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24
Apr-19
Wednesday

How to make customers unhappy

5
The Age published an article about poor service in department stores, including comments about gift cards: every year 1.9 million Australians fail to redeem gift cards totaling $148 million, most of which used to be valid for 12 months.  From November 2018 gift cards sold are valid for a minimum of three years, but apparently this new rules don’t apply to gift cards used in marketing promotions.  The author got such a card last December in a department store and was recently surprised to discover that it was valid for a mere one month.  When you add to this staff indifference and invasive security rules, we can understand author's view that things are getting worse rather than better in the struggling department stores segment.

Amazon returns

6
CNBC reported that Kohl's, an American department store retail chain operating in excess of 1,100 locations, has announced that it will start accepting returns for items purchased on Amazon at all of its stores across the country, starting in July.  Kohl's already handles Amazon returns at about 100 locations.  With this service, Kohl's accepts "eligible" Amazon items — without a box or label — at no additional cost for the customer. It then packages the items and sends them back to one of Amazon's return centers. Kohl's gains extra benefit from the arrangement with Amazon by generating additional traffic for its stores.  This project illustrates the scale and the importance of returns management in an eCommerce business, particularly a pure-play one.  
23
Apr-19
Tuesday

Strong economic news from the US

6
Blomberg reported that the US Department of Labor figures show the lowest number of unemployed since 1969.  The US GDP growth rate has been revised up from 2.4% to 2.8%.  Strong growth is expected to continue with policy makers indicating that interest rates will remain on hold for the rest of 2019.  Consumer confidence is on the rise as well (from 47 to 50%).

Top global retailers

5
NRF Stores magazine has listed the top 50 global retailers.  Walmart continues to be number 1, with annual turnover of $18 billion in 2017.  Amazon is not far behind, although its market capitalisation is 3 times higher than Walmart's.  Schwarz Group (Eurpoe's largest retailer) which operates Kaufland and Lidl comes third.  Costco is 6th and Aldi is number 8.  It begs a question when will Walmart make a move into the Australian market?

Debenhams changes

4
BBC reported that Debenhams CEO in the UK has stepped down following the recent takeover by Debenhams' lenders. Debenhams is the biggest department store chain in the UK with 166 stores. It employs about 25,000 people.  Debenhams, Chairman said that new leadership would carry through the restructuring and turnaround of the business, which had reported record annual losses last year.  Its stores will continue to trade as normal during the initial restructuring process, although some are expected to close in the future.
18
Apr-19
Thursday

Aldi keeps expanding globally

9
Press-Telegram reported that Aldi in the US continues to expand in California, having just opened its 64th store there.  15 new stores have been planned for 2019.  Aldi currently operates more than 1,800 U.S. stores in 35 states, employing 32,300 workers.  The intention is to reach a total store count of 2,500 by 2022.  Clearly Aldi's business formula makes it hard to beat within its market segment, the lesson already learned by Australian supermarket operators.  In the US a typical Aldi store employs 15 to 20 people and its store layout has fewer than five aisles; the decor is simple and services provided to customers are limited.  While its core concept is well proven, Aldi keeps evolving - e.g. in the US it is increasing its fresh-food selection by 40% with more organic and easy-to-prepare options, many of which are under the company’s private label brands.
17
Apr-19
Wednesday

Brick & Mortar stress continues unabated

8
The Wall Street Journal reported that U.S. retailers have closed 5,994 stores so far this year, up from 5,864 closures for all of 2018. Shopping mall vacancy rates rose to 9.3% in the first quarter from 9% in the previous quarter, and owners have pushed back openings as retail sales have slipped.  While the larger mall landlords have done a remarkable job in the past year to keep their properties vibrant, the pace of store closures by struggling retailers has accelerated this year and could pose more problems for property owners if vacancies occur on a much larger scale and at a faster pace than previously anticipated.  eCommerce is convenient to blame, but in our assessment unrealistic lease costs and rapidly growing wages are more damaging than on-line sale.  On-line retailers such as Amazon, who can afford to run at loss, add to the pressure on the established retailers.
16
Apr-19
Tuesday

Mecca's 100

7

News.com.au reported that Mecca Brand opened its 100th store in Rundle Mall (Adelaide) last Friday.  Stocking more than 100 brands, it will include cosmetics and luxury fragrances previously unavailable in SA. It will also offer individual make-up and skincare appointments and group lessons.  The Australian beauty retailer was founded in 1997 and it operates the Mecca Maxima and Mecca Cosmetica chains.  Meccas on-going expansion proves that soft market conditions matter little for great retailers - they keep going strong.

 

Some discounters are doing well

7
Digiday commented on strong results achieved by Dollar General in the US, which go against the prevailing malaise in the discount department stores segment. For example, discount chain Fred recently announced plans to close 159 stores; Dollar Tree-owned Family Dollar continues to be a drag on the parent company; regional discount chain Shopko filed for bankruptcy in January and will close all of its stores by the summer.  Australian discount operators are struggling as well.  A publicly listed company, Dollar General operates over 15,000 stores and it has reported U$25.6 billion in revenue in 2018, a 9% increase year over year.   The business attracts customers beyond the low-income customer segments because its inventory includes value items from national brands that aren’t necessarily at the strict $1 price point.

Buy-now-pay-later space is getting crowded

10
The Australian Financial Review commented on the continuing emergence of new payment providers, trying to get a piece of action in the market dominated by AfterPay.  A US-based Sezzle which intends to list on ASX, QuadPay in the US, Humm (aka Flexigroup) - they are all trying to compete in this increasingly crowded space.  This is in addition to ZipPay, OxiPay, Laybuy and OpenPay.  Even Amex now has an offer in this space.  AfterPay continues to expand in the US, with 1 million customers and 2,000 merchants signed up at the end of March.
15
Apr-19
Monday

More supermarket gimmicks

10
Inside Retail commented on Coles and Woolworths trialling 'new technologies to combat theft and ensure better safety in stores'.  This include 'safety robots' and cameras at self-serve checkouts.  The robots will roam around to detect spills, which sounds like a white elephant to us.  The cameras in the self-checkout ostensibly make more sense, but they wouldn't be needed if self-checkouts were not installed in the first place.  We remain unimpressed with the big two spending ever more capital on dubious projects rather than pursuing operational excellence to become a meaningful competitor to Aldi and Costco.  Needless to say, in Australia neither Aldi or Costco use self-checkouts.