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Amazon shuts pop up stores as it tinkers with store strategy

The Wall Street Journal reported that Inc. is shutting down all 87 of its US pop-up stores. Amazon has pop-ups inside Whole Foods locations, Kohl’s stores and malls around the US. The shops let customers try Amazon products. The company will instead focus on expanding Amazon Books and Amazon 4-star, as well as on opening dozens of new grocery stores around the country, with the first expected in Los Angeles sometime this year, according to a separate Journal report last week. The closures also don’t affect cashierless Amazon Go stores, with the business considering opening as many as 3,000 Amazon Go locations by 2021, according to a report from Bloomberg in September 2018.

Kaufland first stores approved in Victoria

Inside Retail reported that the big players on the Australian supermarket scene will be buckling up for some stiff competition following the announcement that German hypermarket Kaufland has received planning approval for its first three stores in Victoria and Australia’s largest distribution centre. The first stores at Chirnside Park, Dandenong and Epping received planning approval after an independent Advisory Panel process and despite the objections of many other players in the market. The state-of-the-art distribution centre to be located in Mickleham, will be the largest in Australia and will act as the point of consolidation and distribution of goods to its supermarkets. The proposed Melbourne headquarters was also approved.

Amazon suppliers panic amid purge

Bloomberg reported that Inc. has abruptly stopped buying products from many of its wholesalers, sowing panic. The company is encouraging vendors to instead sell directly to consumers on its marketplace. Amazon makes more money that way by offloading the cost of purchasing, storing and shipping products. Meanwhile, Amazon can charge suppliers for these services and take a commission on each transaction, which is much less risky than buying goods outright. Amazon is determined to boost profits at the core e-commerce business, even if that means disrupting relationships with longtime suppliers. Because many suppliers source products from manufacturers months in advance, they’ll have to quickly shift their sales tactics if the expected Amazon orders don’t come in. Pushing more suppliers onto the marketplace is part of Amazon’s larger effort to reduce overhead by getting more suppliers to use an automated self-service system that requires no input from Amazon managers.

Retail veteran to kick goals for Rebel

The AFR reported that Super Retail Group's new chief executive Anthony Heraghty has moved quickly to plug a leadership gap at its second largest business, Rebel Sport. Mr Heraghty, who took the helm from Peter Birtles last month, has appointed retail veteran Gary Williams as managing director of sports retailing to succeed Erica Berchtold, who resigned in October after being poached by leading online fashion retailer The Iconic.Mr  Williams, who starts on April 8, is one of Australia's most well-rounded retail and consumer product executives, having worked with David Jones and Country Road Group as chief customer officer, Myer, where he was head of strategy, Sass & Bide, Westfield and Coca-Cola Amatil, where he ran the Australian beverage operations.

Retail sales miss while trade surges

The AFR reported that poor department store sales meant retail trade had a "weak bounce" of just 0.1% in January in seasonally adjusted terms, a result that failed to meet economists' expectations of a 0.3% rise. A 2.1% fall in department store sales offset gains in food retailing and hospitality, the Australian Bureau of Statistics said. Overall sales totalled $27.02 billion. All figures are seasonally adjusted. Results were mixed from state to state, with a rise in NSW of 0.7% standing in contrast to a 0.5% decline in Queensland. Victoria saw a modest rise of 0.1%. KordaMentha, who is administering business closures at retailer Roger David, Crabtree & Evelyn and Laura Ashley, warned that the inability of consumers and businesses to get credit was slowing consumption. In his address to The AFR Business Summit on Wednesday, Reserve Bank governor Philip Lowe said household income was more of a factor than falling house prices.

DJ's discounting threatens Myer's strategy

The AFR reported that excess stock at David Jones threatens to derail Myer's strategy of boosting earnings in the absence of sales growth by cutting back on discounting. Hours after Myer reported a better-than-expected first-half result, underpinned by selling more products at full price, David Jones launched another discount promotion, offering 20% or $30 off every $150 spent storewide until Monday. Analysts said David Jones was carrying too much stock and was discounting heavily to boost sales after a tough December half, when profits plunged 39% to $36 million. Myer has pulled back on discounting to boost profits but analysts say this strategy might be at risk if David Jones keeps cutting prices.

