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The hidden costs of online shopping

Inside Retail reported on the hidden costs of online shopping for both consumers and retailers. The article notes that “customer first” is now generally the basis of all retailer strategies. But now retailers are struggling with the consequences of the rush to meet this objective. The return rates from e-commerce are quoted as two to three times higher than those for in-store purchases. Additionally, KPMG found that the cost of handling a return can be as much as three times the cost of delivering the item in the first place. Then there are costs involved in the returns support systems and return fraud is increasing. When you add to the picture the surprising number of additional costs in being an omnichannel retailer, which materially impact margins, it begs the question: how long can the ubiquity of free returns last?  

EU fines Mastercard more than 500M euros

137 reported that the European Commission has fined Mastercard €570 million for preventing retailers from looking for better card payment terms at banks around Europe. The Commission, which monitors competition, said that Mastercard's rules prior to 2015 forced retailers to pay certain bank fees in the country they are located rather than let them shop around - ultimately increasing costs for customers. The Commission said the infringement ended after Mastercard changed its rules following the introduction of the Interchange Fee Regulation. The fine would have been higher, but Brussels reduced the amount by 10% to thank Mastercard for cooperating.

Afterpay regulatory risks fading?

The AFR reported that the potential for buy now, pay later market leader Afterpay Touch Group to be forced to adopt bank-like credit checks appears to have faded further after a Senate hearing demonstrated how policymakers are struggling to come to grips with the extraordinary rise of the company, and the wider sector. Heads of both Afterpay and its market rival Zip appeared at the first hearing of a Senate inquiry into the hot sector yesterday, and were split on whether or not the sector should be regulated to impose bank-like responsible lending checks - Afterpay is against the idea, while Zip supports it. Overall, Afterpay, Zip and FlexiGroup all want to keep working with ASIC on data collection, monitoring, and further reforms. This seems a sensible course of action, particularly considering the open banking regime will kick in in July.  

Uber to build autonomous bikes and scooters

TechCrunch reported that Uber wants to develop autonomous technology for its JUMP group, responsible for its bike and scooter-share programs. Aptly named “Micromobility Robotics,” Uber’s new unit will integrate driving and sensory tech into its vehicles to be less reliant on humans to charge them. Instead, the scooters and bikes will drive themselves to charging stations or relocate to locations with higher demand. Of course, Uber will also have to deal with local laws and, more importantly, the public. It will be intriguing to see how this project evolves.

Super Retail Group announces new CEO

According to an ASX announcement, Super Retail Group has appointed Anthony Heraghty as CEO, effective 31 March 2019. He will replace outgoing chief executive Peter Birtles. Heraghty is currently the group’s managing director of outdoor retailing, and is responsible for the BCF, Rays, and Macpac businesses. In a statement to investors, Heraghty said he aims to modernise Super Retail Group to compete in a changing retail environment.  

Coles closes the gap with Woolworths

The AFR reported that new Coles managing director Steven Cain is quickly making his mark at Australia's second largest supermarket chain, getting a tick of approval from suppliers and closing the gap with rival Woolworths. According to UBS' latest supermarket supplier survey, Coles has lifted its game in 26 key measures closely linked to sales growth including working with suppliers, in-store theatre, private label, management calibre, and staff morale and has narrowed the gap with Woolworths in 24 of the 26 categories. Woolworths lifted its score in 25 of the 26 categories including pricing strategy, promotional cut-through, and private label, but with its overall score approaching 12-year highs and with Coles lifting its game, UBS questioned whether Woolworths had peaked.

New Look sets the restructuring benchmark

Bloomberg reported that Britain’s New Look Retail Group Ltd. has reached an agreement to restructure its debt. The debt-for-equity deal gives the chain of fashion stores crucial breathing space, cutting gross borrowings to about 500 million pounds (US$643 million) from 1.35 billion pounds. New Look appears to have set a benchmark for how to respond to the storm engulfing the industry. Rather than embarking on piecemeal closures, the retailer shuttered stores in one fell swoop. It entered a company voluntary arrangement in March, allowing it to reduce its rent bill. What’s more, this was accompanied by a turnaround plan: It tackled clothing ranges that weren’t appealing to older customers. It reduced costs, pulled out of China, and focused on profitable sales rather than absolute revenue.  

