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18
Dec-18
Tuesday

Oroton set to return to black

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The AFR reported that losses at OrotonGroup more than halved in 2018 after the accessories retailer slashed marketing, sales, and administration costs by about 25% following a $24 million "rescue" by fund manager Will Vicars. As a result, pre-tax losses fell to $6.7 million compared with losses of $17.6 million in 2017. Barring further one-off costs the company, which went into voluntary administration 12 months ago, appears set to return to profitability in 2019 with a significantly stronger balance sheet. Mr Vicars, chief investment officer at Caledonia Funds Management, is hoping to lift sales to $200 million or $300 million in five years by re-invigorating design under creative director Sophie Holt and rebooting marketing and sales with an emphasis on digital.

Costco no frills

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CNN Business reported that while retailers are trying to draw holiday shoppers with splashy perks like free shipping, convenient new ways to shop, and mobile checkout in stores, Costco has eschewed that strategy. It focuses instead on the reliable model that has attracted loyal club members to its no-frills warehouses over the years. During its most recent quarter, Costco's (COST) US sales increased 8.3% compared to the same quarter a year ago. In November, Costco reported double-digit increases from last year in categories like sporting goods, electronics, hardware, and appliances, signaling that it was a top destination for big-ticket holiday purchases. Home furnishings, clothes, and small appliances like toasters and blenders grew as well. We have a suspicion that Coles and Woolworths in Australia could only dream about such results.

Amazon's CRaP items

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The Wall Street Journal commented how Amazon has trained people to buy nearly everything online and now it is having second thoughts because some items don’t make money - Amazon refers to them as CRaP, short for “Can’t Realize a Profit.” So, Amazon started to push big brands to change how they use its site, to remove unprofitable items or pack them differently to reduce logistics costs. The CRaP products, such as bottled beverages or snack foods, tend to be priced at $15 or less, are sold directly by Amazon and are heavy or bulky and therefore costly to ship. We warned in the past that online business needs to be treated differently depending on the category. The common practice of trying to reach the general ratios (like 10% of all sales in the country are made online) can be quite dangerous.  Some categories are ideal for online sales, some should never go there.
17
Dec-18
Monday

Farfetch acquires Stadium Goods for US$250m

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The Hustle reported that online luxury fashion marketplace Farfetch just acquired online sneaker marketplace Stadium Goods for US$250m. Farfetch is one of the biggest online luxury retailers in the game. This year alone, the company went public at a US$6.2B valuation and is on track to hit over a billion in sales. By acquiring Stadium Goods, the company’s diving even further down the sneaker wormhole, blurring the lines between luxury and tennis shoes. According to Farfetch’s CEO, sneakers are already the fastest growing category on the platform.

Afterpay and Lovisa crack a nod from fundies

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The AFR reported on the view of Monash Investors' co-founder regarding AfterPay and Lovisa. Speaking about the former, the fund manager believes it still has significant growth potential because it has won over retailers. Consequently, the fund trades Afterpay a lot, because it's a volatile stock "and it gets a bit crazy at times". The fund also plays downs the current Senate inquiry into payday lending, noting that expecting the inquiry to reveal that improper conduct mainly comes from the "vulture funds". Fast-fashion jewellery retailer Lovisa also gets a mention in the article, with the fund being particularly excited about their bricks and mortar outlets, "the return they get on their new stores is just fabulous." For $250,000, Lovisa can have open a new outlet in Australia, and that investment will pay for itself within 12 months. Lovisa's share price peaked in June at $12.53, but closed at $7.36 on Friday.

Research shows chatbots are a pain in the proverbial

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The Drum reported that new research reveals a rise in consumer dissatisfaction with the increasing reliance placed by brands on automated chatbots, with one in five urging firms to abandon the practice in favour of real-time messaging with actual staff. The research found that 45% of respondents described their own experience of chatbots as ‘annoying’ while no less than 78% dismissed the technology as too impersonal. Widespread dissatisfaction with the service provided by chatbots has done nothing to dent the enthusiasm of marketers, with 80% of CMOs either already using the technology or planning to do so by 2020 according to a separate Oracle survey. Yet another technology that looks attractive on the surface, but it is actually shallow and, in the end, annoying for the consumers.
15
Dec-18
Saturday