Noni B union woes

The Australian Business Review reported that retail unions are blocking Noni B's enterprise agreement, despite more than 80% of workers backing it.  It looks to us like delay tactics in the hope that, once elected, Labor government will restore high penalty rates and improve unions’ bargaining position. Noni B has been forced to pay thousands of workers penalty rates and overtime this week, as the unions terminated the previous Enterprise Agreement. The article also mentioned Bill Shorten’s comment that the minimum wage in Australia is not anywhere near the ‘living wage’ it needs to be.  Considering that Australian minimum wages are highest in the world, we struggle to understand the logic and fear that the already challenged retail industry could be further damaged by the politicians.

In the hands of the social media puppet masters

The Hustle reported that the number of startups building entire businesses on Instagram is on the rise. But if history is any guide, startups that stake their entire businesses on other platforms often go the way of the dodo when their algorithmic overlords make changes to the status quo. Instagram’s 1B+ monthly active users are remarkably engaged: 80% of Instagram users follow at least one of the 25m brands on the platform, and engagement with brands on Instagram is 10x more than on Facebook, 54x more than on Pinterest, and 84x more than Twitter. So for new startups, Instagram is efficient engagement. But, if IG’s algorithm were to change? Dozens of startups that built their entire business models on FB were destroyed when it altered the algorithm behind its News Feed last year. Insta-Commerce is a good side hustle, maybe… But a durable business? Hardly. Retailers should take note too.

WTO aims to modernise cross-border e-commerce regulations

Axios reported that this month, 75 nations have agreed to participate in World Trade Organization (WTO) talks on cross-border e-commerce, one of the fastest-growing and most complicated areas of global trade. Consumer-facing e-commerce has become a US$3.5T global market, and some US$700B of those purchases occur across borders. Most existing trade agreements were written in the pre-digital era to cover the flow of goods from country-to-country in large containers through ports of entry. Problem is, international package delivery volumes have tripled since 2000. Since then, e-commerce has released a stampede of small parcels that is overwhelming customs inspectors - and cross-border purchases are expected to hit US$1T by next year. Given that every country has its own legal framework, the question is, is a one-size-fits-all approach possible?

Geminder's Kin Group takes 19pc of Reject Shop

The AFR reported that struggling discount retailer The Reject Shop is considering giving Raphael Geminder's Kin Group a seat on the board after his investment company's $78 million hostile takeover offer closed. The Reject Shop chairman Bill Stevens expects Kin Group to emerge with between 10% and 15% of its stock, up from 7.1% on Monday, after shareholders rushed to accept the $2.70-a-share on-market offer before it closed at 4pm on Tuesday. However, a Kin Group spokesman said the stake was likely to reach 19% following a surge in volumes in the last few hours of trading. TRS' first-half net profit fell 40% to $10.6 million after a 1.1% fall in sales, and the board expects to lose between $6.5 million and $7.5 million in the June half, dragging full-year profit down at least 75% to between $3.1 million and $4.1 million.

Coles aims for liquor growth in Queensland

The AFR reported that Coles hopes to increase alcohol sales in Queensland despite hiving off its hotel and gaming operations through a joint-venture deal aimed at overcoming the state's archaic liquor licensing laws. Coles has entered into a joint venture with KKR's Australian Venue Co, which owns about 60 pubs, clubs, bars and restaurants around Australia. Australian Venue Co will run Coles' 87 Spirit Hotels venues in Queensland, including about 3000 poker machines, while Coles will manage the day-to-day operations of 243 bottle shops in Queensland and 10 bottle shops attached to Spirit Hotels in Western Australia and South Australia. Coles will take the profits from the bottle shops and receive about $200 million cash – less than the $300 million expected and $20 million less than book value – while AVC will take the profits from the hotels and gaming operations. The deal initially will dent Coles' liquor sales by $200 million and earnings by about $13 million, or 15% on a pro forma basis. However, the deal opens opportunities for Coles to expand its network of bottle shops in Queensland for the first time since 2005 and 2006.

Myer's first-half results better than expected

The AFR reported that Myer returned to profit growth in the January-half, reporting a 3.1% rise in underlying net profit to a better-than-expected $41.3 million, after slashing costs and boosting sales of higher-margin private label brands to counter weaker concession sales. Total sales fell 2.8% to $1.67 billion in the six months ended January 26 as Myer exited unprofitable products such as furniture and bedding to focus on apparel, beauty and private-label goods and as dozens of concessions closed. Same-store sales fell 2.3% in the half after falling 3% in the year-earlier period. Myer's bottom line net profit rebounded to $38.4 million compared with a $476 million loss in the year-ago period, when the retailer wrote down the value of goodwill, brand names and other intangible assets by $515 million and booked $13.7 million in restructuring costs.