; growing national pride driving domestic brand preferences; sustainability becoming a cornerstone with 85% of consumers prioritising it; and the integration of technology, where 90% of consumers value AI-driven personalisation. These trends reflect a broader transformation in luxury consumption, particularly among younger generations, with Gen Z focusing on wellness and self-care while Millennials seek indulgent experiences. The market's evolution demands innovative responses from brands, balancing traditional luxury values with emerging consumer priorities in technology and sustainability.

IADS Notes: Recent market developments support MDRi's forecast findings. In April 2024, Savills reported major Chinese cities allocating 16% of retail space to entertainment zones , while March 2024 saw the second-hand luxury market reach USD 8 billion . The transformation of consumer behavior is evident in November 2024 data showing 95% of Chinese travelers integrating shopping into their journeys . PwC's September 2024 forecast suggests China could become the world's largest luxury market by 2030, reaching USD 148 billion .

This evolution is further demonstrated by Coresight's January 2024 identification of "meaningful consumption" as a key trend , with consumers increasingly seeking purposeful purchases and sustainable practices. The market's digital transformation is particularly noteworthy, with December 2024 data showing 230 million users engaging with retail AI applications , indicating a significant shift towards technology-enhanced luxury experiences.

Navigating change: Insights into China’s luxury market trends for 2025

What: Global economic growth is projected at 2.8% for 2025, with varying regional performance driven by consumer spending patterns and local market dynamics.

Why it is important: This forecast reflects a fundamental shift in global retail dynamics, where success depends on understanding and adapting to distinct regional consumer preferences, from European caution to emerging market optimism.

The global economy demonstrates remarkable resilience heading into 2025, with consumer spending momentum across 75 countries indicating a return to long-term trends. The projected 2.8% growth, though modest, represents a significant shift from recent patterns and highlights the economy's underlying strength. Each region presents distinct opportunities and challenges, with Europe showing signs of recovery despite global uncertainties, and the US navigating through a year of known unknowns. Asia Pacific continues its adaptation to new economic realities, while Latin America focuses on growth amid populist influences. The CEMEA region exhibits four distinct sub-regional trends with global implications, including the CIS and Southeast Europe's stabilization, GCC countries' economic diversification, North Africa's renewable energy push, and Sub-Saharan Africa's tech innovation boom. Labour markets, wage growth, and household income trends remain positive factors, while central banks' gradual reduction in policy rates is expected to improve credit access for households and small businesses.

IADS Notes: The global economic outlook for 2025 is supported by significant regional developments observed throughout 2024. As noted in October 2024 , the contrast between US and European consumer behavior highlights the varying pace of recovery, while November 2024 data revealed China's shift toward experiential retail. European markets showed cautious optimism despite inflationary pressures , while emerging markets, particularly India , demonstrated strong growth potential through retail sector transformation and expansion into new cities.

Visa Global Annual Economic Outlook

What: Myer's acquisition of Premier Retail's Apparel Brands creates a retail conglomerate of over 700 stores across Australia, despite industry experts' concerns about brand cannibalisation and operational complexity.

Why it is important: This deal exemplifies the tension between scale-driven retail consolidation and operational efficiency, particularly as department stores globally struggle to maintain market relevance amid changing consumer preferences.

The merger between Myer and Premier Retail's Apparel Brands has received shareholder approval, marking a significant shift in Australia's retail landscape. However, retail experts, including Professor Gary Mortimer from QUT Business School, express scepticism about the logic behind combining a department store network with hundreds of smaller specialty stores. The merger's proponents, led by Myer executive chair Olivia Wirth, argue that the deal will create greater scale and diversified earnings, potentially generating at least £30 million in pre-tax earnings benefits. Critics point to the challenges of managing such a diverse portfolio, particularly given the vulnerability of the middle market to cost-of-living pressures. The deal's success may be further complicated by potential cannibalisation between existing Myer brands and the incoming Premier brands, raising questions about whether the merger will genuinely expand customer choice or simply redistribute existing market share.

IADS Notes: The Myer-Premier deal reflects a broader global trend in department store transformation strategies, as seen in July 2024 with the Saks-Neiman Marcus merger. While Saks Global leveraged technology partnerships with Amazon and Salesforce, Myer's approach focuses on expanding its retail footprint through apparel brand integration. This strategy aligns with the industry's varied responses to market challenges, as evidenced in December 2024 when major retailers like Macy's implemented diverse transformation plans. The merger's success may hinge on lessons learned from Galeria Karstadt Kaufhof's experience in May 2024, which demonstrated the importance of curated product selections and enhanced customer service when managing multiple retail formats. However, the concerns raised by retail experts about potential brand cannibalisation and management focus echo similar challenges faced by other consolidated retail entities, suggesting that careful integration planning will be crucial for the deal's long-term viability.

Why Myer’s new chapter has retail analysts and practitioners divided

What: Supply chain management is evolving from a cost center to a strategic differentiator as AI adoption, risk management, and infrastructure modernization reshape traditional operational models.

Why it is important: The shift from reactive to proactive supply chain management, supported by emerging technologies and data-driven decision-making, is reshaping how retailers approach inventory, logistics, and risk management, making it crucial for long-term survival in an increasingly complex market.

The retail supply chain landscape is experiencing a profound transformation as organizations move beyond traditional operational frameworks. The integration of Generative AI and advanced analytics is revolutionizing how companies approach decision-making, with successful implementations showing significant improvements in application development speed and administrative efficiency. This technological evolution extends beyond mere automation, encompassing sophisticated risk management strategies that address operational, geopolitical, and environmental challenges. The freight industry, despite historical resistance to change, is gradually embracing cloud-based solutions and AI-driven innovations to optimize operations at scale. This transformation requires a delicate balance between human expertise and artificial intelligence, particularly in strategic decision-making processes. Organizations are increasingly focused on building resilient supply chains that can not only absorb disruptions but also adapt to changing market conditions through intelligent systems and proactive risk management strategies. The modernization of legacy systems and the adoption of cloud-based solutions are becoming essential components of this evolution, enabling real-time visibility and enhanced operational efficiency.

