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3
Dec-18
Monday

Consumer spending key for economists

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The AFR reported that economists are awaiting indications that wage growth has ticked higher in the second half of the year, with consumer spending set to be the key focus when Australia's third-quarter GDP figures are released on Wednesday. GDP growth for the three months ending September is set to be just slightly weaker than the previous quarter at 0.6%, according to market consensus, falling from 0.9% in June. That figure is expected to take the annualised growth to 3.3%, still well above the five-year average. Australia's wage price index rose 2.3% year-on-year in the third quarter as signs emerge that wage growth is rising.

eBay tips today for online shopping peak

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The AFR reported that eBay Australia says today will be its busiest day of the year as people begin their gift shopping in earnest, with an estimated 2.6 million visitors predicted on the site. The busiest hour is expected between 8pm and 9pm - when dinner is over and Australians are settled down with their devices - with the most manic 15 minutes of 2018 anticipated to come between 8.30pm and 8.45pm. More than three-quarters of visitors will be shopping on mobile devices. Past trends suggest consumers will be thinking of their children first, with a toy predicted to be sold every three seconds. But, fear not, as they won't be neglecting their own Christmas cheer, with a bottle of alcohol forcast to be sold every 42 seconds.
30
Nov-18
Friday

Myer board face strike over pay

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The AFR reported that Solomon Lew is expected to deliver a second "strike" over pay at Myer's annual meeting today, but the besieged retailer is likely to avoid a spill of their board. The Australian Securities and Investments Commission is understood to be examining two letters from Mr Lew to Myer shareholders which the board  questioned. Speaking after the Premier Investments AGM on Thursday, Mr Lew repeated his criticism of Myer's board. Myer were recently forced into a trading halt to announce their sales figures for the first quarter had declined by 4.8%, after information was leaked to The Australian Financial Review.

Amazon undercuts Woolworths and Coles on household staples

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The AFR reported that Amazon has launched an assault on Australia's $100 billion food and grocery market, prompting complaints from Woolworths that multinational suppliers are favouring the e-commerce giant with lower prices. After stepping up pressure on Woolworths and Coles by adding food and beverages to its non-food pantry range last month, Amazon Australia is now undercutting the dominant supermarket chains by as much as 50% on household staples. Woolworths, which accounts for about 38% of the food and grocery market, plans to seek a "please explain" from suppliers, threatening to remove underperforming brands from its shelves. It seems to us like Woolworths' reaction is exactly the PR Amazon was seeking.
29
Nov-18
Thursday

Celebrity and ethical brands upend US$52 billion beauty industry

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The Wall Street Journal reported that independent cosmetic companies such as Anastasia Beverly Hills Inc., Glossier Inc., Kylie Cosmetics and Milk Makeup are among dozens of brands wooing millennials and younger consumers away from traditional beauty companies. These retailers are giving the industry a makeover by offering a more diverse range of natural products and by using celebrity founders, such as Kylie Jennier, and social media to engage consumers. The results are significant: independent makeup brands' sales grew 24% in 2017, compared with the market average of 5.9%, according to research.

US tax code typo

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An article in The Hill covered an error in a US tax reform law, which has had a material impact on retail store renovation projects. The mistake means retailers are required to depreciate remodeling work over 39 years rather than taking the immediate write-off Congress intended. The Tax Cuts and Jobs Act of 2017 was supposed to eliminate the previous 15 year depreciation period on renovations by allowing retailers and restaurants to write off the full cost immediately. But in the rush toward passage, a mistake in wording meant that improvements at stores and restaurants fall into a category intended for constructing the building itself, which lasts for decades and has to be depreciated over 39 years. This "typo" definitely affects Australian retailers operating in the US as well.

