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Dismal December for retail as sales slump

The AFR reported that retail sales fell during December as online sale events in November reduced consumer spending in the weeks leading up to Christmas. Seasonally adjusted retail turnover fell 0.44% in December according to the Australian Bureau of Statistics, dropping well below market expectations for flat growth. Household goods and clothing and footwear led the falls during December after strong rises in November from Black Friday promotions. Foot traffic in retail stores in December was the worst on record as the changing spending calendar and increased online shopping left bricks and mortar retailers struggling. Kmart, Kathmandu and PAS Group issued profit warnings or downgraded forecasts earlier this year after weak Christmas sales while David Jones revealed that sales tanked in the lead-up to Christmas. Looking at approximate year-on-year statistics, retail spending was still up around 2.5% over December 2017.

NRF: US retail sales to top US$3.8 trillion in 2019

The National Retail Federation has forecast that retail sales in the US during 2019 will increase between 3.8% and 4.4% to more than US$3.8 trillion despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown. Preliminary estimates show that retail sales during 2018 grew 4.6% over 2017 to US$3.68 trillion, exceeding NRF’s forecast of at least 4.5% growth. The number includes online and other non-store sales, which were up 10.4% at US$682.8 billion. That met NRF’s forecast of 10-12% online growth, and online is expected to grow in the same 10-12% range again this year. The numbers exclude automobile dealers, gasoline stations and restaurants. NRF expects the overall economy to gain an average of 170,000 jobs per month, down from 220,000 in 2018, and that unemployment – currently at 4% – will drop to 3.5% by the end of the year. Gross domestic product is likely to grow about 2.5% over 2018.

HMV deal reached to save 100 shops

Reuters reported that HMV, the British music retailer that collapsed after Christmas, has been sold to the owner of Canada’s Sunrise Records in a deal that will save 100 stores and 1,487 jobs. Administrators said that 27 stores were not included in the deal and would close immediately, resulting in 455 redundancies. HMV, Britain’s best-known record store chain, has been hit by competition from online rivals and music streaming services. The group, which opened its flagship store on London’s Oxford Street in 1921, was rescued from a previous collapse in 2013 by restructuring specialist Hilco, but it collapsed again in December, blaming a 30% fall in the DVD market. Like the previous owner of HMV said, given the rise of digital music distribution, the retailer faces a tsunami of retail challenges.  

Online retail sales weakened in December

The AFR reported that online retail spending fell sharply in December, lending further credence to the view that November's blockbuster e-commerce promotions came at the expense of Christmas sales. National Australia Bank's online retail sales index recorded a 1.4% month-on-month contraction in December, down from a 2.9% increase in November. Official retail sales data for December is due later today. The only other December contraction in NAB's online series was back in 2016, when the index recorded only a 0.1% drop. Low wage growth, high personal debt levels and a weakening housing market are weighing on consumer ability to spend on non-essentials.

Amazon squeezes Coles and Woolworths

The AFR reported that Woolworths and Coles are under growing pressure to cut prices on health, beauty and cleaning products and offer free deliveries to avoid losing market share and volumes to Amazon. Analysis by Credit Suisse has confirmed Amazon is actively matching and, in most cases, undercutting Woolworths and Coles on a wide range of non-food grocery brands after launching Amazon Pantry last year. The analysis found Woolworths' average daily prices were 14% higher over a two-week period in January than Amazon's prices on a basket of 50 identical baby, beauty, cleaning and health products and its minimum prices were 4% higher than Amazon's prices. Coles' prices on a basket of 40 identical products were 25% on average higher than Amazon's over a two-week period and its minimum prices were 18% higher. When the major retailers lower or raise prices, Amazon follows the next day.

Hong Kong Dec retail sales growth slows to 18-month low

Reuters reported that Hong Kong’s retail sales in December rose at their slowest pace in 18 months, as consumer sentiment increasingly became cautious amid protracted Sino-US trade tensions. In volume terms, retail sales grew 0.2% in December, compared with a revised 1.2% rise in November. That was the slowest since April 2017. Retail sales edged higher 0.1% from a year earlier in value terms, to HK$44.9 billion (US$5.7 billion), marking the 22nd consecutive monthly expansion, and the slowest since June 2017. That compares with a 1.4% rise in November. For the whole of 2018, total retail sales rose 8.8% in terms of value and 7.6% in terms of volume from the previous year, the sharpest since 2013 when retail sales climbed 11% in value and 10.6% in volume. Australian is not the only market where December sales were mediocre.    