IADS Notes: The supply chain landscape in 2025 is undergoing a fundamental transformation, driven by the convergence of technological innovation and operational necessity. As reported in November 2024 , the implementation of Generative AI has delivered concrete benefits, with organizations achieving 30% faster application development and 50% reduction in administrative tasks, validating the article's emphasis on moving beyond traditional algorithmic AI. This technological evolution comes at a crucial time, as July 2024 findings  revealed that conventional "one-size-fits-all" supply chain models are no longer viable in today's complex global environment. The integration of AI in supply chain management, highlighted in April 2024 , has proven particularly effective in enhancing inventory management and demand forecasting accuracy, supporting the article's prediction about the increasing role of data-driven decision-making. This transformation is further supported by major technology providers, as identified in Coresight's January 2024 Tech 25 report , who are developing sophisticated enterprise solutions to modernize supply chain infrastructure and enable the real-time optimization capabilities described in the article.

Supply Chain Trends for Retail in 2025

What: BCG forecasts dramatic shifts in global trade patterns through 2033, with proposed US tariffs potentially reshaping supply chains while China's trade with the Global South surges by $1.25 trillion.

Why it is important: The projected trade shifts represent a critical turning point for retailers, requiring them to balance increased tariff costs against the need for supply chain resilience, while adapting to the growing economic influence of the Global South.

Global trade patterns are undergoing a significant transformation driven by geopolitical rivalries and economic security considerations. BCG's analysis reveals that while world trade will continue growing at 2.9% annually through 2033, the routes goods travel will change dramatically. A potential 60% tariff on Chinese goods could add $640 billion to US import costs, particularly affecting consumer electronics, electrical machinery, and fashion goods. North America is solidifying as a resilient trade bloc, with US-Mexico trade projected to increase by $315 billion and US-Canada trade by $147 billion by 2033. Meanwhile, China is pivoting toward the Global South, with trade expected to surge by $1.25 trillion, despite contracting trade with Western nations. The Global South itself is emerging as a significant force, with trade among developing nations projected to expand by $673 billion. These shifts are accompanied by strategic changes in the EU's trade relationships and ASEAN's growing role in global supply chains. For businesses, success will depend on developing agile supply chains and the ability to sense and react to geopolitical shifts in this new, fast-moving reality.

IADS Notes: The BCG report's findings align with significant shifts observed in global trade throughout 2024. As noted in November 2024, fashion brands were already restructuring their sourcing strategies in response to evolving trade policies , while December 2024 saw China implementing measures to streamline e-commerce exports despite Western regulatory challenges . The projected impact of US tariffs parallels broader trends in supply chain transformation, with January 2025 reports showing retailers abandoning traditional one-size-fits-all models in favor of more agile, regionally-adapted approaches . This shift is particularly evident in emerging markets, where India's retail sector is projected to reach $2 trillion by 2033 , and Southeast Asia is becoming a key battleground for retail expansion . The Global South's rising prominence is further validated by the establishment of Free Trade Warehousing Zones , offering new supply chain solutions as companies navigate these geopolitical shifts.

US tariffs set to accelerate landmark shifts in global trade flows, Press Release

BCG report: Great Powers, Geopolitics, and the Future of Trade

What: China's retail landscape is experiencing a strategic shift towards digital innovation and service consumption, backed by government initiatives to create a unified national market.

Why it is important: The developments highlight the growing importance of balancing digital advancement with sustainable practices while maintaining competitiveness in both domestic and international markets.

China's commercial sector is undergoing a significant transformation, characterised by the integration of digital technologies and evolving consumer preferences. With retail sales projected to reach ¥44.2 trillion in 2024, the market demonstrates remarkable resilience despite economic challenges. Digital innovation stands at the forefront, with 230 million users embracing AI-powered retail solutions and major cities allocating 16% of retail space to digital experiences. Consumer behaviour is shifting notably towards experiential retail and sustainability, with 85% of shoppers prioritising eco-friendly practices. The government's commitment to creating a unified national market has streamlined commerce while supporting domestic consumption growth. Traditional retailers are adapting to intense competition through innovative business models, while e-commerce platforms engage in strategic expansion both domestically and internationally. The integration of online and offline channels continues to evolve, with service consumption emerging as a key growth driver, particularly in sectors like tourism, culture, and health services.

IADS Notes: Recent market developments underscore China's retail transformation throughout 2024. In January, Coresight Research identified digital innovation and meaningful consumption as key trends , while April saw major cities dedicating significant retail space to entertainment zones . The sector's evolution continued with SKP's successful expansion in Wuhan in August , demonstrating the viability of integrated online-offline models. By December, China's retail AI adoption reached 230 million users , while cross-border e-commerce showed remarkable growth despite regulatory challenges . These developments align with broader trends in experiential retail and digital transformation, suggesting a mature market increasingly focused on innovation and consumer experience.

Ten higlights of China’s commercial sector in 2025

What: Retailers are transforming physical spaces into community-focused third places, exemplified by Coach's Coffee Shop, as consumers seek meaningful connections beyond traditional shopping experiences.

Why it is important: This evolution marks a crucial response to post-pandemic consumer behavior, where physical retail spaces are being reimagined to address social isolation while creating deeper brand connections, as evidenced by successful implementations across luxury and mainstream retail sectors.

The retail landscape is experiencing a significant transformation as brands increasingly embrace the concept of third spaces, locations beyond work and home where people can gather and connect. This trend, originally conceptualised by sociologist Ray Oldenburg in 1989, has gained renewed relevance in response to the closure of traditional public spaces and growing digital fatigue. Coach's recent opening of a Coffee Shop at Jersey Shore Premium Outlets exemplifies this evolution, offering not only beverages but also unique brand-themed experiences through pastries modeled after classic handbag styles. This approach builds upon successful implementations by established brands like Tiffany's Blue Box Café and Ralph's Coffee shops, which have demonstrated the viability of integrating hospitality into retail environments. The trend particularly resonates with a growing consumer group dubbed "Gleamers" by WGSN, who seek simpler, more meaningful experiences in response to burnout. Industry experts emphasise that success in this space requires creating authentic experiences that encourage repeat visits and foster genuine community connections, suggesting that the future of retail lies in creating spaces that prioritise emotional engagement over traditional sales metrics.

