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9
Jan-19
Wednesday

Retailers stuck as shoppers stay home

140
The AFR reported that retailers are scrambling to avoid a "liquidity crisis"; after in-store foot traffic fell 8% between Black Friday and Boxing Day, compared to 3% over the same period in the previous year. "Foot traffic appears to have been weak as shoppers continue to shift December shopping trips online and pull forward purchases into Black Friday in November," said Citi in a note reviewing the past Christmas season. Citi said that discounting had not increased, and in some cases, retailers had pulled back after "several years of discounting ramping up to unsustainable levels in some categories". Analysts attributed the steep decline in foot traffic to three broader trends: the rise of online shopping, shifts in the retail calendar, and growing cost-of-living pressures.
8
Jan-19
Tuesday

Sears on the brink of liquidation

143
CNBC reported that Sears is planning to announce its decision on Chairman Eddie Lampert's bid to save the company tomorrow morning. According to sources close to the business, Sears and Lampert have been so far unable to resolve disagreements over his US$4.4 billion bid to save Sears and 50,000 jobs by buying it out of bankruptcy through his hedge fund ESL Investments. Without a fix, Sears will liquidate.

Amazon’s cashierless stores could be a US$4.5b business by 2021

146
The Hustle reported that not only are Amazon’s new cashierless and cashless stores giving traditional “convenience” stores a run for their money in the US, but new research also suggests they’re already more lucrative. Based on in-person tests and data-collection, analysts at RBC Capital found that each Amazon Go store will reel in an estimated US$1.5m in yearly revenue, 50% more than your typical corner shop. With 8 Go locations on the map presently, Amazon is considering a plan to open as many as 3,000 new Go stores over the next 2 years, which, based on RBC’s report, would mean that the storefronts could become a $4.5B business by 2021. While it may be more profitable long-term, the upfront investment for cashierless stores is much larger than “dark age” convenience outlets. The first Go location cost more than US$1m in hardware alone.
7
Jan-19
Monday

Cross-channel the new fraud

145
The Ragtrader reported that new research indicates that retailers, both online and off, are falling behind when it comes to payment security, with Card-Not-Present (CNP) fraud to cost the industry $130 billion in the next four years. The report revealed that cybercriminals are looking to make cross-channel the new fraud. For instance, larger retailers reported 1,525 fraud attempts per month in 2018, which was up 43 percent year-on-year. In comparison, smaller players only reported an average of 249 fraud attempts in 2018. However, this still represented an 11 percent increase in prevalence YOY. We've repeatedly commented that a cybercrime-enabled loss prevention function has become essential to retail operations in the Digital Age.

ZipPay supports 'scaled' responsible lending checks

144
The AFR reported that buy now, pay later service ZipPay is ready to embrace responsible lending checks and caps on late fees, as the sector faces increasing scrutiny from the regulator and a Labor-led Senate committee. Zip's co-founder and chief operating officer said the company would be open to a more limited regime. This would include verifying income and identity, and checking credit history, but wouldn't extend to expense checks. This position is in contrast to Afterpay, which said it supports the corporate regulator exercising its soon-to-be-granted product intervention powers but has been resistant to the idea of responsible lending checks.
4
Jan-19
Friday

Kathmandu in the spotlight

150
Australian Financial Review and The Age reported that Kathmandu's same-store sales fell 1% in the second half of 2018, affected by lower than expected sales over the Christmas period.  The share price dropped by 14% after Kathmandu's announcement and this has affected other retail stocks - particularly in the discretionary segments.  In our assessment, this was an overreaction, as Kathmandu actually made more profit.  However, according to AFR, "the retailer provided a rosy picture of trading in late November", so the market has judged Kathmandu  against this benchmark rather than assessing its performance in general.

Australian $ crash

146
Various media outlets commented on a wild 24 hours for the Australian currency, which at some stage hit a 10-year low against US$ (67.46 cents), recovering to 69.37 by the end of the day.  Apparently the dip was caused by computer trading, with sell algorithms triggered by a sale order, combined with thin liquidity and low transaction volumes.  ANZ Chief Economist made a prediction that AUD will go down to 67 cents by mid-year, but most analysts believe that the rate will stay above 70 cents.
3
Jan-19
Thursday

Costco keeps increasing its market share

152
The Age reported that American discount giant Costco has taken a bigger bite out of the Australian retail market, achieving double-digit sales and profit growth last year and putting more pressure on the major players i.e. Coles and Woolworths.  Costco operates 10 very large format stores in Australia and two more are planned for 2019.  Costco's total revenue for the 12 months to September grew by $228 million, or 14%, to $1.8 billion.  Potential to open on-line business has been mentioned for 2019, but in our assessment this wouldn't necessarily make Costco much richer; however, it would put extra pressure on its competitors.  The company already offers a wholesale delivery service to customers around Melbourne on orders of over $700, including fresh food and groceries for hospitality operators.  Costco's CEO said that the Australian sales growth on a like-for-like basis was 5-6%,  outstripping like-for-like growth at Coles (1.1%) and Woolworths (4.3%).
2
Jan-19
Wednesday

2019: retail game on

152
CNBC provided an overview of 2018's US retail winners and losers. Big box chains, Target and Walmart kicked some major goals last year - Target reported unprecedented traffic at its stores and Walmart focused on buying various online sellers to grow digital sales. Discounters such as T.J. Maxx, Ross Stores and Burlington Stores continue to see sales grow at stores open for at least 12 months as customers continue to seek low prices. Those who failed or were slow to adapt such as Bon-Ton, Sears, J.C. Penny, Toys R Us, Mattress Firm and David's Bridal were among a slew of retailers that filed for bankruptcy in 2018. Clearly, 2019 will be another fascinating and competitive year in the retail landscape.

HMV in the UK in administration

153
Reuters reported that music retailer HMV announced on Friday that it was calling in the administrators, blaming a worsening market for entertainment CDs and DVDs. Reuters commented that "HMV has become the latest victim of brutal trading conditions in Britain’s retail sector", but we fail to see the connection. Retailers selling CDs and DVDs are being decimated due to the rapid shift online because their merchandise can be delivered electronically, not because the overall retail market is up or down. HMV's Chairman confirmed this, by saying that during the Christmas trading period the market for DVDs fell by over 30% compared to the previous year.  The HMV chain operates 125 stores and employs over 2,000 people. It is worth noting that HMV went into administration once already (in 2013); we doubt whether it can be resuscitated for the second time. HMV opened its first store in 1921 in Oxford Street in London.
31
Dec-18
Monday
28
Dec-18
Friday

Drone trials

163
The Wall Street Journal published an article about drone delivery trials in Canberra (Australia).  Conducted by a subsidiary of Alphabet Inc. (owners of Google), the trial causes considerable controversy in the local community. One resident thought that she heard a “chain saw gone ballistic” when a drone passed over her house. Noise and the potential risk of a crash / spillages seem to outweigh the claimed benefit of a 6% reduction in energy usage during deliveries.  In our assessment, the chance of home deliveries over built-up areas becoming day-to-day practice is low.  A heavy machine flying at 100 km/hour falling down can cause considerable damage and injuries.  Not sure whether anyone will want to insure such risks, given the dependency on the hardware, radio communications, and weather - particularly sudden gusts of wind.  Local authorities banning air deliveries due to resident complaints won't help either - this is currently under consideration in the Canberra trial.