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Costco keeps increasing its market share

The Age reported that American discount giant Costco has taken a bigger bite out of the Australian retail market, achieving double-digit sales and profit growth last year and putting more pressure on the major players i.e. Coles and Woolworths.  Costco operates 10 very large format stores in Australia and two more are planned for 2019.  Costco's total revenue for the 12 months to September grew by $228 million, or 14%, to $1.8 billion.  Potential to open on-line business has been mentioned for 2019, but in our assessment this wouldn't necessarily make Costco much richer; however, it would put extra pressure on its competitors.  The company already offers a wholesale delivery service to customers around Melbourne on orders of over $700, including fresh food and groceries for hospitality operators.  Costco's CEO said that the Australian sales growth on a like-for-like basis was 5-6%,  outstripping like-for-like growth at Coles (1.1%) and Woolworths (4.3%).

2019: retail game on

CNBC provided an overview of 2018's US retail winners and losers. Big box chains, Target and Walmart kicked some major goals last year - Target reported unprecedented traffic at its stores and Walmart focused on buying various online sellers to grow digital sales. Discounters such as T.J. Maxx, Ross Stores and Burlington Stores continue to see sales grow at stores open for at least 12 months as customers continue to seek low prices. Those who failed or were slow to adapt such as Bon-Ton, Sears, J.C. Penny, Toys R Us, Mattress Firm and David's Bridal were among a slew of retailers that filed for bankruptcy in 2018. Clearly, 2019 will be another fascinating and competitive year in the retail landscape.

HMV in the UK in administration

Reuters reported that music retailer HMV announced on Friday that it was calling in the administrators, blaming a worsening market for entertainment CDs and DVDs. Reuters commented that "HMV has become the latest victim of brutal trading conditions in Britain’s retail sector", but we fail to see the connection. Retailers selling CDs and DVDs are being decimated due to the rapid shift online because their merchandise can be delivered electronically, not because the overall retail market is up or down. HMV's Chairman confirmed this, by saying that during the Christmas trading period the market for DVDs fell by over 30% compared to the previous year.  The HMV chain operates 125 stores and employs over 2,000 people. It is worth noting that HMV went into administration once already (in 2013); we doubt whether it can be resuscitated for the second time. HMV opened its first store in 1921 in Oxford Street in London.

Drone trials

The Wall Street Journal published an article about drone delivery trials in Canberra (Australia).  Conducted by a subsidiary of Alphabet Inc. (owners of Google), the trial causes considerable controversy in the local community. One resident thought that she heard a “chain saw gone ballistic” when a drone passed over her house. Noise and the potential risk of a crash / spillages seem to outweigh the claimed benefit of a 6% reduction in energy usage during deliveries.  In our assessment, the chance of home deliveries over built-up areas becoming day-to-day practice is low.  A heavy machine flying at 100 km/hour falling down can cause considerable damage and injuries.  Not sure whether anyone will want to insure such risks, given the dependency on the hardware, radio communications, and weather - particularly sudden gusts of wind.  Local authorities banning air deliveries due to resident complaints won't help either - this is currently under consideration in the Canberra trial.

Amazon reports record-breaking Christmas sales

The AFR reported that while US President Donald Trump may have questioned the existence of Santa, on Wall Street, the Santa Claus rally was undeniable, with the Dow advancing more than 1000 points. At the bottom of it all was an announcement from retail giant Amazon: they had broken their own record for the number of items ordered worldwide. The company specified that they had a "record-breaking holiday season" and that customers had purchased millions more Amazon devices compared with last year. It was enough to send the retail index rising by 7.4% and Amazon's own shares soaring by 9.5%.

Gift card woes

The Age reported that customers at Myer and Coles had their gift cards declined on Boxing Day.  The problem was fixed around 5:30 pm and apparently it was caused by Coles' "third-party gift card provider's technical difficulties".  Woolworths, who uses the same provider, also had its gift vouchers declined on Boxing Day. Furthermore, ANZ and Westpac payment systems faced difficulties on the day. Volumes processed on Boxing Day are massive and we feel for all who were impacted, as this is not a situation a retailer, bank, services provider or a customer wants to be faced with.

Boxing Day sales to top $2.5b

The AFR reported the Australian Retailers Association and Roy Morgan are forecasting a 3.1% increase in post-Christmas sales, and predict Aussie shoppers will spend in excess of $2.5 billion this Boxing Day both in-store and online. NSW shoppers are projected to take the lead, spending around $790 million on Boxing Day, followed by Victoria on $786 million.

One of the strongest holiday seasons in the US

The Wall Street Journal reported that Americans crowded stores for last-minute Christmas gifts and delivery companies have so far been keeping up with the surge in online orders. Total US retail sales rose 5.2% from Nov. 1 through Dec. 19 compared with the last year. Online sales continued to grow faster than sales overall, rising 18.4% during that time and accounting for 13% of total sales.

Aussie shoppers set to splurge on Boxing Day

The AFR reported that Australian shoppers are set to splurge a record $2.49 billion at the Boxing Day sales. It will be the biggest single spending day of a Christmas season that already has retailers raking in a record-breaking $50 billion in sales since mid- November, the National Retail Association (NRA) says. According to the NRA CEO, "this is the largest Christmas we've seen in some time, which is great news for retailers, especially with those figures being quite flat across the year."

Costly returns

Reuters reported that fashion retailers are finding that almost a third of the shoes and clothes are bigger or smaller than the size on the label indicates, explaining why many clothes bought online are sent back.  Sometimes, the same sizes differ even between colors within a single style. Any change in fabric or design can also have a big impact as far as fit is concerned. Achieving good fit is further complicated, as some people prefer more loose or over-sized garments.  Calculating sizes more accurately is essential for online retailers to cut costly returns and improve customer satisfaction. According to a recent survey, around half of Americans expect to return clothes ordered online this holiday season due to poor fit.  The tip for Australian retailers: examine your processes that relate to defining and verifying sizes.  Improvements in this 'soft' area can generate hard savings.