IADS Notes: The emergence of third spaces as a key retail trend in 2025 builds upon significant developments observed throughout 2024. In November 2024, Louis Vuitton's café concept in New York demonstrated how luxury brands can successfully blend dining with brand storytelling, similar to Coach's approach with their coffee shop. The transformation of physical retail spaces gained momentum when, in October 2024, research showed how retailers were actively combating social isolation through community-focused environments. This trend was further validated by the Vogue Business Index, which highlighted how brands are successfully integrating digital tools with physical experiences to create more engaging customer interactions. By August 2024, fashion brands had already begun embracing third places as intimate, community-driven shopping destinations, setting the foundation for what would become a defining retail strategy in 2025. This evolution shows how retailers are moving beyond traditional commerce to create spaces that foster genuine connection and community engagement, while maintaining brand authenticity and commercial viability.

Why third spaces are the retail trend to tap into in 2025

What: Fashion's resale and rental sectors show signs of growth heading into 2025, with The RealReal's stock surging 444%, Nuuly expanding its subscriber base, and P180 introducing innovative inventory management solutions through rental partnerships.

Why it is important: These developments highlight the increasing viability of circular fashion business models, as companies refine their strategies to balance consumer demand with operational efficiency.

The fashion resale and rental landscape demonstrates promising growth, with The RealReal's stock performance leading the industry with a 444% increase to $10.93. Under new CEO Rati Levesque, the company sees potential for $200 billion in untapped luxury resale value in the U.S. market alone. Meanwhile, Nuuly has emerged as the world's largest fashion rental company, with sales up 53.9% to $265.9 million and 297,000 active subscribers. The company's success in attracting first-time renters, with over two-thirds of new subscribers never having rented clothing before, suggests market expansion. P180 introduces a new approach by converting potential markdowns into rental inventory, recently demonstrated through investments in Elyse Walker and Altuzarra.

IADS Notes: While The RealReal's stock surged 444% and Nuuly grew to 297,000 subscribers, the broader market faces profitability challenges. P180's innovative approach to managing unsold inventory through rental represents a new model for addressing industry-wide challenges with inventory monetisation.

Resale and rental show signs of life headed into 2025

What: Trump's proposed tariffs of up to 60% on Chinese imports threaten to disrupt the US beauty industry's USD 2.6 billion trade surplus by forcing supply chain restructuring and price increases across 25,000 mass-market products.

Why it is important: As beauty retailers already grapple with supply chain reorganization and rising costs, the proposed tariffs could accelerate industry transformation, particularly affecting smaller independent brands and potentially reducing market diversity.

President-elect Donald Trump's proposed tariff policies signal a significant shift in US trade relations, with far-reaching implications for the beauty industry. The proposed measures include a universal tariff of 10-20% on all imports and a substantial 60% duty on Chinese goods, with potential increases targeting Canada and Mexico through USMCA renegotiations. These changes threaten to disrupt the beauty sector's established supply chains and manufacturing processes, potentially affecting over 25,000 products in the US mass beauty market. The Personal Care Products Council emphasises the industry's significant contribution to the US economy, including a USD 2.6 billion trade surplus, which could be at risk. Smaller independent brands face particular challenges due to limited financial flexibility, while larger conglomerates may better weather the transition. The prospect of reshoring presents both opportunities and challenges, with only 7% of beauty products currently manufactured domestically. Higher labour costs and limited raw material availability in the US pose significant hurdles for brands considering local production, though some companies are already adapting through hybrid approaches and strategic supply chain diversification.

IADS Notes: The beauty industry's response to Trump's proposed tariffs builds upon significant shifts already observed in the sector. As noted in January 2025, BCG's analysis shows that a 60% tariff on Chinese goods could add USD 640 billion to US import costs , forcing beauty retailers to reconsider their supply chain strategies. This aligns with trends seen in November 2024, where major retailers like Ulta Beauty began implementing regional fulfilment centres to enhance supply chain resilience. The industry's vulnerability was further highlighted during the October 2024 port strikes , prompting brands to explore alternative manufacturing locations. Mexico's emerging potential as a manufacturing hub is particularly noteworthy, with its beauty market growing 17% to EUR 7 billion in 2024 , suggesting a viable nearshoring option. However, as revealed in April 2024, changes to de minimis thresholds in both US and EU markets indicate that beauty brands must navigate an increasingly complex regulatory landscape while adapting their manufacturing and pricing strategies to maintain competitiveness.

How US tariffs would hit beauty

What: Luxury groups shift strategic priorities from China to the US market as global sector faces its lowest sales rates in years.

Why it is important: This shift demonstrates how luxury brands are actively responding to market polarization, with the US emerging as a potential growth driver while Chinese consumer behavior undergoes significant transformation.

Global luxury goods companies are strategically pivoting towards the US market amidst ongoing challenges in China. The industry's recalibration is evidenced by positive signs in US luxury credit card spending, which rose 1% year-on-year in December, marking the first increase in over two years. This shift comes as the EUR 363 billion global luxury goods market grapples with historically low sales rates, complicated by China's property crisis and sluggish economy.

Major luxury conglomerates, including LVMH and Kering, are particularly focused on leveraging US wealth, buoyed by strong stock market performance and cryptocurrency gains. The potential implementation of tariffs by US President-elect Donald Trump could further strengthen the dollar, enhancing Americans' purchasing power for European luxury goods. Meanwhile, the Chinese market's challenges have significantly impacted the sector, with LVMH losing over 30 billion euros in market capitalisation over six months. The industry faces a complex balancing act, managing reduced Chinese consumer appetite while developing strategies to capture growing US market opportunities.

IADS Notes: The luxury industry's strategic pivot towards the US market, as discussed in the article, aligns with significant shifts observed throughout 2024. In October 2024, LVMH's notable 5% decline in fashion and leather goods sales highlighted the challenges in the Chinese market, while June 2024 revealed a growing "luxury fatigue" among Chinese consumers, who increasingly prefer discreet luxury experiences.