Solid sales growth in the US

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Reuters reported that the US sales keep growing unabated and the economy is strong.  Consumer spending gathered momentum in November as households bought furniture, electronics and a range of other goods, which could further allay fears of a significant slowdown in the American economy even as the outlook outside of the US continues to darken.  As usual, Reuters quoted irrelevant statistics (0.9% increase in November in comparison to October).  The relevant number was 4.2%, which was the increase in November 2018 against November 2017; quite a massive number.   According to Reuters,  the recent sharp sell-off on Wall Street and partial inversion of the U.S. Treasury yield curve had stoked fears of a recession, but worries over the economy’s health were eased on Thursday after government data showed the number of Americans seeking unemployment benefits fell back to a near 49-year low last week.
14
Dec-18
Friday

How to get Amazon to your neighbourhood

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The AFR reported on the lengths New York went to in order to coax Amazon into opening one of its two new headquarters in the city. Overall, 200 US cities put in initial bids for the HQ privilege and the 20 that made the shortlist went to extraordinary efforts to try secure Amazon's presence. In its first proposal, New York offered to use eminent domain to help Amazon get the necessary land. Amazon ended up selecting Long Island City and there are no plans to use eminent domain. New York's second response included dozens of pages of detailed information on outcomes from the city's educational institutions. Amazon had asked for detailed information on the availability of machine-learning specialists, user-experience designers and hardware engineers - three jobs critical to its growth. The e-commerce giant will open its second new HQ in Arlington, Virginia.

L Brands to sell La Senza lingerie brand

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Reuters reported that L Brands, Victoria's Secret owner, said it would sell its luxury lingerie brand La Senza to an affiliate of private equity firm Regent LP, capping a month's long effort to sell the loss-making business. The company has been facing stiff competition from American Eagle Outfitter’s Aerie and upstarts such as Adore Me and Third Love, forcing it to sell its non-core assets and focus on brands such as Victoria’s Secret and Bath & Body Works. L Brands monopoly has all but disappeared amid the rise of new direct-to-consumer underwear brands, with its share price tumbling around 48% this year.

UK regulator delays first word on Sainsbury's-Asda deal

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Reuters reported that Britain’s competition regulator has delayed plans to publish its initial view on a probe into Sainsbury’s proposed 7.3 billion pound takeover of rival Asda. The Competition and Markets Authority (CMA) said on Thursday it would notify provisional findings and consider possible remedies in “January/early February”, ahead of the publication of its final report in “early March”. The CMA had previously said its initial report would be issued in “early January”. Sainsbury’s Chief Executive had already said last month that the firm would challenge in the courts any unfavorable final ruling by the CMA on the deal if it believed it was not backed up by published evidence.
13
Dec-18
Thursday

Amazon ‘R’ Us?

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The Hustle reported that Amazon has started producing its own toys under its AmazonBasics private label, stepping into the giant hole Toys ‘R’ Us left in the US toy market. Private-labeling, Amazon’s next step on its march to ultimate e-commerce efficiency, sent shivers down the spines of toymakers from Mattel to the North Pole. But what would a future without toy stores look like? We all know how the story starts: Amazon targets an industry, undercuts existing sellers until they fold, and adds the leftovers into its marketplace (RIP Borders, Tower Records, Circuit City, Sears...). After the news of Amazon’s plans surfaced, Mattel shares dropped more than 3% and Hasbro shares dropped more than 1%.
12
Dec-18
Wednesday

The Dollar General story

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The Hustle reported that Dollar General became the fastest growing retailer in the US by catering to low-income consumers with no other options. Now, Dollar General and Dollar Tree are expected to have 50k stores in the next few years - roughly 10x as many as Walmart. But, dollar stores can be a discounted devil in disguise: Dollar store “deals” are often more expensive than bulk-bought alternatives due to deceptive packaging, and they often leave consumers with fewer options by driving local stores out of business. Box stores like Walmart cost millions to open, but Dollar General can open a store the size of a basketball court for US$250k, and turn a profit even in low-income communities with just 1,000 homes. And, the formula works astonishingly well, Dollar General has posted 28 straight years of same-store sales growth by serving as the lucrative last resort to America’s “permanent underclass.”