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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.

Are your spidey senses tingling?

Quartz reported that synthetic spider silk producer, German biotech company AMSilk has teamed with luxury-watch maker Omega on a watch strap that blends polyamide and AMSilk’s “Biosteel” synthetic. Because spider silk’s strength is comparable to steel (scientists believe it actually can stop trains), synthetic spider silk has long been the white whale of textile research. AMSilk has made silky headway in the medical and cosmetic industries. But in the apparel industry, AMSilk has only spun up prototypes, like the sneaker it made last year with Adidas... until now. Recent tech advances have finally made it possible to spin synthetic silk at scale, and the Nato watch strap marks the first commercially available product made with AMSilk’s Biosteel. "With great power comes great responsibility."

Invest to keep up with Amazon?

An article in the AFR reported that Australian retailers must make further investments in price, range and service online as sales shift from physical stores to e-commerce, warns UBS. Online spending now accounts for 9% of total retail sales, up from 7% before Amazon's arrival in December 2017 and the launch of buy-now, pay-later services such as Afterpay and Zip Money. UBS expects online penetration to reach 14% by 2023 - broadly in line with the global average - with more than a quarter of the growth (27%) driven by Amazon. UBS says that discretionary retailers in categories most exposed to Amazon will be hardest hit. Looking abroad, the evidence suggests that it's the retailers who tried to beat Amazon at its own game that failed. Businesses such as Best Buy, Nordstrom, and Lululemon Athletica have defied the media narrative to find a strong position in an Amazon-dominated world. Aussie retailers should take note.

Noni B set for wage hit

The AFR reported that fashion chain Noni B will be forced to significantly increase pay for thousands of staff after its long-expired enterprise agreement was scrapped. The company's newly acquired Speciality Fashion Group brands, including Millers, Katies, Crossroads, Autograph and Rivers, have been paying staff across 785 stores below the retail industry award for the past five years through an old EA. The EA, which expired in 2014 but continued to operate, legally permitted SFG to not pay overtime, evening or weekend penalty rates to 5,500 managers and sales assistants, giving it a significant market advantage. However, the Fair Work Commission this month ordered the EA's termination following union and employee applications and directed SFG and Noni B to move its workforce to the higher-paying award by March 4.

Smiggle turns up heat on UK landlords

The AFR reported that landlords in Australia aren't the only store-owners copping heat from Solomon Lew's Premier Investments. It's understood Premier has been in talks with landlords in the United Kingdom about rent reductions for Smiggle stores following the worst Christmas trading since the global financial crisis. According to the British Retail Consortium, retailers reported zero year-on-year total sales growth in December, the worst performance for the month since 2008, as Brexit woes exacerbated weak consumer confidence. The flat figure compared with 1.4% growth in December 2017. The reaction from beleaguered UK landlords has been similar to that in Australia - some are standing firm while others are more inclined to reduce rents in order to retain the fast-growing Smiggle brand. Smiggle, a Retail Directions client achieving tremendous success abroad, opened 36 stores in the UK and the Republic of Ireland last year, and plans to open another 20-odd, including concessions.  

New Look may have to put itself up for sale

The Guardian reported that struggling UK clothing retailer New Look may be forced to put itself up for sale in order to complete a rescue refinance. New Look, which has 500 stores, will hand bondholders up to 92% of the company in return for reducing its £1.35b debt pile to about £500m. The company closed 85 stores last year through an insolvency procedure after an annual loss of nearly £235m, which its chairman blamed on its product range becoming too young and edgy and on an ill-starred international venture. It launched the financial restructure after sales at established stores fell 5.7% in December. Experts said New Look may need to demonstrate there was no better alternative to the restructure in order to avoid any legal challenge from creditors, particularly from those holding £176m in unsecured bonds.

Intelligent automation and retail transformation

CS News reported that IBM and the NRF have released their latest joint thought leadership report, The Coming AI Revolution in Retail and Consumer Products. The report involved a global survey across 23 countries and approximately 2,000 retail industry leaders. Key findings include: 85% of retail companies and 79% of consumer products companies plan to be using intelligent automation for supply chain planning by 2021, 79% of retail and consumer products companies combined expect to be using intelligent automation for customer intelligence by 2021, and retail and consumer products executives project that intelligent automation capabilities could help increase annual revenue growth by up to 10%. In 2019, retailers and consumers will need to adapt to new retail interfaces/capabilities across AI, machine learning, 5G, blockchain and more.