This transformation comes as the global luxury sector faces its most challenging period since the Great Recession, with December 2024 data showing a 2% market decline and the loss of 50 million consumers. The industry's response, including the focus on US growth potential and the adaptation to changing consumer behaviors, reflects a fundamental restructuring of the luxury market landscape, with American consumers projected to drive over a third of global luxury growth in 2025.

As China weakness endures, luxury groups pin hopes on US growth

What: Slow pop-ups are replacing traditional stores in China as retailers shift towards longer-term experiential spaces that prioritise customer engagement over immediate sales.

Why it is important: This evolution signals a fundamental shift in retail strategy, where successful brands must balance operational costs with the growing demand for immersive experiences, reflecting broader changes in Chinese consumer behavior.

China's retail landscape is undergoing a significant transformation with the rise of "slow pop-ups," a concept that has surpassed traditional pop-up stores in strategic importance. While pop-up stores were initially complementary to physical retail, these new formats are now becoming primary retail channels. This shift is driven by economic rationalisation, with brands like FREY TAILORED demonstrating how location flexibility can optimise costs and traffic. The trend is particularly evident in luxury retail, where brands such as Schiaparelli and Burberry are using these spaces as laboratories for testing and refining their market approaches.

These slow pop-ups, lasting from two months to a year, offer brands access to prestigious locations while allowing them to develop local communities and refine their merchandising strategies. The movement aligns perfectly with Gen Z's evolving values, as evidenced by the 180% growth in "slow life" related content on Little Red Book between 2023 and 2024. This transformation represents a strategic response to changing consumer preferences, where emotional connection and deep interaction take precedence over immediate sales conversion.

IADS Notes: Pop-up retail evolution in China reflects wider market changes seen in 2024. In January, Coresight Research identified pop-ups as a key trend, followed by DFS and Douyin's "phygital" model launch in March. By April, Savills reported major Chinese cities allocating 16% of retail space to entertainment, while department stores transformed into lifestyle centres. August saw SKP implementing new engagement strategies, as Gen Z's USD 360 billion spending power shaped retail development . The year ended with 'chaotic customisation' becoming prominent and 95% of Chinese travellers integrating shopping into their journeys. The trend has evolved into "third spaces" in early 2025, validating Chinese luxury spending projections of USD 88 billion by 2028.

China turns "slow pop-ups" into new retail laboratories

What: Stablecoins are poised to revolutionise retail payments by offering near-zero transaction fees and eliminating traditional payment gatekeepers.

Why it is important: As retailers face significant payment processing fees, evidenced by the recent USD 30 billion Visa-Mastercard settlement , stablecoins offer a transformative solution that could dramatically improve profit margins while enhancing payment accessibility.

The current payment landscape is dominated by intermediaries who extract substantial fees from every transaction, significantly impacting business profitability. Stablecoins emerge as a compelling alternative, offering near-zero transaction costs and enhanced accessibility without sacrificing reliability or convenience. With 28.5 million unique users conducting over 600 million stablecoin transactions in recent months, the technology has already demonstrated its viability as a payment solution.The impact could be particularly significant for businesses with thin margins. Major retailers like Walmart could potentially increase profitability by 60% through reduced payment fees, while restaurants and grocery stores could see even more dramatic improvements to their bottom lines. The adoption of stablecoins is expected to begin with businesses most affected by current payment costs, gradually expanding as the technology matures and infrastructure improves.As stablecoins gain traction, their programmable nature and permissionless composability will enable new payment experiences and business models, fostering innovation in the retail sector. This transformation, while gradual, is likely to accelerate as more businesses recognise the potential for improved profitability and operational efficiency.

IADS Notes: Recent developments in retail payment systems strongly support the potential for stablecoin adoption. In March 2024, Visa and Mastercard's USD 30 billion settlement over swipe fees  highlighted the industry's need for cost-effective payment solutions. This was further emphasised when Printemps became Europe's first department store to accept cryptocurrencies in November 2024 , demonstrating traditional retail's openness to digital currency innovation. The retail payment landscape has evolved significantly, with mobile payments reaching 70% of global sales by January 2025 , while cross-border transactions during the 2024 Black Friday weekend alone totaled USD 3.2 billion . These developments, coupled with successful implementations of digital currencies like Hong Kong's e-CNY integration , suggest that the retail industry is primed for stablecoin adoption. The trend towards lower transaction fees and improved payment accessibility aligns with the article's vision of stablecoins as a transformative force in retail payments.

How stablecoins will eat payments, and what happens next

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Last month, the IADS attended the presentation of the State of Retail 2024 - Europe: Transition and transformation in non-grocery retail, a report carried out by Eurocommerce in collaboration with McKinsey. Usually dedicated to grocery retail, this report addresses key trends shaping the specialty retail landscape in 2025 for the first time. It combines market data with surveys of 30 European executives and approximately 15,000 consumers across six European countries (France, Germany, Italy, Poland, Spain and the United Kingdom). The scope focuses on six retail categories: furniture and furnishings, DIY and hardware, consumer electronics, sporting goods, beauty and personal care, and pet care.

Introduction: trends and the European consumer

Eurocommerce presented the key numbers and trends in the European retail industry. While the industry’s nominal turnover increased by 2.3% annually, inflation-adjusted growth slowed by 1.8%, below 2019 levels. Real growth is projected to be 0.6% per year through 2028, however the dynamics vary by category and country.

Across Europe, the proportion of retail sales between grocery and non-grocery categories varies. For example, in Germany and the United Kingdom (UK), non-grocery items account for more than half of retail sales while French consumers allocate almost 60% of their budget to groceries. Furthermore, European households remain cautious about future spending post-Covid. Retail sales of discretionary items hinge on purchasing power, which varies across Europe. The challenge for retailers here is that the expected slowing of real income growth could undercut purchasing power gains. More than half of low-income households have saved as much as possible in the past 12 months instead of spending. The combination of cautious spending and eroding purchasing power suggests that consumer spending is polarising; adapting to the needs of both high- and low-income groups will be critical for retailers as the favour for discounter options and private labels continues.