The cost of retail shrink

Forbes reported that, based on a 2018 survey by the National Retail Federation (NRF), shrink, or loss of inventory related to theft, shoplifting, error, or fraud, is reducing the bottom line by US$46.8 billion across the US retail industry. The report found that shrink costs retailers about 1.33% of sales, on average. The average cost per shoplifting incident doubled to US$559. The average costs of return fraud was US$1,766.27, with a median of US$171. The average dollar loss per dishonest employee was US$1,203.16. In 2019, retail crime remains one of the most serious problems facing the industry. You can download the full NRF 2018 National Retail Security Survey here.

China poised to topple US as world’s leading retail market

Retail World reported that China will overtake the US in retail sales in 2019, driven by booming e-commerce, according to new data. In fact, China’s retail sales this year will surpass that of the US by more than US$100 billion, predicts eMarketer’s latest worldwide retail and e-commerce forecast. In 2019, China’s total retail sales will grow 7.5% to reach US$5.636 trillion. By comparison, US retail sales will grow 3.3% to US$5.529 trillion. Growth rates are slowing for both countries, but China’s growth rate will exceed that of the US through 2022. By the end of this year, China will have 55.8% of all online retail sales globally.

Microsoft 365 outage a warning for retailers

MyBusiness reported that an unknown number of businesses in Australia and overseas have reportedly been hit by an outage to Microsoft 365 services. The software giant has noted that it was “investigating” an issue that was reportedly locking some users out of their accounts. The incident is a good warning against operational dependency on a solitary technology. It highlights the risk to retail operations when mission-critical functions, such as point of sale, are made dependent on thin client terminals and remote servers.

Napoleon Perdis collapses

Multiple media outlets reported that the Napoleon Perdis retail cosmetics chain has collapsed and been put up for sale, with hundreds of jobs at risk if new owners can't be found. The company, which has 56 stores in Australia including concession outlets inside Myer stores, appointed administrators from Worrells Solvency and Forensic Accountants this morning. Napoleon Perdis has been in a financially precarious situation for several years, running at a $1.6 million loss in 2014 and a $154,808 loss in 2015, corporate documents show. The company's current liabilities exceeded its current assets by $3.8 million that year, after its banks called in their loans due to a breach of a covenant. The loans had to be renegotiated. It is understood the arrival and expansion of Sephora, the world's largest beauty retailer, in Australia was the final blow for the company.

Temple & Webster defies housing downturn

The AFR reported that Temple & Webster chief executive Mark Coulter believes the $500 million online furniture and homewares market will continue to grow regardless of the slump in house prices. Temple & Webster is defying the downturn in the housing market, posting its first interim profit after growing sales 40% in the December-half. EBITDA reached $900,000 – beating market forecasts of about $600,000 – compared with a loss of $500,000 in the year-ago period and a $5.4 million loss two years ago. The Australian furniture and homewares market is worth about $13.6 billion, but online penetration is estimated to be only about 4%, compared with 13.7% in the United States and 14.2% in Britain. Webster believes online penetration will rise as online-savvy Millennials start buying furniture and homewares and as new market players such as Amazon accelerate the shift from bricks-and-mortar stores to e-commerce.

Coles partners with Uber Eats to trial meal delivery

Multiple media outlets reported that Coles is trialling the delivery of ready-to-eat and ready-to-heat ranges through a partnership with third-party food ordering and delivery app, Uber Eats. The trial is initially limited to Coles’ supermarket Pagewood, NSW, and entails a $5 delivery fee per order. Products available for delivery include roast chicken, deli salads, bakery items, frozen desserts, pizzas, curries and pies, with a range of grab-and-go options and beverages available. More menu options are set to become available in the coming weeks, according to Uber Eats. It's a nifty alliance, especially for those who prefer their couch to shopping.