Dec '18 spending up 5% over previous year

According to the latest Commonwealth Bank Business Sales Indicator, economy-wide spending grew 0.4% from November to December 2018, driven by the purchase of “little luxuries”. The report found that business conditions and confidence are generally good and noted that consumers spent more in December 2018 than the previous year. Spending in December 2018 was up 5.3% compared to 2017. This is in contrast to Illion’s recently published analysis of business expectations, which recorded the lowest level of business confidence since the December 2017 quarter, and Westpace-Melbourne Institute’s Consumer Sentiment Index, which last week measured pessimistic consumers outweighing optimistic ones for the first time in 13 months. It's refreshing to see YoY figures, which generally paint a much more balanced picture of performance.

Zip finds investor favour

The AFR reported that while shares in Afterpay Touch have doubled in the past 12 months, some investors are hoping its major rival, Westpac-backed payment provider Zip Co, can follow that lead. Regal Funds Management chief investment officer describes Zip as a "high-growth company that is in the sweet spot of moving from start-up losses to very high earnings growth". The renowned fund manager used to own Afterpay, but now prefers Zip on valuation grounds. Zip shares have gained 30% in the past year to give it a market capitalisation of $359 million. That is about 10% of Afterpay's. To ensure a frictionless customer experience in terms of buy now, pay later solutions, we've seen many retailers adopt both Zip and Afterpay rather than make their customers choose between the two.  

Gymboree files for bankruptcy protection

Reuters reported that children’s clothing retailer Gymboree Group Inc filed for Chapter 11 bankruptcy protection, the second time in almost two years, and said this week it will close more than 800 Gymboree and Crazy 8 stores. The San Francisco-based company said it will also sell its high-end line, Janie and Jack, as well as its intellectual property and online platform. More than 20 US retailers, including Sears Holdings Corp and Toys R US, filed for bankruptcy since the start of 2017. The media sentiment is that they succumbed to the onslaught of fierce e-commerce competition from companies like Amazon Inc, however other bricks and mortar retailers have soared during the same period. This suggests that the e-commerce narrative is only part of the story.

DJs reports that sales tanked in the run-up to Christmas

Trend World News reported that David Jones is the latest retailer to reveal that sales tanked in the run-up to Christmas as consumers, rattled by falling house prices and struggling with higher living costs, stayed away from shopping centres or shopped online. DJs' lacklustre sales follow recent downgrades from Wesfarmers’ Kmart, outdoor clothing chain Kathmandu and womenswear retailer PAS Group and are likely to add to fears about the upcoming profit season and outlook for the full year, following an unprecedented fall in foot traffic in December. Analysts have warned against reading too much into the foot-traffic data, saying it is not highly correlated with Australian Bureau of Statistics retail sales figures, and that the fall in traffic partly reflects the fact more consumers are browsing and shopping online instead of in-store.

Souring Apple sales hurt Kogan

The AFR reported that e-commerce pioneer Ruslan Kogan has blamed Apple and overseas websites dodging GST for a 47% collapse in sales of global brands in the December-half. In a trading update on Thursday, Mr Kogan said sales of Apple products including the new iPhone halved during the six months ending December, offsetting growth from brands such as Samsung, Google, and Garmin and exacerbating the impact of the new GST regime. Excluding Apple, Kogan's sales from global brands, which account for about 40% of group sales but just 18% of profits, rose 8.5%. After previously playing down the threat from changes to the GST-free threshold, Kogan revealed in October that global sales had fallen 27% since the new GST regime came into effect on July 1. Momentum has deteriorated since October, with weak demand for Apple contributing to the slide.