The average European consumer has changed significantly:

• Purchasing behaviour: omnichannel journeys are becoming increasingly prevalent, with more than 50% of consumers using online and in-store options to research and purchase non-grocery items.
• Price sensitivity: transitioning from a focus on low-cost options, one in three consumers prioritise value for money. This characteristic includes promotions, discounts, a wide product range, trustworthiness, and a fun shopping experience.
• Loyalty: with low levels of loyalty, more than 60% of consumers actively seek opportunities to trade down. Convenience is the top factor in purchasing decisions, both online and offline.
• Approach to sustainability: consumers also have a paradoxical approach to sustainability where one-third cited it as their second-biggest concern, yet it hardly affects purchasing decisions.

The growing presence of omnichannel journeys

Following rapid e-commerce penetration during the Covid era, brick-and-mortar retail recaptured some of these gains post-pandemic. More recently, e-commerce has started increasing again but remains below 2019 levels. Given the growing presence of omnichannel journeys in consumers’ shopping habits, more than 50% reported using online and in-store options to research and purchase non-grocery items. The rise of omnichannel is evident in the context of other consumer trends, such as a preference for convenience, value for money and a general decline in retail sales.  /nbsp]

Consumers decision journeys are now predominantly omnichannel. The first step is often beginning to research products online through brand, retailer, competitor, or third-party websites (social media and marketplaces). Next, they visit stores to get advice and experience the products. Finally, they return online to purchase the item at the best prices.

It is notable that brick-and-mortar retail plays an important role in the omnichannel journey. Over one-third of consumers choose physical retail for convenience and almost a third prefer it for the opportunity to experience products. Functioning as fulfilment centres, showrooms, and community hubs, physical stores provide unique experiences that cannot be replicated online.

Non-grocery retail channels (multi-brand and brand-owned) still capture the largest share of consumers’ declared spending. Consumers are motivated to purchase from non-grocery channels given the broad range of products and services retailers offer, the availability of specific items at the time of purchase, their trust in the retailers, and their love for the in-store experience. This trend is expected to persist, with net future purchasing intent in non-grocery retail channels at its highest over the coming years.

Despite this maintenance of spending intentions in these retail channels, department stores are increasingly challenged by online resellers, which are gaining ground across all surveyed countries. Specialised multi-brand and brand’s own stores capture the largest market share in all markets.

In the face of growing consumer polarisation, omnichannel retail caters to all groups and gives them the added value of convenience, the most important factor affecting purchase decisions. Investing in and providing a seamless omnichannel experience keeps consumer journeys within retailer-owned channels. This necessitates cross-channel harmonisation to meet the needs of different kinds of consumers.

Building new ecosystems to restore loyalty

Increasing diversity and fragmentation in the retail sector give consumers more choices. This results in lower customer loyalty, an increase in the variety of retailers visited and a decrease in the size of shopping baskets per visit. Furthermore, consumers’ focus on value for money includes promotions, a rewarding experience, a variety of products and trustworthiness. To take advantage of this, retailers must capture the consumers’ interest, both high and low spending groups, by going beyond products and traditional retail to services that enhance customer experience.

Retailers are creating ecosystems that include services to combat decreasing customer loyalty. These include retail media networks (RMNs), repair, maintenance, travel and insurance services. While travel and insurance services have become staples at El Corte Inglés, El Palacio de Hierro or Falabella, Macy’s media network has recently been expanded to include personalised post-purchase offers1. Creating a comprehensive ecosystem for customers’ needs can reward retailers with higher customer loyalty and a larger share of their spending, as shown by the predominance of El Corte Inglés in Spain. Introducing and strengthening private label capabilities can also enhance customer loyalty while affording the retailer better margins.

Existing assets can be leveraged to develop an ecosystem strategy, as suggested during the 2023 General Assembly by Michael Jacobides, strategy professor at the LBS (IADS Exclusive here). Tapping into all available tangible and intangible assets can drive growth and reduce investment needs. Brands, loyalty programmes, stores, applications, products, services, and expertise, can all potentially be used in the new ecosystem.

By putting customers’ needs at the centre of the retailer’s value proposition, they can build a portfolio of traditional retail and services that better serve customers while increasing revenue. Digitisation and advancing technologies have made it easier for retailers to explore segments beyond core retail to create a network of services.

Demanded sustainability won’t come out of the consumer’s pocket

Climate change and sustainability are still on the minds of European consumers. Thirty percent of survey respondents cited sustainability as their second-greatest concern. Consumers expect sustainability: across all segments, more than one-third of consumers reported paying close attention to environmental friendliness when shopping for non-grocery goods.

However, this awareness of sustainability has yet to influence buying decisions. When asked whether retailers offering a broad range of sustainable products is important in purchasing decisions, consumers ranked this driver at just 32 out of 40.

There is a gap between consumers’ declared priorities on sustainability without manifesting in purchasing decisions. They expect retailers to meet sustainability priorities without it coming out of the consumer’s pocket. In this vein, circularity as an alternative has worked well and is seeing gains as it meets cost considerations while enhancing sustainable objectives.

This explains the current momentum around circular models. Retailers with sustainable or circular offerings in certain categories experience strong growth. This is especially true in consumer electronics and appliances, where refurbished items allow consumers to get a better value for their money, and in sporting goods, where equipment rental and second-hand purchases are on the rise.

Overall, retailers are faced with a complex decision on sustainability. Focusing on these priorities could improve incremental long-term revenue growth by integrating new sustainability and circularity practices into their operations at the cost of short- to medium-term growth. More and more retail groups now focus on circularity (such as FNAC-Darty’s refurbished electronics and appliances offering) and sustainability (for example, cosmetics brand Davines) as key value propositions.

Note on CEO sentiment: cautious optimism

Most of the 30 European non-grocery executives surveyed by Eurocommerce expected market conditions in 2025 to improve or remain the same. Cautiously optimistic, the sector is adapting to ongoing economic challenges. Margin pressures and consumer downtrading, driven by rising costs and heightened price sensitivity, remain top concerns for CEOs in the coming year. Executives are prioritising investments in omnichannel experiences to meet evolving consumer demands, along with expanding private label offerings.

