Welcome to 2020.
The year will bring more social unrest and riots overseas as citizens fight for increased independence, improved living conditions, including better wages, and pension reform.
As for January in particular, Brexit’s on the agenda, as well as the anticipated signing of the phase one trade agreement between the U.S. and China.
On the retail front, the Barneys New York website has been redirected to Saks, while Dressbarn officially shut down operations at year-end. What will 2020 bring for these two nameplates? Stay tuned.
Riots in Hong Kong, Chile and Paris
The riots in Hong Kong as a result of a pro-democracy push that began in March has gotten progressively worse. Protests at the start of 2020 had police resorting to water cannons to move protesters off roads. The shopping district of Mong Kok reportedly saw police fire a few rounds of tear gas in the early hours of New Year’s Day.
The social unrest, which has pressured retail selling in the region, is expected to remain a headwind for luxury brands over the short term. The months-long protests in 2019 disrupted the Hong Kong International Airport, as well as local transportation hubs, leading to store closures at key shopping districts.
Unrest was an issue in other parts of the world, too. In October, Chile saw its citizens protest against the country’s high living costs and economic inequality, beginning over a hike in public transportation fares. At one point the country’s government declared a state of emergency. Police also used tear gas and water cannons in an effort to stop the demonstrations.
The clashes between citizens and police also saw much looting at stores, prompting Walmart to seek court orders for police protection to ensure the safety of its staff in stores across six Chilean cities. The discounter did not seek any reimbursement from the government for any store damage, according to a statement from its local subsidiary Walmart Chile. The discounter noted 1,200 episodes of looting and fires at about 128 of its 400 stores in the statement. In addition, 34 supermarkets were set on fire and 17 locations were destroyed, Walmart said.
The protests are believed to have resulted in more than $1.5 billion in losses for businesses. Finance Minister Ignacio Briones last month slashed the government’s forecast for economic growth to 1.4 percent from 2 percent, following the government’s disclosure of plans to rollout a $5.5 billion economic recovery plan. Whether that actually helps to quell any uprisings remain to be seen.
Economic inequality also prompted the rioting in Paris for much of 2019. Unrest in the streets also saw luxury storefront windows smashed as stores were looted. Fires and burnt vehicles were seen around the Champs-Élysées. The protests began in 2018 in mid-November as a reaction to French President Emmanuel Macron’s tax hike on fuel. While he canceled the tax a month later, demonstrations continued through 2019 as protesters became more vocal about the government’s economic policies.
April 2019 saw the French president promise income tax cuts and pension raises for the middle class, but the protests continued. The U.S. Embassy in Paris provides regular alerts regarding the demonstrations and has warned American tourists to be cautious when near popular sites such as the Eiffel Tower and the Arc de Triomphe.
More recently, riots in Paris made the news again when transportation trade unions called for strikes in early December because of the government’s planned overhaul of its pension plan.
Digital Services Tax
As governments around the world focus on both growing their economies and on balancing their budgets to pay for services promised to citizens, lawmakers are also looking for new ways to garner much-needed revenue. The digital services tax could be where they’ll be focused this year.
France has already instituted a tax of its own, and last month Italian lawmakers did the same. The new law places a 3 percent tax on digital revenue for companies that meet certain criteria, including American technology firms, like Amazon and Google. There is also a base amount set in each country that must be met regarding the minimum amount of revenue generated in each country.
The Italian tax went into effect on Jan. 1, and Turkey has a similar tax that goes into effect in March 2020. Other countries, like the Czech Republic, are also said to be exploring similar levies on technology firms.
U.S. President Donald Trump said Tuesday he will sign the phase one agreement with China on Jan. 15. The signing is expected to take place in Washington, in the presence of “high level representatives” from China. At some point, talks are expected to restart between the two countries for the phase two agreement.
A Brexit breakthrough on Dec. 20, with lawmakers approving an exit plan, means the U.K. has its divorce plan in place in connection to its separation from the European Union. The plan needs to be sent to the House of Lords for final debate and approval. An exit date is set for Jan. 31, 2020.
What’s next for Barneys, Dressbarn and Charlotte Russe?
The luxury department store Barneys New York was sold in bankruptcy to brand management firm Authentic Brands Group. Going-out-of-business sales are still ongoing at its stores, but the online sites for Barneys and Barneys’ Warehouse are now being redirected to Saks Fifth Avenue. ABG inked a deal with Saks parent Hudson’s Bay Co. to host Barneys’ boutiques at certain locations, as well as take over the dot-com operation. ABG’s plans for evolving Barneys are expected to be disclosed later this month or in early February.
The Dressbarn business also shut down at the end of the year. The intellectual property was owned by the struggling Ascena Retail Group, but has since been sold to a subsidiary of Retail Ecommerce Ventures LLC. How, or when, the new owners plan to bring back the nameplate to an online operation isn’t yet clear, but details are expected to emerge later this year.
Similarly, YM Inc. last year acquired the Charlotte Russe name in March after the company filed for Chapter 11 bankruptcy court protection. In June, five store locations were opened under the Charlotte Russe banner, YM said, noting that it planned to open at least 100 doors. No word since then on where else those doors could be located, but the retail sector could see a few more open in 2020.