Sales are reshaping the retail calendar

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An article on the ABC covered the trading shift generated by shopping events such as Black Friday, Cyber Monday, and China's Singles Day, which are reshaping the retail calendar. The change is beginning to show through in the statistics, with last year's November sales spiking, while December disappointed. The Australian Bureau of Statistics' seasonally-adjusted figures showed November retail turnover coming in at $26.4 billion, beating December. However, according to the ABS original figures, December sales were actually still ahead at $33.6 billion. NAB's group chief economist Alan said it indicates the ABS is not yet used to accounting for a bigger November and it will take about three years for the seasonal factors to essentially allow for this new change in behaviour. In response to this increasing trend, retailers need to reforecast and plan staffing and inventory levels accordingly, rather than assume the traditional Christmas boom will continue.

Buy now, pay later sector booming but are regulations coming?

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The AFR reported that the Australian Securities and Investments Commission (ASIC) has expressed concern about Afterpay being used as the lender of last resort by debt-ridden consumers. It has also warned the entire buy now, pay later sector that it is prepared to use new powers to intervene against harmful products. After investigating six players including Afterpay, ASIC found one in six users of the service became either overdrawn, delayed bill payments or borrowed additional money. The ASIC report shows the sector has grown dramatically to include two million users in the 2018 financial year compared to 400,000 consumers two years ago.    
28
Nov-18
Wednesday

US Black Weekend results

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Bloomberg reflected on the Black Weekend sales results in the US - their takeaway from the past few days is that Americans are spending at unprecedented levels, and the overwhelming majority of that growth is online. While brick-and-mortar chains can rightfully claim their stores help boost web sales by giving shoppers a chance to see products in person, the growth in web sales means lower margins. The shift online means that chains have to spend more on already-elevated shipping costs, and many now offer zero or reduced rates for mailing packages during November and December, which only exacerbates the hit to results. In general, physical stores had a disappointing four-day period with visits down 6.6%, but not all brick-and-mortar chains and categories are the same. For example, sales of electronics and appliances rose 6.4% over the weekend. The four-day Black Weekend delivered $60 billion in sales, compared to $41 billion in 2012 and $57 billion in 2017.

Omni-channel retail keeps expanding - in both directions

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DigiDay reported that Parachute, a US-based born-digital bedding and bath brand, is now expanding into physical retail - two years after opening its first retail store in Venice, California. Parachute has six physical stores and plans to open 20 by 2020.  The company commented that its online and physical stores are profitable. Parachute joins a growing group of brands, born online, that are building store networks. Casper (online bedding specialist), announced in August that it plans to open 200 stores in the next three years. Warby Parker (online eyewear)  intends to have 100 stores up and running by the end of this year.  What encourages Parachute to expand into brick and mortar is the realisation that where there is a Parachute store in an area average online spend increases ten-fold. We have pointed out on a number of occasions that a strong driver for online sales is an on-the-ground presence.
27
Nov-18
Tuesday

Sussan Group sale process steps up

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The AFR reported that the Sussan Group parent company ARJ Group Holdings, with brands include Sportsgirl, Sussan and Suzanne Grae, lodged documents with ASIC last week detailing a four-fold increase in net profits to $30 million in the 12 months ending July 2018 as sales rose 4% to $473.1 million.  It was a big rebound from 2016, when sales fell 3% to $459 million and net profit slumped to just $2.27 million compared with $36.1 million in 2015. Off the back of the results, the Group is making a fresh push to find a buyer for the business. It would be intriguing to know what portion of the net profit gain came from improving sales and margin, and what was the result of cost cutting, to boost the financial position of the business in preparation for sale.
26
Nov-18
Monday

Those in store spent more on Black Friday

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The Financial Times reported that Americans splashed out record sums on Black Friday online deals last week but fewer of them went shopping in person. Sales in stores during Thanksgiving and Black Friday dropped between 4 and 7% compared with last year, according to a preliminary analysis by one retail analytics platform. However, another tracking platform found that shopper visits for the two-day period fell just 1%, less steep than the 1.7% decline it recorded a year ago. To us, the most interesting statistics are that those consumers who did shop in-store spent more with average transaction values up about 3%. As we've said before, winning in the retail game requires a strong Digital Path to Purchase that drives sales through all channels, not just online. And, clearly, stores still play a pivotal role in the retail experience.