More than 70% of CEOs believe that by 2030, delivering a seamless omnichannel shopping experience will be the cornerstone of success. Approximately one in three executives also cite factors such as developing robust private label strategies and reinventing store formats to excite customers. On the other hand, only 20% of leaders believe improving the sustainability of products will be important to win in their segment by 2030.

Conclusion: omnichannel is key, sustainability is (unfortunately) not

The retail landscape is undergoing a significant transformation driven by polarising consumer spending. Retailers must cater to both high- and low-income groups to maximise their reach by adapting to omnichannel strategies that cater to all groups, offering a seamless shopping experience and giving them the added value of convenience which is the most important factor affecting purchases. Reduced customer loyalty driven by this fragmentation of consumers and the availability of large numbers of retailers, calls for the development of an ecosystem of value-added services and private labels to recapture consumers. The focus on value for money for consumers includes promotions, a rewarding experience, a variety of products and trustworthiness. As the sector navigates economic challenges, executives focus on enhancing omnichannel experiences and expanding private label offerings as key strategies for success.

There is a gap between consumers’ declared priorities on sustainability without it reflecting in purchasing decisions. They expect retailers to meet sustainability priorities without the cost being passed on to consumers. In this vein, circularity has worked well and is seeing gains as it meets consumers’ cost considerations while meeting sustainable objectives. This approach addresses consumer expectations and positions retailers for incremental long-term growth. While sustainability is not yet a top priority for many leaders, integrating these practices could become increasingly important as consumer awareness continues to grow.

Credits: IADS (Anchita Ranka)

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*Known for its rapid economic growth during the past two decades, China is now navigating a period of moderated expansion. The current economic and societal landscape is marked by a complex interplay of challenges and opportunities: a significant real estate crisis, high youth unemployment rates, a shrinking and ageing population and newfound Asian pride. These factors are reshaping consumer behaviour and economic priorities within the country.

Despite these challenges, as stated by IADS’ partner NellyRodi in their What’s Up China conference held in Paris in October, there are sectors poised for growth, including sportswear, consumer health, and experiential travel. Understanding these dynamics and local macro-trends is crucial for businesses aiming to navigate the evolving Chinese market landscape effectively.*

China’s 2024 economic and societal context

It’s the economy, stupid!

China’s economic growth, once characterised by double-digit increases, has slowed considerably. While 2023 saw a modest recovery with a +5.2% GDP and a +7.2% consumption growth, there has been a -7.5% decrease in exports. The transition from rapid expansion to more moderate growth presents significant challenges illustrated by the 2024 economic landscape marked by a profound real estate crisis, slower consumption and an average 20% unemployment rate among the younger generations. Slowing down compared to 2023, China’s GDP only grew by +5% during the first half of 2024, while retail sales only increased by +3.7% during this period. The outlook for 2025 is both cautious and optimistic as GDP growth should resume. On its side, the IMF growth forecast sits at +4.5%.

Demographics: China is getting old 

The demographic shift is another key concern. China has now become the second-highest population in the world (it was previously the first), and the UN estimates that the country will lose 100 million by 2050. As a result, the replacement of the Chinese population is not guaranteed anymore. Overall, the total population could decrease from 911mn in 2025 to 700mn in 2050. Even more than its shrinking, the main issue is China’s population ageing rapidly, with a declining and historically low birth rate and an increasing proportion of the population over 65 years old. In 2023, more than 20% of the Chinese population was over 60 years old, and this group should reach 25% in 2050. Government initiatives to address this issue have had limited success so far. They have been distributing child benefits, extensively communicating on the birth rate and, since 2021, allowing all couples to have three children. Also, to maintain the workforce, the government raised the retirement age for the first time since the 1950s, from 50 to 55 for women in blue-collar jobs and from 55 to 58 for females in white-collar jobs. Men will see an increase from 60 to 63. The Chinese demographic future is brighter, though: bigger than Gen Z, the generation aged 5 to 15 now, will relieve demographic pressure in the coming years.

Western lifestyle 

The family structure is changing, with young people delaying marriage and parenthood, further complicating the demographic picture. The traditional family life model is challenged as the number of marriages decreased for 9 years, slowly rising again since 2023. Besides, the young population challenges the work status quo and no longer accepts the “9-9-6 model” (working from 9 am to 9 pm, 6 days a week). In 2021, the Supreme Court even ruled that this system was illegal. In reality, most of the Chinese population still works according to the model. Still, resistance is truly growing as people want a better work-life balance, with 76% of the population born after 2000 aspiring to a high level of flexibility. Freed time is dedicated to activities centred around well-being, sport and travel. Finally, 3-tier and 4-tier cities gain popularity among young adults as they offer a better lifestyle with less population and nature nearby.

Chinese consumer behaviour: myths and reality

The middle class is shrinking

Key to local consumption and once optimistic about the future, the Chinese middle class represented 400mn people in 2023. With 70% of family assets tied up in property, the current real estate crisis hits hard as 28,9% of the middle class lost 10% to 30% of their fortune, and 11.4% lost more than 30% of it. Now, many are even slipping back toward poverty. This is a significant issue for the Chinese Communist Party, which the middle class has always supported in exchange for prosperity.

Besides, Chinese starting salaries have declined by -1.3% during the 2023 fourth quarter, the most recent period for which data are available. Bonuses fell by -17.5% on average compared to the previous year (-27% in the internet and telecommunications sector and -35% in the financial sector), directly impacting consumption and luxury spending in 2024. It’s no secret that luxury brands face a major crisis, as illustrated by the latest LVMH results for 2024 third quarter: sales in Asia (excluding Japan) fell by 16%, while Japan — a key destination for Chinese customers leveraging a weak yen exchange rate — steeply decreased, growing 20% compared to 57% in the previous quarter.

Today, the middle class, whose aspirational customers once fueled the luxury growth, is more refined overall and has different needs and cravings, especially as they favour products and services that truly enhance their quality of life. As a result, other sectors benefit from the slowdown in luxury. The Chinese middle class invests in education, with an increase of +12.7% between 2022 and 2023. Quality food expenses grew by +8.5%, health by +9.2%, and travel by 7%.

The luxury shame impact on the HNWI and the UHNWI  consumption

The Chinese government has targeted influencers who flaunt their wealth on social media, resulting in bans for high-profile personalities. This has contributed to the ‘luxury shame’ phenomenon, where HNWIs and UHNWIs refrain from displaying their wealth. However, the HNWIs did not stop spending; instead, they shifted brands. They are becoming more discerning and opting for brands offering classics that retain value over time rather than trendy products. This is why brands like Hermès and The Row don’t experience slowdowns.

Also, McKinsey & Company describes a more nuanced picture of the luxury sector. While luxury brands are seeing their sales decline in mainland China, Chinese overseas spending on luxury goods in the first half of 2024 has already exceeded the 2019 level. Chinese consumers might simply choose to make these purchases outside of China. In parallel, UHNWIs tend to relocate outside of China. Their number in China shows a slowdown, from 495 billionaires in 2023 to 406 in 2024. Singapore and Tokyo’s real estate is booming thanks to those tentative relocations.

Asian tourism rather than Western tourism

In 2023, with $196.5bn spent, Chinese tourists became (again) the highest tourist spenders, but they completely shifted their tourism habits. Exit Europe and welcome Asia! They favour local tourism, as it’s easier, cheaper, and supported by the government's push for local consumption. Having a newfound Asian pride, tourists' top destinations in 2024 were Korea, Japan, USA, Thailand and Hong Kong. Italy ranked 10 and France… 23. Compared to 2019, Lunar New Year tourism in China increased by +73.1% in 2024. 765 million domestic trips were made across the country during the Golden Week holiday in October 2024, a year-on-year increase of 5.9%. Expenditure by domestic tourists reached $99.30bn, a year-on-year increase of 6.3%. However, per capita spending was 2.09% lower than before COVID-19.

China’s opportunities for growth

It’s not all bad

Despite historically low consumer confidence, concerns over high living costs, job security and the property slump, consumption growth still exists. Sportswear, urban outdoor apparel, and consumer health have seen double-digit growth. The beauty and wellness sectors present significant opportunities. The hospitality sector, particularly experiential travel and personalised services, also shows strong potential. The food and beverage sector, including alcohol-free options and gourmet products, offers promising avenues for growth.

Consumer segments worth watching

Despite high youth unemployment rates, the urban Gen Z remains optimistic about their financial future due to strong family support. They prioritise spending on dining out and cultural entertainment. Baby Boomers in tier-1 cities have benefited from past economic growth and hold positive consumption views despite low current consumption growth expectations. Millennials in tier-1 and tier-2 cities remain a significant growth engine for many companies but exhibit less confidence than their tier-3 counterparts. This confidence is attributed to lower living costs and better job security in tier-3 and tier-4 cities.

The macro trends identified by NellyRodi

These trends reveal a complex interplay of factors, including national pride, a growing focus on well-being, emotional shopping, personalisation, and digital technologies' influence.

• Local pride: “Guochao”, a new and strong sense of national pride, is driving increased demand for domestically produced goods and services. There is a strong shift in the perception of “Made in China.” It has been perceived negatively for many years and is now a symbol of pride. This is particularly evident in the sports and beauty sectors. This calls for non-Chinese brands to adapt culturally to compete with rising Chinese brands. The “Guochao” market should reach $388bn by 2028. Another striking example comes from Chinese sportswear brand Anta: their turnover in H1 2024 outpaced Nike by 20% and Adidas by 160%.
• The rise of women: contributing to the luxury market, Chinese women are increasingly entrepreneurs and members of company boards and, as such, become influential consumers, exhibiting independent spending habits and rejecting stereotypical marketing approaches.
• Well-being and health: they have become a top priority for Chinese consumers, driving demand for premium healthcare products, services (including plastic surgery), and experiences. Health is considered the ultimate luxury, reflecting the growing interest in mental health, holistic wellness, and preventative care. Also, China is the digital healthcare global leader (doctor-patient platforms, online pharmacies).
• Responsibility and sustainability: China’s CO2 emissions decreased by -65% between 2005 and 2023. Growing awareness of environmental issues drives demand for sustainable products (including second-hand) and eco-friendly practices, especially as consumers link durability to security and their aspiration for better times. Brands are increasingly incorporating sustainability into their marketing and product development strategies.
• Escapism: A desire for escape and personal growth fuels demand for travel, outdoor activities, and experiences that foster self-discovery. ‘City walks’ and the ‘20 minutes in the park’ movement gain traction, highlighting the role of nature in relieving stress.
• Ultra-digitalisation: China’s advanced digital infrastructure and the widespread adoption of online platforms are transforming the consumer landscape. The omnipresence of digital technologies in daily life impacts shopping experiences, brand engagement, and information access. There are countless platforms constantly evolving to increase innovation.
• Entertainment first: immersive experiences offering more than products have become necessary to enhance consumer engagement and brand loyalty. The use of augmented reality, virtual reality, and gamification is creating unique shopping experiences. Short-term pop-up shops and events are becoming increasingly popular, offering brands a way to generate buzz and engage consumers.
• Cultural and emotional elevation: a significant challenge for luxury brands is to define a specific ‘target emotion’ they want to evoke. Without this clarity, brands often resort to generic messaging that lacks impact. Brands should move beyond selling abstract dreams and instead focus on a precise emotional outcome. Emotional storytelling must be culturally relevant and shift from being brand-centric to client-centric. Brands should focus on authentic stories that resonate with their defined target emotion rather than relying on clichés like heritage or exclusivity.
• Regression and nostalgia: a trend towards regression and nostalgia is evident in the popularity of products and experiences that evoke childhood memories. The feeling of comfort and security gains traction in the Chinese context. This is reflected in collaborations with popular characters and brands.
• Service and personalisation: Consumers expect personalised service and unique experiences, which drive demand for one-to-one interactions, exclusive products, and customised offerings. 97% of Chinese consumers expect to be rewarded with special perks by brands during their shopping journeys.

China's economic environment presents notable challenges, and also offers opportunities for growth across various sectors. The evolving consumer behaviour highlights a shift towards quality of life improvements, with increased spending on education, health, and well-being. Moreover, the rise of national pride and sustainability concerns are redefining consumer expectations and market dynamics. As stated by NellyRodi, brands and retailers looking to succeed in China must adapt and understand that the value for consumers is no longer just determined by the products sold but by the brands’ ability to entertain, educate, anchor the brand in the culture, truly bring wellbeing and interact with consumers.

Credits: IADS (Christine Montard )

What: US retail returns surge to US$890 billion as consumers increasingly expect seamless return processes.

Why it is important: This unprecedented level of returns is reshaping retail operations, with two-thirds of retailers now charging for returns while balancing customer satisfaction.

The National Retail Federation's latest data reveals an unprecedented surge in consumer returns, reaching USD 890 billion and accounting for nearly 17% of total annual sales. This dramatic increase has prompted retailers to implement significant operational changes, with two-thirds now charging for at least one return method. The challenge is particularly acute during the holiday season, where return rates are projected to be 17% higher than the annual average. Retailers are responding with multi-faceted strategies, including partnering with third-party service providers and hiring additional seasonal staff specifically for returns processing. David Sobie, Happy Returns' CEO, emphasises that return policies now influence purchasing decisions from the outset, especially among younger consumers. The situation is further complicated by online shopping trends and economic pressures, with GlobalData's Neil Saunders noting that financially constrained consumers are less likely to keep uncertain purchases. Despite the costs and operational challenges, retailers must maintain customer-friendly return options, as three-quarters of shoppers consider free returns crucial for e-commerce transactions.

IADS Notes: The retail industry's returns challenge has escalated dramatically, as evidenced by the jump from US$743 billion in returns reported in January 2024 to the current US$890 billion figure. This 19.8% increase aligns with findings from September 2024 showing that 39% of consumers return online purchases monthly, with each return costing retailers US$25-30. The industry's response has been decisive, with research from August 2024 documenting a widespread shift away from no-questions-asked policies, explaining why two-thirds of retailers now charge for at least one return method. However, March 2024 studies suggest that return fees alone have not effectively deterred returns, supporting the NRF's prediction of a 17% higher return rate for the 2024 holiday season. This trend has pushed retailers toward more comprehensive solutions, including enhanced third-party partnerships and seasonal staffing strategies.

National Retail Federation reports USD 890 billion refunding problem

What: Gen Z's 'chaotic customisation' trend is reshaping retail through extreme personalisation and DIY-driven self-expression, pushing brands to adapt their strategies for 2025.

Why it is important: As Gen Z's spending power reaches $360 billion, their preference for individualistic expression and customisation is forcing retailers to fundamentally rethink their approach to product development, store experiences, and brand engagement.

The retail landscape is undergoing a significant transformation as Gen Z drives a new trend dubbed 'chaotic customisation' by WGSN. This movement represents a decisive shift away from minimalism and standardised micro-trends, emphasizing extreme personalization and uninhibited self-expression. The trend began with the 'Jane Birkin-ification' of bags, generating millions of TikTok views, and has since expanded to various fashion categories, from footwear to apparel. Major brands are responding strategically, with Adidas hosting customization pop-ups and Coach introducing shoe charms in their Spring/Summer 2025 collection. Notably, collaborations between established brands and innovative designers, such as Conner Ives's partnership with Nike and Chopova Lowena's work with Asics, demonstrate the trend's commercial viability despite production challenges. The movement extends beyond mere aesthetic choices, reflecting a deeper cultural shift towards individualistic expression and a rejection of mass-produced fashion. While this presents logistical challenges for brands, particularly in scaling customized products, it offers opportunities to create meaningful connections with consumers through personalized experiences and sustainable practices.

IADS Notes: The emergence of 'chaotic customisation' aligns with broader retail trends identified in recent months. In November 2024, BCG research revealed that 70% of shoppers desire personalised experiences , suggesting this trend is part of a larger shift in consumer behaviour. This is particularly relevant for Gen Z, who command $360 billion in spending power as of October 2024  and are driving significant retail innovation. The trend's success is evidenced by recent initiatives such as Future Stores' £20 million investment in Oxford Street , which creates dynamic, social media-inspired retail spaces. The movement towards customisation is further supported by successful implementations like YSL Beauty's immersive pop-ups  and Flannels' luxury personalisation services. Notably, this trend intersects with sustainability concerns, as Euromonitor's 2025 forecast indicates that 63% of consumers prioritise environmental impact in their purchasing decisions , suggesting that 'chaotic customisation' could evolve to incorporate more sustainable practices in personalisation.

Gen Zs want ‘chaotic customisation’ in 2025. How can brands tap in?

What: The struggle between retail transformation and real estate monetisation intensifies as department stores like Macy's face activist pressure to unlock property value, while HBC's Richard Baker demonstrates how real estate assets can finance acquisitions but rarely produce retail success stories.

Why it is important: This tension exemplifies the broader challenges facing department stores as they balance the immediate financial gains from real estate monetisation against the need for sustainable retail transformation and long-term viability.

Department stores' valuable real estate holdings have become both an asset and a liability in their transformation efforts. Activist investors Barington Capital and Thor Equities are pressuring Macy's to create a separate real estate subsidiary to monetise properties valued at over $9 billion, while simultaneously pursuing store closures and stock buybacks. Meanwhile, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions, including the recent $2.65 billion Neiman Marcus deal backed by $2 billion in junk bonds. However, historical examples like Lord & Taylor and Sears demonstrate that real estate monetisation alone doesn't ensure retail success. The sale of Lord & Taylor's Manhattan flagship to WeWork for $850 million in 2017 preceded the chain's eventual closure, highlighting the risks of prioritizing property value over retail operations.

IADS Notes: While Macy's faces pressure from activists to monetise its $9 billion property portfolio, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions like Neiman Marcus. However, as seen in cases like Lord & Taylor and Sears, focusing solely on real estate monetisation often fails to address fundamental retail challenges, highlighting the need for balanced transformation strategies.

US department stores’ real estate strategies reveal divergent approaches